Social Justice and

Labour Jurisprudence
 Social Justice and
Labour Jurisprudence

Justice V.R. Krishna Iyer’s Contributions

I. Sharath Babu and Rashmi Shetty

Copyright © National Law School of India University, 2007

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Library of Congress Cataloging-in-Publication Data

Sharath Babu, I., 1960–

Social justice and labour jurisprudence: Justice V.R. Krishna Iyer’s contributions/I.
Sharath Babu and Rashmi Shetty.
p. cm.
1. Labour laws and legislation—India. 2. Krishna Iyer, V.R., 1915– 3. Judicial
power—India. 4. Judges—India. 5. Labour courts—India. I. Shetty, Rashmi.
II. Title.
KNS1220.S53 344.5401—dc22 2007 2007001007

ISBN: 978-0-7619-3523-0 (HB) 978-81-7829-678-4 (India-HB)

Commissioning Editor: Leela Kirloskar

Sage Production Team: Gayatri E. Koshy and Rajib Chatterjee
 Contents

List of Cases 8
Foreword by Justice V.R. Krishna Iyer 36
Preface 39

1 Introduction 43
• Labour Issues—Attitude of the Judiciary of Late 45
2 Industrial Jurisprudence 50
• Introduction 50
• Purpose of the Industrial Disputes Act, 1947 52
• The Constitution and Labour Philosophy 53
• Interpretation of Labour Statutes: The Constitutional Values 55
• The Binding Nature of Decisions of the Superior Courts 57
• The Role of English Law as Precedent 58
• Powers of the High Courts under Article 226 of the Constitution 58
3 Threshold Part Issues under the Industrial Disputes Act, 1947 60
• The Definition of ‘Industry’ 60
• The Definition of ‘Workman’ 132
• The Definition of ‘Industrial Dispute’ 135
• The Definition of ‘Award’ and its Scope 138
• The Meaning and Scope of ‘Undertaking’ under the 141
Industrial Disputes Act, 1947
4 Collective Bargaining Agreement Issues 151
• The Far-reaching Impact of Nullifying Settlements 152
• Wages for Strike Period 158
• The Legality of Strikes 160
• The Scope and Coverage of Settlements under the 171
Industrial Disputes Act, 1947
• The Force of a Settlement under the Industrial Disputes Act, 1947, 178
as against the Provisions of the General Statute: The Rule
• Termination of Settlements: The Legality 231
5 Maharashtra (Recognition of Trade Unions and Prevention of 240
Unfair Labour Practices) Act, 1972
• The Recognition of Trade Unions: Procedural Requirements 240
6 The Government’s Power of Reference of Industrial Disputes 244
• When is the Second Reference Valid? 244
6 Social Justice and Labour Jurisprudence

• The Nature of Power Conferred on the Appropriate 250

Government under Section 10(1) of the Act
• The Scope of the Power of Reference under Section 10(1) 254
• The Precise Scope of Section 10(3) 260
7 Industrial Adjudication: The Concept 263
• The Concept of ‘Tribunal’ 263
• Interference with the Tribunal’s Award 263
• Powers of the Labour Court to Give Appropriate Relief to a 265
Dismissed Workman under Schedule II, Item I of the Act
• Powers of the Labour Court to Give Appropriate Relief to 271
Laid-off Workmen where Chapters VA and VB of the Industrial
Disputes Act, 1947, Have No Application
• The Power of Tribunals to Scrutinise the Employer’s Action under 277
Section 33(2)
• The Discharge of a Workman during the Pendency of the Proceedings 283
and the Powers of the Labour Court to Provide Appropriate Relief
• Findings of the Labour Court with Respect to Relief for a 284
Dismissed Workman
• The Rigidity of the Tribunals in Extending Equal Benefits to the 290
Same Class of Workmen: Validity
• The Findings of the Labour Court: Validity 291
• Awarding Benefits to Workmen who are not Parties 292
to the Settlement: Validity
• The Role of the Supreme Court in Interfering with Respect to an 294
Appeal against the Award
• Illegal Termination: The Remedy 301
8 Voluntary Arbitration as a Mechanism for Dispute Settlement 307
• When Can an Arbitration Award be Set Aside? 307
• Arbitrators’ Ruling over the Justifiability of Mass Termination by the 317
Employer on Account of Illegal Strike: Interference when Justified
9 Industrial Employment (Standing Orders) Act, 1946 361
• Service Conditions: The Scope of the Standing Orders Act 361
• Modification of Standing Orders: The Views of the Supreme Court 369
10 Change of Service Conditions: Restrictions on the Freedom of the Employer 372
• Notice of Change Exclusively under Section 9A 372
• Pendency of Proceedings before the Conciliation Officer: 378
Duties under Section 33(1)(a)
• Termination during Pendency of Proceedings: Validity 379
• The Role of the Labour Court or Tribunal in Adjudicating Matters 384
under Sections 33(2) and 33(3)
• Application for Approval of an Act of Dismissal for Misconduct: 388
The Scope for Interference
• Action Amounting to Change of Conditions of Service during 402
Pendency of the Proceedings: The Amount of Relief
 Contents 7

11 Disciplinary Proceedings 409

• Reopening of Disciplinary Proceedings: The Rule 410
• Cases where the Act of Misconduct is Not So Serious: The Relief 411
• Termination on Grounds of Loss of Confidence: Discharge Simpliciter 412
or Discharge for Misconduct
• Mass Termination without Enquiry: The Approach 418
12 Lay-off and Retrenchment 458
• The Law Relating to Retrenchment 458
• Closure and Retrenchment: The Distinction 464
• The Definition of Retrenchment under Section 2(oo) 468
• The Definition of Retrenchment under the Payment of 472
Gratuity Act, 1972: Interpretation
• The Scope of ‘Retrenchment’ that Includes All Kinds of Termination 476
• The Procedure for Retrenchment: The Approach 480
13 Labour Employed through Middlemen—their Rights 486
• The Entitlement of Contract Labour to be Absorbed 486
as Regular Employees
14 Wages and Monetary Benefits 490
• Payment of Tips to Hotel Staff: Whether a Part of the Dearness Allowance 490
• Running Allowance: Whether Wages 491
• Grant of Additional Dearness Allowances: Principles for Consideration 497
• Interpretation of an Industrial Truce Agreement Relating to 500
Wage Structure: The Approach
• Computation of Dearness Allowance: Validity 503
• Adjusting Payment of Customary Bonus under the Statute: 506
The Guiding Principles
• Effects of Agreements which are Inconsistent with the Payment of 520
Bonus Act, 1965: The Interpretation
• Constitutional Validity of Section 10 of the Payment of Bonus Act, 1965 529
• Applicability of the Payment of Bonus Act, 1965: The Scope of 530
Section 32(5)(c)
• Veracity of the Balance Sheet: Powers of the Tribunal 531
15 Social Security and Welfare 536
• Employees’ State Insurance Act, 1948: Applicability 536
• Computation of Maternity Benefit under the Maternity Benefit Act, 1961 541
• The Employees Provident Fund and Miscellaneous Provisions Act, 1952: 547
Interpretation of Section 14B
• The Payment of Gratuity Act, 1972: Applicability 561
• Principles to be Followed in Framing a Scheme of Gratuity 565
by the Industrial Tribunal under Schedule 3, Item 5 of the Industrial
Disputes Act, 1947

About the Authors 574

 List of Cases

Sl. No. Name of the Case Citation Page Number in Book

1. A.K. Kraipak vs U.O.I (1970) 1 SCR 457: AIR 1970 SC 150 156, 157
2. A.K. Roy vs U.O.I (1982) 1 SCC 271: (1982) SCC (cri) 152 126
3. A.M. Allison vs B.L. Sen 1957 SCR 359: AIR 1957 SC 227 294
4. Aeltemesh Rein vs U.O.I (1988) 4 SCC 54: 1988 SCC (cri) 900 118, 126
5. Ahmedabad Mill Owners Association vs (1965) (11) FLR 337: (1950–67) 507
The Textile Labour Association 1. SCLJ 253: (1966) 1. S.C.R. 382
6. Air India Corporation, Bombay vs V.A. Rebello (1972) 3 SCR 605: AIR 1972 SC 1343 282
7. Air India Statutory Corporation vs United Labour Unon. (1997) 9 SCC 377 48
8. Alembic Chemical Works Co. Ltd. vs Workmen AIR 1961 SC 647 370
9. Alien vs Flood 1898 A.C. 1 166, 313
10. Allen vs Flood (1898) AC 1 445
11. Alloy Steel Project vs The Workmen 1971 (22) FLR 181: 1971 (3) SCR 529 533
(List of Cases continued )
(List of Cases continued )
Sl. No. Name of the Case Citation Page Number in Book
12. M/s. Ameteep Machine Tools vs Labour Court AIR 1980 SC 2135 291–92
13. Anandji Haridas and Co. Pvt. Ltd. vs Engineering 1975 (30) F.L.R. 133 229
Mazdoor Sangh (1975) 3 S.C.R. 542
14. Assam Oil Co. vs Its Workmen (1960) 3 SCR 457: AIR 1960 SC 1264 334, 338, 433, 445
15. Associated Cement Co. Ltd. vs P.D. Vyas AIR 1960 SC 665 366
16. Associated Cement Companies Ltd. AIR 1972 SC 1552 296
17. Avinder Singh vs State of Punjab (1979) 1 SCC 137 551
18. M/s. Avon Services Production Agencies (P) Ltd. AIR 1979 SC 170 47, 141, 142–45, 250–54
vs Industrial Tribunal
19. B. Shah vs Presiding Officer AIR 1978 SC 12 57, 542–47
20. B.S. Vadera vs U.O.I 1968 2 S.C.R 575 217
21. Babu Manmohan Das Shah vs Bishun Das 1967 1 S.C.R. 856 227
22. Babu Ram C.A. No. 107 of 1966 decided on 165, 212, 313
Nov. 27, 1968 (S.C)
23. Bangalore Water Supply and Sewerage Board vs A. Rajappa (1978) 2 SCC 213: 47, 48, 49, 61–116, 185, 198
AIR 1978 SC 548 217, 218, 238, 467
24. Bar Council of Maharashtra vs M.V. Dabholkar (1976) 1 SCR 306 508
(List of Cases continued )
(List of Cases continued )
Sl. No. Name of the Case Citation Page Number in Book
25. Baroda Borough Municipality 1957 SCR 33, AIR 1957 SC 110 76
26. Barraclough vs Brown and Others 1897 A.C. 615 169, 316
27. Barsi Light Railways Co. Ltd. vs K.N. Joglekar AIR 1957 SC 121: (1957) 1 LLJ 243; 474, 563
(1956–57) 11 FJR 317
28. Basti Sugar Mills Co. Ltd. vs State of U.P. and Another AIR 1979 SC 262 520–29
29. Bata Shoe Co. (P) Ltd. vs D.N. Ganguly 1961 (2) F.L.R. 183 176, 349, 446, 447
30. Beetham vs Trinidad Cement Ltd. (1960) 1 AII ER 274 136
31. Bengal Bhatdee Coal Co. vs Ram Prabesh Singh. (1964) 1 SCR 709: AIR 1964 SC 486 288
32. Bengal Chemical and Pharmaceutical Works Ltd, Calcutta (1959) Suppl. 2 S.C.R. 136 296, 570
AIR 1959 SC 633
33. Bengal Chemical and Pharmaceutical (1969) 2 SCR 113: AIR 1969 SC 360 498, 505
Works Ltd. vs Its Workmen
34. Bharat Bank Ltd. vs Employees of Bharat Bank Ltd. AIR 1950 SC 188 399
35. Bharat Barrel and Drum Manufacturing Co. AIR 1967 SC 361 165, 311
36. Bharat Heavy Electricals Ltd. vs State of U.P. and Others (2003) 6 SCC 528 488
37. Bharat Sugar Mills Ltd. vs Shri Jai Singh (1976) 1 SCR 361: AIR 1975 SC 1441 391, 392, 393
38. Bhiwani Textile Mills vs Their Workmen (1969) 2 LLJ 739 SC 375
(List of Cases continued )
(List of Cases continued )
Sl. No. Name of the Case Citation Page Number in Book
39. Bihar State Road Transport Corporation Case (1970) 3 SCR 708 268, 415
40. Binny Ltd vs Their Workmen AIR 1972 SC 1975 253
41. Bolton Corporation 1943 AC 166 71
42. Bombay Gas Co. Ltd. vs Jagannath Pandurang (1975) II LLJ 345 (SC) 519
43. Bombay Panjarapole (1972) 1 SCR 202: AIR 1971 SC 2422 98, 107
44. British India Corporation (1965) 10 Fac LR 244 (SC) 570
45. British Paints AIR 1966 SC 732 570
46. Buckingham and Carnatic Co. Ltd. vs Workers of the Company 1952 LAC 490 268, 330, 414, 430
47. Buckingham and Carnatic Co. vs Venkatiah AIR 1964 SC 1272 404
48. Budge Budge Municipality. 1953 SCR 302: AIR 1953 SC 58 112
49. Bungo Steel Furniture AIR 1967 SC 378: (1967) 1 SCR 633 165, 311, 343, 441
50. Burn and Co. Ltd. vs Their Workmen AIR 1959 SC 259 349, 446
51. C. Sankaranarayanam vs State of Kerala AIR 1971 SC 1997 212
52. C.S.T. vs Radhakrishan (1979) 2 SCC 249 551
53. Calcutta Insurance Co. Ltd. AIR 1967 SC 1286 570
54. Cape Brandy Sydicat vs IRC (1921) 2 KB 403: 90 LJKB 461 (CA) 125
(List of Cases continued )
(List of Cases continued )
Sl. No. Name of the Case Citation Page Number in Book
55. Central Bank of India Ltd. New Delhi vs AIR 1969 SC 983 288
Shri Prakash Chand Jain
56. Central Board of Dawoodi Bohra community vs (2005) 2 SCC 673: 2005 SCC 125
State of Maharashtra (L and S) 246 2005 SCC (cri) 546
57. Central Press (1977) 3 SCR 35: (1977) LIC 884 541
AIR 1977 SC 1351
58. Champsey Bhara and Co. 50. I.A. 324 165, 311
59. Chanan Singh vs Registrar, Co-op. Societies, AIR 1976 SC 1821 410–11
Punjab and Others
60. Chartered Accountants (Rabindranath Sen) vs (1963) 1 Lab.LJ 567 (cal) 107
First Industrial Tribunal, West Bengal
61. Chief Conservator of Forests vs Jaganath Maruthi Kondhare (1996) 2 SCC 293: 117
1996 SCC (L and S) 500
62. Chief Conservator of Forests vs Jagannath Maruti Kondhare (1996) 2 SCC 293 46
63. Chinta Lingam vs G.O.I. (1971) 2 SCR 871 558
64. Coir Board vs Indira Devai P.S. (1998) 3 SCC 259 49, 124, 128
65. Commissioner of Coal Mines Provident Fund Dhanbad vs J.P. Lalla (1976) 3 SCR 365 558
66. Conway vs Wade. 1909 AC 506 78
(List of Cases continued )
(List of Cases continued )
Sl. No. Name of the Case Citation Page Number in Book
67. Cooper Engineering Ltd. vs P.P. Mundha 1976 1 SCR 361: 1975 LIC 1441 389, 391, 396, 397, 398, 399, 401, 408
68. Cooper vs Wilson (1937) 2 KB 309 399
69. Corporation of the City of Nagpur vs Its Employees AIR 1960 SC 675 74, 75, 76, 77, 78, 80, 81, 83, 93, 107,
109, 110, 120,
70. M/s. Cox and Kings (Agents) Ltd. vs Their workmen and others AIR 1977 SC 1966 138–41, 244–49
71. Cricket Club of India AIR 1969 SC 276 101, 103, 105, 107
72. Crompton Greaves vs The Workmen AIR 1978 SC 1489 159–60, 348, 445
73. D.C. Roy vs Presiding Officer, M.P. Industrial Court Indore (1976) 3 SCR 801: AIR 1976 SC 1760. 354, 451, 452
74. D.N. Banerji vs P.R. Mukherjee 1953 SCR 302: 61, 64, 65, 66, 68, 69, 72, 73, 74, 75,
76, 107, 108, 110, 112,
118, 119
AIR 1953 SC 58 61, 64, 65, 66, 68, 69, 72, 73, 74, 75,
76, 107, 108, 110, 118, 119, 198
75. D.P. Maheshwari vs Delhi Administration 1983 (47) FLR 477: 145
1983 (2) LLJ 424
76. Dabholkar AIR 1976 SC 242 88
77. M/s. Dalmia Dadri Cement Ltd. vs Its Workmen 1970 LIC 350 (Punj) 400
78. Dawkins vs Rokeby (1873) 8 QB 255 339, 436
(List of Cases continued )
(List of Cases continued )
Sl. No. Name of the Case Citation Page Number in Book
79. Delhi Administration, Delhi vs Workmen of Edward AIR 1978 SC 976 260–62
Keventers and Another
80. Delhi Cloth and General Mills Co. vs Ludh Budh Singh 1972 LIC 573 395, 397, 398, 399, 401
81. Delhi Cloth and General Mills Co. vs Workmen AIR 1970 SC 919 569
82. Delhi Cloth and General Mills Ltd. vs Shambu Nath Mukerjee (1976) 1 SCR 591: AIR 1978 SC 8. 480
83. Delhi Transport Undertaking vs Goel (1970) 2 LLJ 20: (1970) 11 LLJ 20 269, 270, 416
84. Devendra Pratap Narain Raj Sharma vs State of U.P. 1962 Supp (1) SCR 315: 495
AIR 1962 SC 1334
85. Dhanrajgirji Hospital vs Workmen AIR 1975 SC 2032 99, 107, 109, 120
86. Dhingra’s Case 1958 SCR 828: AIR 1958 SC 36 329, 332, 429, 432
87. Dilbagh Rai Jerry vs Union of India AIR 1974 SC 130 491–97
88. Divisional Supt. Northern Rly. vs Pushkar Dutt Sharma (1967) 14 Fac LR 204 495
89. Doe vs Bridges (1831) 1 B and AD 847 (2) 859 169, 316
9 LJ 03 KB 113: 199 ER 1001
90. Eastern Electric and Trading Co. vs Baldev Lal 1975 LIC 1435: AIR 1975 SC 1892 288
91. Employers in Relation to Digwadih Colliery vs AIR 1966 SC 75 479
Their Workmen
(List of Cases continued )
(List of Cases continued )
Sl. No. Name of the Case Citation Page Number in Book
92. Engineering Mazdoor Sabha vs Hind Cycles Ltd. (1962) 2 LLJ 760 SC 163, 229, 234, 310, 337
(1963) Supp. I.S.C.R. 625
93. Express Newspapers (P) Ltd. vs Michael Marx AIR 1963 SC 1141 404
94. Fabricated Engine Drivers 1913 16 CLR 245 (Aus) 78
95. Federated Municipal and Shire Employee’s Union of 26 C.L.R. 508 (Aus.) 73
Australia vs Melbourne Corporation
96. Federated School Teacher’s Association of Australia vs (1929) 41 CLR 569 78
State of Victoria
97. Forbes Forbes Campbell and Co. Ltd. vs Engineering AIR 1978 SC 340 240–43
Mazdoor Sabha
98. French Motor Car Company Ltd. vs Their Workmen 1963 (61 FLR 80: (1050–67) S.C.L.J. 505
4136: (1962) 2 LLJ 744
99. G.T. Lad and Others vs Chemical and Fibres India Ltd. (1979) 1 SCC 590: AIR 1979 SC 582 354, 402–7, 451
100. Gaya Cotton and Jute Mills Ltd. vs Gaya Cotton and 1952 2 Lab. LJ 37 (L.A.T 1-Cal) 272, 459
Jute Mills Labour Union
101. M/s. Ghaziabad Engineering Co. Pvt. Ltd. vs AIR 1978 SC 769 370–71
The Certifying Officer and Another
102. Gladstone vs Bower (1960) 3 All ER 353 341, 439
(List of Cases continued )
(List of Cases continued )
Sl. No. Name of the Case Citation Page Number in Book
103. Graham Trading Co. (India) Ltd. vs Its Workmen (1960) 1 SCR 107(111): 511
AIR 1959 SC 1151 at 1153
104. Gujarat Steel Tubes Ltd. vs Gujarat Steel Tubes AIR 1980 SC 1896 44, 55, 59, 318–57, 320–59,
Mazdoor Sabha and Others 418–55, 420–57
105. Hamdard Dawakhana Wakf vs Its Workmen (1962) 2 LLJ 772 289
106. Haribhau Shinde vs F.H. Lala Industrial Tribunal AIR 1970 Bom. 213 223
107. Harinagar Cane Farm vs State of Bihar AIR 1964 SC 903 131
108. Hariprasad Shivshankar Shukla vs A.D. Divakar 1957 SCR 121 477, 478, 480
109. Hariwadan K. Desai vs LIC of India 1977 Lab. IC 1072 228
110. M/s. Hatisingh Mfg. Co. Ltd. vs U.O.I AIT (1960) 3 SCR 528: AIR 1960 SC 923 144, 466
111. Hem Raj vs State of Ajmer (1954) SCR 1133: AIR 1954 SC 462 296
112. Herbertsons Ltd. vs Their Workmen and Others 1977 LIC 162 172, 233
113. Heydon’s Case 1584 (76) ER 634 77, 111
114. Himangsu Chakraborty vs L.I.C of India 1977 Lab. IC 622 (Cal HC) 225
115. Hind Construction and Engineering Co. Ltd. vs Their Workmen (1965) 2 SCR 83: AIR 1965 SC 917 288
116. Hindustan Antibiotics AIR 1967 SC 948 570
117. Hindustan Construction Co. Ltd. vs G.K. Patankar and Another AIR 1976 SC 907 293–94
(List of Cases continued )
(List of Cases continued )
Sl. No. Name of the Case Citation Page Number in Book
118. Hindustan Lever Ltd. vs Rammohan Roy AIR 1972 SC 1156 376
119. M/s. Hindustan Steel Ltd. vs Their Workmen 1970 LIC 102 394
120. Hindustan Steel Ltd. vs Workmen, Orissa 3 SCR 303: AIR 1973 SC 878 467
121. Hindustan Tin Worker vs Its Employees AIR 1979 SC 75 59, 448, 449, 450
122. Hindustan Tin Works vs Its Employees 1978 LIC 1667: AIR 1979 SC 75 351, 353, 448, 449, 450
123. Hookinsons vs Feraie (1857) 3 C.B. (N.S) 189 165, 311
124. Hotel and Catering Industry Training Board vs (1968) 1 WLR 1526, 1530 66
Automobile Proprietary Ltd.
125. Howrah-Amta Light Railway Co. Ltd. vs Central (1966) 2 LLJ 294, 302 (Pat HC) 512
Government Industrial Tribunal
126. Hukam Chand vs U.O.I AIR 1972 SC 2427 217
127. Hussain Bhai vs The Alath Factory Thezhilali Union, (1978) 4 SCC 257 47, 59, 486–89
Kozhikode and Others
128. Hydro-Engineers AIR 1969 SC 182 570
129. I.M.H. Press, Delhi vs Addl. Industrial Tribunal Delhi AIR 1961 SC 1168 349, 447
130. I.S.I. Case AIR 1976 SC 145 106–7
131. I.T.O vs M.C. Ponnoose (1970) 1 S.C.R 678 212
132. Imperial Tobacco Company of India Ltd. vs Its Workmen AIR 1962 SC 1348. 350, 447
(List of Cases continued )
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Sl. No. Name of the Case Citation Page Number in Book
133. India General Navigation and Rly Co. Ltd. vs Their Workmen AIR 1960 SC 219 348, 349, 350, 352, 353
445, 446, 447, 449, 450
134. India Marine Service (1963) 3 SCR 575: AIR 1963 SC 528 298
135. Indian Hume Pipe Co. Ltd. vs Workmen AIR 1960 SC 251: (1960) 2 SCR 32 478
136. Indian Iron and Steel Co. Ltd. vs Their Workmen 1958 SCR 667: AIR 1958 SC 130. 349, 393, 447
137. Indian Link Chain Manufacturers Ltd. vs Workmen (1972) (24) F.L.R 321 212, 223
138. Indian Standards Institution (Workmen) vs 1976 (2) SCR 138: AIR 1976 SC 145 61, 106
Indian Standards Institution
139. Inland Revenue Commrs. vs Ayrshire Employers Mutual (1946) 1 All ER 637 339, 437
Insurance Association
140. M/s. Ispahani Ltd. vs Employees Union (1960) 1 SCR 24: AIR 1959 SC 1147 511
141. J.K. Cotton Spinning and Weaving Mills Co. Ltd. 1961 (2) F.L.R. 529 198, 206, 366
vs State of U.P.
142. Jai Chand Sawhney vs Union of India (1969) 3 SCC 642 493, 494
143. Jalan Trading Co. (P) Ltd. vs D.M. Aney and Another AIR 1979 SC 233 530
144. Jalan Trading Co. Pvt. Ltd. vs Mill Mazdoor Union AIR 1967 SC 691 514, 530
145. James Clark (1944) 1 K.B. 566 165, 312
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Sl. No. Name of the Case Citation Page Number in Book
146. Jardine Henderson Ltd. vs Workmen 1962 Supp (3) SCR 382: 512
AIR 1963 SC 474
147. Judhisthir Chandra vs Mukherjee AIR 1950 Cal. 577 190
148. K. Savanth vs The Mysore State Road Transport AIR 1978 SC 1133 500–502
Corporation and Another
149. K.C.P. Employees Association, Madras vs 1978 I LLJ 322: AIR 1978 SC 474 531–33
Management of K.C.P. Ltd., Madras and Others
150. K.L. Gupta vs Bombay Municipal Corporation (1968) I SCR 674 558
151. K.S. Ramaswamy vs U.O.I 1977 1 LLJ 211: 1978 Lab IC 46 226
(Mad HC)
152. K.T. Rolling Mills Pvt. Ltd. vs M.R. Meher AIR 1963 Bom. 146 276, 463
153. Kajori Lal Agarwal vs U.O.I (1966) 3 SCR 141: AIR 1966 SC 1538 125
154. Kalyanmal Bhandari vs State of Rajasthan 1975 Lab. IC 790 (Raj HC) 212
155. Kamalaranjan vs Secy. of State AIR 1938 PC 281 342, 439
156. Kanhaiya Lal Gupta vs Ajeet Kumar Dey (1967) 2 LLJ 761 (All) 276, 463
157. Keshavananda Bharati vs State of Kerala AIR 1973 SC 1461: (1973) 4 SC 228 46, 114, 120
158. Keventers Karmachari Sangh vs Lt. Governor Delhi (1971) 2 LLJ 375 (Delhi) (DB) 260, 261
(List of Cases continued )
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Sl. No. Name of the Case Citation Page Number in Book
159. Killick Nixon Limited vs Killick and Allied Companies (1975) Supp SCR 453: 499
Employees Union (AIR 1975 SC 1778)
160. Komalprasad vs The Central India Spinning AIR 1978 SC 473 411
Weaving and Mfg Co. Ltd. and Another
161. L. Michael and Another vs M/s. Johnson Pumps Ltd. AIR 1975 SC 661 44, 51, 265–71, 412–17
162. L. Robert D’Souza vs Executive Engineer, Southern Rly. (1979) ILLJ 211 (Ker) 480
163. L.I.C. of India vs D.J. Bahadur AIR 1980 SC 2181 51, 52, 53, 54, 56
164. L.I.C. of India vs Sunil Kumar Mukherjee 1964 (8) F.L.R. 158 206, 215
165. Lalla Ram vs Management of D.C.M Chemical Works Ltd. AIR 1978 SC 1004 284–89
166. London and Blackwall Railway vs Limehouse District 26 LJ Ch 164: 69 ER 1048 366
Board of Works
167. M. Pontish vs Veeramallappa AIR 1961 SC 1107 110
168. M. Tilak and Co. vs Third Industrial Tribunal AIR 1959 Cal. 797 512
169. Madan Mohan Pathak vs U.O.I. (1978) 3 S.C.R. 334 183, 210, 212, 218, 220
170. Madhya Pradesh State Road Transport Corporation vs 1970 LIC 510 394
Industrial Court, M.P.
171. Madras State vs C.P. Sarathy AIR 1953 SC 53 137, 252
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Sl. No. Name of the Case Citation Page Number in Book
172. Magor and St. Mellons Rural District Council vs 1952 AC 189 342, 439
Newport Corporation
173. M/s. Mahabir Jute Mills Ltd. Gorakhpur vs Shibban Lal AIR 1975 SC 2057 152–58
Saxena and Others
174. Mahalaxmi Cotton Mills Ltd. Calcutta vs 1952 LAC 370 511
Mahalaxmi Cotton Mills Workers Union
175. Mahendra Singh Dhantwal vs Hindustan Motors Ltd. AIR SC 2062 277–83, 379–84
176. Malayalam Plantations Ltd. Cochin vs 1975 LIC 848: AIR 1975 (Ker) 86 543, 547
Inspector of Plantations, Mundakayam
177. Management of Bangalore, Woollen, Cotton and Silk Mills AIR 1968 SC 585 139, 246
Co. Ltd. vs The Workmen
178. Management of Bombay Co. Ltd. vs Workmen (1964) 7 SCR 277: AIR (1964) SCR 1770 512
179. Management of Borpukhurie Tea Estate vs AIR 1978 SC 992 385–87
The Presiding Officer, Industrial Tribunal, Assam and Another
180. Management of Churakulam Tea Estate vs Workman (1969) 1 SCR 931: AIR 1969 SC 998 511
181. Management of Hindustan Steel Ltd. vs The Workmen 3 SCR 303: AIR 1973 SC 878 467
182. Management of Hotel Imperial, New Delhi vs AIR 1959 SC 1342 274, 462
Hotel Workers Union
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Sl. No. Name of the Case Citation Page Number in Book
183. Management of Ritz Theatre (P) Ltd. vs Its Workmen AIR 1963 SC 295 392, 398, 399
184. Management of Safdarjung Hospital, New Delhi vs (1971) 1 SCR 177: 62, 64, 65, 68, 95, 99, 104–9,
Kuldip Singh Sethi AIR 1970 SC 1407 114, 120, 130
185. Management of U.B. Dutt and Co. vs Workmen of 1962 3 (SCR) 822: AIR 1963 SC 411 268, 330, 414, 430
U.B. Dutt and Co.
186. Management of Willcox Buckwell India Ltd. vs AIR 1964 SC 1166: (1965) 3 SCR 448: 479
Jagannath
187. Management of Wenger and Co. vs Workmen AIR 1964 SC 864 490
188. Managing Director National Garage vs (1967) ILLJ 545 (Pun) 480
J. Gonsalves Goodlass Nerolac Paints (P) Ltd. vs
Chief Commissioner
189. Maneka Gandhi (Mrs) vs UOI 1978 2 SCR 621 549
190. Mangaldas Narandas vs Payment of Wages Authority (1957) 2 LLJ 256 190
191. Maruti Mahipati Mullick vs Polson Ltd. 1970 Lab. IC 308, 310, 194
71 Bom. LR 655 (Bom. HC)
192. Mary Sewards vs Owner of the ‘Vera Curz’ (1884) 10 AC 59, 68 196, 198, 206, 366
193. May and Baker (1961) 2 ILJ 94 570
(List of Cases continued )
(List of Cases continued )
Sl. No. Name of the Case Citation Page Number in Book
194. Mazagaon Dock Ltd. vs Commissioner of Income Tax and 1951 S.C.R. 848 226
Excess Profit Tax
195. Md. Qasim Larry, Factory Manager, Sasamusa Sugar Works 1964 (9) FLR 115 193, 204
vs Md. Samsuddin and Another
196. Mersey Docks and Harbour Board vs Coggins and Griffith Ltd. 1947 AC 1 133
197. Model Mills AIR 1958 SC 311 349, 447
198. Moghul Steam Ship Co. 1892 A.C. 25 166, 313
199. Mohinder Singh Gill vs Chief Election Commissioner, (1978) 2 SCR 272 549
New Delhi
200. Mohmedalli vs UOI (1963) Supp. I SCR 993 558
201. Municipal Corporation of Delhi vs Rasal Singh, etc. AIR 1976 SC 2454 283–84
202. Municipal Corporation of Greater Bombay vs P.S. Malvenkar (1978) 3 SCR 1000: AIR 1978 SC 1380 334, 434
203. N.M. Desai vs Testeels Ltd. CA. No. 245 of 1970: 550
D/-17-12-1975 (SC)
204. N.M. Desai vs Testeels Ltd. and Another AIR 1980 SC 2124 379
205. Nagendra Nath Bora vs Commr. of Hills Division and 1958 SCR 1240: AIR 1958 SC 398 337
Appeals, Assam
(List of Cases continued )
(List of Cases continued )
Sl. No. Name of the Case Citation Page Number in Book
206. Narayanaswamy vs Presiding Officer (1971) 1 LLJ 310 (Mad) 192
207. Navinchandra vs Manager, Ahmedabad Co-op (1978) 19 Guj LR 108 337
Department Stores Ltd.
208. Newabbganj Sugar Mills Co. Ltd. vs Union of India (1976) 1 SCR 120 508
209. Oil and Natural Gas Commission vs Workmen AIR 1973 SC 968 376
210. Om Oil and Oilseeds Exchange Ltd., Delhi vs (1966) Supp. SCR 74: AIR 1966 SC 1657 482
Their Workmen
211. Organo Chemicals Industries and Another vs UOI and Others AIR 1979 SC 1803 547–65
212. Oriental Textile Finishing Mills, Amritsar vs (1972) 1 SCR 490: AIR 1972 SC 277. 350, 447
Labour Court Jullunder
213. P.H. Kalyani vs M/s. Air France, Calcutta (1963) 1 LLJ 697: AIR 1963 SC 1756 287, 337, 354, 451, 452
214. P.N. Kaushal vs UOI (1978) 3 SCC 558 551
215. P.P. Abubacker vs Union of India AIR 1972 Ker 103, 107 para 5 496
216. Panitole Tea Estates (1971) 3 SCR 774: AIR 1971 SC 2171 354, 451
217. Pannalal Binjraj vs UOI 1957 SCR 223 558
218. Patna Electric Supply Co. Ltd. Patna vs Bali Rai AIR 1958 SC 204 387
219. Pellas vs Neptune Marine Insurance Co. (1980) 5 CPD 34, 40 214
(List of Cases continued )
(List of Cases continued )
Sl. No. Name of the Case Citation Page Number in Book
220. Phulbari Tea Estate vs Its Workmen 1960 1 SCR 32: AIR 1959 SC 1111 393
221. Precision Bearings India vs Baroda Mazdoor Sabha AIR 1978 SC 419 497–500
222. Prem Nath Motors Workshop Pvt. Ltd. vs (1971) 22 Fac. LR 370 394
Industrial Tribunal Delhi
223. Premier Automobiles AIR 1975 SC 2238. 169, 212, 315, 316
224 Pritam Singh vs State of Madras (1950) SCR 453: AIR 1950 SC 169 296
225. Province of Bombay vs Bombay Municipal Corporation AIR 1947 PC 34 551
226. Provincial Transport Service vs State Industrial Court (1968) 3 SCR 650: AIR 1963 SC 114 350, 447
227. Punjab National Bank vs Its Workmen AIR 1960 SC 160 353, 393, 450
228. Quinn vs Leathem 1901 A.C. 495 166, 313, 348, 445
229. R.B.H.N. Jute Mills vs Provident Fund Commissioner 1958 I LLJ 598 (Pat) 552
230. R.S. Joshi STO vs Ajit Mills (1977) 4 SCC 98 552
231. R.V. Secretary of State 1973 2 All ER 103 471
232. R.V. Secretary of State for the Home Department ex p (1975) 2 WLR 1 (1995): 1 All ER 888: 126
Fire Brigades Union (1995) 2 AC 513 (CA)
233. Rajasthan Electricity Board vs Mohan Lal AIR 1967 SC 1857 363, 366
(List of Cases continued )
(List of Cases continued )
Sl. No. Name of the Case Citation Page Number in Book
234. Rajasthan State Electricity Board vs Mohan Lal 1976 (2) SCR 377: AIR 1967 SC 1857 115
235. Ram Kishore Sharma vs Addl. District Judge Saranpur 1969 All LJ 225: (1970 Lab JC 582) 495
236. Raman Nambissan vs State Electricity Board (1967) 1 LLJ 252 368
237. Ramnagar Cane and Sugar Co. Ltd vs Jatin Chakravorty 1960 (1) F.L.R. 411 176
(1950–67)S.C.L.J. 2369:
(1960) 3 S.C.R. 968
238. Rohtak Hissar District Electricity Supply Co. Ltd. vs (1966) 2 SCR 863 365
State of U.P.
239. Rohtas Industries vs Its Union AIR 1976 SC 425 44, 52, 58, 307–17, 336
240. Rookes vs Barnard (1964) 1 All ER 367 168, 315, 348, 445
241. Roshan Lal vs Union 1968 1 S.C.R 185 212
242. Royal Acquarium vs Parkinson (1892) 1 QB 431 339, 436
243. Royal Talkies, Hyderabad and Others vs AIR 1978 SC 1478 536–41
Employees State Insurance Corporation
244. Russell vs Russell 1987 AC 395 196
245. S. Narayanaswami vs G. Panneerselvam AIR 1972 SC 2284 342, 439
(List of Cases continued )
(List of Cases continued )
Sl. No. Name of the Case Citation Page Number in Book
246. Sadhu Singh vs State of Pepsu AIR 1954 SC 271 296
247. Samsher Singh vs State of Punjab (1975) I SCR 814: AIR 1974 SC 2192 329, 331, 332, 429, 431, 432
248. Sanghi Jeevaraj Ghewar Chand vs Secretary, Madras Chillies AIR 1969 SC 530: (1969) 1 SCR 366 275, 463, 514, 516, 517
Grain Kirana Merchants Workers Union
249. Santosh Gupta vs State Bank of Patiala AIR 1980 SC 1219 476–80
250. Sasa Musa Sugar Works (P) Ltd. vs Shobrati Khan MA AIR 1959 SC 923 354, 452
251. Satya Studios vs Labour Court (1961) 1 LLJ 105 192
252. Seaford Court Estates Ltd. vs Asher (1949) 2 All ER 155 110, 342, 440
253. Secretary Madras Gymkhana Club Employee’s Union 1968 (1) SCR 742: AIR 1968 SC 554 86, 87, 101, 102, 103, 105, 106,
vs Gymkhana Club 107, 109, 120, 131
254. Secretary, Haryana State Electricity Board vs AIR 1999 SC 116 488
Suresh and Others
255. Shambu Nath Goyal vs Bank of Baroda AIR 1978 SC 1088 136–38
256. Shankar Chakravarti vs Britannia Biscuit Co. Ltd. and Another AIR 1979 SC 1652 388–401
257. Shaw. vs D.P.P. 1962 AC 220 341, 438
258. Sheo Prasad vs Addl. District Judge, Moradabad AIR 1962 All 144 494
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Sl. No. Name of the Case Citation Page Number in Book
259. Shivnandan Sharma vs The Punjab National Bank Ltd. AIR 1955 SC 404 133
260. Shri Ram Swarath Sinha vs Belund Sugar Co. (1954) Lab AC 697 393
261. Shukla Manseta Industries Pvt. Ltd. vs Workmen 1977 (55) FLR 246 223
262. Shyamala Studios vs Kannu Devar (1966) II LLJ 428 (Mad) 281, 383
263. Siemens Engineering and Manufacturing Co. 1976 Supp. SCR 489 549, 550
of India Ltd. vs UOI
264. Sindhu Settlement Corporation Ltd. vs Industrial Tribunal AIR 1968 SC 529 137
265. Solicitor’s Case 1962 Supp (3) SCR 157: 85, 86, 88, 90, 107, 109, 120
AIR 1962 SC 1080
266. Sorrel vs Smith 1925 A.C. 700 166, 168, 313, 314
267. South Indian Bank Ltd. vs A.R. Chacko 1964 (8) FLR 118 194, 204, 212, 220, 221, 223
268. Sri Rama Machinery Corporation (P) Ltd. Madras vs (1966) II LLJ 899 (Mad) 281, 383
N.R. Murthi
269. State Bank of India vs R.K. Jain (1972) 1 SCR 755: 1972 LIC 13 393, 394, 395, 398, 399
270. State of Andhra Pradesh vs S. Sree Rama Rao (1964) 3 SCR 25: AIR 1963 SC 1723 337
271. State of Bihar vs Dr Asis Kumar Mukherjee (1975) 2 SCR 894: AIR 1975 SC 192 342, 440
(List of Cases continued )
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Sl. No. Name of the Case Citation Page Number in Book
272. State of Bihar vs S.K. Roy 1966 Supp. SCR 259: AIR 1966 SC 1995 125
273. State of Bombay vs The Hospital Mazdoor Sabha (1960) 2 SCR 866: AIR 1960 SC 610 74, 75, 80, 83, 106, 107, 109, 110,
113, 120, 121, 131, 144, 466, 470
274. State of Gujarat vs Pratamsingh Narsinh Parmar (2001) 9 SCC 713: 2002 SCC 46, 117
(L and S) 269
275. State of Orissa vs Dr (Miss) Binapani Dei AIR 1967 SC 1269 157
276. State of Punjab vs Jai Bir Singh (2005) 5 SCC 1 46
277. State of Punjab vs Labour Court Jullundur and Others AIR 1970 SC 1981 472–76, 561–65
278. State of Rajasthan vs Mst. Vidhyawati 1962 Supp. (2) SCR 989: 115
AIR 1962 SC 933
279. State of U.P. vs Jai Bir Singh (2005) 5 SCCI 45, 116–32
280. State of U.P. vs Babu Ram Upadhya (1961) 2 S.C.R 679 165, 212
281. State of U.P. vs Basti Sugar Mills Co. Ltd. AIR 1961 SC 420 at p. 426 528
282. Steel and General Mills Co. Ltd. vs (1972) 1 LLJ 284: (1971) 1 LIC 1356 276, 463
Additional District Judge, Rohtak
283. Steel Authority of India Ltd. vs National Union (2001) 7 SCC 1 46
Water Front Workers
(List of Cases continued )
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Sl. No. Name of the Case Citation Page Number in Book
284. Straw Board Manufacturing Co. vs Its Workmen AIR 1977 SC 941 43, 50, 565–71
285. Sukhdev Singh vs Bhagatram 1975 (30) F.L.R 283 (SC) 206, 212, 223, 363, 366, 367
286. Swadeshi Industries Ltd. vs Its Workmen AIR 1960 SC 1258. 447, 450
287. Tata Chemicals Ltd. vs Its Workmen AIR 1978 SC 828 172–78, 503–6
288. Tata Engineering and Locomotive Co. Ltd. vs S.C. Prasad (1969) 2 LLJ 799 289, 334, 434
289. M/s. Tata Iron and Steel Co. Ltd. vs Workmen AIR 1972 SC 1917 377
290. Tata Oil Mills Co. Ltd. vs Its Workmen 1964 7 SCR 555: AIR 1965 SC 155 287, 334, 434
291. Technological Institute of Textiles vs Its Workmen 1965 II LLJ 149 (SC) 141, 246, 248
292. The Ahmedabad Textile Industries Research Association 1961 (2) SCR 480: AIR 1961 SC 484 98, 99, 107
293. The Chartered Bank, Bombay vs The Chartered Bank (1960) 11 LLJ 222: AIR 1960 SC 919 267, 268, 330, 331, 334, 414,
Employee’s Union 415, 430, 431, 434
294. The Employers in Relation to Punjab National Bank vs AIR 1978 SC 481 132–35, 264
Ghulam Dastagir
295. The Indian Express Newspapers (Bombay) Pvt. Ltd. and AIR 1978 SC 1137 50, 254–60, 263
Another vs The Indian Express Newspapers (Bombay)
Employees Union and Others
(List of Cases continued )
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Sl. No. Name of the Case Citation Page Number in Book
296. The Jhagrakhan Collieries (P) Ltd. vs Shri. G.C. Agrawal, 1975 (30) F.L.R./175 (S.C.) 177
Presiding Officer, Central Govt. Industrial Tribunal-cum-
Labour Court, Jabalpur
297. The Lord Krishna Textile Mills vs Its Workmen (1961) 3 SCR 204: AIR 1961 SC 860 287
298. The Management of Indian Oil Corporation vs Its Workmen AIR 1975 SC 1856 50, 54, 193, 194, 373–78
299. The Management of Murugan Mills Ltd. vs Industrial AIR 1965 SC 1496: (1965) 2 SCR 148 267, 270, 281, 282, 330, 334, 414
Tribunal Madras 416, 430, 434
300. The Mumbai Kamgar Sabha Mumbai vs AIR 1976 SC 1455 44, 52, 55, 57, 506–20
M/s. Abdulbhai Faizallabhai and Others
301. The Queen vs Marshall Ex Parte Federated Clerks 1975 (132) CLR 595 103
Union of Australia
302. The Rambagh Palace Hotel, Jaipur vs AIR 1976 SC 2503 490–91
The Rajasthan Hotel Workers Union, Jaipur
303. The Senior Electric Inspector vs Laxmi Narayan Chopra 1962 SCR 146: AIR 1962 SC 159 111
304. The State Bank of India vs Shri N. Sundara Money AIR 1976 SC 1111 55, 466, 469–72, 479, 480
305. The Statesman Ltd. vs Their Workmen AIR 1976 SC 758 294–301
(List of Cases continued )
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Sl. No. Name of the Case Citation Page Number in Book
306. The Workmen of M/s. Firestone Tyre and Rubber Co. of AIR 1976 SC 1775 271–77, 280, 396, 397, 399, 459–64
India (P) Ltd. vs The Firestone Tyre and Rubber Co.
307. The Workmen Shift Incharge Substation vs AIR 1980 SC 511 53, 290–91
The Presiding Officer
308. Thiru Manickam and Co. vs State of T.N. (1977) 1 SCC 199: 1977 SCC (tax) 125
165 AIR 1977 SC 518
309. Thiruvenkataswami vs Coimbatore Municipality (1968) 1 LLJ 361 368
310. Thorpe vs Adam (1871) LR 6 CP 125 366
311. Tin Printers (Pvt.) Ltd. vs Industrial Tribunal (1967) 2 LLJ 677 400
312. Titaghur Paper Mills Co. Ltd. vs Ram Naresh Kumar 1961 1 LLJ 551 288
313. Trustee of Port of Bombay vs Premier Automobiles Ltd. (1974) 4 SCC 710: AIR 1974 SC 923 472
314. Tulsidas Khimji vs Workmen (1962) 11 LLJ 435: AIR 1963 SC 1007 512
315. U.P. State Electricity Board and Another vs Hari Shankar Jain AIR 1979 SC 65 55, 199, 206, 217, 361–69
316. Union of India vs Bungo Steel Furniture Pvt. Ltd. (1967) 1 SCR 324: AIR 1967 SC 1032 313, 343, 441
317. Union of India vs J.N. Sinha AIR 1971 SC 40 157
318. Union of India vs Hafiz Mohd IIR (1973) 2 Delhi 673 at 676: 469
APR 1975 Delhi 75 at 76
(List of Cases continued )
(List of Cases continued )
Sl. No. Name of the Case Citation Page Number in Book
319. United States vs American Trucking Association (1940) 310 U.S. 534 57, 340, 437
320. University of Delhi 1964 (2) SCR 703: AIR 1963 SC 1873 91, 92, 93, 94, 107, 109, 119
321. V.P. Gindroniya vs State of Madhya Pradesh AIR 1970 SC 1494 275, 462
322. Vasantlal Maganbhai Sanjanwala vs State of Bombay 1961 1 S.C.R. 341 227
323. Veiyra (M.A) vs Fernandez AIR 1957 Bom. 100: (1956) I LLJ 547 275, 462
324. W.M. Agnani vs Badri Das (1963) 1 LLJ 684 287
325. Watney Combe Reid and Co. vs Berners 1915 AC 885 199
326. Western India Automobile Association (1949) 1 LLJ 245 170, 317, 333, 433
1949 FCR 321: AIR 1949 FC III
327. Western India Match Co. Ltd. vs The Third Industrial AIR 1978 SC 311 301–2
Tribunal West Bengal and Others
328. Western India Match Co. Ltd. vs Their Workmen (1963) 2 LLJ 459 387
329. Western India Match Co. Ltd. vs Western India Match Co. AIR 1970 SC 1205: (1970) 3 SCR 370 158, 252
Workers Union
330. Workman of Dimakuchi Tea Estate vs 1958 SCR 1156: AIR 1958 SC 353 112
The Management of Dimakuchi Tea Estate
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Sl. No. Name of the Case Citation Page Number in Book

331. Workmen of Dewan Tea Estate vs Management AIR 1964 SC 1458: (1964) 5 SCR 548 275, 462
332. Workmen of Edward Keventers Pvt. Ltd. vs 1969 ILR Del 767 (DB) 260–62
Delhi Administration
333. Workmen of Hindustan Shipyard (Pvt) Ltd. vs (1961) 2 LLJ 526 (A.P.) 375
Industrial Tribunal, Hyderabad
334. Workmen of Indian Standards Institution vs Management (1960) 2 SCR 866: 61, 106
of Indian Standards Institute 1976 ILLJ SC 33
335. Workmen of Motipur Sugar Factory (Pvt) Ltd. vs (1965) 3 SCR 588: AIR 1965 SC 1803 350, 392, 447
Motipur Sugar Factory
336. Workmen of Sudder Office Chinnamare vs Management (1972) LIC 1262: (1971) 2 LLJ 620. 267, 268, 414, 415, 434
337. Workmen of Sudder Workshop of Jorehaut Tea Co. Ltd. vs AIR 1980 SC 1454 481–84
The Management of Jorehaut Tea Co. Ltd.
338. Workmen of Swadeshi Cotton Mills Co. Ltd. vs 1973 LIC 711 (All) 140, 246, 249
Swadeshi Cotton Mills Co. Ltd. Kanpur
339. Workmen of the Rajasthan Atomic Power Project vs AIR 1976 SC 441 1976 (32) 231–33
Management of Rajasthan Atomic Power Project FLR 90: 1976 LIC 315
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Sl. No. Name of the Case Citation Page Number in Book

340. Workmen of Tirumala Tirupathi Devasthanam vs AIR 1980 SC 604 530–31

Management and Another
341. Workmen vs M/s. Dharampal Premchand Saughandi (1965) 3 S.C.R (394) 177
342. Workmen vs New Egerton Woollen Mills 1969 (18) F.L.R. 228: (1969) 2 LLJ 782: 505
(1967–68) 32 FJR 182)
343. Yamuna Mills Co. Ltd vs Majdoor Mahajan Mandal, 1957 (1) LLJ 620 190, 191
Baroda and Others
344. Yogendra Nath Naskar vs CIT (1969) 1 SCC 555: (1969) 3 SCR 742 125
 Foreword

Social Justice and Labour Law—A Judge’s Foreword

Indian jurisprudence has many dimensions and labour law does occupy a prominent
judicial space by way of case law, as is evident from the profusion of rulings on Parts III
and IV of the Constitution and industrial statutes. The working class is not confined to
urban factories and technological services that are well organized, but extend to the vastly
dispersed villages of rural India. We are a socialist republic, as the Preamble to the Con-
stitution articulates . There are several statutes, that deal with the rights and duties of the
working people, which are enforceable through courts. Inevitably, trade unionism—with
political and economic ideologies—had to come up for their semantic construction before
the courts, especially the highest court, making the final pronouncement.
Judges have their biases, because they often belong to the bourgeoisie. Consequently,
capitalists resist socialist meanings, and labour injustice results in strikes and other indus-
trial disputes. It is in this context that I have had the opportunity to deal with trade
unions and explore the constructive role they play in producing harmony and peace,
better understanding and just settlement of disputes between managements and workers.
Without casting any reflections on the ‘robed brethren’ who rarely have the benefit of
industrial dispute in action, I must be forgiven for saying that Justice Gajendragadkar
was a pioneer in the field of labour law. During my time on the Bench, I took a liberal
view of the rights of labour, who are the actual builders of Bharat with sweat and toil and
hard engineering. There will be chaos in industrial jurisprudence if we do not evoke a
sense of justice in those whose sweat and toil as operators of production result in factories,
plantations and workshops. The great and now late D.A. Desai, Chinnappa Reddy and
quite a few other eminent jurists, including myself, have striven towards the creation of a
dynamic labour jurisprudence. Radical but realistic was my vision, shared by several of
my colleagues. Law assigns a construction worker the status not of a mere wage earner
but a skilled producer of goods and services.
Many questions arise as to what is an ‘industry’ and who is a ‘worker’, how law must
mediate in disputes, how the relations between workers and managements should be
fairly regulated and how far courts can intervene to ensure social justice and how healthy
conditions can be created through conciliation. I must frankly say that judges as a class
have an ethos not happily in favour of the working class. The Politics of the Judiciary,
written by Prof. Griffith, makes this clear:

Judges are the product of a class and have the characteristics of that class. Typically coming from
middle-class professional families, independent schools, Oxford or Cambridge, they spend
 Foreword 37

20 to 25 years in successful practice at the bar, mostly in London, earning very considerable
incomes by the time they reach their forties. This is not the stuff of which reformers are made,
still less radicals.

Winston Churchill once told the House of Commons:

The courts hold justly a high, and I think, unequalled pre-continence in the respect of the
world in criminal cases, and in civil cases between man and man, no doubt, they deserve and
command the respect and admiration of all classes of the community, but where class issues are
involved, it is impossible to pretend that the courts command the same degree of general con-
fidence. On the contrary, they do not, and a very large number of our population have been led
to the opinion that they are, unconsciously, no doubt, biases.

Lord Justice Scrutton, in an address to the University of Cambridge, observed:

Where are your impartial judges? They all move in the same circle as the employers, and they
are all educated and nursed in the same ideas as the employers. How can a labour man or a trade
unionist get impartial justice? It is very difficult sometimes to be sure that you have put yourself
into a thoroughly impartial position between two disputants, one of your own class and one not
of your class.

The points I have quoted above are not alien to the Indian forensic mentality. Cardozo’s
great book The Judicial Process also hints at judicial predilections. If the Constitution is to
receive fair curial treatment, judges must consciously negate the class character of the
higher judiciary in India that has had a tradition of feudal and colonial conditioning.
I must make it clear that I have had colleagues powerfully Left in tune with the Preamble
to the Constitution and true to their oath of office. The majority of the judges, however,
are of a different class, unwittingly shaped by their social milieu. Felix Frankfurter provides
an apt reminder:

For the highest exercise of judicial duty is to subordinate one’s personal pulls and one’s pri-
vate views to the law of which we are all guardians—those impersonal convictions that make a
society a civilized community, and not the victims of personal rule.

Brothers D.A. Desai and Chinnappa Reddy are precisely what the Constitution in its
Preamble emphasises as a tryst with the people of India.
I would not prolong these prefatory observations as the readers will read through the
book for themselves and be able to judge impartially from the socialistic perspective.
I know that there is a tendency, especially after American capitalist influence has gained
hold on Indian economic philosophy, of rejecting Nehru and Indira Gandhi; but this
trend must be corrected. A majority of judges, brought up contrary to the views of the
founding fathers, are inclined to ignore the progressive Preamble and the labour law set
out in Part IV of the Constitution. Industrial law, after US economic domination of
Indian legal thought, has reached the vanishing point of social justice jurisprudence.
History, in the long run, will rewrite the current pro-West verdict of the judiciary and
will vindicate what we, in our profound convictions, dreamt—India’s labouring people
in their vast majority would make India’s one billion and odd humans a happy family.
38 Social Justice and Labour Jurisprudence

Pro-US, critics notwithstanding, my consolation is that even Lord Denning had in a

letter to me written:

You have indeed been using your time to full advantage. Your book on Human Rights and the
Law will be of the greatest value to many. During your time on the bench, you were a leader of
thought on these matters and your judgements have received much acclaim. I find myself largely
in agreement with your point of view. Meanwhile, with all best wishes for success in all the
many things you still do so that others may learn of your wisdom.

Justice V.R. Krishna Iyer

 Preface

The labour legislations that govern the industrial relations aspect—namely the Trade
Unions Act, 1926; the Industrial Employment (Standing Orders) Act, 1946; and the
Industrial Disputes Act, 1947—historically contributed immensely to the growth of labour
jurisprudence in India. A clear understanding of the content of these principal legislations
is the first and foremost need. The labour legislation would see the light of the day, with
a clear presumption that it is an adequate code in meeting the whole purpose meant under
the long title to it. But when put into practice in a country like India with its myriad
problems, many uncertainties and legislative gaps, advertent or inadvertent, are found in
meeting the purposes. In this context, the role of the judiciary is paramount in maintaining
regularity and certainty. The immediate post-Constitutional period witnessed the apex
court, under Article 136 of the Constitution, convinced—contrary to the apprehensions
of the first Law Commission that ‘labour matters were thrust upon a Court which has
not the means or materials for adequately informing itself about the different aspects of
the questions which arise in these appeals and therefore finds it difficult to do adequate
justice’—that it could not only entertain matters from the labour courts and tribunals,
but also expressed itself decisively and comprehensively on every subject that entered into
labour–management relations. The credit for this initial step should go to the late Justice
Gajendragadkar, former Chief Justice, along with his brethren judges for rendering invalu-
able decisions on labour matters, which in fact laid solid foundations as far as labour
jurisprudence in India is concerned. Later, immediately after the Keshavananda Bharathi
case, it was historically perceived that the apex court had elevated with pro-socialist judges.
In this background, the contribution of Justice V.R. Krishna Iyer to the growth of labour
jurisprudence was viewed as pro-labour .
It is agonising to note that the labour laws, especially the laws relating to industrial
relations, are perceived by employers in the country as rigid, restricting their freedom to
carry on business with flexible labour so as to meet the competitive situations in the global
market. Also, there is an impression that the awards of the industrial courts have made
employers shell out huge amounts by way of back wages in case of a small lapse in con-
ducting the domestic enquiry, which has left their business in ruins. No doubt the chang-
ing perceptions of the global market may require certain reforms in the area of industrial
relations law in the country, specially in the areas relating to retrenchment and closure.
But at the same time, the prevailing economic scenario of the country should be kept in
mind—the percentage of work force made up by the unorganised sector in the country’s
total working population, their wage levels, their pattern of employment, the prevailing
social security measures, and their social and educational status.
40 Social Justice and Labour Jurisprudence

On the other hand, the workers and their organisations are vexed by the time-consuming
processes involved in the adjudicating system. Already substantial amounts of information
are available, through various studies, as to the reasons for such delay. This needs close
examination in order for apt conclusions to be drawn. The statutory mandate of prescribing
a time limit—under Section 10(2A) of the Industrial Disputes Act, 1947—within which
the labour courts and the tribunals have to submit awards, whether in cases of individual
disputes or in industrial disputes, in the order of reference by the appropriate government
has become redundant in view of the experience gained. This was the major concern ex-
pressed by Justice V.R. Krishna Iyer while deciding labour disputes. The finger must be
pointed towards the legislature for this lapse of continuing without any reforms in this
area for years.
In this book the labour judgements delivered by Justice V.R. Krishna Iyer, both speaking
for the majority and in terms of the judgements concurring with the majority view, are
placed on record contextually in accordance with their subject content as per the framework
of industrial laws in this country. The authors place on record their own observations to
negate the contrary views expressed with regard to Justice Krishna Iyer’s commitment in
deciding the labour matters. The critics may be correct in their assertion that at one stage
of his tenure, i.e., while deciding the Bangalore Water Supply and Sewerage Board case,
he might have yielded too much in expanding the scope of the definition of ‘industry’;
but it was done with a qualification, urging the Parliament to step in with a legislative re-
form, making his intention clear. Throughout his role as a judge of the apex court, Justice
V.R. Krishna Iyer has demonstrated constructively the art of interpretating the provisions
of labour legislations with the technicalities involved therein wherever there is ambiguity
or inconsistency. The spirit and essence of the Directive Principles of State Policy under
Part IV of the Constitution are what he held sacrosanct while he interpreted the provisions
of labour welfare legislations. Where the law is sole in its intention, his approach was to
interpret the spirit of it and the circumstances under which it has emanated from. Where
the law contained a gap, the manner in which he filled the gap by solely confining himself
to the long title of the legislation is admirable.
Of course, there are also instances wherein he interfered with the awards of the labour
courts and the industrial tribunals when they failed to follow what the legislation provided
for, though such decisions went against the labour.
The purpose of this work is to make very clear certain key aspects of industrial relations
in India to those within the country and to the outside world, with a view to impressing
upon the reader that the labour laws are not harsh but humane, oriented towards providing
a protective mechanism for the economically weaker sections of this vast country.
The authors pay tribute to Dr A. Jayagovind, Vice-Chancellor of the prestigious Na-
tional Law School of India University, Bangalore, and Prof. Babu Mathew, Professor (on
Lien), National Law School of India University, Bangalore, for their sincere inspiration,
encouragement and support in this endeavour. The authors express their deep sense of
gratitude to Mr Sachin Biraj, Research Officer, Centre for Labour Studies, Mrs Bernadine,
Project Research Officer, and Mrs Pushpa of the Centre for Child and Law for their in-
valuable support in completing this work. The authors place on record their indebtedness
to the Humanist Institute for Cooperation with Developing Countries, The Netherlands
(HIVOS) for their valuable financial support in completing this work.
 Preface 41

Finally, the fundamental purpose of this work is in one way to give a clear understanding
of the very linkage between labour issues and Constitutional philosophy as perceived by
Justice V.R. Krishna Iyer, and clarify the art of interpretation and understanding of the
provisions of various labour legislations for students of law, researchers, academics, trade
union organisations, and managerial persons. This is presented with due respect to the
members of the bar and judicial fraternity in India.

I. Sharath Babu
Rashmi Shetty

Disclaimer: All judgements, acts and laws in this book have been reproduced as it is
from the original. The publishers are not liable for any issues that might arise therefrom.
 Chapter 1

Introduction

Judges occupy the public bench of justice. They implement the public’s sense of justice.
If the courts are the fulcrum of the justice system, there is a strong case for the reform of
court methodology and bestowal of attention on efficient management of judicial admin-
istration. Otherwise, the courts may be so overloaded or so mismanaged that they grind
to a halt and the exercise of citizens’ rights is discouraged or frustrated. A vital aspect of
judicial remedies is speeding the pace of litigation ‘from the cradle to the grave’. We are
reluctant to make these self-critical observations towards putting our house in order, but
when the consumers of justice—such as workmen—lose interest in the judicial process,
legislative unawareness of the research and development of the courts and a simplification
and acceleration of the judicative apparatus become matters of national concern. Law’s
delays are, in some measure, caused by legislative inaction towards making competent,
radical changes in the procedural laws and sufficient financing and modernising of the
justice system a high-priority programme.1
Opposed to the traditional industrial culture of open competition or laissez faire, the
present structure of industrial law is an outcome of long-term agitation and struggle by
the working class for participation in industries for their growth and profits on an equal
footing with the employers. Therefore, in interpreting the industrial law, which aims at
promoting social justice, the interests of employers, employees and, in a democratic society,
the people as a whole, who are the ultimate beneficiaries of the industrial activities, have
to be kept in view.2
Several critical questions arose with regard to the interpretation of various aspects of
the Industrial Disputes Act, 1947 and other related labour legislations immediately after the
commencement of the Constitution. On all these questions, our courts have accepted the
principles prevailing by way of precedents and the interpretation of the statutes, considering
the socio-economic background from which these laws have emanated.
The decisions rendered by his lordship Justice V.R. Krishna Iyer, including those wherein
his coordination in delivering the dominant view was involved in the area of labour law,
are central to this work. In every decision, his lordship referred to the previous ratio pre-
vailing on the point and has analysed and applied the ratio while deciding similar issues
with authority. Where the law was silent on the issue and where there was no prevailing
ratio on the issue, Justice Krishna Iyer with precision and the application of interpretative
skills decided the cases unambiguously. This way, in judicial terms, is called the ‘creativity
of the judge’. This applied to important areas of industrial relations, where the Parliament
construed the purpose by reading between the lines of the provisions of said legislations
and Justice Krishna Iyer deals with this without leaving any impression of having gone
beyond the statutory implication.
44 Social Justice and Labour Jurisprudence

Equal credit is richly deserved by the judges who occupied posts in the apex Court
immediately after the commencement of the Indian Constitution. They are Justice
P.B. Gajendragadkar, Justice K.N. Wanchoo, Justice K.C. Das Gupta, Justice Pathanjali
Sastri, Justice J.M. Shelat, Justice Grover, Justice K.S. Hegde, Justice H.R. Khanna, Justice
Jaswant Singh, Justice D.A. Desai, Justice O. Chinnappa Reddy and Justice P.B. Sawant.
An immense contribution to labour jurisprudence immediately after the commencement
of the Constitution was from Justice P.B. Gajendragadkar, who rendered labour judgements
with great clarity and precision within the confinements of the Constitution and the
relevant statutory provisions. Of course, at the same time, he was very cautious in adhering
to the norms of industrial discipline to be followed by an industrial worker. The Consti-
tution was the guiding principle for these judges in deciding labour matters. The Directive
Principles of State Policy embodied in Part IV of the Constitution were the spirit enshrined
in the judgements of this era.
In this work, every case wherein either Justice Krishna Iyer’s majority view or his con-
current view were involved has been discussed at length in order to give readers a clear
understanding of the judgement. His role as a judge involved rewriting the following
provisions/areas under labour legislations. This was done in keeping with the Constitu-
tional mandate under the Directive Principles of State Policy under Part IV as well as the
object with which the labour legislations were enacted. While deciding each case, he
went beyond the routine to consider the issue carefully with a view that such decisions
would guide the deciding of similar cases in future. At the same time, he sounded a note
of caution: that while exercising the wider power under Article 136, the Supreme Court
must have due regard for the Constitutional limitations on Article 133(1) and owe alle-
giance to those restraints save in exceptional cases.

1. Interpretation of the definition of ‘industry’ under Section 2(j) of the Industrial Disputes
Act, 1947.3
2. Clarification of the meaning of the term ‘undertaking’ within the scope of the Industrial
Disputes Act, 1947.4
3. Legally limiting the scope of the prerogative of the employer in dismissing the workman on
the ground of ‘loss of confidence’.5
4. Defining the scope of the operation of Section 33(2)(b), i.e., whether it goes beyond the
scope of acts of misconduct specified under the standing orders of the establishment.
5. Whether the scope of the powers of the arbitrator under Section 10A of the Industrial
Disputes Act, 1947, covers the matters specified as outside the scope of the said Act.6
6. The antagonistic relationship between a claim for compensation for tortuous liability and
the definition of ‘industrial dispute’ under Section 2(k) of the Industrial Disputes Act,
1947.7
7. The hard question relating to labour employed through a middleman and their claim for
absorption as regular employees of the principal employer in situations where the provisions
of the Contract Labour (Regulation & Abolition) Act, 1970, are defeated in employing
such labour.8
8. Does Section 11A of the Industrial Disputes Act, 1947, include an arbitrator?9
9. Whether mass dismissal for participating in an illegal strike amounts to discharge simpliciter
or discharge for misconduct.10
10. Entitlement to customary bonus by the workmen—the scope of Section 17 and Section 34
of the Payment of Bonus Act, 1965.11
 Introduction 45

There is mention in the judgements delivered by Justice Krishna Iyer pertaining to

grey areas in the legislations, relating to the position of other staff employed in the Con-
stitutional functions of the government12 and the prohibition of strikes during the pen-
dency of the proceedings before the authorities specified in Section 23(a) of the Industrial
Disputes Act, 1947.13
Also one can find a noble gesture from Justice Krishna Iyer, while deciding cases
involving a workman initiating flawed proceedings in respect of money due from the
employer under special labour legislations. After having settled the right position of law
by quashing the award of the tribunal, he disposed of the matter with an assurance from
the employer’s counsel that the amount due would be paid to the workman without put-
ting him to the hardship of repeating the proceedings to recover the money due.

Labour Issues—Attitude of the Judiciary of Late

The Indian judicial experience is unique. Judicial accountability was very much in
question in the first two decades of the Supreme Court, from 1950 to 1973. There were
clashes between the Supreme Court’s decisions on property and on agrarian and eco-
nomic reform, and the Government’s view that the Supreme Court was unsympathetic and
at times hostile to its legislation on such matters. However, after 1973, there has been no
such problem as the judiciary changed its direction.14 But the recent years’ developments
in the labour judgements of the Supreme Court are very much a cause for concern. For
nearly a decade, during the liberalisation era, the Indian judiciary has exhibited a trend of
insensitivity towards upholding the prevailing political economy of the country as far as
the issues pertaining to labour rights are concerned. Of late, the Supreme Court has
rendered certain judgements pertaining to the primary aspects of labour rights and indus-
trial relations recognised over the years, leading to certain concerns.
Today no one speaks of judges’ accountability for their judgements in labour matters.
The present scenario is that many state governments have either declared some regions
‘exclusive economic zones’, excluding them from the purview of the labour laws, or have
provided exemptions to many sectors from the application of vital labour laws. The strength
of the organised-sector workforce is receding everyday. The workers of the unorganised
sector constitute 93 per cent of the total working population in the country, and they are
working in totally exploitative conditions without any protective coverage under various
labour legislations. It is equally painful to note that the Central Trade Union Movement
in India has fallen way behind in addressing these issues.
Labour jurisprudence in India has a history of more than five decades, emanating
from the Directive Principles of State Policy in the Constitution. This is what the Supreme
Court prior to the regime of Justice Krishna Iyer and during his regime insisted upon and
incorporated while delivering its decisions. Today this soundness in the judgements relat-
ing to labour matters may be spoken or felt but no remedy is provided.15
In the recently decided State of UP vs Jai Bir Singh,16 a five-judge bench of the court
held that:

The word ‘industry’ seems to have been redefined under the Amendment Act keeping in view
the judicial interpretation of the word ‘industry’ in the case of Bangalore Water Supply.17 Had there
46 Social Justice and Labour Jurisprudence

been no such expansive definition of ‘industry’ given in Bangalore Water Supply18 case, it would
have been open to Parliament to bring in either a more expansive or a more restrictive definition
of industry by confining it or not confining it to industrial activities other than sovereign functions
and public welfare activities of the State and its departments. Similarly, employment generated
in carrying on of liberal professions could be clearly included or excluded depending on social
conditions and demands of social justice. Comprehensive change in law and/or enactment of
new law had not been possible because of the interpretation given to the definition of ‘industry’
in Bangalore Water Supply19 case. The judicial interpretation seems to have been one of the in-
hibiting factors in the enforcement of the amended definition of the Act for the last 23 years.
The Supreme Court must, therefore, reconsider where the line, excluding some callings, services
or undertakings from the purview of ‘industry’ should be drawn and what limitations can and
should be reasonably implied in interpreting the wide words used in Section 2(j). That no doubt
is rather a difficult problem to resolve more so when both the legislature and the executive are
silent and have kept an important amended provision of law dormant on the statute-book.
It is not necessary to say anything more and leave it to the larger Bench to give such meaning
and effect to the definition clause in the present context with the experience of all these years and
keeping in view the amended definition of ‘industry’ kept dormant for long 23 years. Pressing
demands of the competing sectors of employers and employees and the helplessness of the
legislature and the executive in bringing into force the Amendment Act compel this Bench, to
make the reference.
The decision in Bangalore Water Supply20 is not a unanimous decision. Of the five Judges who
constituted the majority, three have given a common opinion but two others gave separate
opinions projecting a view partly different from the views expressed in the opinion of the other
three Judges. Beg, C.J. having retired had no opportunity to see the opinions delivered by the
other Judges subsequent to his retirement. Krishna Iyer, J. and the two Judges who spoke through
him did not have the benefit of the dissenting opinion of the other two Judges and the separate
partly dissenting opinion of Chandrachud, J., as those opinions were prepared and delivered
subsequent to the delivery of the judgment.
Let the cases be now placed before Hon’ble Chief Justice of India for constituting a suitable
larger Bench for reconsideration of the judgment of this Court in the case of Bangalore Water
Supply.21

Thanks are due to the Supreme Court for conducting detailed, principled, empirical
research on the Bangalore Water Supply22 decision. If one proceeds in this manner in re-
spect of every case decided by the Supreme Court, that may be the best order of the day.
The background for constituting the five-judge bench on a reference made in the
State of Punjab vs Jai Bir Singh23 was due to apparent conflict between the judgements of
two different benches of the Supreme Court on a question as to whether ‘Social Forestry
Department’ of the state, which is a welfare scheme undertaken for the improvement of
the environment, would be covered by the definition of ‘industry’ under Section 2(j) of
the Industrial Disputes Act, 1947, in the cases of Chief Conservator of Forests vs Jagannath
Maruti Kondhare 24 (of three judges) and State of Gujarat vs Pratamsingh Narsinh Parmar 25
(of two judges).
The Supreme Court ought not to have shown such a concern since the decision of the
three judges would prevail in the circumstances. Moreover, the norm in jurisprudence
that a smaller bench of the apex Court is always bound by the decision of a larger bench
is seriously threatened in the circumstances.26 If this be the situation, why may not a
smaller bench appeal to the Hon’ble Chief Justice of India to reconsider the decision
in the Kesavananda Bharati27 case and the decision in the Steel Authority of India28 case?
 Introduction 47

One may even entertain a motion that this must be a plausible approach to nullifying the
pragmatic efforts of Justice Krishna Iyer in the Bangalore Water Supply 29 case, with regard
to the definition of ‘industry’ under the Act.
Was this exercise by the Supreme Court really necessary? The long title of the Industrial
Disputes Act, 1947, clearly provides for the investigation and settlement of industrial
disputes and for certain other purposes. As long as the management transparently exer-
cises its powers in maintaining industrial discipline by having a clear policy within the
managerial level, the situation should not warrant the extent of adverse effects suffered
when matters reach the level of adjudication. If the approach of the Supreme Court is to
narrow down the definition of ‘industry’ under the Act on the felt grounds, then it throws
hundreds of labourers into the open market, as ‘unemployed’, without having any forum
for the redressal of their grievances. Civil servants who are out of the purview of the
Industrial Disputes Act, 1947, have remedies under the Constitution for the redressal of
their grievances. But the employees who possess the character of neither ‘civil servant’ nor
‘workman’ under the Industrial Disputes Act, 1947, are left in despair, without any remedy
under the present competitive global economy. There is no answer yet from the apex
Court on this important need of the hour. Unlike Britain, we do not have comprehensive
employment laws in India that deal with the employment-related rights of employees
in the event of abrupt termination, dismissal or other related grievances, other than the
Industrial Disputes Act, 1947.30
After all, the Supreme Court need not come down to the state of showing a grave
concern for the industry and baptising their hire-and-fire policy at the cost of the starving
labouring masses in India. Of course, recent decisions of the Supreme Court in enforcing
industrial discipline as pertaining to acts of misconduct on the part of workmen is wel-
come, since judges like C.J. Gajendragadkar and Krishna Iyer have shown great concern
for industrial discipline while dealing with such matters.
The views of the nation on certain matters may definitely change and, unconsciously,
judges interpret the law to correspond with the changes in national views, circumstances
and progress. The most precious rights in any state are those of justice and equality. It
is quite possible that gradually inroads may be made on these by the force of circumstances
following the evolution of new national ideas which the yawning void of the future con-
ceals from us. Yet the highest judiciary must lead the way with circumspection, keeping
in view the social realities of our society. It should not yield to say that the political phil-
osophy and economic necessity of the dominant classes may animate legal theory.

NOTES

1. Justice V.R. Krishna Iyer’s observation in Straw Board Manufacturing Co. vs Its Workmen, AIR 1977 SC 941
at para 3.
2. State of UP vs Jai Bir Singh (2005) 5 SCC at para 33.
3. See Bangalore Water Supply and Sewerage Board vs A. Rajappa and Others. (1978) 2 SCC 213: AIR 1978 SC.
4. See M/s Avon Services Production Agencies (P) Ltd vs Industrial Tribunal. AIR 1979 SC 170. The same was
nullified by an amendment act of 1982, by inserting section 2(ka).
5. See L. Michael & another vs M/s Johnson Pumps India Ltd. AIR 1975 SC 661.
6. See Rohtas Industries vs Its Union. AIR 1976 SC 425.
7. Ibid.
8. See Hussainbhai vs The Alath Factory Tezhilali Union, Kozhikode and Others. (1978) 4 SCC 257.
9. See Gujarat Steel Tubes Ltd. vs Gujarat Steel Tubes Mazdoor Sabha and Others. AIR 1980 SC 1896.
48 Social Justice and Labour Jurisprudence

10. See Gujarat Steel Tubes Ltd. vs Gujarat Steel Tubes Mazdoor Sabha and Others. AIR 1980 SC 1896.
11. See The Mumbai Kamgar Sabha Mumbai vs. M/s Abdulbhai Faizulbhai. AIR 2976 SC 1455.
12. In Bangalore Water Supply and Sewerage Board vs A. Rajappa and Others (1978) 2 SCC 213 : AIR 1978 SC
548 (para 74), it was observed that: ‘although we are not concerned in this case with those categories
of employees who particularly come under departments charged with the responsibility for essential
constitutional functions of government, it is appropriate to state that if there are industrial units severable
from the essential functions and possess an entity of their own it may be plausible to hold that the employees
of those units are workmen and those undertakings are industries. A blanket exclusion of every one of the
host of employees engaged by government in departments falling under general rubrics like, justice, defence,
taxation, legislature, may not necessarily be thrown out of the umbrella of the Act. We say no more except
to observe that closer exploration, not summary rejection, is necessary.’
13. See Gujarat Steel Tubes Ltd. vs Gujarat Steel Tubes Mazdoor Sabha and Others. AIR 1980 SC 1896. At para
108, it is observed that: ‘Prefatory to the discussion about the factum of misconduct and its sequel, we
must remind ourselves that the strike was illegal, having been launched when another industrial dispute
was pending adjudication. Section 23(a) appears, at a verbal level, to convey such a meaning although
the ambit of sub-clause (a) may have to be investigated fully in some appropriate case in the light of its
scheme and rationale. It looks strange that the pendency of a reference on a tiny or obscure industrial
dispute—and they often pend too long—should block strikes on totally unconnected yet substantial and
righteous demands. The constitutional implications and practical complications of such a veto of a valuable
right to strike often leads not to industrial peace but to seething unrest and lawless strikes.’
14. Andhyarujina. T.R. 2005. ‘Judicial Accountability: India’s Methods and Experience’, in Cyrus Das and
K. Chandra (eds), Judges and Judicial Accountability, p. 101. Delhi: Universal Law Publications Co. (P) Ltd.
15. See Steel Authority of India Ltd vs National Union Waterfront Workers (2001). 7 SCC1. The fundamental
issue involved in the case was ‘when once the contract labour system was duly abolished by the appro-
priate Government under section 10 of the Contract Labour (Regulation & Abolition) Act, 1970, whether
the erstwhile contract labour are entitled to be absorbed automatically as the regular employees of the
principal employer’. The court unprovokingly reversed the previous ratio laid down by the court in Air
India Statutory Corporation vs United Labour Union (1997). 9 SCC 377, and held that such workers are not
entitled to such privilege (at paras 89 and 125[3]).

Further, the court in that context held (at paras 8 and 9)

that the history of exploitation of labour is as old as the history of civilization itself. There has been an
ongoing struggle by labourers and their organizations against such exploitation but it continues in one
form or the other. The Industrial Disputes Act, 1947, is an important legislation in the direction of at-
taining fair treatment to labour and industrial peace, which are the sine qua non for sustained economic
growth of any country. After the advent of the Constitution of India, the State is under an obligation to
improve the lot of the workforce. Articles 23, 38, 39, 43, 43-A, 14 and 15 are relevant in this regard. The
Preamble to the Constitution is the lodestar and guides those who find themselves in a grey area while
dealing with its provisions. It is now well settled that in interpreting a beneficial legislation enacted to
give effect to the Directive Principles of State Policy which is otherwise Constitutionally valid, the con-
sideration of the court cannot be divorced from those objectives. In a case of ambiguity in the language
of a beneficial labour legislation, the courts have to resolve the quandary in favour of conferment of,
rather than denial of, a benefit on the labour by the legislature but without rewriting and/or doing vio-
lence to the provisions of the enactment.

16. (2005) 5 SCC.

17. Bangalore Water Supply and Sewerage Board vs A. Rajappa and Others (1978) 2 SCC 213: 1978 SCC
(L&S) 215.
18. Ibid.
19. Ibid.
20. Ibid.
21. Ibid.
22. Ibid.
23. (2005) 5 SCC 1.
24. (1996) 2 SCC 293.
25. (2001) 9 SCC 713.
 Introduction 49

26. As to this, the court has justified its stance on the following grounds: ‘A necessity to re-examine the deci-
sion rendered in Bangalore Water Supply was felt in Coir Board Case (1998) 3 SCC 259 wherein it was ob-
served that:

Looking to the uncertainty prevailing in this area and in the light of the experience of the last two
decades in applying the test laid down in the case of Bangalore Water Supply it is necessary that the
decision is reexamined. The experience of the last two decades does not appear to be entirely happy.
Instead of leading to industrial peace and welfare of the community (which was the avowed purpose of
artificially extending the definition of industry), the application of the Industrial Disputes Act, 1947 to
organizations, which were quite possibly not intended to be so covered by the machinery set up under
the Act, might have done more damage than good, not merely to the organizations but also to employees
by the curtailment of employment opportunities.

An order of reference to the Chief Justice for constituting a larger Bench of more than seven judges, if
necessary, was passed. However, when the matter was listed before a three-Judge Bench, the request for
constituting a larger Bench was refused both on the grounds that the Industrial Disputes Act had undergone
an amendment and that the matter did not deserve to be referred to a larger Bench as the decision of
seven Judges in Bangalore Water Supply case was binding on Benches of less than seven Judges. But no
such inhibition limits the power of the present Bench of five Judges which has been constituted on a
reference made due to apparent conflict between the judgments of two different Benches of the Supreme
Court. The experience of Judges in Coir Board case was not derived from the case in which the observations
were made. The experience was from the cases regularly coming to the Supreme Court through the
Labour Courts. It was experienced by all dealing in industrial law that overemphasis on the rights of the
workers and undue curtailment of the rights of the employers to organize their business had given rise to
a large number of industrial and labour claims resulting in awards granting huge amounts of back wages
for past years, allegedly as legitimate dues of the workers, who were found to have been illegally terminated
or retrenched. Industrial awards granting heavy packages of back wages sometimes result in taking away
the very substratum of the industry. Such burdensome awards in many cases compel the employer having
moderate assets to close down industries causing harm to interests of not only the employer and the
workers but also the general public who is the ultimate beneficiary of material goods and services from
the industry. The awards of reinstatement and arrears of wages for past years by Labour Courts by
treating even small undertakings of employers and entrepreneurs as industries is experienced as a serious
industrial hazard particularly by those engaged in private enterprises. The experience is that many times
idle wages are required to be paid to the worker because the employer has no means to find out whether
and where the workman was gainfully employed pending adjudication of industrial dispute raised by
him.

