BEFORE THE SUPREME COURT OF INDIA, NEW DELHI

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1 BEFORE THE SUPREME COURT OF INDIA, NEW DELHI IN THE MATTER OF SEELAN RAJ.... PETITIONER Vs PRESIDING OFFICER 1 ST ADDITIONAL LABOUR COURT, CHENNAI RESPONDENT SUBMITTED BEFORE THE HON BLE COURT IN EXCERSISE OF THE JURISDICTION CONFERRED UPON IT BY VIRTUE OF SECTION 136OF THE CONSTITUTION OF INDIA. COUNSEL FOR THE RESPONDENT VISHNU TANDI 12LLB084

2 TABLE OF CONTENTS 1. INDEX OF AUTHORITIES...3 A. BOOKS REFERRED...3 B. CASES REFERRED...3 C. STATUTES REFERRED LIST OF ABBREVIATIONS STATEMENT OF JURISDICTION SUMMARY OF FACTS STATEMENT OF ISSUES SUMMARY OF ARGUEMENTS ARGUEMENTS ADVANCED PRAYER

3 INDEX OF AUTHORITIES STATUTES REFERRED 1. The Factories Act The Constitution of India The Industrial Dispute Act Employees state insurance Act 1948 CASES REFERRED 1. Tata Consultancy Services V. State Of Andhra Pradesh, 2005 AIR M/S Psi Data Systems Ltd Vs Collector Of Central Excise, 1997 AIR (SC) 785 BOOKS REFFERRED 1. P.L MALIK, LABOURE AND INDUSTRIAL LAW, EASTERN BOOK COMPANY, 12TH ED.,

4 LIST OF ABBREVIATIONS AIR Anr. Art. Ed. HC Hon ble i.e. ID No. Para/ Pg. Sec. SC SCC LLR u/s All India Reporter Another Article Edition High Court Honourable That is Industrial Dispute Number Paragraph Page Section Supreme Court Supreme Court Cases Labour Law Review Under Section v. Versus Vol. Volume 4

5 STATEMENT OF JURISDICTION Petitioner approach before this Hon ble Court under Art of the Constitution of India and The Respondent humbly submits a reply to their case. 1 Special leave to appeal by the Supreme Court (1) Notwithstanding anything in this Chapter, the Supreme Court may, in its discretion, grant special leave to appeal from any judgment, decree, determination, sentence or order in any cause or matter passed or made by any court or tribunal in the territory of India (2) Nothing in clause ( 1 ) shall apply to any judgment, determination, sentence or order passed or made by any court or tribunal constituted by or under any law relating to the Armed Forces 5

6 SUMMARY OF FACT The respondent company [respondent No.2 herein] was formed in the year 1982 with the object of rendering computer services to its customers relating to collection and maintenance of information and to develop company software application to suit the special requirements of the customers. In March 1983, the second respondent set up a data processing division which undertook data processing services such as preparation of pay rolls, financial accounting and inventory control related statements. After few years, on account of availability of indigenously manufactured computers, the demand for the service of the data processing division of the second respondent was declined and the division became non-viable. Therefore the respondent was forced to close down the data processing division. Total 46 persons were employed in the data processing division and they were informed of the decision to close down the unit on The state government was intimated by a notice u/s 25FFA of the ID Act 1947 on that the data processing operation would be closed down with effect from The services of the workmen in the data processing division were terminated on account of closure of the unit. By October, 1989, the software division of the second respondent also was closed and the services of 71 workmen had been terminated after paying the closure compensation in terms of the provisions of the ID Act. Appellant approached to the Labour Court with the question, whether the closure of the data processing division rendering the appellants unemployment is justified or not? Before the labour court, three issues were raised viz. 6

7 (i) (ii) (iii) Whether the second respondent establishment is a factory; Whether on the date of closure of the establishment, the second respondent was employing more than 100 workmen requiring protection from the specified authority for closure of the establishment; and To what relief the workmen are entitled Before the Labour Court. Labour court held that the ID Act covers the establishment of the second respondent and directed reinstatement of the workmen with back wages. Labour Court also rejected the argument that the second respondent is not a factory and held that the closure was unjustified. Second Respondent filed writ petition against the order of Labour Court and single judge bench held that the establishment is not a factory. Writ appeal was filed against the order and same was dismissed by the division bench. Hence the case is before the Hon ble Supreme Court by virtue of Art 136 of the Constitution of India. 7

8 ISSUES RAISED 1. WHETHER THE SECOND RESPONDENT ESTABLISHMENT IS A FACTORY OR NOT? 2. WHETHER THE WORKERS ARE ENTITLED TO ANY RELIEF? 8

9 SUMMARY OF ARGUMENTS 1. THAT THE SECOND RESPONDENT ESTABLISHMENT IS NOT A FACTORY. No manufacturing process is carried on Excluded by the explanation II of the Sec 2(m) of the Factories Act THAT THE WORKERS ARE NOT ENTITLED TO ANY RELIEF. Establishment is not a factory hence dispute is not covered under ID Act. Workers were informed in advance and their service was terminated after paying closure compensation. 9

