KUNDANMALS INDUSTRIES LTD
WIMALASENA COMMISSIONER OF LABOUR AND OTHERS
COURT OF APPEALJ. A. N. DE SILVA (P/CA)
C.A. 708/97APRIL 05th, 2001
Termination of Employment (Special provisions) Act No. 45 of 1971 -Amended by 4 of 1976 and 51 of 1988 – S. 2. S. 11(2) – Approval toterminate the services – Closure of Business – Compensation ordered -legality – No reasons given – applicability of "he who hears must decide"Rule.
Whilst a strike was in progress the Petitioner Company sought approvalfrom the Commissioner of Labour to terminate the services of its employeesupon the closure of the business, and whilst the application was pendingclosed down its business. The Commissioner of Labour after inquiryordered the Petitioner to pay compensation.
It was contended by the Petitioner that:
No reasons were given for the order;
The order is ultra vires as it is in violation of the principle 'he whohears must decide.
that, the 1st Respondent has not disclosed the material on which hemade the order;
the legality of the payment.
(vi) that the Commissioner of Labour has not taken into account thefinancial capacity of the Petitioner.
(i) There is no general duty to give reasons but reasons must be availablefor perusal, if and when ordered by Court. Court is satisfied onperusal of the documents that there are adequate reasons in the order,though not communicated to the Petitioner.
Per J. A. N. de Silva, J. (P/CA)
"I see no serious objection to the Head of the Department taking afinal decision having considered the evidence recorded and documents
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made available to him In the question that has to be decided. There isno materia] available to establish that the Commissioner mechanicallyadopted the recommendations without giving his mind to the evidenceand documents."
(ii) There is no statutory requirement that the Commissioner should takeinto account the financial position of the company, but it is clearly amatter for the Commissioner to take into consideration, in balancingthe competing interest of the employer and workman.
APPLICATION for a Writ of Certiorari.
Cases referred to :
Karunadasa u. Unique Gemstones Ltd., – 1997 – 1 SRI LR 256
Yaseen Omar v. Pakistan International airlines & two others.- SC28/96
Samalanka Ltd., u. Weerakoone. Commissioner of Labour. – 1994- 1SRI LR
Edlrisinghe v. Commissioner of Labour – BASL 1998 Vol. 11 Part 11
Nagalingam v. Luxman de Mel – 78 NLR 23
Chas P. Hayley & Co. Ltd., v. Commercial & Industrial Workers1995 – 2 Sri LR 42 at 50
Faiz Musthapa P.C., with Hemaslri Withanachchl. Sanjeewa
Jayawardena and M. S. M. Suhaid for Petitioner.
Uditha Egalahewa. S. C for la. 2nd Respondents.
Shirley Fernando P.C.. with H. Amarawlckrema for 3rd Respondent and
Cur. adv. null.
June 20, 2001.
J. A. N. DE SILVA, J.(P/CA)The petitioner company is seeking a writ of certiorariquashing the order of the Commissioner of Labour, the lslrespondent to this application, dated 28. 02. 1997 requiringthe petitioner company to pay compensation to several workmanunder the Termination of Employment (Special Provisions) ActNo 45 of 1971 as amended by Law No 4 of 1976 and Act No 51of 1988.
CA Kundanmats Industries Ltd u. Wtmalasena Commissioner of 231
Labour and Others (J. A. N. De Silva, (P/CA))
The facts relevant to this application are as follows.
The petitioner company had been incorporated on 14thNovember 1960 and had been affiliated with two JapaneseCompanies namely Ceiko Ltd. and Tevjin Ltd. for themanufacture of Rayon and Synthetic materials for the localmarket. Raw materials were imported and after the processof weaving, dying and finishing, the finished products werereleased to the local market. The production commenced in orabout 1964. During the period of 1964 -1980 the petitioner'sbusiness had generated a profit of approximately Rs. 49.2Million. According to the petition after 1980 the companystarted running at a loss, it is alleged that the petitioner lostseveral million of rupees during the period 1980 -1994.
The position of the company was that losses occasioneddue to the following reasons which were beyond its control.
Increase in the cost of production.
Liberalization of the imports in 1977.
Competition prevailed in the free market economy.
Establishment of several new garment factories by the publicsector.
A strategically timed strike in 1994.