Exploitation of workers and the employers has to be equally checked. But law and particularly industrial
law needs to be so interpreted as to ensure that neither the employers nor the employees are in a position
to dominate the other. Both should be able to cooperate for their mutual benefit in the growth of indus-
try and thereby serve public good.

27. Keshavananda Bharati vs State of Kerala. AIR 1973 SC 1461: (1973) 4 SC 228.
28. Bangalore Water Supply and Sewerage Board vs A. Rajappa and Others. (1978). 2 SCC 213: 1978 SCC
(L&S) 215.
29. Ibid.
30. In the absence of such an approach, the numerous problems needing solution that now arise in the shape
of industrial disputes cannot be tackled satisfactorily, and this is why every civilised government has thought
of a machinery of conciliation officers, boards and tribunals for the effective settlement of disputes.
 Chapter 2

Industrial Jurisprudence

Introduction

In this chapter, various aspects relating to the concept of industrial jurisprudence, the
Constitutional commitment to labour and the principles of interpretation of labour
legislations—as dealt with by Justice Krishna Iyer while deciding labour cases—have
been analysed with a view to restating the position on these. Of course, the Supreme
Court too has several times touched upon these issues while deciding labour cases. It is,
however, in order to demonstrate Justice Krishna Iyer’s trendsetting vision of labour juris-
prudence that these aspects have been dealt here.
Industrial jurisprudence is not a static, rigid code of cold text, but dynamic, burgeoning
and warm with life. To the Biblical interrogation ‘What man is there of you, who if his
son asks bread, will give him a stone?’,1 it replies emphatically: ‘None’
Our industrial jurisprudence strives to treat capitalists and labour as co-sharers and to
break away from the tradition of labour’s subservience to capital.2
The primary concern of industrial jurisprudence is to maintain peace among the various
parties and ensure the contentment of the workers, the end product being increased pro-
duction informed by distributive justice. Law, especially labour law, is the art of establishing
economic order sustained by social justice. It aims at pragmatic success, but is guided by
value-based realities. It believes in relativity and rejects absolutes. Article 43A—which
emphasises the workers’ role in production as partners in the process—read in the light of
the earlier accent on workers’ rights and social justice, accords a new status and sensitivity
to industrial jurisprudence in our ‘socialist republic’. This social philosophy must inform
interpretation and adjudication—a caveat needed because precedents become time-bound
and no longer appropriate as the societal ethos progresses. The golden rule in a rapidly
changing system is that there are no golden rules. We should be guided by realistic judicial
responses to societal problems against the backdrop of the new radical values implied in
reserving ‘social justice’ to labour, who are the production backbone of the nation.3
Industrial law in India has had many twilight patches, as illustrated by the problem of
an employee whose services have been terminated simpliciter by the management. Two
socially vital factors must inform the understanding and application of industrial juris-
prudence. The first is the Constitutional mandate of Part IV, obligating the state to make
‘provision for securing just and humane conditions of work’. Security of employment is
 Industrial Jurisprudence 51

the first requisite of a worker’s life. The second, equally axiomatic consideration is that a
worker who wilfully or anti-socially holds up the wheels of production or undermines
the success of the business is a high risk and deserves, in the industrial interest, to be re-
moved without tears. Legislation and judicial interpretation have woven the legal fabric
based on these patterns.4
To lose sight of the crucial nature of legislation—that is, in terms of the role of industrial
disputes and their settlement by law—and to regard it as mere enactment with little bear-
ing on the terms and conditions of service in enterprises is to miss the distinctiveness of
genre, unique flavour and legislative quintessence of the Industrial Disputes Act.5
Law is a form of order, and good law must necessarily mean good order. The roots of
jurisprudence lie in the soil of society’s urges and it blooms with nourishment from the
humanity it serves. To petrify statutory constructions by imposing pedantic impediments
and to forget that the law of all laws is that the welfare of the people is paramount, is to
bid farewell to the spirit of our Constitutional order.
The Constitutional bias towards ensuring social justice to the weaker sections, including
the working class, in the Directive Principles of State Policy is a factor that must enliven
the judicial consciousness while decoding the meaning of legislation. Rules of construction
of a Victorian vintage cannot override this value-laden guidebook that is the Constitution.6
Bidding farewell to the context and fanatically adhering to the text of the law may lead
to the tyranny of literality—a hazardous road that misses the author’s meaning or reaches
for a sense that the author never meant. Lord Denning has observed: ‘A judge should not
be a servant of the words used. He should not be a mere mechanic in the powerhouse of
semantics.’ Reed Dickerson has, in his ‘The Interpretation and Application of Statutes’
warned against ‘the disintegration of statutory construction’ and quoted Fuller to say:7

We do not proceed simply by placing the word in some general context … Rather, we ask
ourselves, what can this rule be for? What evil does it seek to avert?
Surely the judicial process is something more than a cataloguing procedure.
… a rule or statute has a structural or systematic quality that reflects itself in some measure into
the meaning of every principal term in it.8

In the decision of major industrial disputes, three factors are thus involved. The interests
of the employees, who have received Constitutional guarantees under the Directive
Principles; the interests of the employers, who have received a guarantee under Article 19
and other articles of Part III of the Constitution; and the interests of the community at
large, which are so important in a welfare state. It is on lines cognizant of these that
industrial jurisprudence has developed during the last two decades in India.9
Now, if a sacrifice is necessary in the overall interest of the industry or a particular
undertaking, it would be both unfair and iniquitous to expect only one partner in the
industry to make the sacrifice. Sacrifice for the survival of an industrial undertaking can-
not be a unilateral action. It must be two-way traffic. Pragmatism compels a sacrifice on
the part of both. Yet we need hardly state the obvious—that labour is the weaker partner
and is more often called upon to make the entire and only sacrifice. However, the manage-
ment need not have a merry time while making the workman the sacrificial goat. ‘If sacri-
fice is necessary, those who can afford and have the cushion and the capacity must bear
52 Social Justice and Labour Jurisprudence

the greater brunt making the shock of sacrifice as less poignant as possible for those who
keep body and soul together with utmost difficulty.’10 And this is where industrial juris-
prudence must step in.

Our adjectival branch of jurisprudence, by and large, deals not with sophisticated litigants
but the rural poor, the urban lay and the weaker societal segments for whom law will be an
added terror if technical mis-descriptions and deficiencies in drafting pleadings and setting out
the cause title create a secret weapon to non suit a party. Where foul play is absent and fairness is
not faulted, latitude is a grace of processual justice. Test litigations, representative actions, pro bono
publico and like broadened forms of legal proceedings are in keeping with the current accent on
justice to the common man and a disincentive to those who wish to bypass the real issues on the
merits by suspect reliance on peripheral, procedural shortcomings.11

Industrial law in India has not fully lived up to the current challenges of industrial life,
either in terms of the substantive norms or regulations binding the three parties—the
state, management and labour—or in the processual system that has baulked, by dawdling
dysfunction, the achievement of early finality and prompt remedy in a sensitive area
where quick solution is the very essence of real justice. The legislative and judicial processes
have promises to keep if positive industrial peace, in tune with distributive economic
justice and the continuity of active production, is to be accomplished. The architects of
these processes will, we hope and expect, fabricate creative changes in the system, both
normative and adjectival.12

Purpose of the Industrial Disputes Act, 1947

The Industrial Disputes Act 1947 is a special statute devoted wholly to the investigation
and settlement of industrial disputes, which provides definitionally for the nature of the
industrial disputes coming within its ambit. It creates an infrastructure for investigation
into the solution of and adjudication upon industrial disputes. It also provides for the
necessary machinery for the enforcement of awards and settlements. From alpha to omega,
the Industrial Disputes Act has one special mission—the resolution of industrial disputes
through specialised agencies, according to specialised procedures, and with special refer-
ence to the weaker categories of employees coming within the definition of ‘workmen’.13
The Industrial Disputes Act is a benign measure that seeks to pre-empt industrial
tensions, provide the mechanics for dispute resolution and set up the necessary infrastruc-
ture so that the energies of both partners in production may not be dissipated in counter-
productive battles and so that the assurance of industrial justice may create a climate of
goodwill. Industrial peace is a national need and, absent law, order in any field will be
absent. Chaos is the enemy of creativity, sans which production will suffer. Thus the great
goal to which the Industrial Disputes Act is geared is establishing the legal mechanism for
canalising conflicts towards conciliatory or adjudicatory processes.14
The very personality of the statute has a basis in welfare, being a piece of beneficial
legislation that protects labour, promotes their contentment and regulates situations of
crisis and tension where production may be imperilled by untenable strikes and black-
mail lock-outs. The mechanism of the Act is geared towards conferment of regulated
 Industrial Jurisprudence 53

benefits to workmen and the resolution, according to a sympathetic rule of law, of conflicts,
actual or potential, between managements and workmen. Its goal is the amelioration of
the condition of workers, tempered by a practical sense of peaceful co-existence, to the
benefit of both parties in industry—not a neutral position, but one laying restraints on
laissez faire and concerned for the welfare of the weaker lot. To hit one’s opponent below
the belt by trading legal phrases is not industrial law.15 Empathy with the statute is necessary
to understand not merely its spirit, but also its sense.16
‘It is no more open to debate that in the field of industrial jurisprudence declaration
can be given that the termination of service is bad and the workman continues to be in
service. The spectre of common law doctrine that contract of personal service cannot be
specifically enforced or the doctrine of mitigation of damages does not haunt this branch
of law.’17

The Constitution and Labour Philosophy

The source and strength of the industrial branch of Third World jurisprudence is social
justice, as proclaimed in the Preamble to the Constitution. A myriad devices, half-hidden
in fold after fold of legal forms, depending on the degree of concealment needed—the
type of industry, the local conditions and the like—may be resorted to when labour legis-
lation casts welfare obligations on the real employer, based on Articles 38, 39, 42, 43 and
43A of the Constitution. ‘The Court must be astute to avoid mischief and achieve the
purpose of the law and not be misled by the maya of legal appearances.’18
Industrial justice is not an application of rigid formula but, in consonance with Part
IV of the Constitution, the award of wages that are substantially just, subject of course to
the well-recognised principles evolved by this Court.19

Judicial Obligations

The judicature, like other Constitutional instrumentalities, has a culture of national

accountability. Two factors must be highlighted in this context. A court is more than a
judge: a collegium has a personality that exceeds its members. The price that a collective
process, free from the personality cult, has to pay consists in Jobian patience, free exchange
of ideas and final decisions in conformity with the democracy of judicial functionality.
Sometimes, when divergent strands of thought haunt the mentations of the members, we
pause, ponder and reconsider because we follow the words of Oliver Cromwell commended
for courts by Judge Learned Hand: ‘My brethren, I beseech you, in the bowels of Christ,
think it possible that you may be mistaken.’ Utter incompatibility exists between judicial
democracy and dogmatic infallibility; and so in this case, we have taken time, more time
and repeated extensions of time to evolve a broad consensus out of our initial dissensus.
Not procrastination, but plural toil is the hidden truth behind the considerable interval.20
Our Constitution guarantees the right to form associations not for gregarious pleasure,
but to fight effectively for the redressal of grievances. Our Constitution is sensitive to
workers’ rights. Our story of freedom and social emancipation led by the Fathers of the
Nation has employed, from the highest of the motives, a path of combined action to
54 Social Justice and Labour Jurisprudence

resist evil and to right wrong even if it meant loss of business profits for the liquor vendor,
the brothel-keeper and the dealer in foreign cloth. Without expatiating on these seminal
factors, we may observe that English history, political theory and lifestyle being different
from Indian conditions—ours being replete with organised boycotts and mass satyagrahas—
we cannot incorporate English torts into India law without any adaptation. A tort trans-
plant into a social organism is as complex an operation as a heart-transplant into an individual
organism and requires as much care, law being life’s instrumentality and the rejection of
exotics being a natural human tendency. Here judges must be sociological surgeons.21
When important issues demand the court’s collective judgement, an informed meeting
of instructed minds is in many ways a sine qua non. But the torrent of litigation flooding
the court drowns the judges in the daily drudgery of accumulated dockets. To gain leisure
for fundamental reflections, with some respite from a paper-logged existence and with
supportive research from trained law clerks, is a ‘consummation devoutly to be wished’ if
the final court is to fulfil its trust with the Constitution and country. The Indian judicial
process sui generis in some respects has its problems, which are Himalayan in dimension
but are hardly appreciated in perspective and in their true proportions. Two of these have
been mentioned by me in extenuation of the great gap between closure of judgement and
its actual pronouncement.22
Law is no cold-blooded craft bound by traditional techniques and formal forceps
handed down to us from the Indo-Anglian era, but a warm-blooded art which has made
a break from the past and kept a tryst with the present, deriving its sole force from the
Constitution enacted by the people of India. Law, as Vice President G.S. Pathak emphasised
in several lectures, is a tool with which to engineer a peaceful ‘civil revolution’ one of the
components of which is a fair deal for the weaker human sectors, such as the working
class. The striking values of social justice enshrined in the Constitution impact on the
interpretation of Indian laws, and to forget this essential postulate while relying on erudition
is to weaken the vital flame of the democratic, socialist republic of India.23
Our judges are not monks or scientists, but participants in the living stream of our
national life, steering the law between the dangers of rigidity on the one hand and of
formlessness on the other. Our system faces no theoretical dilemma but a single continuous
problem: how to apply to ever-changing conditions the never-changing principles of
freedom. For the Indian judicial process, the nidus of these never-changing principles is
the Indian Constitution.
The best way to construe the scope of an Act of parliament is to not stop with the
words of the sections. ‘Our law (like all others) consists of two parts viz., of body and soul.
The letter of the law is the body of the law and the sense and reason of the law is the soul
of the law….’ The social conscience of the judge hesitates to deprive the working class,
for whom Part IV of the Constitution has shown concern, of such rights as they currently
enjoy on the strength of mere implication by a statute unless there are compulsive provisions
constraining the court to the conclusion.24
Appreciation of the Constitutional consciousness with regard to labour law shows us
that the Constitution of India is not a non-aligned parchment but a partisan of social
justice, with a direction and destination that it sets out in the Preamble and Article 38.
When the evidence is read, the rulings, the statute and the rival pleas must be guided by
this value set of the Constitution. Industrial law, however, is not only appraised from this
perspective in the disputes before the Supreme Court, but it is also realised that India is
a mixed economy with capitalist mores, only slowly wobbling towards a socialist order.
 Industrial Jurisprudence 55

After all, ideals apart, ‘law can never be higher than the economic order and the cultural
development of society brought to pass by that economic order’. New jurisprudence in
industrial relations must therefore prudently be tuned to the wavelength of our Consti-
tutional values.25
An industry is a common venture, the participation being the capital and labour. Gone
are the days when labour was considered a factor of production. Article 43A of the Con-
stitution requires the State to take steps to secure the participation of workmen in the
management of the undertaking, establishment or other organisations engaged in any
industry. Thus, from being a factor of production, labour has become a partner in industry.
It is now truly a common venture in the pursuit of a desired goal.26
The morality of law and the Constitutional mutation implied in Article 43A bring
about a new equation in industrial relations.27

Interpretation of Labour Statutes:

The Constitutional Values

Statutory interpretation, in the creative Indian context, may look for light to the lodestar
of Part IV of the Constitution, for example, Articles 39(a) and (c) and Article 43. Where
two judicial choices are available, the construction in conformity with the social philosophy
of Part IV has preference.28
Statutory construction, when courts consider welfare legislation with a bias towards
economic justice, cannot turn on cold print glorified as grammatical construction, but
must look to the teleological purpose and protective intendment. Words of multiple im-
port have to be winnowed judicially to suit the social philosophy of the statute. The dic-
tionaries are not dictators of statutory construction where the benignant mood of a law
and, more emphatically, the definition clause furnish a different denotation. However,
while canons of traditional sanctity cannot wholly govern, courts cannot go haywire in
interpreting provisions by ignoring the text and context.29
The Constitution has expressed a deep concern for the welfare of workers and has
provided in Article 42 that the State shall make provision for securing just and humane
conditions of work and in Article 43 that the State shall endeavour to secure, by suitable
legislation or economic organisation or in any other way, to all workers—agricultural,
industrial or otherwise—work, a living wage, conditions of work ensuring a decent standard
of life and full enjoyment of leisure, and so on. These are among the Directive Principles
of State Policy. The mandate of Article 37 of the Constitution is that while the Directive
Principles of State Policy shall not be enforceable by any court, the principles are ‘never-
theless fundamental in the governance of the country’ and ‘it shall be the duty of the State
to apply these principles in making laws’. Addressed to the courts, what the injunction
means is that while courts are not free to direct the making of legislation, courts are bound
to evolve, affirm and adopt principles of interpretation that will further and not hinder
the goals set out in the Directive Principles of State Policy. This command of the Con-
stitution must be ever present in the minds of the judges when interpreting statutes that
are concerned directly or indirectly with matters set out in the Directive Principles of
State Policy.30
56 Social Justice and Labour Jurisprudence

In the field of statutory interpretation, there are no inflexible formulae or foolproof

mechanisms. The sense and sensibility, the setting and the scheme, the perspective and
the purpose—these help the judge to navigate towards the harbour of true intendment
and meaning. The legal dynamics of social justice also guide the court in statutes of the
type we are interpreting. In determining whether a statute is a special or a general one,
the focus must be on the principal subject matter plus the particular perspective. For certain
purposes, an Act may be general; for certain other purposes, it may be special. However,
the court cannot blur the distinctions when dealing with the finer points of law. In law,
we have a cosmos of relativity, not absolutes—as too in life.31
An economy of words is a legislative risk before a judiciary accustomed to the Anglo-
Saxon meticulousness in drafting. For instance, a ‘tribunal’ is merely a seat of justice or a
judicial body with the jurisdiction to render justice. If an arbitrator fulfils this functional
role—and he does—how can he be excluded from the scope of the expression? A caste
distinction between courts, tribunals, arbitrators and others is functionally fallacious and,
in our context, stems from confusion. The Section makes only a hierarchical, not func-
tional, distinction in speaking of tribunals and national tribunals. So we see no grounds
to truncate the natural meaning of ‘tribunal’ on the supposed intent of parliament to
omit—irrationally—the category of adjudicatory organs known as ‘arbitrators’. To cut
down is to cripple and the art of interpretation makes whole rather than mutilate; it fur-
thers the expressed purpose, rather than be hampered by narrow literality. It is perfectly
open to the court to give the natural meaning to a word defined in an Act if the context
in which it appears suggests a departure from the definition, because then there is something
repugnant in the subject or context.32
Here we come upon the fundamental dilemma of interpretative technology vis-à-vis
the judicative faculty. What are the limits of statutory construction? Does creativity in
the jurisprudential area permit travel into semantic engineering as a substitute for verbal-
ism? It is increasingly important for developing countries, where legislative transformation
of the economic order is an urgent item on the national agenda, to have the judiciary play
a meaningful role in the Constitutional revolution without ferretting out the flaws of the
draftsman once the object and effect are plain. Judges may not be too ‘Anglophonic’ lest
the system fail.33
We may reinforce this liberal rule of statutory construction, being a matter of importance
in the daily work of the court, by reference to Roman law from the days of Justinian as
carried down to the American Supreme Court.

‘Not all special cases can be contained in the laws and resolutions of the Senate’, said the Roman
jurist Jullianus. ‘But where their meaning is manifest in some case, the one who exercises jurisdic-
tion must apply the provision analogously and in this way administer justice.’ Prof. Bodenheimer
has explained that Civil Law does not regard words as the sole basis of law but allows it to be
modified by purpose. Celsus added the following admonition to these general principles of
interpretation: ‘The laws should be liberally interpreted, in order that their intent be preserved’.34

Samuel Thorne has shown that, during certain periods of English medieval history,
the position of the common law towards the construction of statutes was similar to the
general attitude of the Roman and civil law. Statutes were frequently extended to situations
not expressly covered by them.35
 Industrial Jurisprudence 57

Plowden pointed out that ‘when the words of a statute enact one thing, they enact all
other things which are in the like degree’. Plowden demonstrated that a statutory remedy
at that time was deemed to be merely illustrative of other analogous cases that deserved to
be governed by the same principle.36
Prof. Bodenheimer states that the American trend is towards a purpose-oriented rather
than a plain-meaning rule in its rigid orthodoxy. In United States vs American Trucking
Association,37 the US Supreme Court wrote:

When the plain meaning has led to absurd or futile results… this Court has looked beyond the
words to the purpose of the Act. Frequently, however, even when the plain meaning did not
produce absurd results but merely an unreasonable one ‘plainly at variance with the policy of
the legislation as a whole’ this Court has followed that purpose rather than the literal words.
When aid to construction of the meaning of words, as used in the statute is available, there can
certainly be no ‘rule of law’ which forbids its use, however clear the words may be on ‘superficial
examination’.38

This long digression has become important because, once in a while, social legislation
that requires a sharing of social philosophy between the parliament and the judiciary
meets its Waterloo in the higher courts because the actual role of interpretation shifts
from judge to judge. We are clearly of the view that the statutory construction that fulfils
the mandate of the statute must find favour with the judges, except where the words and
the context rebel against such flexibility. We would prefer to be liberal rather than lexical
when reading the meaning of the industrial legislation that develops from day to day in
the growing economy of India.39
In interpreting the provisions of beneficient pieces of legislation that are intended to
achieve the object of securing social justice to women workers employed in the
plantations—which squarely falls within the purview of Article 42 of the Constitution—
the beneficent rule of construction that would enable the woman worker not only to
subsist but also to top up her dissipated energy, nurse her child, preserve her efficiency as
a worker and maintain the level of her previous efficiency and output has to be adopted
by the court.40

The Binding Nature of the Decisions of the Superior Courts

It is trite to say, going by Anglophonic principles, that a ruling by a superior court is a

binding law. It is not, in fact, of scriptural sanctity but is rather of ratio-wise luminosity
within the edifice of facts where the judicial lamp plays the legal flame. Beyond its walls
and hors du milieu, the court cannot impart vernal value to the decision, exalting the
doctrine of precedents into a prison-house of bigotry, regardless of varying circumstances
and myriad developments. Realism dictates that a judgement has to be read which is sub-
ject to the facts directly presented for consideration and not affecting those matters which
may lurk below the record. Whatever be the position of a subordinate court’s casual ob-
servations, generalisations and sub silentia determinations must be judiciously read by
courts of co-ordinate jurisdiction.41
58 Social Justice and Labour Jurisprudence

The Role of English Law as Precedent

English law is not binding on the Supreme Court of India, but the jurisprudence of
judicial review in this branch is substantially common for both Indian and Anglo-American
systems, and so Halsbury has considerable persuasive value. The wider emergence of
common canons of judicial review is a welcome trend towards a one-world public law.42

Powers of the High Courts

under Article 226 of the Constitution

The expansive and extraordinary power of the High Courts prescribed under Article 226
is as wide as the amplitude of the language used indicates, and so can affect any person—
even a private individual—and be available for any (other) purpose—even one for which
another remedy may exist. The amendment to Article 226(1A) reiterates the targets of
the writs power as being inclusive of any person by the expressive reference to ‘the residence
of such person’. The Supreme Court has spelt out wise and clear restraints on the use of
this extraordinary remedy and High Courts will not go beyond those wholesome
inhibitions except where the monstrosity of the situation or other exceptional circumstances
cry out for timely judicial interdiction or mandate. The mentor of law is justice, and such
a potent drug should be judiciously administered. Speaking in critical retrospect of this
portentous prospect, the writ’s power has, by and large, been the people’s sentinel on the
qui vive. To cut back on or liquidate that power may cast human rights into peril.43
While the remedy under Article 226 is extraordinary and is of Anglo-Saxon vintage, it
is not a carbon copy of English processes. Article 226 is a sparing surgery—the lancet
operates where injustice suppurates. While traditional restraints such as the availability of
alternative remedy hold back the court and while judicial power should not ordinarily
rush in where the other two branches fear to tread, judicial daring is not daunted where
glaring injustice demands affirmative action. The wide words of Article 226 are designed
to serve the lowly in their grievances if they belong to the court’s province and the remedy
be appropriate to the judicial process. There is a native hue about Article 226, without
being Anglophilic or Anglophobic in attitude. Viewed from this jurisprudential perspective,
we have to be cautious both to not overstep as if Article 226 were as large as an appeal and
to not fail to intervene where a grave error has crept in. Moreover, at the Supreme Court,
we sit in appeal over the High Courts’ judgements. And an appellate power interferes not
when the order appealed is not right, but only when it is clearly wrong. The difference is
real, though fine.44
We are what we are because the framers of our Constitution have felt the need for a
pervasive reserve power in the higher judiciary to right the wrongs in our conditions.
Heritage cannot hamstring nor custom constrict where the language used is wisely wide.
The British paradigms are not necessarily models for the Indian republic. So broad are
the expressions designedly used in Article 226 that any order that should have been passed
 Industrial Jurisprudence 59

by a lower authority may be passed by the High Court. The very width of the power and
the disinclination to meddle, except where gross injustice or fatal illegality and the like
are present, inhibit the exercise but do not abolish the power.45

NOTES

1. Indian Express Newspapers (Bombay) and Another vs Indian Express Newspapers (Bombay) Employees Union
and Others. AIR 1978 SC 1137 (para 3).
2. Management of Indian Oil Corporation vs Its Workmen. AIR 1975 SC 1856 (para 10).
3. Straw Board Manufacturing Co. vs Its Workmen. AIR 1977 SC 941 (Para 8).
4. Michael and another vs M/s Johnson Pumps and Another. AIR 1975 SC 66 (para 1).
5. L.I.C. of India vs D.J. Bahadur. AIR 1980 SC 2181 (para 28).
6. L.I.C. of India vs D.J. Bahadur. AIR 1980 SC 2181 (para 6).
7. Fuller, L., ‘Positivism and Fidelity to Law—A Reply to Prof. Hart’, Harvard Law Review, 71: 665, 666, 669.
8. Quoted in L.I.C. of India vs D.J. Bahadur. AIR 1980 SC 2181 (para 8).
9. The Report of the National Commission on Labour, New Delhi: Government of India, Ministry of Labour,
(1969) at para 57.
10. Hindustan Tin Works vs Its Employees. AIR 1979 SC 75 (Para 13).
11. Mumbai Kamgar Sabha vs Abdulbhai Faizulbhai AIR 1976 SC 1455 (Para 7).
12. Rohtas Industries vs Its Union. AIR 1976 SC 425 (para 2).
13. L.I.C. of India vs D.J. Bahadur. AIR 1980 SC 2181 (para 51).
14. L.I.C. of India vs D.J. Bahadur. AIR 1980 SC 2181 (para 22).
15. L. Michael vs M/s Johnson Pumps India Ltd. AIR 1975 SC 661 (para 21).
16. L.I.C. of India vs D.J. Bahadur. AIR 1980 SC 2181 (para 22).
17. Hindustan Tin Works vs Its Employees. AIR 1979 SC 75 (para 9).
18. Hussainbhai vs The Alath Factory Tezhilali Union Kozhikode and others. AIR 1978 SC 1410 (para 5).
19. The Workman Shift Incharge Substation vs The Presiding Officer. AIR 1980 SC 511.
20. L.I.C. of India vs D.J. Bahadur. AIR 1980 SC 2181 (para 2).
21. The Management of Indian Oil Corporation vs Its Workmen AIR 1975 SC 1856 (para 10).
22. L.I.C. of India vs D.J. Bahadur. AIR 1980 SC 2181 (para 3).
23. L.I.C. of India vs D.J. Bahadur. AIR 1980 SC 2181 (para 5).
24. The Management of Indian Oil Corporation vs Its Workmen. AIR 1975 SC 1856 (para 94).
25. Gujarat Steel Tubes Ltd vs Gujarat Steel Tubes Mazdoor Sabha and Others. AIR 1980 SC 1896 (para 44).
26. Hindusthan Tin Works vs Its Employees. AIR 1979 SC 75 (para 12).
27. Hindusthan Tin Works vs Its Employees. AIR 1979 SC 75 (para 12).
28. Mumbai Kamgar Sabha vs Abdulbhai Faizulbhai. AIR 1976 SC 1455 (para 29).
29. The State Bank of India vs Shri N. Sundara Money. AIR 1976 SC 1111 (paras 6 and 8).
30. U.P. State Electricity Board and another vs Hari Shankar Jain. AIR 1979 SC 65 (para 4A).
31. L.I.C. of India vs D.J. Bahadur. AIR 1980 SC 2181 (para 21).
32. Gujarat Steel Tubes Ltd vs Gujarat Steel Tubes Mazdoor Sabha and Others. AIR 1980 SC 1896 (paras 84
and 85).
33. Gujarat Steel Tubes Ltd vs Gujarat Steel Tubes Mazdoor Sabha and Others. AIR 1980 SC 1896 (para 89).
34. Gujarat Steel Tubes Ltd vs Gujarat Steel Tubes Mazdoor Sabha and Others. AIR 1980 SC 1896 (para 91).
35. Gujarat Steel Tubes Ltd vs Gujarat Steel Tubes Mazdoor Sabha and Others. AIR 1980 SC 1896 (para 92).
36. Gujarat Steel Tubes Ltd vs Gujarat Steel Tubes Mazdoor Sabha and Others. AIR 1980 SC 1896 (para 93).
37. (1940) 310 US 534, pp. 543–44.
38. Gujarat Steel Tubes Ltd vs Gujarat Steel Tubes Mazdoor Sabha and Others. AIR 1980 SC 1896 (para 95).
39. Gujarat Steel Tubes Ltd vs Gujarat Steel Tubes Mazdoor Sabha and Others. AIR 1980 SC 1896 (para 104).
40. B. Shah vs Presiding Officer. AIR 1978 SC 12 (para 18).
41. The Mumbai Kamgar Sabha, Bombay vs M/s. Abdulbhai Faizulbhai. AIR 1976 SC 1455 (para 38).
42. Rohtas Industries vs Its Union. AIR 1976 SC 425 (para 13).
43. Rohtas Industries vs Its Union. AIR 1976 SC 425 (para 9).
44. Gujarat Steel Tubes Ltd vs Gujarat Steel Tubes Mazdoor Sabha and Others. AIR 1980 SC 1896 (Para 73).
45. Gujarat Steel Tubes Ltd vs Gujarat Steel Tubes Mazdoor Sabha and Others. AIR 1980 SC 1896 (para 79).
60 Social Justice and Labour Jurisprudence

Chapter 3

Threshold Part Issues under

the Industrial Disputes Act, 1947

The long title of the Industrial Disputes Act, 1947, provides for the investigation and
settlement of industrial disputes and for certain other purposes. This is the only labour
legislation through which a large content of labour jurisprudence has emerged since the
date of its enactment. The primary concern of this legislation, when it was put into practice,
related to the issues of threshold part jurisdiction. When a concern or activity is an industry,
the disputing person is a workman or the dispute is an industrial dispute then only the
provisions of this Act can be invoked into the aid. In this context, the first area of con-
flict was the definition of ‘industry’. It is better that tribunals, particularly those entrusted
with the task of adjudicating labour disputes where delay may lead to misery and
jeopardise industrial peace, should decide all issues in dispute at the same time without
trying some of them as preliminary issues. Nor should High Courts, in the exercise of
their jurisdiction under Article 226 of the Constitution, stop proceedings before a tribunal
so that a preliminary issue may be decided by them. Neither the jurisdiction of the High
Court under Article 226 of the Constitution nor the jurisdiction of the Supreme Court
under Article 136 may be allowed to be exploited by those who can well afford to wait,
to the detriment of those who can ill afford to wait by dragging the latter from court to
court for adjudication of peripheral issues, avoiding a decision on issues more vital to
them. The nature of the jurisdiction under Article 226 is supervisory and not appellate,
while that under Article 136 is primarily supervisory although the Court may exercise all
necessary appellate powers to do substantial justice. In the exercise of such jurisdictions,
neither the High Court nor the Supreme Court is required to be too assiduous in inter-
fering with the exercise of jurisdiction by special tribunals at interlocutory stages and pre-
liminary issues.1

The Definition of ‘Industry’

Under Section 2(j) of the Industrial Disputes Act, 1947:

Industry means any business, trade, undertaking, manufacture or calling of employers and
includes any calling, service, employment, handicraft, or industrial occupation or avocation of
workmen.
 Threshold Part Issues under the Industrial Disputes Act, 1947 61

The definition, as it is contained here, is in two parts. The first part simply defines what
an industry is and the second part deliberately includes certain items within the ambit of
‘industry’.
The definition was originally borrowed from the Australian Federal Statute (Common
Wealth Conciliation and Arbitration Act, 1904). Hence, the Supreme Court initially—
while deciding cases pertaining to the definition of ‘industry’—relied with approval on
decisions given by the Australian courts with regard to the interpretation of this definition.
There are several decisions rendered by the Supreme Court pertaining to the definition
of ‘industry’ under the Act, in respect of different activities, be they carried on by the state
or otherwise. Way back in 1953, the Supreme Court in the D.N. Banerji2 case went a step
further and clarified precisely the scope of the definition of ‘industry’. Later, the period till
1978 witnessed the inconsistent approach of the apex Court in interpreting the definition
of ‘industry’ under the Act.

Bangalore Water Supply and Sewerage Board vs A. Rajappa and Others3

In the background, behind the reason for referring this case before a larger bench,4 was
the fact that the Supreme Court, in Workmen of Indian Standards Institution vs Management
of Indian Standards Institute5 was confronted with the issue of whether the activities carried
on by the Indian Standards Institute was an industry or not. It finally reached the conclu-
sion that it was indeed an industry. Perhaps the judicial voyage pertaining to the interpre-
tation of the definition of ‘industry’ over nearly a quarter of a century made the Court
resolve the issue with all certainty this time.
The Bangalore Water Supply6 case was based on simple facts, wherein an employee of
the Bangalore Water Supply and Sewerage Board—which is a statutory body—upon
claiming his retirement benefits as a workman under the Industrial Disputes Act, 1947,
was rejected by the Board on the grounds that the activities of the Board did not fall
within the purview of the definition of ‘industry’ under the Act. The majority decision
that was rendered by Justice Krishna Iyer deserves applause for two reasons. First, he laid
down a ‘triple test’ to decide the ambit and scope of the definition of ‘industry’ under the
Act. Second, he also expressly reversed the negative trend set by the apex Court in important
cases involving the industrial activities of an undertaking.
It should be placed on record that before taking up the hearing of the case, the bench
urged S.V. Gupta, the Attorney General of India, to take the time to consult the Gov-
ernment of India as to whether an amendment to the definition of the term ‘industry’
under the Act could be effected in the light of the prevailing decisions of the Supreme
Court. Later, Gupta appeared before the Court and requested the Court to proceed with
the hearing of the case. This is another background detail that compelled the Supreme
Court to address the issue comprehensively in the light of the prevailing conflict. The
judgement contains at the beginning the separate but concurring opinions delivered by
M.H. Beg, C.J. Y.V. Chandrachud, Jaswant Singh and V.D. Tulzapurkar, JJ, have concurred
with the majority view delivered by Justice Krishna Iyer.

THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

The rather zigzag course of the landmark cases and the tangled web of judicial thought have
perplexed one branch of Industrial Law, resulting from obfuscation of the basic concept
62 Social Justice and Labour Jurisprudence

of ‘industry’ under the Industrial Disputes Act, 1947 (for short, the Act). This bizarre
situation, 30 years after the Act was passed and industrialization had advanced on a
national scale, could not be allowed to continue. So, the urgent need for an authoritative
resolution of this confused position which has survived—indeed, had been accentuated
by—the judgement of the six-member bench in Management of Safdar Jung Hospital,
New Delhi vs Kuldip Singh Sethi,7 if we may say so with deep respect, led to a reference to
a larger bench of this die-hard dispute as to what an ‘industry’ under Section 2(j) means.
Legalese and logomachy have the genius to injecting mystique into common words,
alienating the laity in effect from the rule of law. What is the common worker or ordinary
employer to do if he is bewildered by a definitional dilemma and is unsure whether his
enterprise—say, a hospital, a university, a library, a service club, a local body, a research
institute, a pinjarapole, a chamber of commerce, a Gandhi ashram—is an industry at all?
Natural meaning is nervous of acceptance in court, where the meaning of meanings is
lost in uncertain erudition and cases have even cancelled each other out while reading
meaning.
‘I do not think,’ said Diplock, L.J., ‘that anywhere, except in a Court of Law, it would
be argued with gravity that a Dutch barn or grain and fodder stores or any ordinary farm
buildings are properly described as repositories. A Gloucestershire farmer would say they
were farm buildings and would laugh at their being called ‘repositories’.’ In the same
spirit, Stamp, J., rejected the argument that the carrying on of the business of a crematorium
involved the ‘subjection of goods or materials to any process’ within Section 271(1)(c) of
the Income Tax Act, 1952, as ‘a distortion of the English language…. I protest against sub-
jecting the English language, and more particularly simple English phrase, to this kind of
process of philology and semasiology’.8
Esoterica is anathema for law affecting the common man in the commerce of life, and
so the starting point for our discussion is the determination to go by the plain, not the
possible, sense of the words used in the definition, informed by the context and purpose
of the statute, illumined by its scheme and setting and conceptually coloured by what is
an industry at the current developmental stage in our country. In our system of precedents,
our endeavour must be, as was argued by counsel, to reconcile prior pronouncements, if
possible, and to reconsider the question altogether, if necessary. There are no absolutes in
law since life, which it serves, is relative. What is an industry in America or the Soviet Union
may not be one in India; and even in our Country, what was not an industry decades ago
may well be one now. Our judgment can have no pontifical flavour in such cases, but seeks
to serve the future hour till changes in the law or in industrial culture occur.
Law—especially industrial law, which regulates the rights and remedies of the working
class, unfamiliar with the sophistications of definitions and shower of decisions, unable
to secure expert legal opinion, what with poverty pricing them out of the justice market
and denying them the staying power to withstand the multi-decked litigative process—
de facto denies social justice if legal drafting is vagarious, definitions indefinite and court
rulings contradictory. Is it possible, that the legislative chambers are too preoccupied with
other pressing business to listen to court signals calling for clarification of ambiguous
clauses? A careful, prompt amendment of Section 2(j) would have pre-empted this docket
explosion before tribunals and courts. This Court, perhaps more than the Legislative and
Executive branches, must be deeply concerned with the law’s delays and to device a prompt
delivery system of social justice.
 Threshold Part Issues under the Industrial Disputes Act, 1947 63

Though the tailoring of a definition is the sole forensic job in this batch of appeals—
dependent on which, perhaps, a few thousand other cases await decision—the cycloramic
semantics of the simple word ‘industry’ and the judicial gloss on it in a catena of cases led
to an avoidable glut of labour litigation, where speedy finality and working criteria are
most desirable. And this delay in the disposal of thousands of disputes and the consequent
partial paralysis in the industrial life is partly blameable on the absence of a mechanism of
communication between the court and the law-making chambers.
The great American judge, Justice Cardozo, while he was Chief Justice of New York
Supreme Court, made this point:

The Courts are not helped as they could and ought to be in the adaptation of law to justice. The
reason they are not helped is because there is no one whose business it is to give warning that
help is needed… We must have a courier who will carry the tidings of distress…. Today Courts
and Legislature work in separation and aloofness. The penalty is paid both in the wasted effort
of production and in the lowered quality of the product. On the one side, the Judges, left to
fight against anachronism and injustice by the methods of judge-made law, are distracted by the
conflicting promptings of justice and logic, of consistency and mercy, and the output of their
labours bears the tokens of the strain. On the other side, the Legislature, informed only casually
and intermittently of the needs and problems of the Courts, without expert or responsible or
disinterested or systematic advice as to the workings of one rule or another, patches the fabric
here and there, and mars often when it would mend. Legislature and Courts move on in proud
and silent isolation. Some agency must be found to mediate between them.

The grave disquiet about arrears in courts must be accompanied by deeper insight into
newer methodology than a collection of statistics and minor reforms. Appreciating the
urgency of quick justice—a component of social justice—as a priority item on the agenda of
Law Reforms and suspecting public unawareness of some essential aspects of the problem,
we make these painful observations.
This obiter exercise is in discharge of the Court’s obligation to inform the community
in our developing country where to look for faults in the legal order and how to take
meaningful corrective measures. The courts too have a constituency—the nation—and a
manifesto—the Constitution. That is the validation of this divagation.
Back to the single problem of thorny simplicity: What is an ‘industry’? Historically
speaking, this Indian statute has its beginnings in Australia, even as the bulk of our corpus
juris, with a colonial flavour, is a carbon copy of English law. Therefore, in interpreta-
tion, we may seek light Australasially, and so it is that the precedents of the Court have
drawn on Australian cases as on English dictionaries. But India is India and its individuality,
in law and society is attested by National Charter, so that statutory constructions must be
homespun even if hospitable to alien thinking.
The reference to us runs thus:

One should have thought that an activist Parliament by taking quick policy decisions and by
resorting to amendatory processes would have simplified, clarified and de-limited the defini-
tion of ‘industry’, and, if we may add ‘workman’. Had this been done with aware and alert speed
by the Legislature, litigation which is the besetting sin of industrial life could well have been
avoided to a considerable degree. That consummation may perhaps happen on a distant day,
but this Court has to decide from day to day disputes involving this branch of industrial law
and give guidance by declaring what is an industry, through the process of interpretation and
re-interpretation, with a murky accumulation of case-law. Counsel on both sides have chosen
64 Social Justice and Labour Jurisprudence

to rely on Safdar Jung9 each emphasising one part or other of the decision as supporting his
argument. Rulings of this Court before and after have revealed no unanimity nor struck any
unison and so, we confess to an inability to discern any golden thread running through the string
of decisions bearing on the issue at hand.
…the chance of confusion from the crop of cases in an area where the common man has to
understand and apply the law makes it desirable that there should be a comprehensive, clear
and conclusive declaration as to what is an industry under the Industrial Disputes Act as it now
stands. Therefore, we think it necessary to place this case before the learned Chief Justice for
consideration by a larger Bench. If in the meantime the Parliament does not act, this Court may
have to illumine the twilight area of law and help the industrial community carry on smoothly.

So, the long and short of it remained: ‘What is an industry?’ Section 2(j) defines it:

‘industry’ means any business, trade, undertaking, manufacture or calling of employers and
includes any calling, service, employment, handicraft, or industrial occupation or avocation of
workmen.

Let us put it plain. The canons of construction are trite that we must read the statute
as a whole to get a hang of it and a holistic perspective of it. We must have regard for the
historical background; objects and reasons; international thoughtways; popular under-
standing; contextual connotations; and suggestive subject matter. Equally important,
dictionaries, while not absolutely binding, are aids to ascertain meaning. Nor are we writ-
ing on a tabula rasa. Since Banerji,10 decided a silver jubilee span of years ago, we have had
a heavy harvest of rulings on what is an ‘industry’ and we have to be guided by the variorum
of criteria stated therein as far as possible, and not spring a creative surprise on the industrial
community by a stroke of freak originality.
Another sobering sign: In a world of relativity where law and life interlace, a search for
absolutes is a self-condemned exercise. Legal concepts, ergo, are relativist, and to miss this
rule of change and developmental stage is to interpret oneself into error.
Yet a third signpost: The functional focus of this industrial legislation and the social
perspective of Part IV of the Paramount Law drive us to hold that the dual goals of the Act
are the contentment of workers and peace in the industry. Judicial interpretation should
be geared to their fulfilment, not to their frustration. A worker-oriented statute must receive
a construction where, conceptually, the keynote must be the worker and the community,
since the Constitution has shown concern for them, inter alia, in Articles 38, 39 and 43.
A look at the definition, dictionary in hand, decisions in head and Constitution at
heart, reveals some sure characteristics of an ‘industry’, narrowing down the twilight zone
of turbid controversy. An industry is a continuity, is an organised activity, is a purpose-
ful pursuit—not any isolated adventure, desultory excursion or casual, fleeting engage-
ment motivelessly undertaken. Such is the common feature of a trade, business, calling,
manufacture—(mechanical or handicraft-based) service, employment, industrial occupa-
tion or avocation. For those who know English and are not given to the luxury of splitting
semantic hairs, this conclusion argues itself. The expression ‘undertaking’ cannot be torn
off the words whose company it keeps, if birds of a feather flock together and noscitur
a sociis is a commonsense guide to construction, ‘undertaking’ must be read down to
conform to the restrictive characteristics shared by the society of words before and after.
 Threshold Part Issues under the Industrial Disputes Act, 1947 65

Nobody will torture ‘undertaking’ in Section 2(j) to mean meditation or musheira, which
are spiritual and aesthetic undertakings. Wide meanings must fall in line and discordance
must be excluded from a sound system. From Banerji11 to Safdar Jung12 and beyond, this
limited criterion has passed muster and we see no reason, after all the marathon of argu-
ment, to shift from this position.
Likewise, an ‘industry’ cannot exist without a cooperative endeavour between employer
and employee. No employer, no industry; no employee, no industry—not as a dogmatic
proposition in economics, but as an articulate major premise of the definition and the
scheme of the Act, and as a necessary postulate of industrial disputes and the statutory
resolution thereof.
An industry is not a futility, but geared to utilities in which the community has a
concern. And in this mundane world where law lives now, economic utilities—material
goods and services, not transcendental flights nor intangible achievements—are the func-
tional focus of industry. Therefore, no temporal utilities, no statutory industry, is axiomatic.
If society, in its advance, experiences subtler realities and assigns values to them, juris-
prudence may reach out to such a collective good. Today, not tomorrow, is the first charge
of the pragmatic law of Western heritage. So we are confined to material, not ethereal,
end products.
This much flows from a plain reading of the purpose and provision of the legislation
and its Western origin and the ratio of all the rulings. We hold these triple ingredients to
be unexceptionable.
The relevant Constitutional entry speaks of industrial and labour disputes (Entry 22,
List III, Schedule VII). The preamble to the Act refers to the ‘investigation and settlement of
industrial disputes’. The definition of ‘industry’ has to be decoded in this background and
our holding is reinforced by the fact that industrial peace, collective bargaining, strikes
and lock-outs, industrial adjudications, works committees of employers and employees
and the like connote organised, systematic operations and a collectivity of workmen
cooperating with their employer in producing goods and services for the community.
The betterment of the workmen’s lot, the avoidance of outbreaks blocking production
and just and speedy settlement of disputes concern the community. In trade and business,
goods and services are for the community, not for self-consumption.
The penumbral area arrives as we move on to the other essentials needed to make an
organised, systematic activity, oriented on productive collaboration between employer
and employee—an ‘industry’ as defined in Section 2(j). Here we have to be cautious not
to fall into the trap of definitional expansionism bordering on reductio ad absurdum,
nor to truncate the obvious amplitude of the provision to fit it into our mental mould of
beliefs and prejudices or social philosophy conditioned by class interests. Subjective
wish shall not be father to forensic thought, if credibility with a pluralist community is a
value to be cherished. ‘Courts do not substitute their social and economic beliefs for the
judgements of the legislative bodies’ (see Constitution of the United States of America,
Corwin, p. xxxi). Even so, this legislation has something to do with social justice between
the ‘haves’ and the ‘have-nots’, and naive, fugitive and illogical cut-backs on the import
of ‘industry’ may do injustice to this benignant enactment.
Avoiding Scylla and Charybdis, we proceed to decipher the fuller import of the
definition. To sum up, the personality of the whole statute, be it remembered, has a
66 Social Justice and Labour Jurisprudence

welfare basis, it being a beneficial legislation which protects labour, promotes their con-
tentment and regulates situations of crisis and tension where production may be imperilled
by untenable strikes and blackmail lock-outs. The mechanism of the Act is geared to
conferment of regulated benefits to workmen and resolution, according to a sympathetic
rule of law, of the conflicts, actual or potential, between managements and workmen. Its
goal is amelioration of the condition of workers, tempered by a practical sense of peaceful
co-existence, to the benefit of both—not a neutral position but restraints on laissez faire
and concern for the welfare of the weaker lot. Empathy with the statute is necessary to
understand not merely its spirit, but also its sense. One of the vital concepts on which the
whole statute is built, is ‘industry’, and when we approach the definition in Section 2(j),
we must be informed by these values.
This certainly does not mean that we should strain the language of the definition to
import into it what we regard as desirable in an industrial legislation, for we are not legis-
lating de novo but construing an existing Act. Crusading for a new type of legislation with
dynamic ideas for humanist justice and industrial harmony cannot be under the umbrella
of interpreting an old, imperfect enactment. Nevertheless, statutory diction speaks for
today and tomorrow; words are semantic seeds to serve the future hour. Moreover, as
earlier highlighted, it is legitimate to project the value-set of the Constitution, especially
Part IV, in reading the meaning of even a pre-Constitution statute. The paramount law is
paramount and, Part IV sets out the Directive Principles of State Policy which must guide
the judiciary, like other instrumentalities, in interpreting all legislation. Statutory construc-
tion is not a petrified process and the old bottle may, to the extent language and realism
permit, be filled with new wine. Of course, the bottle should not break or lose shape.
Lord Denning has stated the Judge’s task in reading the meaning of enactments:

The English language is not an instrument of mathematical precision. Our literature would be
much poorer if it were… He must set to work in the constructive task of finding the intention
of Parliament, and he must do this not only from the language of the statute, but also from a
consideration of the social conditions which gave rise to it and of the mischief which it was
passed to remedy, and then he must supplement the written word so as to give ‘force and life’ to
the intention of the Legislature… A Judge should ask himself the question, how, if the makers
of the Act had themselves come across this ruck in the texture of it, they would have straightened
it out? He must then do as they would have done. A Judge must not alter the material of which
the Act is woven, but he can and should iron out the creases.
The duty of the Court is to interpret the words that the Legislature has used; those words
may be ambiguous, but, even if they are, the power and duty of the Court to travel outside
them on a voyage of discovery are strictly limited.13

We may start the discussion with the leading case on the point, which perhaps may be
treated as the mariner’s compass for judicial navigation: D.N. Banerji vs P.R. Mukherjee.14
But before setting sail, let us map out briefly the range of the dispute around the definition.
Lord Denning, in Automobile Proprietary Ltd.,15 observed:

It is true that ‘the industry’ is defined; but a definition is not to be read in isolation. It must be
read in the context of the phrase which it defines, realising that the function of a definition is to
give precision and certainty to a word or phrase which would otherwise be vague and uncertain—
but not to contradict it or supplant it altogether.
 Threshold Part Issues under the Industrial Disputes Act, 1947 67

A definition is ordinarily the crystallisation of a legal concept promoting precision

and rounding off blurred edges but, alas, the definition in Section 2(j), viewed in retrospect,
has achieved the opposite. Even so, we must try to clarify. Sometimes, active interrogatories
tell more than bland affirmatives and so, marginal omissions notwithstanding, we will
string the points together in a few questions on which we have been addressed.
A cynical jurist surveying the forensic scene may make unhappy comments. Counsel for
the respondent Unions sounded that note. A pluralist society with a capitalist backbone,
notwithstanding the innocuous objective ‘socialist’ added to ‘Republic’ by the Constitution
(42nd Amendment Act, 1976), regards profit-making as a sacrosanct value. Elitist
professionalism and industrialism is sensitive to the ‘worker menace’ and inclines to ex-
clude such sound and fury as ‘labour unrest’ from its sanctified precincts by judicially
de-industrialising the activities of professional men and interest groups to the extent
feasible. Governments, in a mixed economy, share some of the habits of thought of the
dominant class, and doctrines like ‘sovereign function’, which pull out economic enter-
prises run by them, come in handy. The latent love for club life and charitable devices and
escapist institutions bred by clever capitalism and hierarchical social structure shows up
as inhibitions transmuted into doctrines, interpretatively carving out immunities from
the ‘industrial’ demands of labour by labelling many enterprises ‘non-industries’. Univer-
sities, clubs, institutes, manufactories and establishments managed by eleemosynary or
holy entities, are instances. To objectify doctrinally subjective consternation is casuistry.
A counter-critic, on the other hand, may acidly contend that if judicial interpreta-
tion, uninformed by life’s realities, were to go wild, every home will be not a quiet castle
but tumultuous industry, every research unit will grind to a halt, every god will face new
demands, every service club will be the venue of rumble and every charity choked off by
brewing unrest—and the salt of the earth as well as the lowliest and the lost will suffer.
Counsel for the appellants struck this pessimistic note. Is it not obvious from these rival
thoughtways that law is value-loaded, that social philosophy is an inarticulate interpretative
tool? This is inescapable in any school of jurisprudence.
Now let us itemise, illustratively, the posers springing from the competing submissions,
so that the contentions may be concretised.

1. (a) Are establishments run without a profit motive ‘industries’?

(b) Are Charitable institutions ‘industries’?
(c) Do undertakings governed by a no-profit, no-loss rule, statutorily or otherwise fastened,
fall within the definition in Section 2(j)?
(d) Do clubs or other organisations (like the YMCA), whose general emphasis is not on
profit-making but on fellowship and self-service, fit into the definition?
(e) To go to the core of the matter, is it an inalienable ingredient of ‘industry’ that it should
be plied with a commercial object?
2. (a) Should cooperation between employer and employee be direct in so far as it relates to
the basic service or essential manufacture which is the output of the undertaking?
(b) Could a lawyer’s chamber or chartered accountant’s office, a doctor’s clinic or other
liberal profession’s occupation or calling be designated an ‘industry’?
(c) Would a University or college or school or research institute be called an ‘industry’?
3. (a) Is the inclusive part of the definition in Section 2(j) relevant to the determination of
what is an ‘industry’? If so, what impact does it have on the categories?
(b) Do domestic service drudges—who slave without respite—become ‘industries’ by this
extended sense?
68 Social Justice and Labour Jurisprudence

4. Are governmental functions, stricto sensu, industrial and if not, what is the extent of immunity
of the instrumentalities of government?
5. What rational criterion exists for a cut-back on the dynamic potential and semantic sweep
of the definition implicit in the industrial law of a progressive society geared to greater
industrialisation—and consequent concern for regulating relations and investigating disputes
between employers and employees—as industrial processes and relations become more
complex and sophisticated and as workmen become more right-conscious.
6. As the provision now stands, is it scientific to define ‘industry’ based on the nature—the
dominant nature—of the activity, i.e. on the terms of the work, remuneration and conditions
of service which bond the two wings together into an employer–employee complex?

Back to the Banerji,16 to begin at the very beginning. Technically, this bench that
heard the appeals now is not bound by any of the earlier decisions. But we cannot agree
with Justice Roberts of the U.S. Supreme Court that ‘adjudications of the Court were
rapidly gravitating into the same class as a restricted railroad ticket, good for this day and
train only’ (See Corwin XVII). The present—even the revolutionary present—does not
break wholly with the past; but breaks bread with it, without being swallowed by it, and
may eventually swallow it. While it is true, academically speaking, that the Court should
be ultimately right rather than consistently wrong, the social interest in the certainty of the
law is a value which urges continuity where possible, clarification where sufficient and cor-
rection where derailment, misdirection or fundamental flaw defeats the statute or creates
considerable industrial confusion. Shri M.K. Ramamurthy, encored by Shri R.K. Garg,
argued emphatically that after Safdarjung,17 the law was in trauma and so a fresh look at
the problem is ripe. The learned Attorney General and Shri Tarkunde, who argued at
effective, illuminating length, as well as Dr Singhvi and Shri A.K. Sen, who briefly and
tellingly supplemented, did not hide the fact that the law was in Queer Street here, but
sought to discern a golden thread of sound principle which could explain the core of the
rulings which peripherally had contradictory thinking.
In this situation, it is not wise, in our view, to reject everything ruled till date and
fabricate new tests, armed with lexical wisdom or reinforced by vintage judicial thought
from Australia. The Banerji18 case we take as good, and, anchored on its authority, we will
examine later decisions to stabilise the law on the firm principles gatherable there from,
rejecting erratic excursions. To sip every flower and change every hour is not realism but
romance, which must not enchant the Court. Indeed, Sri Justice Chandrasekhara Aiyar,
speaking for a unanimous bench, sketched the guidelines perceptively, if we may say so
respectfully. Later cases have only added their glosses, not overruled it, and the fertile
source of conflict has been the bashyams rather than the basic decision. Therefore, our task
is not to supplant the ratio of Banerji19 but to straighten and strengthen it in its application,
away from different deviations and aberrations.

BANERJI20

The Budge Budge Municipality dismissed two employees, whose dispute was spon-
sored by the Union. The award of the Industrial Tribunal directed reinstatement, but the
Municipality challenged the award before the High Court and this Court on the funda-
mental ground that a municipality, in discharging its normal duties connected with local
self-government, is not engaged in any industry as defined in the Act.
 Threshold Part Issues under the Industrial Disputes Act, 1947 69

A panoramic view of the statute and its jurisprudential bearings has been projected there
and the essentials of an ‘industry’ decocted. The definitions of ‘employer’ (Section 2[g]),
‘industry’ (Section 2[j]), ‘industrial dispute’ (Section 2[k]) and ‘workman’ (Section 2[e]) are
a statutory dictionary, not popular parlance. It is plain that merely because the employer
is a government department or a local body (and, a fortiori, a statutory board, society or
like entity), the enterprise does not cease to be an ‘industry’. Likewise, what the common
man does not consider as ‘industry’ need not necessarily stand excluded from the statutory
concept (and vice versa). The latter is deliberately drawn wider, and in some respects nar-
rower, as Chandrasekhara Aiyar, J., emphatically expressed:

In the ordinary or non-technical sense, according to what is understood by the man in the street,
industry or business means an undertaking where capital and labour co-operate with each other
for the purpose of producing wealth in the shape of goods, machines, tools, etc., and for making
profits. The concept of industry in this ordinary sense applied even to agriculture, horticulture,
pisciculture and so on and so forth. It is also clear that every aspect of activity in which the rela-
tionship of employer and employee exists or arises does not thereby become an industry as com-
monly understood. We hardly, think in terms of an industry, when we have regard, for instance,
to the rights and duties of master and servant, or of a Government and its secretariat, or the mem-
bers of the medical profession working in a hospital. It would be regarded as absurd to think so;
at any rate the layman unacquainted with advancing legal concepts of what is meant by industry
would rule out such a connotation as impossible. There is nothing however to prevent a statute
from giving the world ‘industry’ and the words ‘industrial dispute’ a wider and more compre-
hensive import in order to meet the requirements of rapid industrial progress and to bring about
in the interests of industrial peace and economy, a fair and satisfactory adjustment of relations
between employers and workmen in a variety of fields of activity. It is obvious that the limited
concept of what an industry meant in early times must now yield place to an enormously wider
concept so as to take in various and varied forms of industry, so that dispute arising in connection
with them might be settled quickly without much dislocation and disorganisation of the needs
of society and in a manner more adapted to conciliation and settlement than a determination of
the respective rights and liabilities according to strict legal procedure and principles. The conflicts
between capital and labour have now to be determined more from the standpoint of status than
of contract. Without such an approach, the numerous problems that now arise for solution in
the shape of industrial disputes cannot be tackled satisfactorily, and this is why every civilised
government has thought of machinery of conciliation officers, Boards and Tribunals for the
effective settlement of disputes. (emphasis added)

The dynamics of industrial law, even if incongruous with the popular understanding
in this first proposition, we derive from Banerji:21

Legislation had to keep pace with the march of times and to provide for new situations. Social
evolution is a process of constant growth, and the State cannot afford to stand still without
taking adequate measures by means of legislation to solve large and momentous problems that
arise in the industrial field from day to day almost.

The second, though trite, guidance that we get, is that we should not be beguiled by
similar words in dissimilar statutes, contexts, subject-matters or socio-economic situations.
The same words may mean one thing in one context and another in a different context.
This is the reason why decisions on the meaning of particular words or collections of
70 Social Justice and Labour Jurisprudence

words found in other statutes of other nations are scarcely of much value when we have
to deal with a specific statute of our own, they may persuade, but cannot pressure.
We would only add that a developing country is anxious to preserve the smooth flow
of goods and services, and interdict undue exploitation. Towards those ends labour legis-
lation is enacted and must receive liberal construction to fulfil its role.
Let us get down to the actual amplitude and circumscription of the statutory concept
of ‘industry’. Not a narrow but an enlarged acceptation is intended. This is supported by
several considerations. Chandrasekhara Aiyar, J., observes:

Do the definitions of ‘industry’, ‘industrial disputes’ and ‘workman’ take in the extended signi-
ficance, or exclude it? Though the word ‘undertaking’ in the definition of ‘industry’ is wedged
in between business and trade on the one hand and manufacture on the other, and though,
therefore, it might mean only a business or trade undertaking, still it must be remembered that
if that were so, there was no need to use the word separately from business or trade. The wider
import is attracted even more clearly when we look at the latter part of the definition which refers
to ‘calling, service, employment, or industrial occupation or avocation of workmen’. ‘Undertaking’
in the first part of the definition and ‘industrial occupation or avocation’ in the second part
obviously mean much more than what is ordinarily understood by trade or business. The defin-
ition was apparently intended to include within its scope what might not strictly be called a
trade or business venture.

So ‘industry’ overflows trade and business. Capital, ordinarily assumed to be a component

of ‘industry’, is an expendable item so far as statutory ‘industry’ is concerned. To reach
this conclusion, the Court referred to ‘public utility service’ (Section 2[n]) and argued:

A public utility service such as railways, telephones and the supply of power, light or water to
the public may be carried on by private companies or business corporations. Even conservancy
or sanitation may be so carried on, though after the introduction of local self-government this
work has in almost every country been assigned as a duty to local bodies like our Municipalities
or District Boards or Local Boards. A dispute in these services between employees and workmen
is an industrial dispute, and the proviso to Section 10 lays down that where such a dispute arises
and a notice under Section 22 has been given, the appropriate Government shall make a reference
under the sub-section. If the public utility service is carried on by a corporation like a Municipality
which is the creature of statute and which functions under the limitations imposed by the statute,
does it cease to be an industry for this reason? The only ground on which one could say that
what would amount to the carrying on of an industry if it is done by a private person ceases to
be so if the same work is carried on by a local body like a Municipality is that in the latter there
is nothing like the investment of any capital or the existence of a profit earning motive as there
generally is in a business. But neither the one nor the other seems a sine quo non or necessary
element in the modern conception of industry.

Absence of capital does not negative ‘industry’. Nay, even charitable services do not
necessarily cease to be ‘industries’ definitionally, although popularly charity is not industry.
Interestingly, the learned Judge dealt with the point. After enumerating typical municipal
activities, he concluded:

Some of these functions may appertain to and partake of the nature of an industry, while others
may not. For instance, there is a necessary element of distinction between the supply of power
 Threshold Part Issues under the Industrial Disputes Act, 1947 71

and light to the inhabitants of a Municipality and the running of charitable hospitals and dispen-
saries for the aid of the poor. In ordinary parlance, the former might be regarded as an industry
but not latter. The very idea underlying the entrustment of such duties or functions to local
bodies is not to take them out of the sphere of industry but to secure the substitution of public
authorities in the place of private employers and to eliminate the motive of profit making as far
as possible. The levy of taxes for the maintenance of the service of sanitation and the conservancy
or the supply of light and water is a method adopted and devised to make up for the absence of
capital. The undertaking or the service will still remain within the ambit of what we understand
by an industry though it is carried on with the aid of taxation, and no immediate material gain
by way of profit is envisaged.

The contention that charitable undertakings are not industries is, by this token,
untenable.
Another argument pertinent to our discussion is the sweep of the expression ‘trade’.
The Court refers, with approval, to Lord Wright in the case of Bolton Corporation,22 where
Law Lord had observed:

Indeed ‘trade’ is not only in the etymological or dictionary sense, but in the legal usage, a term
of the widest scope. It is connected originally with the word ‘trade’ and indicates a way of life
or an occupation. In ordinary usage it may mean the occupation of a small shopkeeper equally
with that of a commercial magnate. It may also mean a skilled craft. It is true that it is often used
in contrast with a profession. A professional worker would not ordinarily be called a tradesman,
but the word ‘trade’ is used in the widest application ‘trade unions’. Professions have their trade
unions. It is also used in the Trade Boards Act to include industrial undertakings. I see no reason
to exclude from the operation of the Industrial Courts Act the activities of local authorities, even
without taking into account the fact that these authorities now carry on in most cases important
industrial undertakings. The order expressly states in its definition section that ‘trade’ or ‘industry’
includes the performance of its functions by a ‘public local authority’. It is true that these words
are used in Part III, which deals with ‘recognized terms and conditions of employment’, and in
Part IV, which deals with ‘departures from trade practices’ in ‘any industry or undertaking’ and
not in Part I, which deals with ‘national arbitration’ and is the part material in this case, but I
take them as illustrating what modern conditions involve—the idea that the functions of local
authorities may come under the expression ‘trade or industry’. I think the same may be said of
the Industrial Courts Act and Reg. 58-AA, in both of which the word ‘trade’ is used in the very
wide connotation which it bears in the modern legislation dealing with conditions of employment,
particularly in relation to matters of collective bargaining and the like. (emphasis added)

In short, ‘trade’ embraces the functions of local authorities, even professions, thus
departing from popular notions.
Another facet of the controversy is next touched upon—i.e. profit-making motive
is not a sine qua non of ‘industry’, functionally or definitionally. For this, Powers, J., in
Federated Municipal and Shire Employees’ Union of Australia vs Melbourne Corporation23
was quoted with emphatic approval where the Australian High Court considered an
industrial legislation:

So far as the question in this case is concerned, as the arguments proceeded the ground mostly
relied upon (after the Councils were held not to be exempt as State instrumentalities) was that
the work was not carried on by the municipal corporations for profit in the ordinary sense of
72 Social Justice and Labour Jurisprudence

the term, although it would generally speaking be carried on by the Councils themselves to save
contractor’s profits. If that argument were sufficient, then a philanthropist who acquired a
clothing factory and employed the same employees as the previous owner had employed would
not be engaged in an occupation about which an industrial dispute could arise, if he distributed
the clothes made to the poor free of charge or even if he distributed them to the poor at the bare
cost of production. If the contention of the respondents is correct, a private company carrying on
a ferry would be engaged in an industrial occupation. If a municipal corporation carried it on,
it would not be industrial. The same argument would apply to baths, bridge-building, quarries,
sanitary conttracts, gas-making for lighting streets and public halls, municipal building of house
or halls, and many other similar industrial undertakings. Even coal-mining of use on municipal
railways or tramways would not be industrial work if the contention of the respondents is
correct. If the works in question are carried out by contractors or by private individuals it is said
to be industrial, but not industrial within the meaning of the Arbitration Act or Constitution if
carried out by municipal corporations. I cannot accept that view.

The negation of the profit motive as a telling test against ‘industry’ is clear from this
quote.
All the indicia of ‘industry’ are packed into the judgement which condenses the conclu-
sion tersely to hold that ‘industries’ will cover ‘branches of work that can be said to be
analogous to the carrying out of a trade or business’. The case, read as a whole, contributes
to industrial jurisprudence, with special reference to the Act, a few positive facets and
knocks down a few negative fixations. Governments and municipal and statutory bodies
may run enterprises, which do not for that reason cease to be industries. Charitable activ-
ities may also be industries. Undertakings, sans a profit motive, may well be industries.
Professions are not ipso facto beyond the pale of industries. Any operation carried on in a
manner analogous to trade or business may legitimately be a statutory ‘industry’. The
popular limitations on the concept of ‘industry’ do not amputate the ambit of legislative
generosity in Section 2(j). Industrial peace and smooth supply to the community are among
the aims and objects the Legislature had in view, as also the nature, variety, range and areas
of disputes between employers and employees. These factors must inform the construction
of the provision.
The limiting role of the Banerji24 case must also be noticed so that a total view is gained.
For instance, ‘analogous to trade or business’ cuts down ‘undertaking’, a word of fantastic
sweep. Spiritual undertakings, casual undertakings, domestic undertakings, war waging,
policing, justicing, legislating, tax collecting and the like are, prima facie, pushed out. Wars
are not merchantable, nor justice saleable, nor divine grace marketable. So, the problem
shifts to what is ‘analogous to trade or business’. As we proceed to the next set of cases, we
come upon the annotation of other expressions like ‘calling’ and get to grips with the
specific organisations which call for identification in the several appeals before us.
At this stage, a close-up of the content and contours of the controversial words
‘analogous, etc.’, which consumed considerable time of counsel, may be taken. To be fair
to Banerji,25 with the path-finding decision that conditioned and canalised and fertil-
ised subsequent juristic–humanistic ideation, we must show fidelity to the terminological
exactitude of the seminal expression used and search carefully for its import. The prescient
words are: ‘branches of work that can be said to be analogous to the carrying out of a
‘trade or business’. The same judgement has negatived the necessity for a profit motive
and included charity impliedly, has virtually equated private sector and public sector
operations and has even perilously hinted at ‘professions’ being ‘trade’. In this perspective,
 Threshold Part Issues under the Industrial Disputes Act, 1947 73

the comprehensive reach of ‘analogous’ activities must be measured. The similarity stressed
relates to ‘branches of work’, and more—the analogy with trade or business is in the
‘carrying out’ of the economic adventure. So the parity is in the modus operandi, in the
working—not in the purpose of the project nor in the disposal of the proceeds, but in
the organisation of the venture, including the relations between the two limbs, viz. labour
and management. If the mutual relations, the method of employment and the process of
cooperation in the carrying out of the work bear close resemblance to the organisation,
method, remuneration, relationship of employer and employee, and the like, then it is
‘industry’; otherwise not. This is the kernel of the decision—an activity-oriented, not
motive-based, analysis.
The landmark Australian case of the Melbourne Corporation,26 which was heavily
relied on in the Banerji27 case, may engage us. That ruling contains dicta early in the
century, which make Indian forensic fabianism, sixty years after, in a ‘socialist’ Republic,
blush. That apart, the discussion in the leading judgements dealing with ‘industry’ from
a Constitutional angle, but relying on statute similar to ours, is instructive. For instance,
consider the promptings of profit as a condition of ‘industry’: Higgine, J., crushes that
credo thus:

The purpose of profit-making can hardly be the criterion. If it were, the labourers who excavated
the underground passage for the Duke of Portland’s whim, or the labourers who build (for day)
a tower of Babel or a Pyramid, could not be parties to an ‘industrial dispute.’

The worker-oriented perspective is underscored by Isaacs and Rich, JJ. It is at the

same time, as is perceived, contended on the part of labour that matters even indir-
ectly prejudicial to the workers are within the sphere of dispute. For instance, at p. 70
(para 175[4][a]), one of the competing contentions is thus stated:

Long hours proceed from the competition of employer with employer in the same trade. Employer
ought to be prevented from competing in this way at the expense of their workmen.

As a fact, in a later year, Lord James of Hereford in an award, held that one employer
in a certain trade must conform to the practice of others. What must be borne steadily in
mind, as evidenced by the nature of the claims made, is that the object of obtaining a
large share of the product of the industry and of exercising a voice as to the general condi-
tions under which it shall be carried on (para 100) covers all means, direct and incidental,
without which the main object cannot be fully or effectively attained. Some of these will
be particularised; but in the meantime it should be said that they will show in themselves—
and from the character of the disputants to this will be confirmed—that so long as the
operations are of capital and labour in cooperation for the satisfaction of material human
needs, the objects and demands of labour are the same, whether the result of the operations
be money or money’s worth. The inevitable conclusion, as it seems to us, is that in 1894
it was well understood that ‘trade disputes’, which at one time had a limited scope of
action without altering their inherent and essential nature, so developed as to be recognised
better under the name of ‘industrial disputes’ or ‘labour disputes’, and came to be more
and more founded on the practical view that human labour was not a mere asset of
capital but was a cooperating agency of equal dignity—a working partner—and entitled
to consideration as such.
74 Social Justice and Labour Jurisprudence

The same two judges choose to impart a wide construction to the word ‘industry’, for
they ask:

How can we, conformably to recognized rules of legal construction, attempt to limit, in an
instrument of self-government for this Continent, the simple and comprehensive words ‘industrial
disputes’ by any apprehension of what we might imagine would be the effect of a full literal
construction, or by conjecturing what was in the minds of the framers of the Constitution, or
by the forms industrial disputes have more recently assumed? ‘Industrial warfare’ is no mere
figure of speech. It is not the mere phrase of theorists. It is recognized by the law as the correct
description of internal conflicts in industrial matters. It was adopted by Lord Loreburn, L.C. in
Conway vs Wade.28 Strikes and lock-outs are by him correctly described as ‘weapons’.

These arguments hold good for the Indian industrial statute, and so Section 2(j) must
receive comprehensive literal force, limited only by some cardinal criteria. One such
criterion, in the monarchical vocabulary of English jurisprudence, is Crown exemption,
reincarnating in a republic as the inalienable functions of constitutional government. No
government, no order; no order, no law; no rule of law, no industrial relations. So the core
functions of the State are paramount, and paramountcy is paramountcy. But this doctrinal
exemption is not expansionist but strictly narrowed to necessitous functions. Isaacs and
Rich, JJ., dwell on this topic and, after quoting Lord Watson’s test of the inalienable func-
tions of a Constitutional government, state:

Here we have the discrimen of Crown exemption. If a municipality either (1897) I QB 64, at
70–71 is legally empowered to perform and does perform any function whatever for the Crown,
or is lawfully empowered to perform and does perform any function which constitutionally is
inalienably a Crown function—as, for instance, the administration of justice—the municipality
is in law presumed to represent the Crown, and the exemption applies. Otherwise, it is outside
that exemption and, if impliedly exempted at all, some other principle must be resorted to. The
making and maintenance of streets in the municipality is not within either proposition.

Now the cornerstone of industrial law is well laid by Banerji29 supported by Lord
Mayor of the City of Melbourne.
A chronological survey of post-Banerji30 decisions of this Court, with accent on the
juristic contributions registered by them, may be methodical. Thereafter, a survey of cases
in alien jurisdictions and derivation of guidelines may be attempted. Even here, we may
warn ourselves that the literal latitude of the words in the definition cannot be allowed
grotesquely inflationary play, but must be read down to accord with the broad industrial
sense of the nation’s economic community, of which labour is an integral part. To bend
beyond credible limits is to break with facts, unless language leaves no option. Forensic
inflation of the sense of words shall not lead to an adaptational breakdown, outraging the
good sense of even radical realists. After all, the Act has been drawn on an industrial canvas
to solve the problems of industry, not of chemistry. A functional focus and social control
desideratum must be in the mind’s eye of the Judge.
The two landmark cases, the Corporation of the City of Nagpur vs Its Employees31 and
the State of Bombay vs The Hospital Mazdoor Sabha,32 may now be analysed in the light of
what we have just said. Filling the gaps in the Banerji33 decision and the authoritative
connotation of the fluid phrase ‘analogous to trade and business’ were attempted in these
 Threshold Part Issues under the Industrial Disputes Act, 1947 75

twin decisions. To be ‘analogous’ is to resemble in functions rele-vant to the subject,

as between like features of two apparently different things. So, some kinship through
resemblance to trade or business, is the key to the problem, if the Banerji34 case is the
guide star. Partial similarity postulates selectivity of characteristics for comparability.
Wherein lies the analogy to trade or business is then the query.
Sri Subba Rao, with uninhibited logic, chases this thought and reaches certain tests in
the Nagpur Municipality35 case, speaking for a unanimous bench. We respectfully agree
with much of his reasoning, and proceed to deal with the decision. If the ruling were right,
as we think it is, the riddle of ‘industry’ is resolved in some measure. Although foreign
decisions, words and phrases, lexical plenty and definitions from other legislations were
read before us to stress the necessity of direct cooperation between employer and employees
in the essential product of the undertaking, of the need for the commercial motive, of
services to the community, etc.—as implied inarticulately in the concept of ‘industry’—
we bypass them as but marginally persuasive. The rulings of this Court, the language and
scheme of the Act, and the well-known canons of construction exert real pressure on our
judgement. And, in this latter process, next to the Banerji36 case comes the Corporation of
Nagpur37 case, which spreads the canvas wide and illumines the expression ‘analogous to
trade or business’, although it comes a few days after the Hospital Mazdoor Sabha38 case
decided by the same bench.
To be sure of our approach on a wider basis, let us cast a glance at internationally re-
cognised concepts vis-à-vis industry. The International Labour Organisation (ILO) has
had occasion to consider freedom of association for labour as a primary right and collective
bargaining, followed by strikes if necessary, as a derivative right. The question has arisen
as to whether public servants employed in the crucial functions of the government fell
outside the orbit of industrial conflict. Convention 98 concerning the Application of the
Principles of the Right to Organise and to Bargain Collectively, states in Article 6:

This Convention does not deal with the position of public servants engaged in the administration
of the State, nor shall it be construed as prejudicing their rights or status in any way.

Thus, it is well-recognised that public servants in the key sectors of administration

stand out of the industrial sector. The committee of experts of the ILO had something to
say about the carving out of public servants from the general category.
Incidentally, it may be useful to note certain clear statements made by the ILO on the
concepts of industry, workmen and industrial disputes—made not with clear-cut legal
precision but with sufficient particularity for general purposes, although looked at from
a different angle. We quote from Freedom of Association, Second Edition, 1976, which is
a digest of the decisions of the Freedom of Association Committee of the governing body
of the ILO:

2. Civil servants and other workers in the employment of the State:

(250) Convention 98, and in particular Article 4 thereof concerning the encouragement and
promotion of collective bargaining, applies both to the private sector and to nationalised
undertakings and public bodies, it being possible to exclude from such application public servants
engaged in the administration of the State.
(Report 141, Case 729, para 15.)
76 Social Justice and Labour Jurisprudence

(251) Convention 98, which mainly concerns collective bargaining, permits (Article 6) the exclu-
sion of ‘public servants engaged in the administration of the State’. In this connection, the
Committee of Experts on the Application of Conventions and Recommendations has pointed
out that, while the concept of public servant may vary to some degree under the various national
legal systems, the exclusion from the scope of the Convention of persons employed by the State
or in the public sector, who do not act as agents of the public authority (even though they may be
granted a status identical with that of public officials engaged in the administration of the State)
is contrary to the meaning of the Convention. The distinction to be drawn, according to the
Committee, would appear to be basically between civil servants employed in various capacities
in government ministries or comparable bodies on the one hand and other persons employed
by the government, by public undertakings or by independent public corporations.
(Report 116, Case 598, para 377; Report 121, Case 635, para 81; Report 143, Case 764, para 87.)
(254) With regard to a complaint concerning the right of teachers to engage in collective bar-
gaining, the Committee, in the light of the principles contained in Convention 98 draws attention
to the desirability of promoting voluntary collective bargaining, according to national conditions,
with a view to the regulation of terms and conditions of employment.
(Report 110, Case 573, para 194.)
(255) The Committee has pointed out that Convention 98, dealing with the promotion of
collective bargaining, covers all public servants who do not act as agents of the public authority,
and consequently, among these employers of the postal and tele-communications services.
(Report 139, Case 725, para 278.)
(256) Civil aviation technicians working under the jurisdiction of the armed forces cannot be
considered, in view of the nature of their activities, as belonging to the armed forces and as such
liable to be excluded from the guarantees laid down in Convention 98; the rule contained in
Article 4 of the convention concerning collective bargaining should be applied to them.
(Report 116, Case 598, paras 375–378.)

This divagation was calculated only to emphasise certain fundamentals in international

industrial thinking which accord with a wider conceptual acceptation for ‘industry’. The
wings of the word ‘industry’ have been spread wide in Section 2(j) and this has been
brought out in the decision in the Corporation of Nagpur39 case. That case was concerned
with a dispute between a municipal body and its employees. The major issue considered
there was the meaning of the much-disputed expression ‘analogous to the carrying on of
a trade or business’. Municipal undertakings are ordinarily industries, as the Baroda Borough
Municipality40 case held. Even so, the scope of ‘industry’ was investigated by the bench
in the City of Nagpur41 case, which affirmed Banerji 42 and Baroda 43 cases. The Court took
the view that the words used in the definition were prima facie of the widest import and
declined to curtail the width of meaning by invocation of noscitur a sociis. Even so, the
Court was disinclined to spread the net too wide by expanding the elastic expressions
‘calling’, ‘service’, ‘employment’ and ‘handicraft’. To be over-inclusive may be impractical;
and so, while accepting the enlargement of meaning by the device of inclusive definition,
the Court cautioned:

But such a wide meaning appears to over-reach the objects for which the Act was passed. It is,
therefore, necessary to limit its scope on permissible grounds, having regard to the aim, scope
and the object of the whole Act.
 Threshold Part Issues under the Industrial Disputes Act, 1947 77

After referring to the rule in the Heydon’s case,44 Subba Rao, J., proceeded to outline
the ambit of industry thus (at p. 680 of AIR):

The word ‘employers’ in clause (a) and the word ‘employees’ in clause (b) indicate that the
fundamental basis for the application of the definition is the existence of that relationship. The
cognate definitions of ‘industrial dispute’, ‘employer’, ‘employee’, also support it. The long title of
the Act as well as its preamble show that the Act was passed to make provision for the promotion
of industries and peaceful and amicable settlement of disputes between employers and employees
in an organised activity by conciliation and arbitration and for certain other purposes. If the
preamble is read with the historical background for the passing of the Act, it is manifest that
the Act was introduced as an important step in achieving social justice. The Act seeks to ameliorate
the service conditions of the workers, to provide a machinery for resolving their conflicts and to
encourage co-operative effort in the service of the community. The history of labour legislation
both in England and India also shows that it was aimed more to ameliorate the conditions of
service of the labour in organised activities than to anything else. The Act was not intended to
reach the personal service which do not depend upon the employment of a labour force.