10 ARGUMENTS ADVANCED 1. THAT THE SECOND RESPONDENT ESTABLISHMENT IS NOT A FACTORY. It is most humbly submitted before this Hon ble court that the second respondent establishment is not a factory and does not falls under the definition of Factory as defined u/s 2(m) 2 of the factories Act Software is an intellectual property being product of thought, creativity and intellectual efforts cannot be goods for the purpose of the Act 3 ; that it is an intangible intellectual property and, therefore, cannot be goods; that software is an essentially classic form of intellectual property. Though software has a physical component, these physical components are merely tangential incidents of a computer programme, they do not change the programmes clearly intangible character. 4 We make it clear at the outset that when we shall speak of software, we shall be referring to tangible software of the nature of discs, floppies and C.D., R.O.M and not to the intellectual property, also called software that is recorded or stored thereon. It is necessary, to start with, to make a distinction between hardware, which is the computer, and the programming necessary to run it, which is the software. "Programmes which consist of instructions recorded on punched cards, magnetic tapes and discs. These devices instruct the computer as to what functions it will perform" to produce the desired output. 5 Hence these computers instruction and software applications don t have any physical and tangible form and not covered under definition of 2(k) of this Act. 2 (m) factory means any premises including the precincts thereof (i) whereon ten or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power, or is ordinarily so carried on, or (ii) whereon twenty or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power, or is ordinarily so carried on.. 3 sec 2(h), Andhra Pradesh General Sales Tax Act. 4 Tata Consultancy Services v. State of Andhra Pradesh, 2005 AIR M/S Psi Data Systems Ltd vs Collector Of Central Excise, 1997 AIR (SC)

11 Clause (i) and clause (ii) of the Sec 2(m) of this Act clearly says that there must be a manufacturing process and manufacturing process 6 is defined as, any process for- (i) Making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing, or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal, (ii) Pumping oil, water, sewage or any other substance; or (iii)generating, transforming or transmitting power; or (iv) Composing types for printing, printing by letter press, lithography, photogravure or other similar process or book binding; or (v) Constructing, reconstructing, repairing, refitting, finishing or breaking up ships or vessels; (vi) Preserving or storing any article in cold storage; The definition of manufacturing process uses various verbs like making, altering, repairing, ornamenting etc. but nowhere is written that developing of software comes under the purview of manufacturing process. Software developing division as mentioned in the present suit does not cover under the ambit of Sec 2(m) of the Factories Act and Section 2(14AA) 7 in The Employees' State Insurance Act, The mere fact that an Electronic Data Processing Unit or a Computer Unit is installed in any premises or part thereof, shall not be construed to make it a factory if no manufacturing process is being carried on in such premises or part thereof. 8 In the present suit the second respondent has two divisions of his establishment; first division is software development division in which he develops company software application to suit the special requirements of the customers and another division is Data processing division which undertake data processing services such as preparation of pay rolls, financial accounting and inventory control related statements. Both the divisions are interconnected with each other. In terms of Sec 2(m) of the Factories Act, a premise becomes factory only when the manufacturing process is carried on such premises with the help of power with ten or more workmen or when the manufacturing process is carried on without the help of power with 20 or more workers. Thus the manufacturing process should be in progress in order to make that premises a factory. 6 Sec 2(k) the Factories Act 7 Sec 2(14AA) manufacturing process shall have the meaning assigned to it in the Factories Act, Explanation II of sec 2(m), the Factories Act

12 Hence both the divisions are not comes under the ambit of Sec 2(m) because in software development unit, there is not manufacturing process and the data processing unit is clearly excluded by virtue of explanation II of the sec 2(m) of the Factories Act. 12

13 2. THAT THE WORKERS ARE NOT ENTITLED TO ANY RELIEF. It is most humbly submitted before this hon ble court that the closure of the data processing division of the respondent second was justified because both the divisions were interconnected as they belong to the same group of company. Working of one division without another was not possible and respondent second was suffering huge economic loss and he was forced to close the data processing division. Respondent second develop the software and thereafter sells the same and therefore it is not an establishment as defined under Sec 25L (a)(i) 9 of the ID Act much less a factory as defined u/s 2(m) of the Factories Act The same has been proved in the above arguments, thus the current dispute cannot be an industrial dispute in terms of sec 2(a) of the ID Act. As per the provision of the ID Act Where an undertaking is closed down for any reason whatsoever, every workman who has been in continuous service for not less than one year in that undertaking immediately before such closure shall, subject to the provisions of sub- section (2), be entitled to notice and compensation in accordance with the provisions of section 25F. 10 according to the ID act if an employer who intends to close down an undertaking of an industrial establishment to which this Chapter applies shall, in the prescribed manner, apply, for prior permission at least ninety days before the date on which the intended closure is to become effective, to the appropriate government, stating clearly the reasons for the intended closure of the undertaking and a copy of such application shall also be served simultaneously on the representatives of the workmen in the prescribed manner. 11 In the present suit, even though the establishment is not covered under the Industrial Dispute as specified in ID Act and he is not bound by the ID Act, still the second respondent informed the workers well in advance about the closure and terminated their services after paying the closure compensation in terms of the provisions of the ID Act. He also intimated the appropriate govt regarding the closure of the establishment but the appropriate govt did not raise any objection. Silence of the govt shows their intention about their acceptance in regard to the closure. Hence, the closure is justified and the workers are not entitled to any further relief. 9 25L. Definitions.- For the purposes of this Chapter,-- (a) " industrial establishment" means-- (i)a factory as defined in clause (m) of section 2 of the Factories Act, 1948 (63 of 1948 ) 10 Sec 25FFF. Compensation to workmen in case of closing down of undertakings 11 Sec 25(o) of ID Act 13

14 PRAYER Wherefore in the light of the facts presented, issues raised, arguments advanced, reasons given and authorities cited, the counsel for the Respondent humbly pray before this Hon ble Court that may be pleased to adjudge and declare. (i) That the second respondent establishment is not factory; and (ii) Workers are not entitled to any relief. Pass any other order that the Hon ble Court may deem fit and proper. Place: New Delhi All of which is most respectfully submitted Vishnu tandi Counsel for Respondent 14

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