According to the petition in the early part of 1994 the 3rdrespondent union made certain demands including a salaryrevision. With a view of effecting a resolution of the matters thepetitioner formulated proposals and held several rounds ofdiscussions with the employees. However the 3rd respondentunion rejected the proposals put forward by the petitioner andcommenced a strike on or about 09. 08. 1994 and the saidstrike continued till 02. 05. 1995. Whilst the strike was inprogress the petitioner preferred an application to the 1strespondent on or about 28. 12. 1994 in terms of Section 2 ofthe Termination of Employment of Workman (SpecialProvisions) Act No 45 of 1971 as amended, seeking approval ofthe 1st respondent to terminate the service of its employees upon
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the closure of the business. When the said application waspending before the Commissioner of Labour the petitionercompany closed down the factory with effect from 20. 04. 1995which resulted in the termination of services of all the workmen.The Commissioner of Labour conducted an inquiry and theorder was delivered on 28. 02. 1997 in which he directed thepetitioner to pay compensation as set out in the said order P4which is the subject matter of this application.
Learned Counsel for the petitioner in his submissions toCourt as well as in his application challenged the said order onthe following grounds.
The 1st respondent and 2nd respondent acted in breach ofnatural justice by not giving reasons for the order dated28. 12. 1997.
The order is ultra vires in as much as it is in violation ofthe principle that "he who hears must decide".
Alternatively, even assuming that a "delegated hearing' ispermissible the 1st respondent had not disclosed thematerial on which he made the order and there is nothingto show that he addressed his mind to the evidence, thedocuments produced at the inquiry and the issuesinvolved and as such the order is ultra vires.
The 1st respondent himself has held that the closure wasdue to circumstances beyond the control of the petitionercompany but failed to address his mind to the question asto whether compensation should be paid.
The order is vitiated by the failure on the part of the 1strespondent to take into account the financial capacity ofthe petitioner company. Therefore the basis of compensationis arbitrary.
It is to be noted that having issued Noice to the petitionerdn 17. 10. 1997 Justice E N. D. Jayasuriya who presided inthat Court has observed thus.
CA Kundanmals Industries Ltd v. Wlmalasena Commtssloner of 233
Labour and Others (J. A. N. De Silva, (P/CA) )
'The petitioner has applied for certified copies of the writtenreasons of the commissioner for his order dated 28. 02. 1997and for a copy of the recommendations with reasons of theDeputy Commissioner Mr. Wijeweera (2nd respondent). Therehad been no response to this request from the two respondents.This Court is of the considered view that a perusal of reasonsfor the order of the Commissioner dated 28. 02. 1997 andperusal of recommendation and the reasons are grounds forthe findings and recommendations of Mr. Wijeweera arenecessary for the consideration of the matter arising upon thisapplication. In the circumstances Court direct the Is' respondentto issue certified copies of the following documents.
The order together with reasons dated 28. 02. 1997.
The memorandum of recommendation together' with
reasons for grounds for the findings of the 2nd respondent
contained in file bearing reference No. TE/3/95. . ."
In compliance with this direction the said documents werefurnished to the petitioner on 27. 11. 1997. The said documentswere also made available for perusal of Court by the StateCounsel who appeared for the 1st and 2nd respondents. Havingexamined the documents this Court is satisfied that there areadequate reasons in the order as well as in the memorandumof recommendation though not communicated to the petitioner.In several of Sri Lankan cases it has been held that there is nogeneral duty to give reasons but reasons must be available forperusal if and when ordered by Court. (Vide Karunadasa v.Unique Gemstones Ltd.111, Yaseen Omar v. PakistanInternational Airlines and Two others121, and Samalanka Ltd.v. Weerakoon, Commissioner of Labour and Others131) In thesecircumstances the Is* ground relied on by the petitioner thatthe absence of reasons has resulted in the breach of naturaljustice is untenable.
The 2nd and 3rd objections relate to the concept of"delegated hearing'.
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Learned Counsel for the petitioner contended that theprinciple "he who hears must decide" has been violated as theinquiry was held by the 2nd respondent and the order madeby the 1st respondent.
It must be noted that sometimes it is impossible for a singleofficer or a Minister to decide multitude of applications. In suchsituation the law. on account of necessity permits the authoritywho is called upon to make the decision to delegate to asubordinate officer the functions of holding an inquiry in thesense to collect the facts. That officer may record evidence,collect all the relevant documents and submissions of the personor his representatives and forward the inquiry notes to thedeciding authority with or without his recommendations. Thisprinciple is clearly brought out by Professor Wade in his book"Administrative Law" 7th Edition at Page 548 in the followingwords.
"Where the deciding authority is a Minister or CentredGovernment Department, it must be assumed that Parliamentintends the Department to operate in its usual way. so that theMinister's duties may be performed by subordinate officials. Inother cases, the Courts allow some relaxation of the normal rulewhich requires statutory powers to be exercised by the preciseperson or body on whom they are conferred and make itimpossible for them to be legally exercised by others e. g. subcommittees. The Privy Council has held that the Dairy Board,in making zoning orders affecting milk producers, may appointa person or persons to receive evidence and to make an order,the Board is fully informed of the evidence and submissions,there will be no breach of natural justice."