Whether the exclusion of personal services is warranted may be examined a little later.
However, the Court proceeded to carve out the negative factors which—notwithstanding
the literal width of the language of the definition—must, for other compelling reasons,
be kept out of the scope of industry. For instance, the sovereign functions of the State
cannot be included, although what such functions are has been aptly termed ‘the primary
and inalienable functions of a constitutional government’. Even here, we may point out
the inaptitude of relying on the doctrine of regal powers. That has reference, in this con-
text, to the Crown’s liability in tort and has nothing to do with industrial law. In any case,
it is open to the Parliament to make Laws that govern the State’s relations with its employees.
Articles 309 to 311 of the Constitution of India, the enactments dealing with the defence
forces and other legislation dealing with employment under statutory bodies may, ex-
pressly or by necessary implication, exclude the operation of the Industrial Disputes Act,
1947. That is a question of interpretation and statutory exclusion; but, in the absence
of such a provision of law, it may indubitably be assumed that the key aspects of public
administration like public justice stand outside the circle of ‘industry’. Even here, as has
been brought out by the excerpts from the ILO documents, it is not every employee who
is excluded but only certain categories who are primarily engaged and supportively
employed in the discharge of the essential functions of constitutional government. In a
limited way, this head of exclusion has been recognised throughout.
Although we are not concerned in this case with those categories of employees who
particularly come under the departments charged with the responsibility for essential
constitutional functions of government, it is appropriate to state that if there are industrial
units severable from the essential functions and possess an entity of their own, it may be
plausible to hold that the employees of those units are ‘workmen’ and those undertakings
are ‘industries’. A blanket exclusion of every one of the host of employees engaged by the
government in departments falling under general rubrics—like justice, defence, taxation
and legislature—may not necessarily be thrown out of the umbrella of the Act. We say no
more except to observe that closer exploration, not summary rejection, is necessary.
The Court proceeded in the Corporation of Nagpur45 case to pose for itself the import
of the words ‘analogous to the carrying out of a trade or business’ and took the view that
78 Social Justice and Labour Jurisprudence

the emphasis was more on ‘the nature of the organised activity implicit in trade or busi-
ness than to equate the other activities with trade or business’. Obviously, non-trade oper-
ations were in many cases ‘industry’. Relying on the Fabricated Engine Drivers46 case,
Subba Rao, J., observed (at pp. 662, 683 of AIR):

It is manifest from this decision that even activities of a municipality which cannot be described
as trading activities can be the subject-matter of an industrial dispute.

The true test, according to the learned judge, was concisely expressed by Isaacs, J., in
his dissenting judgement in the case of the Federated School Teachers’ Association of Australia
vs State of Victoria:47

The material question is; What is the nature of the actual function assumed—is it a service
that the State could have left to private enterprise, and, if so fulfilled, could such a dispute be
‘individual’?

Thus the nature of the actual function and of the pattern of organised activity is decisive.
We will revert to this aspect a little later.
It is useful to remember that the Court rejected the test attempted by counsel in the
case (at p. 683 of AIR):

It is said that unless there is a quid pro quo for the service. It cannot be an industry. This is the
same argument, namely, that the service must be in the nature of trade in a different garb.

We agree with this observation and with the further observation that there is no merit in
the plea that unless the public who are benefited by the services pay in cash, the services
so rendered cannot be ‘industry’. Indeed, the signal service rendered by the Corporation
of Nagpur48 case is to dispel the idea of ‘profit-making’. Relying on Australian cases which
held that profit-making may be important from the income-tax point of view but irrelevant
from an industrial dispute point of view, the Court approved of a critical passage in the
dissenting judgement of Isaacs, J., in the School Teachers’ Association49 case:

The contention sounds like an echo from the dark ages of industry and political economy…
Such disputes are not simply a claim to share the material wealth…
Monetary considerations for service are therefore, not an essential characteristic of industry
in a modern State.

Even according to the traditional concepts of English law, profit has to be disregarded
when ascertaining whether an enterprise is a business:

3. Disregard of Profit—Profit or the intention to make profit is not an essential part of the legal
definition of a trade or business; and payment or profit does not constitute a trade or business
that which would not otherwise be such.50

Does the badge of industrialism, broadly understood, banish from its fold, education?
This question needs fuller consideration, as it has been raised in this batch of appeals
 Threshold Part Issues under the Industrial Disputes Act, 1947 79

and has been answered in favour of the employers by the Supreme Court in the Delhi
University case.51 But since Subba Rao, J., has in support cited Isaacs, J., in the School Teachers’
Association52 case, which relates to the same problem, we may even here prepare the
ground by dilating on the subject with special reference to the Australian case. That
learned judge expressed surprise at the very question:

The basic question raised by this case, strange as it may seem is whether the occupation of em-
ployees engaged in education, itself universally recognised as the key industry to all skilled occu-
pations, is ‘industrial’ within the meaning of the Constitution.

The employers argued that it was fallacious to spin out ‘industry’ from ‘education’ and
the logic was a specious economic doctrine. Isaacs, J., with unsparing sting and in fighting
mood, stated and refuted the plea:

The theory was that society is industrially organised for the production and distribution of
wealth in the sense of tangible, ponderable, corpuscular wealth, and therefore an ‘industrial
dispute’ cannot possibly occur except where there is furnished to the public—the consumers—
by the combined efforts of employers and employee, wealth of that nature. Consequently, say the
employers, ‘education’ not being ‘wealth’ in that sense, there never can be an ‘industrial dispute’
between employers and employed engaged in the avocation of education, regardless of the
wealth derived by the employers from the joint co-operation.
The contention sounds like an echo from the dark ages of industry and political economy.
It not merely ignores the constant currents of life around us, which is the real danger in deciding
questions of this nature, but it also forgets the memorable industrial organisation of the nations,
not for the production or distribution of material wealth, but for services, national service, as
the service of organised industry must always be. Examination of this contention will not
only completely dissipate it, but will also serve to throw material light on the question in hand
generally. The contention is radically unsound for two great reasons. It erroneously conceives
the object of national industrial organization and thereby unduly limits the meaning of the terms
‘production’ and ‘wealth’ when used in that connection. But it further neglects the fundamental
character of ‘industrial disputes’ as a distinct and insistent phenomenon of modern society.
Such disputes are not simply a claim to share the material wealth jointly produced and capable
of registration in statistics. At heart they are a struggle, constantly becoming more intense on
the part of the employed group engaged in co-operation with the employing group in render-
ing services to the community essential for a higher general human welfare, to share in that wel-
fare in a greater degree… That contention, if acceded to, would be revolutionary… How could
it reasonably be said that a comic song or a jazz performance, or the representation of a comedy,
or a ride in a tram-car or motor-bus, piloting a ship, lighting a lamp or showing a moving pic-
ture is more ‘material’ as wealth than instruction, either cultural or vocational? Indeed, to take
one instance, a workman who travels in a tramcar a mile from his home to his factory is not more
efficient for his daily task than if he walked ten yards, whereas his technical training has a direct
effect in increasing output. If music or acting or personal transportation is admitted to be
‘industrial’ because each is productive of wealth to the employer as his business undertaking,
then an educational establishment stands on the same footing. But if education is excluded
for the reasons advanced, how are we to admit barbers, hair-dressers, taxi-car drivers, furniture
removers, and other occupations that readily suggest themselves? And yet the doctrine would
admit manufacturers of intoxicants and producers of degrading literatures and pictures, because
these are considered to be ‘wealth’. The doctrine would concede, for instance, the establishments
for the training of performing dogs, or of monkeys simulating human behaviour, would be
80 Social Justice and Labour Jurisprudence

‘industrial’, because one would have increased material wealth, that is, a more valuable dog or
monkey, in the sense that one could exchange it for more money. If parrots are taught to say
‘Pretty Polly’ and to dance on their perch, that is, by concession, industrial, because it is the
production of wealth. But if Australian youths are trained to read and write their language
correctly and in other necessary elements of culture and vocation making them more efficient
citizens, fitting them with more or less directness to take their place in the general industrial ranks
of the nation and to render the services required by the community, that training is said not to
be wealth and the work done by teachers employed is said not to be industrial.

So long as services are part of the wealth of a nation—and it is obscurantist to object

to it—educational services are wealth, are ‘industrial’. We agree with Isaacs, J.
More closely analysed the issue we may ask ourselves—as Isaacs, J., did—whether, if
private scholastic establishments carried on teaching on the same lines as the State schools,
giving elementary education free and charging fees for the higher subjects providing the
same curriculum and so on by means of employed teachers, would such a dispute as we
have here be an industrial dispute? … ‘I have already indicated my view’, says Isaacs, J.:

…that education so provided constitutes in itself an independent industrial operation as a

service rendered to the community. Charles Dickens evidently thought so when ninety years
ago Squeers called his school ‘the shop’ and prided himself on Nickleby’s being ‘cheap’ at Pounds 5
a year and commensurate living conditions. The world has not turned back since then. In 1926
the Committee on Industry and Trade, in their report to the British Prime Minister, included
among ‘Trade Unions’ those called ‘teaching’. If there appears that in 1897 there were six unions
with a total membership of 45,319 and in 1924 there were seventeen unions with a membership
of 194,946. The true position of education in relation to the actively operative trades is not really
doubtful. Education, cultural and vocational, is now and is daily becoming as much as the artisan’s
capital and tool, and to a great extent his safeguard against unemployment, as the employers’
banking credit and insurance policy are part of his means to carry on the business. There is at
least as much reason for including the educational establishments in the constitutional power as
‘labour’ services, as there is to include insurance companies and as ‘capital’ services.

We have extensively excerpted from the vigorous dissent because the same position
holds good for India, which is emerging from feudal illiteracy to industrial education.
In Gandhi’s India, basic education and handicraft merge and in the latter half of our
century, higher education involves field studies, factory training, house surgeoncy and
clinical education; and sans such technological training and education in the humanities,
industrial progress is self-condemned. If education and training are integral to industrial
and agricultural activities, such services are part of ‘industry’ even if high-browism may
be unhappy to acknowledge it. It is a class-conscious, inegalitarian outlook with an elitist
aloofness which makes some people shrink from accepting educational institutions,
vocational or other, as industries. The definition is wide and embraces training for industry,
which, in turn, ensconces all processes of producing goods and services by employer–
employee cooperation. Education is the nidus of industrialisation and itself is ‘industry’.
We may consider certain aspects of this issue while dealing with later cases of our
Court. Suffice it to say, that the unmincing argument of Isaacs, J., has been specifically
approved in the Corporation of Nagpur53 and Hospital Mazdoor Sabha54 cases in a different
aspect.
 Threshold Part Issues under the Industrial Disputes Act, 1947 81

Now we revert to the more crucial part of the Corporation of Nagpur55 decision. It is
meaningful to notice that in this case the Court, in its incisive analysis, department by
department, of variform municipal services, specifically observed:

Education Department: This department looks after the primary education, i.e., compul-
sory primary education within the limits of the Corporation. (See the evidence of witness 1 for
party 1.) This service can equally be done by private persons. The department satisfies the other
tests. The employees of this department coming under the definition of ‘employees’ under the
Act would certainly be entitled to the benefits of the Act.

The substantial breakthrough achieved by this decision in laying bare the fundamentals
of ‘industry’ in its wider sense deserves mention. The ruling tests are clear. The ‘analogous’
species of quasi-trade qualify for becoming ‘industry’ if the nature of the organised activity
implicit to a trade or business is shared by them. It is not necessary to ‘equate the other
activities with trade, or business’. The pith and substance of the matter is that the struc-
tural, organisational, engineering aspects, crucial industrial relations such as wages, leave
and other service conditions, as well as characteristic business methods (not motives) in
running the enterprise, govern the conclusion. The presence of a profit motive is expressly
negated as a criterion. Even the quid pro quo theory—which is the same monetary object in
a milder version—has been dismissed. The subtle distinction, drawn in lovely lines and
pressed with emphatic effect by Sri Tarkunde, between gain and profit, between no-profit,
no-loss basis, having different results in the private and public sectors, is fascinating, but
in the rough-and-tumble and sound and fury of industrial life, such nuances break down
and nice refinements defeat. For the same reason, we are disinclined to chase the differential
ambits of the first and the second parts of Section 2(j). Both read together and each,
viewed from the angle of employer or employee and applied in its sphere, as the learned
Attorney General pointed out, will make sense. If the nature of the activity is para-trade or
quasi-business, it is of no moment that it is undertaken in the private sector, joint sector,
public sector, philanthropic sector or labour sector; it is ‘industry’. It is the human sector,
the way the employer–employee relations are set up and processed, that gives rise to
claims, demands, tensions, adjudications, settlements, truce and peace in industry. That
is the raison d’etre of industrial law itself.
Two seminal guidelines of great moment flow from this decision: (a) the primary and
predominant activity test; and (b) the integrated activity test. The concrete application
of these two-fold tests is illustrated in the very case. We may set out in the concise words
of Subba Rao, J. (at p. 684 of AIR):

The result of the discussion may be summarized thus: (1) The definition of ‘industry’ in the Act
is very comprehensive. It is in two parts: one part defines it from the standpoint of the employer
and the other from the standpoint of the employee. If an activity falls under either part of the
definition, it will be an industry within the meaning of the Act. (2) The history of industrial
disputes and the legislation recognizes the basic concept that the activity shall be an organized
one and not that which pertains to private or personal employment. (3) The regal functions
described as primary and inalienable functions of State though statutorily delegated to a cor-
poration are necessarily excluded from the purview of the definition. Such regal functions shall
be confined to legislative power, administration of law and judicial power. (4) If a service rendered
by an individual or private person could be an industry, it would equally be an industry in the
hands of a corporation. (5) If a service rendered by a corporation is an industry, the employees
82 Social Justice and Labour Jurisprudence

in the departments connected with that service, whether financial, administrative or executive
would be entitled to the benefits of the Act. (6) If a department of a municipality discharged many
functions, some pertaining to industry as defined in the Act and other non-industrial activities,
the predominant functions of the department shall be the criterion for the purpose of the Act.

By these tokens, which find assent from us, the tax department of the local body is
‘industry’. The reason is this (at pp. 685, 686 of AIR):

The scheme of the Corporation Act is that taxes and fees are collected in order to enable the
municipality to discharge its statutory functions. If the functions so discharged are wholly or
predominantly covered by the definition of ‘industry’, it would be illogical to exclude the tax
department from the definitions. While in the case of private individuals or firms services are paid
in cash or otherwise, in case of public institutions, as the services are rendered to the public, the
taxes collected from them constitute a fund for performing those services. As most of the services
rendered by the municipality come under the definition of ‘industry’, we should hold that the
employees of the tax department are also entitled to the benefits under the Act.

The health department of the municipality too is held in that case to be ‘industry’—a
fact which is pertinent when we deal later with hospitals, dispensaries and health centres
(at p. 687 of AIR):

This department looks after scavenging, sanitation, control of epidemics, control of food
adulteration and running of public dispensaries. Private institutions can also render these services.
It is said that the control of food adulteration and the control of epidemics cannot be done by
private individuals and institutions. We do not see why. There can be private medical units to
help in the control of epidemics for remuneration. Individuals may get the food articles purchased
by them examined by the medical unit and take necessary action against guilty merchants. So
too, they can take advantage of such a unit to prevent epidemics by having necessary inoculations
and advice. This department also satisfies the other tests laid down by us, and is an industry
within the meaning of the definition of ‘industry’ in the Act.

Even the General Administration Department is ‘industry’. Why? Because (at p. 689
of AIR):

Every big company with different sections will have a general administration department. If the
various departments collated with the department are industries, this department would also
be a part of the industry. Indeed the efficient rendering of all the service would depend upon
the proper working of this department, for, otherwise there would be confusion and chaos. The
State Industrial Court in this case has held that all except five of the departments of the Corpor-
ation come under the definition of ‘industry’ and if so, it follows that this department, dealing
predominantly with industrial department, is also an industry. Hence the employees of this
department are also entitled to the benefits of this Act.

Running right through are three tests: (a) the paramount and predominant duty
criterion (p. 971); (b) the specific service being an integral, non-severable part of the
same activity (p. 960); and (c) the irrelevance of the statutory duty aspect.

It is said that the functions of this department are statutory and no private individuals can
discharge those statutory functions. The question is not whether the discharge of certain functions
 Threshold Part Issues under the Industrial Disputes Act, 1947 83

by the Corporation has statutory backing, but whether those functions can equally be performed
by private individuals. The provisions of the Corporation Act and the by-laws prescribe certain
specifications for submission of plans and for the sanction of the authorities concerned before the
building are put up. The same thing can be done by a co-operative society or a private individual.
Co-operative societies and private individuals can allot lands for building houses in accordance
with the conditions prescribed by law in this regard. The services of this department are therefore
analogous to those of a private individual with the difference that one has the statutory sanction
behind it and the other is governed by terms of contracts.

Be it noted that even cooperatives are covered by the learned judge, although we may
deal with that matter a little later.
The same bench decided both the Corporation of Nagpur56 case and the Hospital Mazdoor
Sabha57. This latter case may be briefly considered now. It repels the profit motive and
quid pro quo theory as having any bearing on the question. The wider import of Section 2(j)
is accepted, but it expels essential ‘sovereign activities’ from its scope.
It is necessary to note that the hospital concerned in this case was run by the government
for the medical relief to the people. Nay, more: It had a substantial educational and train-
ing role.

This group serves as a clinical trading group for students of the Grant Medical College which is
a Government Medical College run and managed by the appellant for imparting medical sciences
leading to the Degree of Bachelor of Medicine and Bachelor of Surgery of the Bombay University
as well as various Post-Graduate qualifications of the said University and the College of Physicians
and Surgeons, Bombay; the group is thus run and managed by the appellant to provide medical
relief and to promote the health of the people of Bombay.

And yet the holding was that it was an industry. Medical education, without mincing
words, is ‘industry’. This has no vulgarising import at all, since the term ‘industry’ is a tech-
nical one for the purposes of the Act, even as a masterpiece of painting is a priceless art
but is ‘goods’ under the sales-tax law without any philistinic import. Law abstracts certain
attributes of persons of things and assigns juridical values without any pejorative connota-
tion about its other aspects. The Court admonishes that:

Industrial adjudication has necessarily to be aware of the current of socio-economic thought

ground; it must recognise that in the modern welfare State healthy industrial relations are a matter
of paramount importance and its essential function is to assist the State by helping a solution of
the industrial disputes which constitute a distinct and persistent phenomenon of modern
industrialised States. In attempting to solve industrial disputes industrial adjudication does not
and should not adopt a doctrinaire approach. It must evolve some working principles and
should generally avoid formulating or adopting abstract generalisations. Nevertheless it cannot
harp back to old age notions about the relations between employer and employee or to the
doctrine of laissez faire which then governed the regulation of the said relations. That is why,
we think in construing the wide words used in Section 2(j) it would be erroneous to attach undue
importance to attributes associated with business or trade in the popular mind in days gone by.

Again, this note is reported on a later page:

Isaacs, J., has uttered a note of caution that in dealing with industrial disputes industrial
adjudicators must be conversant with the current knowledge on the subject and they should
not ignore the constant currents of life around them for otherwise it would introduce a serious
84 Social Justice and Labour Jurisprudence

infirmity in their approach. Dealing with the general characteristics of industrial enterprises the
learned Judge observed that they contribute more or less to the general welfare of the community.

A conspectus of the clause has induced Gajendragadkar, J., to take note of the impact
of provisions regarding the public utility service also:

If the object and scope of the statute are considered there would be no difficulty in holding that
the relevant words of wide import have been deliberately used by the Legislature in defining
‘industry’ in Section 2(j). The object of the Act was to make provision for the investigation and
settlement of industrial disputes, and the extent and scope of its provisions would be realised
if we bear in mind the definition of ‘industrial dispute’ given by Section 2(k), of ‘wages’ by
Section 2(rr), ‘workman’ by Section 2(s), and of ‘employer’ by Section 2(g). Besides, the definition
of a public utility service prescribed by Section 2(n) is very significant. One has merely to glance
at the six categories of public utility service mentioned by Section 2(n) to realise that the rule of
construction on which the appellant relies is applicable in interpreting the definition prescribed
by Section 2(j).

The positive delineation of ‘industry’ is set in these terms:

…as a working principle it may be stated that an activity systematically or habitually under-
taken for the production or distribution of goods or for the rendering of material service to the
community at large or a part of such community with the help of employees is an undertaking.
Such an activity generally involves the co-operation of the employer and the employees; and its
object is the satisfaction of material human needs. It must be organised or arranged in a manner
in which trade or business is generally organised or arranged. It must not be casual nor must it
be for oneself nor for pleasure. Thus the manner in which the activity in question is organised
or arranged, the condition of the co-operation between employer and the employee necessary
for its success and its object to render material service to the community can be regarded as some
of the features which are distinctive of activities to which Section 2(j) applies. Judged by this test
there would be no difficulty in holding that the State is carrying on an undertaking when it
runs the group of hospitals in question.

Again:

It is the character of the activity which decides the question as to whether the activity in question
attracts the provision of Section 2(j); who conducts the activity and whether it is conducted for
profit or not do not make a material difference.

By these tests, even a free or charitable hospital is an industry. That the Court intended
such a conclusion is evident:

If that be so, if a private citizen runs a hospital without charging any fees from the patients treated
in it, it would nevertheless be an undertaking under Section 2(j). Thus the character of the activity
involved in running a hospital brings the institution of the hospital within Section 2(j).

The ‘rub with the ruling’, if we may with great deference say so, begins when the
Court inhibited from effectuating the logical thrust of its own crucial ratio:

…though Section 2(j) uses words of very wide denotation, a line would have to be drawn in a
fair and just manner so as to exclude some callings, services or undertakings. If all the words
 Threshold Part Issues under the Industrial Disputes Act, 1947 85

used are given their widest meaning, all services and callings would come within the purview of
the definition; even service rendered by a servant purely in a personal or domestic matter or
even in a casual way would fall within the definition. It is not and cannot be suggested that in
its wide sweep the word ‘service’ is intended to include service howsoever rendered in whatsoever
capacity and for whatsoever reason. We must, therefore, consider where the line should be drawn
and what limitations can and should be reasonably implied in interpreting the wide words used
in Section 2(j); and that no doubt is a somewhat difficult problem to decide.

What is a ‘fair and just manner? It must be founded on grounds justifiable by the
principles derived from the statute if it is not to be sublimation of subjective phobia,
rationalisation of interests or judicialisation of non-jurists’ negatives. And this hunch, in
our respectful view, has been proved true not by the positive pronouncement in the case,
but by two points suggested but left open. One relates to education and the other to
professions. We will deal with them in due course.
Liberal Professions—When the delimiting line is drawn to whittle down a wide defi-
nition, a principled working test, not a projected wishful thought, should be sought.
This conflict surfaced in the Solicitors case.58 Before us, too, a focal point of contest was
whether the liberal professions are, ipso facto, excluded from ‘industry’. Two grounds were
given by Gajendragadkar, J., for overruling Sri A.S.R. Chari’s submissions. The doctrine
of direct cooperation and the features of liberal professions were given as good reasons to
barricade professional enterprises from the militant clamour for more by lay labour. The
learned judge expressed himself on the first salvational plea thus:

When in the Hospital 59 case this Court referred to the organisation of the undertaking involving
the co-operation of capital and labour or the employer and his employee, it obviously meant the
co-operation essential and necessary for the purpose of rendering material service or for the
purpose of production. It would be realised that the concept of industry postulates partnership
between capital and labour or between the employer and his employees. It is under this partnership
that the employer contributes his capital and the employees their labour and the joint contribution
of capital and labour leads directly to the production which the industry has in view. In other
words, the co-operation between capital and labour or between the employer and his employees
which is treated as a working test in determining whether any activity amounts to an industry
is the co-operation which is directly involved in the production of goods or in the rendering of
service. It cannot be suggested that every form or aspect of human activity in which capital and
labour co-operate or employer and employees assist each other is an industry. The distinguish-
ing feature of an industry is that for the production of goods or for the rendering of service,
co-operation between capital and labour or between the employer and his employees must be
direct and must be essential. Co-operation to which the test refers must be co-operation between
the employer and his employees which is essential for carrying out the purpose of the enterprise
and the service to be rendered by the enterprise should be the direct outcome of the combined
efforts of the employer and the employees.

The second reason for exoneration is qualitative:

Looking at this question in a broad and general way, it is not easy to conceive that a liberal
profession like that of an attorney could have been intended by the Legislature to fall within the
definition of ‘industry’ under Section 2(j). The very concept of the liberal professions has its
own special and distinctive features which do not readily permit the inclusion of the liberal pro-
fessions into the four corners of industrial law. The essential basis of an industrial dispute is that
86 Social Justice and Labour Jurisprudence

it is a dispute arising between capital and labour in enterprises where labour and capital combine
to produce commodities or to render service. This essential basis would be absent in the case of
liberal professions. A person following liberal profession does not carry on his profession in any
intelligible sense with the active co-operation of his employees and the principal, if not the sole,
capital which he brings into his profession is his special or peculiar intellectual and educational
equipment. That is why on broad and general considerations which cannot be ignored, a liberal
profession like that of an attorney must, we think, be deemed to be outside the definition of
‘industry’ under Section 2(j).

Let us examine these two tests. In the sophisticated, subtle, complex, assembly-line oper-
ations of modern enterprises, the tests of ‘direct’ and ‘indirect’, ‘essential’ and ‘inessential’
will snap easily. In an American automobile manufactory, everything from the shipping
of iron ore into and the shipping of cars out of the vast complex takes place as myriad
major and minor jobs. A million administrative, marketing and advertising tasks are done.
Which, out of this maze of chores, is ‘direct’? A battle may be lost if winter wear were
shoddy. Is the army’s tailor a direct contributory?
An engineer may lose a competitive contract if his typist typed wrongly or shabbily
or despatched late. He is a direct contributory to the disaster. No lawyer or doctor can
impress client or court if his public-relations job or homework were poorly done, and that
part depends on smaller men, adjuncts. Can the great talents in administration, profession,
science or art shine if a secretary fades or faults? The whole theory of direct cooperation
is an improvisation which with great respect, hardly impresses.
Indeed, Hidayatullah, C.J., in the Gymkhana Club Employees’ Union60 case, scouted the
argument about direct nexus, making specific reference to the Solicitors’61 case (at p. 560
of AIR):

…The service of a solicitor was regarded as individual depending upon his personal qualifica-
tions and ability, to which employees did not contribute directly or essentially. Their contribution,
it was held, had no direct or essential nexus with the advice or service. In this way learned pro-
fessions were excluded.

To nail this essential nexus theory, Hidayatullah, C.J., argued (at pp. 560, 561 of AIR):

What partnership can exist between the company and/or board of directors on the one hand
and the menial staff employed to sweep floors on the other? What direct and essential nexus is
there between such employees and production? This proves that what must be established is the
existence of an industry viewed from the angle of what the employer is doing and if the definition
from the angle of the employer’s occupation is satisfied, all who render service and fall within
the definition of workman come within the fold of industry irrespective of what they do. There
is then no need to establish a partnership as such in the production of material goods or material
services. Each person doing his appointed task in an organization will be a part of the industry
whether he attends to a loom or merely polishes door handles. The fact of employment as
envisaged in the second part is enough provided there is an industry and the employee is workman.
The learned professions are not industry not because there is absence of such partnership but
because viewed from the angle of the employer’s occupation, they do not satisfy the test.

Although Gajendragadkar, J., in the Solicitors’62 case and Hidayatullah, J., in the Gymkhana63
case agreed that the learned professions must be excluded, on the question of direct or
effective contribution in partnership, they flatly contradicted each other. The reasoning
 Threshold Part Issues under the Industrial Disputes Act, 1947 87

on this part of the case which has been articulated in the Gymkhana Club Employees’
Union64 (supra) appeals to us. There is no need for insistence upon the principle of part-
nership, the doctrine of direct nexus or the contribution of values by employees. Every
employee in a professional office, be he a para-legal assistant or full-fledged professional
employee or, down the ladder, a mere sweeper or janitor—everyone—makes for the success
of the office, even the mali who collects flowers and places a beautiful bunch in a vase
on the table spreading fragrance and pleasantness around. The failure of any one can mar
even the success of everyone else. Efficient collectivity is the essence of professional success.
We reject the plea that a member of a learned or liberal profession, for that sole reason,
can self-exclude himself from operation of the Act.
Professional immunity from labour’s demand for social justice because learned pro-
fessions have a halo also stands on sandy foundations and, perhaps, validates G.B. Shaw’s
witticism that all professions are conspiracies against the laity. After all, let us be realistic
and recognise that we live in an age of experts, alias ‘professionals’, each having his ethics,
monopoly, prestige, power and profit. The proliferation of professions is a ubiquitous
phenomenon, and none but the tradition-bound will agree that theirs is not a liberal
profession. Lawyers have their code. So too medics swearing by Hippocrates, chartered
accountants and company secretaries, and other autonomous nidi of know-how.
Sociological critics have tried to demythologise the learned professions. Perhaps they
have exaggerated. Still, it is there. The politics of skill, not service of the people, is the
current orientation, according to a recent book on ‘Professions for the People’:

The English professions in the eighteenth century were an acceptable successor to the feudal
ideal of landed property as a means of earning a living. Like landed property, a professional
‘competence’ conveniently ‘broke the direct connection between work and income...’65 for the
gentryman. A professional career provided effects, aristocratic, protective coloration, and at the
same time enabled one to make a considerable sum of money without sullying his hands with a
‘job’ or ‘trade’. One could carry on commerce by sleight of hand while donning the vestments
of professional altruism. To boot, one could also work without appearing to drive income directly
from it. As Reader explains:

The whole subject of payment… seems to have caused professional men acute embarrassment,
making them take refuge in elaborate concealment, fiction, and artifice. The root of the
matter appears to lie in the feeling that it was not fitting for one gentleman to pay another for
services rendered, particularly if the money passed directly. Hence, the device of paying a
barristers’ fee to the attorney, not to the barrister himself. Hence, also the convention that in
many professional dealings the matter of the fee was never openly talked about, which could
be very convenient, since it precluded the client or patient from arguing about whatever sum
his advisor might eventually indicate as a fitting honorarium.66

The established professions—the law, medicine, and the clergy—held (or continued to hold)
estate-like positions:

The three ‘liberal professions’ of the eighteenth century were the nucleus about which the
professional class of the nineteenth century was to form. We have seen that they were united
by the bone of classical education: that their broad and ill-defined functions covered much
that later would crystallize out into new, specialised, occupations; that each, ultimately, derived
much of its standing with the established order in the State…67
88 Social Justice and Labour Jurisprudence

In the United States, professional associations are guilds in modern dress.

Modern professional associations are organizational counterparts of the guilds. They are
occupational self-interest organisations. Inasmuch as the professions still perform custom work
and exercise a monopoly of training and skill, the guild analogy is plausible. However, aspects of
economic history lead to a different conclusions. There has been a shift of emphasis on the part
of professionals from control over the quality of the product or service, to control of price.
Indeed, in America, professionals advertise, hold a strict monopoly, charge heavy fees and
wear humanitarianism as an altruist mask. In England a Royal Commission has been appointed
to go into certain aspects of the working of the legal profession.
The Observer, in a leading article ‘WIGS ON THE GREEN’ dated 15 February 1976,
wrote:

In preparing for the challenge of a Royal Commission, lawyers ought to realise how deep
public disillusionment goes, how the faults of the legal system are magnified by the feeling
that the legal profession is the most powerful pressure group—some would say a mutual
protection society—in the land, with its loyal adherents in Westminister, Whitehall, and on
the Bench, like a great freemasonry designed to protect the statute quo.
****
It robs the client of the benefits of free competition among barristers for his custom. It
confirms his impression that Her Majesty’s courts, which he rightly regards as part of the
service the State offers to all its citizens, are a private benefit society for lawyers.
****
The fees that lawyers are paid, and the services that they give in return, must also be studied.
A recent survey suggested that in one criminal court 79 per cent of barristers in contested
cases and 96 per cent in uncontested cases saw their clients only on the morning of the
hearing. How much is that worth?
****

....For Britain at present has a legal system which often looks as anachronistic as its wigs and
gowns, a system in which solicitors are plentiful in well-to-do areas, and inaccessible in less
fashionable districts; in which the law appears suited only to the property rights of the middle
class, but oblivious of the new problems of poorer and less well-educated people, who need
help with their broken marriages or their landlord-and-tenant disputes. Sooner rather than
later, the legal system must be made to appear less like a bastion of privilege, more like a defender
of us all. The American Medical Association has come in for sharp social criticism and litigative
challenge. Which architect, engineer or auditor has the art to make huts, landscape little villages
or bother about small units? And which auditor and company secretary has not been pressured
to break with morals by big business? Our listening posts are raw life.

The Indian Bar and Medicine have a high social ethic upto now. Even so, the Dabholkar68
case cannot be ignored as freak or recondite. Doctors have been criticised for unsocial
conduct. The halo conjured up in the Solicitors’69 case hardly serves to ‘de-industrialise’
the professions. After all, it is not infra dig for lawyers, doctors, engineers, architects,
auditors, company secretaries or other professionals to regard themselves as workers in
their own sphere or as employers or suppliers of specialised service to society. Even justicing
is service and, but for the exclusion from industry on the score of sovereign functions,
might qualify for being regarded as ‘industry’. The plea of ‘profession’ is irrelevant for
industrial law except as an expression of anathema. No legal principle supports it.
 Threshold Part Issues under the Industrial Disputes Act, 1947 89

Speaking generally, the authors of the book ‘Professions for the People’ earlier men-
tioned state:

Jethro K. Lisberman (1970, p. 3) warns: ‘Professionals are dividing the world into spheres of
influence and erecting large signs saying “experts at work here, do not proceed further”.’ He
shows that via such mechanisms as licensing, self-regulation, and political pressure the professions
are augmenting the erosion of democracy. Professional turf is now ratified by the rule of law. If
there is the case, it represents a significant development; the division of labour in society is again
moving towards the legalization of social status quo occupational roles.

All this adds up to the decanonisation of the noble professions. Assuming that a pro-
fessional, in our egalitarian ethos, is like any other man of common clay plying a trade or
business, we cannot assent to the cult of the elite in carving out islands of exception to
‘industry’.
The more serious argument of exclusion urged to keep the professions out of the coils
of industrial disputes and the employees’ demands backed by agitations ‘red in tooth and
claw’ is a sublimated version of the same argument. Professional expertise and excellence,
with its occupational autonomy, ideology, learning, bearing and morality, holds aloft a
standard of service which centres around the individual doctor, lawyer, teacher or auditor.
This reputation and quality of special service being of the essence, the cooperation of the
workmen in this core activity of professional offices is absent. The clerk and stenos, the
bell-boys and doormen, the sweepers and menials have no art or part in the soul of
professional functions, with its higher code of ethics and intellectual proficiency, their
contribution being peripheral and low-grade, with no relevance to clients’ wants and require-
ments. This conventional model is open to the sociological criticism that it is an ideological
cloak conjured up by highborns, a posture of noblesse oblige which is incongruous with raw
life, especially in the democratic Third World and post-Industrial societies.
To hug the past is to materialise the ghost. The paradigms of professionalism are gone.
In the large solicitors’ firms, architects’ offices, medical polyclinics and surgeries, we find
a humming industry, each section doing its work with its special flavour and culture and
code, and making the end product worth its price. In a regular factory, you have highly
skilled technicians whose talent is of the essence, managers whose ability organises and
workmen whose coordinated input is from one angle secondary, from another significant.
Let us look at a surgery or walk into a realtor’s firm. What physician or surgeon will not
kill if an attendant errs or a clerk enters wrong or dispenses deadly dose? One such disaster
somewhere in the assembly-line operations and the clientele will be scared despite the
doctor’s distalled skill. The lawyer is no better and just cannot function without the
specialised supportive tools of para-professionals like secretaries, librarians and law-knowing
steno-typists, even the messengers and telephone girls. The mystique of professionalism
easily melts in the hands of modern social scientists who have—as Watergate has shown
in America (and has India had its counterparts?)—debunked and stripped the professional
emperor naked. ‘Altruism’ has been exposed, cash has overcome craft nexus, and if pro-
fessionalism is a mundane ideology, then ‘profession’ and ‘professional’ are sociological
contributions to the pile.
Anyway, in the sophisticated organisation of expert services, all occupations have central
skills, an occupational code of ethics, a group culture, some occupational authority, and
90 Social Justice and Labour Jurisprudence

some permission to monopoly practice from the community. This incisive approach makes
it difficult to ‘caste-ify’ or ‘class-ify’ the liberal professions as part and beyond the pale
of ‘industry’ in our democracy. We mean no disrespect to the members of the profes-
sions. Even the judicial profession or administrative profession cannot escape the winds
of social change. We may add that the modern world, particularly the Third World, can
hope for a human tomorrow only through professions for the people, through expertise
at the service of the millions. Indian primitivism can be banished only by pro bono publico
professions in the field of law, medicine, education, engineering and what not. But that
radicalism does not detract from the thesis that ‘industry’ does not spare professionals....
We see no rationale in the claim to carve out islets. Look: A solicitor’s firm or a lawyer’s firm
becomes successful not merely by the talent of a single lawyer but the cooperative operations
of several specialists, juniors and seniors. Likewise, the ancillary services of competent
stenographers para-legal supportive services are equally important. The same test applies
to other professions. The conclusion is inevitable that contribution to the success of the
institution—every professional unit has an institutional goodwill and reputation—comes
not merely from the professional or specialist but from all those whose excellence in their
respective parts makes for the total proficiency. We have, therefore, no doubt that the
claim for exclusion on the score of liberal professions is unwarranted from a functional
and definitional angle. The floodgates of exemption from the obligations under the Act
will be opened if professions flow out of its scope.
Many callings may clamour to be regarded as liberal professions. In an age when trad-
itions have broken down and the Old World professions of liberal descent have begun to
resort to commercial practices (even legally, as in America, or factually, as in some other
countries), exclusion under this new label will be infliction of injury on the statutory
intent and effect.
The result of this discussion is that the Solicitors’70 case is wrongly decided and must,
therefore, be overruled. We must hasten, however, to repeat that a small category, perhaps
large in numbers in the mofussil, may not squarely fall within the definition of ‘industry’.
A single lawyer, a rural medical practitioner or urban doctor with a little assistant and/or
menial servant may ply a profession but may not be said to run an industry. That is not
because the employee does not make a contribution nor because the profession is too
‘high’ to be classified as a trade or industry, with its commercial connotations, but because
there is nothing like organised labour in such employment. The image of industry or
even quasi-industry is one of a plurality of workmen, not an isolated or single little assist-
ant or attendant. The latter category is more or less like a personal avocation for liveli-
hood, taking some paid or part time for another. The whole purpose of the Industrial
Disputes Act is to focus on resolution of industrial disputes and regulation of industrial
relations, and not to meddle with every little carpenter in a village or blacksmith in a town
who sits with his son or assistant to work for the customers who trek in. The ordinary
spectacle of a cobbler and his assistant or a cycle repairer with a helper we come across on
the pavements of cities and towns repels the idea of industry and industrial dispute. For
this reason, which applies all along the line—to small professions, petty handicrafts-
men, domestic servants and the like—the solicitor or doctor or rural engineer, even like
the butcher, the baker and the candlestick maker, with an assistant or without, does not
fall within the definition of ‘industry’. In regular industries, of course, even a few employees
are enough to bring them within Section 2(j). Otherwise automated indus-tries will slip
through the net.
 Threshold Part Issues under the Industrial Disputes Act, 1947 91

Is Education an Industry?

We will now move on to a consideration of education as an industry. If the triple tests of

systematic activity, cooperation between employer and employee, and production of goods
and services were alone to be applied, a university, a college, a research institute or any
teaching institution will be industry. But in the University of Delhi71 case, it was held
that the Industrial Tribunal was wrong in regarding the University as an industry because
it would be inappropriate to describe education as an industrial activity. Gajendragadkar, J.,
agreed in his judgement that the employer–employee test was satisfied and that cooperation
between the two was also present. Undoubtedly, education is a sublime cultural service,
technological training and personality builder. A human being without education is a
brute and nobody can quarrel with the proposition that education, in its spectrum, is
significant service to the community. We have already given extracts from the rulings of
the Australian judge Isaacs, J., to substantiate the thesis that education is not merely
industry, but the mother of industries. A philistinic, illiterate society will be not merely
uncivilised but incapable of industrialisation. Nevertheless, Gajendragadkar, J., observed:

It would, no doubt, sound somewhat strange that education should be described as industry
and the teachers as workmen within the meaning of the Act, but if the literal construction for
which the respondents content is accepted, that consequence must follow.

Why is it strange to regard education as an industry? Its respectability? Its lofty character?
Its professional stamp? Its cloistered virtue which cannot be spoilt by the commercial impli-
cations and the raucous voices of workmen? Two reasons are given to avoid the conclusion
that imparting of education is an industry. The first ground relied on by the Court, is based
upon the preliminary conclusion that teachers are not ‘workmen’ by definition. Perhaps
they are not, because teachers do not do manual work or technical work. We are not too
sure whether it is proper to disregard, with contempt, manual work and separate it from
education; nor are we too sure whether, in our technological universe, education has to
be excluded. However, that may be a battle to be waged on a later occasion by litigation,
and we do not propose to pronounce on it at present. The Court, in the University of Delhi72
case, proceeded on the assumption viz. teachers are not workmen—which we will adopt
to test the validity of the argument. The reasoning of the Court is best expressed in the
words of Gajendragadkar, J.:

It is common ground that teachers employed by educational institutions, whether the said
institutions are imparting primary, secondary, collegiate or post-graduate education, are not
workmen under Section 2(s), and so, it follows that the whole body of employees with whose
co-operation the work of imparting education is carried on by educational institutions do not fall
within the purview of Section 2(s), and any disputes between them and the institutions which
employed them are outside the scope of the Act. In other words, if imparting education is an
industry under Section 2(j), the bulk of the employees being outside the purview of the Act, the
only disputes which can fall within the scope of the Act are those which arise between such
institutions and their subordinate staff, the members of which may fall under Section 2(s). In
our opinion, having regard to the fact that the work of education is primarily and exclusively
carried on with the assistance of the labour and co-operation of teachers, the omission of the whole
class of teachers from the definition prescribed by Section 2(s) has an important bearing and
92 Social Justice and Labour Jurisprudence

significance in relation to the problem which we are considering. It would not have been the
policy of the Act that education should be treated as industry for the benefit of a very minor and
insignificant number of persons who may be employed by educational institutions to carry on
the duties of the subordinate staff. Reading Sections 2(g), (j) and (s) together, we are inclined to
hold that the work of education carried on by educational institutions like the University of
Delhi is not an industry within the meaning of the Act.

The second argument which appealed to the Court to reach its conclusion is this:

The distinctive purpose and object of education would make it very difficult to assimilate it to
the position of any trade, business or calling or service within the meaning of Section 2(j).

Why so? The answer is given by the learned judge himself:

Education seeks to build up the personality of the pupil by assisting his physical, intellectual,
moral and emotional development. To speak of this educational process in terms of industry
sounds so completely incongruous that one is not surprised that the Act has deliberately so
defined workman under Section 2(s) as to exclude teachers from its scope. Under the sense of
values recognised both by the traditional and conservative as well as the modern and progressive
social outlook, teaching and teachers are, no doubt, assigned a high place of honour and it is
obviously necessary and desirable that teaching and teachers should receive the respect that is
due to them. A proper sense of values would naturally hold teaching and teachers in high esteem,
though power or wealth may not be associated with them. It cannot be denied that the concept
of social justice is wide enough to include teaching and teachers, and the requirement that
teachers should receive proper emoluments and other amenities which is essentially based on
social justice cannot be disputed; but the effect of excluding teachers from Section 2(s) is only
this, that the remedy available for the betterment of their financial prospects does not fall under
the Act. It is well-known that Education Departments of the State Governments as well as the
Union Government, and the University Grants Commission carefully consider this problem
and assist the teachers by requiring the payment to them of proper scales of pay and by insisting
on the fixation of other reasonable terms and conditions of service in regard to teachers engaged
in primary and secondary education and collegiate education which fall under their respective
jurisdictions. The position nevertheless is clear that any problems connected with teachers and
their salaries are outside the purview of the Act, and since the teachers from the sole class of
employees with whose co-operation education is imparted by educational institutions, their
exclusion from the purview of the Act necessarily corroborates the conclusion that education
itself is not within its scope.

Another reason has also been adduced to reinforce this conclusion:

It is well-known that the University of Delhi and most other educational institutions are not
formed or conducted for making profit; no doubt, the absence of profit motive would not take
the work of any institution outside Section 2(j) if the requirements of the said definition are
otherwise satisfied. We have referred to the absence of profit motive only to emphasize the fact
that the work undertaken by such educational institutions differs from the normal concept of
trade or business. Indeed, from a rational point of view, it would be regarded as inappropriate to
describe education even as a profession. Education in its true aspect is more a mission and a
vocation rather than a profession or trade or business, however wide may be the denotation of
the two latter words under the Act. That is why we think it would be unreasonable to hold that
educational institutions are employers within the meaning of Section 2(g), or that the work of
 Threshold Part Issues under the Industrial Disputes Act, 1947 93

teaching carried on by them is an industry under Section 2(j), because essentially, the creation of
a well-educated healthy young generation imbued with a rational progressive outlook on life
which is the sole aim of education, cannot at all be compared or assimilated with what may be
described as an industrial process.

The Court was confronted by the Corporation of Nagpur73 case, where it had been
expressly held that the education department of the Corporation was service rendered by
the department and so the subordinate menial employees of the department came under
the definition of ‘employees’ and would be entitled to the benefits of the Act. This was
explained away by the suggestion that:

the question as to whether educational work carried on by educational institutions like the
University of Delhi which have been formed primarily and solely for the purpose of imparting
education amounts to an industry within the meaning of Section 2(j) was not argued before the
Court and was not really raised in that form.

We dissent, with utmost deference, these propositions and are inclined to hold, as
the Corporation of Nagpur74 held, that education is ‘industry’, and as Isaacs, J., held in the
Australian case75 that education is pre-eminently service.
The actual decision in the University of Delhi76 case was supported by another ground,
namely that the predominant activity of the University was teaching and since teachers
did not come within the purview of the Act, only the incidental activity of the subordinate
staff could fall within its scope but that could not alter the predominant character of the
institution.
We may deal with these contentions in a brief way, since the substantial grounds on
which we reject the reasoning have already been set out elaborately. First, the premises
relied on is that the bulk of the employees in the University is the teaching community:
teachers are not ‘workmen’ and cannot raise disputes under the Act; the subordinate staff
being only a minor category of insignificant numbers, the institution must be excluded,
going by the ‘predominant character’ test. It is one thing to say that an institution is not
an industry. It is altogether another thing to say that a large number of its employees are
not ‘workmen’ and cannot therefore avail of the benefits of the Act, and so the institu-
tion ceases to be an industry. The test is not the predominant number of employees
entitled to enjoy the benefits of the Act. The true test is the predominant nature of the
activity. In the case of the University or an educational institution, the nature of the activity
is—ex hypothesi—education, which is a service to the community. Ergo, the university is
an industry. The error has crept in, if we may say so with great respect, in mixing up the
numerical strength of the personnel with the nature of the activity.
Secondly, there are a number of other activities of the University administration
demonstrably industrial, which are severable although ancillary to the main cultural enter-
prise. For instance, a university may have a large printing press as a separate but consid-
erable establishment. It may have a large fleet of transport buses with an army of running
staff. It may have a tremendous administrative strength of officers and clerical cadres.
It may have karmcharis of various use. As the Corporation of Nagpur77 case has effectively
ruled, these operations—viewed in severality or collectively—may be treated as ‘industry’.
It would be strange, indeed, if a university has 50 transport buses, hiring drivers, con-
ductors, cleaners and the workshop technicians. How are they to be denied the benefits
of the Act, especially when their work is separable from academic teaching, merely because
94 Social Justice and Labour Jurisprudence

the buses are owned by the same corporate personality? We find, with all deference,
little force in this process of nullification of the industrial character of the University’s
multi-form operations.
The next argument which has appealed to the Court in the case is that education
develops the personality of the pupil and this process, if described as industry, sounds
grotesque. We are unable to appreciate the force of this reasoning, if we may respectfully
say so. It is true that our societal values assign a high place of honour to education, but
how does it follow from this that education is not a service? The sequitur is not easily
discernible. The pejorative assumption seems to be that ‘industry’ is something vulgar,
inferior, disparaging, and should not be allowed to sully the sanctified subject of education.
In our view, ‘industry’ is a noble term and embraces even the most sublime activity. At
any rate, in legal terminology located in the statutory definition, it is not money-making,
it is not lucre-loving, it is not commercialising, it is not profit hunger. On the other hand,
a team of painters who produce works of art and sell them or a travelling orchestra group
that travels and performs and makes money may be an industry if they employ supportive
staff of artistes or others. There is no degrading touch about ‘industry’, especially in the
light of Mahatma Gandhi’s dictum that ‘work is worship’. Indeed, the colonial system of
education, which divorced book learning from manual work and practical training, has
been responsible for the calamities in the field. Gandhiji and Dr Zakir Hussain propagated
basic education that used work as a modus operandus for teaching. We have hardly any
hesitation in regarding education as an industry.
The final ground accepted by the Court is that education is a mission and vocation
rather than a profession or trade or business. The most that one can say is that this is an
assertion which does not prove itself. Indeed, all life is a mission and a man without a
mission is spiritually still-born. The high mission of life is the manifestation of the divinity
already in man. To christen education as a mission, even if true, is not to negate its being
an industry. We have to look at educational activity from the angle of the Act; and so
viewed, the ingredients of education are fulfilled. Education is, therefore, an in-dustry
and nothing can stand in the way of that conclusion.
It may well be said by realists in the cultural field that educational managements depend
so much on governmental support and some of them charge such high fees that schools
have become a trade and managers merchants. Whether this will apply to universities or
not, schools and colleges have been accused, at least in the private sector, of being tarnished
with trade motives.
Let us trade romantics for realities and see. With evening classes, correspondence
courses, admissions unlimited, fees and government grants escalating, and certificates
and degrees for prices, education—legal, medical, technological, school-level or colle-
giate education—is riskless trade for cultural entrepreneurs and haplessness of campus
(‘industrial’) unrest. Imaginary assumptions are experiments with untruth.
Our conclusion is that the University of Delhi78 case was wrongly decided and that
education can be and is, in its institutional form, an industry.

Are Charitable Institutions Industries?

Can charity be ‘industry’? This paradox can be unlocked only by examining the nature
of the activity of the charity, for there are charities and charities. The grammar of labour law
 Threshold Part Issues under the Industrial Disputes Act, 1947 95

in a pluralist society tells us that the worker is concerned with wages and conditions of
service, the employer with output and economies, and the community with peace, pro-
duction and stream of supply. This complex of work, wealth and happiness, firmly grasped,
will dissolve the dilemma of the law bearing on charitable enterprises. Charity is free;
industry is business. Then how? A lay look may scare; a legal look will see; a social look
will see through a hiatus inevitable in a sophisticated society with organisational diversity
and motivational dexterity.
If we mull over the major decisions we get a hang of the basic structure of ‘industry’
in its legal anatomy. Bedrocked on the ground norms, we must analyse the elements of
charitable economic enterprises established and maintained for satisfying human wants.
Easily three broad categories emerge; more may exist. The charitable element enlivens the
operations at different levels in these patterns and the legal consequences are different,
viewed from the angle of ‘industry’. For income-tax purposes, Trusts Act or company law
or registration law or penal code requirements the examination will be different. We are
concerned with a benignant disposition towards workmen and a trichotomy of charitable
enterprises run for producing and/or supplying goods and services, organised systematically
and employing workmen, is scientific.
The first is one where the enterprise, like any other, yields profits but they are siphoned
off for altruistic objects. The second is one where the institution makes no profit, but hires
the services of employees as in other like businesses; but the goods and services, which are
the output, are made available at low or no cost to the indigent needy who are priced
out of the market. The third is where the establishment is oriented on a humane mission
fulfilled by men who work not because they are paid wages, but because they share a passion
for the cause and derive job satisfaction from their contribution. The first two are industries,
the third not. What is the test of identity whereby these institutions with eleemosynary
inspiration fall or do not fall under the definition of ‘industry’?
All industries are organised, systematic activity. Charitable adventures which do not
possess this feature, of course, are not industries. Sporadic or fugitive strokes of charity
do not become industries. All three philanthropic entities we have itemised fall for con-
sideration only if they involve cooperation between employers and employees to produce
and/or supply goods and/or services. We assume, all three do. The crucial difference is
over the presence of charity in the quasi-business nature of the activity. Shri Tarkunde,
based on the Safdarjung79 case, submits that, ex hypothesi, charity frustrates commerciality
and thereby deprives it of the character of industry.
It is common ground that the first category of charities is disqualified for exemption.
If a business is run for production and/or the supply of goods and services with an eye to
profit, it is plainly an industry. The fact that the whole or substantial part of the profits
so earned are diverted for purely charitable purposes does not affect the nature of the
economic activity, which involves the cooperation of employer and employee and results
in the production of goods and services. The workers are not concerned about the destin-
ation of the profits. They work and receive wages. They are treated like any other workmen
in any like industry. All the features of an industry, as spelt out from the definition by the
decisions of this Court, are fully present in these charitable businesses. In short, they are
industries. The application of the income for philanthropic purposes, instead of filling
private coffers, makes no difference either to the employees or to the character of the
activities. Good Samaritans can be clever industrialists.
96 Social Justice and Labour Jurisprudence

The second species of charity is really an allotropic modification of the first. If a kind-
hearted businessman or a high-minded industrialist or service-minded operator hires
employees like his non-philanthropic counterparts and, in cooperation with them, pro-
duces and supplies goods or services to the lowly and the lost, the needy and the ailing,
without charging them any price or receiving a negligible return, people regard him as
of charitable disposition and his enterprise as a charity. But then, so far as the workmen
are concerned, it boots little whether he makes available the products free to the poor.
They contribute labour in return for wages and conditions of service. For them, the char-
itable employer is exactly like a commercial-minded employer. Both exact hard work.
Both pay similar wages. Both treat them as human machine cogs and nothing more. The
material difference between the commercial and the compassionate employers is not with
reference to the workmen but with reference to the recipients of goods and services.
Charity operates not vis-à-vis the workmen, in which case they will be paying a liberal
wage and generous extras with no prospect of strike. The beneficiaries of the employer’s
charity are the indigent consumers. Industrial law does not take note of such extraneous
factors but regulates industrial relations between employers and employers, employers and
workmen, and workmen and workmen. From the point of view of the workmen, there is
no charity. For them, charity must begin at home. From these strands of thought flows the
conclusion that the second group may legitimately and legally be described as ‘industry’.
The fallacy in the contrary contention lies in shifting the focus from the worker and the
industrial activity to the disposal of the end product. This law has nothing to do with that.
The income-tax law may have, social opinion may have.
Some of the appellants may fall under the second category just described. While we
are not investigating into the merits of those appeals, we may as well indicate in a general
way that the Gandhi Ashram, which employs workers like spinners and weavers and sup-
plies cloth or other handicrafts at concessional rates to needy rural consumers, may not
qualify for exemption. Even so, particular incidents may have to be closely probed be-
fore pronouncing with precision upon the nature of the activity. If cotton or yarn is given
free to workers, if charkhas are made available free for families, if fair price is paid for the
net product and substantial charity thus benefits the spinners, weavers and other handi-
craftmen, one may have to again look closely into the character of the enterprise. If em-
ployees are hired and their services are rewarded by wages—whether on a cottage industry
or a factory basis—the enterprises become industries, even if some kind of concession is
shown and even if the motive and project may be to encourage and help poor families and
find them employment. A compassionate industrialist is nevertheless an industrialist.
However, if raw material is made available free and the finished product is fully paid
for—rather exceptional to imagine—the conclusion may be hesitant but for the fact that
the integrated administrative, purchase, marketing, advertising and other functions are
like in trade and business. This makes them industries. Noble objectives, pious purposes,
spiritual foundations and developmental projects are no reason not to implicate these
institutions as industries.
We now move on to economic activities and occupations of an altruistic character
falling under the third category.
The heart of trade or business or analogous activity is organisation with an eye on
competitive efficiency by hiring employees, systematising processes, producing goods
and services needed by the community and obtaining the money’s worth of work from the
employees. If such be the nature of operations and employer—employee relations which
 Threshold Part Issues under the Industrial Disputes Act, 1947 97

make an enterprise an industry, the motivation of the employer in the final disposal of
products or profits is immaterial. Indeed, the activity is patterned on a commercial basis,
judging by what other similar undertakings and commercial ventures do. To qualify for
exemption from the definition of ‘industry’ in a case where there are employers and em-
ployees, and systematic activities and production of goods and services, we need a totally
different orientation, organisation and method which will stamp on the enterprise the
imprint of commerciality.
Special emphasis, in such cases, must be placed on the central fact of employer–employee
relations. If a philanthropic devotion is the basis for the charitable foundation or estab-
lishment, the institution is headed by one who whole-heartedly dedicates himself to the
mission and pursues it with passion, attracts others into the institution not for wages but
for sharing in the cause and its fulfilment, then the undertaking is not ‘industrial’. Not
that the presence of a charitable impulse extricates the institution from the definition in
Section 2(j), but that there is no economic relationship such as is found in trade or busi-
ness between the head who employs and the others who emotively flock to render service.
In one sense, there are no employers and employees, but crusaders all. In another sense,
there is no wage basis for the employment but voluntary participation in the production,
inspired by lofty ideals and unmindful of remuneration, service conditions and the like.
Supposing there is an Ashram or Order with a guru or other head. Let us further assume
that there is a band of disciples, devotees or priestly subordinates in the Order, gathered
together for prayers, ascetic practices, bhajans, meditation and worship. Supposing further
that outsiders are also invited, daily or occasionally, to share in the spiritual proceedings.
And let us assume that all the inmates of the Ashram and members of the Order, invitees,
guests and other outside participants are fed, accommodated and looked after by the insti-
tution. In such a case, as often happens, the cooking and the cleaning, the bed-making
and service may often be done, at least substantially, by the Ashramites themselves. They
may chant in spiritual ecstasy even as material goods and services are made and served.
They may affectionately look after the guests and all this they may do not for wages but
for the chance to propitiate the Master, work selflessly and acquire spiritual grace. It may
well be that they may have surrendered their lucrative employment to come into the holy
institution. It may also be that they take some small pocket money from the donations
or takings of the institution. Nay, more: there may be a few scavengers and servants, a
part-time auditor or accountant employed on wages. If the substantial number of par-
ticipants, in making available goods and services, if the substantive nature of the work,
as distinguished from trivial items, is rendered by voluntary wageless sishyas, it is impos-
sible to designate the institution as an industry, notwithstanding a marginal few who are
employed on a regular basis for hire. The reason is that in the crucial, substantial and sub-
stantive aspects of institutional life, the nature of the relations between the participants is
non-industrial.
Perhaps when Mahatma Gandhi lived in Sabarmati and Aurobindo had his hallowed
silence in Pondicherry, the inmates belonged to this chastened brand. Even now, in many
foundations, centres, monasteries, holy orders and Ashrams in the East and in the West,
spiritual fascination pulls men and women into the precincts and they work tirelessly for
the Maharishi or Yogi or Swamiji, and are not wage-earners in any sense of the term. Such
people are not workmen and such institutions are not industries despite some menials
and some professionals in a vast complex being hired. We must look at the predominant
98 Social Justice and Labour Jurisprudence

character of the institution and the nature of the relations resulting in the production of
goods and services. Stray wage-earning employees do not shape the soul of an institution
into an industry.
It now remains to make a brief survey of the precedents on this point. One case that
is germane to the issue is that of the Bombay Panjarapole.80 A bench of this Court con-
sidered the earlier case law, including the decisions of the High Courts, bearing on humane
activities for the benefit of sick animals. Let there be no doubt that kindness to our dumb
brethren, especially invalids, springs from the highest motives of fellow feeling. In the land
of the Buddha and Gandhi, no one dare argue to the contrary. So let there be no mistaking
our compassionate attitude to suffering creatures. It is laudable and institutions dedicated
to the amelioration of the conditions of animals deserve encouragement from the State
and affluent philanthropists. But these considerations have no bearing on the crucial
factors which invoke the application of the definition in the Act as already set out elaborately
by us. ‘The manner in which the activity in question is organised or arranged, the condi-
tion of the co-operation between the employer and the employee necessary for its success
and its object to render material service to the community’ is a pivotal factor in the activity-
oriented test of an ‘industry’. The compassionate motive and the charitable inspiration
are noble but extraneous.
Indeed, medical relief for human beings made available gratis by regular hospitals, run
by the government or by philanthropists, employing doctors and supportive staff on
business-like terms may not qualify for exemption from ‘industry’. Service to animals
cannot be on a higher footing than service to humans. Nor is it possible to contend that
love of animals is religious or spiritual any more than the love of human beings is. A
panjarapole is no church, mosque or temple. Therefore, without going into the dairying
aspects or the income and expenditure and other features of the Bombay Panjarapole,81
one may hold that the institution is an industry. After all, the employees are engaged on
ordinary economic terms and with conditions of service as in other business institutions,
and the activities also have organisational comparability to the other profit-making dairies
of panjarapoles. What is different is the charitable object. What is common is the nature of
the employer–employee relations. The conclusion, notwithstanding the humanitarian
overtones, is that such organisations are also industries. Of course, in the Bombay
Panjarapole82 case, the same conclusion was reached but on different and, to some extent,
faulty reasoning. For the assumption in the judgement of Mitter, J., was that if the income
were mostly from donations and the treatment of animals were free, perhaps such charity,
be it a hospital for humans or animals, may not be an ‘industry’. We agree with the hold-
ing, not because panjarapoles have commercial motives but because, despite compassionate
objectives, they share a business-like orientation and operation. In this view, Section 2(j)
applies.

Is a Research Institution an Industry?

We may proceed now to consider the applicability of Section 2(j) to institutions whose
objectives and activities cover the research field in a significant way. This has been the
bone of contention in a few cases in the past and is one of the appeals argued at consider-
able length and with considerable force by Shri Tarkunde, who has presented a panoramic
view of the entire subject in his detailed submissions. An earlier decision of this Court in
The Ahmedabad Textile Industries Research Association83 case has taken the view that even
research institutes are roped in by definition, but later judicial thinking at the High Court
 Threshold Part Issues under the Industrial Disputes Act, 1947 99

and Supreme Court levels has leaned more in favour of exemption where a profit motive
has been absent. The Kurji Holy Family Hospital was held not to be an industry be-
cause it was a non profit-making body and its work was in the nature of training, research
and treatment.84 Likewise in Dhanrajgirji Hospital vs Workmen,85 a bench of this Court
held that the charitable trust that ran the hospital and served research purposes and
training of nurses was not an industry. The High Courts of Madras and Kerala have also
held that research institutes such as the Pasteur Institute, the CSIR and the Central
Plantation Crops Research Institute are not industries. The basic decision which has gone
against the Ahmedabad Textile86 case is the Safdarjung87 case. We may briefly examine
the rival viewpoints, although in substance we have already stated the correct principle.
The view that commends itself to us is plainly in reversal of the ratio of the Safdarjung88
case, which has been wrongly decided, if we may say so with great respect.
Does research involve collaboration between employer and employee? It does. The
employer is the institution; the employees are the scientists, para-scientists and other
personnel. Is scientific research ‘service’? Undoubtedly it is. Its discoveries are valuable
contributions to the wealth of the nation. Such discoveries may be sold for a heavy price
in the industrial or other markets. Technology has to be paid for and technological inven-
tions and innovations may be patented and sold. In our scientific and technological age,
nothing has more cash value—as intangible goods and invaluable services—than dis-
coveries. For instance, the discoveries of Thomas Alva Edison made him fabulously rich.
It has been said that his brain had the highest cash value in history for he made the world
vibrate with the miraculous discovery of recorded sound. Unlike most inventors, he did not
have to wait to get his reward in Heaven; he received it munificently on this gratified and
grateful earth, thanks to the conversion of his inventions into money aplenty.
Research benefits industry: Even though a research institute may be a separate entity,
disconnected from the many industries that founded the institute itself, it can be regarded
as an organisation propelled by systematic activity, modelled on cooperation between
employer and employee, and calculated to throw up discoveries and inventions and use-
ful solutions which benefit individual industries and the nation in terms of goods and
services and wealth. It follows that research institutes, albeit run without a profit motive,
are industries.
True, Shri Tarkunde is right—if the Safdarjung89 case is rightly decided. The concluding
portions of his decision proceeded on the footing that research and training have an ex-
clusionary effect. That reasoning, as we have already expounded, hardly has our approval.

Are Clubs Industries?

The wide words used in Section 2(f ), if applied without rational limitations, may cover
every bilateral activity—even spiritual, religious, domestic, conjugal, pleasurable and pol-
itical. But functional circumscription springs from the subject matter and other cognate
considerations already set out early in this judgement. Industrial law—any law—may
insanely run amok if limitless lexical liberality were to inflate expressions into bursting
point or proliferate odd judicial arrows that, at random sent, hit many an irrelevant mark
the legislative archer never meant. To read down words to yield relevant sense is a Pragmatic
art, if care is taken to eschew subjective projections masked as judicial processes. The
true test, as we apprehend from the economic history and functional philosophy of the
Act, is based on the pathology of industrial friction and explosion, impeding community
production and consumption and imperilling peace and welfare. This social pathology
100 Social Justice and Labour Jurisprudence

arises from the exploitative potential latent in organised employer–employee relations.

So where the dichotomy of employer and workmen in the process of material production
is present, the service of economic friction and need for conflict resolution show up. The
Act is meant to obviate such confrontation, and ‘industry’ cannot functionally and non-
functionally exceed this object.
The question then is whether in a club situation—or a cooperative or even a monas-
tery situation, for that matter—a dispute potential of the nature suggested exists. If it
does, it is an industry, since the basic elements are satisfied. If productive cooperation be-
tween employer and employee is necessary, conflict between them is on the cards, be it a
social club, mutual-benefit society, pinjarapole, public service or professional office. Tested
on this touchstone, most clubs will fail to qualify for exemption. For clubs—gentlemen’s
clubs, Proprietary clubs, service clubs, investment clubs, sports clubs, art clubs, military
clubs or other brands of recreational association—when X-rayed from the industrial angle,
project a picture on the screen typical of employers hiring employees for wages for render-
ing services and/or supplying goods on a systematic basis at specified hours. There is a
cooperation: the club management providing the capital, the raw material, the appliances
and auxiliaries, and the cooks, waiters, bell-boys, pickers, barmaids or other servants making
available enjoyable eats, pleasures and other permissible services for the price paid by way
of subscriptions or bills charged. The club life, the warm company, the enrichment of the
spirits and the freshening of the mind are there. But these blessings do not contradict the
coexistence of an ‘industry’ in the technical sense. Even tea tasters hired for high wages or
commercial art troupes and games teams remunerated fantastically enjoy company, taste,
travel and games; but, elementally, they are workmen with employers above and together
constitute not merely entertainment groups but industries under the Act. The protean
hues of human organisation project delightfully different designs, depending upon the
legal prism and the filtering process used. No one can deny the cultural value of club life;
neither can anyone blink at the legal result of the organisation.
The only ground to extricate clubs from the coils of industrial law (except a specific
statutory provision) is absence of employer–employee cooperation on the familiar luring–
firing pattern. Before we explain this possible exemption—and it applies to many clubs
at the poorer levels of society—we must meet another submission made by counsel.
Clubs are exclusive: they cater to the needs and pleasures of their members, not of the
community as such, and this latter feature salvages them from the clutches of industrial
regulation. We do not agree. Clubs are open to the public for membership, subject to their
own bye-laws and rules. But any member of the community complying with those con-
ditions and waiting for his turn has a reasonable chance of membership. Even the world’s
summit club—the United Nations—has cosmic membership subject to vetoes, qualifica-
tions, voting and what not. What we mean is that a club is not a limited partnership, but
is formed from the community. Moreover, even the most exclusive clubs of imperial vin-
tage and class snobbery admit members’ guests who are not specific souls but come from
the undiffused community or part of a community. Clubs, speaking generally, are social
institutions enlivening community life and are the fresh breath of relaxation in a faded
society. They serve a section of it and answer the doubtful test of serving the community.
They are industry.
We have adverted to a possible category of clubs and associations which may swim out
of the industrial pool—we mean self-serving clubs, societies, groups or associations. Less
 Threshold Part Issues under the Industrial Disputes Act, 1947 101

fashionable but more numerous in a poor, populous, culturally hungry country with
democratic urges and youthful vigour is this species. Lest there should be a rush by the
clubs we have considered and dismissed to get into this proletarian brood, if we may so
describe them to identify, not at all to be pejorative, we must elucidate.
It is a common phenomenon in parts of our country that workers, harijans, student
youth at the lower rungs of the socio-economic ladder, weaker sections such as women
and low-income groups quench their cultural thirst by forming gregarious organisations
mainly for recreation. A few books and magazines, a manuscript house magazine con-
tributed by and circulated among members, a football or volleyball game in the evenings—
not golf, billiards or other expensive games—a music or drama group, an annual day, a
competition and pretty little prizes, family get-togethers and even organising occasional
meetings inviting VIPs—these tiny yet lucent cultural bulls dot our proletarian cheerless-
ness. And these hopeful organisms, if fostered, give a mass spread for our national awaken-
ing for those for whom no developmental bells yet toll.
Even these people’s organs cannot be non-industries unless one strict condition is
fulfilled. They should be—and usually are—self-serving. They are poor men’s clubs with-
out the wherewithal of a Gymkhana90 or C.C.I. (Cricket Club of India),91 which reached the
Supreme Court for adjudication. Indeed, they rarely reach a court, being easily priced out
of our expensive judicial market. These self-service clubs do not have hired employees to
cook or serve, to pick or chase balls, to tie up nets or arrange the cards table, the billiards
table, the bar and the bath, or do those elaborate business management chores of the
well-run city or country clubs. The members come and arrange things for themselves.
The secretary, an elected member, keeps the key. Those interested in particular pursuits
organise those terms themselves. Even the small accounts or clerical items are maintained
by one member or other. On special evenings, all contribute efforts to make a good show,
excursion, joy picnic or anniversary celebration. The dynamic aspect is self-service.
In such an institution, a part-time sweeper or scavenger or multi-purpose attendant
may sometimes exist. He may be an employee. This marginal element does not transform
a little association into an industry, however. We have projected an imprecise profile and
there may be minor variations. The central thrust of our proposition is that if a club or
other like collectivity has a basic and dominant self-service mechanism, a modicum of em-
ployees at the periphery will not metamorphose it into a conventional club whose verve
and virtue are taken care of by paid staff and where the members’ role is to only enjoy.
These lesser folks’ Nehru Club, Gandhi Granthasala, Anna Manram, Netaji Youth Centre,
Brother Music Club, Muslim Sports Club and like organs often named after national
or provincial heroes and manned by members themselves as contrasted with the upper
bracket’s Gymkhana Club, Cosmopolitan Club, Cricket Club of India, and National
Sports Club of India, whose badge is pleasure paid for and provided through skilled or
semi-skilled catering staff. We do not deal with 100-per cent social-service clubs which meet
once in a way, hire a whole evening in some hotel, have no regular staff and devote their
energies and resources also to social-service projects. There are many brands and we need
not deal with every one. Only if they answer the test laid down affirmatively they qualify.
The leading cases on the point are the Gymkhana92 and C.C.I.93 We must deal with
them before we conclude this topic.
The Madras Gymkhana Club,94 a blue-blooded members’ club, has the socialite cream of
the city on its rolls. It offers choice facilities for golf, tennis and billiards; arranges dances,
102 Social Justice and Labour Jurisprudence

dinners and refreshments; entertains and accommodates guests; and conducts tournaments
for members and non-members. These are all activities richly charged, with pleasurable
service. For the fulfilment of these objects, the club employs officers, caterers and others
on reasonable salaries. Does this club become an industry? The label matters little; the
substance is the thing. A night-club for priced nocturnal sex is a lascivious ‘industry’. But a
literary club, meeting weekly to read or discuss poetry, hiring a venue, and run solely by
the self-help of the participants, is not. Hidayatullah, C.J., in Gymkhana95 ruled that
the club was not an ‘industry’. Reason? ‘An industry is thus said to involve co-operation
between employer and employees for the object of satisfying material human needs but
not for oneself nor for pleasure nor necessarily for profit.’

It is not of any consequence that there is no profit motive, because that is considered immaterial.
It is also true that the affairs of the club are organised in the way business is organised, that there is
production of material and other services and, in a limited way, production of material goods,
mainly in the catering department. But these circumstances are not truly representative in the
case of the club because the services are to the members themselves, for their own pleasure and
amusement, and the material goods are for their consumption. In other words, the club exists
for its members. No doubt occasionally strangers also take benefit from its services, but they can
only do so on the invitation of members. No one outside the list of members has the advantage
of these services as of right. Nor can these privileges be bought. In fact they are available only to
members or through members.
If today the club were to stop entry of outsiders, no essential change in its character vis-à-vis
the members would take place. In other words, the circumstance that guests are admitted is
irrelevant to determine if the club is an industry. Even with the admission of guests being open,
the club remains the same—that is to say, a members’ self-serving institution. No doubt the
material needs or wants of a section of the community is catered for, but that is not enough. This
must be done as part of trade or business or as an undertaking analogous to trade or business. This
element is completely missing in a members’ club.

Why is the club not an industry? It involves the cooperation of employer and employees,
organised like in a trade and calculated to supply pleasurable utilities to members and
others. The learned Judge agrees that ‘the material needs or wants of a section of the com-
munity is catered for but that is not enough. This must be done as part of trade or business
or as an undertaking analogous to trade or business. This element is completely missing
in a members’ club’.
‘This element’? What element makes it analogous to trade? A profit motive? No, says
the learned judge. Because it is a self-serving institution? Yes? Not at all. For, if it is self-
service, then why the expensive establishment and staff with high salary bills? It is plain as
daylight that the club members do nothing to produce the goods or services. These are
rendered by employees who work for wages. The members merely enjoy the club life, the
geniality of company and exhilarating camaraderie to the accompaniment of dinners,
dances, games and thrills. The ‘reason’ one may discover is that it is a members’ club in
the sense that ‘the club belongs to members for the time being on its list of members and
that is what matters. Those members can deal with the club as they like. Therefore, the
club is identified with its members at a given point of time. Thus it cannot be said that
the club has an existence apart from the members.’
We are intrigued by this reason. The ingredients necessary for an industry are present
here and yet it is declared a non-industry because the club belongs to members only. But
 Threshold Part Issues under the Industrial Disputes Act, 1947 103

a company belongs to the shareholders only; a cooperative belongs to the members only;
a firm of experts belongs to the partners only. And yet, if they employ workmen with
whose cooperation goods and services are made available to a section of the community
and the operations are organised in the manner typical of the business method and organ-
isation, the conclusion is irresistible that an ‘industry’ emerges. Likewise, the members of
a club may own the institution and become the employers for that reason. It is transcen-
dental logic to jettison the inference of an ‘industry’ from such a factual situation on the
ingenious plea that a club ‘belongs to members for the time being and that is what matters’.
We are inclined to think that that just does not matter. The Gymkhana96 case, we respect-
fully hold, is wrongly decided.
The case of the Cricket Club of India97 stands in a worse position. It is a huge undertaking
with activities wide-ranging, with big budgets, an army of staff and profit-making adven-
tures. Indeed, the members share in the gains of these adventures by getting money’s worth
by cheaper accommodation, free or low-priced tickets for entertainment, and concessional
refreshments; and yet Bhargava, J., speaking for the Court, held this mammoth industry
a ‘non-industry’. Why? Is the promotion of sports and games by itself a legal reason for
excluding the organisation from the category of industries if all the necessary ingredients
are present? Is the fact that the residential facility is exclusive for members an exemptive
factor? Do not the members share in the profits through the invisible process of lower
charges? When all these services are rendered by hired employees, how can the nature
of the activity be described as self-service, without taking liberty with reality? A number
of utilities which have money’s worth are derived by the members. An indefinite section of
the community, entering as the guests of the members, also share in these services. The
testimony of the activities can leave none in doubt that this colossal ‘club’ is a vibrant
collective undertaking which offers goods and services to a section of the community for
payment and there is cooperation between employer and employees in this project. The
plea of non-industry is unpresentable and exclusion is possible only by straining the law
to snapping point to salvage a certain class of socialite establishments. Presbyter is only
priest writ large. Club is ‘industry’ manu brevi.

Are Cooperatives Industries?

Cooperative societies ordinarily cannot, we feel, fall outside Section 2(j). After all, the
society, a legal person, is the employer. The members and/or others are employees and
the activity partakes of the nature of trade. Merely because Cooperative enterprises deserve
State encouragement, the definition cannot be distorted. Even if the society is worked by
members only, the entity (save where they are few and self-serving) is an industry because
the member-workers are paid wages and there can be disputes about rates and different
scales of wages among the categories, i.e., between workers and workers or between workers
and employer. These societies—credit societies, marketing cooperatives, producers’ or
consumers’ societies, and apex societies—are industries.
Do credit unions, organised on a cooperative basis, scale the definitional walls of
‘industry’? They do. The judgement of the Australian High Court in The Queen vs Marshall
Ex Parte Federated Clerks Union of Australia98 helps reach this conclusion. There, a credit
union which was a cooperative association which pooled the savings of small people and
104 Social Justice and Labour Jurisprudence

made loans to its members at a low interest, was considered from the point of view of
industry. Admittedly, they were credit unions incorporated as cooperative societies and
the thinking of Mason, J., was that such institutions were industrial in character. The
industrial mechanism of society, according to Starke, J., included:

all those bodies ‘of men associated, in various degrees of competition and co-operation, to win
their living by providing the community with some service which it requires’.

Mason, J., went a step further to hold that even if such credit unions were an adjunct
of industry, they could be regarded as industry.
It is enough, therefore, if the activities carried on by credit unions can accurately be
described as incidental to industry or to the organised production, transportation or dis-
tribution of commodities or other forms of material wealth. To our minds, the evidence
admits of no doubt that the activities of credit unions are incidental in this sense.
This was sufficient, in his view, to conclude that credit unions constituted an indus-
try under an Act that has resemblance to our own. In our view, therefore, societies are
industries.

The Safdarjung Hospital Case99

A sharp bend in the course of the law came when the Safdarjung100 case was decided. The
present reference has come from that landmark case and necessarily, it claims our close
attention. Even so, no lengthy discussion is called for, because the connotation of ‘industry’
has already been given by us at sufficient length to demarcate out deviation from the
decision in the Safdarjung101 case.
Hidayatullah, C.J., considered the facts of the appeals clubbed together there and held
that all the three institutions in the bunch of appeals were not industries. Abbreviated
reasons were given for the holding in regard to each institution, which we may extract for
precise understanding:

It is obvious that Safdarjung Hospital is not embarked on an economic activity which can be
said to be analogous to trade or business. There is no evidence that it is more than a place where
persons can get treated. This is a part of the functions of Government and the hospital is run as
a Department of Government. It cannot, therefore, be said to be an industry. The Tuberculosis
Hospital is not an independent institution. It is a part of the Tuberculosis Association of India.
The hospital is wholly charitable and is a research institute. The dominant purpose of the
hospital is research and training, but as research and training cannot be given without beds in a
hospital, the hospital is run. Treatment is thus a part of research and training. In these circum-
stances the Tuberculosis Hospital cannot be described as industry.
The objects of the Kurji Holy Family Hospital are entirely charitable. It carries on work of
training, research and treatment. Its income is mostly from donations and distribution of surplus
as profit is prohibited. It is, therefore, clear that it is not an industry as laid down in the Act.

Even a cursory glance makes it plain that the learned judge took the view that a place
of treatment of patients, run as a department of government, was not an industry because
it was a part of the functions of the government. We cannot possibly agree that running
a hospital, which is a welfare activity and not a sovereign function, cannot be an industry.
 Threshold Part Issues under the Industrial Disputes Act, 1947 105

Likewise, dealing with the Tuberculosis Hospital case, the learned Judge held that the
hospital was wholly charitable and also was a research institute. Primarily, it was an insti-
tution for research and training. Therefore, the Court concluded, the institution could
not be described as ‘industry’. Non sequitur. A hospital facility, research products and
training services are surely services and hence ‘industry’. It is difficult to agree that a hos-
pital is not an industry. In the third case, the same factors plus the prohibition of profit,
are relied on by the Court. We find it difficult to hold that absence of profit or functions
of training and research, take the institution out the scope of industry.
Although the facts of the three appeals considered in the Safdarjung102 case related only
to hospitals with research-and-training component, the Bench went extensively into a
survey of the earlier precedents and a crystallisation of the criteria for designating indus-
tries. After stating that trade and business have a wide connotation, Hidayatullah, C.J.,
took the view that professions must be excluded from the ambit of industry:

A profession ordinarily is an occupation requiring intellectual skill, often coupled with manual
skill. Thus a teacher uses purely intellectual skill, while a painter uses both. In any event, they are
not engaged in an occupation in which employers and employees co-operate in the production
or sale of commodities or arrangement for their production or sale or distribution and their ser-
vices cannot be described as material service.

We are unable to agree with this rationale. It is difficult to understand why a school or
a painting institute or a studio which uses the services of employees and renders the
service to the community cannot be regarded as an industry. What is more baffling is the
subsequent string of reasons presented by the learned Judge:

What is meant by ‘material services’ needs some explanation too. Material services are not
services which depend wholly or largely upon the contribution of professional knowledge, skill
or dexterity for the production of a result. Such services being given individually and by individuals
are services no doubt but not material services. Even an establishment where many such operate
cannot be said to convert their professional services into material services. Material services
involve an activity carried on through co-operation between employers and employees to pro-
vide the community with the use of something such as electric power, water, transportation,
mail delivery, telephones and the like. In providing these services there may be employment of
trained men and even professional men, but the emphasis is not on what these men do but
upon the productivity of a service organised as an industry and commercially valuable. Thus
the services of professional men involving benefit to individuals according to their needs, such
as doctors, teachers, lawyers, solicitors, etc., are easily distinguishable from an activity such as
transport service. The latter is of a commercial character in which something is brought into
existence quite apart from the benefit to particular individuals. It is the production of this
something which is described as the production of material services.

With the greatest respect to the learned Chief Justice, the arguments strung together
in this paragraph are too numerous and subtle for us to imbibe. It is transcendental to
define material service as excluding professional services. We have explained this pos-
ition at some length elsewhere in this judgment and do not feel the need to repeat it here.
Nor are we convinced that the Gymkhana103 and Cricket Club of India104 cases are correctly
decided. The learned Judge placed accent on the non profit-making members’ clubs as
being outside the pale of trade or industry. We demur to this proposition.
106 Social Justice and Labour Jurisprudence

Another intriguing reasoning in the judgement is that the Court has stated:

it is not necessary that there must be a profit motive but the enterprises must be analogous to
trade or business in a commercial sense.

However, somewhat contrary to this reasoning, we find—in the concluding part of

the judgement—emphasis on the non profit-making aspect of the institutions. Equally
puzzling is the reference to ‘commercial sense’; what precisely does this expression mean?
It is interesting to note that the word ‘commercial’ has more than one semantic shade. If
it means profit-making, the reasoning is self-contradictory. If it merely means a commercial
pattern of organisation, of hiring and firing employees, of indicating the nature of the
employer–employee relation (as in trade or commercial house), then the activity-oriented
approach is the correct one. On that footing, the conclusions reached in this case do not
follow, however. As a matter of fact, Hidayatullah, C.J., had in Gymkhana105 turned down
the test of commerciality:

Trade is only one aspect of industrial activity .... This requires co-operation in some form between
employers and workmen and the result is directly the product of this association but not neces-
sarily commercial.

Indeed, while dealing with the reasoning in the Hospital Mazdoor Sabha106 case, he
observes:

if a hospital, nursing home or a dispensary is run as a business, in a commercial way, there may
be found elements of an industry there.

This facet suggests either a profit motive (which has been expressly negatived in the
very case) or commercial type of activity, regardless of profit, which affirms the test which
we have accepted (namely, that there must be employer–employee relations more or less
on the pattern of trade or business). All that we can say is that there are different strands
of reasoning in this judgement that are somewhat difficult to reconcile. Of course, when
the learned judge states that the use of the first schedule to the Act depends on the
condition precedent of the existence of an industry, we agree. But that by itself does not
mean that a hospital cannot be regarded as an industry, profit or no profit, research or no
research. We have adduced enough reasons in the various portions of this judgement to
regard hospitals, research institutions and training centres as valuable material services
to the community, qualifying for coming within Section 2(j). We must plainly state that
vis-à-vis hospitals, Safdarjung107 was wrong and Hospital Mazdoor Sabha108 was right.
Because of these problems of reconciliation of apparently contradictory strands of
reasoning in Safdarjung,109 we find subsequent cases of this Court striking different notes.
In fact, one of us (Bhagwati J.), in the case of Indian Standards Institution (workmen) vs
Indian Standards Institution,110 referred even in the opening to the baffling, perplexing
question that judicial ventures had not solved. We fully endorse the observations of the
Court in the Indian Standards Institution111 case (at pp. 150, 151 of AIR):

So infinitely varied and many-sided is human activity and with the incredible growth and
progress in all branches of knowledge and ever widening areas of experience at all levels, it is
 Threshold Part Issues under the Industrial Disputes Act, 1947 107

becoming so diversified and expanding in so many directions hitherto unthought of, that no
rigid and doctrinaire approach can be adopted in considering this question. Such an approach
would fail to measure up the needs of the growing welfare State which is constantly engaged in
undertaking new and varied activities as part of its social welfare policy. The concept of industry,
which is intended to be convenient and effective tool in the hands of industrial adjudication for
bringing about industrial peace and harmony, would lose its capacity for adjustment and change.
It would be petrified and robbed of its dynamic content. The Court should, therefore, so far as
possible, avoid formulating or adopting generalisations and hesitate to cast the concept of industry
in a narrow rigid mould which would not permit of expansion as and when necessity arises.
Only some working principles may be evolved which would furnish guidance in determining
what are the attributes or characteristics which would ordinarily indicate that an undertaking is
analogous to trade or business.

Our endeavour in this decision is to provide such working principles. This Court,
within a few years of the enactment of the salutary statute, explained the benign sweep of
‘industry’ in the Banerji112 case, which served as a beacon in later years—the Ahmedabad
Textile Research113 case acted on it, and the Hospital Mazdoor Sabha114 and Nagpur
Corporation115 cases marched in its sheen. The law shed steady light on industrial inter-
relations and the country’s tribunals and courts settled down to evolve a progressive
labour jurisprudence, burying the bad memories of laissez faire and bitter struggles in
this field and nourishing new sprouts of legality fertilised by the seminal ratio in Banerji.116
Indeed, every great judgement is not merely an adjudication of an existing lis but an
appeal addressed by the present to the emerging future. And here the future responded,
harmonising with the humanscape hopefully projected by Part IV of the Constitution.
But the drama of a nation’s life, especially when it confronts die-hard forces, develops
situations of imbroglio and shows a tendency to backtrack. And Law quibbles where Life
wobbles. Judges only read signs and translate symbols in the national sky. So ensued an
era of islands of exception dredged up by judicial process. Great clubs were privileged
out, liberal professions swam to safety, educational institutions vast and small were helped
out, diverse charities—disinclined to be charitable to their own weaker workmen—made
pious pleas and philanthropic appeals to be extricated. A procession of decisions—in the
Solicitors’ 117 case, the University of Delhi118 case, the Gymkhana Club119 case, the Cricket Club
of India120 case, the Chartered Accountants (Rabindranath Sen vs First Industrial Tribunal,
West Bengal)121 case, climaxed by the Safdarjung122 case, carved out sanctuaries. The six-
member bench, the largest which sat on this Court, conceptually to reconstruct ‘industry’,
affirmed and reversed, held profit motive irrelevant but upheld charitable service as
exemptive; and, in its lights and shadows, judicial thinking became ambivalent and
industrial jurisprudence landed itself in a legal quagmire. Pinjarapoles sought salvation
and succeeded in principle (the Bombay Pinjarapole case), chambers of commerce fought
and failed, hospitals battled to victory (Dhanrajgirji Hospital ),123 a standards institute
made a vain bid to extricate (the ISI 124 case), research institutes at the High Court level,
waged and won non-industry status in Madras and Kerala. The murky legal sky paralysed
tribunals and courts and administrations and then came, in consequence, this reference
to a larger bench of seven Judges.
Banerji125 amplified by the Corporation of Nagpur126 case, in effect met with its Waterloo
in the Safdarjung127 case. But in this latter case, two voices could be heard and sub-
sequent rulings zigzagged and conflicted precisely because of this built-in ambivalence.
108 Social Justice and Labour Jurisprudence

It behoves us, therefore, hopefully to abolish the blurred edges, illumine the penumbral
areas and overrule what we regard as wrong. Hesitancy, half-tones and hunting with the
hounds and running with the hare, can claim heavy penalty in the shape of industrial
confusion, adjudicatory quandaries and administrative perplexity at a time when the nation
is striving to promote employment through diverse strategies which need, for their smooth
fulfilment, less stress and distress, more mutual understanding and trust based on a dynamic
rule of law which speaks clearly, firmly and humanely. If the salt of law lose its savour of
progressive certainty, wherewith shall it be salted? So we proceed to formulate the principles
deducible from our discussion which are decisive, positively and negatively, of the identity
of ‘industry’ under the Act. We speak not exhaustively, but to the extent covered by the
debate at the bar and, to that extent, authoritatively until overruled by a larger bench or
superseded by the legislative branch.

1. ‘Industry’, as defined in Section 2(j) and explained in Banerji,128 has a wide import.
(i) Where (a) systematic activity, (b) organised by cooperation between employer and
employee (the direct and substantial element is chimerical), (c) for the production
and/or distribution of goods and services calculated to satisfy human wants and wishes
(not spiritual or religious but inclusive of material things or services geared to celestial
bliss i.e. making, on a large scale of prasad or food), prima facie, there is an ‘industry’ in
that enterprise.
(ii) The absence of a profit motive or gainful objective is irrelevant, be the venture in the
public, joint, private or other sector.
(iii) The true focus is functional and the decisive test is the nature of the activity, with
special emphasis on employer–employee relations.
(iv) If the organisation is a trade or business, it does not cease to be one because of
philanthropy animating the undertaking.
2. Although Section 2(j) uses words of the widest amplitude in its two limbs, their meaning
cannot be magnified to overreach itself.
(i) ‘Undertaking’ must suffer a contextual and associational shrinkage as explained in
Banerji129 and in this judgement; so also ‘service’, ‘calling’ and the like. This yields the
inference that all organised activity possessing the triple elements in I (supra), although
not trade or business, may still be ‘industry’, provided the nature of the activity viz.
the employer–employee basis, bears resemblance to what we find in trade or business.
This takes into the fold of ‘industry’ undertakings callings and services, adventures
‘analogous to the carrying on of trade or business’. All features, other than the method-
ology of carrying on the activity viz. in organising the cooperation between employer
and employee—may be dissimilar. It does not matter if there is an analogy in the terms
of employment.
3. Application of these guidelines should not stop short of their logical reach by invocation of
creeds, cults or any inner sense of incongruity or outer sense of motivation for or resultant
from the economic operations. The ideology of the Act being industrial peace, the regulation
and resolution of industrial disputes between employer and workman, the range of this
statutory ideology must inform the reach or the statutory definition. Nothing less, nothing
more.
(i) The consequences are (a) professions, (b) clubs, (c) educational institutions, (d)
cooperatives, (e) research institutes, (f ) charitable projects and ( g) other kindred
ventures, if they fulfil the triple tests listed in I (supra), cannot be exempted from the
scope of Section 2(j).
 Threshold Part Issues under the Industrial Disputes Act, 1947 109

(ii) A restricted category of professions, clubs, cooperatives, even gurukulas and little research
labs may qualify for exemption if in simple ventures, substantially—and, going by the
dominant nature criterion, substantively—no employees are entertained but in minimal
matters and marginal employees are hired without destroying the no-employee character
of the unit.
(iii) If, in a pious or altruistic mission many employ themselves free or for small honoraria
or like returns, mainly drawn by sharing in the purpose or cause—such as lawyers
volunteering legal services at a free clinic, doctors serving in their spare hours in a free
medical centre or ashramites working at the bidding of a Holiness, divinity or like
central personality—and the services are supplied free or at a nominal cost and those who
serve are not engaged for remuneration or on the basis of a master–servant relation-
ship, then the institution is not an industry even if stray servants, manual or technical,
are hired. Such eleemosynary or like undertakings alone are exempt—not other projects
inspired by generosity, compassion or developmental passion.
4. The Dominant Nature Test
(i) Where a complex of activities—some of which qualify for exemption, others not—
involves employees in the total undertaking, some of whom are not ‘workmen’ (as in
the University of Delhi130 case) or some departments are not productive of goods and
services if isolated, even then the predominant nature of the services and the integrated
nature of the departments (as explained in the Corporation of Nagpur131 case) will be
the true test. The whole undertaking will be an ‘industry’, although those who are not
‘workmen’ by definition may not benefit by the status.
(ii) Notwithstanding the previous clauses, the State’s sovereign functions, strictly under-
stood, (alone) qualify for exemption, not the welfare activities or economic ventures
undertaken by government or statutory bodies.
(iii) Even in departments discharging sovereign functions, if there are units that are indus-
tries and they are substantially severable, then they can be considered to come within
Section 2(j).
(iv) Constitutional and competently enacted legislative provisions may well remove from
the scope of the Act categories that otherwise may be covered thereby.
5. We overrule the decisions in the Safdarjung,132 Solicitors’,133 Gymkhana,134 Delhi University,135
and Dhanrajgirji Hospital 136 cases and other rulings whose ratio runs counter to the principles
enunciated above. The decision in the Hospital Mazdoor Sabha137 is hereby rehabilitated.

We conclude with diffidence because the Parliament, which has a commitment to the
political nation to legislate promptly in vital areas such as industry and trade and articulate
welfare expectations in the ‘conscience’ of the Constitution, has hardly intervened to
restructure the rather clumsy, vaporous, tall-and-dwarf definitions or tidy up the scheme
although judicial theses and antitheses disclosed in the two decades long decisions over
two long decades should have produced a legislative synthesis becoming of a welfare state
and socialistic society in a world setting where ILO norms are advancing and India needs
updating. We feel confident, in another sense, since counsel stated at the bar that a bill
on the subject is in the offing. The rule of law, we are sure, will run with the rule of life—
Indian life—at the threshold of a decade of new development in which labour and manage-
ment, guided by the State, will constructively partner the better production and fair diffu-
sion of national wealth. We have stated that, save the case of the Bangalore Water Supply
and Sewerage Board appeal, we are not disposing of the others on the merits. We dismiss
that appeal with costs and direct that all the others be posted before a smaller Bench for
disposal on the merits in accordance with the principles of law herein laid down.
110 Social Justice and Labour Jurisprudence

A Separate but Concurring Judgement Delivered by Chief Justice Beg—

Bangalore Water Supply vs A. Rajappa & Others

I am in general agreement with the line of thinking adopted and the conclusions reached by my
learned brother Krishna Iyer. I would, however, like to add my reasons for this agreement and
to indicate my approach to a problem where relevant legislation leaves so much for determination
by the Court as to enable us to perform a function very akin to legislation.
My learned brother has relied on what was considered in England a somewhat unorthodox
method of construction in Seaford Court Estates Ltd. vs Asher,138 where Lord Denning, L.J., said:

When a defect appears a Judge cannot simply fold his hands and blame the draftsman. He
must set to work on the constructive task of finding the intention of Parliament - and then
he must supplement the written words so as to give ‘force and life’ to the intention of legislature.
A Judge should ask himself the question how, if the makers of the Act had themselves come
across this ruck in the texture of it, they would have straightened it out? He must then do as
they would have done. A Judge must not alter the material of which the Act is woven, but he
can and should iron out the creases.

When this case went up to the House of Lords it appears that this Law Lords disapproved of
the bold effect of Lord Denning to make ambiguous legislation more comprehensive. Lord
Simonds found it to be ‘a naked usurpation of the legislative function under the thin disguise
of interpretation’. Lord Morton (with whom Lord Goddard entirely agreed) observed: ‘These
heroics are out of place.’ Lord Tucker said: ‘Your Lordships would be acting in a legislative rather
than a judicial capacity if the view put forward by Denning, L.J., were to prevail.’
Perhaps, with the passage of time, what may be described as the extension of a method re-
sembling the ‘arm-chair rule’ in the construction of wills, Judges can more frankly step into the
shoes of the legislature where an enactment leaves its own intentions in much too nebulous or
uncertain a state. In M. Pontish vs Veeramallappa,139 Sarkar, J., approved of the reasoning, set out
above, adopted by Lord Denning. And, I must say that, in a case where the definition of ‘industry’
is left in the state in which we find it, the situation perhaps calls for some judicial heroics to
cope with the difficulties raised.
In his heroic efforts, my learned brother Krishna Iyer, if I may say so with great respect, has
not discarded the tests of industry formulated in the past. Indeed, he has actually restored the
tests laid down by this Court in D.N. Banerji’s140 case, and, after that, in the Corporation of the
City of Nagpur vs Its Employees,141 and State of Bombay vs The Hospital Mazdoor Sabha,142 to their
pristine glory. My learned brother has, however, rejected what may appear, to use the word
employed recently by an American Jurist, ‘excrescences’ of subjective notions of Judges which
may have blurred those tests. The temptation is great, in such cases, for us to give expression of
what may be purely objective personal predilections. It has, however, to be resisted if law is to
possess a direction in conformity with constitutional objectives and criteria which must impart
that reasonable state of predictability and certainty to interpretations of the Constitution as
well as to the laws made under it which citizens should expect. We have, so to speak, to chart
what may appear to be a sea in which the ship of law like Noah’s ark may have to be navigated.
Indeed, Lord Sankey on one occasion, said that Law itself is like the ark to which people look for
some certainty and security amidst the shifting sands of political life and vicissitudes of times.
The Constitution and the directive principles of State policy, read with the basic fundamental
rights, provide us with a compass. This Court has tried to indicate in recent cases that the mean-
ing of what could be described as a basic ‘structure’ of the Constitution must necessarily be
found in express provisions of the construction and not merely in objective notions about
meanings of words. Similar must be the reasoning we must employ in extracting the core of
meaning hidden between the interstices of statutory provisions.
 Threshold Part Issues under the Industrial Disputes Act, 1947 111

Each of us is likely to have a subjective notion about ‘industry’. For objectivity, we have to
look first to the words used in the statutory provision defining industry in an attempt to find the
meaning. If that meaning is clear, we need proceed no further. But, the trouble here is that the
words found there do not yield a meaning so readily. They refer to what employers or workers
may do as parts of their ordinary avocation or business in life. When we turn to the meaning
given of the term ‘worker’ in Section 2(s) of the Act, we are once more driven back to find it in
the bosom of ‘industry’, for the term ‘worker’ is defined as one:

Employed in any industry to do any skilled or unskilled manual, supervisory, technical or

clerical work for hire or reward, whether the terms of employment be express or implied, and
for the purposes of any proceeding under this Act in relation to an industrial dispute, includes
any such person who has been dismissed, discharged or retrenched in connection with or as
a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that
dispute.

The definition, however, excludes specifically those who are subject to the Army Act, 1950,
or the Air Force Act, 1950, or the Navy Discipline Act, 1934, as well as those who are employed
in the Police Service, officers and other employees of a prison, those employed in mainly
managerial or administrative capacities, and those who, being employed in a supervisory capacity,
draw wages exceeding Rs 500 per mensem.
Thus, in order to draw the ‘circle of industry’, to use the expression of my learned brother
Iyer, we do not find even the term ‘workman’ illuminating. The definition only enables us to see
that certain classes of persons employed in the service of the State are excluded from the purview
of industrial dispute which the Act seeks to provide for in the interests of industrial peace and
harmony between the employers and employees so that the welfare of the nation is secured. The
result is that we have then to turn to the preamble to find the object of the Act itself, to the legis-
lative history of the Act, and to the socio-economic ethos and aspirations and needs of the times
in which the Act was passed.
The method which has been followed, whether it be called interpretation of construction of
a part of an organic whole in which the statute, its objectives, its past and its direction for the
future, its constitutional setting are all parts of this whole with their co-related functions. Perhaps
it is impossible, in adopting such a method of interpretation, which some may still consider
unorthodox, a certain degree of subjectivity. But, our attempt should be not to break with the
well-established principles of interpretation in doing so. Progressive, rational and beneficial
modes of interpretation import and fit into the body of the old what may be new. It is a process
of adaptation for giving new vitality in keeping with the progress of thought in our times. All
this, however, is not really novel, although we may try to say it in a new way.
If one keeps in mind what was laid down in Heydon’s143 case referred to by my learned brother
Krishna Iyer, the well-known principle that a statute must be interpreted as a whole, in the
context of all the provisions of the statute, its objects, the preamble and the functions of various
provisions, the true meaning may emerge. It may not be strictly a dictionary meaning in such
cases. Indeed, even in a modern statute the meaning of a term such as ‘industry’ may change
with a rapidly changed social and economic structure. For this proposition I can do no better
than to quote Subba Rao, J. speaking for this Court in The Senior Electric Inspector vs Laxmi
Narayan Chopra144

The legal position may be summarised thus: The maxim contemporanea expositio as laid
down by Coke was applied to construing ancient statutes but not to interpreting Acts which
are comparatively modern. There is a good reason for this change in the mode of interpretation.
The fundamental rule of construction is the same whether the Court is asked to construe a
112 Social Justice and Labour Jurisprudence

provision of an ancient statute or that of a modern one, namely, what is the expressed inten-
tion of the Legislature. It is perhaps difficult to attribute to a legislative body functioning in
a static society that its intention was couched in terms of considerable breadth so as to take
within its sweep the future developments comprehended by the phraseology used. It is more
reasonable to confine its intention only to the circumstances obtaining at the time the law was
made. But in a modern progressive society it would be unreasonable to confine the intention
of a Legislature to the meaning attributable to the word used at the time the law was made, for
a modern Legislature making laws to govern a society which is fast moving must be presumed
to be aware of an enlarged meaning the same concept might attract with the march of time
and with the revolutionary changes brought about in social, economic, political and scientific
and other fields of human activity. Indeed, unless a contrary intention appears, an interpre-
tation should be given to the words used to take in new facts and situations, if the words are
capable of comprehending them.

In the Workmen of Dimakuchi Tea Estate vs The Management of Dimakuchi Tea Estate145 it was
observed:

A little careful consideration will show, however, that the expression ‘any person’ occurring
in the third part of the definition clause cannot mean anybody and everybody in this wide
world. First of all, the subject-matter of dispute must relate to (i) employment or non-
employment or (ii) terms of employment or conditions of labour of any person; these neces-
sarily import a limitation in the sense that a person in respect of whom the employer-employee
relation never existed or can never possibly exist cannot be the subject-matter of a dispute
between employers and workmen. Secondly, the definition clause must be read in the context
of the subject-matter and scheme of the Act, and consistently with the objects and other
provisions of the Act. It is well-settled that the words of a statute, when there is a doubt about
their meaning are to be understood in the sense in which they best harmonise with the
subject of the enactment and the object which the Legislature has in view. Their meaning is
found not so much in a strictly grammatical or etymological propriety of language, not even
in its popular use, as in the subject or in the occasion on which they are used, and the object
to be attained.146

It was also said there:

It is necessary, therefore, to take the Act as a whole and examine its salient provisions. The
long title shows that the object of the Act is ‘to make provision for the investigation and
settlement of industrial disputes, and for certain other purposes.’ The preamble states the
same object and Section 2 of the Act which contains definitions states that unless there is
anything repugnant in the subject or context certain expressions will have certain meanings.

Thus, it is in the context of the purpose of the Act that the meaning of the term ‘industry’
was sought.
Again dealing with the objects of the Act before us in Budge Budge Municipality147 case this
Court said:

When our Act came to be passed, labour disputes had already assumed big proportions and
there were clashes between workmen and employers in several instances. We can assume
therefore that it was to meet such a situation that the Act was enacted, and it is consequently
necessary to give the terms employed in the Act referring to such disputes as wide an import
as reasonably possible.
 Threshold Part Issues under the Industrial Disputes Act, 1947 113

In that very case this Court also said (at p. 308 of SCR: at p. 60 of AIR):

There is nothing, however, to prevent a statute from giving the word ‘industry’ and the words
‘industrial dispute’ a wider and more comprehensive import in order to meet the requirements
of rapid industrial progress and to bring about in the interests of industrial peace and economy,
a fair and satisfactory adjustment of relations between employers and workmen in a variety of
fields of activity. It is obvious that the limited concept of what an industry meant in early times
must now yield place to an enormously wider concept so as to take in various and varied forms
of industry, so that disputes arising in connection with them might be settled quickly with-
out much dislocation and disorganisation of the needs of the society and in a manner more
adopted to conciliation and settlement than a determination of the respective rights and liabil-
ities according to strict legal procedure and principles.

Again, in Hospital Mazdoor Sabha case148 this Court said:

If the object and scope of the statute are considered there would be no difficulty in holding
that the relevant words of wide import have been deliberately used by the Legislature in
defining ‘Industry’ in Section 2(j). The object of the Act was to make provision for the inves-
tigation and settlement of industrial disputes, and the extent and scope of the provisions would
be realised if we bear in mind the definition of ‘industrial disputes’ given by Section 2(k), of
‘wages’ by Section 2(rr), ‘workman’ by Section 2(s), and of ‘employer’ by Section 2(g).

It added:

It is obvious that the words used in an inclusive definition denote extension and cannot be
treated as restricted in any sense.

I may here set out the definition given by the Act of the term ‘industry’ in Section 2, sub-
section (j):

(j) ‘Industry’ means any business, trade, undertaking, manufacture or calling of employers
and includes any calling, service, employment, handicraft, or industrial occupation or avocation
of workman.

It seems to me that the definition was not meant to provide more than a guide. It raises
doubts as to what could be meant by the ‘calling of employers’ even in business, trade, undertaking
or manufacture could be found capable of being more clearly delineated. It is clear that there is
no mention here of any profit motive. Obviously, the word ‘manufacture’ of employers could
not be interpreted literally. It merely means a process of manufacture in which the employers
may be engaged. It is, however, evident that the term ‘employer’ necessarily postulates employees
without whom there can be no employers. But, the second part of the definition makes the con-
cept more nebulous as it, obviously, extends the definition to ‘any calling, service, employment,
handicraft or industrial occupation or avocation of workman.’ I have already examined the
meaning of the term ‘workman’ which refers us back to what is an ‘industry’. It seems to me that
the second part, relating to workmen, must necessarily indicate something which may exclude
employers and include an ‘industry’ consisting of individual handicraftsmen or workmen only.
At any rate, the meaning of industrial disputes includes disputes between workmen and workmen
also. Therefore, I cannot see how we can cut down the wide ambit of last part of the definition by
searching for the predominant meaning in the first part unless we were determined, at the outset,
to curtail the scope of the second part somehow. If we do that, we will be deliberately cutting
114 Social Justice and Labour Jurisprudence

down the real sweep of the last part. Neither ‘noscitur a sociis’ rule nor the ‘ejusdem generis’ rule
are adequate for such a case.
There is wisdom in the suggestion that in view of these difficulties in finding the meaning
of the term ‘industry’, as defined in the Act, it is best to say that an industry cannot strictly be
defined but can only be described. But laying down such a rule may again leave too wide a door
open for speculation and subjective notions as to what is describable as an industry. It is, perhaps,
better to look for a rough rule of guidance in such a case by considering what the concept of
‘industry’ must exclude.
I think the phrase ‘analogous to industry’, which has been used in the Safdarjung Hospital 149
case could not really cut down the scope of ‘industry’. The result, however, of that decision has
been that the scope has been cut down. I, therefore, completely agree with my learned brother
that the decisions of this Court in Safdarjung Hospital 150 case and other cases mentioned by my
learned brother must be held to be overruled. It seems to me that the term ‘analogous to trade
or business’ could reasonably mean only activity which results in goods made or manufactured
or services rendered which are capable of being converted into saleable ones. They must be
capable of entering the world of ‘res commerciam’ although they may be kept out of the market
for some reason. It is not the motive of an activity in making goods or rendering a service, but
the possibility of making them marketable if one who makes goods or renders services so desires,
that should determine whether the activity lies within the domain or circle of industry. But,
even this may not be always a satisfactory test.
The test indicated above would necessarily include the type of services which are rendered
purely for the satisfaction of spiritual or physiological urges of person rendering those services.
These cannot be bought or sold. For persons rendering such services there may be no ‘industry’,
but, for persons who want to benefit from the services rendered, it could become an ‘industry’.
When services are rendered by groups of charitable individuals to themselves or others out of
missionary zeal and purely charitable motives, there would hardly be any need to invoke the
provisions of the Industrial Disputes Act to protect them. Such is not the type of persons who
will raise such a dispute as workmen or employees whatever they may be doing.
This leads one to consider another kind of test. It is that, wherever an industrial dispute
could arise between either employers’ and their workmen or between workmen and workmen,
it should be considered an area within the sphere of ‘industry’ but not otherwise. In other words,
the nature of the activity will be determined by the conditions which give rise to the likelihood
of occurrence of such disputes and their actual occurrence in the sphere. This may be a pragmatic
test. For example, a lawyer or solicitor could not raise a dispute with his litigants in general on
the footing that they were his employers. Nor could doctors raise disputes with their patients
on such a footing. Again, the personal character of the relationship between a doctor and his
assistant and a lawyer and his clerk may be of such a kind that it requires complete confidence
and harmony in the productive activity in which they may be co-operating so that, unless the
operations of the solicitor or the lawyer or the doctor take an organised and systematised form
of business or trade, employing a number of persons, in which disputes could arise between
employers and their employees, they would not enter the field of industry. The same type of
activity may have both industrial and non-industrial aspects or sectors.
I would also like to make a few observations about the so-called ‘sovereign’ functions which
have been placed outside the field of industry. I do not feel happy about the use of the term
‘sovereign’ here. I think that the term ‘sovereign’ should be reserved, technically and more correctly,
for the sphere of ultimate decisions. Sovereignty operates on a sovereign plane of its own as I sug-
gested in Keshavananda Bharati’s151 case supported by a quotation from Ernest Barker’s Social
and Political Theory. Again, the term ‘Regal’, from which the term ‘sovereign’ functions appears
to be derived, seems to be a misfit in a Republic where the citizen shares the political sovereignty
in which he has even a legal share, however small, inasmuch as he exercises the right to vote.
What is meant by the use of the term ‘sovereign’, in relation to the activities of the State, is more
accurately brought out by using the term ‘governmental’ functions although there are difficulties
 Threshold Part Issues under the Industrial Disputes Act, 1947 115

here also, inasmuch as the Government has entered largely new fields of industry. Therefore,
only those services which are governed by separate rules and constitutional provisions, such as
Articles 310 and 311 should, strictly speaking, be excluded from the sphere of industry by
necessary implication.
I am impressed by the argument that certain public utility services which are carried out
by governmental agencies or corporations are treated by the Act itself as within the sphere of
industry. If express rules under other enactments govern the relationship between the State as
an employer and its servants as employees it may be contended, on the strength of such provisions,
that a particular set of employees are outside the scope of the Industrial Disputes Act for that
reason. The special excludes the applicability of the general. We cannot forget that we have to
determine the meaning of the term ‘industry’ in the context of and for the purposes of matters
provided for in the Industrial Disputes Act only.
I have contended myself with a very brief and hurried outline of my line of thinking partly
because I am in agreement with the conclusions of my learned brother Krishna Iyer and I also
endorse his reasoning almost wholly, but even more because the opinion I have dictated just
now must be given today if I have to deliver it at all. From tomorrow I cease to have any
authority as a Judge to deliver it. Therefore, I have really no time to discuss the large number of
cases cited before us, including those on what are known as ‘sovereign’ functions.
I will, however, quote a passage from State of Rajasthan vs Mst. Vidhyawati152 where this
Court said:

In this connection it has to be remembered that under the Constitution we have established
a welfare State, whose functions are not confined only to maintaining law and order but
extend to engaging in all activities including industry, public transport, State trading, to
name only a few of them. In so far as the State activities have such wide ramifications involv-
ing not only the use of sovereign powers but also its powers as employers in so many public
sectors, it is too much to claim that the State should be immune from the consequences of
tortious acts of its employees committed in the course of their employment as such.

I may also quote another passage from Rajasthan State Electricity Board vs Mohan Lal153 to
show that the State today increasingly undertakes commercial functions and economic activities
and services as part of its duties in a Welfare State. The Court said there:

Under the Constitution, the State is itself envisaged as having the right to carry on trade
or business as mentioned in Article 19(1)(g). In Part IV, the State has been given the same
meaning as in Article 12 and one of the Directive Principles laid down in Article 46 is that
the State shall promote with special care the educational and economic interests of the weaker
sections of the people. The State, as defined in Article 12, is thus comprehended to include
bodies created for the purpose of promoting the educational and economic interests of the
people. The State, as constituted by our Constitution, is further specifically empowered under
Article 298 to carry on any trade or business. The circumstance that the Board under the
Electricity Supply Act is required to carry on some activities of the nature of trade or commerce
does not, therefore, give any indication that the Board must be excluded from the scope of
the word ‘State’ as used in Article 12.

Hence, to artificially exclude State-run industries from the sphere of the Act, unless statutory
provisions, expressly or by a necessary implication have that effect, would not be correct. The
question is one which can only be solved by more satisfactory legislation on it. Otherwise, Judges
could only speculate and formulate tests of ‘industry’ which cannot satisfy all. Perhaps to seek
to satisfy all is to cry for the moon.
For the reasons given above, I endorse the opinion and the conclusions of my learned brother
Krishna Iyer.
116 Social Justice and Labour Jurisprudence

VIEWS EXPRESSED BY Y.V. CHANDRACHUD, JASWANT SINGH AND

V.D. TULZAPURKAR, JJ.

We are in respectful agreement with the view expressed by Krishna Iyer, J. in his critical judgment
that the Bangalore Water Supply and Sewerage Board appeal should be dismissed. We will give
our reasons later indicating the area of concurrence and divergence, if any, on the various points
in controversy on which our learned Brother has dwelt.

THE AFTERMATH

No doubt the apex Court’s decision in the Rajappa154 case has put an end to the plethora
of unending controversies with regard to the definition of ‘industry’ under the Act that
assailed the Court for nearly three decades. Certainly the decision is a landmark in the
history of the labour jurisprudence of the country. After all, the Court had not done this
job out of its own whims and convictions, but has taken a pragmatic approach by looking
into the scheme of the Industrial Disputes Act, 1947.
The first casualty of this judicial reform was from the highest legislature of the country
in the year 1982. Of course, the amended definition was in tune with the Rajappa155
decision except certain exceptions thereunder. The reason for not bringing the amended
definition into force by notification was that no alternative machinery for redressal of
service disputes for such excluded workmen has been provided by law; therefore, till date,
the amended definition has not been brought into force.
Hence even today we are governed by the Rajappa156 decision as far as the interpretation
of definition of ‘industry’ under the Act is concerned. In spite of the fact that the Supreme
Court had categorically analysed the various tests that are to be observed while determining
whether an activity is an industry or not, advertently or inadvertently, a catena of cases
have stood before the High Courts and the apex Court later.

THE IMPACT OF THE NEW POLITICAL ECONOMY ON THE RAJAPPA DECISION

Nearly for two decades, the summit court did not respond to the resistance against the
Rajappa157 ratio on the definition of ‘industry’. A mild resistance started in the late 1990s
and gradually picked up momentum to climax in 2005.

State of UP vs Jai Bir Singh158

In the case of the State of UP vs Jai Bir Singh,159 the fundamental reason for referring the
Bangalore Water Supply160 case before the Chief Justice of India for constituting a suitable
larger bench for reconsideration of the judgement was that the experience of past years
had shown that the majority view in the Bangalore Water Supply161 case, instead of ushering
in industrial peace, has given rise to large number of awards granting reinstatement of
service and huge amounts of back wages to workers, compelling employers having only
moderate assets to close down their industries, causing harm not only to employers and
workers but the public in general, they being the ultimate beneficiaries. The interpretation
has to be a balanced one, with regard for the interests of the workers and the employers,
as also the public. How far is this observation relevant in the context of the purpose of
labour laws in the country?
 Threshold Part Issues under the Industrial Disputes Act, 1947 117

This case, along with other connected cases, has been listed before the Constitution
bench of five judges, which found an apparent conflict between the decisions of the two
benches of the apex Court in the cases of the Chief Conservator of Forests vs Jaganath
Maruthi Kondhare162 (presided over by a bench of three judges) and the State of Gujarat vs
Pratamsingh Narsinh Parmar163 (a bench of two judges).

THE JUDGEMENT DELIVERED BY JUSTICE D.M. DHARMADHIKARI

On the question of whether ‘Social Forestry Department’ of State, which is a welfare

scheme undertaken for improvement of the environment, would be covered by the
definition of ‘industry’ under Section 2(j) of the Industrial Disputes Act, 1947, the afore-
said benches (supra) of this Court culled out differently the ratio of the seven-judge
bench decision of this court in the case of Bangalore Water Supply and Sewerage Board vs
A. Rajappa164 (shortly hereinafter referred to as Bangalore Water case). The bench of three
judges in the case of Chief Conservator of Forests vs Jaganath Maruthi Kondhare165 based
on the decision in the Bangalore Water166 case, came to the conclusion that Social Forestry
Department is covered by the definition of ‘industry,’ whereas the two–judge bench in the
State of Gujarat vs Pratamsingh Narsinh Parmar167 case took a different view.
As the cleavage of opinion between the two benches of this Court seems to have been on
the basis of the seven-judge bench decision of this Court in the case of Bangalore Water,168
the present case (along with the other connected cases in which correctness of the decision
in the Bangalore Water169 case is doubted) has been placed before this bench.
Various decisions rendered by this Court prior to and after the decision in the Bangalore
Water170 case on the interpretation of the word ‘industry’ under the Industrial Disputes Act,
1947, have been cited before. It has been strenuously urged on behalf of the employers
that the expansive meaning given to the word ‘industry’, with certain specified exceptions
carved out in the judgement of the Bangalore Water171 case is not warranted by the language
used in the definition clause. It is urged that the government and its departments, while
exercising its ‘sovereign functions’, have been excluded from the definition of ‘industry’.
On the question of ‘what is sovereign function, there is no unanimity in the different
opinions expressed by the judges in the Bangalore Water172 case. It is submitted that in a
Constitutional democracy, where sovereignty vests in the people, all welfare activities
undertaken by the State in discharge of its obligation under the directive principles of
State Policy contained in Part IV of the Constitution are ‘sovereign functions’. To restrict
the meaning of ‘sovereign functions’ to only specified categories of so-called ‘inalienable
functions’ like law and order, legislation, judiciary, administration and the like is uncalled for.
It is submitted that the definition of ‘industry’ given in the Act is no doubt wide, but not
so wide as to hold it to include in it all kinds of ‘systematic organized activities’ undertaken
by the State and even individuals engaged in professions and philanthropic activities.
On behalf of the employers, it is also pointed out that there is no unanimity in the
opinions expressed by the Judges in the Bangalore Water173 case on the ambit of the defin-
ition of ‘industry’ given in the Act. Pursuant to the observations made by the Judges in
their different opinions in the judgement of Bangalore Water,174 the Legislature responded
and amended the Act by the Industrial Disputes (Amendment) Act, 1982. In the amended
definition, certain specified types of activities have been taken out of the purview of the
word ‘industry’. The Act stands amended, but the amended provision redefining the word
118 Social Justice and Labour Jurisprudence

‘industry’ has not been brought into force because notification to bring those provi-
sions into effect has not been issued in accordance with sub-section (2) of Section 1 of the
Amendment Act. The amended definition thus remains in the statute unenforced for a
period now of more than 23 years.
On behalf of the employers, it is pointed out that all other provisions of the Amendment
Act of 1982, which introduced amendments in various other provisions of the Industrial
Disputes Act, have been brought into force by the issuance of a notification, but the
Amendment Act to the extent of its substitute definition of ‘industry’, with specified
categories of industries taken out of its purview, has not been brought into force. Such a
piecemeal implementation of the Amendment Act, it is submitted, is not contemplated
by sub-section (2) of Section 1 of the Amendment Act. The submission made is that if
in response to the opinions expressed by the seven Judges in the Bangalore Water175 case,
the legislature intervened and provided a new definition of the word ‘industry’ with the
exclusion of certain public utility services and welfare activities, the unamended defin-
ition should be construed and understood with the aid of the amended definition, which
although not brought into force is nonetheless part of the statute.
On behalf of the employees, learned counsel vehemently urged that the decision in the
Bangalore Water176 case being in the field as binding precedent for more than 23 years
and having been worked to the complete satisfaction of all in the industrial field, on the
principle of stare decisis, this Court should refrain from referring the case to a larger
bench for reconsideration. It is strenuously urged that upsetting the law as settled by the
Bangalore Water177 case was neither expedient nor desirable.
It is pointed out that earlier an attempt was made to seek enforcement of the amended
Act through this Court (see Aeltemesh Rein vs Union of India178). The Union came for-
ward with an explanation that for employees of the categories of industries excluded
under the amended definition, no alternative machinery for redressal of their service dis-
putes has been provided by law, and therefore the amended definition was not brought
into force.
We have heard the learned counsel appearing on behalf of the employers and on
the other side on behalf of the employees at great length. With their assistance, we have
surveyed critically all the decisions rendered so far by this Court on the interpretation of
the definition of ‘industry’ as contained in Section 2(j) of the Act. We begin with a close
examination of the decision in the Bangalore Water179 case for considering whether a reference
to a larger bench for reconsideration of that decision is required.
Justice Krishna Iyer, who delivered the main opinion on his own behalf and on behalf
of Bhagwati and Desai JJ, in his inimitable style has construed the various expressions
used in the definition of ‘industry’. After critically examining the previous decisions, he
has recorded his conclusions thus (SCC, pp. 282–84, paras 139–44):

139… So we proceed to formulate the principles, deducible from our discussion, which are
decisive, positively and negatively of the identity of ‘industry’ under the Act. We speak not
exhaustively, but to the extent covered by the debate at the Bar and, to the extent authoritatively,
until overruled by a larger Bench or superseded by the legislative bench.

140. ‘Industry’, as defined in Section 2(j) and explained in Banerji,180 has a wide import.
(a) Where (i) systematic activity, (ii) organized by co-operation between employer and employee
(the direct and substantial element is chimerical) (iii) for the production and/or distribution
 Threshold Part Issues under the Industrial Disputes Act, 1947 119

of goods and services calculated to satisfy human wants and wishes (not spiritual or religious
but inclusive of material things or services geared to celestial bliss i.e. making, on a large
scale or prasad or food), prima facie, there is an ‘industry’ in that enterprise.
(b) Absence of profit motive or gainful objective is irrelevant, be the venture in the public,
joint, private or other sector.
(c) The true focus is functional and the decisive test is the nature of the activity with special
emphasis on employer–employee relations.
(d) If the organization is a trade or business it does not cease to be one because of philanthropy
animating the undertaking.

141. Although Section 2(j) uses words of the widest amplitude in its two limbs, their meaning
cannot be magnified to over reach itself.
(a) ‘Undertaking’ must suffer a contextual and associational shrinkage as explained in Banerji181
and in this judgment; so also, service, calling and the like. This yields the inference that all
organized activity possessing the triple elements in I (supra), although not trade or business,
may still be ‘industry’ provided the nature of the activity, viz. the employer–employee basis,
bears resemblance to what we find in trade or business. This takes into the fold of ‘industry’
undertakings, callings and services, adventures ‘analogous to the carrying on of trade or busi-
ness’. All features, other than the methodology of carrying on the activity, viz. in organizing
the cooperation between employer and employee may be dissimilar. It does not matter, if on
the employment terms there is analogy.

142. Application of these guidelines should not stop short of their logical reach by invocation of
creeds, cults or inner sense of incongruity or outer sense of motivation for or resultant of the
economic operations. The ideology of the Act being industrial peace, regulation and resolution
of industrial disputes between employer and workman, the range of this statutory ideology
must inform the reach of the statutory definition. Nothing less, nothing more.
(a) The consequences are (i) professions, (ii) clubs, (iii) educational institutions, (iv) co-operatives,
(v) research institutes, (vi) charitable projects and (vii) other kindred adventures, if they
fulfil the triple tests listed in I (supra), cannot be exempted from the scope of Section 2(j).
(b) A restricted category of professions, clubs, co-operative and even gurukulas and little re-
search labs, may qualify for exemption if, in simple ventures, substantially and, going by
the dominant nature criterion, substantively, no employees are entertained but in minimal
matters, marginal employees are hired without destroying the non-employee character of
the unit.
(c) If, in a pious or altruistic mission many employ themselves, free or for small honoraria or
like return, mainly drawn by sharing in the purpose or cause, such as lawyers volunteering
to run a free legal services clinic or doctors serving in their spare hours in a free medical
centre or ashramites working at the bidding of the holiness, divinity or like central personality,
and the services are supplied free or at nominal cost and those who serve are not engaged for
remuneration or on the basis of master and servant relationship, then, the institution is not
an industry even if stray servants, manual or technical, are hired. Such eleemosynary or like
undertaking alone are exempt - not other generosity, compassion, developmental passion or
project.

143. The dominant nature test:

(a) Where a complex of activities, some of which qualify for exemption, others not, involves
employees on the total undertaking, some of whom are not ‘workmen’ as in the University
of Delhi182 case or some departments are not productive of goods and services if isolated,
120 Social Justice and Labour Jurisprudence

even then, the predominant nature of the services and the integrated nature of the depart-
ments as explained in the Corporation of Nagpur,183 will be the true test. The whole under-
taking will be ‘industry’ although those who are not ‘workmen’ by definition may not benefit
by the status.
(b) Notwithstanding the previous clauses, sovereign functions, strictly understood, (alone) qualify
for exemption, not the welfare activities or economic adventures undertaken by government
or statutory bodies.
(c) Even in departments discharging sovereign functions, if there are units which are industries
and they are substantially severable, then they can be considered to come within Section 2(j).
(d) Constitutional and competently enacted legislative provisions may well remove from the
scope of the Act categories which otherwise may be covered thereby.

144. We overrule Safdarjung,184 Solicitors,185 Gymkhana,186 Delhi University,187 Dhanrajgirji

Hospital 188 and other rulings whose ratio runs counter to the principles enunciated above and
Hospital Mazdoor Sabha189

What is to be noted is that the opinion of Krishna Iyer, J., on his own behalf and on
the behalf of Bhagwati and Desai, JJ. was only generally agreed to by Beg, C.J., who
delivered a separate opinion with his own approach to the interpretation of the definition
of the word ‘industry’. He agreed with the conclusion that the Bangalore Water Supply
and Sewerage Board is an ‘industry’ and its appeal should be dismissed, but he made it
clear that since the judgement was delivered on his last working day which was a day
before he was to retire, he did not have enough time to go into a discussion of the various
judgements cited, particularly on the nature of the sovereign functions of the State and
whether the activities in discharge of those functions would be covered in the definition
of ‘industry’. What he stated reads thus: (SCC, pp. 291–92, para 165)

165. I have contented myself with a very brief and hurried outline of my line of thinking partly
because I am in agreement with the conclusions of my learned Brother Krishna Iyer and I also
endorse his reasoning almost wholly, but even more because the opinion I have dictated just
now must be given today if I have to deliver it at all. From tomorrow I cease have any authority
as a Judge to deliver it. Therefore, I have really no time to discuss the large number of cases cited
before us, including those on what are known as ‘sovereign functions’.

Beg, C.J., clearly seems to have dissented from the opinion of his other three brethren
on excluding only certain State-run industries from the purview of the Act. According
to him, that is a matter purely of legislation and not of interpretation. These were his
observations: (SCC, p. 291)

163. I would also like to make a new observation about the so-called ‘sovereign functions’
which have been placed outside the field of industry. I do not feel happy about the use of term
‘sovereign’ here. I think that the term ‘sovereign’ should be reserved, technically and more correctly,
for the sphere of ultimate decisions. Sovereignty operates on a sovereign plane of its own as I
suggested in Kesavananda Bharati’s190 case supported by a quotation from Ernest Barker’s Social
and Political theory. Again, the term ‘Regal’, from which the term ‘sovereign’ functions appears
to be derived, seems to be a misfit in a Republic where the citizen share, however small, inasmuch
as he exercises the right to vote. What is meant by the use of the term ‘sovereign’, in relation to
the activities of the state, is more accurately brought out by using the term ‘governmental’
 Threshold Part Issues under the Industrial Disputes Act, 1947 121

functions although there are difficulties here also inasmuch as the Government has entered
largely new fields of industry. Therefore, only those services which are governed by separate
rules and constitutional provisions, such as Articles 310 and 311 should, strictly speaking, be
excluded form the sphere of industry by necessary implication.

Since Beg, C.J., was to retire on 22 February 1978, the bench delivered the judgement
on 21 February 1978 with its conclusion that the appeal should be dismissed. The above
conclusion was unanimous, but the three Hon’ble judges—namely, Chandrachud, J., on
behalf of himself, and Jaswant Singh, J., speaking for himself and Tulzapurkar, J.—on the
day the judgement was delivered, i.e., as on 21 February, had not prepared their separate
opinions. They only declared that they would deliver their separate opinions later. This is
clear from paragraph 170 of the judgement, which reads thus:

We are in respectful agreement with the view expressed by Krishna Iyer J. in his critical judgement
that the Bangalore Water Supply and Sewerage Board appeal should be dismissed. We will give
our reasons later indicating the area of concurrence and divergence, if any, on the various points
in controversy on which our learned Brother has dwelt.

On the retirement of Beg, C.J., Chandrachud, J., took over as the Chief Justice.
He delivered his separate opinion on 7 April 1978, which was obviously neither
seen by Beg, C.J., nor dealt with by the other three judges: Krishna Iyer, Bhagwati and
Desai. As can be seen from contents of the separate opinion subsequently delivered by
Chandrachud, C.J. (as he then was), he did not fully agree with the opinion of Krishna
Iyer, J., that the definition of ‘industry’, although of wide amplitude, can be restricted to
take out of its purview certain sovereign functions of the State limited to its ‘inalienable
functions’ and other activities which are essentially for the self and spiritual attainments.
Chandrachud, C.J., seems to have projected a view that all kinds of organised activities
giving rise to an employer–employee relationship are covered by the wide definition of
‘industry’, and its scope cannot be restricted by identifying and including certain types of
industries and leaving some other types impliedly outside its purview.
A separate opinion was delivered much later by Jaswant Singh, J., for himself and
Tulzapurkar, J., after they had gone through the separate opinion given by Chandrachud
C.J. (as he then was). The opinion of Jaswant Singh, J., for himself and Tulzapurkar, J.,
is clearly a dissenting opinion, in which it is said that they are not agreeable with categories
2 and 3 of the charities excluded by Brother Krishna Iyer, J.
In the dissenting opinion of the two Judges, the definition covers only such activities
as are: ‘Systematically and habitually carried on commercial lines for production of goods
or for rendering material services to the community’.
The dissenting opinion is on the lines of the opinion of Gajendragadkar, J., in the case
of the State of Bombay vs Hospital Mazdoor Sabha,191 where it was observed that although
the definition in the Act is very wide, ‘a line has to be drawn in a fair and just manner’ to
exclude some callings or services or undertakings which do not fit in with the provisions
of the Act. We may quote from the dissenting opinion of Jaswant Singh, J. (for himself
and for Tulzapurkar, J.).

However, bearing in mind the collection of the terms in which the definition is couched and
applying the doctrine of noscitur a sociis (which as pointed out by this Court in State of Bombay
vs Hospital Mazdoor Sabha192 means that, when two or more words which are susceptible of
122 Social Justice and Labour Jurisprudence

analogous meaning are coupled together they are understood to be used in the cognate sense.
They take as it were their colour from each other, that is, the more general is restricted to a sense
analogous to a less general. Expressed differently, it means that the meaning of a doubtful word
may be ascertained by reference to the meaning of words associated with it), we are of the view
that despite the width of the definition it could not be the intention of the legislature that
categories 2 and 3 of the charities alluded to by our learned Brother Krishna Iyer in his judgement,
hospitals run on charitable basis or as a part of the functions of the Government or Local bodies
like municipalities and educational and research institutions whether run by private entities or
by Government and liberal and learned professionals like that of doctors, lawyers and teachers,
the pursuit of which is dependent upon an individual’s own education, intellectual attainments
and special expertise should fall within the pale of the definition. We are inclined to think that
the definition is limited to those activities systematically or habitually undertaken on commercial
line by private entrepreneurs with the cooperation of employees for the production or distribution
of goods or for the rendering of material services to the community at large or a part of such com-
munity. It is needless to emphasise that in the case of liberal professions, the contribution of the
usual type of employees employed by the professionals to the value of the end product (viz
advise and services rendered to the client) is so marginal that the end product cannot be regarded
as the fruit of the cooperation between the professional and his employees.

The judges thus delivered different opinions in the case of Bangalore Water193 at different
points of time, and in some cases, without going through or having an opportunity of
going through the opinions of the other judges. They have themselves recorded that the
definition clause in the Act is so wide and vague that it is not susceptible to a very definite
and precise meaning. In the opinions of all of them, it is suggested that to avoid reference
of the vexed question of interpretation to larger benches of the Supreme Court, it would
be better that the Legislature intervened and clarified the legal position by simply amend-
ing the definition of ‘industry’. The Legislature did respond by amending the definition
of ‘industry’; but unfortunately, 23 years were not enough for the Legislature to provide
alternative disputes resolution forums to the employees of specified categories of industries
excluded from the amended definition. The legal position thus continues to be unclear and
to a large extent uncovered by the decision of Bangalore Water194 case as well.
Krishna Iyer, J., himself, who delivered the main judgement in the Bangalore Water195
case, at various places in his opinion expressed that the attempt made by the Court to
impart definite meaning to the words in the wide definition of ‘industry’ is only a working
solution until a more precise definition is provided by the Legislature. See the following
observations:

2… Our judgement here has no pontifical flavour but seek to serve the future hour till changes
in the law or in industrial culture occur.
3… Law, especially industrial law, which regulates the rights and remedies of the working class,
unfamiliar with the sophistications of definitions and shower of decisions, unable to secure
expert legal opinion, what with poverty pricing them out of the justice market and denying
them the staying power to withstand the multi-decked litigative process, de facto denies social
justice if legal drafting is vagarious, definitions indefinite and court rulings contradictory. Is it
possible, that the legislative chambers are too preoccupied with other pressing business to listen
to court signals calling for clarification of ambiguous clauses? A careful prompt amendment
of Section 2(j) would have pre-empted this docket explosion before tribunals and courts. This
Court perhaps more than the legislative and executive branches, is deeply concerned with law’s
delays and to devise a prompt delivery system of social justice.
 Threshold Part Issues under the Industrial Disputes Act, 1947 123

It is to be noted further that in the order of reference made to the seven-judge bench in
the Bangalore Water Supply and Sewerage Board 196 case, the judges referring the case had
stated thus:

…the chance of confusion from the crop of cases in an area where the common man has to
understand and apply the law makes it desirable that there should be a comprehensive, clear
and conclusive declaration as to what is an industry under the Industrial Disputes Act as it now
stands. Therefore, we think it necessary to place this case before the learned Chief Justice for
consideration by a larger Bench. If in the meantime Parliament does not act, this Court may
have to illumine the twilight area of law and help the industrial community carry on smoothly.

In the separate opinions of the other Hon’ble Judges in the Bangalore Water197 case,
similar observations have been made by this Court to give some precision to the very
wide definition of ‘industry’. It was an exercise done with the hope of a suitable legisla-
tive change on the subject, which all the Judges felt to be imminent and highly desirable.
See the following concluding remarks (SCC, p. 284, para 145):

145. We conclude with diffidence because Parliament, which has the commitment to the polit-
ical nation to legislate promptly in vital areas like industry and trade and articulate the welfare
expectations in the ‘conscience’ portion of the constitution, has hardly intervened to restructure
the rather clumsy, vaporous and tall and dwarf definition or tidy up the scheme although judicial
thesis and antithesis, disclosed in the two-decades-long decisions, should have produced a
legislative synthesis becoming of a welfare State and socialistic society, in a world setting where
ILO norms are advancing and India needs updating.

The separate opinion of Beg, C.J., has the same refrain and he also observes that the
question could be solved only by more satisfactory legislation. Chandrachud, C.J. (as he
then was), in his separate opinion delivered on 7 April 1978, concurred partly but went a
step further in expanding the definition of ‘industry’. He has felt the necessity for legislative
intervention at the earliest and has observed thus:

175… But having thus expressed its opinion in a language which left no doubt as to its meaning,
the Court went on to observe that though Section 2(j) used words of a very wide denotation,
‘it is clear’ that a line would have to be drawn in a fair and just manner so as to exclude some
callings, services or undertakings from the scope of the definition. This was considered necessary
because if all the words used in the definition were given their widest meaning, all services and
all callings would come within the purview of the definition including services rendered by a
person in a purely personal or domestic capacity or in a casual manner. The Court then undertook
for examination what it euphemistically called ‘a somewhat difficult’ problem to decide and it
proceeded to draw a line in order to ascertain what limitations could and should be reasonably
implied in interpreting the wide words used in Section 2(j). I consider, with great respect, that
the problem is far too policy-oriented to be satisfactorily settled by judicial decisions. Parliament
must step in and legislate in a manner which will leave no doubt as to its intention. That alone
can afford a satisfactory solution to the question which has agitated and perplexed the judiciary
at all levels.

The dissenting opinion of Jaswant Singh, J., for himself and Tulzapurkar, J., concludes
with the following observations:

187… In view of the difficulty experienced by all of us in defining the true denotation of the
term ‘industry’ and divergence of opinion in regard thereto—as has been the case with this
124 Social Justice and Labour Jurisprudence

Bench also—we think, it is high time that the legislature steps in with a comprehensive Bill to
clear up the fog and remove the doubts and set at rest once for all the controversy which crops
up from time to time in relation to the meaning of the foresaid term rendering it necessary for
larger Benches of this Court to be constituted which are driven to the necessity of evolving a
working formula to cover particular cases.

The above observations, contained in the dissenting view of Jaswant Singh, J., have
proved prophetic. The Legislature has intervened and amended the definition of ‘industry’
in 1982; but for more than 23 years, the amended provision not having been brought
into force, the unamended definition with the same vagueness and lack of precision con-
tinues to confuse the courts and the parties. The inaction of the legislative and executive
branches has made it necessary for the judiciary to reconsider the subject over and over
again in the light of the experience of the working of the provisions on the basis of the
interpretation in the judgement of Bangalore Water198 case, rendered as far back as in the
year 1978.
In the case of the Coir Board vs Indira Devai P.S.,199 a two-judge bench of the Supreme
Court, speaking through Sujata V. Manohar, J., surveyed all previous decisions of the
Court, including the seven-judge bench decision in the Bangalore Water200 case, and passed
an order of reference to the Chief Justice for constituting a larger bench of more than seven
judges if necessary. See the following part of that order:

24. Since the difficulty has arisen because of the judicial interpretation given to the definition
of ‘industry’ in the Industrial Disputes Act, there is no reason why the matter should not be
judicially re-examined. In the present case, the function of the Coir Board is to promote coir
industry, open markets for it and provide facilities to make the coir industry’s products more
marketable. It is not set up to run any industry itself. Looking to the predominant purpose for
which it is set up we would not call it an industry. However, if one were to apply the tests laid
down by Bangalore Water Supply and Sewerage Board 201 case it is an organisation where there are
employers and employees. The organisation does some useful work for the benefit of others.
Therefore, it will have to be called an industry under the Industrial Disputes Act.
We do not just think that such a sweeping test was contemplated by the Industrial Disputes
Act, nor do we think that every organisation which does useful service and employs people can
be labelled as industry. We, therefore, direct that the matter be placed before the Hon’ble Chief
Justice of India to consider whether a larger Bench should be constituted to reconsider the
decision of this Court in Bangalore Water Supply and Sewerage Board.202

When the matter was listed before a three–judge bench (in the case of the Coir Board
vs Indira Devai P.S.),203 the request for constituting a larger bench for the reconsideration
of the judgement in the Bangalore Water204 case was refused both on the grounds that the
Industrial Disputes Act has undergone an amendment and that the matter does not de-
serve to be referred to a larger bench as the decision of seven judges in the Bangalore Water205
case is binding on benches of this Court of less than seven judges. The order refusing
reference of the seven-judge bench decision by the three-judge bench in the Coir Board vs
Indira Devai P.S.206 case reads thus:

1. We have considered the order made in Civil Appeals Nos. 1720–21 of 1990. The Judgement
in Bangalore Water Supply and Sewerage Board vs V. A. Rajappa207 was delivered almost two
decades ago and the law has since been amended pursuant to the judgement though the date of
enforcement of the amendment has not been notified.
 Threshold Part Issues under the Industrial Disputes Act, 1947 125

The Judgement delivered by seven learned Judges of this Court in the Bangalore Water Supply208
case does not, in our opinion, require any reconsideration on a reference being made by two–
judge bench of this Court, which is bound by the Judgement of the larger Bench.
The appeals, shall, therefore, be listed before the appropriate Bench for further proceedings.

Thus, the reference sought by the two judges to a larger Bench (of more than seven
judges) was declined by the three-judge bench. As has been held by the Court subsequently
in the case of the Central Board of Dawoodi Bohra Community vs State of Maharashtra,209 it
was open to the Chief Justice on a reference made by two Hon’ble Judges of this Court to
constitute a bench of more than seven judges for reconsideration of the decision in the
Bangalore Water Case.210
In any case, no such inhibitions limits the power of a bench of five judges, which has
been constituted on a reference made due to an apparent conflict between the judgements
of two benches of the Court. As has been stated by us above, the decision in the Bangalore
Water211 case is not a unanimous decision. Of the five judges who constituted the majority,
three have given a common opinion; but two others had given separate opinions, projecting
a view partly different from the views expressed in the opinion of the other three judges.
Beg, J., having retired, had no opportunity to see the opinions delivered by the other
Judges subsequent to his retirement. Krishna Iyer, J., and the two Judges who spoke through
him did not have the benefit of the dissenting opinion of the other two judges and the sep-
arate, partly dissenting opinion of Justice Chandrachud, as those opinions were prepared
and delivered subsequent to the delivery of the judgement in the Bangalore Water case.212
In such a situation, it is difficult to ascertain whether the opinion of Justice Krishna
Iyer given on his own behalf and on behalf of Bhagawati and Desai JJ., can be held to be an
authoritative precedent which would require no reconsideration even though the judges
themselves expressed the view that the exercise of interpretation done by each one of
them was tentative and was only a temporary exercise till the Legislature stepped in. The
Legislature subsequently amended the definition of the word ‘industry’, but due to the
lack of will both on the part of the Legislature and the Executive, the amended definition
for a long period of 23 years, has remained dormant.
Shri Andhyarujina, Learned Senior Counsel appearing for the M/s National Remote
Sensing Agency—which is an agency constituted by the government in the discharge
of1its sovereign functions dealing with defence, research, atomic energy and space falling
in the excluded category in sub-clause (6) of the amended definition of ‘industry’ in
Section 2(j)—relies on the following decisions in support of his submission that where
the unamended definition in an Act is ambiguous and has been interpreted by the
Court not exhaustively but tentatively until the law is amended, the amendment actually
brought into the statute can be looked at for the construction of the unamended provisions
(Cape Brandy Sydicat vs IRC213 case, followed in the Yogendra Nath Naskar vs CIT 214 case,
in turn referred to and relied upon in the Kajori Lal Agarwal vs the Union of India215 case;
the case of the State of Bihar vs S.K. Roy;216 Thiru Manickam and Company vs the State of
Tamil Nadu217).
Shri Andhyarujina further argued that, by the Industrial Disputes (Amendment)
Act of 1982, not only was the definition of ‘industry’ as provided in the clause amended,
but various other provisions of the principal Act were also amended. Sub-section (2) of
Section 1 of the Amendment Act states that the Act ‘Shall come into force on such date
as the Central Government may, by notification in the Official Gazette, appoint’. It is
submitted that either the whole of the Act should have been notified for enforcement or
126 Social Justice and Labour Jurisprudence

not at all.… It is argued that such piecemeal enforcement of the Act is not permissible by
sub-section (2) of Section 1 of the Amendment Act. Bennion’s Statutory Interpretation
(third edition) is relied on in support of the submission that when the Amendment Act
mandates the Central Government to issue a notification specifying the date on which the
provisions of the Act should be brought into force, such an enabling provision implies
that the enforcement of the Act has to be done within a reasonable time. Failure to enforce
the Act for a period of more than 23 years is an unconstitutional attempt by the ex-
ecutive branch of the State to frustrate the clear intention of the Legislature. Reliance has
been placed by Senior Advocate Shri Andhyarujina on the court of appeal decision in
R.V. Secretary of State for the Home Department ex p Fire Brigades Union,218 which was
upheld by the House of Lords in a decision reported in the same volume.219 It was held in
that case thus:

Having regard to the overriding legislative role of Parliament, the enacted provisions represented
a detailed scheme approved by the legislature which until repealed stood as an enduring statement
of its will; that while the provisions remained unrepealed it was not open to the Secretary of
State to introduce a radically different scheme under his prerogative powers; and that, accordingly,
in purporting to implement the tariff scheme, he had acted unlawfully and in abuse of those
powers.

The House of Lords, in approving the decision of the court of appeals, held:

That Section 17(1) of the Criminal Justice Act, 1988 imposed a continuing obligation on the
Secretary of State to consider whether to bring the statutory scheme in Sections 108 to 117 into
force; that he could not lawfully bind himself not to exercise the discretion conferred on him;
that the tariff scheme was inconsistent with the statutory scheme; and that, accordingly, the
Secretary of State’s decision not to bring Sections 108 to 117 into force and to introduce the
tariff scheme in their place had been lawful.

Senior advocates Ms Indira Jaising and Mr Colin Gonsalves, counsel appearing for the
employees, very vehemently opposed the prayer made on behalf of the employers for
referring the matter to a larger bench for reconsideration of the decision in the Bangalore
Water Supply220 case. It is submitted that even though the definition in the Industrial
Disputes Act had been amended in 1982 and, it has not been brought into force for more
than 23 years, the reasons disclosed to the Court when the enforcement of the Amendment
Act was sought in the case of Aeltemesh Rein vs the Union of India221 is a sound justification.
The stand of the Union of India was that for the category of industries excluded in the
amended definition, no alternative industrial disputes resolution forums could be created.
For the aforesaid reason, the Central Government did not enforce the provisions of the
amended Act, which provided a new and restrictive definition of ‘industry’. Learned
counsel on behalf of the employees relied on the A.K. Roy vs the Union of India222 decision in
support of their submissions that it is not open to the Court to issue a mandamus to the
Government to bring into force the provisions of an Act. It is submitted that it is the
prerogative of the government, in accordance with the provisions of sub-section (2) of
Section 1 of the Amendment Act, to enforce the provisions of the Act when it finds that
there were conditions suitable to take out of the purview of the definition of ‘industry’
certain categories of ‘industries’ in which the employees have been provided separate
forums for the redressal of their industrial disputes.
For the purpose of these cases, we need not go into the aforesaid side issue because
neither is there any substantive petition nor has a prayer been made in any of the cases
 Threshold Part Issues under the Industrial Disputes Act, 1947 127

before us seeking issuance of mandamus to the government to publish a notification

in the Official Gazette for the enforcement of the amended definition of ‘industry’ as
provided in the Amendment Act of 1982. The only question before us is as to whether
the amended definition, which is now undoubtedly a part of the statute (although not
enforced), is a relevant piece of subsequent legislation which can be taken aid of to amplify
or restrict the ambit of the definition of ‘industry’ in Section 2(j) of the Act as it stands in
its original form.
On behalf of the employees, it was submitted that pursuant to the decision in the
Bangalore Water223 case although the Legislature responded by amending the definition of
‘industry’ to exclude certain specified categories of industries from the purview of the
Act, employees of the excluded categories of industries could not be provided with alter-
native forums for the redressal of their grievances. The unamended definition of ‘industry’,
as interpreted by the Bangalore Water224 case, has since been the settled law of the land in
the industrial field. The settled legal position, it is urged, has operated well and no better
enunciation of scope and effect of the ‘definition’ could be made either by the Legislature
or by the Indian Labour Organisation in its report.
After hearing learned counsels for the contesting parties, we find there are compelling
reasons—more than one—before us for making a reference on the interpretation of
the definition of ‘industry’ in Section 2(j) of the Act to a larger bench and for reconsider-
ation by it, if necessary, of the decision rendered in the case of the Bangalore Water Supply
& Sewerage Board.225 The larger bench will have to necessarily go into all the legal questions
in all dimensions and depth depth. We briefly indicate why we find justification for a
reference, although it is stiffly opposed on behalf of the employees.
In the judgement of the Bangalore Water Supply226 case, Krishna Iyer, J.—speaking for
himself and on behalf of the other two Hon’ble judges agreeing with him—proceeded to
deal with the interpretation of the definition of ‘industry’ on a legal premise, stating thus:

A worker–oriented statute must receive a construction where, conceptually, keynote thought

must be the worker and the community, as the Constitution has shown concern for them, inter
alia, in Articles 38, 39 and 43.

With utmost respect, the statute under consideration cannot be looked at only as a
worker-oriented statute. The main aim of the statute, as is evident from its preamble and
various provisions contained therein, is to regulate and harmonise the relationships between
employers and employees for maintaining industrial peace and social harmony. The defin-
ition clause read with other provisions of the Act under consideration deserves inter-
pretation keeping in view interests of the employer, who has put his capital and expertise
into the industry, and the workers, who by their labour equally contribute to the growth
of the industry. The Act under consideration has a historical background of the Industrial
Revolution inspired by the philosophy of Karl Marx. It is a piece of social legislation.
Opposed to the traditional industrial culture of open competition or laissez faire, the pre-
sent structure of industrial law is an outcome of long-term agitation and struggle of the
working class for participation on an equal footing with the employers in industries for
its growth and profits. In interpreting, therefore, the industrial law, which aims at promot-
ing social justice, interests of employers, employees and, in a democratic society, the people
who are the ultimate beneficiaries of industrial activities have to be kept in view.
Ms Indira Jaising fervently appealed that in interpreting industrial law in India—
which is obliged by the Constitution to uphold democratic values, as has been said in some
other judgement by Krishna Iyer, J.—‘the court should be guided not by ‘Maxwell’ but
128 Social Justice and Labour Jurisprudence

‘Gandhi’ who advocated the protection of the interest of the weaker sections of the society
as the prime concern in democratic society. In the legal field, the Court has always derived
guidance from the immortal saying of the great Judge Oliver W. Holmes that ‘the life of
law has never been logic, it has been experience’. The spirit of law is not to be searched in
any ideology or philosophy, which might have inspired it but it may be found in the ex-
perience of the people who made and put it into practice.
In the case of the Coir Board 227 Sujatha V. Manohar, J., speaking for the bench while
passing an order of reference to a larger bench for reconsideration of the judgement of the
Bangalore Water Supply & Sewerage Board 228 has observed:

Looking to the uncertainty prevailing in this area and in the light of the experience of the last
two decades in applying the test laid down in the case of Bangalore Water Supply229 it is necessary
that the decision in Bangalore Water Supply230 case is re-examined. The experience of the last two
decades does not appear to be entirely happy. Instead of leading to industrial peace and wel-
fare of the community (which was the avowed purpose of artificially extending the definition of
industry), the application of the Industrial Disputes Act to organisations which were, quite
possibly, not intended to be so covered by the machinery set up under the Industrial Disputes
Act, might have done more damage than good, not merely to the organisations but also to
employees by the curtailment of employment opportunities.

The above quoted observations were criticised on behalf of the employees, stating that
for making them there was no material before the Court. We think that the observa-
tions of the learned judges are not without foundation. The experience of Judges at the
apex Court is not derived from the case in which the observations were made. The experi-
ence was from the cases regularly coming to this Court through the Labour Courts. It is
experienced by all dealing in industrial law that overemphasis on the rights of the workers
and undue curtailment of the rights of the employers to organise their business through
employment and non-employment has given rise to a large number of industrial and
labour claims resulting in awards granting huge amounts of back wages for past years,
allegedly as legitimate dues of the workers who are found to have been illegally termin-
ated or retrenched. Industrial awards granting heavy packages of back wages sometimes
result in taking away the very substratum of the industry. Such burdensome awards in
many cases compel the employer with moderate assets to close down industries, causing
harm to interests of not only the employer and the workers, but also the general public,
who is the ultimate beneficiary of material goods and services from the industry. The
awards of reinstatement and arrears of wages for past years by Labour Courts by treating
even small undertakings of employers and entrepreneurs as ‘industries’ is experienced as
a serious industrial hazard, particularly for those engaged in private enterprises. The ex-
perience is that many times idle wages have to be paid to the worker because the employer
has no means to find out whether and where the workman was gainfully employed pending
adjudication of industrial dispute raised by him.
Exploitation of workers and the employers has to be equally checked. Law, and particu-
larly industrial law, needs to be so interpreted as to ensure that neither the employers nor
the employees are in a position to dominate the other. Both should be able to cooperate
for their mutual benefit in the growth of the industry and thereby serve public good. An
overexpansive interpretation of the definition of ‘industry’ might be a deterrent to pri-
vate enterprise in India, where public employment opportunities are scarce. The people
 Threshold Part Issues under the Industrial Disputes Act, 1947 129

should, therefore, be encouraged towards self-employment. To embrace within the defin-

ition of ‘industry’ even liberal professionals like lawyers, architects, doctors, chartered
accountants and the like—which are occupations based on talent, skill and intellectual
attainments—is experienced as a hurdle by professionals in their self-pursuits. In carrying
on their professions, if necessary, some employment is generated, that should not expose
them to the rigours of the Act. No doubt even liberal professions are required to be regu-
lated, and reasonable restrictions in favour of those employed for them can, by law, be
imposed; but that should be the subject of a separate, suitable legislation.
If we adopt an ideological or philosophical approach, we would be treading on the
wrong path against which learned Shri Justice Krishna Iyer himself recorded a caution in
his imitable style thus (Bangalore Water Supply case)231:

Here we have to be cautious not to fall into the trap of definitional expansionism bordering on
reduction ad absurdum nor to truncate the obvious amplitude of the provisions to fit it into our
mental mould of beliefs and prejudices or social philosophy conditioned by class interests.
Subjective wish shall not be father to the forensic thought, if credibility with a pluralist com-
munity is a value to be cherished. ‘Courts do not substitute their social and economic beliefs for
the judgement of legislative bodies.’

A worker-oriented approach in construing the definition of ‘industry’, unmindful of the

interest of the employer or the owner of the industry and the public who are the ultimate
beneficiaries, would be a one-sided approach and not in accordance with the provisions
of the Act.
We also wish to enter a caveat on confining ‘sovereign functions’ to the traditional so
described as ‘inalienable functions’, comparable to those performed by a monarch, a
ruler or a non-democratic government. The learned Judges in the Bangalore Water Supply232
case seem to have confined only such sovereign functions outside the purview of ‘industry’
which can be termed strictly as Constitutional functions of the three wings of the State,
i.e. the executive, the legislature and the judiciary. The concept of sovereignty in a
constitutional democracy is different from the traditional concept of sovereignty which
is confined to ‘law and order’, ‘defence’, ‘law-making’ and ‘justice dispensation’. In a dem-
ocracy governed by the Constitution, the sovereignty vests in the people and the State
is obliged to discharge its Constitutional obligations contained in the Directive Principles
of State Policy in Part IV of the Constitution of India. From that point of view, wherever
the government undertakes public welfare activities in discharge of its Constitutional
obligations as provided in Part IV of the Constitution, such activities should be treated as
activities in discharge of sovereign functions falling outside the purview of ‘industry’.
Whether employees employed in such welfare activities of the government require pro-
tection, apart from the Constitutional rights conferred on them, may be a subject of
separate legislation; but for that reason, such governmental activities cannot be brought
within the fold of industrial law by giving an undue expansive and wide meaning to the
words used in the definition of ‘industry’.
In response to Bangalore Water Supply & Sewerage Board 233 case, Parliament inter-
vened and substituted the definition of ‘industry’ by including within its meaning some
activities of the government and excluding some other specified governmental activities
and ‘public utility services’ involving sovereign functions. For the past 23 years, the amended
definition has remained unenforced on the statute book. The government has been
experiencing difficulty in bringing into effect the new definition. Issuance of notification as
130 Social Justice and Labour Jurisprudence

required by sub-section (2) of Section 1 of the Amendment Act, 1982, has been withheld
so far. It is, therefore, high time for the court to re-examine the judicial interpretation given
by it to the definition of ‘industry’. The Legislature should be allowed greater freedom to
come forward with a more comprehensive legislation to meet the demands of employers
and employees in the public and private sectors. The inhibition and the difficulties which
are being exercised (sic experienced) by the legislature and the executive in bringing into
force the amended industrial law, more due to judicial interpretation of the definition of
‘industry’ in the Bangalore Water Supply 234 case, need to be removed. The experience of
the workings of the provisions of the Act would serve as a guide for a better and more
comprehensive law on the subject to be brought into force without inhibition.
The word ‘industry’ seems to have been redefined under the Amendment Act keeping
in view the judicial interpretation of the word ‘industry’ in the case of Bangalore Water.235
Had there been no such expansive definition of ‘industry’ given in the Bangalore Water 236
case, it would have been open to Parliament to bring in either a more expansive or a more
restrictive definition of ‘industry’ by confining it or not confining it to the industrial activ-
ities other than sovereign functions and public welfare activities of the State and its depart-
ments. Similarly, employment generated in carrying on of liberal professions could be
clearly included or excluded, depending on social conditions and the demands of social
justice. Comprehensive change in law and/or enactment of a new law had not been possible
because of the interpretation given to the definition of ‘industry’ in the Bangalore Water 237
case. The judicial interpretation seems to have been one of the inhibiting factors in the
enforcement of the amended definition of the Act for the last 23 years.
In the Bangalore Water 238 case not all the judges in interpreting the definition clause
invoked the doctrine of noscitur a sociis. We are inclined to accept the view expressed by
the six-judge bench in the case of Safdarjung Hospital,239 that keeping in view the other
pro-visions of the Act and the words used in the definition clause, although ‘profit motive’
is irrelevant, in order to encompass the activity within the word ‘industry’, the activity
must be ‘analogous to trade or business in a commercial sense’. We also agree that the mere
enumeration of ‘public utility services’ in Section 2(n) read with the first schedule should
not be held decisive. Unless the public utility service positively answers the test of being
an ‘industry’ as defined in clause (j) of Section 2, the enumeration of such public utility
service in the first schedule to the Act would not make it an ‘industry’. The six judges also
considered the inclusion of services such as hospitals and dispensaries as public utility
services in the definition under Section 2(n) of the Act and rightly observed thus:

When Parliament added the sixth clause under which other services could be brought within
the protection afforded by the Act to public utility services, it did not intend that the entire
concept of industry in the Act, could be ignored and anything brought in. Therefore, it said
that an industry could be declared to be a public utility service. But what could be so declared
had to be an industry in the first place.

The decision in the case of Safdarjung Hospital 240 was a unanimous decision by all six
Judges and we are inclined to agree with the following observations in the interpretation
of the definition clause:

But in the collocation of the terms and their definitions these terms have a definite economic
content of a particular type and on the authorities of this Court have been uniformly accepted
as excluding professions and are only concerned with the production and availability of material
 Threshold Part Issues under the Industrial Disputes Act, 1947 131

services. Industry has thus been accepted to mean only trade and business, manufacture, or under-
taking analogous to trade or business for the production of material goods or wealth and material
services.

The six Judges unanimously upheld the observations in Gymkhana Club241 case:

…before the work engaged in can be described as an industry, it must bear the definite character
of ‘trade’ or ‘business’ or ‘manufacture’ or ‘calling’ or must be capable of being described as a
undertaking resulting in material goods or material services.

In construing the definition clause and determining its ambit, one has not to lose sight
of the fact that in activities in hospitals and education, concepts such as the right of the
workers to go on ‘strike’ or the employer’s right to ‘close down’ and ‘layoff ’ are not con-
templated, because they are services in which the motto is ‘service to the community’. If
patients or students are to be left to the mercy of the employer and employees exercising
their rights at will, the very purpose of the service activity would be frustrated.
We are respectfully inclined to agree with the observations of Shri Justice P.B.
Gajendragadkar in the case of the Harinagar Cane Farm:242

As we have repeatedly emphasised in dealing with industrial matters, industrial adjudication

should refrain from enunciating any general principles or adopting any doctrinaire considerations.
It is desirable that industrial adjudication should deal with problems as and when they arise and
confine its decisions to the points which strictly arise on the pleadings between the parties.

We conclude, agreeing with the conclusion of the Hon’ble with the Judges in the case
of the Hospital Mazdoor Sabha:243

[T]hough Section 2(j) used words of very wide denotation, a line would have to be drawn in a
fair and just manner so as to exclude some callings, services or undertakings.

This Court must, therefore, reconsider where the line should be drawn and what
limitations can and should be reasonably implied in interpreting the wide words used in
Section 2(j). That, no doubt, is rather a difficult problem to resolve—more so when both
the Legislature and the Executive are silent and have kept an important amended provision
of law dormant on the statute books.
We do not consider it necessary to say anything more and leave it to a larger bench to
give such meaning and effect to the definition clause in the present context, with the
experience of all these years and keeping in view the amended definition of ‘industry’
kept dormant for long 23 years. Pressing demands of the competing sectors of employers
and employees and the helplessness of the Legislature and the Executive in bringing into
force the Amendment Act compel us to make this reference.
Let the cases be now placed before the Hon’ble Chief Justice of India for constituting
a suitable larger bench for a reconsideration of the judgement of this Court in the case of
the Bangalore Water Supply.244

A Ravage?

Indeed the five-judge bench of the apex Court had laid emphasis only on one aspect,
that is, that the Chief Justice of India should constitute a suitable larger bench for the
132 Social Justice and Labour Jurisprudence

reconsideration of the decision in the Bangalore Water Supply 245 case. At the same time,
the Court expressed deep concern over the amended definition not having been brought
into force. If one goes by the observations made in the cases referred to earlier in this
chapter, it is abundantly clear that the Bangalore Water Supply 246 case has created more
reversals than progress for industrial development in the country. The reasons for these
industrial reversals are the shedding of back wages and retrenchment compensation by
the employers. Is this a reflection of the apex Court’s concern for the social security and
protection of the working-class masses in India? On one hand, the Court speaks of the
segregation of the ‘sovereign functions’ (with an enlarged ambit) beyond the purview of
the definition of ‘industry’; at the same time, it shows concern for the capital invested by
individuals for the purpose of obtaining a return.
At one stage, the Judiciary questioned the wisdom of Parliament in listing the public–
utility service industries in the first schedule of the Industrial Disputes Act. The issue that
stood before the Court in the Jai Bir Singh247 case pertained to the activities of a State-
owned department, that is, the Social Forestry Department. In this context the Court
expressed its anxiety over the damage caused to the concerns by virtue of the Rajappa248
decision. On the contrary, the Court did not go to the extent of relying on the statistics for
the percentage of people living below the poverty line, the number of starvation deaths
and the percentage of unemployed citizens in the country. Is this exercise by the apex
Court really necessary at this stage? Perhaps the reasons for shedding crores of rupees by
way of back wages and such by employers is due to their own lapses in developing a clear
management policy rather than the statute. A proper domestic enquiry or a proper notice
in accordance with the provisions of the Industrial Disputes Act, 1947, would suffice to
meet the real purposes of the said legislation.