The learned Counsel for the petitioner submitted that interms of Section 11(2) of the Termination of Employment ofWorkman Act the concept of delegated hearing as a matter ofnecessity does not arise since the power of making the orderitself can also be delegated with the power to decide. He reliedon the decision of Edirtsinghe u. Commissioner of Labour 141
Kundanmals Industries Ltd o. Wlmalasena Commissioner of
Labour and Others (J. A. N. De Silva, (P/CA))
I do not accept this proposition. Even if it is accepted forthe purpose of argument since the Courts have recognized thatit is permissible to delegate to subordinate officials to collectfacts and record evidence. I see no serious objection to the Headof the Department taking a final decision having considered theevidence recorded and documents available to him on thequestion that has to be decided. In the circumstances I statethat there is no merit in this submission. There is no materialavailable to establish that the 19‘ respondent mechanicallyadopted the recommendations without giving his mind to theevidence and documents. The power to delegate hearing underthe Termination of Employment of Workman Act was consideredand accepted in the case of Nagalingam v. Laxman de Mel,5>.
The final point raised by the learned Counsel for thepetitioner was that having decided that the closure of thecompany was due to circumstances beyond the control of thepetitioner, the Commissioner should have taken into accountthe financial capacity of the petitioner in determining whethercompensation should be paid or not. It was his submissionthat the Chief Internal Auditor of the petitioner company gaveevidence and produced copious documentation marked A – 1to A – 20 to demonstrate the adverse financial status of thepetitioner company and its inability to continue in businessany further. Mr. Mustapha, PC, submitted that when theCommissioner made the order he had not made any referencewhatsoever to the loss incurred and the financial capacity ofthe petitioner to pay the compensation awarded. He relied onthe decision in Chas. P Hayley and Co. Ltd. v. Commercial andIndustrial Workers Union161 and submitted that it is a fatal error.
It is to be noted that the above case deals with a situationwhere the workers demanded an increase in the salary and thecompany took up the position that as the company was runningat a loss the demands cannot be met. In these circumstancesthe Court had held that the arbitrator appointed under theIndustrial Disputes Act should have considered the financial -position of the company in granting an award in favour of theworkers.
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The instant case deals with a terminal situation and acessation of services of employees on account of closure.However in the order of the Commissioner he deals with theprofits gained and also losses incurred by the petitionercompany for the^ period of 1964 – 1994. In addition to this the1st respondent in paragraph 6 of his affidavit has stated asfollows.
That 8% of the earnings of the employees has been deductedby the petitioner for contribution to the EmployeesProvident Fund and the said sum has been used by thecompany.
That 12% of the earnings of the employees has to becontributed by the employer to the Employees ProvidentFund.
That a sum of money equivalent to 20% of the earnings ofthe employees should have been deposited with the CentralBank as contributions to the Employees Provident Find.
That the employees would have received 12% interest onthe sum referred to above.
That a sum not less than 17 Million Rupees is due asEmployees Provident Fund contribution for a period priorto the application of the petitioner in this Court.
That the default by the company in the payment ofEmployees Trust Fund contributions has deprived theemployees of many benefits like medical assistance andscholarships to children of the employees.
That I deny that the company’s perilous financial statusdid not permit the company to deposit the EmployeesProvident Fund and the Employees Trust Fund contributions.
From the above it is very clear that the petitioner companyhad not only failed to contribute the statutory dues to theemployees but also had misappropriated the same. On top of
CA Kundanmals Industries Ltd v. Wlmalasena Commissioner of 237
Labour and Others (J. A. N. De Silva, (P/GA))
that if the employees are to go home without a cent at the timeof closure where do the employees stand? There is no statutoryrequirement that the Commissioner should take into accountthe financial position of the company before orderingcompensation to workman under the Termination ofEmployment of Workman Act. By this I do not mean to say thatthe Commissioner should be completely oblivious to the financialcapacity of the employer. It certainly is a matter for theCommissioner. He may take into consideration in balancingthe competing interest of the employer and workman. But onthe facts of this case, the petitioner's deliberate and wilful failureto perform his statutory obligations towards his employeesoperates as a bar to any request for relief on account of hisfinancial capacity. The order to pay compensation had beengiven having taken into account the workman's age, theirperiod of service, family position and difficulties in findingalternate employment. I see nothing arbitrary or unreasonablein this order. It is an order the Commissioner could have justlymade in the circumstances of this case. Accordingly theapplication of the petitioner is dismissed with costs.
KUNDANMALS INDUSTRIES LTD v. WIMALASENA COMMISSIONER OF LABOUR AND OTHERS