The Definition of ‘Workman’

The second aspect of the threshold part jurisdiction of the Industrial Disputes Act, 1947,
is the definition of ‘workman’. In spite of clarity, precision, explanation and exceptions,
the Judiciary is confronted in some cases with the matter of an interpretation of the de-
finition, due to the factual nature of the work done by the disputing party always being rele-
vant in considering the definition. The excluding part of the definition clearly provides
that a person who is employed mainly in a managerial or administrative capacity or who,
being employed in a supervisory capacity, draws wages exceeding Rs 1,600 per mensem or
who exercises (either by the nature of the duties attached to the office or by reason of the
powers vested in him or her) functions mainly of a managerial nature is excluded from
the definition of ‘workman’.249

Punjab National Bank vs Ghulam Dastagir 250

In this case, the issue relating to the definition of ‘workman’ under the Act was a primary
concern before the Supreme Court.
 Threshold Part Issues under the Industrial Disputes Act, 1947 133

FACTS OF THE CASE

The area manager of this nationalised bank was given a personal allowance by the bank to enable
him to employ a driver for a vehicle provided by the bank. The jeep, which the driver was to
drive, its petrol and oil requirements, and its maintenance all fell within the financial responsibility
of the bank. The industrial dispute was between the individual driver, the respondent, and the
management of the Punjab National Bank, Calcutta Branch, as to the justifiability of the ter-
mination of the services of Ghulam Dastagir, driver, with effect from the 27th May 1975. The
reference assumes what really is the most contested point in the case is whether the respondent
was the driver of the said bank. Also, the basic jurisdictional issue is whether the respondent
workman was a person employed by the bank. If he was, his termination was illegal. If he was
not, the reference to the industrial dispute was without jurisdiction. The industrial tribunal
examined the matter at some length and came to the conclusion that the driver was employed
by the bank. Consequently, a direction for reinstatement together with back wages was made.
It was contended by the appellants that on the peculiar facts and circumstances present in
the case, it was impossible to reach the conclusion that the driver concerned was employed by
the bank. His employer, the area manager, had been given a personal allowance of Rs 200 by the
bank to enable him to employ a personal driver of his own. The bank insisted that Rs 200 was
the maximum allowance payable and if the expense incurred was less than Rs 200, the allowance
would be reduced to the actual. In this regard, they have relied on the case Shivnandan Sharma
vs Punjab National Bank251 and subsequent decisions.252

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

Speaking for the majority, Justice Krishna Iyer observed that social justice is the signature tune
of the Constitution of India and this note is nowhere more vibrant than in industrial juris-
prudence.
There is no doubt that the proposition laid down in the Shivnandan Sharma253 case is un-
exceptionable law and the crucial tests in most cases are as to who exercises control and supervision
over the workman.
It is clear that the direction and control are the telling factors in deciding whether the driver
in the present case was an employee of the bank. This test does not exclude other factors and
indeed, as Lord Macmillan in the Mersey Docks and Harbour Board vs Coggins & Griffith254 case
rightly stressed, the question in each case turns on its own circumstances and the decisions in
other cases are rather illustrative than determinative.
To crystallise such criteria conclusively is baffling, but broad indications are available
from the decisions. The ‘beedi cases’ turn on the reality of ‘independent contractors’ standing
between the management and the beedi workers. The Supreme Court, in many such cases, dis-
covered that there was a common practice of using deceptive devices and that the so-called
independent contractors were really agents or workers of the management posing as independent
contractors for the purpose of circumventing the Factories Act and like statutes, which compel
managements to meet certain economic and social obligations towards the workers. It is no
doubt that if in this case there is evidence to show colourable devices resorted to by the bank,
then the conclusion would have been adverse to the management. On the other hand, the
evidence adduced before the tribunal, oral and documentary, only led to one conclusion: that
the bank made available a certain allowance to facilitate the area manager to engage the driver
privately. Of course the jeep he was to drive, its petrol and oil requirements, and its maintenance,
all fell within the financial responsibility of the bank. So far as the driver was concerned, his
salary was paid by the manager, who drew the same by way of allowance from the bank. There
is nothing on record to indicate that the control and direction of the driver vested in the bank.
134 Social Justice and Labour Jurisprudence

After all, the evidence is clearly to the contrary. In the absence of material to make out that
the driver was employed by the bank, was under its direction and control, was paid his salary
by the bank and otherwise included in the army of employees in the establishment of the bank,
there cannot be any assumption of this crucial point which remains to be proved. It must be
remembered that there is no case of camouflage or circumvention of any statute here. It is not
unusual for public sector industries or a nationalised banking institution to give allowances to
its high-level officers, leaving it to them to engage the services of drivers or others for fulfilling
the needs for which the allowances are meant. In this view, it is clear that the award fails as it is
unsupportable and hence the award is reversed.
It is conceivable that the facts in the case of the employment of other drivers may be dif-
ferent. If other materials are available regarding the terms and conditions of service, regarding
the direction and the control of the drivers and regarding other indicia of employment, the
conclusion may be different. Therefore it cannot be dogmatised generally as to the nature of the
employment of other drivers under this bank or other industry even where features of allowance
may be present. This is stated because, as Lord Macmillan pointed out in the case referred to,
the facts vary from case to case. Evidence is shaped in each case and conclusions are reached on the
basis of the facts and evidence of each case. There is no invariable proposition where fluid facts
are involved. The Court also impressed upon the respondent’s counsel that the system of allow-
ances, in a country where there is wide unemployment, may lead to individual injustice with an
exploitative edge. It is likely that if the bank had to employ drivers for their vehicles, the terms
and conditions would have been much higher but in the private sector, individual drivers may
be hired as ‘personal’ employees on lower pay. This is not a desirable tendency for a public-
sector undertaking such as a nationalised bank. Further, the Court also felt that the possibility
of abuse of the system of drivers’ allowances and the obligation of the public sector undertakings
to be model employers will lead to a change in the approach of nationalised banks and other
public-sector undertakings towards the issue of employing persons on a private basis by senior
officers, with the management itself giving some small sum by way of allowance in lieu of
procuring such services. On the other hand, a fair and straightforward method would be for the
bank or like institution to engage its own driving staff. It is also important to remember that the
vehicles belong to the industry and if drivers hired on a private basis by officers are allowed to
use such vehicles, there may be potential damage and reckless use. In the long run, both from
the point of view of the employment morality and the preservation of institutional property, it
may be wise to revise the approach to issues like the one which the Court had been confronted
with. Of course, on the facts in this case, it is decided that what is considered is the only conclu-
sion which is possible. Even so, this does not preclude banking institutions and like undertakings
adopting a different policy which is considered as commendable.
In the course of the arguments it was indicated to the counsel appearing for the appellant
when he presented the case of the management that the approach of this Court may not turn
purely on the technicalities of evidence but on the consideration of social justice. The counsel
readily responded to the spirit in which the Court put this aspect to him. He gave an assurance
to the Court that this driver, though not an employee of the bank, would be paid ex gratia a sum
of Rs 7,500 by deducting the sum which has already been paid on an earlier occasion. The
appellant bank will further see that, within three months from today, the respondent driver is
absorbed in the personal service of one or other of the higher officers of the bank in or around
Calcutta on a salary of not less than Rs 250. The driver respondent was to be given intimation
by registered notice about this offer of absorption. And, if he did not report within one month
of the receipt of such notice, this part of the assurance will lapse.

Indeed this judgement, delivered by Justice Krishna Iyer for the majority of the Court
renders invaluable propositions. As a law court, the apex Court had to confine itself strictly
to the principles of evidence in determining the question of whether the disputing work-
man was in fact really employed by the bank under the guise of an extra allowance paid to
 Threshold Part Issues under the Industrial Disputes Act, 1947 135

the manager. The facts involved did not go beyond anything but that an allowance was paid
by the manager to his servant who was engaged to drive the car. But at the same time, based
on the sound submissions of the counsel appearing for the respondent, Justice Krishna Iyer
aptly perceived the prospective trend of the forms of exploitation of labour by institutions
such as banks and public-sector undertakings in the country. This, in one way, leads to
show a form of renaissance of the contract-labour system, which is at present deeply rooted
in the country in the new neo-liberal order, which the Court at that point of time showed
the deserving resistance.
Due to absence of support of any statute to prove the employer–employee relation-
ship, the Court rightly rejected the findings of the industrial tribunal of the Central Govern-
ment. In view of the helplessness of the disputing workman in claiming his absorption,
however, the Court at the end of its judgement offered a suitable relief for absorption on a
salary of not less than Rs 250 within three months from the date of delivering the judgement.
In India, labour legislations to a large extent support the instances in determining
the employer–employee relationship directly. Legislations such as the Industrial Employ-
ment (Standing Orders) Act, 1946, the Employees’ State Insurance Act, 1948, and the
Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, provide sufficient
legal support in proving the relationship of employer and employee. In cases of this type,
wherein the agent of an employer is asked to make his own arrangements for his conveyance
and in such cases a person is employed by the agent himself, do not come under any statute
regarding the relationship of employer and employee.

The Definition of ‘Industrial Dispute’

The third element of the threshold part jurisdiction under the Act is the definition of
‘industrial dispute’. The definition consists of three ingredients, the consideration of which
has assumed paramount importance for the apex Court.
The first and foremost ingredient of the definition is the factum of dispute. This is
necessarily a mixed question of fact and law. This issue at times leads to questioning the
very competency of the appropriate government to refer a dispute to the authorities pro-
vided under Section 10(1) of the Act. In any dispute involving the discharge or dismissal
of a workman, the mere fact that the matter has come before a conciliation officer followed
by a failure report thereunder to the appropriate government should invariably lead to
the conclusion that there exists an industrial dispute.
Section 12(1) of the Act provides that where any industrial dispute exists or is appre-
hended, the conciliation officer may—or where the dispute relates to a public-utility
service and a notice under Section 22 has been given, shall—hold conciliation proceedings
in the prescribed manner. This particular provision was invoked only to show the existence
or non-existence of an industrial dispute in cases where the appropriate government refer-
red such a dispute for adjudication based on the report sent by the conciliation officer
under Section 12(5) of the Act. The first ingredient of the definition, that is, the factum
of dispute—whether it is confined to the fact of the existence of an industrial dispute or
to the case of apprehension of an industrial dispute—is something that still stands for
clarity. The Supreme Court, in the case we will now discuss, considered the powers of the
appropriate government in referring an industrial dispute to the various authorities pro-
vided under Section 10(1) of the Act.
136 Social Justice and Labour Jurisprudence

Shambu Nath Goyal vs Bank of Baroda255

This case apparently stands on a simple footing, but involves an important question of
law pertaining to the interpretation of the definition of ‘industrial dispute’ under Section
2(k) of the Act.
This was an appeal by special leave out of an award made by the industrial tribunal of
Chandigarh. The appellant was a clerk in the Bank of Baroda. The management, after
conducting an enquiry into charges of misconduct, dismissed him from service. The indus-
trial dispute arising out of the dismissal of the workman was espoused by the bank workers’
union. On the failure of conciliation proceedings recorded by the conciliation officer, the
Government of India made a reference of the case to the court in the following terms:

whether the action of the management of Bank of Baroda in dismissing the appellant was
justified? If not, to what relief is he entitled?

Before the tribunal, the management had raised a preliminary objection that as no
demand in respect of the appellant was made upon the management, there was no indus-
trial dispute in existence and therefore the reference made by the government under
Section 10 of the Industrial Disputes Act was incompetent. The Tribunal upheld the con-
tention of the management that as no demand, either oral or in writing, had been made
by the concerned workman before approaching the conciliation officer, there was no
dispute in existence on the date of the reference and therefore the reference made by the
government was incompetent.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

Sec. 2(k) defines Industrial Dispute as under:

‘industrial dispute’ means any dispute or difference between employers and employers, or
between employers and workmen, or between workmen and workmen, which is connected
with the employment or non-employment or the terms of employment or with the conditions
of labour, of any person.

A bare perusal of the definition would show that where there is a dispute or difference between
the parties contemplated by the definition and the dispute or difference is connected with the
employment or non-employment or the terms of employment or with the conditions of labour
of any person there comes into existence an industrial dispute. The Act nowhere contemplates
that the dispute would come into existence in any particular, specific or prescribed manner. For
coming into existence of an industrial dispute a written demand is not a sine qua non, unless of
course in the case of public utility service because Section 22 forbids going on strike without
giving a strike notice. The key words in the definition of industrial dispute are ‘dispute’ or
‘difference’. What is the connotation of these two words? In Beetham vs Trinidad Cement Ltd.,256
Lord Denning while examining the definition of expression of ‘trade dispute’ in Section 2(1) of
Trade Disputes (Arbitration and Inquiry) Ordinance of Trinidad observed:

by definition a ‘trade dispute’ exists wherever a ‘difference’ exists and a difference can exist
long before the parties become locked in a combat. It is not necessary that they should have
come to blows. It is sufficient that they should be sparring for an opening.
 Threshold Part Issues under the Industrial Disputes Act, 1947 137

Thus the term ‘industrial dispute’ connotes a real and substantial difference having some ele-
ment of persistency and continuity till resolved and likely if not adjusted to endanger the industrial
peace of the undertaking or the community. When parties are at variance and the dispute or
difference is connected with the employment, or non-employment or the terms of employment
or with the conditions of labour there comes into existence an industrial dispute. To read into
definition the requirement of written demand for bringing into existence an industrial dispute
would tantamount to re-writing the section.
The reference in this case was made under Section 10(1) which provides inter alia that where
the appropriate Government is of opinion that any industrial dispute exists or is apprehended, it
may at any time by order in writing refer the matter to adjudication as therein mentioned. The
power conferred by Section 10(1) on the Government to refer the dispute can be exercised not
only where an industrial dispute exists but when it is also apprehended. From the material
placed before the Government, Government reaches an administrative decision whether there
exists an industrial dispute or an industrial dispute is apprehended and in either event it can
exercise its power under Section 10(1). But in making a reference under Section 10(1) the
Government is doing an administrative act and the fact that it has to form an opinion as to the
factual existence of an industrial dispute as a preliminary step to the discharge of its function
does not make it any the less administrative in character. The Court cannot therefore, canvass
the order of reference closely to see if there was any material before the Government to support
its conclusion, as if it was a judicial or quasi- judicial determination. No doubt it will be open to
a party seeking to impugn the resulting award to show that what was referred by the Government
was not an industrial dispute within the meaning of the Act, and that therefore, the Tribunal
had no jurisdiction to make the award. But, if the dispute was an industrial dispute as defined
in the Act, its factual existence and expediency of making a reference in the circumstances of a
particular case are matters entirely for the Government to decide upon and it will not be com-
petent for the Court to hold the reference bad and quash the proceedings for want of jurisdiction
merely because in its opinion there was no material before the Government on which it could
have come to an affirmative conclusion of those matters (vide Madras State vs C.P. Sarathy).257
The Tribunal, however, referred to the decision of the Court in Sindhu Settlement Corporation
Ltd vs Industrial Tribunal,258 in which the Court proceeded to ascertain whether there was in
existence an Industrial Dispute at the date of reference, but the question whether in case of an
apprehended dispute Government can make reference under Section 10(1) was not examined.
But that apart the question whether an industrial dispute exists at the date of reference is a
question of fact to be determined on the material placed before the Tribunal with the cautions
enunciated in C.P. Sarathy’s259 case. Undoubtedly, it is for the Government to be satisfied about
existence of the dispute and the Government does appear to be satisfied. However, it would be
open to the party impugning the reference that there was no material before the Government,
and it would be open to the Tribunal to examine the question, but that does not mean that it
can sit in appeal over the decision of the Government and come to a conclusion that there was
no material before the Government.
In this case the Tribunal completely misdirected itself when it observed that no demand was
made by the workman claiming reinstatement after dismissal. When the enquiry was held, it is
an admitted position, that the workman appeared and claimed reinstatement. After his dismissal
he preferred an appeal to the Appellate forum and contended that the order of dismissal was
wrong, unsupported by evidence and in any event he should be reinstated in service. If that was
not a demand for reinstatement addressed to employer what else would it convey? That appeal
itself is a representation questioning the decision of the management dismissing the work-
man from service and praying for reinstatement. There is further a fact that when the Union
approached the Conciliation Officer, the management appeared and contested the claim for
reinstatement. There is thus unimpeachable evidence that the concerned workman persistently
demanded reinstatement. If in this background the Government came to the conclusion that
138 Social Justice and Labour Jurisprudence

there exists a dispute concerning workman and it was an industrial dispute because there was
demand for reinstatement and a reference was made, such reference could hardly be rejected on
the ground that there was no demand and the Industrial Dispute did not come into existence.
Therefore, the Tribunal was in error in rejecting the reference on the ground that the reference was
incompetent. Accordingly the appeal was allowed and the Award of the Tribunal was set aside
and the matter was remitted to tribunal for disposal according to law as expeditiously as possible.

The Apex Court rightly rejected the Award of the Tribunal by interpretating the
definition of ‘industrial dispute’ in a manner provided under the Act. The existence or
the apprehension of an industrial dispute is a mixed question of law and fact. The mere
fact that the Union approaching the conciliation officer challenging the order of dismissal
made by the management and the management participating in conciliation proceedings
in pursuance of the dispute, resulting in failure speaks volumes about the existence of an
industrial dispute. The language in Section 12(1) of the Act is very clear to the effect that
the duties of the conciliation officer stem from the factum of the existence or apprehension
of an industrial dispute between the parties. This decision of the Apex Court has paved
the way in removing the ambiguities pertaining to the existence of an industrial dispute
between the parties and the role of the Industrial Disputes Act, 1947 in investigating and
settlement of industrial disputes.

The Definition of ‘Award’ and its Scope

The term ‘award’260 is defined in the Act with a purpose of including the determination
by the adjudicating authorities of an ‘interim relief ’ moved by the parties. The adjudicating
authorities, in the course of their proceedings under the scope of an order of reference,
have to confront certain ‘preliminary objections’ put forth either by the employer or by
workmen. One fundamental ‘preliminary objection’ that ultimately relates to the very
scope and content of the term ‘award’ is the very fact of existence of an industrial dispute
between the parties concerned. Then inevitably certain issues stand for determination
before the higher courts. One such instance will now be discussed in order to gain a clear
understanding of the definition and scope of the term ‘award’ from the decision of the
Supreme Court in the following case.

Cox and Kings (Agents) vs Their Workmen and Others261

In this case, the appellants dismissed from service three of their workmen after a domestic
enquiry conducted against them on certain charges. In May 1967, the Lieutenant Governor
of Delhi made a reference under Section 10 read with Section 12(5) of the Industrial
Disputes Act to the Labour Court of Delhi to determine:

Whether the termination of services of the three workmen shown in the order were unlawful
and unjustified, and if so, to what relief are these workmen entitled.

By an amendment of their written statement in February 1969, augmented by an

application dated 17 March 1971, the management raised a preliminary objection that
since no demand notice had been served on the management, no industrial dispute had
 Threshold Part Issues under the Industrial Disputes Act, 1947 139

legally come into existence, and as such the reference was invalid and the Labour Court
had no jurisdiction to adjudicate it.262 By an order dated 27 September 1972, the Labour
Court accepted the objection, holding that:

No industrial dispute came into existence before this reference, as the workmen have failed to
establish serving of demand on the management prior to this reference. The effect of this finding
is that the reference could not have been made for adjudication and the same is accordingly
invalid and hence the question of deciding the issue as in the reference or other issues does not
arise as the industrial dispute under reference did not come into existence in accordance with law
before this reference. The award is made accordingly.

Thereafter, on 25 October 1972, the workmen raised a dispute by serving demand

notices on the management. By his order dated 2 May 1973, the Lieutenant Governor,
Delhi, again made a reference to the Labour Court under the Act for adjudication of the
same matter relating to the termination of the services of the aforesaid workmen.
The principal question that arises in this appeal is:

Whether an order of the Labour Court to the effect, that since no demand of the workmen had
been served on the employer, no industrial dispute had come into existence in accordance with
law, and as such the Reference was invalid and the Court had no jurisdiction to adjudicate the
matter referred to it by the Government, is an ‘award’263 for the purposes of Section 19 of the
ID Act?

The management raised, inter alia, a preliminary objection that a second reference
within one year of the first ‘award’ dated 27 September 1972 was not competent in view
of what is contained in Section 19 of the Act.
By an order dated 2 May 1973, the Labour Court dismissed the preliminary objection.
After recording the evidence produced by the parties, the court held on merits that the
termination of the services of the three workmen was illegal and unjustified. This award
was made by the Labour Court on 1 May 1975.
It was contended by the appellant that the determination dated 27 September 1972
by the Labour Court was an ‘award’ as defined in Section 2(b) of the Act, and in view of
sub-section (3) of Section 19, it had to be in operation for a period of one year. It could
be terminated only by a notice given under sub-sections (4) and (6) of Section 19. Since no
such notice was given, the award continued to be in operation. The second award, dated
1 May 1975, thus could not be made during the period the first award was in operation.
Emphasis has also been laid on the point that the ‘award’ dated 27 September 1972
had been duly published by the government under Section 17(1) and had assumed finality
under sub-section (2) of the same section. It was submitted that no second reference could
be validly made by the government during the period in which the first award remained
operative, and since the second reference, dated 2 May 1973, was made before the expiry
of the period of the first award (which had been not terminated in the manner laid down
in Section 19), it was invalid and the consequential adjudication by the Labour Court on
its basis was null and void.
In this connection, the appellants relied upon a judgement of the Supreme Court in the
case of the Management of Bangalore, Woollen, Cotton & Silk Mills vs the Workmen,264 wherein
it was held that when there is a subsisting award binding on the parties, the tribunal has
no jurisdiction to consider the same points in a fresh reference. Reference has also been
140 Social Justice and Labour Jurisprudence

made to a single-bench judgement of the Allahabad High Court in the Workmen of Swadeshi
Cotton Mills vs Swadeshi Cotton Mills, Kanpur 265 case.
As against this, the respondents contended that the Labour Court’s order, dated 1 May
1972, was not an ‘award’ within the definition of the term in Section 2(b) of the Industrial
Disputes Act, inasmuch as it was not a determination, on merits, of any industrial dispute
or of any question relating to an industrial dispute. In this connection, reliance was placed
on a judgement by the apex Court in the case of the Institute of Textiles vs Its workmen.266

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE SARKARIA

There is no dispute that the order on the earlier Reference was made by the Labour Court on
27-9-1972, while the second Reference with the same terms of Reference to that Court was
made by the Government on 2-5-1973, i.e., within one year of the earlier order. It is common
ground that the period of one year for which an award normally remains in operation under
sub-section (3) was not reduced or curtailed by the Government under Section 19 or under any
other provisions of the Act. It is further admitted between the parties that no notice was given
by any party of its intention to terminate the order dated 27-9-1972.
The controversy with regard to the first point therefore narrows down into the issue:

Whether the determination dated 27-9-1972 of the Labour Court was an award as defined
in Section 2(b) of the Act?

The definition of ‘award’ in Section 2(b) falls in two parts. The first part covers a determination,
final or interim, of any industrial dispute. The second part takes in a determination of any ques-
tion relating to an industrial dispute. But the basic postulate common to both the parts of the
definition, is the existence of an industrial dispute, actual or apprehended. The ‘determination’
contemplated by the definitions of the industrial dispute or a question relating thereto, on merits.
It is to be noted further that Section 2 itself, expressly makes the definition subject to ‘anything
repugnant in the subject or context’. It is therefore necessary to consider this definition in the
context of Section 19 and other related provisions of the Act.
The appellants contended that the order dated 27-9-1972 is not a determination of any
industrial dispute, as such, falling under the first part of the definition. However, it is argued that
the expression ‘or any question relating thereto’ in the second part of the definition is of wide
amplitude and should be spaciously construed. It is maintained that a question, whether or not
an industrial dispute exists, will itself be a question relating to an industrial dispute within the
intendment of the second part of the definition.
It was observed that the contention appears to be attractive but does not stand a close examin-
ation. Sub-section (1) of Section 10 indicates when the matters can be referred to the Labour
Court for adjudication. The sub section expressly makes formation of opinion by the appropriate
Government ‘that any industrial dispute exists or is apprehended’ as a condition precedent to
the exercise of the power of making a Reference. Sub-section (4) gives a mandate to the Labour
Court to confine its adjudication to those points of dispute which have been specified in the
order of Reference, or are incidental thereto. From a conjoint reading of clause (b) of Section 2
and sub-sections (1) and (4) of Section 10, it is clear that in order to be an ‘award’ within the
second part of the definition, a determination must be (i) an adjudication of a question or point
relating to an industrial dispute, which has been specified in the order of Reference or is incidental
thereto, and (ii) such adjudication must be one on merits.
The Labour Court’s order, dated 27-9-1972, in the light of the above enunciation did not
satisfy any of the criteria indicated above. It did not determine the questions or points specified
in the Government’s Order of Reference. Nor was it an adjudication on merits of any industrial
dispute or a question relating thereof. The only question determined by the order 27-9-1972,
 Threshold Part Issues under the Industrial Disputes Act, 1947 141

was about the existence of a preliminary fact viz., existence of an industrial dispute which in the
Labour Court’s opinion was a sine qua non for the validity of the reference and exercise of further
jurisdiction by the Court. Rightly or wrongly, the Court found that this preliminary jurisdictional
fact did not exist, because ‘no industrial dispute had come into existence in accordance with the
law’, and, in consequence, the Reference was invalid and the Court was not competent to enter
upon the reference and determine the matter referred to it. With this finding, the Court refused
to go into the merits of the question referred to it. There was no determination on merits of an
industrial dispute or a question relating thereto.
It was therefore held that the Labour Court’s determination dated 27-9-1972 did not possess
the attributes essential to bring it within the definition of an ‘award’. The mere fact that this
order was published by the Government under Section 17(1) of the Act did not confer that
status on it.
The Court relied on its own earlier decision in Technological Institute of Textiles vs Its Workmen.267
In this case, there was a settlement which in the absence of necessary formalities, was not binding
on the parties. Certain items of dispute were not pressed and withdrawn under the terms of such
settlement. In the subsequent Reference before the Industrial Tribunal, some of the items of
dispute were withdrawn and no award was made in respect thereto. Thereafter, these items were
referred for adjudication along with certain other matters to the Tribunal. It was contended on
behalf of the Management that subsequent Reference with regard to the items which had been
withdrawn and not pressed in the earlier award had not been terminated in full, Ramaswamy, J.,
speaking for the Court, repelled this contention, with these observations:

It is manifest in the present case that there has been no adjudication on merits by the industrial
tribunal in the previous reference with regards to the matters covered by items (1) and (3) of
the present reference because the workman had withdrawn those matters from the purview
of the dispute. There was also no settlement, because the demands in question had been with-
drawn by the workman and there was no agreement between the parties in regard thereto.
The conclusion therefore, is that the bar of Section 19 of the Industrial Disputes Act does
not operate with regard to the matters covered by items (1) and (3) of the present reference
and the argument put forward by the appellant on this aspect of the case must be rejected.

It was observed that facts of the case before the Court are different, yet the principle enunciated
therein viz. that the bar of Section 19 operates only with regard to a determination made on
merits, is fully applicable. By any reckoning, the decision dated 27-9-1972, of the Labour Court
by its very nature did not impose any continuing obligation on the parties bound by it. This was
an additional reason for holding that the second reference was not barred by anything contained
in sub-section (3) or other provisions of Section 19.
On these grounds, the apex Court did not accept the contentions of the appellants in this
regard; but as far as the issue of reinstatement with back wages was concerned, the Court made
slight modifications to the findings of the Labour Court.

The Meaning and Scope of ‘Undertaking’ under the

Industrial Disputes Act, 1947

The Industrial Disputes Act, 1947, does not as such contain the definition of an
‘undertaking’. But the word ‘undertaking’ is contained in the definition of ‘industry’ under
Section 2(j) of the Act. In the case of Avon Services Production Agencies vs the Indus-
trial Tribunal,268 the Supreme Court had occasion to deal with the issue of the scope of
142 Social Justice and Labour Jurisprudence

‘undertaking’ inter alia, wherein two employees were retrenched by the appellant which
was engaged in the business of manufacturing fire fighting foam compound. Though
this case stands on a simple footing, the facts involved in this case have far-reaching
implications in view of the judgement delivered in it. The outcome of this judgement
virtually compelled Parliament to initiate a legislative reform that appears to be a pro
labour amendment. But taking into consideration the ratio of the Court, the amendment
almost renders the decision futile.

Avon Services Production Agencies vs the Industrial Tribunal

The company had set up two factories, one at Bombay and the other at Ballabhgarh. The
industrial dispute which is the subject matter of the appeal relates to the Ballabhgarh
factory. According to the appellant, this factory, when commissioned in 1962, was divided
into two sections, now styled as two separate undertakings: (a) a manufacturing section
and (b) packing material making section. The manufacturing section comprised two
sub-sections: the chemical section (that is, Foam Compound Manufacturing Section) and
the boiler section. The packing material section was again composed of two sub-sections:
one manufacturing containers and the other painting the containers. Respondents 3 and 4,
according to the appellant, were employed in the painting section. Around 1964 the ap-
pellant decided to buy containers from the market and consequently closed down its pack-
ing material making section but continued the painting sub-section. On 13 July 1971,
the appellant purported to serve a notice on respondents 3 and 4 and others, intimating
them that the management has decided to close the painting section, effective 13 July,
due to unavoidable circumstances and hence the services of the three workmen would
no longer be required and, therefore, they are retrenched. Even though it is alleged that
the notice was served upon the three workmen, the tribunal found that the notice never
reached respondents 3 and 4. By the notice, the workmen concerned were also informed
that they should collect their dues under Section 25FFF of the Industrial Disputes Act,
1947, from the office of the company.
Subsequently, the trade union of the employees served a notice of demand on 16 July
1971, inter alia, calling upon the appellants to reinstate respondents 3 and 4 and the
third workman and also to pay them full back wages. Subsequently the Government of
Haryana referred the demands 2 to 9 to the industrial tribunal for adjudication. In respect
of demand No. 1, relating to the reinstatement of three workmen in the painting section,
a reference was refused on the ground that there was no work for painting in the factory
where these two workmen were working. This refusal to refer the demand concerning
respondents 3 and 4 became the subject matter of a very serious submission on behalf of
the company that the reference made by the government was invalid. To proceed further
with the narrative, subsequently the Government of Haryana, by its order dated 23 Novem-
ber 1972, referred the following dispute to the industrial tribunal for adjudication:

Whether the retrenchment of Sarvashri Mohammed Yamin and Mohammed Yasin was justified
and in order? If not, to what relief they are entitled?

The tribunal registered the reference at No. 82/72 and proceeded to adjudicate upon
the dispute. Three issues were raised before the tribunal and it is necessary to set down
 Threshold Part Issues under the Industrial Disputes Act, 1947 143

the three issues here in order to point out that one of the contentions raised at the hear-
ing of this appeal was never put forth before the tribunal. The issues framed by the tri-
bunal are:

1. Whether the present reference is bad in law for the reason given in para No. 1 of the
preliminary objection in the written statement? (On management).
2. Whether the statement of claim filed on behalf of the workmen is not in order? (On
management).
3. Whether the retrenchment of Sarvashri Mohammed Yamin and Mohammad Yasin was
justified and in order? If not, to what relief they are entitled?

The industrial tribunal rightly held that respondents 3 and 4 were retrenched and the
case would squarely fall under Section 25F of the Industrial Disputes Act, 1947, and
as the appellant (employer) has not complied with the pre-condition laid down in Sec-
tions 25F(a) and (b) of the Act—to wit, serving of one month’s notice or wages in lieu of
such notice and payment of retrenchment compensation—the retrenchment was invalid.
The tribunal was further of the opinion that as both the workmen have been in service
for 15 years or so, they could have been conveniently absorbed in some other department
and therefore the retrenchment was unjustified. The tribunal accordingly directed the
reinstatement of respondents 3 and 4 with full back wages.
The relevant point contended by the appellant was that the tribunal was in error in
holding that respondents 3 and 4 were retrenched from service and that their case would
be governed by Section 25F, while in fact the services of respondents 3 and 4 were termin-
ated on account of closure of the painting undertaking of the appellant company and there-
fore the case would be governed by Section 25FFF, and that failure to pay compensation
and notice charges simultaneously with termination of service being not a pre-requisite,
the termination would neither be illegal nor invalid.

EXCERPTS FROM THE JUDGMENT DELIVERED BY JUSTICE D.A. DESAI

Section 25F prescribes conditions precedent to retrenchment of workmen. The conditions

precedent are: (a) giving one month’s notice in writing to the workman sought to be retrenched
indicating the reasons for retrenchment and the retrenchment can be brought about on the
expiry of the notice period or on payment of wages in lieu of such notice for the period of notice;
(b) payment of retrenchment compensation as per the formula prescribed therein. No notice
to the workman would be necessary if the retrenchment is under an agreement which specifies
a date for the termination of service. Section 25 FFF prescribes liabilities of an employer to pay
compensation to workmen in case of closing down of undertaking. The relevant portion of
Section 25 FFF as under:

25 FFF(1) 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 provision of sub-section (2) be entitled to notice and
compensation in accordance with the provisions of Section 25F, as if the workman had been
retrenched:
Provided that where the undertaking is closed down on account of unavoidable circum-
stances beyond the control of the employer, the compensation to be paid to the workman
under clause (b) of Section 25F, shall not exceed his average pay for three months.
144 Social Justice and Labour Jurisprudence

A comparison of the language employed in Section 25F and section 25FFF(1) would bring
about in bold relief the difference between phraseology employed by the Legislature and its impact
on the resultant rights of the workmen, Under Section 25F a workman employed in an industrial
undertaking cannot be retrenched by the employer until the payment is made as provided in
clauses (a) and (b). Section 25FFF(1) provides that the workman shall be entitled to notice and
compensation in accordance with the provisions of Section 25F if the undertaking is closed for
any reason as if the workman has been retrenched. Taking note of this difference in language,
this Court in State of Bombay vs the Hospital Mazdoor Sabha269 held that the failure to comply with
the provision prescribing conditions precedent for valid retrenchment invalid and inoperative.
Expounding this position, a Constitution Bench of this Court in M/S Hatisingh Mfg Co Ltd vs
Union of India, AIT270 held that the Legislature has not sought to place closure of an under-
taking on the same footing as retrenchment under Section 25F. By Section 25F a prohibition
against retrenchment until the conditions prescribed by that section are fulfilled, is imposed; by
Section 25FFF(1) termination of employment on closure of the undertaking without payment
of compensation and without either serving notice is not prohibited. Payment of compensation
and payment of wages for the period of notice are not, therefore, conditions precedent to closure.
Further it was held that the expression ‘undertaking’ is not defined in the Act. It finds its
place in the definition of the expression ‘industry’ in Section 2(j) of the Act. While ascertaining
the amplitude of the expression ‘undertaking’ in the definition of the expression ‘industry’, noscitur
a sociis canon of construction was invoked and a restricted meaning was assigned to it in Bangalore
Water Supply and Sewerage Board vs Rajappa.271 While thus reading down the expression in the
context of Section 25FFF it must mean separate and distinct business or commercial or trading
or industrial activity. It cannot comprehend an infinitesimally small part of a manufacturing
process.

It is interesting to note that at the time when this case was decided by this Court, the
Industrial Disputes Act, 1947, the definitions of ‘closure’ and ‘industrial establishment
or undertaking’. Perhaps the outcome of this decision compelled the Parliament to go for
negative legislative reform to nullify the effect of this judgement as far as the law relating
to a situation of closure of an undertaking. The newly inserted definitions pertaining to
‘closure’ and ‘industrial establishment or undertaking’ read as follows:

(i) ‘Closure’ means the permanent closing down of a place of employment or part
thereof;272
(ii) ‘Industrial establishment or undertaking’ means an establishment or undertaking
in which any industry is carried on;

Provided that where several activities are carried on in an establishment or undertaking

and only one or some of such activities is or are an industry or industries, then—

(a) if any such establishment or undertaking carrying on any activity, being an industry
is severable from the other unit or units of such establishment or undertaking, such
a unit shall be deemed to be a separate industrial establishment or undertaking;
(b) if the predominant activity or each of the predominant activities carried on in such
establishment or undertaking or any unit thereof is an industry and the other activity
or each of the other activities carried on in such establishment, or undertaking or
unit thereof is not severable from and is, for the purpose of carrying on, or aiding
the carrying on of, such predominant activity or activities, the entire establishment
or undertaking or, as the case may by, unit thereof shall be deemed to be an industrial
establishment or undertaking;273
 Threshold Part Issues under the Industrial Disputes Act, 1947 145

Thus history has shown that the threshold part issues or jurisdictional definitions have con-
sumed lengthy time in adjudicating the labour issues under the Industrial Disputes Act, 1947.
To conclude, it is relevant to repeat again the observations made by Justice O. Chinnappa
Reddy in the B.P. Maheswari vs Delhi Administration274 case:

We think it is better that tribunals, particularly those entrusted with the task of adjudicating
labour disputes where delay may lead to misery and jeopardise industrial peace, should decide
all issues in dispute at the same time without trying some of them as preliminary issues. Nor
should High Courts in the exercise of their jurisdiction under Article 226 of the Constitution
stop proceedings before a Tribunal so that a preliminary issue may be decided by them.
Neither the jurisdiction of the High Court under Article 226 of the Constitution nor the
jurisdiction of this Court under Article 136 may be allowed to be exploited by those who can
well afford to wait to the detriment of those who can ill afford to wait by dragging the latter
from Court to Court for adjudication of peripheral issues, avoiding decision on issues more
vital to them. The nature of jurisdiction under Article 226 is supervisory and not appellate
while that under Article 136 is primarily supervisory but the Court may exercise all necessary
appellate powers to do substantial justice. In the exercise of such jurisdiction neither the
High Court nor this Court is required to be too astute to interfere with the exercise of
jurisdiction by special tribunals at interlocutory stages and preliminary issues.

NOTES

1. D.P. Maheshwari vs Delhi Administration. (1983) 47 FLR 477: (1983) LLJ 424.
2. D.N. Banerji vs P.R. Mukherjee. (1953) SCR 302:AIR 1953 SC 58.
3. AIR 1978 SC 548.
4. The bench consisted of M.H. Beg (Chief Justice), Y.V. Chandrachud, P.N. Bhagawati, V.R. Krishna Iyer,
Jaswant Singh, V.D. Tulzapurkar and D.A. Desai, JJ.
5. (1960) 2 SCR 866:1976 I LLJ SC 33.
6. AIR 1978 SC 548.
7. (1971) I SCR 177:AIR 1970 SC 1407. This case was heard by Hidayatullah (Chief Justice), J.C. Shah, K.S.
Hegde, A.N. Grover, A.N. Ray and I.D. Dua, JJ. The majority decision was delivered by Chief Justice
Hidayatullah.
8. P. St. J. Langan (ed.), 1969. Maxwell on the Interpretation of Statutes, 12th edn. London: Sweet and Maxwell.
9. (1971) I SCR 177:AIR 1970 SC 1407.
10. (1953) SCR 302:AIR 1953 SC 58.
11. (1953) SCR 302:AIR 1953 SC 58.
12. (1971) I SCR 177:AIR 1970 SC 1407.
13. O.P. Malhotra, 1998. The Industrial Disputes, vol. I, pp. 44, 45. Delhi: Universal Law Publishing Co.
14. (1953) SCR 302:AIR 1953 SC 58.
15. Hotel and Catering Industry Training Board vs Automobile Proprietary Ltd. (1968) 1 WLR 1526, 1530.
16. (1953) SCR 302:AIR 1953 SC 58.
17. (1971) I SCR 177:AIR 1970 SC 1407.
18. (1953) SCR 302:AIR 1953 SC 58.
19. (1953) SCR 302:AIR 1953 SC 58.
20. (1953) SCR 302:AIR 1953 SC 58.
21. (1953) SCR 302:AIR 1953 SC 58.
22. (1943 AC 166).
23. 26 CL.R 508 (Aus).
24. AIR 1953 SC 58.
25. AIR 1953 SC 58.
26. 26 CLR 508 (Aus).
27. AIR 1953 SC 58.
28. 1909 AC, 506.
29. AIR 1953 SC 58.
30. AIR 1953 SC 58.
146 Social Justice and Labour Jurisprudence

31. (1902) 2 SCR 942:AIR 1960 SC 675.

32. (1960) 2 SCR 866:AIR 1960 SC 610.
33. AIR 1953 SC 58.
34. AIR 1953 SC 58.
35. AIR 1960 SC 675.
36. AIR 1953 SC 58.
37. AIR 1960 SC 675.
38. AIR 1960 SC 610.
39. (1960) 2 SCR 942:AIR 1960 SC 675.
40. 1957 SCR 33:AIR 1957 SC 110.
41. (1960) 2 SCR 942:AIR 1960 SC 675.
42. AIR 1953 SC 58.
43. 1957 SCR 33:AIR 1957 SC 110.
44. 1584 (76) ER 634.
45. AIR 1960 SC 675.
46. 1913 16 CLR 245 (Aus).
47. (1929) 41 CLR 569.
48. AIR 1960 SC 675.
49. (1929) 41 CLR 569 (Aus).
50. Halsbury’s Laws of England, 3rd Edition, Vol. 38, p. 11.
51. 1964 (2) SCR 703:AIR 1963 SC 1873.
52. (1929) 41 CLR 569 (Aus).
53. AIR 1960 SC 675.
54. AIR 1960 SC 610.
55. AIR 1960 SC 675.
56. AIR 1960 SC 675.
57. AIR 1960 SC 610.
58. 1962 supp (3) SCR 157:AIR 1962 SC 1080.
59. AIR 1960 SC 610.
60. 1968 (1) SCR 742:AIR 1968 SC 554.
61. AIR 1962 SC 1080.
62. AIR 1962 SC 1080.
63. 1968 (1) SCR 742:AIR 1968 SC 554.
64. 1968 (1) SCR 742:AIR 1968 SC 554.
65. Reader, 1966, p. 3.
66. Reader, 1966, p. 37.
67. Reader, 1966, p. 23.
68. AIR 1976 SC 242.
69. AIR 1962 SC 1080.
70. AIR 1962 SC 1080.
71. 1964 (2) SCR 703:AIR 1963 SC 1873.
72. 1964 (2) SCR 703:AIR 1963 SC 1873.
73. AIR 1960 SC 675.
74. AIR 1960 SC 675.
75. (1929) 41 CLR 569.
76. AIR 1963 SC 1873.
77. AIR 1960 SC 675.
78. AIR 1963 SC 1873.
79. (1971) I SCR 177:AIR 1970 SC 1407.
80. (1972) I SCR 202:AIR 1971 SC 2422.
81. (1972) I SCR 202:AIR 1971 SC 2422.
82. (1972) I SCR 202:AIR 1971 SC 2422.
83. 1961 (2) SCR 480:AIR 1961 SC 484.
84. 1971 (1) SCR 177:AIR 1970 SC 1407.
85. AIR 1975 SC 2032.
86. 1961 (2) SCR 480:AIR 1961 SC 484.
87. Safdarjung Hospital vs Kuldip Singh Sethi. (1971) I SCR 177:AIR 1970 SC 1407.
88. (1971) I SCR 177:AIR 1970 SC 1407.
 Threshold Part Issues under the Industrial Disputes Act, 1947 147

89. (1971) I SCR 177:AIR 1970 SC 1407.

90. AIR 1968 SC 554.
91. AIR 1969 SC 276.
92. AIR 1968 SC 554.
93. AIR 1969 SC 276.
94. AIR 1968 SC 554.
95. AIR 1968 SC 554, pp. 564, 565.
96. AIR 1968 SC 554.
97. 1969 (1) SCR 600:AIR 1969 SC 276.
98. 1975 (132) CLR 595.
99. AIR 1970 SC 1407.
100. AIR 1970 SC 1407.
101. AIR 1970 SC 1407.
102. AIR 1970 SC 1407.
103. AIR 1968 SC 554.
104. AIR 1969 SC 276.
105. AIR 1968 SC 554.
106. AIR 1960 SC 610:1960 I LLJ 251 SC.
107. AIR 1970 SC 1407.
108. AIR 1960 SC 610. 1960 I LLJ 251 SC.
109. AIR 1970 SC 1407.
110. 1976(2) SCR 138:AIR 1976 SC 145.
111. 1976(2) SCR 138:AIR 1976 SC 145.
112. AIR 1953 SC 58.
113. AIR 1961 SC 484.
114. AIR 1960 SC 610.
115. AIR 1969 SC 675.
116. AIR 1953 SC 58.
117. AIR 1962 SC 1080.
118. AIR 1963 SC 1873.
119. AIR 1968 SC 554.
120. AIR 1969 SC 276.
121. (1963) 1 LLJ 567 (Cal).
122. AIR 1970 SC 1407.
123. AIR 1975 SC 2032.
124. AIR 1976 SC 145.
125. AIR 1953 SC 58.
126. AIR 1960 SC 675.
127. AIR 1970 SC 1407.
128. AIR 1953 SC 58.
129. AIR 1953 SC 58.
130. AIR 1963 SC 1873.
131. AIR 1960 SC 675.
132. AIR 1970 SC 1407.
133. AIR 1962 SC 1080.
134. AIR 1968 SC 554.
135. AIR 1963 SC 1873.
136. AIR 1975 SC 2032.
137. AIR 1960 SC 610.
138. (1949) 2 All ER 155. p. 164.
139. AIR 1961 SC 1107. p. 1115.
140. (1953) SCR 302:AIR 1953 SC 58.
141. (1960) 2 SCR 942:AIR 1960 SC 675.
142. (1960) 2 SCR 866:AIR 1960 SC 610.
143. (1584) 76 ER 637.
144. 1962 SCR 146:AIR 1962 SC 159.
145. 1958 SCR 1156 at p. 1163:AIR 1958 SC 353 at p. 356.
146. Maxwell, Interpretation of Statutes, p. 55.
148 Social Justice and Labour Jurisprudence

147. 1953 SCR 302 at p. 310:AIR 1953 SC 58 at p. 61.

148. 1960 (2) SCR 866 at p. 875:AIR 1960 SC 610 at p. 614.
149. AIR 1970 SC 1407.
150. AIR 1970 SC 1407.
151. AIR 1973 SC 1461.
152. 1962 Supp (2) SCR 989 at p. 1002:AIR 1962 SC 933 at p. 938.
153. 1976 (2) SCR 377 at p. 385:AIR 1967 SC 1857 at p. 1863.
154. AIR 1978 SC 548.
155. AIR 1978 SC 548.
156. AIR 1978 SC 548.
157. AIR 1978 SC 548.
158. (2005) 5 SCC 1. A five-judge bench consisting of N. Santosh Hegde, K.G. Balakrishnan, D.M.
Dharmadhikari, Arun Kumar and B.N. Srikrishna, JJ heard the case and the majority decision was delivered
by Justice D.M. Dharmadhikari.
159. (2005) 5 SCC 1.
160. AIR 1978 SC 548.
161. AIR 1978 SC 548.
162. (2005) 5 SCC 1.
163. (1996) 2 SCC 293:1996 SCC (L&S) 500.
164. (2001) 9 SCC 713:2002 SCC (L&S) 269.
165. (1978) 2 SCC 213:1978 SCC (L&S) 215.
166. (1996) 2 SCC 293:1996 SCC (L&S) 500.
167. (1978) 2 SCC 213:1978 SCC (L&S) 215.
168. (2001) 9 SCC 713:2002 SCC (L&S) 269.
169. (1978) 2 SCC 213:1978 SCC (L&S) 215.
170. (1978) 2 SCC 213:1978 SCC (L&S) 215.
171. (1978) 2 SCC 213:1978 SCC (L&S) 215.
172. (1978) 2 SCC 213:1978 SCC (L&S) 215.
173. (1978) 2 SCC 213:1978 SCC (L&S) 215.
174. (1978) 2 SCC 213:1978 SCC (L&S) 215.
175. (1978) 2 SCC 213:1978 SCC (L&S) 215.
176. (1978) 2 SCC 213:1978 SCC (L&S) 215.
177. (1978) 2 SCC 213:1978 SCC (L&S) 215.
178. (1978) 2 SCC 213:1978 SCC (L&S) 215.
179. (1988) 4 SCC 54:1988 SCC (Cri) 900.
180. (1978) 2 SCC 213:1978 SCC (L&S) 215.
181. AIR 1953 SC 58.
182. AIR 1953 SC 58.
183. AIR 1963 SC 1873.
184. AIR 1960 SC 675.
185. Safdarjung Hospital vs Kuldip Singh Sethi. (1970) 1 SCC 735.
186. National Union of Commercial Employees vs M.R. Meher. 1962 Supp (3) SCR 157:AIR 1962 SC 1080.
187. Secretary Madras Gymkhana Club Employees Union vs Gymkahana Club. (1968) 1 SCR 742:AIR 1968
SC 554.
188. University of Delhi vs Ram Nath. (1964) 2 SCR 703:AIR 1963 AC 1873.
189. Dhanrajgirji Hospital vs Workmen. (1975) 4 SCC 621:1975 SCC (L&S) 342.
190. State of Bombay vs Hospital Mazdoor Sabha. (1960) 2 SCR 866:AIR 1960 SC 610.
191. Kesavananda Bharati vs State of Kerala. (1973) 4 SCC 225.
192. (1960) 2 SCR 866:AIR 1960 SC 610.
193. (1960) 2 SCR 866:AIR 1960 SC 610.
194. (1978) 2 SCC 213:1978 SCC (L&S) 215.
195. (1978) 2 SCC 213:1978 SCC (L&S) 215.
196. (1978) 2 SCC 213:1978 SCC (L&S) 215.
197. (1978) 2 SCC 213:1978 SCC (L&S) 215.
198. (1978) 2 SCC 213:1978 SCC (L&S) 215.
199. (1978) 2 SCC 213:1978 SCC (L&S) 215.
200. (1998) 3 SCC 259:1998 SCC (L&S) 806.
201. (1978) 2 SCC 213:1978 SCC (L&S) 215.
 Threshold Part Issues under the Industrial Disputes Act, 1947 149

202. (1978) 2 SCC 213:1978 SCC (L&S) 215.

203. (1978) 2 SCC 213:1978 SCC (L&S) 215.
204. (2000) 1 SCC 224:2000 SCC (L&S) 120.
205. (1978) 2 SCC 213:1978 SCC (L&S) 215.
206. (1978) 2 SCC 213:1978 SCC (L&S) 215.
207. (2000) 1 SCC 224:2000 SCC (L&S) 120.
208. (1978) 2 SCC 213:1978 SCC (L&S) 215.
209. (1978) 2 SCC 213:1978 SCC (L&S) 215.
210. (2005) 2 SCC 673:2005 SCC (L&S) 246: 2005 SCC (Cri) 546.
211. (1978) 2 SCC 213:1978 SCC (L&S) 215.
212. (1978) 2 SCC 213:1978 SCC (L&S) 215.
213. (1978) 2 SCC 213:1978 SCC (L&S) 215.
214. (1921) 2 KB 403:90 LJKB 461 (CA).
215. (1969) 1SCC 555:(1969) 3 SCR 742.
216. (1966) 3 SCR 141:AIR 1966 SC 1538.
217. 1966 Supp SCR 259:AIR 1966 SC 1995.
218. (1977) 1 SCC 199:1977 SCC (tax) 165:AIR 1977 SC 518.
219. (1995) 2 WLR 1:(1995) 1 All ER 888:(1995) 2 AC 513 (CA).
220. R. vs Secretary of State for the Home Department, ec p Fire Brigades Union. (1995) 2 WLR 464:(1995)
2 ALL E R 244 (HL).
221. (1978) 2 SCC 213:1978 SCC (L&S) 215.
222. 1988 4 SCC 54.
223. (1982) 1 SCC 271:1982 SCC (Cri) 152.
224. (1978) 2 SCC 213:1978 SCC (L&S) 215.
225. (1978) 2 SCC 213:1978 SCC (L&S) 215.
226. (1978) 2 SCC 213:1978 SCC (L&S) 215.
227. (1978) 2 SCC 213:1978 SCC (L&S) 215.
228. Coir Board vs Indira Devi P.S. (1998) 3 SCC 259:1998 SCC (L&S) 806.
229. (1978) 2 SCC 213:1978 SCC (L&S) 215.
230. (1978) 2 SCC 213:1978 SCC (L&S) 215.
231. (1978) 2 SCC 213:1978 SCC (L&S) 215.
232. (1978) 2 SCC 213:1978 SCC (L&S) 215.
233. (1978) 2 SCC 213:1978 SCC (L&S) 215.
234. (1978) 2 SCC 213:1978 SCC (L&S) 215.
235. (1978) 2 SCC 213:1978 SCC (L&S) 215.
236. (1978) 2 SCC 213:1978 SCC (L&S) 215.
237. (1978) 2 SCC 213:1978 SCC (L&S) 215.
238. (1978) 2 SCC 213:1978 SCC (L&S) 215.
239. (1978) 2 SCC 213:1978 SCC (L&S) 215.
240. Safdarjung Hospital vs Kuldip Sethi. (1970) I SCC 735.
241. Safdarjung Hospital vs Kuldip Sethi. (1970) I SCC 735.
242. Secretary, Madras Gymkhana Club Employees’ Union vs Gymkhana Club. (1968) I SCR 742:AIR 1968
SC 554.
243. Harinagar Cane Farm vs State of Bihar. AIR 1964 SC 903.
244. State of Bombay vs Hospital Mazdoor Sabha. (1960) 2 SCR 866:AIR 1960 SC 610.
245. (1978) 2 SCC 213:1978 SCC (L&S) 215.
246. (1978) 2 SCC 213:1978 SCC (L&S) 215.
247. (1978) 2 SCC 213:1978 SCC (L&S) 215.
248. State of U.P. vs Jai Bir Singh. (2005) 5 SCC.
249. (1978) 2 SCC 213:1978 SCC (L&S) 215.
250. Definition of ‘workman’ prior to the Amendment Act of 1982:
The definition of ‘workman’ as given originally in the Act of 1947 read as follows:
‘Workman’ means any person employed (including an apprentice) in any industry to do any skilled or
unskilled, manual or clerical work for hire or reward and includes, for the purpose of any proceedings
under this Act in relation to an industrial dispute, a workman discharged during that dispute, but does
not [include] any person employed in the naval, military or air services of the Crown.
150 Social Justice and Labour Jurisprudence

The word ‘Crown’ was substituted by the word ‘Government’ by the Adaptation of Laws Order, 1950. By
the Industrial Disputes (Amendment and Miscellaneous Provisions) Act, 1956 (36 of 1956), the previous
definition was omitted and a new definition was inserted, reading as follows:
‘Workman’ means any person (including an apprentice) employed in any industry to do any skilled or
unskilled manual, supervisory, technical or clerical work for hire or reward, whether the terms of employment
be expressed or implied, and for the purpose of any proceeding under this Act in relation to an industrial
dispute includes any such person who has been dismissed, discharged or retrenchment has led to that
dispute, but does not include any such person…
(i) who is subject to the Army Act, 1950 (46 of 1950), or the Air Force Act, 1950 (45 of 1950), or Navy
(Discipline) Act, 1934 (34 of 1934);
(ii) who is employed in the police service or as an officer or other employee of a prison; or
(iii) who is employed mainly in a managerial or administrative capacity; or
(iv) who, being employed in a supervisory capacity, draws wages exceeding five hundred rupees per
mensem or exercise[s], either by the nature of the duties attached to the office or by reason of the
powers vested in him, functions mainly of a managerial nature.

251. AIR 1978 SC 481.

252. AIR 1955 SC 404.
253. AIR 1966 SC 370.
254. AIR 1966 SC 370.
255. 1947 AC 1.
256. AIR 1978 SC 1088.
257. (1960) 1 All E R 274. p. 279.
258. AIR 1953 SC 53.
259. AIR 1968 SC 529.
260. AIR 1953 SC 53.
261. Under Section 2(b) of the Act, ‘award’ means an interim or a final determination of any industrial dispute
or of any question relating thereto by any Labour Court, industrial tribunal or national industrial tribunal
and includes an arbitration award made under Section 10A.
262. AIR 1977 SC 1666. This case was heard by V.R. Krishna Iyer, R.S. Sarkaria and Jaswant Singh, JJ. The
majority judgement was delivered by Justice R.S. Sarkaria.
263. Under Section 2(k) of the Industrial Disputes Act, an ‘industrial dispute’ means any dispute or difference
between employers and employers, or between employers and workmen, or between workmen and
workmen, which is connected with the employment, non-employment or the terms of employment or
with the conditions of labour, of any persons.
The essential ingredients of the definition are the following;
1. the factum of the dispute;
2. the parties to the dispute; and
3. the subject matter of the dispute.

264. Under Section 2(b) of the ID Act ‘award’ means an interim or a final determination of any industrial dis-
pute or of any question relating thereto by any Labour Court, Industrial Tribunal or National Tribunal and
includes an arbitration award made under Section 10A.
265. AIR 1968 SC 585.
266. 1973 LIC 711 (All).
267. 1965 II LLJ 149 (SC).
268. 1965 II LLJ 149 SC.
269. AIR 1979 SC 170. The case was heard by V.R. Krishna Iyer and D.A. Desai, JJ. The majority judgement
was delivered by Justice D.A. Desai.
270. (1960) 2 SCR 866 at p. 871:AIR 1960 SC 610.
271. (1960) 3 SCR 528:AIR 1960 SC 923.
272. 1978 (36) FLR 266:AIR 1978 SC 548.
273. See Section 2(cc) of the Act. Inserted by Act 46 of 1982 with effect from 21 August 1984.
274. Inserted by Act 46 of 1982 with effect from 21 August 1984.
275. 1983 (2) LLJ 424.
 Collective Bargaining Agreement Issues 151

Chapter 4

Collective Bargaining Agreement Issues

The collective bargaining process plays an important role in establishing healthy relations
between the labour and the management. It is a process wherein labour and management
participate in negotiations regarding demands of common concern that may be made by
each party and reach an amicable settlement. The basis for any industrial conflict is the
failure of the collective bargaining process. A study of a few cases would reveal a mixed
trend of factors contributing to the failure of the collective bargaining process. Sometimes
it is the mixed contribution of both parties, in some cases the extremely unbending attitude
of the management, and in other cases the extremely stubborn nature of union leaders that
ultimately results in cases of lock-out or closure of an industrial establishment.
The Industrial Disputes Act, 1947, provides a mechanism for the strengthening of the
settlements entered into by the parties, for the adjudication of industrial disputes and for
the regulation of the rights and privileges of the parties concerned. The long title of the
Act provides for the investigation and settlement of industrial disputes, which means
adjudication of such disputes also. The Act envisages collective bargaining contracts be-
tween the unions representing workmen and the management, a matter which falls outside
the realm of common law or the Indian law of contract.1
The Industrial Disputes Act, 1947, does not define the reasons on account of which
workmen can go on strike or when an employer can lawfully declare a lock-out in an
industry or establishment. But the law simply defines a ‘strike’ and a ‘lock-out’ in contrast
to each other. Strike and lock-out are viewed as antithesis to each other. No law in India
enables workers to go on strike or employers to declare a lock-out of their workmen. The
Act only imposes appropriate legal disabilities on the workers’ right to go on strike or the
employers’ right to declare a lock-out, as the case may be. A strike is legal if it does not vio-
late any provisions of statute. Hence, in India, the workers’ right to go on strike is a cus-
tomary right. A well-recognised custom is, of course, one of the sources of law.
It is argued that a strike is a legitimate weapon in the hands of workmen for the re-
dressal of their grievances and if they are made liable for breach of contractual remedies
or for the damages suffered by the employer on account of a strike then the basic idea of
a strike as a means of having the grievances redressed will be taken away. The fallacy in
this argument is that it presupposes the strike to be legal and justified. Our Constitution
guarantees the right to form associations, not for gregarious pleasure, but to fight effectively
for the redressal of grievances. Our Constitution is sensitive to workers’ rights. Our story
of freedom and social emancipation led by the Father of the Nation has employed, from
the highest of motives, combined action to resist evil and to right wrong even if it meant
152 Social Justice and Labour Jurisprudence

loss of business and profits for the liquor vendor, the brothel-keeper and the foreign–
cloth dealer. English history, political theory and lifestyle being different from Indian
conditions, which are replete with organised boycotts and mass satyagrahas, we cannot
incorporate English torts without any adaptation into Indian law.2

The Far-reaching Impact of

Nullifying Settlements

As already stated, the reason for any industrial conflict is the failure of the collective bar-
gaining process. But at the same time, it is quite interesting to examine whose fault or
attitude allows the conflict to persist. In India, we do not come across any doctrinal
research to establish a precise conclusion as to whose fault it was that a dispute persisted,
rather than reaching an amicable settlement. Here is an example of a situation to sub-
stantiate this proposition.

Mahabir Jute Mills, Gorakhpur, vs Shibban Lal Saxena and Others3

A bench of four judges presided over this case and delivered a concurrent view. If one
looks at the facts and the position of law, it is quite difficult to be convinced by the deci-
sion rendered in this case, however.
The Industrial Disputes Act, 1947, under Section 12(5) provides: ‘if, on a consideration
of the report of the Conciliation Officer under sub-section (4), the appropriate Govern-
ment is satisfied that there is a case for reference to a Board, Labour Court, Tribunal or
National Tribunal, it may make such reference. Where the appropriate Government does
not make such a reference it shall record and communicate to the parties concerned its rea-
sons therefor.’4 The Government of Uttar Pradesh enacted the U.P. Industrial Disputes
Act (28 of 1947), wherein the relevant provision is not similar to Section 12(5) of the
Industrial Disputes Act, 1947, in substance. The entire controversy in this case surrounded
one particular issue, that is, whether the appropriate government is bound to furnish rea-
sons to the parties concerned for not referring the dispute to the concerned authorities.

THE FACTS OF THE CASE

The Mahabir Jute Mills Mazdoor Sabha was formed in 1946 and the respondent in this case
was the president of the union. There arose some disputes between the management and the
union. The union gave a notice of general strike, listing 18 demands. Later, a total strike was
launched and during the strike period the respondent left for China. Meanwhile, the management
arrived at a settlement with the working president of the union and the dispute was resolved.
Subsequently, after the return of the respondent with his re-entry into the union, matters assumed
serious proportions and the disputes reached a high pitch. He agitated with the settlement
reached and insisted for a re-opening of the settlement. He also started an agitation and the
workers responded to the ‘go slow’ call given by the respondent, which resulted in heavy losses
to the management. The strike went on for several days. It is alleged that the president had de-
livered a number of inflammatory speeches against the management. The management initiated
 Collective Bargaining Agreement Issues 153

disciplinary proceedings against the workers, numbering 1,000, and terminated all from service.
It appears that 200 workers were taken back into employment due to the reason they tendered
an apology.
In view of these developments, the union invoked the jurisdiction of the regional conciliation
officer under Section 3 of the U.P. Industrial Disputes Act, 1947. A conciliation board, consisting
of the additional regional conciliation officer as the chairman, and Shibban Lal Saxena and Shri
Arora representing the labour and the management respectively as members, was constituted.
The board heard the case, but unfortunately no settlement could be arrived at. Consequently,
the report of the board members was forwarded to the labour commissioner and the same was
placed before the government. The chairman of the board sent a secret report to the labour
commissioner, recommending that the allegations made by the workers against the management
were baseless and should not be entertained. After considering the reports, the Government of
U.P., by its order, refused to make a reference to the industrial tribunal on the ground that it was
not expedient to do so. There was some controversy before the single judge of the High Court
on the question as to when the order of the government was received by the workers. The High
Court accepted the plea of the workers that there was sufficient delay in communicating the
order by the government to the workers as a result of which a writ petition was filed before the
High Court after a year and a half. But the High Court found that the petitioners were not
guilty of laches.

THE JUDGEMENT DELIVERED BY JUSTICE S. MURTAZA FAZIL ALI

The learned single judge, while allowing the petition, set aside the order of the Government and
directed the Government to make a reference to the industrial tribunal, ignoring the secret
report sent by the Assistant Regional Conciliation Officer. Another reason which the single
judge gave was that the order of the Government did not state any reasons and was not a
speaking order, hence it was legally invalid and was fit to be quashed. The Division Bench of
the High Court in appeal has not accepted—and in our opinion, rightly—this part of the order
of the High Court which was set aside. The Division Bench held as the order of the government
was purely an administrative order, unless there was any provision that required the Government
to give reasons for the order, the same could not be vitiated for the absence of the reasons. The
High Court observed thus:

The function of the Government is administrative. In law administrative decisions are not
generally required to be accompanied by a statement of reasons. There is nothing in the Indus-
trial Disputes Act or the notification aforesaid requiring the State Government to state its
reason in support of its conclusions. There was nothing particular in the present case impelling
the issuance of such a direction to the State Government.

We find ourselves in complete agreement with the view taken by the High Court on this point.
In a diverse society such as ours, the government has to work through several administrative agen-
cies which have got a very wide sphere. If every administrative order is required to give reasons,
it will bring the governmental machinery to a standstill. It is well settled that while the rules of
natural justice apply to administrative proceedings, it is not necessary that the administrative
orders should be speaking orders unless the statute specifically enjoins such a requirement. But
we think it desirable that such orders should contain reasons when they decide matters affecting
rights of parties. The Division Bench of the High Court, however, set aside the order of the gov-
ernment refusing to make a reference to the industrial tribunal and directed it to reconsider
the matter on the following three grounds:

1. That the government took into consideration the secret report, which had seriously
prejudiced and coloured its decision;
154 Social Justice and Labour Jurisprudence

2. that in accordance with the principles of natural justice, the regional conciliation officer
should have shown the secret report to the other members of the conciliation board so
that they may have had the opportunity to rebut the same; and
3. that the government order was based on the secret report sent by the additional regional
conciliation officer as also the report of the labour commissioner.

In the aforesaid order of the Division Bench of the High Court, certain mandatory directions
have been given to the government to ignore the secret report as also the report of the labour
commissioner and to consider the report of the other members of the conciliation board, namely
Shibban Lal Saxena and Arora. The Division Bench of the High Court has, however, granted
the certificate of fitness by its order dated 9 April 1973.
Coming to first ground which weighed with the High Court in setting aside the order of the
government refusing to make a reference to the industrial tribunal, it seems to us that the High
Court has proceeded on a complete misconception of the real position and on a premise which
is, wrong on a point of fact. Having perused the materials placed before us, we find that there is
no reliable material on record at all to show that the government order was based mainly on
the secret report of the additional regional conciliation officer or of the labour commissioner.
The order does not say so; it only recites that the reference to the industrial tribunal was refused
because the government did not think it expedient to make a reference. The High Court, however,
com-pletely overlooked the specific averment made in the counter affidavit filed by the govern-
ment before the High Court. In paragraph 29 of this counter affidavit, while rebutting the allega-
tions made by the petitioner, it was stated:

That with respect to the contents of para 38 of the said affidavit it is stated that the opinion
of the Government that it was expedient to refer the dispute to adjudication was formed after
the matter was fully considered by the State Government. The report of the Labour
Commissioner submitted through his letter No. 7241/I-CR-CB-5(147)/1955 dated 22nd
October, 1955, was also before the Department concerned. A true copy of the said letter of
the Labour Commissioner is Annexure III to this affidavit.
The Government took the decision after considering the said report and other surrounding
circumstances. It is denied that there was any discrimination against the petitioner Union.
Each case was duly considered on its merits and only those cases were dropped which in the
opinion of the Government were not fit for reference.

This averment, which has not been proved to be false, manifestly shows that the government,
before making the impugned order, had considered all the aspects, including the reports of the
chairman and the members of the conciliation board, the labour commissioner and other sur-
rounding circumstances. In these circumstances, the finding of the Division Bench of the High
Court that the order of the government was based merely on the secret report of the chairman
or that of the labour commissioner is not sustainable. We fail to understand on what basis the
High Court has presumed that the government acted solely on the secret report of the regional
conciliation officer.
Under Section 4-K of the U.P. Industrial Disputes Act, the statute confers the power on the
government to refer any industrial dispute if it is of the opinion that such a dispute exists or that
any matter is connected with or relevant to the dispute. The section runs as follows:

Where the State Government is of opinion that any industrial dispute exists or is apprehended,
it may at any time by order in writing refer the dispute or any matter appearing to be connected
with, or relevant to, the dispute to a Labour Court if the matter of industrial dispute is one of
those contained in the First Schedule, or to a Tribunal if the matter of dispute is one contained
in the First Schedule or the Second Schedule for adjudication:
 Collective Bargaining Agreement Issues 155

Provided that where the dispute relates to any matter specified in the Second Schedule and
is not likely to affect more than one hundred workmen, the State Government may, if it so
thinks fit, make the reference to a Labour Court.

This section, therefore, gives a wide discretion to the state government to act under certain
circumstances. If the government, on the basis of the materials before it, comes to the conclusion
that no real dispute existed and it was not expedient to make a reference, one can hardly find
fault with the order of the government, passed under Section 4-K of the U.P. Industrial Disputes
Act. There can be no doubt that the secret report of the additional regional conciliation officer
and the report of the labour commissioner, like other circumstances, had to be considered by
the government in making its overall assessment of the situation; there was no reason for excluding
the secret report submitted by the additional regional conciliation officer at all. In these circum-
stances, the first ground on which the Division Bench has set aside the government order was
not legally sound and cannot be sustained.
As regards the second ground, the main contention of Gupte, learned counsel for the appellant,
has been that the High Court was in error in applying the principles of natural justice to a matter
like this. He submitted that the cases relied upon by the judge of the high court regarding the
application of the principles of natural justice to administrative proceedings cannot be invoked
in the facts and circumstances of this case. To begin with, we have to examine the ambit and
scope of the conciliation board and the procedure adopted by it by virtue of the provisions con-
tained in the notification issued by the government under Section 3 of the U.P. Industrial Dis-
putes Act. The relevant portion of the notification runs thus:

5. Functions of the Boards and submission of Memorandum of Report.

(1) Upon reference of a dispute to the Conciliation Board under cl. 4 it shall be its duty to
endeavour to bring about a settlement of the dispute, and for this purpose the Board
shall, in such manner as it thinks fit, and without delay, investigate the dispute and all
matters affecting the merits and just settlement thereof, and may do all such things as it
thinks fit for the purpose of inducing the parties to come to an amicable settlement.
(2) In any case where the Conciliation Board is successful in bringing about an amicable
settlement between the parties it shall prepare a memorandum stating the terms of
settlement arrived at and the chairman shall send copies thereof to the State Government,
the Labour Commissioner, U.P. and the parties concerned.
(3) Where no amicable settlement can be reached on one or more than one issue, the Chairman
shall, within seven days (excluding holidays but not annual vacations observed by courts
subordinate to the High Court) of the close of the proceedings, send to the State
Government and the Labour Commissioner, a full report setting forth the steps taken by
the Board for ascertaining the facts and circumstances relating to the dispute and for
bringing about an amicable settlement thereof.
(4) The memorandum under sub-clause (2) or the report under sub-clause (3) shall be
submitted by the Chairman within thirty days (excluding holidays but not annual vacations
observed by courts subordinate to the High Court) of the date on which the reference
was made to the Board:
Provided that the State Government may extend the said period from time to time.
(5) The memorandum under sub-clause (2) or the report under sub-clause (3) shall be signed
by the Chairman and such members as may be present:
Provided that the memorandum under sub-clause (2) shall also be signed by the parties to
the dispute
Provided that nothing in this clause shall be deemed to prevent any member of the Board
from submitting a dissenting report.
156 Social Justice and Labour Jurisprudence

A perusal of this notification clearly shows that the jurisdiction of the conciliation board is
very limited. The procedure prescribed for the board does not involve any adjudicatory process
but is purely of an exploratory nature, and what the board has to do is make an effort to bring
about an amicable settlement between the management and the workers, and if it fails to do so
it has to send a detailed report to the government. That is the limited area within which the
board has to function. Nevertheless, it is not disputed in this case that the conciliation board
held a full investigation in the matter, heard the parties, and framed as many as 33 issues after
going into the matter, and then the chairman and the members sent their reports. Thus, before
making the reports, all the rules of natural justice were fully complied with: The parties were
given a hearing, their points of view were fully considered, and in fact the representative of
the management and that of the labour were members of the board. There is no provision in the
notification or in the U.P. Industrial Disputes Act which enjoins that the report submitted by
the chairman or any other members should be shown to one another. This also does not appear
to be necessary. The High Court seems to think that because the chairman did not show his
secret report to the other members of the board, this has resulted in the violation of the principles
of natural justice. We are, however, unable to agree with this line of reasoning. The principles of
natural justice are no doubt very essential, but they have got their own limits and cannot be
stretched too far.
We would like to deal with some cases which have been referred to in the judgement of the
High Court and which are also relied upon by Chowdhri, counsel for the respondents. In the
first place, reliance was placed on the case of A.K. Kraipak vs Union of India,5 where this Court
observed:

The aim of the rules of natural justice is to secure justice or to put it negatively to prevent
miscarriage of justice. These rules can operate only in areas not covered by any law validly
made. In other words they do not supplant the law of the land but supplement it… If the
purpose of the rules of natural justice is to prevent miscarriage of justice one fails to see why
those rules should be made inapplicable to administrative enquiries. Often times it is not
easy to draw the line that demarcates administrative enquiries from quasi-judicial enquiries.

This Court, however, took care to point out as follows:

What particular rule of natural justice should apply to a given case must depend to a great
extent on the facts and circumstances of that case, the framework of the law under which the
enquiry is held and the constitution of the Tribunal or body of persons appointed for that
purpose. Whenever a complaint is made before a court that some principles of natural justice
had been contravened the court has to decide whether the observance of that rule was necessary
for a just decision on the facts of that case.

The facts in the Kraipak 6 case are quite different from the facts in the present case. In the
Kraipak 7 case, the main grievance of the petitioner was that in the selection board which was
constituted for recommending the promotion of state officers to the Indian Forest Service
Cadre, the chief conservator of forests was also a member although he himself was a candidate
for promotion to the Indian Forest Service Cadre. Thus what happened was that the chief
conservator of forests acted as a judge in his own cause. This was undoubtedly a gross violation
of the principles of natural justice, because the very person who stood as a candidate also sat on
the selection board that had to decide his own future as that of his rivals.
Such is, however, not the case here. The conciliation board had completed its proceed-
ings and the stage at which, according to the High Court, the rules of natural justice had to be
applied was the stage of submitting the report. A full hearing was given to the parties concerned.
 Collective Bargaining Agreement Issues 157

Thus all the indicia of the principles of natural justice were present in the facts of the present
case. In these circumstances, we are satisfied that the Kraipak 8 case could not be called into
support of the reason given by the High Court.
Reliance was also placed on the case of the Union of India vs J.N. Sinha,9 where also it was
pointed out by the Court that:

Whether the exercise of a power conferred should be made in accordance with any of the
principles of natural justice or not depends on the express words of the provision conferring
the power, the nature of the power conferred, the purpose for which it is conferred and the
effect of the exercise of that power.

In the present case, we have already pointed out that neither clause (5) of the notification referred
to above nor Section 3 of the U.P. Industrial Disputes Act contained any provision which
required that the members of the conciliation board were to show their reports to one another,
nor did Section 3 of the U.P. Industrial Disputes Act. All that was required was that they should
send their reports to the government through the labour commissioner. This was undoubtedly
done. We are, therefore, unable to see any infraction of the rules of natural justice in the pre-
sent case.
Reliance was also placed on the decision of this Court in State of Orissa vs Dr (Miss) Binapani
Dei.10 This case also does not appear to us to be of any real assistance to the respondents, be-
cause in that case the entire procedure of inquiry held was in violation of the rules of natural
justice. That, however, is not the position here.
It was then contended by Gupte that after quashing the order of the government refusing to
make a reference and asking it to reconsider, it was not open to the High Court to have given
peremptory directions so as to circumscribe the statutory jurisdiction of the government under
Section 4-K of the U.P. Industrial Disputes Act. In our opinion, this contention is well founded
and must prevail. Even if the High Court thought that the impugned order of the government
suffered from any legal infirmity, all that it could have done was to have asked the government
to reconsider it; but it had no jurisdiction to direct the government on how to act and how to
exercise its statutory discretion which was conferred by Section 4-K of the U.P. Industrial Disputes
Act. There was absolutely no warrant for the High Court prohibiting the government from
considering the secret report of the additional regional conciliation officer or that of the labour
commissioner. The government was fully entitled to consider the matter in all its comprehensive
aspects and the secret reports of the chairman of the conciliation board and that of the labour
commissioner were undoubtedly relevant materials which the government could have considered.
The High Court could not debar the government from considering those matters nor could it
compel the government to exercise its discretion in a particular manner. In the circumstances,
we are satisfied that the order of the High Court is not legally sustainable and must be quashed.
The other point which arises for consideration is as to the relief which could be granted to
the appellant. Gupte, counsel for the appellant, submitted that after the judgement of the High
Court, the government passed another order dated 6 February 1973, by which—in consonance
with the directions given by the High Court—it made a reference to the industrial tribunal. It
was submitted that it was not at all proper for the government to have revived a dead issue after
more than 20 years and further, as the order of the government was based on the order of the
High Court, if the order of the High Court was quashed, the order of the government making
a reference to the industrial tribunal would fall automatically. We find ourselves in agreement
with the counsel for the appellant. There can be no doubt that the order of the government
dated 6 February 1973 is undoubtedly based on the order passed by the Division Bench of the
High Court. This is proved by a letter written by Vishnu Prakash, up sachiv (deputy secretary),
158 Social Justice and Labour Jurisprudence

U.P. Government, to the manager of the appellant mills. The relevant portion of the letter, after
being translated in English, runs thus:

I am directed to say that their Lordships of the High Court in their Judgment in Special
Appeal No. 1963/915 State vs Shri Shibban Lal Saxena (M/s. Mahabir Jute Mills, Sahjanwa)
have ordered that the Government after taking the dissenting reports from both the parties
should consider on the question whether the aforesaid dispute should be referred for
adjudication.
Therefore you are requested that within 10 days from the date of the receipt of this letter
to send your dissenting report and whether further you want to say on your behalf to the
Government.

A perusal of this letter clearly shows that the government did not exercise its independent
decision under Section 4-K of the U.P. Industrial Disputes Act, but was guided mainly by the
judgement of the High Court and the directions given in special appeal filed in the High Court.
If the order of the High Court is quashed, then it will undoubtedly materially affect the decision
of the government in making a reference to the industrial tribunal. Had the government made
the reference uninfluenced by the High Court’s directions, the legal situation would have been
different.
The learned counsel for the respondents submitted that no prayer was made by the appellant
for quashing the order of the government for making a reference to the industrial tribunal. It
was, however, not necessary for the appellant to make such a prayer because if the High Court’s
order is quashed, then any subsequent proceeding which comes into existence as a result of the
High Court’s order would fall to the ground as a logical corollary of our finding. The counsel for
the respondents, after due consideration, submitted that he would have no objection if the gov-
ernment order for making a reference is quashed, provided the government’s decision to make
a fresh reference to the industrial tribunal on the dispute is not fettered. We would, however,
like to make it clear that the government has ample discretion to make a reference to the industrial
tribunal under Section 4-K of the U.P. Industrial Disputes Act if it thinks fit. The Supreme
Court in the case of the Western India Match Company vs the Western India Match Company
Workers Union11 clearly held that even if a reference was refused by the government, that will
not debar the government from making a reference at a later time if it was satisfied that in the
changed circumstances a reference is necessary.
For the reasons given above, we allow the appeal, quash the order of the High Court dated
8 May 1972 and as a consequence of this, also set aside the order of the government dated
6 February 1973 for making a reference to the industrial tribunal. In the peculiar circumstances
of this case, however, we would make no order as to costs throughout.

Wages for Strike Period

The Industrial Disputes Act, 1947, defines a strike and provides for its prohibition. In
India, industrial jurisprudence is very clear as to the ‘no work, no pay’ effect. Employment
in any establishment or industry is essentially a contract between the employer and the
workman. Wages are the sum payable by an employer to his workmen if the terms and
conditions of employment, be they express or implied, are fulfilled by the workmen.12
The question with which the Judiciary was confronted related to wages during the strike
period. In this context, the Judiciary has evolved altogether new propositions such as (a)
strikes that are legal and justified; (b) strikes that are legal but unjustified; (c) strikes that
are illegal and unjustified; and (d ) strikes that are illegal but justified.
 Collective Bargaining Agreement Issues 159

Crompton Greaves vs the Workmen13

This was a case relating to the legality and justifiability of a strike undertaken by the
workers. This issue is pertinent from the point of view of workers’ entitlement to wages
during the strike period. The most interesting aspect of this case lies in the analysis of the
circumstances under which a strike is designated as illegal and unjustified.

THE FACTS OF THE CASE

This appeal by special leave challenges the award dated 30 December 1970 by the VIII Industrial
Tribunal, West Bengal, in a reference made to it by the State Government under Section 10 of
the Industrial Disputes Act, 1947, holding ‘the striking workmen entitled to their wages’ for a
portion of the strike period viz. from 11 January 1968 to the end of February 1968—and dir-
ecting the appellant to pay the same to the workmen within one month from the date of the
publication of the award in the Calcutta Gazette.
On 27 December 1967, the appellant which is an engineering concern engaged in the manu-
facture and sale of electrical products such as motor fans, motor control gears, transformers and
other electrical instruments, and has its registered office at Bombay and branches at several places
in India, intimated Greaves Cotton and Crompton Parkinston Associates concerns workmen’s
union, Calcutta, of its decision to reduce the strength of the workmen in its branch at Calcutta on
the ground of severe recession in business. Apprehending mass retrenchment of the workers,
who numbered 353, the union sought the intervention in the matter of the labour minister.
The labour commissioner arranged joint conferences in his office of the representatives of the
union and the company with a view to explore avenues for conciliation and amicable settlement.
Two conferences were accordingly held on 5th and 9th January 1968, in which both parties
participated. As a result of these conferences, the company agreed to hold bipartite talks with
the representatives of the union at its Calcutta office on the morning of 10 January 1968 to find
out the possibility of an agreed solution. The talk, as agreed, did take place; but no agreement
could be arrived at. Whereas according to the union, the management of the company was not
serious to arrive at a negotiated settlement and merely made a show of discussing the matter with
its representatives. According to the management of the company, the unseemly and recalcitrant
attitude adopted by the union during the course of the talks led them to believe that the union
was not interested in any fruitful negotiation. The Assistant Labour Commissioner, however,
continued to use his good offices to bring about an amicable settlement through another joint
conference that was scheduled for 12 January 1968.
On the afternoon of 10 January 1968, the company—without informing the labour commis-
sioner that it was proceeding to implement its proposed scheme of retrenchment—hung up a
notice retrenching 93 of its workmen belonging to the Calcutta office. Treating the step taken
by the company as pretty serious demanding urgent attention and immediate action, the work-
men resorted to a strike with effect form 11 January 1968, after giving notice to the appellant
and the labour directorate; they continued the strike upto 26 June 1968. In the meantime, the
industrial dispute in relation to the justification of the aforesaid retrenchment was referred by
the government to the industrial tribunal on 1 March 1968. Subsequently, the government, vide
its order No. 8890–I.R./IR/10L-79/67 dated 13 December 1968, referred the issue of the
workmen’s entitlement to wages for the strike period from 11 January 1968 to 26 June 1968 to
the industrial tribunal for adjudication. By its aforesaid order dated 30 December 1976, the
industrial tribunal acceded to the workmen’s demand for wages for the period commencing
from 11 January 1968 to the end of February 1968, but rejected their demand for the remain-
ing period of the strike, observing that redress for the retrenchment having been sought by the
union itself through the tribunal, there remained no justification for the workmen to continue
the strike. The scope of the appeal was, therefore, restricted to the determination of the short
160 Social Justice and Labour Jurisprudence

question of entitlement or otherwise of the striking workmen to wages for the period commencing
from 11 January 1968 and ending 29 February 1968.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE JASWANT SINGH

It is well settled that in order to entitle the workmen to wages for the period of strike, the strike
should be legal as well as justified. A strike is legal if it does not violate any provisions of the
statute. Again, a strike cannot be said to be unjustified unless the reasons for it are entirely per-
verse or unreasonable. Whether a particular strike was justified or not is a question of the facts
and circumstances of each case. It is also well settled that the use of force or violence or acts of
sabotage resorted to by the workmen during a strike disentitles them to wages for the strike
period.
In the light of the above mentioned principles, the following two points arise for consideration:

1. Whether the aforesaid strike was illegal or unjustified?

2. Whether the workmen resorted to force or violence during the portion of the strike period
commencing from January 11th 1968 and ending with February 29th 1968?

No specific provision of law has been brought to our notice on behalf of the appellant which
rendered the strike illegal during the period under consideration. The strike cannot also be said
to be unjustified as before the conclusion of the talks for conciliation which were going on
through the instrumentality of Assistant Labour Commissioner, the Company retrenched as
many as 93 of its workmen without even intimating to the Labour Commissioner that it was
carrying out its proposed plan of effecting retrenchment of the workmen. It is therefore answered
in the negative.
The Tribunal has held that it has not been proved that the workmen resorted to force and
violence during the period in question. We have ourselves gone through the entire evidence
adduced in the case but have not been able to discern anything therein which may impel us to
take a view different from the one taken from the Tribunal. May be that force and violence was
resorted to by the striking workmen but the vital question that confronts us is whether the
Company has been able to establish it. No clear, cogent and disinterested evidence has been
adduced to substantiate the charge that the striking workmen gheraoed the managerial staff or
assaulted and intimidated the loyal employees or cut off electric lines or prevented any dealer
from entering the business premises of the Company and transacting business with it. No pro-
secution also appears to have been launched in regard to any of these alleged incidents except-
ing the one by C.G. Biswanathan which was also later withdrawn. The Company has failed to
produce either Mr Bose or any other employee mentioned in its various letters to the police.
The material on the record thus falls far short of the standard of proof required in cases of this
nature. The Tribunal was, therefore, justified in holding that the Management had failed to
prove that the workmen resorted to force or violence during the relevant period with which we
are concerned. Accordingly, we cannot interfere with the decision of the Tribunal in this appeal
under Article 136 of the Constitution.

The Legality of Strikes

The Industrial Disputes Act prohibits the commencement and continuation of a strike
or a lock-out, as the case may be. In the event of any violations, the Act provides appropriate
penal provisions.14 The Indian Trade Union Act, 1926, provides certain immunities for a
 Collective Bargaining Agreement Issues 161

registered trade union under Sections 17 and 18. The immunity provided under Section 18
sub-section (2) is paramount, since it provides immunity for a registered trade union in
respect of tortuous liability under certain circumstances in respect of acts done in con-
templation or furtherance of a trade dispute.15 If the acts of a registered trade union while
contemplating or furthering a trade dispute fall outside the scope of the immunity under
sub-section (2) of Section 18, the proceedings would lie. Whether the machinery provided
under the Industrial Disputes Act or the regular civil courts constitute the proper authorities
to entertain such proceedings is one of the issues that was central to the following case.

Rohtas Industries vs Its Union16

In this case, very interesting fundamental issues figured for consideration before the
Supreme Court. They were as follows:

1. The scope of arbitrators under Section 10A of the Industrial Disputes Act to adjudicate
matters provided not only under the Industrial Disputes Act but also a claim by the
management under tortuous liability against a registered trade union.
2. The scope of registered trade unions’ immunity under Section 18(2) of the Trade Unions
Act, 1926, in respect of acts done in contemplation and furtherance of a trade dispute.

The decision rendered by Justice V.R. Krishna Iyer, speaking for the majority, involved
a consideration of the issues relating to the positions of English and Indian law in respect
of conspiracy as a tort and the scope of the High Court under Article 226 to interfere
with the award made by arbitrators under Section 10A of the Act.

THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

We permit ourselves a few preliminary observations disturbingly by the not altogether untypical
circumstances of these two appeals, before proceeding to state the facts, set out the submissions
and decide the points.
Industrial law in India has not fully lived up to the current challenge of industrial life both
in the substantive norms or regulations binding the three parties—the State, Management and
Labour—and in the proccesual system which has baulked, by dawdling dysfunctions, early
finality and prompt remedy in a sensitive area where quick solution is of the very essence of real
justice. The legislative and the judicial processes have promises to keep it positive industrial
peace, in tune with distributive economic justice and continuity of active production, were to
be accomplished. The architects of these processes will, we hopefully expect, fabricate creative
changes in the system, normative and adjectival.
The two appeals before us, passported by special leave under Art. 136 relate to an industrial
dispute with its roots in 1948, meandering along truce, union rivalry and the like, into strike
and settlements, the last of which led to an arbitration award in 1959 which, in turn, promoted
two writ petitions before the High Court. After a spell of a few years they ripened into a judge-
ment. Appeals to this court followed and, after long gestation of six years for preparation of
papers and a like period the cases are ready for final hearing or parturition in all 12 years after
the grant of leave. By this cumulative lapse of time the generation of workers who struck work two
decades ago have themselves all but retired, the representative Union itself which sponsored the
dispute has, the other side faintly states, ceased to command representative character, the Manage-
ments themselves have, out of many motives, disclaimed the intention to recover the huge sums
162 Social Justice and Labour Jurisprudence

awarded to them by the arbitrators and the only survival after death, as it were, is a die-hard
litigation tied up to a few near academic, but important, legal points for adjudication by the
highest Bench. On this elegiac note we will enter the relevant areas of facts and law since we
must decide cases brought before us, however stale the lis.
At this stage we may mention our strong feeling that where the superior courts, after hearing
full arguments, are clearly inclined to affirm the judgement under appeal for substantially similar
reasons as have weighed with the lower court, there is no need to give lengthy reasons for dis-
missing the appeal. Brevity, except in special cases, may well fill the bill where the fate is dismissed.
On this score we are disposed to make short shrift of the appeals with stating but the necessary
facts the points pressed have defeated condensation.
Two connected managements of industries in the same locality, who figure as appellants
before us, had a running industrial dispute with their workers, which has had a long history
moving in a zig-zag course and sicklied over by alleged internecine trade-union strife. There
were two trade unions which were perhaps of competitive strength and enjoying recognition.
One of them, the Rohtas Industries Mazdoor Sabha (for short the Mazdoor Sabha) was the
representative union during the relevant period while the other, the Rohtas Industries Seva
Sangh (for brevity, the Seva Sangh) was not a party before this court and so we are not concerned
with it except for the purpose of noticing its presence in the settlement of the dispute which
starts the story so far as the litigation is concerned. There was a strike in the industry (for our
purpose the expression embraces both the appellants) which came to an end by virtue of a
memorandum of agreement dated 2 October 1957, to which not merely the management but
also the two registered unions aforementioned and the two un-registered unions which had a
lesser following, were party. The terms of the said agreement provided inter alia that:

The employees’ claim for wages and salaries for the period of strike and the company’s for
compensation for losses due to strike shall be submitted for arbitration of Sri. J.N. Majumdar
and R.C. Mitter, Ex-High Court Judge and Ex-Members of the Labour Appellate Tribunal
of India as joint arbitrators and their decisions on the two questions shall be final and binding
on all the parties. (Clause 7 of agreement.)

This agreement was admittedly arrived at conciliation proceedings contemplated by the

Industrial Disputes Act, 1947 (for short, the Act), and the reference to arbitration spelt out in
clause 7 directly and admittedly fell under Section 10-A of the Act.
It is apparent that the arbitrators were seized of two questions: (a) the claim of the workers
for wages for the period of strike: and (b) the claim of management for compensation for its
losses flowing from the strike. The Broad of arbitrators, two retired judges of the Calcutta High
Court—held extensive hearings spread over a year and a half, made a lengthy award marshalling
the evidence, adducing the reasons, discussing the law and recording its decision on the two
vital issues. At the end of the detailed and reasoned record of conclusions, the award runs thus:

Our award accordingly is:

(1) That the workmen participating in the strike are not entitled to wages and salaries for the
period of the strike.
(2) That the company do recover from the workmen participating in the strike, compensation
assessed at Rs 80,000 (rupees eighty thousand).
(3) That the workmen jointly and severally do pay to the company one-eight of the total
costs of the arbitration. In default of payment the company will be at liberty to recover
the same in such manner as it thinks fit. Subject to this the parties do bear their respect-
ive costs.

The workmen were deprived of their wages during the period of the strike on the score that
it was an illegal strike. Both sides seem to have accepted this finding after an unsuccessful
 Collective Bargaining Agreement Issues 163

challenge in the High Court and happily industrial peace is said to be prevailing currently.
What did hurt the Mazdoor Sangh more and what the management did try to have and to hold
as a bonanza was the second finding that the strikers, apart from forfeiting wages, do pay com-
pensation in the huge sum of Rs 6,90,000 in one case and Rs 80,000 in the other, for the loss of
profits suffered by the manufacturing business of the management, a pronouncement unusual
even according to counsel for the appellant although sustainable in law, according to him. For
the workers this unique direction of industrial law is fraught with ominous consternation and
dangerous detriment. The Mazdoor Sangh challenged the award as illegal and void by filing
two writ petitions but the High Court quashed that part of the award which directed payment
of compensation by the workers to the management and, as earlier pointed out, both sides have
chosen to abide by the award in the relation of the denial of wages during the strike period.
The Main Points Urged:
The short but important issue, which has projected some serious questions of law, is as to
whether the impugned part of the award has been rightly voided by the High Court. We may as
well formulate them but highlight the only major submission that merits close examination,
dealing with the rest with terse sufficiency. In logical order, Counsel for the appellant urged
that: (1) (a) an award under Section 10A of the Act savours of a private arbitration and is not
amenable to correction under Article 226 of the Constitution. (b) Even if there be jurisdiction,
a discretionary desistence from its exercise is wise, proper and in consonance with the canons of
restraint this Court has set down. (2) The award of compensation by the arbitrators suffers from
no vice which can be regarded as a recognized ground for the High Court’s interference. (3) The
view of law taken by the High Court on (i) the supposed flaw in the award based on ‘mixed
motives’ for the offending strike; (ii) the exclusion of remedies other than under Section 26 of
the Act; and (iii) the implied immunity from all legal proceedings against strikers allegedly
arising from Section 18 of the Trade Union Act, 1926 is wrong. A few other incidental arguments
have cropped up but the core contentions are what we have itemized above.
The expansive and extraordinary power of the High Courts under Article 22617 is as wide as
the amplitude of the language used indicates and so can affect any person—even a private
individual—and be available for any (other) purpose—even one for which another remedy may
exist. The amendment of Article 226 in 1963 inserting Art 226(1A) reiterates the targets of the
writ power as inclusive of any person by the expressive reference to ‘the residence of such person’.
But it is one thing to affirm the jurisdiction, another to authorise its free exercise like a bull in
a china shop. This Court has spelt out wise and clear restraints on the use of this extraordinary
remedy and High Courts will not go beyond those wholesome inhibitions except where the
monstrosity of the situation or other exceptional circumstances cry for timely judicial interdict
or mandate. The mentor of law is justice and a potent drug should be judiciously administered.
Speaking in critical retrospect and portentous prospect, the writ power has, by and large, been
the people’s sentinel on the qui vive and to cut back on or liquidate that power may cast a peril
to human rights. We hold that the award here is not beyond the legal reach of Article 226,
although this power must be kept in severely judicious leash.
Many rulings of the High Courts, pro and con, were cited before us to show that an award
under Section 10A of the Act is insulated from interference under the Article 226 but we respectfully
agree with the observations of Gagendragadkar, J. (as he then was) in Engineering Mazdoor
Sabha18 which nails the argument against the existence of jurisdiction. The learned Judge clarified
(at p. 640 of SCR): (at p. 881 of AIR):

Article 226 under which a writ of certiorari can be issued in a appropriate case, is, in a sense,
wider than Article 136, because the power conferred on the High Courts to issue certain
writs is not conditioned or limited by the requirement that the said writs can be issued only
against the orders of courts or Tribunal under Article 226(1), an appropriate writ can be
164 Social Justice and Labour Jurisprudence

issued to any person or authority, including in appropriate cases any Government, within the
territories prescribed. Therefore even if the arbitrator appointed under Section 10A is not a
Tribunal under Article 136 in a proper case, a writ may lie against his award under Article 226.

We agree that the position of an arbitrator under Section 10A of the Act (as it then stood)
vis-a-vis Article 227 might have been different. Today, however, such an arbitrator has power to
bind even those who are not parties to the reference or agreement and the whole exercise under
Section 10A as well as the source of the force of the award on publication derives from the statute.19
It is legitimate to regard such an arbitrator now as part of the methodology of the sovereign’s
dispensation of justice, thus falling within the rainbow of statutory tribunal amenable to judicial
review. This observation made en passant by us is induced by the discussion at the Bar and turns
on the amendments to Section 10A and cognate provisions like Section 23, by Act XXXVI
of 1964.
Should the Court invoke this high prerogative under Article 226 in the present case? That
depends. We will examine the grounds on which the High Court has, in the present case,
excised a portion of the award as illegal, keeping in mind the settled rules governing judicial
review of private arbitrator’s awards. Suffice it to say, an award under Section 10A is not only
not invulnerable but more sensitively susceptible to the writ lancet being a quasi-statutory
body’s decision. Admittedly, such an award can be upset if an apparent error of law stains its
face. The distinction, in this area, between a private award and one under Section 10A is fine,
but real. However it makes slight practical difference in the present case; in other cases it may.
The further grounds for invalidating an award need not be considered as enough unto the day
is the evil thereof.
Thus, we arrive at a consideration of the appellant’s second submission, perhaps the most
significant in the case, that the High Court had no legitimate justification to jettison the com-
pensation portion of the award. Even here, we may state that Counsel for the appellants, right
at the outset, mollified possible judicial apprehensions springing from striking workers being
held liable for loss of management’s profits during the strike period by the assurance that the
clients were inclined to abandon realization of the entire compensation, even if this Court up-
held that part of the award in reversal of the judgment of the High Court—a generous realism.
He fought a battle for principle, not pecunia. We record this welcome fact and proceed on that
footing.
The relevant law which is beyond controversy now has been clearly stated in Halsbury’s Laws
of England thus:

Error of Law on the face of award—An arbitrator’s award may be set aside for error of law
appearing on the face of it, though the jurisdiction is not lightly to be exercised… The juris-
diction is one that exists at common law independently of statute. In order to be a ground for
setting aside the award, an error in law on the face of the award must be such that there can
be found in the award, or in a document actually incorporated with it, some legal proposition
which is the basis of the award and which is erroneous.
…where the question referred for arbitration is a question of construction, which is, generally
speaking, a question of law, the arbitrator’s decision cannot be set aside only because the
court would itself have come to a different conclusion; but if it appears on the face of the award
that the arbitrator has proceeded illegally, as for instance, by deciding on evidence which was
not admissible, or on principles of construction which the law does not countenance, there is
error in law which may be ground for setting aside the award.

We adopt this as sound statement of the law. Not that English law binds us but that the
jurisprudence of judicial review in this branch is substantially common for Indian and Anglo-
American systems and so Halsbury has considerable persuasive value. The wider emergence of
 Collective Bargaining Agreement Issues 165

common canons of judicial review is a welcome trend towards a one-world public law. Indeed,
this Court has relied on the leading English decisions in several cases. We may content ourselves
with adverting to Bungo Steel Furniture,20 and to the unreported decision Babu Ram.21 In simple
terms, the Court has to ask itself whether the arbitrator has not tied himself down to an obvi-
ously unsound legal proposition in reaching his verdict as appears from the face of the award.
Bhargava, J., speaking for the majority, in Bungo Steel state the law:

It is now a well-settled principle that if an arbitrator, in deciding a dispute before him, does
not record his reasons and does not indicate the principles of law on which he has proceeded,
the award is not on that account vitiated. It is only when the arbitrator proceeds to give his
reasons or to lay down principles on which he has arrived at his decisions that the Court is
competent to examine whether he has proceeded contrary to law and is entitled to interfere
if such error in law is apparent on the face of the award itself.

In Bharat Barrel & Drum Manufacturing Co.22 dealing with a private award and the conditions
necessary for exercise of writ jurisdiction to correct an error of law apparent on the record, did
not lay down the law differently from what we have delineated.
In one of the leading English cases Champsey Bhara & Co.23 followed in India, Lord Dunedin
defined, ‘error of law on the face of the award’ as ‘where the question of law necessarily arises on
the face of the award or upon some paper accompanying and forming part of the award’ and
said that then only the error of law therein would warrant judicial correction. The law Lord ex-
pressed himself lucently when he stated:

An error in law on the face of the award means, in their Lordships’ view, that you can find in
award… some legal proposition which is the basis of the award and which you can then say
is erroneous.

Williams J., in the case of Hookinsons vs Feraie 24 hit the nail on the head by using the telling
test as firmly established, viz., where the question of law necessarily arises on the face of the
award. In this view the enquiry by the court before venturing to interfere is to ascertain whether
an erroneous legal proposition is the basis of the award. Nay, still less. Does a question of law
(not even a proposition of law) necessarily arise on the award followed by a flaw some finding
explicit or visibly implicit? Then the court can correct.
Tucker, J., in James Clark 25 formulates the law to mean that if the award were founded on a
finding which admits of only one proposition of law as its foundation and that law is erroneous
on its face, the Court has the power and, therefore, the duty to set right. While the Judge
cannot explore, by chasing subterranean routes or ferret out by delving deep what lies buried in
the unspoken cerebration of the arbitrator and interfere with the award on the discovery of an
error of law by such adventure, it is within his purview to look closely at the face of the award to
discern the law on which the arbitrator has acted if it is transparent, even translucent but
lingering between the lines or merely wearing a verbal veil. If by such an intelligent inspection
of the mien of the award—which is an index of the mind of the author—an error of law form-
ing the basis of the verdict is directly disclosed, the decision is liable to judicial demolition. In
James Clark,26 the issue was posed with considerable clarity and nicety. If, at its face value, the
award appears to be based on an erroneous finding of law alone, it must fail. The clincher is that
the factual conclusion involving a legal question must necessarily be wrong in point of law.
Even though the award contains no statement of the legal proposition if the facts found raise ‘a
clear point of law which is erroneous on the face of it’, the Court may rightly hold that an error
of law on the face of the award exists and invalidates.
Let us put the proposition more expressively and explicitly. What is important is a question
of law arising on the face of the facts found and its resolution ex facie or sub-silentio. The arbi-
trator may not state the law as such. Even then such cute silence confers no greater or subtler
166 Social Justice and Labour Jurisprudence

immunity on the award than plain speech. The need for a speaking order, where considerable
numbers are affected in their substantial rights, may well be a facet of natural justice or fair
procedure, although, in this case, we do not have to go so far. If, as here, you find an erroneous
law as the necessary buckle between the facts found and the conclusions recorded, the award
bears it condemnation on its bosom. Not a reference in a narrative but a clear legal nexus be-
tween the facts and the finding. The law sets no premium on juggling with drafting the award
or hiding the legal error by blanking out. The inscrutable face of the sphinx has no better title to
invulnerability than a speaking face which is a candid index of the mind. We may, by way of
aside, express hopefully the view that a minimal judicialisation by statement, laconic or lengthy,
of the essential law that guides the decision, is not only reasonable and desirable but has, over
the ages, been observed by arbitrators and quasi-judicial tribunals as a norm of processual justice.
We do not dilate on this part of the argument as we are satisfied that be the test the deeply
embedded rules to issue certiorari or the traditional grounds to set aside an arbitration award
‘thin partition do their bounds divide’ on the facts and circumstances of the present case.
The decisive question now comes to the fore. Did the arbitrators commit an error of law on
the face of the award in the expanded sense we have explained? The basic facts found by the
arbitrators are beyond dispute and admit of a brief statement. We summarise the fact situation
succinctly and fairly when we state that according to the arbitrators, the strike in question was
in violation of Section 24 of the Act and therefore illegal. This illegal strike animated by inter-
union power struggle, inflicted losses on the management by forced closure. The loss flowing
from the strike was liable to be recompensed by award of damages. In this chain of reasoning is
necessarily involved the question of law as to whether an illegal strike causing loss of profit is a
delict justifying award of damages. The arbitrators held, yes. We hold this to be an unhappy
error of law—loudly obtrusive on the face of the award. We may as well set out, for the sake of
assurance, the simple steps in the logic of the arbitrators best expressed in their own words
which we excerpt:

(a) It is argued that strike is a legitimate weapon in the hands of workmen for redressal of
their grievances and if they are made liable for loss on account of strike then the basic
idea of strike as a means for having the grievances redressed will be taken away. The
fallacy in this argument is that it presupposes the strike not to be illegal and unjustified.
In the present case we found the strike to be otherwise. The workmen have got no right
of getting their grievances redressed by resorting to illegal means which is an offence.
(b) It has been argued that the claim for compensation is not an industrial dispute as defined
in the Industrial Disputes Act. Considering the issue of compensation in a watertight
compartment the argument might appear to be attractive. But, in our opinion, in this
case the claim for compensation by the company is a consequence flowing from an admit-
ted industrial dispute, which in this case is whether the strike was illegal and/or unjustified
and as against the condition of service as laid down in the certified standing order on
which point our finding has been against the workmen…

The award of the tribunal, in its totality, is quite prolix, the reasons stated in arguing out its
conclusions many and thus it is just to state that in the present case the arbitrators—two retired
judges of the Calcutta High Court—have made a sufficiently speaking award both on facts and
on law. They have referred to the strike being illegal with specific reference to the provisions of
the Act, but faulted themselves in law by upholding a case for compensation as axiomatic
necessarily based on a rule of common law, i.e. English common law. The rule of common law
thus necessarily arising on the face of the award is a clear question of law.
What is the rule of common law? Counsel for the appellants inevitably relied on the tort of
‘conspiracy’ and referred us to Moghul Steam Ship Co;27 Alien vs Flood;28 Quinn vs Leathem29 and
Sorrel vs Smith.30 These decisions of the English Courts are response to the societal requirements
 Collective Bargaining Agreement Issues 167

of the industrial civilisation of the 19th century England. Trade and Industry on the laissez faire
doctrine flourished and the law of the torts was shaped to serve the economic interests of the
trading and industrial community. Political philosophy and economic necessity of the dominant
class animate legal theory. Naturally, the British law in this area protected business from the
operations of a combination of men, including workers, in certain circumstance. Whatever the
merits of the norms, violation of which constituted ‘conspiracy’ in English law, it is a problem
for creative Indian jurisprudence to consider, detached from Anglophonic inclination, how far
a mere combination of men working for furthering certain objectives can be prohibited as a
tort, according to the Indian value system. Our Constitution guarantees the right to form asso-
ciations, not for gregarious pleasure, but to fight effectively for the redressal of grievances. Our
Constitution is sensitive to workers’ rights. Our story of freedom and social emancipation led
by the Father of the Nation has employed, from the highest of motives, combined action to
resist evil and to right wrong even if it meant loss of business profits for the liquor vendor, the
brothel-keeper and the foreign-cloth dealer. Without expatiating on these seminal factors, we
may observe that English history, political theory and life-style being different from Indian
conditions replete with organised boycotts and mass satyagrahas, we cannot incorporate English
torts without any adaptation into Indian law. A tort transplant into a social organism is as com-
plex and careful an operation as a heart-transplant into an individual organism, law being life’s
instrumentality and rejection of exotics being a natural tendency. Here, judges are sociological
surgeons.
Let us examine ‘conspiracy’, in the English law of tort to see if even there it is possible to hold
that an illegal strike per se spells the wrong. We may state that till recently it could not be said
with any certainty that there was any such tort as ‘conspiracy’. Salmond thought that there was
not… It is interesting that in that edition of Salmond, Mogul 31 is linked up by the learned
author with a capitalist economy. Be that as it may, the common law of England today is more
or less clear some rumblings notwithstanding:

A combination willfully to do an act causing damage to a man in his trade or other interests is
unlawful and if damage in fact is caused is actionable as a conspiracy. To this there is an ex-
ception where the defendants’ real and predominant purpose is to advance their own lawful
interests in matter in which they honestly believe that those interests would directly suffer if
the action against the plaintiff was not taken. In truth, the Crofter case has made Section 1 of
the Trade Disputes Act, 1906, largely unnecessary, for there will now be few conspiracies arising
out of trade disputes which are protected at common law.

The essence of actionable conspiracy is best brought out by Salmond:

The tort is unusual because it emphasises the purpose of the defendants rather than the results
of their conduct.

Even then there are mixed motives. ‘Liability will depend on ascertaining which is the
predominant object or the true motive or the real purpose of the defendant. Mere combination
or action, even if it be by illegal strike, may be far away from a ‘conspiracy’ in the sense of the
law because in all such cases, except in conceivable exceptional instances, the object or motive is
to advance the workers’ interests or to steal a march over a rival union but never or rarely to
destroy or damage the industry. It is difficult to fancy workers who live by working in the indus-
try combining to kill the goose that lays the golden eggs. The inevitable by-product of
combination for cessation of work may be loss to the management but the obvious intendment
of such a collective bargaining strategy is to force the employer to accept the demand of the
workers for betterment of their lot or redressal of injustice, not to inflict damage on the boss.
In short, it is far too recondite for an employer to urge that a strike, albeit illegal, was motivated
168 Social Justice and Labour Jurisprudence

by destruction of the industry. A scorched earth policy may, in critical times of a war, be reluctantly
adopted by a people, but such an imputed motive is largely imaginary in strike situations.
However, we are clear in our minds that if some individuals destroy the plant or damage the
machinery willfully to cause loss to the employer, such individuals will be liable for the injury so
accused. Sabotage is no weapon in workers’ legal armoury.
The leading case of Sorrel vs Smith32 emphasizes that a combination of two or more persons
for the purpose of injuring a man in his trade is unlawful and, if it results in damage to him, is
actionable. The real purpose of the combination is the crucial test between innocence and
injury. It may well be that even where there is an offending object, it may be difficult for a court
to hold that there is tort if one may read into the facts an equal anxiety for the defendants to
promote their success which produces the plaintiff ’s extinction. There is a penumbral region, as
Lord Summer pointed out in Sorrel:33

How any definite line is to be drawn between acts, whose real purpose is to advance the
defendant’s interests, and acts, whose real purpose is to injure the plaintiff in his trade, is a
thing which I feel at present beyond my power.

It is absolutely plain that the tort of conspiracy necessarily involves advertence to and
affirmation of the object of the combination being the infliction of damage or distraction on
the plaintiff. The strike may be illegal but if the object is to bring the employer to terms with
the employees or to bully the rival trade union into submissions, there cannot be an actionable
combination in tort. In the present case, it is unfortunate that the arbitrators simply did not
investigate or pass upon the object of the strike. If the strike is illegal, the tort of conspiracy is
made out, appears to be the opposition of law writ tersely into the award. On the other hand, it
is freely conceded by counsel for the appellant that the object was inter-union rivalry. There is
thus a clear lapse in the law on the part of the arbitrators manifest on the face of the award.
We have earlier referred to the need for a fresh look at conspiracy as a tort when we bodily
borrow the elements of English law and apply them to Indian Law. It is as well that we notice
that even in England considerable criticism is mounting on the confused state of the law of
conspiracy. J.T. Cameron has argued… that

experience has already shown that conspiracy is a hydra perfectly capable of growing two
heads to replace an amputated one, and the authorities contain material which could be used
to impose liability in very wide and varied circumstances. It is time therefore, to consider what
form legislation should take, and to urge that proper answer is to remove the tort of conspiracy
from the law altogether, and with the Rookes vs Barnard version of intimation, and to put in
its place a different basis of liability.

(Conspiracy and Intimidation: An Anti-Metaphysical Approach)

The author complains that the fundamental basis is unsatisfactory and uncertain and demands
that a complete rewriting of the principles on which the tort of conspiracy and intimidation is
necessary.
We may as well suggest that, to silence possible mischief flowing from the confused state of
the law and remembering how dangerous it would be if long, protracted, but technically illegal
strikes were to be followed by claims by managements for compensation for loss of profits, a
legislative reform and restatement of the law were undertaken at a time when the State is anxious
for industrial harmony consistent with workers’ welfare. This rather longish discussion has
become necessary because the problem is serious and sensitive and the law is somewhat slippery
even in England. We are convinced that the award is bad because the error of law is patent.
The High Court has touched upon another fatal frailty in the tenability of the award of
compensation for the loss of profits flowing from the illegal strike. We express our concurrence
with the High Court that the sole and whole foundation of the award of compensation by the
 Collective Bargaining Agreement Issues 169

arbitrators, ignoring the casual reference to an ulterior motive of inter-union rivalry, is squarely
the illegality of the strike. The workers went on strike claiming payment of bonus as crystallized
by the earlier settlement (dated 2 October 1957). There thus arose an industrial dispute within
Section 2(k) of the Act. Since conciliation proceedings were pending the strike was ipso jure
illegal (Sections 23 and 24). The consequence, near or remote, of this combined cessation of
work caused loss to the management. Therefore the strikers were liable in damages to make
good the loss. Such is the logic of the award.
It is common case that the demands covered by the strike and the wages during the period of
the strike constitute an industrial dispute within the sense of Section 2(k) of the Act. Section 23,
read with Section 24, it is agreed by both sides, makes the strike in question illegal. An ‘illegal
strike’ is a creation of the Act. As we have pointed out earlier, the compensation claimed and
awarded is a direct reparation for the loss of profits of the employer caused by the illegal strike.
If so, it is contended by the respondents, the remedy for the illegal strike and its fallout has to be
sought within the statute and not de hors it. If this stand of the workers is right, the remedy
indicated in Section 26 of the Act, viz., prosecution for starting and continuing an illegal strike,
is the designated statutory remedy. No other relief outside the Act can be claimed on general
principles of jurisprudence. The result is that the relief of compensation by proceedings in arbi-
tration is contrary to law and bad.
The Premier Automobiles34 case settles the legal issue involved in the above argument. The
Industrial Disputes Act is a comprehensive and self-contained code as for so it speaks and the
enforcement of rights created thereby can only be through the procedure laid down therein.
Neither the civil court nor any other tribunal or body can award relief. Untwalia, J., speaking
for an unanimous court, has, in Premier Automobiles35 observed:

The object of the Act, as its preamble indicates, is to make provision for the investigation and
settlement of industrial dispute, which means adjudication of such dispute also. The Act
envisages collective bargaining, contracts between union representing the workmen and the
management, a matter which is outside the realm of the common law or the Indian law of
contract.

After sketching the scheme of the Act, the learned judge stated the law thus:

…the civil court will have no jurisdiction to try and adjudicate upon an industrial dispute if
it concerned enforcement of certain right or liability created only under the Act.
* * * * *

In Doe vs Bridges36 are the famous and off quoted words of Lord Tenterden, C.J., saying:

Where an Act creates an obligation and enforces the performance in a specified manner, we
take it to be a general rule that performance cannot be enforced in any other.

Barraclough vs Brown and Ors,37 decided by the House of Lords is settled telling, particularly
Lord Watson’s statement of the law at p. 622:

The right and the remedy are given uno flatu and one cannot be dissociated from the other.

In short, the enforcement of a right or obligation under the Act, must be by a remedy provided
uno flatu in the statute. To sum up, in the language of the Premier Automobiles Ltd:38

If the industrial dispute relates to the enforcement of a right or an obligation created under
the Act, then the only remedy available to the suitor is to get adjudication under the Act.
170 Social Justice and Labour Jurisprudence

Since the Act which creates rights and remedies has to be considered as one homogeneous
whole, it has to be regarded uno flatu, in one breath, as it were. On this doctrinal basis, the remedy
for the illegal strike (a concept which is the creature not of the common law but of Section 24
of the Act) has to be sought exclusively in Section 26 of the Act. The claim for compensation
and the award thereof in arbitral proceedings is invalid on its face—‘on its face’ we say because
this jurisdictional point has been considered by the arbitrators and decided by committing an
ex facie legal error.
It was argued, and with force in our view, that the question of compensation by workers
to the management was wholly extraneous to the Act and therefore, outside the jurisdiction of
a voluntary reference of industrial dispute under Section 10A. While we are not called upon
to pronounce conclusively on the contention, since we have expressed our concurrence with
the High Court on other grounds, we rest content with briefly sketching the reasoning and its
apparent tenability. The scheme of the Act, if we may silhouette it, is to codify the law bearing
on industrial dispute. The jurisdiction essence of proceedings under the Act is the presence of
an ‘industrial dispute’. Strikes and lockouts stem from such disputes. The machinery for settle-
ment of such disputes at various stages is provided for by the Act. The statutory imprimatur is
given to settlement and awards, and norms of discipline during the pendency of proceedings
are set down in the Act. The prescriptions stipulated, as for example the prohibition of a strike,
are followed by penalties, if breached. Summary procedures for adjudication as to whether
conditions of service, etc., of employees have been changed during the pendency of proceedings,
special provision for recovery of money due to workers from employers and other related
regulations are also written into the Act. Against this backdrop, we have to see whether a claim
by an employer from his workmen of compensation consequent on any conduct of theirs, comes
within the purview of the Act. Suffice it to say that a reference to arbitration under Section 10A
is restricted to existing or apprehended industrial disputes. Be it noted that we are not con-
cerned with a private arbitration, but a statutory one governed by the Industrial Disputes Act,
deriving its validity, enforceability and protective mantle during the pendency of the proceedings,
from Section 10A. No industrial dispute, no valid arbitral reference. Once we grasp this truth,
the rest of the logic is simple. What is the industrial dispute in the present case? Everything that
overflows such disputes spills into areas where the arbitrator deriving authority under Section 10A
has no jurisdiction. The consent of the parties cannot create arbitral jurisdiction under the Act.
In this perspective, the claim for compensation can be a lawful subject for arbitration only if it
can be accommodated by the definition of ‘industrial dispute’ in Section 2(k). Undoubtedly
this expression must receive a wide connotation, calculated as it is to produce industrial peace.
Indeed, the legislation, substitutes for free bargaining between the parties a binding award; but
what disputes or differences fall within the scope of the Act? This matter fell for the consideration
of the Federal Court in Western India Automobile Association.39 Without launching on a long
discussion, we may state that compensation for loss of business is not a dispute or difference
between employers and workmen ‘which is connected with the employment or non-employment
or the terms of employment or with the conditions of labour, of any person’. We are unable to
imagine a tort liability or compensation claim based on loss of business being regarded as an
industrial dispute as defined in the Act, having regard to the language used, the setting and
purpose of the statute and the industrial flavour of the dispute as one between the management
and workmen.
In this context, we are strengthened in our conclusion by the provisions of Section 33C
which provides for speedy recovery of money due to a workman from an employer under a
settlement or an award, but not for the converse case of money due to an employer from work-
men. There is no provision in the Act which contemplates a claim for money by an employer
from the workmen. And indeed, it may be a little startling to find such a provision, having
regard to workmen being the weaker section and Part IV of the Constitution being loaded in
 Collective Bargaining Agreement Issues 171

their favour. The new light shed by the benign clauses of Part IV must illumine even pre-
Independence statutes in the interpretative process. As yet, and hopefully, claims by employers
against workmen on grounds of tortious liability have not found a place in the pharmacopoeia
of Indian industrial law. However, as earlier stated, we do not pronounce finally as it is not
necessary.
There was argument at the Bar that the High Court was in error in relying on Section 18 of
the Trade Unions Act, 1926 to rebuff the claim for compensation. We have listened to the
arguments of Shri B.C. Ghosh in support of the view of the High Court, understood on a wider
basis. Nevertheless, we do not wish to rest our judgment on that ground. Counsel for the
appellants cited some decisions to show that an award falling outside the orbit of the Indian
Arbitration Act can be enforced by action in court. We do not think the problem so posed arises
in the instant case.
We dismiss the appeal but, in the circumstances, there will be no order as to costs.

The Scope and Coverage of Settlements under

the Industrial Disputes Act, 1947

Section 2(p) of the Act defines ‘settlement’ as ‘a settlement arrived at in the course of
conciliation proceeding and includes a written agreement between the employer and
workmen arrived at otherwise than in the course of conciliation proceeding where such
agreement has been signed by the parties thereto in such manner as may be prescribed
and a copy thereof has been sent to an officer authorised in this behalf by the appropriate
Government and the conciliation officer.’
A clear reading of clause (p) of Section 2 of the Act would show that it envisages two
kinds of settlements—(a) a settlement which is arrived at in the course of conciliation
proceedings, that is, a settlement arrived at with the assistance and concurrence of the
conciliation officer who is duty bound to promote right settlement and to do everything he
can to induce the parties to come to a fair and amicable settlement of the dispute;40 and
(b) a written agreement between employer and workmen arrived at otherwise than in the
course of the conciliation proceedings. For the validity of the second type of settlement,
it is essential that the parties thereto should send a copy of such settlement to an officer
authorised in this behalf by the appropriate government and the conciliation officer.
A perusal of Section 18 of the Act would show that whereas a settlement arrived at by
agreement between the employer and the workmen otherwise than in the course of con-
ciliation proceedings shall bind only the parties to the agreement, a settlement arrived at
in the course of conciliation proceedings under the Act is binding not only on the parties
to the industrial dispute but also on other persons specified in clauses (b), (c) and (d) of
sub-section (3) of Section 18 of the Act.41
When a reference is made of a dispute under Section 10 or Section 10A, the legal pro-
cess springs into action. The award is published under Section 17(1) and acquires finality
by virtue of Section 17(2) unless under Section 17A(1) the appropriate government declares
that the award shall not be enforceable.42
An award, adjudicatory or arbitral, and a settlement, either arrived at in the course of
conciliation proceedings or by parties themselves, shall be binding because of statutory
sanction. Section 19 relates to the period of operation of settlements and awards and
172 Social Justice and Labour Jurisprudence

there also it is clear that both settlements and awards, as is evident from a reading of sub-
Sections (2) and (6) of Section 19, stand on the same footing.
Section 19 thus has a key role to play in the life and death of awards and settlements.
Section 9A fetters the management’s right to change the conditions of service of work-
men in respect of certain matters including wages and allowances.43
It is clear that the Industrial Disputes Act, 1947, substantially equates an award with
a settlement from the point of view of their legal force. No distinction in regard to the
nature and period of their effect can be discerned by virtue of sub-sections (2) and (6) of
Section 19.
Any person who commits a breach of any term of any settlement or award shall be
punishable with imprisonment for a term which may extend to six months, or with fine,
or with both, and where the breach is a continuing one, with a further fine which may
extend to Rs 200 for every day during which the breach continues after the conviction for
the first. The court trying the offence, if it fines the offender, may direct that the whole
or any part of the fine realised from him shall be paid, by way of compensation to any
person who, in its opinion, has been injured by such breach.44

Tata Chemicals vs its Workmen

Prior to the decision of the Supreme Court in the Tata Chemicals vs Its Workmen45 case, the
Supreme Court in the Herbertsons vs Their Workmen and Others46 held that when a recognised
union negotiates with an employer, the workers as individuals do not come into the pic-
ture. It is not necessary that each individual worker should know the implications of the
settlement since a recognised union, which is expected to protect the legitimate interests
of labour, enters into a settlement in the best interests of labour. This would be the nor-
mal rule. We cannot altogether rule out exceptional cases where there may be allegations
of malafides, fraud or even corruption or other inducements. Prima facie, a settlement in
the course of collective bargaining is entitled to due weight and consideration. Unless it
can be demonstrated that the objectionable portion is such that it completely outweighs
all the other advantages gained, the court will be slow to hold a settlement as unfair and
unjust. The settlement has to be accepted or rejected as a whole and we are unable to
reject it as a whole as unfair or unjust.
But in the Tata Chemicals vs Its Workmen47 case the Supreme Court has taken a different
view by interpretating the provisions of Section 18 of the Act. This the Court has done
after duly considering the award of the tribunal on its merits and also by looking into the
circumstances prevailing under the statutory norms.
The application of the ratio lies in the understanding of the concept involved in
any particular case, based on its own facts and circumstances. This is exactly depicted in
this case.

THE FACTS OF THE CASE

This appeal by special leave is directed against the award, dated 21 February 1977 of the
Industrial Tribunal, Gujarat, in reference 13 of 1975 made on 21 January 1975, by the
Government of Gujarat in exercise of its powers under Section 10(1)(d) of the Industrial
Disputes Act, 1947 for adjudication of the dispute, relating to five demands—washing
allowance, woollen jersey, unclean allowance, transport allowance and variable dearness
 Collective Bargaining Agreement Issues 173

allowance linked with the Ahmedabad cost-of-living index and adequate dearness allowance
equal to that of textile workers of Ahmedabad (which is 100 per cent neutralisation)
sponsored by the Chemicals Kamdar Sangh, Mithapur (hereafter referred to as ‘the Sangh’).
The appellant was a public limited company registered under the Indian Companies
Act and had its factory at Mithapur in the state of Gujarat. As per its practice and policy
of recognising and negotiating with the union enjoying the support of the largest number
of its workers, it carried on its dealings with the Sangh (which was the recognised union)
till 25 January 1973, when the Assistant Commissioner of Labour, Ahmedabad, declared—
as a result of the verification made by him—that the Tata Chemicals Employees’ Union
(hereafter referred to as ‘the Employees’ Union’) was entitled to be recognised under the
Code of Discipline in view of the fact that 55 per cent of the total number of the employees
of the concern were its members and addressed a communication to the appellant request-
ing it to recognise the said union. Pursuant to this communication, the appellant accorded
recognition to the Employees’ Union with effect from 25 January 1973. Thereupon the
Sangh filed a special civil application challenging the aforesaid order of the Assistant Com-
missioner of Labour in the High Court of Gujarat, which was summarily rejected vide its
order dated 3 April 1973.
On 18 June 1973, the Employees’ Union submitted a charter of demands to the
appellant that included inter alia a demand for dearness allowance at 100 per cent of the
Ahmedabad cotton textile rate, popularly known as the textile dearness allowance. In
respect of these demands, the conciliation officer summoned a conciliatory meeting for
26 July 1973. Meanwhile, on 9 July 1973, the Sangh—representing about 800 workmen
of the concern—submitted the aforesaid charter of demands before the management,
which also included a demand for dearness allowance as paid to the workers of the cotton
textile industry. The charter also contained an intimation to the management of the Sangh’s
intention to resort to a strike for the realisation of its demands. As negotiations between
the parties for an amicable settlement did not prove fruitful, the Sangh wrote to the Con-
ciliation Officer, Rajkot, on 17 July 1973, requesting him to intervene. After preliminary
discussions with both the parties, the conciliation officer admitted the case for concili-
ation on 30 August 1973. As the conciliation proceedings held by him from time to time
between 7 September 1973 and 6 November 1973 (to which the Employees’ Union was also
made a party at its request) did not lead to a settlement between the parties, the concili-
ation officer submitted his failure report to the state government on 14 December 1973.
On even date, the appellant arrived at an agreement with the Employees’ Union in
respect of the demands submitted by the latter on behalf of its daily rated and monthly
rated members, including clerical staff. It was agreed between the parties to this settlement
that it would remain in force for a period of three years with effect from 1 January 1974.
A notice with regard to the settlement with the Employees’ Union was put up on the gen-
eral noticeboard by the appellant on 17 December 1973. On 21 January 1975, the state
government made, as already stated, a reference to the industrial tribunal for the adjudi-
cation of the dispute respecting the aforesaid demands raised by the Sangh. In the course
of the reference proceedings, the Employees’ Union adopted a nebulous and shifting stand.
In its anxiety to maintain its status as the recognised majority union having the sole right
of collective bargaining and settling industrial disputes, it insisted in the first instance on
its right to actively participate in the proceedings and inter alia questioned the right of
the Sangh to raise the demand with regard to a variable dearness allowance, as also the right
174 Social Justice and Labour Jurisprudence

of the government to refer the demand for adjudication, alleging that earlier in 1968,
when it raised a demand for 100 per cent textile dearness allowance, the Sangh resisted
the same and entered into a settlement with the appellant company on 31 July 1969 for a
period of five years. Later on, abandoning its initial stand, it supported the demand of
the Sangh, averring that having regard to the huge profits made by the appellant company
over the years, the workmen were entitled to the payment of a dearness allowance not
only on the lines of the textile dearness allowance, but a still higher dearness allowance
like that of the employees in the Bombay head office of the appellant company.
In the written statement filed by it, the appellant company not only challenged the
locus standi of the Employees’ Union to raise any demand on behalf of the workmen or
to support the demands raised by the Sangh in view of the aforesaid settlement dated
14 December 1973, but also maintained that in view of the said settlement, which con-
tinued to be in operation, the Sangh was precluded from raising any dispute in respect of
the demands which are the subject matter of reference to the tribunal for adjudication. It
further contended that as the benefit accruing from the settlement had been and was
being taken by all the workmen, the reference was incompetent and the tribunal had no
jurisdiction to adjudicate upon the demands incorporated therein. While it resisted the
first four demands raised by the Sangh on mere technicalities, with regard to the demand
for variable dearness allowance, the appellant company averred that in view of the fact
that all the employees were being paid dearness allowance in accordance with the recom-
mendation of the Central Wage Board for the Heavy Chemicals and Fertiliser Industry
and that neutralisation in the increase in cost of living under the said scheme of payment
in case of Group I factories was not cent per cent but was equivalent to 92 per cent, the
demand for variable dearness allowance was not valid. The appellant further urged that
in the matter of fixation of dearness allowance, the formula of industry-cum-region was
to be adhered to and the total pay packet of the comparable concerns in the region had to
be taken into consideration.
On an examination of the material adduced before it—including the facts and figures
relating to the appellant company’s investments, reserves, production, percentage of wages
of workers, profits and declared dividend and so on—the industrial tribunal came to the
conclusion that the appellant company was a very flourishing and highly integrated chemical
complex of long standing, whose profits were continually rising; that no other unit in the
heavy chemicals industry in the region could be favorably compared with the appellant
company so far as the extent and nature of production, business and financial capacity
were concerned; that the industries in other parts of Gujarat—such as Sarabhai Chemicals,
Baroda; Anil Starch, Ahmedabad; Alembic Chemicals Works, Baroda; Atul Products,
Bulsar; and Ahmedabad Manufacturing and Calico Printing, Chemical Division,
Ahmedabad—which were included in the list of heavy chemicals factories covered by the
Wage Board were paying 100 per cent of the dearness allowance linked to the Ahmedabad
cost-of-living index number known as the textile dearness allowance and that the total
pay packet which was being paid to the workers of Mithapur, where the prices of essential
commodities were comparatively higher than at any other place in the district (such as
Jamnagar, Dharangadhra, Porbandar, and Bhavnagar) was much less than Sarabhai Chem-
icals, Baroda; and disallowing the objections raised by the appellant company and con-
sidering the textile dearness allowance as a scientific formula faithfully reflecting the rise
and fall in the consumer price index for the working class, which afforded maximum
protection to the workmen in the lowest basic wage slab, adopted the same and inter alia
 Collective Bargaining Agreement Issues 175

directed the appellant company to pay to all the concerned employees, including the
daily rated workmen in different categories in grades I, III, V, VI, VII and VIII and the
monthly rated clerical, technical and supervisory staff falling in Grades V, VI and VII,
uniform dearness allowance varying from 85 per cent of the Ahmedabad textile dearness
allowance (old) to 95 per cent of the Ahmedabad Textile Dearness Allowance as before
the old revision phased over a period of three years beginning from 1 February 1975 (that
is to say, at 85 per cent from 1 February 1975 to 31 December 1976 and at 95 per cent
from 1 January 1977 and onwards).

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE JASWANT SINGH

Appearing on behalf of the appellant, Mr Pai has addressed us only in regard to the Sangh’s
demand and the Tribunal’s award in respect of variable dearness allowance. He has contended
that regard being had to the fact that the aforesaid settlement dated 14 December 1973 between
the appellant Company and the Employees’ Union covered the demand regarding V.D.A. spon-
sored by the Sangh and the benefit accruing from the settlement was taken by the entire body of
workmen, the aforesaid reference by the State Government as regards the V.D.A. was invalid
and the Tribunal had no jurisdiction to adjudicate upon the same. He has further urged that in
fixing the V.D.A., the Tribunal has erred in ignoring the industry-cum-region principle which
is well recognised in the industrial world.
Mr Tarkunde has, on the other hand, urged that the aforesaid settlement dated 14 December
1973 did not cover the demand regarding V.D.A. sponsored by the Sangh; that in any event,
the said settlement was binding only on the parties thereto, and the Sangh not being a signatory
to the settlement, it was perfectly open to it even though it was a minority union to sponsor the
demand in question and to the Government to make the reference. He has further contended
that there being no comparable concern in the region, the Industrial Tribunal was right in taking
into consideration the dearness allowance paid by Sarabhai Chemicals and other concerns in
other parts of Gujarat.
Five questions arise for consideration in this case—(i) whether the settlement of 14 December
1973 covered the demand with respect to variable dearness allowance sponsored by the Sangh,
(ii) whether the aforesaid reference by the Government was invalid and the Industrial Tribunal
was incompetent to make the award in question during the currency of settlement arrived at by
the Employees’ Union which had been duly recognised under the Code of Discipline, (iii)
whether the acceptance of the benefits flowing from the aforesaid settlement not only by the
members of the majority union but also by the members of the Sangh operated as an implied
agreement by acquiescence and debarred the Sangh from raising the demand, (iv) whether it was
legal and proper for the Tribunal to link the scheme of dearness allowance with the Ahmedabad
Dearness Allowance when the recommendation of the Wage Board set up for the industry in
1968 for adoption of All India Consumer Price Index as the basis of Dearness Allowance had been
accepted and was being implemented and (v) whether in fixing the dearness allowance, the
Industrial Tribunal was justified in going beyond the region and taking into consideration for
the purpose of comparison the dearness allowance paid by Sarabhai Chemicals and other concerns
in other parts of the State.48
Before dealing with these points, we consider it necessary and proper to refer to a few provisions
of the Act.
Clause (p) of Section 2 of the Act defines ‘settlement’ as under:

2. (p) ‘settlement’ means a settlement arrived at in the course of conciliation proceeding and
includes a written agreement between the employer and workmen arrived at otherwise than
in the course of conciliation proceeding where such agreement had been signed by the parties
176 Social Justice and Labour Jurisprudence

thereto in such manner as may be prescribed and a copy thereof has been sent to an officer
authorised in this behalf by the appropriate Government and the Conciliation Officer.

An analysis of the abovementioned clause would show that it envisages two categories of
settlement—(i) a settlement which is arrived at in the course of conciliation proceeding, i.e.,
which is arrived at with the assistance and concurrence of the Conciliation Officer who is duty
bound to promote a right settlement and to do everything he can to induce the parties to come
to a fair and amicable settlement of the dispute (see The Bata Shoe Co. (P) Ltd. vs D.N. Ganguly)49
and (ii) a written agreement between employer and workmen arrived at otherwise than in the
course of conciliation proceeding.
For the validity of the second category of settlement, it is essential that the parties thereto
should have subscribed to it in the prescribed manner and a copy thereof should have been sent
to an officer authorised in this behalf by the appropriate Government and the Conciliation
Officer.
The consequences of the aforesaid two categories of settlement which are quite distinct are
set out in Section 18 of the Act which reads as under:

(1) A settlement arrived at by agreement between the employer and workmen otherwise than
in the course of conciliation proceeding shall be binding on the parties to the agreement.
(2) Subject to the provisions of sub-section (2), an arbitration award which had become
enforceable shall be binding on the parties to the agreement who referred the dispute to
arbitration.
(3) A settlement arrived at in the course of conciliation proceeding under this Act or an
arbitration award in a case where a notification has been issued under sub-section (3A) of
Section 10A or an award of a Labour Court, Tribunal or National Tribunal which has
become enforceable shall be binding on—
(a) all parties to the industrial dispute;
(b) all other parties summoned to appear in the proceeding as parties to the dispute, unless
the Board, Arbitrator, Labour Court, Tribunal or National Tribunal, as the case may
be, records the opinion that they are were so summoned without proper cause;
(c) where a party referred to in clause (a) or clause (b) is an employer, his heirs, successors
assigns in respect of the establishment to which the dispute relates;
(d) where a party referred to in clause (a) or clause (b) is composed of workmen, all per-
sons who are employed in the establishment or part of the establishment, as the case
may be, to which the dispute relates on the date of the dispute and all persons who
subsequently become employed in that establishment or part.

A bare perusal of the above quoted section would show that whereas a settlement arrived at
by agreement between the employer and the workmen otherwise than in the course of conciliation
proceeding is binding only on the parties to the agreement, a settlement arrived at in the course
of conciliation proceedings under the Act is binding not only on the parties to the industrial
dispute but also on other persons specified in clauses (b), (c) and (d) of sub-section (3) of
Section 18 of the Act. We are fortified in this conclusion by a decision of this Court in Ramnagar
Cane & Sugar Co. Ltd. vs Jatin Chakravorty,50 where it was held as follows:

When an industrial dispute is thus raised and is decided either by settlement or by an award,
the scope and effect of its operation is prescribed by Section 18 of the Act. Section 18(1)
provides that a settlement arrived at by agreement between the employer and the workmen
otherwise than in the course of conciliation proceeding shall be binding on the parties to
the agreement; whereas Section 18(3) provides that a settlement arrived at in the course of
conciliation proceedings which has become enforceable shall be binding on all the parties
 Collective Bargaining Agreement Issues 177

specified in clauses (a), (b), (c) and (d) of sub-section (3). Section 18(3)(d) makes it clear
that, where a party referred to in clause (a) or clause (b) is composed of workmen, all persons
who are employed in the establishment or part of the establishment, as the case may be, to
which the dispute relates on the date of the dispute and all persons who subsequently become
employed in that establishment or part, would be bound by the settlement... In order to bind
the workmen, it is not necessary to show that the said workmen belong to the union which
was a party to the dispute before the conciliator.
The whole policy of Section 18 appears to be to give an extended operation to the settlement
arrived at in the course of conciliation proceedings, and that is the object with which the four
categories of persons bound by such settlement are specified in Section 18, sub-section (3).

Similar view seems to have been held by another Division Bench of this Court in The
Jhagrakhan Collieries (P) Ltd. vs Shri G.C. Agrawal, Presiding Officer, Central Government Industrial
Tribunal-cum-Labour Court, Jabalpur.51
The legal position emerging from the aforementioned provisions of the Act being clear, we
now proceed to tackle the questions set out above.
As the first two questions are inseparably linked up, we propose to deal with them together.
Although, prima facie there seems to be considerable force in the Sangh’s stand that paras 2.3,
3.1, 3.2 and 3.3 of the aforesaid agreement of 14 December 1973 arrived at between the
Employees’ Union and the appellant Company related only to the special pay and did not cover
the Sangh’s demand for variable dearness allowance linked to the Ahmedabad cost of living index,
we do not consider it necessary to go into this question, as the said agreement not having been
arrived at during the course of a conciliation proceeding, it could not, according to Section 18(1)
of the Act, bind any one other than the parties thereto. A fortiori, the fact that the Employees’
Union which had been duly recognised under the Code of Discipline arrived at the aforesaid
agreement with the appellant Company could not operate as a legal impediment in the way of
the Sangh (which was not a party to the agreement) to raise a demand or dispute with regard to
the variable dearness allowance linked to the Ahmedabad cost of living index or affect the
validity of the reference by the Government or the jurisdiction of the Industrial Tribunal to go
into the dispute. The conclusion that a minority union can validly raise an industrial dispute
gains support from Section 2(k) of the Act, which does not restrict the ambit of the definition
of ‘industrial dispute’ to a dispute between an employer and a recognised majority union but
takes within its wide sweep any dispute or difference between employer and workmen including
a minority union of workmen which is connected with employment or terms of employment or
conditions of labour of workmen as well as the observations made by this Court in Workmen vs
M/s. Dharampal Premchand (Saughandhi).52
It may also be relevant to mention in this connection that both the Counsel for the Employees’
Union and the Counsel for the appellant Company admitted before the Industrial Tribunal
that the aforesaid agreement had been terminated by two months’ notice (see p. 39 of the
Industrial Tribunal’s Award). We have, therefore, no hesitation in holding that neither the Sangh
was precluded from raising the demand or the dispute, nor was the Government debarred from
making the reference, nor was the Industrial Tribunal’s competence to go into the dispute and
make the award affected in any manner. The first two questions are decided accordingly.
Re Question No. 3—This question is no longer res integra. In Jhagrakhan Collieries (P) Ltd. vs
Shri G.C. Agrawal, Presiding Officer, Central Government Industrial Tribunal-cum-Labour Court,
Jabalpur,53 Sarkaria, J., speaking for the Bench, observed that ‘an implied agreement by
acquiescence, or by conduct such as acceptance of a benefit under an agreement to which the
worker acquiescing or accepting the benefit was not a party, being outside the purview of the
Act, is not binding on such a worker either under sub-section (1) or under sub-section (2) of
Section 18. It follows, therefore, that even if 99 per cent of the workers have impliedly accepted
178 Social Justice and Labour Jurisprudence

the agreement arrived at by drawing V.D.A. under it, it will not—whatever its effect under the
general law—put an end to the dispute before the Labour Court and make it functus officio
under the Act.’
Accordingly, the theory of implied agreement by acquiescence sought to be built up on
behalf of the appellant on the basis of the acceptance of the benefits flowing from the agreement
even by the workmen who were not signatories to the settlement is of no avail to the appellant
Company and cannot operate as an estoppel against the Sangh or its members.

The Force of a Settlement under the Industrial

Disputes Act, 1947, as against the Provisions of
the General Statute: The Rule

The Industrial Disputes Act, 1947, provides for the period of operation of an award
and settlement. But the law is silent on the question of the operation and validity of the
terms of such award or settlement subsequent to its termination as per the provisions of
the Act.

LIC vs D.J. Bahadur

In the case of LIC of India vs D.J. Bahadur,54 Justice V.R. Krishna Iyer, speaking for the
majority, resolved authoritatively on this unanswered legislative mechanism with the aid
of the prevailing ratio and also held that the provisions of any general legislation that has
an application to a particular class of employees cannot supersede the terms under a settle-
ment entered within the framework of special legislation, that is, the Industrial Disputes
Act, 1947. The case was heard by V.R. Krishna Iyer, R.S. Pathak and A.D. Koshal. All
three judges delivered separate judgements with certain deviations.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

A preliminary divagation has become necessary since applications and enquiries had been made
more than once about the postponement of the judgment. The first anniversary of the closure
of oral submissions in the above case is just over; and this unusual delay between argument and
judgment calls from me, the presiding judge of the Bench which heard the case, a word of expla-
nation and clarification so that misunderstanding about the judges may melt away in the light.
A better appreciation of this Court’s functional adversities and lack of research facilities will
promote more compassion than criticism and in that hope I add this note.
The judicature, like other Constitutional instrumentalities, has a culture of national account-
ability. Two factors must be highlighted in this context. A court is more than a judge; a collegium
has a personality which exceeds its members. The price a collective process, free from personality
cult, has to pay is long patience, free exchange and final decision in conformity with the democracy
of judicial functionality. Sometimes, when divergent strands of thought haunt the mentations
of the members, we pause, ponder and reconsider because we follow the words of Oliver Cromwell
commended for courts by Judge Learned Hand:
My brethren, I beseech you, in the bowels of Christ, think it possible that you may be mistaken.
 Collective Bargaining Agreement Issues 179

Utter incompatibility exists between judicial democracy and dogmatic infallibility; and so, in
this case, we have taken time, more time and repeated extension of time to evolve a broad con-
sensus out of our initial dissensus. Not procrastination but plural toil is the hidden truth behind
the considerable interval.
Secondly, when important issues demand the court’s collective judgment, an informed meet-
ing of instructed minds, in many ways, is a sine qua non. But the torrent of litigation flooding
the court drowns the judges in the daily drudgery of accumulated dockets. To gain leisure for
fundamental reflections with some respite from paper-logged existence and supportive research
from trained law clerks is a ‘consummation devoutly to be wished’ if the final court is to fulfill
its trust with the Constitution and country. The Indian judicial process, sui generis in some
respects, has its problems, Himalayan in dimension but hardly appreciated in perspective and
in true proportions two of which have been mentioned by me in extenuation of the great gap
between closure for judgment and its actual pronouncement. Having said this, I must proceed
to deal with the merits of the case and the conclusions we have reached in our diverse opinions.
By majority, anyway, we dismiss the appeal and find no merit in the contentions of the appellant.
The Fundamental Differences in Approach: My learned brother [Justice] Koshal has, after
long reflection on the issues in this appeal, expressed his conclusion, with which I respectfully
disagree. Our difference stems from basic divergence in legal interpretation and judicial
perspective.
Law is no cold-blooded craft bound by traditional techniques and formal forceps handed
down to us from the Indo-Anglican era but a warm-blooded art, with a break from the past and
a tryst with the present, deriving its soul force from the Constitution enacted by the People
of India. Law, as Vice President G.S. Pathak used to emphasise in several lectures, is a tool to
engineer a peaceful ‘civil revolution’, one of the components of which is a fair deal to the weaker
human sector like the working class. The striking social justice values of the Constitution impact
on the interpretation of Indian laws and to forget this essential postulate while relying on foreign
erudition is to weaken the vital flame of the Democratic, Socialist Republic of India. Chief
Justice Earl Warren of the United States has spelt out with clarity and felicity the correct judicial
approach to the issues at stake in this case:

Our judges are not monks or scientists, but participants in the living stream of our national
life, steering the law between the dangers of rigidity on the one hand and of formlessness on
the other. Our system faces no theoretical dilemma but a single continuous problem: how to
apply to ever-changing conditions the never-changing principles of freedom.55

For the Indian judicial process, the nidus of these never-changing principles is the Constitution.
The bearing of this broad observation on statutory construction will become evident when we
get down to the discussion.
Now let me proceed to the merits, but, at the outset, underscore the Constitutional bias
towards social justice to the weaker sections, including the working class, in the Directive Prin-
ciples of State Policy, a factor which must enliven judicial consciousness while decoding the
meaning of legislation. Victorian-vintage rules of construction cannot override this value-laden
guidebook.
The flawless flow of facts, so far as I am able to remember, aided by our notes, finds expres-
sion in the stream of narration in our learned brother’s judgment and that frees me from a like
exercise. But our consensus on the facts is no less than our dissensus on the law. In the pages
that follow I adopt, for convenience, the same acronyms and abbreviations as have been used by
brother [Justice] Koshal in his judgment.
To begin with, I have to stress three key circumstances which colour the vision of social
justice: (a) the factum of payment of bonus, without break, since 1959 by the Corporation56 to
180 Social Justice and Labour Jurisprudence

its employees; (b) the consciousness that the Management in this case is no asocial, purely
profit-oriented private enterprise but a model employer, a statutory corporation, created by
nationalisation legislation inspired by socialistic objectives; and (c) the importance of industrial
peace for securing which a special legislation, viz. the Industrial Disputes Act, 1947 (the ID
Act, for short), has been in operation for 33 years. The Corporation is itself a limb of the State
as defined in Article 12 and Articles 38, 39 and 43, which deal with workers’ weal and have,
therefore, particular significance.
The Corporation, to begin with, had to take over the staff of the private insurers lest they should
be thrown out of employment on nationalisation. These private companies had no homogenous
policy regarding conditions of service for their personnel, but when these heterogeneous crowds
under the same management (the Corporation) divergent emoluments and other terms of service
could not survive and broad uniformity became a necessity. Thus, the statutory transfer of service
from former employees and standardization of scales of remuneration and other conditions of
employment had to be and were taken care of by Section 11 of the Life Insurance Corporation
Act, 1956 (for short, the LIC Act). The obvious purpose of this provision was to enable the
Corporation initially to absorb the motley multitudes from many companies who carried with
them varying incidents of service as to fit them into a fair pattern, regardless of their antecedent
contracts of employment of industrial settlements or awards. It was elementary that the Cor-
poration could not perpetuate incongruous features of service of parent insurers, and statutory
power had to be vested to vary, modify or supersede these contracts, geared to fair, equitable
and, as far as possible, uniform treatment of the transferred staff. Unless there be unmistakable
expression of such intention, the ID Act will continue to apply to the Corporation employees.
The office of Section 11 of the LIC Act was to provide for a smooth take-over and to promote
some common conditions of service in a situation where a jungle of divergent contracts of em-
ployment and industrial awards or settlements confronted the State. Unless such rationalisa-
tion and standardization were evolved the ensuing chaos would itself have spelt confusion,
conflicts and difficulties. This functional focus of Section 11 of the LIC Act will dispel the scope
for interpretative exercises unrelated to the natural setting in which the problem occurs. The
inference is clear that Section 11 does not repel the ID Act as that is not its purpose. Farewell to
the context and fanatical adherence to the text may lead to the tyranny of literality—a hazardous
road which misses the meaning or reaches a sense which the author never meant. Lord Denning
has observed:

A judge should not be a servant of the words used. He should not be a mere mechanic in the
powerhouse of semantics.

Reed Dickerson has in his ‘The Interpretation and Application of Statute’ warned against
‘the disintegration of statutory construction’ and quoted Fuller57 to say:

…We do not proceed simply by placing the word in some general context… Rather, we ask
ourselves, what can this rule be for? What evil does it seek to avert?
…Surely the judicial process is something more than a cataloguing procedure.
…A rule or statute has a structural or systematic quality that reflects itself in some measure
into the meaning of every principal term in it.

I lay so much emphasis on the guide-lines to statutory interpretation as this case turns solely
on the seeming meaning of certain provisions (for example Section 11) of the LIC Act as capable
of perpetual use, not only initial exercise, as the Minister in Parliament indicated. But, as we
will presently see, the decisive aspect of the case turns on another point, viz. the competing
 Collective Bargaining Agreement Issues 181

claims for dominance as between the ID Act and the LIC Act in areas of conflict. Of course, the
problem of decoding the legislative intent is fraught with perils and pitfalls, as the learned
author has noted:58

To do his cognitive job well, a judge must be unbiased, sensitive to language usages and shared
tacit assumptions, perceptive in combining relevant elements affecting meaning, capable of
reasoning deductively, and generously endowed with good judgment. In view of these for-
midable demands, it is hardly surprising that judges often disagree on the true meaning of a
statute.

Even so, legal engineering, in the province of deciphering meaning, cannot abandon the essay
in despair and I shall try to unlock the legislative intent in the light of the text and as reflecting
the context.
A capsulated presentation of the conspectus of facts will aid the discussion.
The battle is about current bonus, the employer is the Life Insurance Corporation and the
employees belong to Classes III and IV in the service of the Corporation. The LIC Act brought
into being a statutory corporation, i.e. the Life Insurance Corporation, and life was breathed
into it as from 1 September 1956. Since there was nationalisation of life insurance business
under the LIC Act, private insurers’ assets and liabilities of employees were transferred to the
Corporation. We are concerned only with the employees and their services and Section 11 of
the LIC Act covers this field. I may extract the said provision to make it clear that it deals with
the remuneration, terms and conditions and other rights and privileges of transferred employees:

(1) Every whole-time employee of an insurer whose controlled business has been transferred
to and vested in the Corporation and who was employed by the insurer wholly or mainly
in connection with his controlled business immediately before the appointed day shall,
on and from the appointed day, become an employee of the Corporation, and shall hold
his office therein by the same tenure, at the same remuneration and upon the same terms
and conditions and with the same rights and privileges as to pension and gratuity and
other matters as he would have held the same on the appointed day if this Act had not
been passed, and shall continue to do so unless and until his employment in the
Corporation is terminated or until his remuneration, terms and conditions are duly altered
by the Corporation:
Provided that nothing contained in this sub-section shall apply and any such employee who
has, by notice in writing given to the Central Government prior to the appointed day intimated
his intention of not becoming an employee of the Corporation.
(2) Where the Central Government is satisfied that for the purpose of securing uniformity
in the scales of remuneration and the other terms and conditions of service applicable to
employees of insurers whose controlled business has been transferred to, and vested in,
the Corporation, it is necessary so to do, or that, in the interests of the Corporation and
its policy-holders, a reduction in the remuneration payable, or a revision of the terms
and conditions of service applicable, to employees or any class of them is called for, the
Central Government may, notwithstanding anything contained in sub-section (1), or in
the Industrial Disputes Act, 1947, or in any other law for the time being in force, or in
any award, settlement or agreement for the time being in force, alter (whether by way of
reduction or otherwise) the remuneration and the other terms and conditions of the
service to such extent and in such manner as it thinks fit; and if the alteration is not
acceptable to any employee, the Corporation may terminate his employment by giving
him compensation equivalent to three months’ remuneration unless the contract of service
with such employee provides for a shorter notice of termination.
182 Social Justice and Labour Jurisprudence

Explanation: The compensation payable to an employee under this sub-section shall be in

addition to, and shall not affect, any pension, gratuity, provident fund money or any other
benefit to which the employee may be entitled under his contract of service.
(3) If any question arises as to whether any person was a whole time employee of an insurer
or as to whether any employee was employed wholly or mainly in connection with the
controlled business of an insurer immediately before the appointed day, the question
shall be referred to the Central Government, whose decision shall be final.
(4) Notwithstanding anything contained in the Industrial Disputes Act, 1947, or in any
other law for the time being in force, the transfer of the service of any employee of an
insurer to the Corporation shall not entitle any such employee to any compensation
under that Act or other law, and no such claim shall be entertained by any court, tribunal
or other authority.

Recruitment of fresh employees is provided for by Section 23. And Section 49 empowers the
Corporation to make regulations in a general way for all the purposes of the Act, including the
terms and conditions of service of the employees of the Corporation. Pursuant to its powers,
the Central Government promulgated the Life Insurance Corporation (Alteration of Remunera-
tion and other Terms and Conditions of Service of Employees) Order, 1957 (the 1957 Order,
for short). This related to the conditions of service of the transferees and was not confined only
to Class III and Class IV employees among them. It was a general Order, not one limited to
workmen as defined in Section 2(s) of the ID Act. Clause 9 of the 1957 Order states that no
bonus will be paid but certain other benefits of insurance, medical care etc. are mentioned
therein. Clause 9 was later amended, providing for non-profit sharing bonus to certain classes
of employees.
Be that as it may, the Corporation, with the clear approval of the Central Government,
reached a settlement with its employees on 2 July 1959 providing for payment of cash bonus
from 1 September 1956 to 31 December 1961. Obviously, this was under the ID Act and not
under the LIC Act and proceeded on the clear assumption that the ID Act provisions regarding
claims of bonus applied to workmen in the employment of the Corporation.
In 1960, the Life Insurance Corporation of India (Staff ) Regulations, 1960 (the 1960 Regu-
lations) were framed. Regulation 58 states:

The Corporation may, subject to such directions as the Central Government may issue,
grant non-profit-sharing bonus to its employees and the payment thereof, including conditions
of eligibility for the bonus, shall be regulated by instructions issued by the Chairman from
time to time.

Here again, it must be noted that the provision is general and covers the entire gamut of employees
of the Corporation and is not a specific stipulation regarding that class of employees who are
workmen under the ID Act and whose industrial disputes will be governed ordinarily by the
ID Act.
Consistently with the good relations between the Corporation and its workmen, the settlement
of 1959 was followed by those of 1963, 1970 and 1972, providing for bonus for workmen in
the service of the Corporation. Rocketing costs of living, rising aspirations and frustrations of
socio-economic life and the general expectations from model employers like the public sector
enterprises have led workmen in this country to make escalating demands for better emoluments,
including bonus. Naturally, the workmen under the Corporation raised disputes for bonus and
other improved conditions. The employer, consistently with the long course of conduct by both
sides as if the ID Act did govern their relations, entered into settlements dated 24 January 1974
 Collective Bargaining Agreement Issues 183

and 6 February 1974, pursuant to the provisions of Section 18 read with Section 2(p) of the
ID Act. Clause 8 of these settlements specificated the scale of bonus and clause 12 thereof is
more general and may be read here:

Clause 8. Bonus.
(i) No profit-sharing bonus shall be paid. However, the Corporation may, subject to such
directions as the Central Government may issue from time to time, grant any other kind
of bonus to its Class III and IV employees.
(ii) An annual cash bonus will be paid to all Class III and Class IV employees at the rate of
15 per cent of the annual salary (i.e. basic pay inclusive of special pay, if any, and dearness
allowance and additional dearness allowance) actually drawn by an employee in respect
of the financial year to which the bonus relates.
(iii) Save as provided herein, all other terms and conditions attached to the admissibility and
payment of bonus shall be as laid down in the settlement on bonus dated 26 June 1972.

Clause 12.
(1) This Settlement shall be effective from 1 April 1973 and shall be for a period of four
years, i.e., from 1 April 1973 to 31 March 1977.
(2) The terms of the settlement shall be subject to the approval of the Board of the Corporation
and the Central Government.
(3) This Settlement disposes of all the demands raised by the workmen for revision of terms
and conditions of their service.
(4) Except as otherwise provided or modified by this Settlement, the workmen shall con-
tinue to be governed by all the terms and conditions of service as set forth and regulated
by the Life Insurance Corporation of India (Staff ) Regulations, 1960, as also the admin-
istrative instructions issued from time to time, and they shall, subject to the provisions
thereof, including any period of operation specified therein, be entitled to the benefits
thereunder.

It is important and, indeed, is an impressive feature that these two settlements cover a wide
ground of which bonus is but one item. Equally significant is the fact that the Board of the
Corporation and the Central Government, which presumably knew the scope of the LIC Act
and the ID Act, did approve of these settlements.
The thought of terminating the payment of bonus to the employees covered by the 1974
settlements apparently occurred to the Central Government a year later and the Payment of
Bonus (Amendment) Ordinance, 1975 [replaced by the Payment of Bonus (Amendment) Act,
1976], was brought into force to extinguish the effect of the 1974 settlements and the claims
for bonus put forward by the workers thereunder. This Act was successfully challenged and this
Court struck down the said legislation in Madan Mohan Pathak vs Union of India59 and directed
the Corporation to pay to its Class III and IV employees bonus for the years 1 April 1975 to
31 March 1977. Thereupon, the Corporation issued to its workmen certain notices under
Section 19(2) of the ID Act and Section 9-A of the same Act. Likewise, the Central Government,
on 26 May 1978, issued a notification under Section 49 of the LIC Act substituting a new
regulation for the old Regulation 58. All these three steps were taken to stop payment of bonus
to the workmen under the two settlements and led to a challenge of their validity in the Allahabad
High Court under Article 226 of the Constitution. If the two notices and the changed regulation
were good, they did deprive the workmen of their benefits of bonus pursuant to the settlements
reached under the ID Act. But the workmen contended that the proceedings under the LIC Act
could not prevail against the continued flow of bonus benefits under the ID Act. The High Court
(Lucknow Bench) struck down the appellant’s actions as of no consequence and void and
184 Social Justice and Labour Jurisprudence

sustained the claim for bonus based on the settlements of 1974. The Corporation has come up
in appeal to this Court, assailing the findings of the High Court.
The Corporation is clearly an ‘industry’, and the ‘workmen’ raised demands for bonus, the
management responded constructively and for long years settlements, as envisioned by the ID
Act, were entered into and the stream of industrial peace flowed smooth. Industrial settlements
marked their relations, the last of which were in 1974, but a later legislation marred this situation
and led to a litigation. In 1976, the Life Insurance Corporation (Modification of Settlement)
Act, 1976 (for short, the 1976 Act) was enacted to abolish the efficacy of the right to bonus
under the two settlements of 1974, but the challenge to its constitutionality was upheld. When
the parliamentary burial of bonus was stultified by judicial resurrection, other measures to effec-
tuate the same purpose were resorted to, both under the LIC Act and the ID Act. These moves
proved to be essays in futility because the High Court held that bonus was still payable, that the
ID Act prevailed over the LIC Act in the area of industrial relations, the former being a special
law, and that the steps taken both by the Corporation and the Central Government under the
LIC Act and Regulations as well as under the ID Act were of legal inconsequence. Against this
judgment, the Corporation has come up in appeal and the questions raised are of great moment
and of serious portent. If law allows administrative negation of bonus, judges are not to reason
why; but whether law does allow nullification of an industrial settlement is for judges to decide,
not for the Administration to say, why not? That is Montesquien functionalism of sorts. So,
against this backdrop, I will analyse the submissions, scan their substance and pronounce upon
their validity.
I may as well formulate, in more particularised form, the various contentions urged on either
side—not exhaustively though, because that has been done by my learned Brothers. I propose
to confine the discussion to the decisive issues. First of all, we have to investigate whether the
two settlements of 24 January 1974 and 6 February 1974, arrived at in pursuance of the pro-
visions of Section 18 read with Section 2(p) of the ID Act, have current validity, having regard
to the notice given by the Management under Section 19(2) of the ID Act terminating the
settlements and under Section 9-A of its intention to vary the conditions of service bearing
on bonus. In case the settlements do not survive the notices, the claim to bonus perishes and
nothing more remains to be decided. But in case I hold that despite the intention to change the
service conditions under Section 9-A and determination under Section 19(2), the terms of the
settlements continue to operate until substituted by a new contract arrived at by mutual settle-
ment or by an award, the further issue opens as to whether a settlement under the ID Act cannot
be operative since the LIC Act contains provisions vesting power in the Corporation and the
Central Government to fix the terms and conditions of service of the Corporation employees
and that power has been exercised to extinguish the bonus claim. The question will throw open
for consideration which statute prevails, the ID Act or the LIC Act, when there is an apparent
conflict between the two. The problem of the prevalence of a special statute as against a general
statute and the determination of which, in a given situation, is the special statute will engage
my attention at the appropriate state. In the event of my holding that the ID Act prevails, as
against the LIC Act, in the given situation, the fate of the steps taken by the Corporation and
the Central Government under the LIC Act and the Regulations framed thereunder will be
sealed. Of course, if the holding is that the ID Act cannot operate as against the LIC Act and
the Regulations framed thereunder, when dealing with the terms and conditions of service of
the employees of the Corporation, I may have to venture into the controversy about how effectual
are the measures taken by the two statutory authorities, i.e. the Corporation and the Central
Government, under the provisions of the LIC Act and the Regulations. Every point has been
emphatically contested and argued by both sides with erudite niceties. However, the judicial
perspective will be the decisive factor in the ultimate analysis. For, as Brennan, J.60 has observed:

The law is not an end in itself, nor does it provide ends. It is pre-eminently a means to serve
what we think is right.
 Collective Bargaining Agreement Issues 185

Law is here to serve! To serve what? To serve, insofar as law can properly do so, within
limits that I have already stressed, the realization of man’s ends, ultimate and mediate… Law
cannot stand aside from the social changes around it.

Judicial acceptance of social dynamics, as projected by the Constitution, is the crucial factor
in this case, if I may anticipate myself.
The spinal issue, then, is as to whether the settlements of 1974 are extant even after the
notice under Section 9-A and the formal termination under Section 19(2) of the ID Act. Let
me go to the basics. Before that, a glance at the nature of the two settlements, their ambit and
ambience and their longevity, actual and potential, may be desirable, after sketching the broad
basics of the ID Act and its means and ends.
The ID Act is a benign measure which seeks to pre-empt industrial tensions, provide the
mechanics of dispute resolutions and set up the necessary infra-structure so that the energies
of partners in production may not be dissipated in counter-productive battles and assurance of
industrial justice may create a climate of goodwill. Industrial peace is a national need and,
absent law, order in any field will be absent. Chaos is the enemy of creativity, sans which prod-
uction will suffer. Thus, the great goal to which the ID Act is geared is legal mechanisms for
canalising conflicts along conciliatory or adjudicatory processes. The objective of this legislation
and the component of social justice it embodies were understood in the Bangalore Water Supply
and Sewerage Board vs Rajappa61 thus:

To sum up, the personality of the whole statute, be it remembered, has a welfare basis, it
being a beneficial legislation which protects labour, promotes their contentment and regulates
situations of crisis and tension where production may be imperiled by untenable strikes and
blackmail lock-outs. The mechanism of the Act is geared to conferment of regulated benefits
to workmen and resolution, according to a sympathetic rule of law, of the conflicts, actual or
potential, between managements and workmen. Its goal is amelioration of the conditions of
workers, tempered by a practical sense of peaceful co-existence, to the benefit of both, not a
neutral position but restraints on laissez faire and concern for the welfare of the weaker lot.
Empathy with the statute is necessary to understand not merely its spirit, but also its sense.

The ID Act deals with industrial disputes, provides for conciliation, adjudication and set-
tlements, and regulates the rights of parties and the enforcement of awards and settlements.
When a reference is made of a dispute under Section 10 or Section 10-A, the legal process
springs into action. Under Section 16, an award is made after a regular hearing if a conciliation
under Section 12 does not ripen into a settlement and a failure report is received. The award
is published under Section 17(1) and acquires finality by virtue of Section 17(2), unless under
Section 17-A(1) the appropriate Government declares that the award shall not be enforceable.
Section 17-A(4), which is of significance, reads thus:

(4) Subject to the provisions of sub-section (1) and sub-section (3) regarding the enforceability
of an award, the award shall come into operation with effect from such date as may be speci-
fied therein, but where no date is so specified, it shall come into operation on the date when
the award becomes enforceable under sub-section (1) or sub-section (3), as the case may be.

It is obvious from Section 18 that a settlement, like an award, is also binding. What I emphasise
is that an award, adjudicatory or arbitral, and a settlement during conciliation or by agreement
shall be binding because of statutory sanction. Section 19 relates to the period of operation of
settlements and awards and here also it is clear that both settlements and awards, as is evident
from a reading of Sections 19(2) and (6), stand on the same footing.
186 Social Justice and Labour Jurisprudence

Section 19 has a key role to play in the life and death of awards and settlements and so we
may read the text here to enable closer comment. Particular attention must be rivetted on
Sections 19(2), (3) and (6):

19. (1) A settlement shall come into operation on such date as is agreed upon by the parties
to the dispute, and if no date is agreed upon, on the date on which the memorandum of the
settlement is signed by the parties to the dispute.
(2) Such settlement shall be binding for such period as is agreed upon by the parties, and if
no such period is agreed upon, for a period of six months (from the date on which the
memorandum of settlement is signed by the parties to the dispute, and shall continue to
be binding on the parties after the expiry of the period aforesaid, until the expiry of two
months from the date on which a notice in writing of an intention to terminate the
settlement is given by one of the parties to the other party or parties to the settlement.
(3) An award shall, subject to the provisions of this section, remain in operation for a period
of one year from the date on which the award becomes enforceable under Section 17-A:
Provided that the appropriate Government may reduce the said period and fix such period as
it thinks fit:
Provided further that the appropriate Government may, before the expiry of the said period,
extend the period of operation by any period not exceeding one year at a time as it thinks fit
so, however, that the total period of operation of any award does not exceed three years from
the date on which it came into operation.
(4) Where the appropriate Government, whether of its own motion or on the application of
any party bound by the award, considers that since the award was made, there has been
a material change in the circumstances on which it was based, the appropriate Government
may refer the award or a part of it to a Labour Court, if the award was that of a Labour
Court or to a Tribunal, if the award was that of a Tribunal or of a National Tribunal, for
a decision whether the period of operation should not, by reasons of such change, be
shortened and the decision of the Labour Court or the Tribunal, as the case may be, on
such reference shall be final.
(5) Nothing contained in sub-section (3) shall apply to any award which by its nature, terms
or other circumstances does not impose, after it has been given effect to, any continuing
obligation on the parties bound by the award.
(6) Notwithstanding the expiry of the period of operation under sub-section (3), the award
shall continue to be binding on the parties until a period of two months has elapsed from
the date on which notice is given by any party should by the award to the other party or
parties intimating its intention to terminate the award.
(7) No notice given under sub-section (2) or sub-section (6) shall have effect, unless it is given
to a party representing the majority of persons bound by the settlement or award, as the
case may be.

Section 9-A fetters the Management’s right to change the conditions of service of workmen
in respect of certain matters, including wages and allowances. We had better read it here:

9-A. 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 proposed to be effected; or
(b) within twenty-one days of giving such notice:
 Collective Bargaining Agreement Issues 187

It will be apparent that the ID Act substantially equates an award with a settlement, from the
point of view of their legal force. No distinction in regard to the nature and period of their
effect can be discerned, especially when we read Sections 19(2) and (6). I highlight this virtual
identity of effect to bring home the fact that judicial pronouncements on this aspect, whether
rendered in a case of award or settlement, will be a guideline for us and nothing turns on whether
the particular is one of an award or settlement. Indeed, there are reported cases on both.
The statutory regulation of industrial disputes is comprehensive, as is manifest from the
rest of the Act. Chapter V prohibits strikes and lock-outs; Chapter V-A deals with lay-off and
retrenchment and Chapter V puts teeth into the provisions by enacting penalties. Importantly,
Section 29, which proceeds on the footing of equal sanctity for awards and settlements, punishes
breaches:

Any person who commits a breach of any term of any settlement or award which is binding
on him under this Act shall be punishable with imprisonment for a term which may extend
to six months, or with fine, or with both, and where the breach is a continuing one, with a
further fine which may extend to two hundred rupees for every day during which the breach
continues after the conviction for the first, and the court trying the offence, if it fines the
offender, may direct that the whole or any part of the fine realised from him shall be paid, by
way of compensation, to any person who, in its opinion has been injured by such breach.

There are miscellaneous provisions to take care of other residuary matters and we get the
picture of a parliamentary project designed to deal, not piecemeal but wholesale, with a special
subject of strategic concern to the nation, viz., ‘the investigation and settlement of industrial
disputes’. Let us be perspicacious about the purpose and sensitive about the social focus of ID
Act in a development perspective. Parliament has picked out the specific subject of industrial
disputes for particularised treatment, whether the industry be in the private or public sector or
otherwise. Our country, with so much leeway to make up, cannot afford paralysing process in
production of goods and services and whoever be the employer—government, quasi-public,
charitable or profit-making private enterprise—both sides, viz., workmen and management
shall abide by the discipline, adopting the mechanics and using the machinery under the ID Act.
The Bangalore Water Supply and Sewerage Board 62 case has highlighted this core truth. To lose
sight of the spinal nature of the legislation, viz., industrial disputes and their settlement through
law, and to regard it as a mere enactment bearing on terms and conditions of service in enterprises
is to miss the distinctive genre, particular flavour and legislative quintessence of the ID Act:

…(Interpretation) involves far more than picking out dictionary definitions of words or
expressions used. Consideration of the context and the setting is indispensable properly to
ascertain a meaning. In saying that a verbal expression is plain or unambiguous, we mean
little more than that we are convinced that virtually anyone competent to understand it, and
desiring fairly and impartially to ascertain its signification, would attribute to the expression
in its context a meaning such as the one we derive rather than any other; and would consider
any different meaning, by comparison, strained, or far-fetched, or unusual, or unlikely.
…Implicit in the finding of a plain, clear meaning of an expression in its context is a finding
that such meaning is rational and ‘makes sense’ in that context.63

Interpretative insight will suffer, even as the judicial focus will blur, if the legislative target is
not sharply perceived. Indeed, I lay so much stress on this facet because brother Koshal’s other-
wise faultless logic has, if I may say so with great deference, failed to convince me because of
this fundamental mis-focus. To repeat for emphasis, the meat of the statute is industrial dispute,
not conditions of employment or contract of service as such. The line of distinction may be fine
but is real.
188 Social Justice and Labour Jurisprudence

Be that as it may, a bird’s eye view of the ID Act reveals the statutory structure and legal
engineering centering round dispute settlement in industries according to the rule of law and
away from fight with fists or economic blackmail. This large canvas, once illumined, may illustrate
the sweep of awards and settlements by reference to the very agreement of 1974 we have before
us. It goes far beyond bonus and embraces a wide range of disputes and rainbow of settlements
in a spirit of give and take. One may visualise the bargaining process. Give in a little on bonus
and get a better deal on salary scale or promotion prospects; relent a wee-bit on hours of work
but bargain better on housing facilities, and so on. The soul of the statute is not contract of
employment, uniformity of service conditions or recruitment rules, but conscionable negotiations,
conciliations and adjudications of disputes and differences animated by industrial justice, to
avoid a collision which may spell chaos and imperil national effort at increasing the tempo of
production.
If there is no dispute, the ID Act is out of bounds, while the LIC Act applies generally to all
employees from the fattest executive to the frailest manual worker and has no concern with
industrial disputes. The former is a ‘war measure’ as it were; the latter is a routine power when
swords are not drawn, if we may put it metaphorically. When disputes break out or are brewing,
a special, sensitive situation fraught with frayed tempers and fighting postures springs into
existence, calling for special rules of control, conciliatory machinery, demilitarising strategies and
methods of investigation, interim arrangements and final solutions, governed by special criteria
for promoting industrial peace and justice. The LIC Act is not a law for employment or disputes
arising therefrom, but a nationalisation measure which incidentally, like in any general take over
legislation, provides for recruitment, transfers, promotions and the like. It is special vis-a-vis
nationalisation of life insurance but general regarding contracts of employment or acquiring
office buildings. Emergency measures are special, for sure. Regular nationalisation statutes are
general even if they incidentally refer to conditions of service.
The anatomy of the 1974 settlements is no more confined to bonus than the physiology of
man is limited to bones. It is an integral, holistic and delicately balanced ensemble of clauses,
with cute calculations and hard bargaining on many matters. To dissect is to murder, in the art
of true poetry as in the craft of settlement in industry; and, therefore, it is impermissible to
single out a clause and extinguish it, as the totality is a living entity which does not permit of
dismemberment, limb by limb, without doing violence to the wholeness and identity of the
settlement. Here, the 1974 settlements have brought about a conflict-resolution on a variety of
items including (a) scales of pay, (b) method of fixation in the new scales, (c) dearness allowance,
(d) house rent allowance, (e) city compensatory allowance, etc. Thus bonus is but one component
of a multi-point agreement. Clause 12 of the Settlement has some significance:

12. Period of Settlement:

(1) This Settlement shall be effective from 1 April 1973 and shall be for a period of four
years, i.e., from 1 April 1973 to 31 March 1977.
(2) The terms of the settlement shall be subject to the approval of the Board of the Corporation
and the Central Government.
(3) This Settlement disposes of all the demands raised by the workmen for revision of terms
and conditions of their service.
(4) Except as otherwise provided or modified by this Settlement, the workmen shall
continue to be governed by all the terms and conditions of service as set forth and regulated
by the Life Insurance Corporation of India (Staff ) Regulations, 1960 as also the admin-
istrative instructions issued from time to time and they shall, subject to the provisions
thereof, including any period of operation specified therein, be entitled to the benefits
thereunder.
 Collective Bargaining Agreement Issues 189

Likewise, the Preamble has a purpose:

WHEREAS the parties representing the workmen, namely:

1. All India Insurance Employees Association

2. All India LIC Employees Federation
3. All India Life Insurance Employees Association and
4. National Organisation of Insurance Workers

(hereinafter called the ‘said Associations’) submitted their Charter of Demands to the Life
Insurance Corporation of India (hereinafter called ‘the Corporation’) for revision of the scales
of pay, allowances and other terms and conditions of service after the expiry of the award of
the National Industrial Tribunal New Delhi on 31 March 1973.
AND WHEREAS the Corporation has carried on negotiations with the said Associations
between the period July 1973 and January 1974, at which there has been free and frank
exchange of views in regard to various matters, including the obligations of the Corporation
to the policy-holders and the community;
AND WHEREAS the said Associations solemnly agree to cooperate with the management
in maintaining discipline and in its endeavour to effect utmost economy in administration
and to improve efficiency and productivity so as to ensure that the growth in profitability is
maintained, which alone will enable the Corporation (i) to safeguard and (ii) to meet the
legitimate demands of the employees for wage revision;
AND WHEREAS the said Associations further agree that the management may issue
administrative instructions in the interest of maintaining discipline and peaceful atmosphere
in the office.
NOW THEREFORE it is hereby agreed by and between the parties hereto as follows:

What stand out prominently in this Memorandum of Settlement are:

(a) There was a previous settlement and new negotiations were started in the light of new
demands for a substitution of the earlier settlement by a new settlement, without leaving
an interregnum of vacuum;
(b) There was a plurality of items unconnected with bonus as such and the overall settlement
is a composite fabric; and
(c) There is specific reference to the LIC (Staff ) Regulations, 1960, and, so far as the Settle-
ment provided, it prevailed over the Regulations and so far as the Settlement did not
cover a topic the Regulations governed, thus making it clear that the Settlements did not
become subordinate to the Regulations.

The core question that first falls for consideration is as to whether the Settlements of 1974
are still in force. There are three stages or phases with different legal effects in the life of an
award or settlement. There is a specific period contractually or statutorily fixed as the period of
operation. Thereafter, the award or settlement does not become non est but continues to be
binding. This is the second chapter of legal efficacy but qualitatively different as we will presently
show. Then comes the last phase. If notice of intention to terminate is given under Section 19(2)
or 19(6), then the third stage opens, where the award or the settlement does survive and is in
force between the parties as a contract which has superseded the earlier contract and subsists
until a new award or negotiated settlement takes its place. Like Nature, Law abhors a vacuum
and even on the notice of termination under Section 19(2) or (6), the sequence and consequence
cannot be just void but a continuance of the earlier terms, but with liberty to both sides to raise
190 Social Justice and Labour Jurisprudence

disputes, negotiate settlements or seek a reference and award. Until such a new contract or
award replaces the previous one, the former settlement or award will regulate the relations
between the parties. Such is the understanding of industrial law at least for 30 years, as precedents
of the High Courts and of this Court bear testimony. To hold to the contrary is to invite industrial
chaos by an interpretation of the ID Act, whose primary purpose is to obviate such a situation
and to provide for industrial peace. To distil from the provisions of Section 19 a conclusion
diametrically opposite of the objective, intendment and effect of the section is an interpretative
stultification of the statutory ethos and purpose. Industrial law frowns upon a lawless void and
under general law, the contract of service created by an award or settlement lives so long as a
new lawful contract is brought into being. To argue otherwise is to frustrate the rule of law. If
law is a means to an end, order in society, can it commit functional ‘harakiri’ by leaving a con-
flict situation to lawless void?
Now we will move on to the precedents on the point, which have been summed up by
Malhotra64 thus:

Effect of termination of award under Section 19(6) on rights and obligations of parties—
Termination of an award by either party under Section 19(6) does not have the effect of
extinguishing the right flowing therefrom. The effect of termination of an award is only to
prevent thereafter the enforcement of the obligation under it in the manner prescribed, but
the rights and obligations which flow from it are not wiped out. Evidently, by the termination
of an award, the contract of employment is not terminated. The obligation created by the
award or contract could be altered by a fresh adjudication or fresh contract.65

In Judhisthir Chandra vs Mukherjee66 the position as stated above was accepted as correct by
the High Court. A Division Bench of the Bombay High Court in Mangaldas Narandas vs
Payment of Wages Authority67 (Shah and Gokhale, JJ.) came to the same conclusion and neatly
summed up the sequence of triple stages and the difference in legal consequences, and upheld
the contention that even after termination of an award under Section 19(6), the terms incor-
porated in the award continued as a contract between the parties. So much so, no reversion to
the pre-award position was permissible on the part of the employer. The head-note, which is
sufficiently lucid and luminous, sums up the ratio thus:

Where an award is delivered by the industrial tribunal it has the effect of imposing a statutory
contract governing the relations of the employer and the employee. It is true that statutory
contract may be terminated in the manner prescribed by Section 19(6) of the Industrial
Disputes Act. After the statutory contract is terminated by notice, the employer by failing
to abide by the terms of the award does not incur the penalties provided by the Industrial
Disputes Act, nor could the award be enforced in the manner prescribed by Section 20 of the
Industrial Disputes (Appellate Tribunal) Act, 1950. But the termination of the award has not
the effect of extinguishing the rights flowing therefrom. Evidently by the termination of the
award the contract of employment is not terminated. The employer and the employee remain
master and servant in the industry in which they are employed, unless by notice the employer
has also simultaneously with the termination of the award terminated the employment of the
employee. If the employment is not terminated, it is difficult to hold that the rights which
had been granted under the award automatically cease to be effective from the date on which
notice of termination of the award becomes effective. The effect of termination of the award
is only to prevent enforcement of the obligations under the award in the manner prescribed,
but the rights and obligations which flow from the award are not wiped out. Termination of
the award or lapsing of the award has not the effect of wiping out the liabilities flowing under
the award.
 Collective Bargaining Agreement Issues 191

An award has the effect of imposing fresh terms upon the contract of employment between
the employer and the employee to which they have been assented. The termination of
such award does not terminate the contract. Even after the award is terminated in the manner
provided by Section 19(6) of the Industrial Disputes Act, the obligation created by the award
could be altered by a fresh contract or a fresh adjudication under the Industrial Disputes Act,
and not otherwise.
The Industrial Disputes Act has been enacted with the object of securing harmonious
relations in the working of the industry between the employer and the employees by providing
a machinery for adjudication of disputes between them; and the object of the legislature would
be frustrated if after every few months, by unilateral action, the employer or the employees
may be entitled to reopen the dispute and ignore the obligations declared to be binding by
the process of adjudication.

There is a remarkable continuity in the Bombay High Court (a jurisdiction where industrial
unrest is a sensitive issue) because we find that another Division Bench interpreting similar
provisions in the Bombay Industrial Relations Act has been persuaded by the same reasoning,
well brought out in the head-note which we excerpts:68

The result of the award ceasing to have effect on notice of termination being given under
Section 116(1) of the Bombay Industrial Relations Act is that the award ceases to exist. The
result of the award ceasing to have effect is that it is open to either party to give a notice of
change under Section 42 of the Act and to attempt to bring about a change. Further, it is
open to the employer in cases in which he could bring a change without a notice of change,
such as matters enumerated in Schedule III to the Act, to bring about the change, because
the impediment placed in his way by Section 46(3) is removed. But until a change is brought
about by the act either of employer or the employee after following relevant provisions in the
Bombay Industrial Relations Act, 1946, the award that exists shall continue to regulate the
relations between the employer and the employees. The effect of termination of an award is
not that the rights which flow from that award cease to be available to the employees, but the
effect of termination is that the award continues to govern the relations between the employer
and the employees until such time as a change is effected in accordance with the provisions of
the Bombay Industrial Relations Act, 1946.

Indeed, the precise submission that upon termination by notice, the award ceased to have
effect for all purposes and the employees were not entitled to benefit thereunder was raised and
examined as a matter of great importance to industrial relations. The court, in our view rightly,
rejected the contention of the employer and with forceful precision argued to reach the conclusion
which is the only sensible solution:69

What this sub-section in effect provides is that if a notice of termination is given by either
party to the award, then on the expiry of two months from the date of such notice, the
registered agreement, settlement or award shall cease to have effect… But the question that
we have been called upon to determine goes a little further than that and the question is by
what is the relationship between the employers and the employees regulated after an award is
terminated? Does termination of the award create a vacuum and leave the employees to the
tender mercy of the employer? Does it, by providing that the award shall cease to have effect,
get rid of the award so as to bring about the result that any agreement that governed the rela-
tions of the parties prior to the date of the award is thereby revived; or does it preserve such
rights as the employees have, prior to the date of termination, already enjoyed under the
award; or does it preserve the whole of the award until it is changed by the procedure prescribed
by the Bombay Industrial Relations Act for a change? Now, quite obviously it would not be
192 Social Justice and Labour Jurisprudence

possible for any court to take the view that the termination of the award creates a vacuum in
which the employees are at the tender mercy of the employer; nor does it appear to us to be
possible to hold that by termination of the award the contract or agreement that governed
the relations of the employer and the employees prior to the award is in some manner revived.
Initially that contract or agreement had binding effect; but it ceased to have such effect on
the award taking effect and the moment the award became binding on the parties, the antecedent
contract or agreement was superseded by the award. It is not a case of an antecedent contract
or agreement being suspended, because there is no provision for suspension which can even
be spelt out from any of the sections of the Bombay Industrial Relations Act. The award,
or as the case may be, a registered agreement or a settlement under the Bombay Industrial
Relations Act, has obviously the effect of superseding the contract or agreement that existed
and that regulated the relations between the employer and the employees prior to the registered
agreement, settlement or award taking effect under the provisions of the Act. Then we come
to the next possibility; Is only so much of the award preserved as relates to the rights already
enjoyed by the employees before the termination of the award? We find it difficult so to hold.
There is no principle or logic in dealing with an award in this piecemeal manner and preserving
rights that have already been actually enjoyed and destroying those which, although they
may have accrued, have to be enjoyed in future in terms of the award. Mr Patel for the
petitioners has argued that on the termination of the award, the effect or rather the result
that is brought about is that the rights of parties are frozen as of that date. Assuming such a
concept of freezing the rights was adopted, even the freezing would be in respect of rights
that have already accrued and it is not quite easy to conceive of rights which would not
accrue to an employee under an industrial award and which can only be contingent. In any
event, if the original contract or agreement has been superseded by the award, holding that
the award is no longer what governs the relations between the employer and the employees
would necessarily create a vacuum. Trying to save the creation of a vacuum by splitting up
the award into two parts, the award under which benefits have already been enjoyed and that
part of the award under which benefits have not been enjoyed, is dissecting the award in a
manner not justified in law or logic. There appears to be on the scene after the termination of
the award only one thing that can govern the relations between the employer and the employees
and that undoubtedly can be nothing else than the award itself. The result of [the] award
ceasing to have effect is not that the award ceases to exist; the result of the award ceasing to
have effect is, as I have already pointed out, that it is open to either party to give a notice of
change and to attempt to bring about a change.

In the Madras jurisdiction the same view has prevailed, as is apparent from Satya Studios vs
Labour Court,70 Narayanaswamy vs Presiding Officer,71 and Sathya Studios vs Labour Court.72 A
Division Bench of that Court in Sathya Studios73 case stressed the purpose of the ID Act and the
preference for that interpretation which will advance that purpose. The head-note brings out
the holding correctly:

…a combined reading of Section 18(3), sub-sections (1) to (3), and (6) of Section 19,
Section 23 and Section 29 leave no doubt that, having regard to the whole purpose of the
Act, to wit, to bring about, conserve and promote industrial peace, the termination of an
award under Section 19(6) does not mean that the terms and conditions evolved by it and
applied to the industrial relations concerned would be set at large. All that the termination
under Section 19(6) would mean is that, thereafter, the parties will be at liberty to raise a
fresh industrial dispute if there is a basis therefor. But, so long as the award terminated under
Section 19(6) has not been substituted by an award, the industry concerned has to proceed
on the basis that the terms and conditions of the award would continue to govern the terms
of employment.
 Collective Bargaining Agreement Issues 193

We need not labour the point further because we are bound, precedentially speaking, by
three decisions of this Court. Chacko case,74 in a clinching passage, settles the proposition and
the Indian Oil Corporation case75 adopts a reasoning compelling the same conclusion, even like
Md Qasim Larry76 has done. Das Gupta, J., speaking for a bench of three Judges, studied the
statutory scheme bearing on the triple periods after an award came into being and indicated, by
purposive interpretation of the relevant provisions, the legal stages of the life of an award. After
quoting Section 19(6) of the ID Act, the court observed:77

This makes it clear that after the period of operation of an award has expired, the award does
not cease to be effective. For, it continues to be binding thereafter on the parties until notice has
been given by one of the parties of the intention to terminate it and two months have elapsed
from the date of such notice. The effect of Section 4 of the Industrial Disputes (Banking
Companies) Decision Act is that the award ceased to be in force after 31 March 1959. That,
however, has nothing to do with the question as to the period for which it will remain bind-
ing on the parties thereafter. The provision in Section 19(6) as regards the period for which
the award shall continue to be binding on the parties is not in any way affected by Section 4
of the Industrial Disputes (Banking Companies) Decision Act, 1955.
Quite apart from this, however, it appears to us that even if an award has ceased to be in
operation or in force and has ceased to be binding on the parties under the provisions of
Section 19(6), it will continue to have its effect as a contract between the parties that has been
made by industrial adjudication in place of the old contract. So long as the award remains in
operation under Section 19(3), Section 23(c) stands in the way of any strike by the work-
men and lock-out by the employer in respect of any matter covered by the award. Again, so
long as the award is binding on a party, breach of any of its terms will make the party liable
to penalty under Section 29 of the Act, to imprisonment which may extend to six months or
with fine or with both. After the period of its operation and also the period for which the
award is binding have elapsed, Section 23 and Section 29 can have no operation. We can,
however, see nothing in the scheme of [the] Industrial Disputes Act to justify a conclusion
that merely because these special provisions as regards prohibition of strikes and lock-outs
and of penalties for breach of award cease to be effective the new contract as embodied in
the award should also cease to be effective. On the contrary, the very purpose for which in-
dustrial adjudication has been given the peculiar authority and right of making new contracts
between employers and workmen makes it reasonable to think that even though the period
of operation of the award and the period for which it remains binding on the parties may
elapse—in respect of both of which special provisions have been made under Sections 23
and 29 respectively—the new contract would continue to govern the relations between the
parties till it is displaced by another contract. The objection that no such benefit as claimed
could accrue to the respondent after 31 March 1959 must therefore be rejected.

The power of reasoning, the purpose of industrial jurisprudence and the logic of the law
presented with terse force in this pronouncement cannot be missed. The new contract which is
created by an award continues to govern the relations between the parties ‘till it is displaced by
another contract’.
Another Bench of three judges, speaking through Chief Justice Gajendragadkar, in Md Qasim
Larry78 case, has ratiocinated on similar lines:

When an award is made and it prescribes a new wage structure, in law the old contractual
wage structure becomes inoperative and its place is taken by the wage structure prescribed by
the award. In a sense, the latter wage structure must be deemed to be a contract between
the parties because that, in substance, is the effect of industrial adjudication. The true legal
194 Social Justice and Labour Jurisprudence

position is that when industrial disputes are decided by industrial adjudication and awards
are made, the said awards supplant contractual terms in respect of matters covered by them
and are substituted for them… In this connection, we may incidentally refer to the decision
of this Court in the South Indian Bank Ltd. vs A.R. Chacko,79 where it has been observed by
this Court that the very purpose for which industrial adjudication has been given the peculiar
authority and right of making new contracts between employers and workmen makes it
reasonable to think that even though the period of operation of the award and the period for
which it remains binding on the parties may elapse—in respect of both of which special
provisions have been made under Sections 23 and 29 respectively—the new contract would
continue to govern the relations between the parties till it is replaced by another contract.
This observation clearly and emphatically brings out that the terms prescribed by an award,
in law, and in substance, constitute a fresh contract between the parties.

Again, a Bench of four Judges in the Indian Oil Corporation case80 reiterated the same principle
in the context of Section 9-A of the ID Act although the court did not specifically advert to
Chacko case81 the Indian Oil Corporation82 case, the question turned on the management seeking
to effect changes in the service conditions of the workmen. The court made observations which
have pertinence to the non-extinguishment of the contract of service until a negotiated or
adjudicated substitution comes into being. Fazal Ali, J. speaking for the Bench observed:

In the circumstances, therefore, Section 9-A 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. If the appellant
wanted to withdraw the Assam Compensatory Allowance it should have given notice to the
workmen, negotiated the matter with them and arrived at some settlement instead of with-
drawing the compensatory allowance overnight.

This ruling shows (a) that unilateral variation by the management is an exercise in futility,
and (b) an award or settlement must take the place of the contract sought to be varied. We have
a similar situation in the present case vis-a-vis the notice under Section 9-A and the ruling in
The Indian Oil case,83 is a helpful guide.
A passing reference was made to a possible difference between an award and a settlement
when it comes to termination of the terms. We have indicated already that a closer study of the
scheme of the ID Act shows the distinction, if any, to be no more than between Twiddledum
and Twiddledee. A Division Bench of the Bombay High Court had occasion to examine the
effect of a notice under Section 19(2) of the ID Act in terminating a settlement and that ruling
deserves special mention because it deals with the survival beyond the two months’ notice of
termination of a settlement (not an award). Tarkunde, J., speaking for the Bench and following
Chacko case84 observed in the context of notice to terminate the settlement under Section 19(2):85

Even if a notice of its intention to terminate the settlement was given by either party, the set-
tlement did not automatically cease to be operative on the expiry of two months from the
date of the notice. The legal position is that the terms of a settlement continue to govern the
relations between the parties after the notice of termination and the expiry of two months
thereafter, until the settlement is replaced by a valid contract or award between the parties.
This was laid down by the Supreme Court in South Indian Bank Ltd. vs A.R. Chacko,86 while
dealing with the binding effect of an award under the provisions contained in sub-section (6)
of Section 19 of the Industrial Disputes Act. The authority in the present case was, therefore,
not justified in rejecting the workmen’s application on the ground that the settlement on
which the workmen relied had ceased to be operative.
 Collective Bargaining Agreement Issues 195

A precedent, as Disraeli said, embalms a principle. We have pointed out the principle and
cited the precedents. There is more to it than mere wealth of precedents or what Burke called
‘the deep slumber of a decided opinion’. It enlivens industrial peace, avoids labour discontent
and helps to set the stage for next negotiations for better terms for workers. Economic freedom
of the weaker sections is behind these precedents, almost reminding us of Tennyson:

A land of settled government,

A land of just and old renown,
Where freedom slowly broadens down
From precedent to precedent.

The law is lucid and the justice manifest on termination notice or notice of change the award
or settlement does not perish but survives to bind until reincarnation, in any modified form, in
a fresh regulation of conditions of service by a settlement or award. Precedents often broadly
guide but when on the same point willy-nilly bind. So here, even if I would, I could not and
even if I could, I would not depart from the wisdom in Chacko case87 with consistent case-flow
before and after. An aching void, an abhorrent vacuum, a legicidal situation of industrial clash
cannot be a judicial bonus when the constitutional command is social justice.
The catena of cases we have briefly catalogued discloses an unbroken stream of case-law
binding on this Court, the ratio whereof, even otherwise, commends itself to us. The award or
settlement under the ID Act replaces the earlier contract of service and is given plenary effect as
between the parties. It is not a case of the earlier contract being kept under suspended animation
but suffering supersession. Once the earlier contract is extinguished and fresh conditions of
services are created by the award or the settlement, the inevitable consequence is that even
though the period of operation and the span of binding force expire, on the notice to terminate
the contract being given, the said contract continues to govern the relations between the parties
until a new agreement by way of settlement or statutory contract by the force of an award takes
its place. If notice had not been given, the door for raising an industrial dispute and fresh con-
ditions of service would not have been legally open. With action under Section 9-A, Section 19(2)
or (6), the door is ajar for disputes being raised and resolved. This, in short, is the legal effect,
not the lethal effect of invitation to industrial trial of strength with no contract of service or rever-
sion to an absolute and long ago ‘dead’ contract of service.
It is inconceivable that any other alternative subsists. For instance, imagine a case where for
30 years an award or settlement might have given various benefits to employees and at the end
of 30 years a notice terminating the settlement were given by the employer. Does industrial law
absurdly condemn the parties to a reversion to what prevailed between them 30 years ago? If
the employees were given Rs 100 as salary in 1947 and, thereafter, by awards and settlements
the salary scale was raised to Rs 1,000, could it be [the] management might, by unilateral yet
disastrous action, give notice under Section 19(2) or (6) terminating the settlement or award,
tell the workers that they would be paid Rs 100 which was the original contract although in
law that contract had been extinguished totally by a later contract of settlement or by force of
an award? The horrendous consequences of such an interpretation may best be left to imagina-
tion. Moreover, if industrial peace is the signature tune of industrial law, industrial violence
would be the vicious shower of consequences if parties were relegated either to an ancient and
obsolete contract or to a state of lawless hiatus. No canon of interpretation of statutes can com-
pel the court to construe a statutory provision in this manner. We have no doubt that the pre-
cedents on the point, the principles of industrial law, the constitutional sympathy of Part IV
and the sound rules of statutory construction converge to the same point that when a notice
intimating termination of an award or settlement is issued, the legal import is merely that the
stage is set for fresh negotiations or industrial adjudication and until either effort ripens into a
fresh set of conditions of service, the previous award or settlement does regulate the relations
196 Social Justice and Labour Jurisprudence

between the employer and the employees. The court never holds justice as hostage with law as
janitor. Law, if at all, liberates justice through the judicial process. Fundamental error can be
avoided only by remembering fundamental values.
At this stage I may record my firm conclusion that for the reasons already given, the settlement
under the ID Act does not suffer death merely because of the notice issued under Section 19(2).
All that is done is a notice ‘intimating its intention to terminate the award’. The award, even if
it ceases to be operative qua award, continues qua contract. Therefore, if the ID Act regulates
the jural relations between the LIC and its employees—an ‘if ’ we will presently scan—then the
rights under the Settlements of 1974 remain until replaced by a later award or settlement.
In my view, to reverse the High Court’s holding will be to disregard the consistent current of
case-law—a step I hesitate to take in the sensitive area of labour relations under a Constitution
with social justice slant. Lord Herschell, in Russell vs Russell,88 observed:

I have no inclination towards a blind adherence to precedents. I am conscious that the law
must be moulded by adapting it on established principles to the changing conditions which
social development involves.

The next logical question then is as to whether the ID Act is a general legislation pushed out
of its province because of the LIC Act, a special legislation in relation to the Corporation
employees. Immediately, we are confronted with the question as to whether the LIC Act is a
special legislation or a general legislation, because the legal maxim generalia specialibus non
derogant is ordinarily attracted where there is a conflict between a special and a general statute
and an argument of implied repeal is raised. Craise states the law correctly:89

The general rule, that prior statutes are held to be repealed by implication by subsequent
statutes if the two are repugnant, is said not to apply if the prior enactment is special and the
subsequent enactment is general, the rule of law being, as stated by Lord Selbourne in Seward
vs Ver Cruz,90 ‘that where there are general words in a later Act capable of reasonable and
sensible application without extending them to subjects specially dealt with by earlier
legislation, you are not to hold that earlier and special legislation indirectly repealed, altered,
or derogated from merely by force of such general words, without any indication of a particular
intention to do so. There is a well-known rule which has application to this case, which is
that a subsequent general Act does not affect a prior special Act by implication. That this is
the law cannot be doubted, and the cases on the subject will be found collected in the third
edition of Maxwell is generalia specialibus non derogant—i.e. general provisions will not abrogate
special provisions. When the legislature has given its attention to a separate subject and made
provision for it, the presumption is that a subsequent general enactment is not intended to
interfere with the special provision unless it manifests that intention very clearly. Each enact-
ment must be construed in that respect according to its own subject-matter and its own terms.

The crucial question, which demands an answer before we settle the issue, is as to whether
the LIC Act is a special statute and the ID Act a general statute so that the latter pro tanto repeals
or prevails over the earlier one. What do we mean by a special statute and, in the scheme of the
two enactments in question, which can we regard as the special Act and which the general? An
implied repeal is the last judicial refuge and, unless driven to that conclusion, is rarely resorted
to. The decisive point is as to whether the ID Act can be displaced or dismissed as a general
statute. If it can be and if the LIC Act is a special statute, the proposition contended for by the
appellant that the settlement depending for its sustenance on the ID Act cannot hold good
against Section 11 and Section 49 of the LIC Act, read with Regulation 58 thereunder. This
exercise constrains me to study the scheme of the two statutes in the context of the specific
controversy I am dealing with.
 Collective Bargaining Agreement Issues 197

There is no doubt that the LIC Act, as its long title suggests, is an Act to provide for the
nationalisation of life insurance business in India by transferring all such business to a Corporation
established for the purpose and to provide for the regulation and control of the business of the
Corporation and for matters connected therewith or incidental thereto. Its primary purpose
was to nationalise private insurance business and to establish the Life Insurance Corporation
of India. Inevitably, the enactment spelt out the functions of the Corporation, provided for
the transfer of existing life insurance business to the Corporation and set out in detail how the
management, finance, accounts and audit of the Corporation should be conducted. Incidentally,
there was provision for transfer of service of existing employees of the insurers to the Corporation
and, sub-incidentally, their conditions of service also had to be provided for. The power to make
regulations covering all matters of management was also vested in appropriate authorities. It is
plain and beyond dispute that so far as nationalisation of insurance business is concerned, the
LIC Act is a special legislation, but equally indubitably, is the inference, from a bare perusal of
the subject, scheme and sections and understanding of the anatomy of the Act, that it has
nothing to do with the particular problem of disputes between employer and employees, or
investigation and adjudication of such disputes. It does not deal with workmen and disputes
between workmen and employers or with industrial disputes. The Corporation has an army of
employees who are not workmen at all. For instance, the higher echelons and other types of
employees do not fall within the scope of workmen as defined in Section 2(s) of the ID Act.
Nor is the Corporation’s main business investigation and adjudication of labour disputes any
more than a motor manufacturer’s chief business is spraying paints.
In determining whether a statute is a special or a general one, the focus must be on the
principal subject-matter plus the particular perspective. For certain purposes, an Act may be
general and for certain other purposes it may be special and we cannot blur distinction when
dealing with finer points of law. In law, we have a cosmos of relativity, not absolutes—so too in
life. The ID Act is a special statute devoted wholly to investigation and settlement of industrial
disputes, which provides definitionally for the nature of industrial disputes coming within its
ambit. It creates an infrastructure for investigation into, solution of and adjudication upon
industrial disputes. It also provides the necessary machinery for enforcement of awards and
settlements. From alpha to omega the ID Act has one special mission—the resolution of industrial
disputes through specialised agencies according to specialised procedures and with special
reference to the weaker categories of employees coming within the definition of workmen.
Therefore, with reference to industrial disputes between employers and workmen, the ID Act is
a special statute, and the LIC Act does not speak at all with specific reference to workmen. On
the other hand, its powers relate to the general aspects of nationalisation, of management when
private businesses are nationalised and a plurality of problems which, incidentally, involve transfer
of service of existing employees of insurers. The workmen qua workmen and industrial disputes
between workmen and the employer as such are beyond the orbit of and have no specific or
special place in the scheme of the LIC Act. And whenever there was a dispute between workmen
and management, the ID Act mechanism was resorted to.
What are we confronted with in the present case, so that I may determine as between the two
enactments which is the special? The only subject which has led to this litigation and which is
the bone of contention between the parties is an industrial dispute between the Corporation
and its workmen qua workmen. If we refuse to be obfuscated by legal abracadabra and see
plainly what is so obvious, the conclusion that flows, in the wake of the study I have made, is
that vis-à-vis ‘industrial disputes’ at the termination of the settlement as between the workmen
and the Corporation the ID Act is a special legislation and the LIC Act a general legislation.
Likewise, when compensation on nationalisation is the question, the LIC Act is the special
statute. An application of the generalia maximum as expounded by English textbooks and
decisions leaves us in no doubt that the ID Act being special law, prevails over the LIC Act,
which is but general law.
198 Social Justice and Labour Jurisprudence

I am satisfied in this conclusion by citations but I content myself with a recent case where
this Court, tackling a closely allied question, came to the identical conclusion.91 The problem
that arose there was as to whether the standing orders under the Industrial Employment (Standing
Orders) Act, 1946, prevailed as against Regulations regarding the age of superannuation made
by the Electricity Board under the specific power vested by Section 79(c) of the Electricity
(Supply) Act, 1948, which was contended to be a special law as against the Industrial Employment
(Standing Orders) Act. This Court (a Bench of three Judges) speaking through Chinnappa
Reddy, J., observed:92

The maximum ‘generalia specialibus non derogant’ is quite well known. The rule flowing from
the maxim has been explained in Mary Seward vs The owner of the ‘Vera Cruz’ 93 as follows:

Now if anything be certain it is this, that where there are general words in a later Act
capable of reasonable and sensible application without extending them to subjects specially
dealt with by earlier legislation, you are not to hold that earlier and special legislation
indirectly repealed, altered or derogated from merely by force of such general words, without
any indication of a particular intention to do so.

In J.K. Cotton Spinning & Weaving Mills Co. Ltd. vs State of U.P.,94 this Court observed:

The rule that general provisions should yield to specific provisions is not an arbitrary principle
made by lawyers and judges but springs from the common understanding of men and women
that when the same person gives two directions, one covering a large number of matters in
general and another to only some of them, his intention is that these latter directions should
prevail as regards these while as regards all the rest the earlier direction should have effect.

We have already shown that the Industrial Employment (Standing Orders) Act is a special
Act dealing with a specific subject, namely with conditions of service, enumerated in the Schedule,
of workmen in industrial establishments. It is impossible to conceive that Parliament sought to
abrogate the provisions of the Industrial Employment (Standing Orders) Act, embodying as they
do hardwon and precious rights of workmen and prescribing as they do an elaborate procedure,
including a quasi-judicial determination, by a general, incidental provision like Section 79(c) of
the Electricity (Supply) Act. It is obvious that Parliament did not have before it the Standing
Orders Act when it passed the Electricity (Supply) Act and Parliament never meant that the
Standing Orders Act should stand pro tanto repealed by Section 79(c) of the Electricity Supply
Act. We are clearly of the view that the provisions of the Standing Orders Act must prevail over
Section 79(c) of the Electricity Supply Act, in regard to matters to which the Standing Orders
Act applies.
I respectfully agree and apply the reasoning and the conclusion to the near-identical situation
before me and hold that the ID Act relates specially and specifically to industrial disputes between
workmen and employers and the LIC Act, like the Electricity (Supply) Act, 1948, is a general
statute which is silent on workmen’s disputes, even though it may be a special legislation regulating
the take over of private insurance business.
A plausible submission was made by the appellants, which was repelled by the High Court,
that the LIC Act contained provisions regarding conditions of service of employees and they
would be redundant if the ID Act was held to prevail. This is doubly fallacious. For one thing,
the provisions of Sections 11 and 49 are the usual general provisions giving a statutory corporation
(like a municipality or university) power to recruit and prescribe conditions of service of its
total staff—not anything special regarding ‘workmen’. This Court in Bangalore Water Supply and
Sewerage95 case (7 Judges’ Bench) and long ago in D.N. Banerji vs P.R. Mukherjee and Others96
(5 Judges’ Bench) has held that the ID Act applied to workmen employed by those bodies
 Collective Bargaining Agreement Issues 199

when disputes arose. The general provision would still apply to other echelons and even to
workmen if no industrial dispute was raised. Secondly, no case or redundant words arose because
the Corporation, like a university, employed not only workmen but others also and to regulate
their conditions of service, power was needed. Again, in situations where no dispute arose,
power in the employer to fix the terms of employment had to be vested. This is a common pro-
vision of a general sort, not a particularised provision to canalise an industrial dispute.
What is special or general is wholly a creature of the subject and context and may vary with
situation, circumstances and angle of vision. Law is no abstraction but realises itself in the living
setting of actualities. Which is a special provision and which general, depends on the specific
problem, the topic for decision, not the broad rubric nor any rule of thumb. The peaceful co-
existence of both legislations is best achieved, if that be feasible, by allowing to each its allotted
field for play. Sense and sensibility, not mechanical rigidity, gives the flexible solution. It is
difficult for me to think that when the entire industrial field, even covering municipalities, uni-
versities, research councils and the like, is regulated in the critical area of industrial disputes by
the ID Act, Parliament would have provided an oasis for the Corporation where labour demands
can be unilaterally ignored. The general words in Sections 11 and 49 must be read contextually
as not covering industrial disputes between the workmen and the Corporation. Lord Haldane
had, for instance, in Watney Combe Reid & Co. vs Berners,97 observed (Cited in The Political
Tradition: The Lord Chancellors, 1912–1940, p. 221) that:

General words may in certain cases properly be interpreted as having a meaning or scope
other than the literal or usual meaning. They may be so interpreted where the scheme appearing
from the language of the legislature, read in its entirety, points to consistency as requiring modi-
fication of what would be the meaning apart from any context, or apart from the general law.

To avoid absurdity and injustice by judicial servitude to interpretative literality is a function of

the court and this leaves me no option but to hold that the ID Act holds where disputes erupt
and the LIC Act guides where other matters are concerned. In the field of statutory interpretation
there are no inflexible formulae or foolproof mechanisms. The sense and sensibility, the setting
and the scheme, the perspective and the purpose—these help the judge navigate towards the
harbour of true intendment and meaning. The legal dynamics of social justice also guide the court
in statutes of the type we are interpreting. These plural considerations lead me to the conclusion
that the ID Act is a special statute when industrial disputes, awards and settlements are the topic
of controversy, as here. There may be other matters where the LIC Act vis-à-vis the other statutes
will be a special law. I am not concerned with such hypothetical situations now.
I have set out, right at the outset, that my perspective must be benign in tune with Part IV of
the Constitution. In the U.P. State Electricity Board case98 this Court underscored the same
approach:

Before examining the rival contentions, we remind ourselves that the Constitution has
expressed a deep concern for the welfare of workers and has provided in Article 42 that the
State shall make provision for securing just and humane conditions of work and in Article 43
that the State shall endeavour to secure, by suitable legislation or economic organisation or in
any other way, to all workers, agricultural, industrial or otherwise, work, a living wage, con-
ditions of work ensuring a decent standard of life and full enjoyment of leisure etc. These are
among the ‘directive principles of State policy’. The mandate of Article 37 of the Constitution
is that while the directive principles of State policy shall not be enforceable by any court, the
principles are ‘nevertheless fundamental in the governance of the country’, and ‘it shall be the
duty of the State to apply these principles in making laws’. Addressed to courts, what the in-
junction means is that while courts are not free to direct the making of legislation, courts are
bound to evolve, affirm and adopt principles of interpretation which will further and not
200 Social Justice and Labour Jurisprudence

hinder the goals set out in the directive principles of State policy. This command of the
Constitution must be ever present in the minds of judges when interpreting statutes which
concern themselves directly or indirectly with matters set out in the directive principles of
State policy.

Whatever be the powers of regulation of conditions of service, including payment or non-

payment of bonus enjoyed by the employees of the Corporation under the LIC Act, subject to
the directives of the Central Government, they stem from a general Act and cannot supplant,
subvert or substitute the special legislation which specifically deals with industrial disputes
between workmen and their employers. In this view, other questions, which have been argued
at length and considered by my learned Brother, do not demand my discussion. The High
Court was right in its conclusion and I affirm its judgment. I, therefore, direct the Corporation
to fulfill its obligations in terms of the 1974 settlements and start negotiations, like a model
employer, for a fair settlement of the conditions of service between itself and its employees, having
realistic and equitable regard to the prevailing conditions of life, principles of industrial justice
and the directive underlying Part IV of the Constitution.
Judicial review of administrative action and judicial interpretation of legislative provisions
have serious limitations. Nevertheless, that power is a constitutional fundamental which must
be exercised circumspectly but without being scared by statutory omnipotence or executive
finality. The words of Professor Wade come to one’s mind:

The law is still developing, but the important thing is that the courts once again accept, as
they had always done except in their period of amnesia, that part of their duty was to require
public authorities to respect certain basic rules of fairness in exercising power over the citizen.

I dismiss the appeal with costs. This disposes of Transfer Case I of 1979 also, in which the
order has to be that a writ will issue to the Corporation compelling it to carry out the terms of
the Settlements of 1974 and injuncting it from acting upon or giving effect to the impugned
notices, circulars and the said amended Government Order, the said amended Staff Regulations
being Annexures F. H. J. K. and L thereto.

EXCERPTS FROM THE SEPARATE JUDGEMENT DELIVERED BY JUSTICE R.S. PATHAK

I have read with great respect the separate judgments of my brother Krishna Iyer and my brother
Koshal, but in view of the importance of the questions raised, I propose to deliver a separate
judgment.
The facts of the case have already been set out in the judgments prepared by my learned
Brothers. I need mention again a few only. Clause (8) of the two settlements of 24 January 1974
and 6 February 1974 made the following provisions respecting bonus:

(i) No profit-sharing bonus shall be paid. However, the Corporation may, subject to such
directions as the Central Government may issue from time to time, grant any other kind
of bonus to its Class III and IV employees.
(ii) An annual cash bonus will be paid to all Class III and Class IV employees at the rate of
15 per cent of the annual salary… actually drawn by an employee in respect of the financial
year to which the bonus relates.
(iii) Save as provided herein all other terms and conditions attached to the admissibility and
payment of bonus shall be as laid down in the settlement on bonus dated 26 June 1972.

The settlements were operative from 1 April 1973 to 31 March 1977. On 3 March 1978 the
Life Insurance Corporation (the ‘Corporation’) issued a notice, purportedly under Section 19(2),
 Collective Bargaining Agreement Issues 201

Industrial Disputes Act, 1947, of its intention to terminate the settlements on the expiry of two
months because of economic and other reasons. The notice, however, recited the reservation
that the material provisions of the Industrial Disputes Act did not apply to the Corporation and
that the notice was not necessary. Another notice, this time under Section 9-A, of the Industrial
Disputes Act and issued on the same date, stated that it was intended to effect a change in the
conditions of service of the workmen with effect from 1 June 1978. The change notified related
to the existing provision for bonus. A new clause was proposed.
The Life Insurance Corporation (Alteration of Remuneration and other Terms and Condi-
tion of Service of Employees) Order, 1957 (the ‘Standardisation Order’) was amended under
Section 111(2), Life Insurance Corporation Act (the ‘Corporation Act’) on 26 May 1978 with
effect from 1 June 1978 substituting a new Clause 9 for the original clause in respect of bonus.
On the same date, the Corporation acting under clauses (b) and (bb) of Section 49(2) of the
same Act amended the Life Insurance Corporation (Staff ) Regulations, also with effect from
1 June 1978 and substituted for the existing provision a new Regulation 58 along the same
lines. Clause 9 of the Standardisation Order and Regulation 58 of the Staff Regulations now
read as follows:

No employee of the Corporation shall be entitled to profit-sharing bonus. However, the

Corporation may, having regard to the financial condition of the Corporation, in respect of
any year and subject to the previous approval of the Central Government, grant non-profit-
sharing bonus to its employees in respect of that year at such rates as the Corporation may
think fit and on such terms and conditions as it may specify as regards the eligibility of such
bonus.

The amendments made in the Standardisation Order and the Staff Regulations, in their
application to the workmen of the Corporation, were made for the purpose of nullifying any
further claim to annual cash bonus in terms of the Settlements of 1974. The workmen challenged
the validity of the amendments insofar as it affected their claim to the bonus, and the Allahabad
High Court having found in their favour, the Corporation has appealed to this Court. An
identical controversy is the subject-matter of a writ petition filed in the Calcutta High Court
and transferred to this Court.
The first question is whether the new clause 9 of the Standardisation Order succeeds in
defeating the claims of the workmen. To determine that, Section 11 of the Corporation Act must
be examined. Sub-section (1) guarantees to the transferred employee the same tenure, at the same
remuneration and upon the same terms and conditions on his transfer to the Corporation as he
enjoyed on the appointed day under the insurer, and he is entitled to them until they are duly
altered by the Corporation or his employment in the Corporation is terminated. The sub-
section envisages alteration by the Corporation.
Sub-section (2) of Section 11, by its first limb, confers power on the Central Government to
alter the scales of remuneration and other terms and conditions of service transferred employee.
Predictably, when the transferred employees of different insurers were brought together in
common employment under the Corporation, they would have been enjoying different scales
of remuneration and other terms and conditions of service. The power under this part of sub-
section (2) is intended for the purpose of securing uniformity among them. The second limb of
sub-section (2) is the source of controversy before us. It empowers the Central Government to
reduce the remuneration payable or revise the other terms and conditions of service. That
power is to be exercised when the Central Government is satisfied that the interests of the Cor-
poration and its policy holders require such reduction or revision. The question is whether
the provision is confined to transferred employees only or extends to all employees generally. In
my opinion, it is confined to transferred employees. The provision is a part of the scheme enacted
in Chapter IV, providing for the transfer of existing life insurance business from the insurers to
202 Social Justice and Labour Jurisprudence

the Corporation, and the attendant concomitants of that process. There is provision for the
transfer of the assets and liabilities pertaining to the business, of provident funds, superannuation
and other like funds, of the services of existing employees of insurers to the Corporation and also
of the services of existing employees of chief agents of the insurers to the Corporation, and finally
for the payment of compensation to the insurers for the transfer of the business to the Cor-
poration. They are all provisions relating to the process of transfer. Sub-section (2) of Section 11
is a part of that process, involving at it does the integration of the Corporation’s staff and labour
force. While the first limb of the sub-section provides for securing uniformity among the trans-
ferred employees in regard to their scales of remuneration and other terms and conditions of
service, the second limb provides that if after such uniformity has been secured, or even in the
process of securing such uniformity, the Central Government finds that the interests of the
Corporation and its policy holders require a reduction in the remuneration payable or revision
of the other terms and conditions of service applicable to those employees, it may make an
order accordingly. It is true that the words ‘employees or any class of them’ in the second limb
are not prefaced by the qualifying word ‘transferred’ or ‘such’. But that was hardly necessary
when regard is had to the mosaic of sections in which the provision is located. Admittedly, the
first limb of sub-section (2) relates to transferred employees only, and it must be held that so
does the second limb. Both provisions are intended to constitute a composite process for
rationalising the scales of remuneration and other terms and conditions of service of transferred
employees with a view not only to effecting a standardisation between the transferred employees,
but also to revising their scales of remuneration and terms and conditions of service to a pattern
which will enable the newly established Corporation to become a viable and commercially suc-
cessful enterprise. The standpoint of the second limit of the sub-section, as its language plainly
indicates, is provided by the interest of the Corporation and its policy holders. For that reason,
it is open to the Central Government under the sub-section to ignore the guarantee contained in
sub-section (1) of Section 11 in favour of the employees, or anything contained in the Industrial
Disputes Act, 1947, or any other law for the time being in force or any award, settlement or
agreement for the time being in force. Benefits conferred thereunder on the employees must
yield to the need for ensuring that the Corporation and its policy holders do not suffer unreason-
ably from the burden of such benefits. The need for such a provision arises because it is a burden
by which the Corporation finds itself saddled upon the transfer; a burden not of its own making.
Unless the statute provided for such relief, the weight of that burden could conceivably cripple
the successful working of the Corporation from its inception as a business organisation. It is a
situation to be distinguished from what happens when the Corporation, launched on its normal
course, voluntarily assumes, in the course of its working, obligations in respect of its employees
or becomes subject to such obligations by reason of subsequent industrial adjudication. Like
any other employer, the Corporation is then open to the normal play of industrial relations in
contemporary or future time. That the two provisions of sub-section (2) are linked with the pro-
cess of transfer and integration is further indicated by the circumstance that the power thereunder
is vested in the Central Government. The scheme of the sections in Chapter IV indicates generally
that Parliament has appointed the Central Government as the effective and direct instrumentality
for bringing about the transfer and integration in the different sectors of that process.
There is no danger of an order made by the Central Government under the second limb of
sub-section (2) in respect of transferred employees being struck down on the ground that it
violates the equality provisions of Part III of the Constitution because similar action has not
been taken in respect of newly recruited employees. So long as such order is confined to what is
necessitated by the process of transfer and integration, the transferred employees constitute a
reasonably defined class in themselves and form the common basis with newly recruited
employees.
I am unable to subscribe to the view that the second limb to sub-section (2) of Section 11 is
related to employees generally, that is to say, both transferred and newly recruited employees, of
the Corporation.
 Collective Bargaining Agreement Issues 203

Another point is whether the power under the second limb of sub-section (2) of Section 11
can be exercised more than once. Clearly, the answer must be in the affirmative. To effectuate
the transfer appropriately and completely, it may be necessary to pass through different stages,
and at each stage to make a definite order. So long as the complex of orders so made is necessarily
linked with the process of transfer and integration, it is immaterial that a succession of orders is
made. I am not impressed by the circumstance that the original Bill moved in Parliament for
amending sub-section (2) of Section 11 contained the words ‘from time to time’ and that those
words were subsequently deleted when enactment took place. The intent of the legislative
provision must be discovered primarily from the legislation itself.
Now turning to the notification dated 26 May 1978 which inserted the new clause 9 in the
Standardisation Order, it is evident from the recital with which it opens that it is intended to
apply to transferred employees only. It declares explicitly that the Central Government is satisfied
that a revision of the terms and conditions of service of the transferred employees is considered
necessary. However, there is nothing to show that the amendment is related to the process of
transfer and integration. On the contrary, the circumstance that an identical provision has been
made by the Corporation, with the prior approval of the Central Government, in the new
Regulation 58 by a notification issued under both clauses (b) and (bb) of Section 49(2), that is
to say, in respect of both newly recruited as well as transferred employees, demonstrates that the
provision has no particular relationship with that process. Accordingly, I am of opinion that the
notification dated 26 May 1978 purporting to amend the Standardisation Order is invalid.
It has no effect on the right to bonus claimed by the workmen.
That takes us to the question whether the new Regulation 58 inserted in the (Staff ) Regulations
by the Life Insurance Corporation of India (Staff ) Second Amendment Regulations, 1978 can
be invoked against the workmen of the Corporation.
The workmen contend that the Industrial Disputes Act constitutes special legislation for the
resolution of industrial disputes and inasmuch as it has been specially enacted for the promotion
of harmonious relations between an employer and his workmen all matters concerning the
workmen must be regarded as falling within the scope of the Industrial Disputes Act. The
Corporation Act, it is said, has a different orientation. It is concerned primarily with the nation-
alisation of life insurance business; and the employment of a staff, and their terms and conditions
of service as well as disputes concerning them, are subsidiary to the main purpose of national-
isation. The workmen, it is urged, are a special category of the total staff employed by the Cor-
poration, and as regards them, it is the Industrial Disputes Act and not the Corporation Act
which governs. Accordingly, the argument goes, a settlement effected under Section 18 of the
Industrial Disputes Act must continue to have force as determined by Section 19(2) of the Act
and even thereafter, and nothing contained in the Corporation Act or the Regulations made
thereunder can be permitted to affect the operation of its terms. It is urged that Regulation 58
cannot be applied in the case of those employees of the Corporation who are ‘workmen’ within
the meaning of the Industrial Disputes Act.
The case of the Corporation and the Union of India is that Regulation 58 was framed when
the settlements had ceased to be operative and binding under Section 19(2), Industrial Disputes
Act, that even if it be assumed that a contract existed between the parties at the time, it must
yield to Regulation 58, which had the force of law. It was contended that as regards the workmen
of the Corporation, the Corporation Act is a special law and the Industrial Disputes Act is the
general law and, therefore, Regulation 58 must prevail over any transaction under the Industrial
Disputes Act.
Before anything more, it is necessary to ascertain the true relationship of the parties in respect
of the settlements of 1974 at the time when Regulation 58 was framed. The settlements were to
remain in operation for a period of four years ending 31st March, 1977. Admittedly, they were
settlements reached under the Industrial Disputes Act. There is no dispute that they were settle-
ments governed by Section 19, Industrial Disputes Act. Therefore, by virtue of Section 19(2)
204 Social Justice and Labour Jurisprudence

they were binding up to 31 March 1977, the period agreed upon by the parties and they
continued to be binding on the parties thereafter until the expiry of two months from the date
on which written notice of the intention to terminate the settlement was given by one of the
parties to the other.
It is desirable to appreciate what is a settlement as understood in the Industrial Disputes Act.
In essence, it is a contract between the employer and the workmen prescribing new terms and
conditions of service. These constitute a variation of existing terms and conditions. As soon as
the settlement is concluded and becomes operative, the contract embodied in it takes effect and
the existing terms and conditions of the workmen are modified accordingly. Unless there is
something to the contrary in a particular term or condition of the settlement the embodied
contract endures indefinitely, continuing to govern the relation between the parties in the future,
subject of course to subsequent alteration through a fresh settlement, award or valid legislation.
I have said that the transaction is a contract. But it is also something more. Conceptually, it is a
‘settlement’. It concludes or ‘settles’ a dispute. Differences which have arisen and were threatening
industrial peace and harmony stand resolved in terms of a new contract. In order that the new
contract be afforded a chance of being effectively worked out, a mandate obliging the parties to
unreservedly comply with it for a period of time is desirable. It was made ‘binding’ by the
statute for such period. Section 19(2) was enacted. The spirit of conciliation, the foundation of
the settlement, was required by law to bind the parties for the time prescribed. Immediate regis-
tration in respect of matters covered by the settlement was banned. Section 23(c) prohibited
strikes by the workmen in breach of the contract and lock-outs by the employer in respect of
such matters. A breach of any term was made punishable by Section 29. Certainly industrial
relations is essential to industry, and a period of such certainty is ensured by Section 19(2). On
the expiry of the period prescribed in the sub-section, the conceptual quality of the transaction
as a ‘settlement’ comes to an end. The ban lifts. The parties are no longer bound to maintain the
industrial status quo in respect of matters covered by the settlement. They are at liberty to seek
an alteration of the contract. But until altered, the contract continues to govern the relations
between the parties in respect of the terms and conditions of service.
The position seems comparable with what happens in the case of an award. Section 19(2)
and Section 19(6) contain similar provisions. In the case of an award, this Court has laid down
in South Indian Bank Limited vs A.R. Chacko,99 that after the period of operation of an award
has expired, the award does not cease to be effective. It continues to be binding on the parties,
by virtue of Section 19(6), until notice has been given by one of the parties of the intention to
terminate it and two months have elapsed from the date of such notice. Thereafter,—it will
continue to have its effect as a contract between the parties that has been made by industrial
adjudication in place of the old contract… the very purpose for which industrial adjudication
has been given the peculiar authority and right of making new contracts between employers
and workmen makes it reasonable to think that even though the period of operation of the
award and the period for which it remains binding on the parties may elapse—in respect of
both of which special provisions have been made under Sections 23 and 29 respectively—may
expire, the new contract would continue to govern the relations between the parties till it is
displaced by another contract.
Later in Md. Qasim Larry, Factory Manager, Sasamusa Sugar Works vs Muhammad Samsuddin100
the court held that when an award was made and it prescribed a new wage structure, in law the
old contractual wage structure became inoperative and its place was taken by the wage structure
prescribed by the award. The court said:

In a sense, the latter wage structure must be deemed to be a contract between the parties,
because that, in substance, is the effect of industrial adjudication. The true legal position is
that when industrial disputes are decided by industrial adjudication and awards are made,
the said awards supplant contractual terms in respect of matters covered by them and are
substituted for them.
 Collective Bargaining Agreement Issues 205

Learned counsel for the Corporation and the Union of India submit that the law declared by
this Court in respect of an award does not hold true in the case of a settlement. I am unable to
agree. Not only are the statutory provisions pertaining to a settlement and an award comparable
in this regard but, if anything, the observations if read in respect of a settlement, which after all
is a voluntary agreement between the parties, would seem to hold more strongly.
The contract between the parties embodied in the settlement of 1974 set forth the terms and
conditions of service when Regulation 58 was substituted in the (Staff ) Regulations under
clauses (b) and (bb) of Section 49(2) of the Corporation Act. The question is whether Regulation
58 will prevail over the ‘settlement’ contract. For that purpose, it is necessary to examine the
controversy whether the Corporation Act is the general law and the Industrial Disputes Act the
special law or vice versa.
It will be noticed that the Corporation Act was enacted primarily for effecting the national-
isation of life insurance business by transferring all such business to a Corporation established
for the purpose. The principle provision in the Corporation Act is Section 7, which provides for
the transfer to, and vesting in, the Corporation of all the assets and liabilities appertaining to
the controlled business of the insurers. The central purpose being assured, the concomitant pro-
visions followed. These included making available to the insurers’ employees, under Section 11(1),
a continuous and unbroken tenure of employment on terms and conditions to which they
would have been entitled on the ‘appointed day’ as if the Corporation Act had not been passed.
It was evidently intended that in running the business the Corporation should broadly take off
from where the insurers had ceased. For the purpose of enabling it to discharge its functions
under the Act, the Corporation has been empowered by Section 23 to employ such number of
persons as it thinks fit. The power conferred in clauses (b) and (bb) of Section 49(2) to make
regulations prescribing the terms and conditions of service of newly recruited as well as transferred
employees has been conferred for the same purpose, that is to say, the purpose, specifically men-
tioned in Section 49(1), of giving effect to the provisions of the Act. Clearly, the object behind
Section 11(1), Section 23 and clauses (b) and (bb) of Section 49(2) is to provide staff and
labour for the purpose of the proper management of the nationalised life insurance business.
On the other hand, the Industrial Disputes Act deals specifically with a special subject-matter,
the investigation and settlement of industrial disputes between an employer and his workmen.
An ‘industrial dispute’ as defined by Section 2(k) is a collective dispute. It is a special kind of
dispute. Except for a case under Section 2-A, the entire body of workmen or substantial number
of them constitutes a party to the dispute. And all the employees of an employer are not
‘workmen’. Those employees are ‘workmen’ who satisfy the definition contained in Section 2(s).
A restricted category of employees is contemplated, and in an industrial dispute that category
alone of all the employees can be interested. The resolution of industrial disputes under the Act
is envisaged through the particular machinery and processes detailed therein. A special jurisdic-
tion is created for the purpose. Industrial disputes, according to the Act, can be resolved by
settlement or an award, there are provisions setting forth the consequences of a settlement or an
award, and there are also provisions indicating how a change can be initiated in the resulting
industrial relations. Other chapters in the Industrial Disputes Act lay down the law in respect of
strikes and lock-outs, lay-off, retrenchment and closure and penalties for breach of its provisions.
Plainly, if a settlement resolves an industrial dispute under the Industrial Disputes Act, it pertains
to the central purpose of that Act. The Act constitutes a special law in respect of a settlement
reached under its auspices between an employer and his ‘workmen’ employees. The consequences
of such settlement are the product of the special law. The Corporation Act does not possess the
features outlined above. It deals only generally in regard to a staff and labour force. They are
referred to compendiously as ‘employees’. No special provision exists in regard to industrial
disputes and their resolution and the consequences of that resolution. The special jurisdiction
created for the purpose under the Industrial Disputes Act is not the subject-matter of the
Corporation Act at all. It would be correct to say that no corresponding provision in the
206 Social Justice and Labour Jurisprudence

Corporation Act, a subsequent enactment, deals with the subject-matter enacted in the Industrial
Disputes Act. Yet Parliament intended to provide for the Corporation’s ‘workmen’ employees
the same opportunities as are available under the Industrial Disputes Act to the workmen of
other employers. That is demonstrated by Section 2(a)(i) of that Act. The expression ‘appropriate
Government’ is specifically defined by it in relation to an industrial dispute concerning the Life
Insurance Corporation. Both the Central Government and the Corporation understood the In-
dustrial Disputes Act in that light, for one finds that Regulation 51(2) of the (Staff ) Regulations
made by the Corporation under clauses (b) and (bb) of Section 49(2) of the Corporation Act,
with the previous approval of the Central Government, speaks of giving effect to a revision of
scales of pay, dearness allowance or other allowances ‘in pursuance of any award, agreement or
settlement’.
In my opinion, it is difficult to resist the conclusion that the Industrial Disputes Act is a
special law and must prevail over the Corporation Act, a general law, for the purpose of protecting
the sanctity of transactions concluded under the former enactment. It is true that as laid down
in L.I.C. of India vs Sunil Kumar Mukherjee101 and reiterated in Sukhdev Singh vs Bhagatram,102
the Regulations framed under the Corporation Act have the force of law. But that is of little
moment if no reference is permissible to the Regulations when considering the validity and
operation of the ‘settlement’ contract. Accordingly, Regulation 58, a product of the Corporation
Act, cannot supersede the contract respecting bonus between the parties resulting from the
settlements of 1974. Support is derived for this conclusion from U.P. State Electricity Board vs
H.S. Jain,103 where reference has been made to Mary Sewards vs Owner of the ‘Vera Cruz’ 104 and
J.K. Cotton Spinning & Weaving Mills Co. Ltd. vs State of U.P.105
At the same time, it is pertinent to note that the ‘workmen’ employees of the Corporation
continue to be governed in matters not covered by the settlements by the (Staff ) Regulations,
and that position is expressly recognised in clause 12(4) of the settlements of 1974.
Clause 12(4) declares:

Except as otherwise provided or modified by this settlement, the workmen shall continue to
be governed by all the terms and conditions of service as set forth and regulated by the Life
Insurance Corporation of India (Staff ) Regulations, 1960… as also the administration
instructions…

Our attention has been drawn to Section 11(1), Corporation Act, which empowers the
Corporation to duly alter the terms and conditions of service of transferred employees. In
construing the scope of the Corporation’s powers in that behalf, it seems to me that appropriate
importance should be attached to the qualifying word ‘duty’. When the Corporation seeks to
alter the terms and conditions of transferred employees, it must do so in accordance with law,
and that requires it to pay proper regard to the sanctity of rights acquired by the ‘workmen’ em-
ployees under settlements or awards made under the Industrial Disputes Act. The only provision,
so far as I can see, where the Corporation Act permits disregard of the Industrial Disputes Act
and awards, settlements or agreements is the second limb of Section 11(2). And the scope of
that provision, as I have explained, is confined to the peculiar circumstance in which the Cor-
poration, immediately on coming into existence, finds itself saddled with a recurring financial
burden, by virtue of the service of the transferred employees, too heavy for its own viability as a
business organisation. No such provision is to be found elsewhere in the Corporation Act. It is
conspicuous by its absence in clauses (b) and (bb) of Section 49(2). The provision in Section 11(2)
has been made for the purpose of protecting the interests of the Corporation and its policy
holders. The policy holders constitute an important and significant sector of public interest.
Indeed, the avowed object of the entire Corporation Act is to provide absolute security to the
policy holders in the matter of their life insurance protection. That is assured by a wise man-
agement of the Corporation’s business, and by ensuring that when settlements are negotiated
 Collective Bargaining Agreement Issues 207

between the Corporation and its workmen or when industrial adjudication is initiated in labour
courts and industrial tribunals, the protection of the policy holders will find appropriately
significant emphasis in the deliberations.
In the view that the notification dated 26 May 1978 purporting to amend the Standardisation
Order by substituting Clause 9 is invalid and the newly enacted Regulation 58 does not affect
the contract in respect of bonus embodied in the settlements of 1974 between the Life Insurance
Corporation and its ‘workmen’ employees, effect must be given to that contract and this appeal
must fail and the writ petition, transferred from the Calcutta High Court, must succeed. If the
terms and conditions of service created by the contract need to be reconsidered, recourse must
be had to the modes recognised by law—negotiated settlement, industrial adjudication or
appropriate legislation.
In the result, Civil Appeal 2275 of 1978 is dismissed with costs of the first, second and third
respondents. The fourth respondent shall bear its own costs. The Transfer Petition 1 of 1979 is
allowed in the terms set out above, costs to be paid to the petitioners by the second respondent.

EXCERPTS FROM THE SEPARATE JUDGEMENT DELIVERED BY JUSTICE KOSHAL

By this judgment I shall dispose of Civil Appeal 2275 of 1978 which has been instituted by
special leave granted by this Court against a judgment dated 11 August 1978 of a Division
Bench of the Allahabad High Court allowing a petition under Article 226 of the Constitution
of India and issuing a writ of mandamus to the Life Insurance Corporation of India (hereinafter
referred to as ‘the Corporation’) directing it not to give effect to a notice dated 6 May 1978,
issued by it under Section 9-A of the Industrial Disputes Act (‘ID Act’ for short) as also to a
notification dated the 26 May 1978, issued under sub-section (2) of Section 11 of the Life
Insurance Corporation Act, 1956 (hereinafter called ‘the LIC Act’). This judgment shall also
cover Transfer Case 1 of 1979 in which another petition under Article 226 aforesaid instituted
before the High Court of Calcutta and raising the same questions which fall for decision in the
said appeal is awaiting disposal by us as that petition was transferred to this Court by its order
dated 10 September 1979.
The petition decided by the Allahabad High Court was filed by the Class III and Class IV
employees of the Corporation challenging the right of the employer and the Union of India to
change to the detriment of the said employees a condition of service regarding the payment to
them of bonus to which they had earlier become entitled through a settlement with the
Corporation made under Section 18 of the ID Act.
The petition last-mentioned arose in circumstances which may be set out in some detail. The
Corporation came into existence on 1 September 1956, as a statutory authority established
under the LIC Act. As from the said date, all institutions carrying on life insurance business in
India were nationalised to the extent of such business and their corresponding assets and liabilities
were transferred to the Corporation. Section 11 of the LIC Act provided for the transfer of ser-
vice of those employees of such institutions who were connected with life insurance business
(described in the Act as ‘controlled business’) immediately before the said date to the Corporation
and for some other matters. As it is the interpretation of that section which is mainly in controversy
before us, it may be set out here in extenso:

11. (1) Every whole-time employee of an insurer whose controlled business has been transferred
to and vested in the Corporation and who was employed by the insurer wholly or mainly in
connection with his controlled business immediately before the appointed day shall, on and
from the appointed day, become an employee of the Corporation, and shall hold his office
therein by the same tenure, at the same remuneration and upon the same terms and conditions
and with the same rights and privileges as to pension and gratuity and other matters as he
would have held the same on the appointed day if this Act had not been passed, and shall
208 Social Justice and Labour Jurisprudence

continue to do so unless and until his employment in the Corporation is terminated or until
his remuneration, terms and conditions are duly altered by the Corporation:
Provided that nothing contained in this sub-section shall apply to any such employee who
has, by notice in writing given to the Central Government prior to the appointed day, intimated
his intention of not becoming an employee of the Corporation.
(2) Where the Central Government is satisfied that for the purpose of securing uniformity
in the scals of remuneration and the other terms and conditions of service applicable to
employees of insurers whose controlled business has been transferred to, and vested in,
the Corporation, it is necessary so to do, or that, in the interests of the Corporation and
its policy holders, a reduction in the remuneration payable, or a revision of the other
terms and conditions of service applicable, to employees or any class of them is called for,
the Central Government may, notwithstanding anything contained in sub-section (1),
or in the Industrial Disputes Act, 1947, or in any other law for the time being in force, or
in any award, settlement or agreement for the time being in force, alter (whether by way
of reduction or otherwise) the remuneration and the other terms and conditions of service
to such extent and in such manner as it thinks fit; and if the alteration is not acceptable
to any employee, the Corporation may terminate his employment by giving him compen-
sation equivalent to three months’ remuneration unless the contract of service with such
employee provides for a shorter notice of termination.
Explanation: The compensation payable to an employee under the sub-section shall be
in addition to, and shall not affect, any pension, gratuity, provident fund money or any
other benefit to which the employee may be entitled under his contract of service.
(3) If any question arises as to whether any person was a whole-time employee of an insurer
or as to whether any employee was employed wholly or mainly in connection with the
controlled business of an insurer immediately before the appointed day the question
shall be referred to the Central Government whose decision shall be final.
(4) Notwithstanding anything contained in the Industrial Disputes Act, 1947, or in any
other law for the time being in force, the transfer of the services of any employee of an
insurer to the Corporation shall not entitle any such employee to any compensation
under that Act or other law, and no such claim shall be entertained by any court, tribunal
or other authority.

Section 23 of the LIC Act gives to the Corporation the power to employ such number of
persons as it thought fit for the purpose of enabling it to discharge its functions under the Act
and declared that every person so employed or whose service stood transferred to the Corporation
under Section 11 would be liable to serve anywhere in India. Section 49 conferred on the Cor-
poration the power to make regulations for the purpose of giving effect to the provisions of the
Act with the previous approval of the Central Government. Sub-section (2) of that section enu-
merated various matters in relation to which such power was particularly conferred. Clauses (b)
and (bb) of sub-section (2) read thus:

(b) the method of recruitment of employees and agents of the Corporation and the terms
and conditions of service of such employees or agents;
(bb) the terms and conditions of service of persons who have become employees of the
Corporation under sub-section (1) of Section 11.

On 1 June 1957, the Central Government, in exercise of the powers conferred on it by sub-
section (2) of Section 11 of the LIC Act, promulgated the Life Insurance Corporation (Alteration
of Remuneration and other Terms and Conditions of Service of Employees) Order, 1957 (for
short ‘the 1957 Order’) altering the remuneration and other terms and conditions of service of
 Collective Bargaining Agreement Issues 209

those employees of the Corporation whose services had been transferred to it under sub-
section (1) of that section (referred to hereinafter as ‘the transferred employees’). Clause 9 of the
1957 Order declared that no bonus would be paid but directed that the Corporation would set
aside an amount every year for expenditure on schemes of general benefit to the employees such
as free insurance scheme, medical benefit schemes and on other amenities to them. On 26 June
1959, the Central Government amended Clause 9 of the 1957 Order so as to provide that non-
profit-sharing bonus would be paid to those employees of the Corporation whose salary did not
exceed Rs 500 per month.
On 2 July 1959 there was a settlement between the Corporation and its employees providing
for payment to them of cash bonus at the rate of 1½ months’ basic salary for the period from 1
September 1956 to 31 December 1961.
In the year 1960 were framed, under Section 49 of LIC Act, the Life Insurance Corporation
of India (Staff ) Regulations, 1960 (the 1960 Regulations, for brevity), whereof Regulation 58
ran thus:

The Corporation may, subject to such directions as the Central Government may issue,
grant non-profit-sharing bonus to its employees and the payment thereof, including conditions
of eligibility for the bonus, shall be regulated by instructions issued by the Chairman from
time to time.

Orders were again passed on 14 April 1962 and 3 August 1963, the effect of which was to
remove the limit of Rs 500 on the basic salary as a condition of eligibility for payment of bonus.
The settlement dated 2 July 1959 was followed by three others which were arrived at on
29 January 1963, 20 June 1970 and 26 June 1972, respectively and each one of which provided
for payment of bonus at a particular rate.
Disputes between the Corporation and its workmen in regard to the latter’s conditions of
service persisted nevertheless, but were resolved by two settlements dated 24 January 1974, and
6 February 1974, arrived at in pursuance of the provisions of Section 18 read with Section 2(p)
of the ID Act. The Corporation was a party to both the settlements which were identical in
terms. However, while four of the five Unions of workmen subscribed to the first settlement,
the fifth Union was a signatory to the second. The settlements provided for revised scales of pay,
the method of their fixation and dearness and other allowances as well as bonus. Clause 8 of
each of the settlements was to the following effect:

Bonus
(i) No profit-sharing bonus shall be paid. However, the Corporation may, subject to
such directions as the Central Government may issue from time to time, grant any
other kind of bonus to its Class III and IV employees.
(ii) An annual cash bonus will be paid to all Class III and Class IV employees at the rate
of 15 per cent of the annual salary (i.e. basic pay inclusive of special pay, if any, and
dearness allowance and additional dearness allowance) actually drawn by an employee
in respect of the financial year to which the bonus relates.
(iii) Save as provided herein all other terms and conditions attached to the admissibility
and payment of bonus shall be as laid down in the settlement on bonus dated 26 June
1972.

Clause 12 of each settlement provided:

(1) This settlement shall be effective from 1 April 1973, and shall be for a period of four
years, i.e., from 1 April 1973 to 31 March 1977.
210 Social Justice and Labour Jurisprudence

(2) The terms of the settlement shall be subject to the approval of the Board of the Cor-
poration and the Central Government.
(3) This settlement disposes of all the demands raised by the workmen for revision of
terms and conditions of their service.
(4) Except as otherwise provided or modified by this settlement, the workmen shall continue
to be governed by all the terms and conditions of service as set forth and regulated by
the Life Insurance Corporation of India (Staff ) Regulations, 1960 as also the admin-
istrative instructions issued from time to time and they shall, subject to the provisions
thereof including any period of operation specified therein, be entitled to the benefits
thereunder.

It is not disputed that the settlements were approved by the Board of the Corporation as also
by the Central Government.
Under clause 11 of each settlement every employee of the Corporation had the option to
elect to be governed either by the new scale of pay applicable to him or the scale which he had
been enjoying hitherto. It is common ground between the parties that all the employees of the
Corporation opted for the new scales of pay and that bonus was paid in accordance therewith
for the years 1973–74 and 1974–75 in April 1974 and April 1975 respectively.
On 25 September 1975, the Payment of Bonus (Amendment) Ordinance, 1975 was pro-
mulgated by the President of India and was subsequently replaced by the Payment of Bonus
(Amendment) Act, 1976 which was brought into force with effect from the date last-mentioned.
This amending law considerably curtailed the rights of employees of industrial undertakings to
bonus, but was inapplicable to the Corporation by virtue of the provisions of Section 32 of the
Payment of Bonus Act. However, the payment of bonus for the year 1975–76 to the employees
of the Corporation was stopped under instructions from the Central Government, whose action
in that behalf was challenged by the employees through a petition under Article 226 of the
Constitution of India in the High Court of Calcutta, a single Judge of which issued a writ of
mandamus directing the Corporation to act in accordance with the terms of the settlement
dated 24 January 1974. The Corporation preferred a letters patent appeal against the decision
of the learned single Judge and that appeal was pending disposal when the Central legislature
promulgated the Life Insurance Corporation (Modification of Settlement) Act, 1976 (for short,
the 1976 Act) Section 3 of which laid down:

Notwithstanding anything contained in the Industrial Disputes Act, 1947, the provisions of
each of the settlements, insofar as they relate to the payment of an annual cash bonus to every
Class III and Class IV employee of the Corporation at the rate of fifteen per cent of his
annual salary, shall not have any force or effect and shall not be deemed to have any force or
effect on and from 1st day of April, 1975.

The 1976 Act was enacted on 29 May 1976 and was challenged by the workmen in this
Court which, on 21 February 1978, declared it to be void as offending Article 31(2) of the
Constitution of India through a judgment which is reported as Madan Mohan Pathak vs Union
of India,106 and directed the Corporation to forbear from implementing the 1976 Act and to
pay to its Class III and Class IV employees bonus for the years 1 April 1975 to 31 March 1976
and 1 April 1976 to 31 March 1977 in accordance with the terms of sub-clause (ii) of clause 8
of each settlement.
On 3 March 1978, the Corporation issued to its workmen a notice under sub-section (2) of
Section 19 of the ID Act declaring its intention to terminate the settlements on the expiry of a
period of two months from the date the notice was served. The notice, however, mentioned in
express terms that according to the Corporation no such notice was really necessary for ter-
mination of the settlement. On the same date, another notice was issued by the Corporation
 Collective Bargaining Agreement Issues 211

under Section 9-A of the ID Act stating that it intended to effect a change in accordance with
the contents of the annexure to the notice, as from 1 June 1978, in the conditions of service of
its workmen. The said annexure contained the following clause:

AND WHEREAS for economic and other reasons it would not be possible for the Life
Insurance Corporation of India to continue to pay bonus on the aforesaid basis;
Now, therefore, it is our intention to pay bonus to the employees of the Corporation in terms
reproduced hereunder:
No employee of the Corporation shall be entitled to profit-sharing bonus. However, the
Corporation may, having regard to the financial condition of the Corporation in respect of
any year and subject to the previous approval of the Central Government, grant non-profit-
sharing bonus to its employees in respect of that year at such rate as the Corporation may
think fit and on such terms and conditions as it may specify as regards the eligibility of such
bonus.

The workmen sent a reply to the two notices just above-mentioned and took the stand that
the Corporation had no right to render inoperative the clause regarding bonus contained in the
two settlements.
On 26 May 1978, the Corporation issued a notification under Section 49 of the LIC Act
substituting a new regulation for the then existing regulation bearing serial Number 58. The
new regulation was to come into force from 1 June 1978, and stated:

58. No employee of the Corporation shall be entitled to profit-sharing bonus. However, the
Corporation may, having regard to the financial condition of the Corporation, in respect of
any year and subject to the previous approval of the Central Government, grant non-profit-
sharing bonus to its employees in respect of that year at such rates as the Corporation may
think fit and on such terms and conditions as it may specify as regards the eligibility for such
bonus.

Simultaneously an amendment on the same lines was made in the 1957 Order (which, as
already stated, was restricted in its application to transferred employees only) by the substitution
of a new clause for the then existing clause 9 in pursuance of the provisions of sub-section (2) of
Section 11 of the LIC Act. The new clause is in the following terms:

9. No employee of the Corporation shall be entitled to profit-sharing bonus. However, the

Corporation may, having regard to the financial condition of the Corporation, in respect of
any year and subject to the previous approval of the Central Government, grant non-profit-
sharing bonus to its employees in respect of that year at such rates as the Corporation may
think fit and on such terms and conditions as it may specify as regards the eligibility for such
bonus.

It was the issuance of the two notices by the Corporation on 3 March 1978, under Section
19(2) and 9-A of the ID Act respectively and the action taken by the Central Government on
26 May 1978, by making new provisions in regard to the payment of bonus to the Corporation’s
employees, that furnished the cause of action for the latter to petition to the Allahabad High
Court under Article 226 of the Constitution of India.
After consideration of the various contentions raised before it, the Allahabad High Court
arrived at the following conclusions:

The ID Act is an ‘independent Act’ which deals with adjudication and settlement of matters
in disputes between an employer and his workmen. It is thus a special law which would
override the provisions of a general law like the LIC Act.
212 Social Justice and Labour Jurisprudence

Three corollaries follow from conclusion I:

(a) Section 23 of the LIC Act which envisages employment of persons by the Corporation
implies settlement of conditions of service which may legally be superseded (only) by
another settlement arrived at under Section 18 of the ID Act.
(b) The new Regulation 58 framed under Section 49 of the LIC Act and the notification
issued under sub-section (2) of Section 11 thereof substituting a new clause 9 in the 1957
Order are wholly ineffective against the operation of the 1974 settlements which were
arrived at in pursuance of the provisions of the ID Act and which, therefore, continue to
govern the parties thereto.
(c) After the issuance of the notices under Sections 19(2) and 9-A of the ID Act, the Cor-
poration had no power to alter the condition of service of its employees in regard to
bonus by a unilateral act as neither of the two sections confers such power on an employer.

Corollary (b) in conclusion II is in full accord with the view expressed in Madan Mohan
Pathak107 case by the Supreme Court inasmuch as it upheld the two settlements even though it
did not advert to Regulation 58 and further ruled that the conditions of service laid down in
those settlements could be varied only by a fresh settlement or award made under the provisions
of the ID Act and that till then sub-clause (ii) of clause 8 of each settlement [which is independ-
ent of clause (i) thereof ] would remain in full force. None of the authorities reported as
C. Sankaranarayanan vs State of Kerala,108 Roshan Lal vs Union,109 Sukhdev vs Bhagatram,110 Kalyanmal
Bhandari vs State of Rajasthan,111 State of U.P. vs Babu Ram Upadhya112 and I.T.O. vs M.C. Ponnoose113
and cited on behalf of the Corporation lays down any rule to the contrary.
In spite of clause 12 of the two settlements they did not cease to be binding on the parties
thereto even after the expiry of the period of 4 years mentioned in that clause and the notice
under Section 19(2) of the ID Act issued by the Corporation would not terminate the settlements
but would have the effect merely of paving the way for fresh negotiations. This proposition
follows from South Indian Bank Ltd. vs A.R. Chacko114 and Indian Link Chain Manufacturers
Ltd. vs Workmen,115 and is not negatived by the decision in Premier Automobiles Ltd. vs K.S. Wadke.116
Although Chacko case,117 dealt in terms with an award and not a settlement, no distinction
exists between the two and they stand on the same footing for the purpose of judging the effect
of a notice under Section 19(2) of the ID Act.
There is no dispute that no petition under Article 226 of the Constitution of India would lie
merely for the enforcement of a contract or for the recovery of an amount payable by the Cor-
poration to its employees where the latter had an alternative remedy under Section 10 or 33-C
of the ID Act. However, the relief sought by the workmen in the present case is directed only
against the action taken by the Corporation and the Union of India under Sections 19 and 9-A
of the ID Act and Sections 11(2) and 49 of the LIC Act a relief similar to that granted by this
Court in Madan Mohan Pathak118 case. The contention raised on behalf of the Corporation
about the non-maintainability of the petition is therefore without force.
It was on the basis of these conclusions that the writ of mandamus mentioned in the opening
paragraph of this judgment was issued by the High Court to the Corporation on whose behalf
the first four of those conclusions have been impugned before us and I proceed to examine the
same in the light of arguments advanced at length by learned counsel for the parties and for the
Class II employees of the Corporation who were permitted to intervene in the appeal before us.
As conclusion II consists merely of corollaries derived directly from conclusion I and it is the
correctness or otherwise of the latter that would determine the sustainability of the former, the
two may legitimately be dealt with together, although it is conclusion I on which I would pri-
marily concentrate.
 Collective Bargaining Agreement Issues 213

For convenience of examination, conclusion I may be split up into two propositions:

(a) The ID Act is a special law because it deals with adjudication and settlement of matters
in dispute between an employer and his workmen while the LIC Act is a general law.
(b) The ID Act, being a special law, would override a general law like the LIC Act.

Now in relation to proposition (a) it cannot be gainsaid that the ID Act deals with the ad-
judication or settlement of disputes between an employer and his workmen and would, therefore,
be a special law vis-a-vis another statute which covers a larger field and may thus be considered
‘general’ as compared to it. It cannot, however, be regarded as a special law in relation to all
other laws irrespective of the subject-matter dealt with by them. In fact a law may be special
when considered in relation to another piece of legislation but only a general one vis-a-vis still
another. An example will help illustrate the point. A law governing matters pertaining to medical
education would be a special law in relation to a statute embracing education of all kinds but
must be regarded as a general law when preference over it is claimed for what I may call a more
special law, such as an Act dealing with only one aspect of medical education, say, instruction in
the field of surgery. And even this ‘more special’ law may become general if there is a conflict
between it and another operating in a still narrower field, e.g., thoracic surgery. ‘Special’ and
‘general’ used in this context are relative terms and it is the content of one statute as compared
to the other that will determine which of the two is to be regarded as special in relation to the
other. Viewed in this light proposition (a) cannot stand scrutiny. The ID Act would no doubt
be a special Act in relation to a law which makes provision for matters wider than but inclusive
of those covered by it, such as the Indian Contract Act, as that is a law relating to contracts gen-
erally (including those between an industrial employer and his workmen), but it would lose
that categorisation and must be regarded as a general law when its rival is shown to operate in a
field narrower than its own. And such a rival is that part of the LIC Act which deals with
conditions of service of the employees of the LIC—a single industrial undertaking (of a special
type) as opposed to all others of its kind which fall within the ambit of the ID Act. Where the
competition is between these two Acts, therefore, the LIC Act must be regarded as a special law
and (in comparison thereto) the ID Act as a general law.
Proposition (b) is equally insupportable even if the ID Act is regarded as a special law in com-
parison to the LIC Act. The High Court appears to have somehow tried to apply the maxim
generalia specialibus non derogant to the situation with which it was concerned. But does that
maxim lead to the proposition under discussion?
The general rule to be followed in the case of a conflict between two statutes is that the later
abrogates the earlier one (leges posteriores priores contrarias abrogant). To this general rule there is
a well known exception, namely, generalia specialibus non derogant (general things do not derogate
from special things), the implications of which are thus stated succinctly by Earl Jowitt in ‘The
Dictionary of English Law’:

Thus a specific enactment is not affected by a subsequent general enactment unless the earlier
enactment is inconsistent with the later enactment, or unless there is some express reference
in the later enactment to the earlier enactment, in either of which cases the maxim leges
posteriores contrarias abrogant applies.

In other words a prior special law would yield to a later general law, if either of the following
two conditions is satisfied:

(i) The two are inconsistent with each other.

(ii) There is some express reference in the later to the earlier enactment.
214 Social Justice and Labour Jurisprudence

If either of these conditions is fulfilled the later law, even though general, will prevail.
The principles enunciated in Chapter 9 of ‘Maxwell’ on the ‘Interpretation of Statutes’ are to
the same effect:

A later statute may repeal an earlier one either expressly or by implication. But repeal by
implication is not favoured by the courts… If, therefore, earlier and later statutes can reasonably
be construed in such a way that both can be given effect to, this must be done… If, however,
the provisions of a later enactment are so inconsistent with or repugnant to the provisions of
an earlier one that the two cannot stand together, the earlier is abrogated by the later…
Wherever Parliament in an earlier statute has directed its attention to an individual case and
has made provision for it unambiguously, there arises a presumption that if in a subsequent
statute the legislature lays down a general principle, that general principle is not to be taken
as meant to rip up what the legislature had before provided for individually, unless an intention
to do so as is specially declared.

The same principles have been thus reiterated in Chapter 15 of ‘Craies on Statute Law’:

Parliament, in the exercise of its supreme legislative capacity, can extend, modify, vary, or re-
peal Acts passed in the same or previous sessions… The provisions of an earlier Act may be
revoked or abrogated in particular cases by a subsequent Act, either from the express lan-
guage used being addressed to the particular point, or from implication or inference from the
language used… Where two Acts are inconsistent or repugnant, the latter will be read as hav-
ing impliedly repealed the earlier. The court leans against implying a repeal, unless two Acts
are so plainly repugnant to each other that effect cannot be given to both at the same time, a
repeal will not be implied. Special Acts are not repealed by general Acts unless there is a
necessary inconsistency in the two Acts standing together. The latest expression of the will of
Parliament must always prevail. It does not matter whether the earlier or the latter enactment
is public, local and personal, or private, or is penal or deals with civil rights only, and the rule
is equally applicable to Orders in Council or Rules of Court if they have statutory force and
are made under authority empowering the rule-makers to supersede prior enactments as to
procedure. Before coming to the conclusion that there is a repeal by implication the court
must be satisfied that the two enactments are so inconsistent or repugnant that they cannot
stand together before they can, from the language of the later, imply the repeal of an express
prior enactment—i.e., the repeal must, if not express, flow from necessary implication… But
the rule must not be pressed too far, for, as Bramwell, L.J. said in Pellas vs Neptune Marine
Insurance Co.,119 a ‘general statute may repeal a particular statute’. And if a special enactment,
whether it be in a public or a private Act, and a subsequent general Act are absolutely repugnant
and inconsistent with one another, the courts have no alternative but to declare the prior
special enactment repealed by the subsequent general Act.

The criteria deducible from the texts of the three standard works just above-quoted are stated
below:

(i) The legislature has the undoubted right to alter a law already promulgated by it through
subsequent legislation.
(ii) A special law may be altered, abrogated or repealed by a later general law through an
express provision.
(iii) A later general law will override a prior special law if the two are so repugnant to each
other that they cannot coexist even though no express provision in that behalf is found
in the general law.
(iv) It is only in the absence of an express provision to the contrary and of a clear inconsistency
that a special law will remain wholly unaffected by a later general law.
 Collective Bargaining Agreement Issues 215

So let us see whether proposition (b) forming part of conclusion I arrived at by the High
Court conforms to these criteria. As already noticed Section 11 is one of the provisions of the
LIC Act which deal with terms and conditions of service of the employees of the Corporation.
Sub-section (1) of that section declares that insofar as a transferred employee is concerned, he
shall ‘hold his office therein by the same tenure, at the same remuneration and upon the same
terms and conditions… as he would have held the same… if this Act had not been passed…’.
This provision does certainly not exclude the application of the ID Act and, on the other hand,
preserves it insofar as it finds expression in the conditions of service of the concerned transferred
employee prior to his absorption in the Corporation. But the sub-section does not stop there
and specifically qualifies and limits the provision thus:

…unless and until his employment in the Corporation is terminated or until his remuneration,
terms and conditions are duly altered by the Corporation.

This qualification gives power to the Corporation to ‘duly’ alter the terms and conditions of
service of the transferred employees and obviously means that once such power is exercised, ‘the
only altered’ terms and conditions of service shall replace those hithertofore governing such em-
ployees. That this is what sub-section (1) clearly means was thus stated by Gajendragadkar, J.,
(as he then was) in LIC of India vs Sunil Kumar Mukherjee:120

The scheme of Section 11(1) is thus clear. With the transfer of the controlled business from
the insurer to the Corporation, the employees of the former became the employees of the
latter, but they were governed by the same terms and conditions until they were altered by
the latter.

Now the word ‘duly’ means properly, regularly or in due manner. In the context in which it
is used it may legitimately be given even a more restricted meaning, namely, in accordance with
law. The case put forward on behalf of the employees is that the only law contemplated here is
the ID Act specially because the non obstante clause occurring in sub-section (2) does not govern,
and is conspicuous by its absence from, sub-section (1) and that the expression ‘by the Cor-
poration’ does not mean ‘by the Corporation unilaterally’. This contention is devoid of force
for the simple reason that if reference to the provisions of the ID Act alone was contemplated
and the alterations envisaged were merely such as could be achieved by a settlement or award
resulting from a compliance thereof, not only would the expression ‘by the Corporation’ become
redundant (which would not be a situation conforming to the well known principle of inter-
pretation of statutes that a construction which leaves without effect any part of the language of
a statute will normally be rejected) but the express provisions of clause (bb) of sub-section (2) of
Section 49 of the LIC Act, which invest the Corporation with power to make regulations (albeit
with the approval of the Central Government) laying down the terms and conditions of service
of the transferred employees would also be rendered otiose. To the extent, therefore, that Sec-
tion 11(1) read with that clause confers on the Corporation the power to alter the terms and
conditions in question—a power not enjoyed by it under the provisions of the ID Act—it is
inconsistent with the ID Act and being a later law, would override that Act despite the absence
of the non obstante clause, the inconsistency having arisen from express language and not from
mere implication.
But the matter does not end here as sub-sections (2) and (4) of Section 11 and clause (b) of
sub-section (2) of Section 49 of the LIC Act pose other insurmountable hurdles in the way of
the acceptance of proposition (b). The scope of sub-section (2) of Section 11 was stated in LIC
of India vs Sunil Kumar Mukherjee121 by Gajendragadkar, J., in the following terms:

Section 11(2) as it originally stood was substantially modified in 1957, and the plain effect of
the provisions contained in the said sub-section as modified is that the Central Government
216 Social Justice and Labour Jurisprudence

is given the power to alter (whether by way of reduction or otherwise) the remuneration and
the other terms and conditions of service to such extent and in such manner as it thinks fit.
It is significant that this power can be exercised by the Central Government notwithstanding
anything contained in sub-section (1) or in the Industrial Disputes Act, 1947, or in any
other law, or in any award, settlement or agreement for the time being in force. It was thought
that for a proper functioning of the Corporation it was essential to confer upon the Central
Government an overriding power to change the terms and conditions of employees who
were wholly or mainly employed by the insurers prior to the appointed day. Having conferred
such wide power on the Central Government, Section 11(2) further provides that if the
alteration made by the Central Government in the terms and conditions of his service is not
acceptable to any employee, the Corporation may terminate his employment by giving him
compensation equivalent to three months’ remuneration unless the contract of service with
such employee provides for a shorter notice of termination. It is thus clear that in regard
to cases which fall under Section 11(2), if as a result of the alteration made by the Central
Government any employee does not want to work with the Corporation, he is given the op-
tion to leave its employment on payment of compensation provided by the last part of Sec-
tion 11(2). Thus, the scheme of the two sub-sections of Section 11 is clear. The employees of
the insurers, whose controlled business has been taken over, become the employees of the
Corporation, then their terms and conditions of service continue until they are altered by the
Central Government, and if the alteration made by the Central Government is not accept-
able to them, they are entitled to leave the employment of the Corporation on payment of
compensation as provided by Section 11(2).

In other words sub-section (2) of Section 11 not only gives to the Central Government the
power to alter the terms and conditions of service of the employees of the Corporation in cer-
tain situations, and to alter them even to the detriment of such employees, to such extent and in
such manner as it thinks fit, but also states in so many words that such power shall be exercisable—

Notwithstanding anything contained in sub-section (1) or in the Industrial Disputes Act,

1947 or in any other law for the time being in force, or in any award, settlement or agreement
for the time being in force.

The mandate of the legislature has been expressed in clear and unambiguous terms in this
non obstante clause and is to the effect that the power of the Central Government to alter con-
ditions of service of the employees of the Corporation shall be wholly unfettered and that any
provisions to the contrary contained in the ID Act or for that matter, in any other law for the
time being in force, or in any award, settlement, or agreement for the time being in force,
would not stand in the way of the exercise of that power even if such exercise is to the detriment
of the employees of the Corporation. The conferment of the power is thus in express supersession
of the ID Act and of any settlement made thereunder. The provisions of that Act and the two
settlements of 1974 must, therefore, yield to the dictates of Section 11(2) and to the exercise of
the power conferred thereby on the Central Government.
Sub-section (4) of Section 11 is again illuminating as in the matter of compensation to be
paid to a transferred employee it provides specifically that the provisions of sub-section (2) of
that section shall override those of the ID Act and of any other law for the time being in force
and that no claim to the contrary shall be entertained by any court, tribunal or other authority.
In the face of an express provision like this it is not open to the employees to contend that the
law laid down in the ID Act and not sub-section (2) of Section 11 would govern them.
The rule-making power conferred on the Corporation by Section 49 of the LIC Act must
also be held to be exercisable notwithstanding the provisions of the ID Act. In clause (b) of sub-
section (2) thereof the method of recruitment of employees and agents of the Corporation and
 Collective Bargaining Agreement Issues 217

the terms and conditions of their service are stated to be matters which the Corporation may
deal with through regulations subject, however, to the previous approval of the Central Gov-
ernment. This power is expressly conferred on the Corporation in addition to that with which
it is invested under clause (bb) of the same sub-section. If these two clauses were not meant to
override the provisions of the ID Act on the same subject they would be completely meaningless,
and that is a situation, as already pointed out, running directly counter to one of the accepted
principles of interpretation of statutes. Besides, these two clauses are not to be read in isolation
from Section 11. The subject-matter of the clauses and the section is overlapping and together
they form an integrated whole. The clauses must, therefore, be read in the light of Section 11.
Sub-section (1) of that section confers power on the Corporation to alter the terms and conditions
of service of the transferred employees and by necessary implication gives a go by to the ID Act
which is again expressly superseded by sub-section (2) of that section insofar as the Central
Government has been invested with the power in certain circumstances to vary the terms and
conditions of service of the Corporation’s employees. When the two clauses, therefore, say that
the Corporation has the power to frame regulations in regard to the terms and conditions of
its employees, including transferred employees, subject, of course, to previous approval of the
Central Government, the power may well be exercised in conformity with the provisions of
Section 11. And if it is so exercised the resultant regulations cannot be said to go beyond the
limits specified in the statute. In this view of the matter Hukam Chand vs Union of India122 and
B.S. Vadera vs Union of India123 which lay down that the authority vested with the power of
making subordinate legislation must act within the limits of and cannot transgress its power, are
of no help to the case of the employees on whose behalf they have been cited.
Another proposition put forward by learned counsel for the employees may be noticed here.
It was contended that Section 49 confers on the Corporation ‘ordinary’ powers of framing sub-
ordinate legislation and that the Corporation has not been invested with any right to unilaterally
promulgate a regulation altering the conditions of service of its employees to their detriment
and that such regulations cannot override the provisions of the ID Act and the settlements
reached thereunder. Reliance for the proposition was placed on U.P. State Electricity Board vs
Hari Shankar Jain124 and Bangalore Water Supply and Sewerage Board vs R. Rajappa.125 In the
former the case of the employees was that they were governed by the Industrial Employment
(Standing Orders) Act which, according to them, was a special Act laying down provisions
in relation to their conditions of service and which could not, therefore, be superseded by
Section 79 of the Electricity Supply Act, 1948. In holding that the section last-mentioned was
a general law which did not override the provisions of the Industrial Employment (Standing
Orders) Act, this Court observed:

Chapter VII (from Section 70 to Section 83) which is headed ‘Miscellaneous’ contains various
miscellaneous provisions amongst which are Section 78 which empowers the Government
to make rules and Section 79 which empowers the Board to make regulations in respect of
matters specified in clauses (d) to (k) of that section. Clause (c) of Section 79 is ‘the duties
of Officers and servants of the Board, and their salaries, allowances and other conditions of
service’. This, of course, is no more than the ordinary general power, with which every employer
is invested in the first instance, to regulate the conditions of service in his employees. It is an
ancillary or incidental power of every employer. The Electricity Supply Act does not presume
to be an Act to regulate the conditions of service of the employees of State Electricity Boards.
It is an Act to regulate the coordinated development of electricity. It is a special Act in regard
to the subject of development of electricity, even as the Industrial Employment (Standing
Orders) Act is a special Act in regard to the subject of conditions of service of workmen in
industrial establishments. If Section 79(c) of the Electricity Supply Act generally provides
for the making of regulations providing for the conditions of service of the employees of the
218 Social Justice and Labour Jurisprudence

Board, it can only be regarded as a general provision which must yield to the special provisions
of the Industrial Employment (Standing Orders) Act in respect of matters covered by the
latter Act.

Quite clearly there was no provision in the Electricity Supply Act such as we find in Section 11
of the LIC Act which, as already shown, is a special law in relation to the terms and conditions
of service of the employees of the Corporation very much in derogation of what the ID Act lays
down and the case cited, therefore, presents no parallel to the case in hand.
In Bangalore Water Supply and Sewerage Board vs R. Rajappa126 the question was whether the
employees of a statutory Corporation would or would not be governed by the provisions of the
ID Act. The question was answered in the affirmative by this Court and Beg, C.J. (as he then was),
while concurring with Bhagwati, Krishna Iyer and Desai, JJ., on that point, observed:

I am impressed by the argument that certain public utility services which are carried out by
governmental agencies or corporation are treated by the Act itself as within the sphere of
industry. If express rules under other enactments govern the relationship between the State as
an employer and its servants as employees it may be contended, on the strength of such pro-
visions, that a particular set of employees are outside the scope of the Industrial Disputes Act
for that reason. The special excludes the applicability of the general. We cannot forget that
we have to determine the meaning of the term ‘industry’ in the context of and for the purposes
of matters provided for in the Industrial Disputes Act only… Hence, to artificially exclude
State-run industries from the sphere of the Act, unless statutory provisions, expressly or by a
necessary implication, have that effect, would not be correct.

Far from assisting the case of the employees these observations only support the conclusion
arrived at by me above inasmuch as they specifically state that if express provision has been
made under a particular enactment governing the relationship of an employer and his employees,
such special provision would govern those employees in supersession of the dictates of the
ID Act.
I thus hold that Section 11 and clauses (b) and (bb) of sub-section (2) of Section 49 of the
LIC Act were intended to be and do constitute an exhaustive and overriding law governing the
conditions of service of all employees of the Corporation including transferred employees.
Proposition (b) forming part of conclusion I is consequently found to be incorrect.
Conclusion I reached by the High Court being faulty in both its material aspects, the three
corollaries flowing from it and set out above as part of conclusion II must also be held to be
unsustainable.
Section 23 of the LIC Act, which envisages employment of persons by the Corporation no
doubt, implies settlement of conditions of service but that does not mean that once a settlement
is arrived at the same is not liable to be altered except by another settlement reached under
Section 18 of the ID Act. As already pointed out the provisions of sub-sections (1), (2) and (4) of
Section 11 of the LIC Act and clauses (b) and (bb) of sub-section (2) of Section 49 thereof have
overriding effect and the terms and conditions of service of the employees of the Corporation
forming part of a settlement under the ID Act cannot last after they have been altered in ex-
ercise of the powers conferred on the Corporation or the Central Government by those provisions,
as was done when the new Regulation 58 was framed under Section 49 by the Corporation and
the new clause 9 was inserted in the 1957 order by the Central Government. Nor can any
action taken under Sections 19(2) and 9-A of the ID Act have any relevance to the exercise of
those powers so long as such exercise conforms to the provisions of the LIC Act.
Conclusion II is, therefore, held to be erroneous in its entirety.
Conclusion III also does not stand scrutiny as the reliance of the High Court on Madan
Mohan Pathak127 case for support to proposition (b) stated above is wholly misplaced. That case
 Collective Bargaining Agreement Issues 219

was decided by a Bench of seven Judges of this Court before whom were canvassed two main
points which were thus crystallized by Bhagwati, J., who delivered the judgment on behalf of
himself, Krishna Iyer and Desai, JJ.:

A. The right of Class III and Class IV employees to annual cash bonus for the years 1 April
1975 to 31 March 1976 and 1 April 1976 to 31 March 1977, under clause 8(ii) of the
Settlement was property and since the impugned Act provided for compulsory acquisition
of this property without payment of compensation, the impugned Act was violative of
Article 31(2) of the Constitution and was hence null and void.
B. The impugned Act deprived Class III and Class IV employees of the right to annual cash
bonus for the years 1 April 1975 to 31 March 1976 and 1 April 1976 to 31 March 1977,
which was vested in them under clause 8(ii) of the settlement and there was, therefore,
clear infringement of their fundamental right under Article 19(1)(f ) and since this depriv-
ation of the right to annual cash bonus, which was secured under a settlement arrived at as
a result of collective bargaining and with full and mature deliberation on the part of the
Life Insurance Corporation and the Central Government after taking into account the
interest of the policy holders and the community and with a view to approximating to-
wards the goal of a living wage as envisaged in Article 43 of the Constitution, amounted
to an unreasonable restriction, the impugned Act was not saved by Article 19(5) and
hence it was liable to be struck down as invalid.

In relation to Point 4 the argument raised on behalf of the Corporation was that under the
then existing Regulation 58 the grant of annual cash bonus was subject to such directions as the
Central Government might issue and that the right of Class III and Class IV employees to re-
ceive such bonus could not therefore be said to be an absolute right which was not liable to be
set at naught by any direction that might be issued by the Central Government, Bhagwati, J.,
appreciated the force of Regulation 58 and remarked:

Regulation 58 undoubtedly says that non-profit sharing bonus may be granted by the Life
Insurance Corporation to its employees, subject to such directions as the Central Government
may issue and, therefore, if the Central Government issues a direction to the contrary, non-
profit sharing bonus cannot be granted by the Life Insurance Corporation to any class of
employees.

He further observed, however:

But here, in the present case, grant of annual cash bonus by the Life Insurance Corporation
to Class III and Class IV employees under clause 8(ii) of the settlement was approved by the
Central Government as provided in clause 12 and the ‘direction’ contemplated by Regulation
58 was given by the Central Government that annual cash bonus may be granted as provided
in clause 8(ii) of the Settlement. It was not competent to the Central Government thereafter
to issue another contrary direction which would have the effect of compelling the Life Insurance
Corporation to commit a breach of its obligation under Section 18, sub-section (1) of the
Industrial Disputes Act, 1947 to pay annual cash bonus in terms of clause 8(ii) of the Settlement.

It was further held by Bhagwati, J., that clause 8(ii) was a clause independent of clause 8(i)
and was subject only to the approval mentioned in clause 12(2) which, as already pointed out,
had been accorded by the Central Government. He went on to hold that the right to bonus for
the two years (1 April 1975 to 31 March 1976 and 1 April 1976 to 31 March 1977) was pro-
perty of which the concerned employees could not be deprived without adequate compen-
sation. Repelling another argument advanced on behalf of the Corporation, Bhagwati, J., held
220 Social Justice and Labour Jurisprudence

that the extinguishment of the right to bonus really meant a transfer of ownership to the Cor-
poration of the debt available to the employees under that right and that such extinguishment
amounted to acquisition of property without compensation so that is was hit by Article 31(2)
of the Constitution of India. In view of this conclusion Bhagwati, J., considered it unnecessary
to consider Point B.
Chandrachud, Fazal Ali and Shinghal, JJ., agreed with the conclusion arrived at by Bhagwati,
J., on Point A. Beg, C.J., however, delivered a separate judgment seriously doubting the correctness
of the proposition enunciated by Bhagwati, J., that the extinguishment of the right to bonus
amounted to acquisition of property, and deciding Point B in favour of the employees with a
finding that in view of the provisions of Article 43 of the Constitution the 1976 Act was vitiated
by the provisions of Article 19(1)(f ) of the Constitution and was not saved by clause (6) of that
article. Beg, C.J., was further of the opinion that the 1976 Act was violative of Article 14 of the
Constitution.
These factors are noteworthy:

(a) Points A and B detailed above were specifically limited to the duration of the settlements
as appearing in clause 12 thereof and the judgment, therefore, does not cover any period
subsequent to 31 March 1977, as has been rightly contended by learned counsel for the
Corporation.
(b) No finding at all was given nor was any observation made by Bhagwati, J., to the effect
that Sections 11 and 49 of the LIC Act or the action taken thereunder (the promulgation
of the new Regulation 58 and the new clause 9 of the 1957 Order) was ineffective against
the operation of provisions of the ID Act or of the 1974 settlements. On the other hand,
his judgment very specifically proceeded on the ground that the two settlements had to
and did fully conform to the provisions of Regulation 58 inasmuch as the Central Gov-
ernment had accorded its approval to them. The High Court thus not only erred in
observing that those settlements had been upheld by this Court ‘even though it did not
advert to Regulation 58’, but also failed to take notice of the clearly expressed opinion of
Bhagwati, J., that bonus under the two settlements could not have been paid if they had
run counter to the requirements of Regulation 58. Far from supporting corollary (b) of
conclusion II, therefore, Madan Mohan Pathak128 case rules to an opposite effect.
(c) Although Bhagwati, J., did hold clearly (and, if I may say so with all respect, quite correctly)
that sub-clause (ii) of clause 8 of the 1974 settlements stood independently of sub-clause (i)
thereof, his judgment contains no finding whatsoever to the effect that the conditions
of service laid down in those settlements could be varied only by a fresh settlement or
award made under the provisions of the ID Act and that till then sub-clause (ii) aforesaid
would remain in full force. The High Court clearly erred in observing that such a finding
formed part of the majority judgment in Madan Mohan Pathak129 case.

Conclusion III also, therefore, is negatived.

We now take up for consideration the High Court’s conclusion IV which is based on the
interpretation of Section 19 of the ID Act by this Court in South Indian Bank Ltd. vs A.R. Chacko.130
That section may with advantage be extracted here in extenso for facility of reference:

19.(1) A settlement shall come into operation on such date as is agreed upon by the parties to
the dispute, and if no date is agreed upon, on the date on which the memorandum of the
settlement is signed by the parties to the dispute.
(2) Such settlement shall be binding for such period as is agreed upon by the parties, and if
no such period is agreed upon, for a period of six months from the date on which the
 Collective Bargaining Agreement Issues 221

memorandum of settlement is signed by the parties to the dispute, and shall continue to
be binding on the parties after the expiry of the period aforesaid, until the expiry of two
months from the date on which a notice in writing of an intention to terminate the set-
tlement is given by one of the parties to the other party or parties to the settlement.
(3) An award shall, subject to the provisions of this section, remain in operation for a period
of one year from the date on which the award period enforceable under Section 17-A:
Provided that the appropriate Government may reduce the said period and fix such
period as it thinks fit:
Provided further that the appropriate Government may, before the expiry of the said
period, extend the period of operation by any period not exceeding one year at a time as
it thinks fit so, however, that the total period of operation of any award does not exceed
three years from the date on which it came into operation.
(4) Where the appropriate Government, whether of its own motion or on the application of
any party bound by the award, considers that since the award was made, there has been
a material change in the circumstances on which it was based, the appropriate Government
may refer the award or a part of it to a Labour Court, if the award was that of a Labour
Court or to a Tribunal, if the award was that of a Tribunal or of a National Tribunal for
decision whether the period of operation should not, by reason of such change, be short-
ened and the decision of Labour Court or the Tribunal, as the case may be, on such refer-
ence shall, be final.
(5) Nothing contained in sub-section (3) shall apply to any award which by its nature, terms
or other circumstances does not impose, after it has been given effect to, any continuing
obligation on the parties bound by the award.
(6) Notwithstanding the expiry of the period of operation under sub-section (3), the award
shall continue to be binding on the parties until a period of two months has elapsed from
the date on which notice is given by any party bound by the award to the other party or
parties intimating its intention to terminate the award.
(7) No notice given under sub-section (2) or sub-section (6) shall have effect, unless it is
given by a party representing the majority of persons bound by the settlement or award,
as the case may be.

Sub-section (2) of the section makes it clear that a settlement reached under the ID Act shall
be binding on the parties thereto—

(a) For the period agreed upon, and if no such period is agreed upon, for a period of six months
from the date on which the memorandum of settlement is signed by the parties; and
(b) for a further period ending with a span of two months reckoned from the date on which
a notice in writing of an intention to terminate the settlement is given by one of the par-
ties thereto to the others.

Sub-sections (3), (4) and (5) provide for the period of operation of an award and its extension
and reduction, while sub-section (6) lays down that after such period has expired the award
shall continue to be binding on the parties to it for a further period ending with a span of two
months reckoned in the same manner as the span mentioned earlier.
Insofar as the explicit language of the section is concerned there is no ambiguity involved.
The difficulty arises regarding the period (hereinafter called the 3rd period) subsequent to the
date on which the said span of two months expires in either case, because the ID Act is silent
about it and it is that difficulty which this Court resolved in Chacko’s case. The parties before
the court in that case were the South Indian Bank Ltd. and one of its clerks named A.R. Chacko
222 Social Justice and Labour Jurisprudence

who had been promoted as an accountant with effect from 13 July 1959 and claimed certain
allowances for periods subsequent to that date in terms of what is called the Sastry Award.
On behalf of the bank reliance was placed on Section 4 of the Industrial Disputes (Banking
Companies) Decision Act, 1955 which runs thus:

Notwithstanding anything contained in the Industrial Disputes Act, 1947, or the Industrial
Disputes (Appellate Tribunal) Act, 1950, the award as now modified by the decision of the
Labour Appellate Tribunal in the manner referred to in Section 3 shall remain in force until
31 March 1959.

A contention was raised that the non obstante clause contained in this section made the provisions
of Section 19(6) of the ID Act inapplicable to the Sastry Award which, therefore, became dead
for all purposes after 31 March 1959. Repelling the contention this Court observed:

The effect of Section 4 of the Industrial Disputes (Banking Companies) Decision Act is that
the award ceased to be in force after 31 March 1959. That however has nothing to do with
the question as to the period for which it will remain binding on the parties thereafter. The
provision in Section 19(6) as regards the period for which the award shall continue to be
binding on the parties is not in any way affected by Section 4 of the Industrial Disputes
(Banking Companies) Decision Act, 1955.

The court then proceeded to consider specifically the situation that would obtain in the 3rd
period in relation to an award and held:

Quite apart from this, however, it appears to us that even if an award has ceased to be in
operation or in force and has ceased to be binding on the parties under the provisions of
Section 19(6) it will continue to have its effect as a contract between the parties that has been
made by industrial adjudication in place of the old contract. So long as the award remains
in operation under Section 19(3), Section 23(c) stands in the way of any strike by the workmen
and lock-out by the employer in respect of any matter covered by the award. Again, so long
as the award is binding on a party, breach of any of its terms will make the party liable to
penalty under Section 29 of the Act, to imprisonment which may extend to six months or
with fine or with both. After the period of its operation and also the period for which the
award is binding have elapsed Section 23 and Section 29 can have no operation. We can how-
ever see nothing in the scheme of the Industrial Disputes Act to justify a conclusion that
merely because these special provisions as regards prohibition of strikes and lock-outs and of
penalties for breach of award cease to be effective the new contract as embodied in the award
should also cease to be effective. On the contrary, the very purpose for which industrial ad-
judication has been given the peculiar authority and right of making new contracts between
employers and workmen makes it reasonable to think that even though the period of operation
of the award and the period for which it remains binding on the parties—in respect of both
of which special provisions have been made under Sections 23 and 29 respectively—may
expire, the new contract would continue to govern the relations between the parties till it is
displaced by another contract. The objection that no such benefit as claimed could accrue to
the respondent after 31 March 1959 must therefore be rejected.

It is the underlined portion of this paragraph which impelled the High Court to come to the
conclusion that even a notice under Section 19(6) of the ID Act would not terminate a settlement
(which, according to the High Court, stands on the same footing as an award and, in fact, is
 Collective Bargaining Agreement Issues 223

indistinguishable therefrom for the purpose of Section 19) but would have the effect of merely
paving the way for fresh negotiations resulting ultimately in a new settlement—a conclusion
which has been seriously challenged on behalf of the Corporation with the submission that
Chacko’s131 case has no application whatsoever to the present controversy inasmuch as the special
law comprised of Sections 11 and 49 of the LIC Act fully covers the situation in the 3rd period
following the expiry of the 1974 settlements. The submission is well based. In Chacko132 case
this Court was dealing with the provisions of the ID Act alone when it made the observations
last extracted and was not concerned with a situation which would cover the 3rd period in
relation to an award (or for that matter a settlement) in accordance with a specific mandate
from Parliament. The only available course for filling the void created by the Sastry Award was
a continuation of its terms till they were replaced by something else legally enforceable which,
in the circumstances before the court, could only be another contract (in the shape of an award
or a settlement), there being no legal provision requiring the void to be filled otherwise. In the
present case the law intervenes to indicate how the void which obtains in the 3rd period shall be
filled and, if it has been so filled, there is no question of its being filled in the manner indicated
in Chacko’s133 case wherein, as already pointed out, no such law was available. The observations
in that case must thus be taken to mean that the expired award would continue to govern the
parties till it is displaced by another contract or by relationship otherwise substituted for it in
accordance with law.
Indian Link Chain Manufactures Ltd. vs Workmen,134 which also the High Court pressed into
service in arriving at conclusion IV is really not relevant for the present discussion as it deals
only with the two periods expressly covered by sub-sections (2) and (6) of Section 19 of the ID
Act and not at all with the 3rd period. The same is true of Shukla Manseta Industries Pvt. Ltd. vs
Workmen135 employed under it, in which the only question canvassed before the court and an-
swered by it was whether the law required that notice of termination under Section 19(2) had
to be given only after the date of expiry of a settlement. However, it may be pointed out that in
both those cases as also in Haribhau Shinde vs F.H. Lala Industrial Tribunal,136 Bombay, which
has been relied upon by learned counsel for the employees, this Court was not concerned with
any special law as I find in a combined reading of Sections 11 and 49 of the LIC Act; and for
that reason also none of these three decisions is of any assistance for the determination of the
point in controversy before us.
Some arguments were addressed to us on proposition advanced by learned counsel for
the Corporation to the effect that a settlement could not be treated at par with an award for the
purpose of the ID Act and that Chacko’s137 case, therefore, could furnish no proper basis for the
High Court’s conclusion IV. I do not propose to deal with that proposition which is merely of
academic interest in view of the material distinction already pointed out, namely, that in the
present case there is a special mandate by Parliament to fill the void of the 3rd period which did
not obtain in Chacko’s case. However, I may briefly dwell on another aspect of the same distinction
and that consists of the circumstance that while in Chacko’s case the employer was the South
Indian Bank Ltd.—a non-statutory banking company—the employer before us now is the cre-
ation of the LIC Act itself and therefore a statutory corporation. This circumstance coupled
with the contents of the LIC Act leads to the following deductions, as laid down in Sukhdev Singh
vs Bhagatram Sardar Singh Raghuvanshi:138

(a) The Corporation carries on the exclusive business of life insurance as an agency of the
Government by which it is managed and which alone can dissolve it. It is, therefore, an
authority within the meaning of Article 12 of the Constitution of India. The status of
persons serving the Corporation thus carries with it the element of public employment.
(b) The LIC Act enables the Corporation to make regulations which may provide, inter alia,
for the terms and conditions of service of its employees. Such regulations cannot be
224 Social Justice and Labour Jurisprudence

equated with those framed by a company incorporated under the Companies Act and,
on the other hand, have the force of law which must be followed both by the Corporation
and those who deal with it.

It is obvious that an application of those deductions to the situation prevailing in the present
case would rule out the relevance of Chacko’s case because Regulation 58 framed under Section
49 of the LIC Act specifically governs the 3rd period following the expiry of the 1974 settlements.
I need not go into the correctness or otherwise of conclusion V reached by the High Court as
no arguments in relation thereto were addressed to us. I shall now proceed, however, to discuss
certain other contentions raised before us on behalf of the employees although the same were
not canvassed before the High Court.
It was argued that both sub-sections (1) and (2) of Section 11 of the LIC Act relate exclusively
to the transferred employees and that sub-section (2) does not embrace the case of employees
recruited under Section 23. In this connection an analysis of Section 11 would be helpful.
Insofar as sub-section (1) is concerned it is quite clear that it cannot be extended to cover em-
ployees recruited under Section 23, and that it is restricted in its operation only to the transferred
employees. This follows from the clear language used. Sub-section (2), however, is differently
worded. It may be split up as follows:

(a) The Central Government may alter (whether by way of reduction or otherwise) the
remuneration and the other terms and conditions of service (of...) to such extent and in
such manner as it thinks fit.
(b) The Central Government may take the action detailed in (a) above notwithstanding
anything contained in sub-section (1), or the ID Act, or in any other law for the time
being in force or in any award, settlement or agreement for the time being in force.
(c) The action detailed in (a) can be taken only if the Central Government is satisfied
(i) that for the purpose of securing uniformity in the scales of remuneration and the
other terms and conditions of service applicable to transferred employees, it is necessary
so to do; or
(ii) that, in the interests of the Corporation and its policy holders, a reduction in the re-
muneration payable or a revision of the other terms and conditions of service appli-
cable to employees or any class of them is called for.

According to learned counsel for the employees the expression ‘employees or any class of
them’ occurring in sub-clause (ii) of the above analysis must be interpreted to mean transferred
employees or any class thereof and the expression does not cover the employees recruited under
Section 23. Support for the contention is sought from the circumstance that the section is not
only a part of Chapter IV of the LIC Act, which is headed ‘Transfer of Existing Life Insurance
Business to the Corporation’ but also carries the marginal note ‘Transfer of service of existing
employees of insurers to the Corporation’. This circumstance is wholly immaterial not only for
the reason that headings of chapters and marginal notes cannot be looked into for the purpose
of ascertaining the intention of the legislature unless the language employed by it is ambiguous
but also because the absorption of the transferred employees into the Corporation may itself
necessitate a change in the conditions of service of the employees recruited under Section 23.
It is not disputed that transferred employees, amongst themselves, were governed by widely
different conditions of service and that was so far the simple reason that they had come from
different companies, each having its own scales of pay applicable to its servants. When the
Corporation came into existence, recruitment under Section 23 need not have waited for action
under Section 11(2) and the process of examination of different scales of pay of the transferred
 Collective Bargaining Agreement Issues 225

employees as compared to those pertaining to hands recruited under Section 23, as also the
appropriate action which should have been taken as a result of such examination, was bound to
be time-consuming; and the result may well have entailed a decision to equalise the scales of pay
not only by raising or reducing those of the transferred employees but also those of the employees
recruited under Section 23. And that appears to be the only reason why the legislature chose the
comprehensive expression ‘employees or any class of them’ in sub-section (2) in spite of the fact
that not only in sub-sections (1) and (4) but also in sub-section (2) itself the detailed description
‘employees of an insurer whose controlled business has been transferred to and vested in the
Corporation’ or words to that effect have been used to denote a transferred employee. Again,
wherever a transferred employee was meant but a detailed description in relation to him was
not given, the expression ‘such employee’ was used with reference to that description. Examples
in point are the proviso to sub-section (1) and the latter part of sub-section (4). If the expression
‘employees or any class of them’ was intended to be restricted to transferred employees, it would
certainly have been preceded by the word ‘such’ so that it could be referable to the detailed
description of employees of that kind occurring in an earlier part of the sub-section. From the
circumstance that no such device was pressed into service the conclusion is irresistible that the
expression last-mentioned was intended to convey a meaning different from that which was
deducible from the detailed description otherwise employed in the section—a conclusion based
on the well known principle of interpretation of statute thus stated by Maxwell in Chapter 12
of his celebrated work earlier cited:

From the general presumption that the same expression is presumed to be used in the same
sense throughout an Act or a series of cognate Acts, there follows the further presumption
that a change of wording denotes a change in meaning.

The matter may also be looked at from another angle. As stated in clause (c) of the above
analysis the Central Government is empowered to take action under sub-section (2) of Section 11
if it is satisfied about the existence of either of two conditions. It may take such action if it is
satisfied that for the purpose of securing uniformity in the scales of remuneration, etc., applicable
to transferred employees it is necessary to do so. But then if no action is intended to be taken for
that purpose it may still be taken provided the Central Government is satisfied that it is in the
interests of the Corporation and its policy holders to make a reduction in the remuneration
payable or a revision of the other terms and conditions applicable to its employees. Now the
first condition which envisages the securing of uniformity in the scales of remuneration clearly
applies to transferred employees only but the same is not true of the second condition. At a par-
ticular juncture in the life of the Corporation it may become necessary to make a reduction in
the remuneration payable to its employees or a revision of the other terms and conditions of
service applicable to them. But then this must follow from the satisfaction of the government
that it is in the interest of the Corporation and its policy holders to do so. It is obvious that this
condition envisages the change in conditions of service, etc., of all the employees of the Cor-
poration and not only the transferred employees. If it were otherwise the sub-section may well
lead to discrimination and render the provision unconstitutional. Even if, therefore, the expression
‘employees or any class of them’ occurring in sub-section (2) was capable of being regarded as
ambiguous, the court would choose that interpretation which would conform to the constitu-
tionality of the provision. This well known principle of statutory construction was made use of
by a learned single Judge of the Calcutta High Court in Himangsu Chakraborty vs LIC of India139
wherein he dealt with sub-section (2) of Section 11 thus:

According to Mr Chatterjee, Section 11(2) of the Act contains two limbs. The first limb con-
fers power on the Central Government to revise the terms and conditions of service of the
226 Social Justice and Labour Jurisprudence

employees of the Corporation. Its power is, however, confined only to those employees whose
services have been transferred to and vested in the Corporation by reason of the commencement
of the Act. The second limb confers power on the Central Government to alter the terms and
conditions of the service applicable to all employees of the Corporation irrespective of whether
they are transferred employees or are directly recruited after the inception of the Corporation.
Strong emphasis is placed on the expression ‘terms and conditions of service applicable to
employees of insurers whose controlled business has been transferred to and vested in the
Corporation’ and ‘terms and conditions of service applicable to employees or any class of
them’. Mr Chatterjee submits that the latter clause does not contain the expression ‘such
employees’ and therefore should be construed to confer a power on the Central Government
to alter the conditions of service of all employees... In my view, this contention of Mr Chatterjee
is sound and should be accepted. On a plain reading of Section 11(2) of the Act it seems to
contain two distinct and separate powers. The first part relates to the power of the Central
Government in relation to ‘transferred employees’ whereas the second part appears to apply
to all employees of the Corporation irrespective of whether they are transferred or directly
recruited.

I find myself in complete agreement with this view for the reasons already stated.
In order to steer clear of the above interpretation of Section 11(2) learned counsel for the em-
ployees put forward the argument that the word ‘or’ occurring in the section should not be read
as a disjunctive and should be given the meaning ‘and’ so that the two clauses forming the con-
ditions about which the Central Government has to be satisfied before it can act under the
section are taken to be one single whole; but we do not see any reason why the plain meaning of
the word should be destroyed to suit the convenience or the cause of the employees. It is no
doubt true that the word ‘or’ may be interpreted as ‘and’ in certain extraordinary circumstances
such as in a situation where its use as a disjunctive could obviously not have been intended (see
Mazagaon Dock Ltd. vs Commissioner of Income Tax and Excess Profits Tax).140 Where no compelling
reason for the adopting of such a course is, however, available, the word ‘or’ must be given its
ordinary meaning, that is, as a disjunctive. This rule was thus applied to the interpretation of
clause (c) of Section 3(1) of the U.P. (Temporary) Control of Rent and Eviction Act, 1974 in
Babu Manmohan Das Shah vs Bishun Das141 by Shelat, J:

The clause is couched in single and unambiguous language and in its plain meaning provides
that it would be a good ground enabling a landlord to sue for eviction without the permission
of the District Magistrate if the tenant has made or has permitted to be made without the
landlord’s consent in writing such construction which materially alters the accommodation
or is likely substantially to diminish its value. The language of the clause makes it clear that
the legislature wanted to lay down two alternatives which would furnish a ground to the
landlord to sue without the District Magistrate’s permission, that is, where the tenant has
made such construction which would materially alter the accommodation or which would
be likely to substantially diminish its value. The ordinary rule of construction is that a provision
of a statute must be constructed in accordance with the language used therein unless there
are compelling reasons, such as where a literal construction would reduce the provision to
absurdity or prevent the manifest intention of the legislature from being carried out. There is
no reason why the word ‘or’ should be construed otherwise than in its ordinary meaning.

In my view this reasoning is fully applicable to the case in hand and there is every reason why
the word ‘or’ should be given its ordinary meaning. This was also the view taken by a learned
single Judge of the Madras High Court in K.S. Ramaswamy vs Union of India,142 of which I fully
approve.
 Collective Bargaining Agreement Issues 227

Still another argument calculated to mould the interpretation of Section 11(2) in favour of
the employees was that the power conferred on the Central Government by it was intended to
be used only once and that too for one purpose, namely, to achieve uniformity in the scales of pay,
etc. In this connection our attention was drawn to two factors, namely, that the words ‘from
time to time’ forming part of the section as it originally stood were deleted therefrom when
it was amended in 1957 and that while the amendment of the section at that time was under
consideration of Parliament the then Finance Minister had given an assurance in that behalf.
The argument is wholly unacceptable to me. One good reason is available in the provisions of
Section 14 of the General Clauses Act which runs thus:

14. (1) Where, by any Central Act or Regulation made after the commencement of this Act,
any power is conferred, then unless a different intention appears, that power may be
exercised from time to time as occasion requires.
(2) This section applies also to all Central Acts and Regulations made on or after the
fourteenth day of January, 1887.

In view of the clear language of the section, no Central law, while conferring a power, need say
in so many words that such power may be exercised from time to time; and if a law does make
use of such an expression that would not change the position. The deletion of such an expression
by the legislature at a given point of time may, therefore, follow the detection of the superfluity
and that would not mean, all by itself, that the legislature intended to limit the exercise of such
power to a single occasion. This is precisely the view that was taken by this Court in a similar
situation in Vasantlal Maganbhai Sanjanwala vs State of Bombay.143 In that case the court was
dealing with Section 6(2) of the Bombay Tenancy and Agricultural Lands Act, 1948, which ran
thus:

The provincial Government may by notification in the official Gazette, fix a lower rate of the
maximum rent payable by the tenants of lands situate in any particular area or may fix such
rate on any other suitable basis as it thinks fit.

It was pointed out to the court that in this section the words ‘from time to time’ which found a
place in the corresponding section of the earlier tenancy legislation were missing although the
expression ‘from time to time’ was retained in Section 8(1) of the Act. The contention raised
was that the power delegated under Section 6(2) was intended to be used only once but was
rejected as fallacious with the following observations:

Why the legislature did not use the words ‘from time to time’ in Section 6(2) when it used
them in Section 8(1) it is difficult to understand; but in construing Section 6(2) it is obviously
necessary to apply the provisions of Section 14 of the Bombay General Clauses Act, 1904
(1 of 1904). Section 14 provides that whereby any Bombay Act made after the commencement
of this Act any power is conferred on any government then that power may be exercised from
time to time as occasion requires. Quite clearly if Section 6(2) is read in the light of Section 14
of the Bombay General Clauses Act it must follow that the power to issue a notification can
be exercised from time to time as occasion requires. It is true that Section 14 of the General
Clauses Act, 1897 (10 of 1897), provides that where any power is conferred by any Central
Act or Regulation then, unless a different intention appears, that power may be exercised from
time to time requires. Since there is a specific provision of the Bombay General Clauses Act
relevant on the point it is unnecessary to take recourse to Section 14 of the Central General
Clauses Act; but even if we were to assume that the power in question can be exercised from
228 Social Justice and Labour Jurisprudence

time to time unless a different intention appears we would feel no difficulty in holding that
no such different intention can be attributed to the legislature when it enacted Section 6(2).
It is obvious that having prescribed for a maximum by Section 6(1) the legislature has delib-
erately provided for a modification of the said maximum rent and that itself shows that the
fixation of any maximum rent was not treated as immutable. If it was necessary to issue one
notification under Section 6(2) it would follow by force of the same logic that circumstances
may require the issue of a further notification. The fixation of agricultural rent depends upon
so many uncertain factors which may vary from time to time and from place to place that
it would be idle to contend that the legislature wanted to fix the maximum only once, or, as
Mr Limaye concedes, twice. Therefore the argument that the power to issue a notification
has been exhausted cannot be sustained.

The language of Section 14 of the General Clauses Act being identical with that of the Bombay
General Clauses Act this reasoning is fully applicable to the interpretation of Section 11(2)
of the LIC Act. The same view was taken by a Division Bench of the Gujarat High Court in
Hariwadan K. Desai vs LIC of India144 in the following words:

While construing a statutory provision, it is not permissible to traverse beyond the language
of the provision unless the legislative intent cannot be gathered from the clear and definite
language of the provision. It is true that often courts do look into the debates in the legislature
and also the marginal notes to ascertain the scope of a particular provision of the statute. But
that is only in exceptional cases. The language of Section 11(2) is very clear. There is nothing
to indicate or suggest even remotely that the power vested in the Central Government under
Section 11(2) get exhausted when once the Central Government exercise that power. Sec-
tion 14 of the General Clauses Act, 1897 further strengthens our view. Section 14 lays down
that where by a Central Act or Regulation made after the commencement of the Act, any
power is conferred, then unless a different intention appears, that power may be exercised
from time to time as occasion requires. We are unable to gather any different intention from
Section 11(2) so as to injunct the government from exercising their power after the issuance
of the Blue Order; in other words, after they once exercised that power.

I may further point out that part of the power to alter the terms and conditions of service of
the Corporation’s employees which the Central Government is authorised to exercise in the
interests of the Corporation and its policy holders must of necessity be a power which can be
exercised as and when occasion so requires. A contrary view would lead to absurd results in
certain given situations. Let us assume that the affairs of the Corporation did not present a rosy
picture to begin with and that therefore, a drastic reduction in the scales of pay of its employees
was called for and was achieved by an order made by the Central Government in exercise of
its power under Section 11(2). Does that mean that if later on Corporation develops its business
and makes sizable progress in the way of earning profits, the power conferred on the Central
Government would not be exercisable to give better pay scales to the employees? An answer to
this question in the negative would obviously not meet the exigencies of the situation and in my
opinion leads to an absurdity. Again, if the scales of remuneration of the transferred employees
are adjusted by the Central Government so as to smooth out anomalies and discrepancies,
would that put an end to the exercise of the power so that it cannot be used subsequently for the
amelioration of the service conditions of the employees when the affairs of the Corporation so
warrant? To put such a restricted meaning on the language used does not appear to be warranted
for any reason whatsoever.
 Collective Bargaining Agreement Issues 229

Insofar as the proceedings of Parliament and speeches made during the course thereof are
concerned, they are not admissible for the purpose of interpretation of the resultant statute un-
less the language used therein is ambiguous and impels the court to resort to factors outside the
statute for the purpose of ascertaining the intention of the law-makers. This is what was clearly
held by this Court in Anandji Haridas & Co. Pvt. Ltd. vs Engineering Mazdoor Sangh145 by
Sarkaria, J., who delivered the judgment on behalf of himself and Alagiriswami, J., and the
observations made therein are worth repetition:

As a general principle of interpretation, where the words of a statute are plain, precise and
unambiguous, the intention of the legislature is to be gathered from the language of the
statute itself and no external evidence such as parliamentary debates, reports of the committees
of the legislature or even the statement made by the minister on the introduction of a measure
or by the framers of the Act is admissible to construe those words. It is only where a statute is
not exhaustive or where its language is ambiguous, uncertain, clouded or susceptible of more
than one meaning or shades of meaning, that external evidence as to the evils, if any, which
the statute was intended to remedy, or of the circumstances which led to the passing of the
statute may be looked into for the purpose of ascertaining the object which the legislature
had in view in using the words in question.

These observations amply cover the situation in hand. Section 11(2) suffers from no ambiguity
either by reason of the omission therefrom of the expression ‘from time to time’ or otherwise
and it is, therefore, not permissible for a reference to be made to the speech of the then Finance
Minister in the matter of interpretation of the section.
The next contention for the employees which raises a question of the vires of Clause 9 of the
1957 Order and of Regulation 58 is based on the following passage in the judgment of Beg,
C.J., in M.M. Pathak case

He submits that Article 43 casts an obligation on the State to secure a living wage for the
workers and is part of the principles declared fundamental in the governance of the country.
In other words, he would have us use Article 43 as conferring practically a fundamental right
which can be enforced. I do not think that we can go so far as that because, even though the
directive principles of State policy, including the very important general ones contained in
Articles 38 and 39 of the Constitution, give the direction in which the fundamental policies
of the State must be oriented, yet, we cannot direct either the Central Government or Par-
liament to proceed in that direction. Article 37 says that they shall not be enforceable by any
court, but the principles therein laid down are nevertheless fundamental in the governance of
the country and it shall be the duty of the state to apply these principles in making laws.
Thus even if they are not directly enforceable by a court they cannot be declared ineffective.
They have the life and force of fundamentals. The best way in which they can be, without
being directly enforced, given vitality and effect in courts of law is to use them as criteria of
reasonableness, and therefore, of validity, as we have been doing. Thus, if progress towards
goals found in Articles 38, 39 and 43 is desired, there should not be any curtailment of wage
rates arbitrarily without disclosing any valid reason for it as is the case here. It is quite reasonable,
in my opinion, to submit that the measure which seeks to deprive workers of the benefits of
a settlement arrived at and assented to by the Central Government, under the provisions of the
Industrial Disputes Act, should not be set at naught by an Act designed to defeat a particular
settlement. If this be the purpose of the Act, as it evidently is, it could very well be said to be
contrary to public interest, and therefore, not protected by Article 19(6) of the Constitution.
230 Social Justice and Labour Jurisprudence

These observations are of no help to the case of the employees as they were made in relation
to the change of conditions of service of employees in an industrial establishment under a settle-
ment which was then in operation and, therefore, covered only the first period mentioned in
Section 19(2) of the ID Act—a period with which we are not concerned. As pointed out by
Bhagwati, J., in his separate judgment, the bonus for the period up to 31 March 1977 had
actually vested in the employees and had become a debt due to them and that was why the ma-
jority of six held that the 1976 Act was violative of Article 31, a view which Beg, C.J., doubted.
Besides, the opinion expressed in the observations just above-extracted, was perhaps not shared
by the other six judges who chose not to decide the question as to whether the 1976 Act was or
was not hit by Articles 14 and 19 of the Constitution of India. In these premises the employees
cannot draw any benefit from Beg, C.J.’s observations. On the other hand, no challenge to the
vires of Section 11(2) was made from either side and so long as the section itself is good the ex-
ercise of the power conferred by it cannot be attacked unless such exercise goes beyond the
limits of the section, either in its content or manner. If the legislature was competent to confer
a power on the central Government to alter the conditions of service of the employees of the
Corporation to their detriment or otherwise, the fact that the power was exercised only to cut
down bonus would furnish no reason for striking down Clause 9 of the 1957 Order or Regulation
58 as being violative of Article 14 or 19.
Clause 9 of the 1957 order was also attacked as contravening Articles 14 and 16 of the Con-
stitution of India for the reason that it applied only to transferred employees who were discrim-
inated against in the matter of equality before the law and of opportunity of employment. That
clause no doubt takes within its sweep only transferred employees because clause 2 of the 1957
order specifically states that the order is restricted in its operation to employees of that category;
but then no question of any dissemination whatsoever is involved inasmuch as the transferred
employees have not only not been treated differently from other employees of the Corporation
but by reason of Regulation 58 they been placed fully at par with the latter. The argument
would have had plausibility only in the absence of Regulation 58 (which applies to all employees
of the Corporation) and is wholly devoid of force.
Another attack levelled against Clause 9 was that it suffered from a contravention of the well
known maxim delegatus non potest delegaro. It was urged that the Central Government having
been invested with the power of altering the terms and conditions of service of the employees of
the Corporation, it was bound in law to exercise that power itself and that it could not delegate
that power to the Corporation as it has done in clause 9. This argument is again without sub-
stance. The clause itself states in unmistakable terms that the Corporation may grant non-profit
sharing bonus to its employees in respect of any particular year subject to the previous approval
of the Central Government, and so the real bonus-granting authority is the Central Government
and not Corporation. There is thus no delegation of any real power to the Corporation through
the promulgation of clause 9.
Clause 9 was also challenged on the ground that although the notification promulgating it
began with the preamble ‘whereas the Central Government is satisfied that in the interests of
the Corporation and its policy holders it is necessary to revise the terms and conditions of
service...’, there is nothing to show that the Central Government was actually so satisfied. This
is a stand which cannot be allowed to be raised at this late stage inasmuch as it involves questions
of fact which cannot be determined without the Central Government being given a full oppor-
tunity to rebut it. Had the contention been raised before the High Court, documentary evidence
could have been produced to establish that the requirement of the section had been fully met in
regard to the relevant satisfaction of the Central Government. Again, in the absence of any
evidence to the contrary, it is permissible to presume that official acts have been regularly per-
formed and that the preamble to the notification, therefore, is in accord with facts.
 Collective Bargaining Agreement Issues 231

Another contention raised on behalf of the employees was that the new clause 9 and the new
Regulation 58 were both hit by the provisions of Articles 14 and 19 of the Constitution of India
inasmuch as they singled out the employees of only one statutory corporation for a special rule
regarding bonus in derogation of the terms hithertofore prevailing, no other Corporation in the
public sector having been so touched. The contention cannot prevail in the absence of evi-
dence that the total emoluments of any employee to be affected by the new clause and the new
regulation (regardless of bonus) would be less than those of his counterpart in any other statutory
corporation. In this connection also I may point out that the contention was not raised before
the High Court and no foundation was laid for it at any stage.
The only other contention raised on behalf of the employees was that Regulation 58 could
not operate to make inapplicable the 1974 settlements to the 3rd period inasmuch as all settlements
reached under the ID Act were protected by the provisions of Regulation 2 which thus specified
the employees of Corporation to whom the 1960 regulations apply:

2. They shall apply to every wholetime salaried employee of the Corporation in India unless
otherwise provided by the terms of any contract, agreement or letter of appointment.

It is impossible to accept the argument under examination in view of the language of Regula-
tion 2 which merely signifies the persons to whom the regulations are to apply. When it says
that it shall apply to every wholetime employee of the Corporation ‘unless otherwise provided
by the terms of any contract, agreement or letter of appointment’, all that it means is that if a
contract, agreement or letter of appointment contains a term stating that the concerned employee
or employees shall not be governed by the regulations, then such employee or employees shall
not be so governed. Regulation 2 is definitely not susceptible of the interpretation that if a set-
tlement has been reached between the Corporation and its employees, the regulations shall not
apply to them even though the settlement makes no provision in that behalf. It is nobody’s case
that the 1974 settlements contain any such provision and Regulation 2, therefore, does not come
into play at all.
In the result Appeal 2275 of 1978 succeeds and is accepted. The impugned judgment is set
aside and the petition under Article 226 of the Constitution of India decided thereby is dismissed
along with Transfer Case 1 of 1979. In the circumstances of the case, however, the parties are
left to bear their own costs.
In view of the opinion expressed by the majority, the appeal is dismissed with costs to the
first, second and third respondents, and the Transfer Petition No. 1 of 1979 stands allowed
insofar that a writ will issue to the Life Insurance Corporation directing it to give effect to the
terms of the settlements of 1974 relating to bonus until superseded by a fresh settlement, an
industrial award or relevant legislation. Costs in respect of the transfer petition will be paid to
the petitioners by the second respondent.

Termination of Settlements: The Legality

Workmen of the Rajasthan Atomic Power Project vs
the Management of the Rajasthan Atomic Power Project146

In this case, the issue relating to the termination of a settlement during its period of oper-
ation on the grounds of mistaken belief figured before the Court.147
232 Social Justice and Labour Jurisprudence

THE FACTS OF THE CASE

The following dispute was referred under Section 10(2) of the Industrial Disputes Act, 1947,
for adjudication to the Central Government Industrial Tribunal-cum-Labour Court, Jabalpur:

Whether the action of the management of Rajasthan Atomic Power Project, Post Office
Anushakti, via Kota in giving a notice of change dated 20 March 1973 under Section 9A of
the Industrial Disputes Act, 1947, in so far as payment of overtime allowance to staff car
drivers is concerned, is justified? If not, to what relief are they entitled?

The dispute arose in the following manner. Prior to 1 August 1971, the motor vehicle drivers
employed in the Rajasthan Atomic Power Project, hereafter called the ‘Project’, were being paid
overtime allowance in accordance with the Staff Car Rules. The Rajasthan Anushakti Pariyojana
Karamchari Sangh, which was the recognised union of the employees of the project, referred to
hereafter as ‘the union’, claimed that the overtime allowance paid to the drivers should be fixed
at the rates at which the other employees of the project were being paid. This claim gave rise to
a dispute, which was settled after protracted discussions on certain terms and a memorandum
of settlement was signed by the representatives of the parties concerned before the Assistant
Labour Commissioner (Central), Kota, on 17 November 1971. The memorandum of settlement
reads as follows:

It is agreed that:

The Motor Vehicle Drivers and Bus Helpers shall be paid overtime in accordance with the
provision of the Motor Transport Workers Act, 1961 and the rules framed thereunder by the
Government of Rajasthan with effect from 1 August 1971.
The arrears accruing in regard to clause (1) above shall be paid to all the entitled workers
by 31 December 1971.
The parties shall furnish their implementation report to the Assistant Labour Commissioner
(C), Kota, on or before 15 January 1972.

On 12 December 1972, the management of the project gave notice to the general secretary of
the union under Section 19(2) of the Industrial Disputes Act, conveying their intention to
terminate the settlement dated 17 November 1971 in so far as the staff-car drivers were concerned.
On the expiry of two months from the serving of this notice, the management served on the
union a notice under Section 9A of the Industrial Disputes Act, proposing to effect a change in
the conditions of service of the staff-car drivers, as indicated in the notice under Section 19(2).
The notice under Section 9A stated that with effect from 12 April 1973, the staff-car drivers
would be entitled to overtime allowance as admissible to them under the Staff Car Rules and
not under the Motor Transport Workers Act, 1961. This gave rise to the dispute, which, as
stated earlier, was referred for adjudication to the Central Government Industrial Tribunal-
cum-Labour Court, Jabalpur. Before the tribunal, it was contended on behalf of the management
that they had entered into the settlement dated 17 November 1971 under a mistaken belief
that the staff-car drivers were covered by the provisions of the Motor Transport Workers Act,
1961, but they found later that the definition of ‘motor transport workers’ in Section 2(h) of
the Motor Transport Workers Act, 1961, did not include the staff-car drivers of the project. The
tribunal agreed that the staff-car drivers were not motor transport workers within the meaning
of Section 2(h) and held that there was force in the contention of the management that they
were wrongly included in the settlement and that the termination of the settlement in so far as
 Collective Bargaining Agreement Issues 233

it concerned the staff-car drivers was therefore justified. The tribunal found that the staff-car
drivers were not entitled to any relief and made its award accordingly. The workmen of the
project represented by their union preferred this appeal by special leave, challenging the validity
of the award.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE A.C. GUPTA

It seems to us that the question whether the staff car drivers of the project were motor transport
workers as defined in the Motor Transport Workers Act, 1961 was not relevant to the issue
before the tribunal. The workmen were not seeking to enforce their right to overtime allowance
under the Motor Transport Workers Act. The settlement dated 17 November 1971 resolved the
existing dispute as to the rate of overtime allowance payable to the motor vehicle drivers by pro-
viding in one of the terms that they should be paid overtime in accordance with the provisions
of the Motor Transport Workers Act, 1961. The agreement making the provisions as to overtime
in the Motor Transport Workers Act, 1961 applicable to the motor vehicle drivers employed in
the project itself suggests that the parties were aware that the Act by its own force did not apply
to the motor vehicle drivers. If these motor vehicle drivers were governed by the provisions
of the Motor Transport Workers Act, then no question of applying that Act for a settlement be-
tween the parties could possibly arise. It is not disputed that motor vehicle drivers include staff
car drivers. The right asserted by the staff car drivers arise on the settlement and does not flow
out of the Motor Transport Workers Act, 1961, and it appears from the memorandum of settle-
ment that it was arrived at ‘after protracted discussions’. In these circumstances we do not think
that it could be said that the management of the project entered into the settlement on a mis-
taken belief. As the award proceeds on the management’s case of ‘mistaken belief ’ which we do
not consider acceptable, we allow the appeal and set aside the award. The appellants will be
entitled to the costs of this appeal.

NOTES

1. The settlements under Section 18 of the Act at times go beyond the scope of the general principles of a
valid contract under the Indian Contract Act, 1872. See also Herbertsons vs Their Workmen. 1977 LIC 162.
2. Rohtas Industries vs Its Union. AIR 1976 SC 425. para 19.
3. AIR 1975 SC 2057. The case was heard by Chief Justice A.N. Ray, V.R. Krishna Iyer, S. Murtaza Fazl Ali,
and K.K. Mathew, JJ.
4. This provision existed originally in the Act from the very date of its enactment.
5. (1970) 1 SCR 457: AIR 1970 SC 150.
6. 1970 I SCR 457: AIR 1970 SC 150.
7. 1970 I SCR 457: AIR 1970 SC 150.
8. 1970 I SCR 457: AIR 1970 SC 150.
9. 1 SCR 791: AIR 1971 SC 40.
10. 2 SCR 625: AIR 1967 SC 1269.
11. (1970) 3 SCR 370:(AIR 1970 SC 1205).
12. Section 2(rr) of the Act defines ‘wages’ to mean all remuneration capable of being expressed in terms of
money, which would—if the terms of employment, express or implied, were fulfilled—be payable to a
workman in respect of his employment, or of work done in such employment, and includes

1. such allowances (including dearness allowance) as the workman is for the time being entitled to;
2. the value of any house, accommodation, or of supply of light, water, medical attendance or other
amenity or of any service or of any concessional supply of food grains or other articles;
3. any travelling concession;
4. any commission payable on the promotion of sales or business or both.
234 Social Justice and Labour Jurisprudence

But does not include

1. any bonus;
2. any contribution paid or payable by the employer to any pension fund or provident fund or for the
benefit of the workman under any law for the time being in force;
3. any gratuity payable on the termination of his service.
13. AIR 1978 SC 1489. The case was heard by V.R. Krishna Iyer and Jaswant Singh.
14. Section 26 of the Act provides that (1) any workman who commences, continues or otherwise acts in
furtherance of a strike which is illegal under this Act, shall be punishable with imprisonment for a term
which may extend to one month, or with fine which may extend to fifty rupees or with both.
(2) Any employer who commences, continues, or otherwise acts in furtherance of a lock-out which is
illegal under this Act, shall be punishable with imprisonment for a term which may extend to one month,
or with fine which may extend to one thousand rupees, or with both.
Further, Section 34 of the Act provides that (1) no court shall take cognizance of any offence punishable
under this Act or of the abetment of any such offence, save on compliant made by or under the authority
of the appropriate government.
(2) No court inferior to that of a metropolitan magistrate or a Judicial Magistrate of the first class shall
try any offence punishable under this Act.
15. Section 18(2) of the Trade Unions Act, 1926, provides that a registered trade union shall not be liable in
any suit or other legal proceeding in any civil court in respect of any tortuous act done in contemplation or
furtherance of a trade dispute by an agent of the trade union if it is proved that such a person acted without
the knowledge of, or contrary to express instructions given by, the executive of the trade union.
16. AIR 1976 SC 425.
17. Article 226 of the Constitution of India provides:
(1) Not withstanding anything in article 32, every High Court shall have powers, throughout the territories
in relation to which it exercises jurisdiction, to issue to any person or authority, including in appropriate
cases, any Government, within those territories directions, orders or writs, including writs in the nature
of habeas corpus, mandamus, prohibition, quo warranto and certiorari, or any of them, for the enforce-
ment of any of the rights conferred by Part III and for any other purpose.
(2) The power conferred by clause (1) to issue directions, orders or writs to any Government, authority or
person may also be exercised by any High Court exercising jurisdiction in relation to the territories
within which the cause of action wholly or in part, arises for the exercise of such power, notwithstanding
that the seat of such Government or authority or the residence of such person is not within those
territories.
(3) Where any party against whom an interim order, whether by way of injunction or stay or in any other
manner, is made on, or in any proceedings relating to, a petition under clause (1), without
a) Furnishing to such party copies of such petition and all documents in support of the pleas for such
interim order; and
b) Giving such party an opportunity of being heard,
Makes an application to the High Court for the vacation of such order and furnishes a copy of such
application to the party in whose favour such order has been made or the counsel of such party, the
High Court shall dispose of the application within a period of two weeks from the date on which it is
received or from the date on which the copy of such application is so furnished, whichever is later, or
where the High Court is closed on the last day of that period, before the expiry of the next day
afterwards on which the High Court is open; and if the application is not so disposed of, the interim
order shall on the expiry of that period, or, as the case may be, the expiry of the said next day, stand
vacated.
(4) The power conferred on a High Court by this article shall not be in derogation of the power conferred
on the Supreme Court by clause (2) of Article 32.
18. Engineering Mazdoor Sabha vs Hind Cycles. (1962) 2 LLJ 760, 796 (SC):(1963) Supp. I.S.C.R 625.
 Collective Bargaining Agreement Issues 235

19. Section 18 of the Industrial Disputes Act, 1947, provides that:

(1) A settlement arrived at by agreement between the employer and workman other wise than in the
course of conciliation proceeding shall be binding on the parties to the agreement
(2) Subject to the provisions of sub-section (3), an arbitration award which has become enforceable shall
be binding on the parties to the agreement who referred the dispute to arbitration.
(3) A settlement arrived at in the course of conciliation proceedings under this Act or an arbitration award
in a case where notification has been issued under sub-section (3A) of Section 10A or an award of a
Labour Court, Tribunal or National Tribunal which has become enforceable shall be binding on—
a) All parties to the industrial dispute;
b) All other parties summoned to appear in the proceedings as parties to the dispute, unless the Board
(arbitrator) Labour Court, Tribunal or National Tribunal, as the case may be, records the opinion
that they were so summoned without proper cause;
c) Where a party referred to in clause (a) or clause (b) is an employer, his heirs, successors or assigns in
respect of the establishment to which the dispute relates;
d) Where a party referred to in clause (a) or in clause (b) is composed of workman, all persons who
were employed in the establishment or part of the establishment., as the case may be, to which the
dispute relates on the date of the dispute and all persons who subsequently become employed in
that establishment or part.
20. (1967) 1 SCR 633:AIR 1967 SC 378.
21. C.A. No. 107 of 1966 decided on 27 November 1968 (S.C.).
22. AIR 1967 SC 361.
23. 50 I.A. 324.
24. (1857) 3 C.B. (N.S.) 189.
25. (1944) 1 K.B. 566.
26. (1944) I KB 566.
27. 1892 A.C. 25.
28. 1898 A.C. 1.
29. 1901 A.C. 495.
30. 1925 A.C. 700.
31. 1892 A.C. 25.
32. 1925 A.C. 700.
33. 1925 A.C. 700.
34. AIR 1975 SC 2238.
35. AIR 1975 SC 2238.
36. (1831) 1 B & Ad 847 (2), 859:9 LJ OS KB 113:199 ER 100 (1).
37. 1897 A.C. 615.
38. AIR 1975 SC 2238.
39. (1949) 1 LLJ 245.
40. Section 12 of the Act provides that (1) ‘where any industrial dispute exists or is apprehended, the conciliation
officer may, or where the dispute relates to a public utility service and a notice under section 22 has been
given, shall, hold conciliation proceedings in the prescribed manner.
(2) The Conciliation Officer shall, for the purpose of bringing about a settlement of the dispute without
delay, investigate the dispute and all matters affecting the merits and right settlement thereof and may
do all such things as he thinks for for the purpose of inducing the parties to come to a fair and amicable
settlement of the dispute.
(3) If a settlement of the dispute or of any of the matters in dispute is arrived at in the course of the
conciliation proceedings, the conciliation officer shall send a report thereof to the appropriate
Government or an officer authorized in this behalf by the appropriate Government together with a
memorandum of the settlement signed by the parties to the dispute…
41. Section 18: Persons on whom settlements and awards are binding—
(1) A settlement arrived at by agreement between the employer and workman otherwise than in the course
of conciliation proceeding will be binding on the parties to the agreement.
236 Social Justice and Labour Jurisprudence

(2) Subject to the provisions of sub-section (3), an arbitration award which has become enforceable shall
be binding on the parties to the agreement who referred the dispute to arbitration.
(3) A settlement arrived at in the course of conciliation proceedings under this Act or an arbitration award
in a case where a notification has been issued under sub-section (3-A) of section 10A or an award of a
Labour Court, Tribunal or National Tribunal which has become enforceable shall be binding on—
(a) all parties to the industrial dispute;
(b) all other parties summoned to appear in the proceedings as parties to the dispute, unless the Board,
arbitrator, Labour Court, Tribunal or National Tribunal, as the case may be, records the opinion
that they were so summoned without proper cause;
(c) where a party referred to in clause (a) or clause (b) is an employer, his heirs, successors or assigns in
respect of the establishment to which the dispute relates;
(d) where a party referred to in clause (a) or clause (b) is composed of workmen, all persons who were
employed in the establishment or part of the establishment, as the case may be, to which the
dispute relates on the date of the dispute and all persons who subsequently become employed in
that establishment or part.
42. Section 17A of the Act provides that an award (including an arbitration award) shall become enforceable
on the expiry of thirty days from the date of its publication under Section 17:
PROVIDED that—
(a) if the appropriate government is of opinion, in any case where the award has been given by a
Labour Court or tribunal in relation to an industrial dispute to which it is a party; or
(b) if the Central Government is of opinion, in any case where the award has been given by a National
Tribunal,
that it will be inexpedient on public grounds affecting national economy or social justice to give
effect to the whole or any part of the award, the appropriate government, or as the case may be, the
Central Government may, by notification in the Official Gazette, declare that the award shall not
become enforceable on the expiry of the said period of thirty days.
(2) Where any declaration has been made in relation to an award under the proviso to sub-section (1), the
appropriate government or the Central Government may, within ninety days from the date of publication
of the award under Section 17, make an order rejecting or modifying the award, and shall, on the first
available opportunity, lay the award together with a copy of the order before the Legislature of the
State, if the order has been made by a State Government, or before parliament, if the order has been
made by the Central Government.
(3) Where any award as rejected or modified by an order made under sub-section (2) is laid before the
Legislature of a State or before parliament, such award shall become enforceable on the expiry of
fifteen days from the date on which it is so laid; and where no order under sub-section (2) is made in
pursuance of a declaration under the proviso to sub-section (1), the award shall become enforceable on
the expiry of the period of ninety days referred to in sub-section (2).
(4) Subject to the provisions of sub-section (1) and sub-section (3) regarding the enforceability of an
award, the award shall come into operation with effect from such date as may be specified therein but
where no date is so specified, it shall come into operation on the date when the award becomes enforceable
under sub-section (1) or sub-section (3), as the case may be.
43. Section 9A. 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 the affected by such change a notice in the prescribed manner
of the nature of change 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—
44. See Section 29 of the Act.
45. AIR 1978 SC 828. The case was heard by V.R. Krishna Iyer and Jaswant Singh. The majority decision was
delivered by Justice Jaswant Singh.
 Collective Bargaining Agreement Issues 237

46. AIR 1977 SC 322. The case was heard by Y.V. Chandrachud, P.K. Goswami and S. Murtaza Fazal Ali, and
the majority decision was delivered by Justice Goswami.
47. AIR 1977 SC 828.
48. For the purpose of this chapter, only first three questions are dealt with. The remaining questions are dealt
with in Chapter XIV, Wages and Monetary Benefits.
49. 1961 (2) FLR 183.
50. 1960 (1) FLR 411:(1950–67) SCLJ 2369:(1960) 3 SCR 968.
51. 1975 (30) FLR/175 (SC).
52. (1965) 3 SCR 394.
53. 1975 (30) FLR SC 175.
54. AIR 1980 SC 2181:1980 LIC 1218:1981 LLJ 1.
55. Earl Warren, 1955. ‘The Law and Future’, Fortune, November.
56. Life Insurance Corporation of India.
57. L. Fuller, 1958. ‘Positivism and Fidelity to Law: A Reply to Prof. Hart’, 71 Harv. L Rev, pp. 665, 666, 669.
58. Reed Dickerson, 1975. The Interpretation and Application of Statutes. Boston: Little Brown, pp. 236–37.
59. (1978) 3 SCR 334.
60. William J. Brennan, Jr. opinion in Roth vs United States. 354 US 476 (1958).
61. 1978 (36) FLR 266 = (1978) 2 SCC 213 at 232.
62. Supra.
63. Hutton vs Phillips, 45 Del 156, 160:70A 2d 15, 17 (1949). Also Reed Dickerson, Interpretation and
Application of Statutes, p. 231
64. (Malhotra: THE LAW OF INDUSTRIAL DISPUTES, 2nd edn., Vol. I, p. 656).
65. Workmen vs New Elphinstone Theatre. (1961) 1 LLJ 105, 119 (Mad HC): Mangaldas Narandas vs Payment
of Wages Authority. (1957) 2 LLJ 256 (Bom HC): Yamuna Mills vs Majdoor Mahajan Mandal. (1957) 1
LLJ 620 (Bom HC).
66. AIR 1950 Cal. 577.
67. (1957) 2 LLJ 256.
68. Yamuna Mills vs Majdoor Mahajan Mandal, Baroda, and Others. 1957 (I) LLJ 620.
69. 1957 (I) LLJ 620. 623–624.
70. (1961) 1 LLJ 105.
71. (1971) 1 LLJ 310 (Mad).
72. (1978) 1 LLJ 227 (Mad HC).
73. Sathya Studios vs Labour Court. (1978) 1 LLJ 227 (Mad HC).
74. South India Bank vs A.R. Chacko. 1964 (8) FLR 128.
75. Management Indian Oil Corporation vs Its Workmen. 1960 (12) FLR 45.
76. Md Qasim Larry, factory manager, Sasamusa Sugar Works vs Md Samsuddin and Another. 1964 (9)
FLR 115.
77. 1964 4 SCR 625. at 630–631.
78. Md Qasim Larry, factory manager, Sasamusa Sugar Works vs Md Samsuddin and Another. 1964 (9)
FLR 115.
79. 1964 (8) FLR 128.
80. Management Indian Oil Corporation vs its workmen. 1976 1 SCR 110.
81. 1964 (8) FLR 128.
82. 1976 I SCR 110.
83. 1976 I SCR 110.
84. 1964 (8) FLR 128.
85. Maruti Mahipati Mullick vs Polson. 1970 Lab IC 308, 310:71 Bom LR 655 (Bom HC).
86. 1964 (8) FLR 128.
87. 1964 (8) FLR 128.
88. 1987 AC 395. Robert Stevens : Law and Politics, p. 92, f.n. 83.
89. Craies on Statute Law, 1963 Edn., pp. 376–77.
90. Mary Sewards vs Owner of the ‘Vera Cruz’. (1884) 10 AC 59, 68.
91. U.P. State Electricity Board vs H.S. Jain. 1978 (37) FLR 280.
238 Social Justice and Labour Jurisprudence

92. Ibid., at 365–66.

93. (1884) 10 AC 59 at 68.
94. 1961 (2) FLR 529.
95. Bangalore Water Supply and Sewerage Board vs Rajappa. 1978 (36) FLR 266.
96. 1953 SCR 302.
97. 1915 AC 885 (at 891).
98. (1970) I SCR 355 at 362.
99. 1964 (8) FLR 128.
100. 1964 (9) FLR 115.
101. 1964 (8) FLR 158.
102. 1975 (30) FLR 283 (SC).
103. 1978 (37) FLR 280.
104. (1884) 10 AC 59 at 68.
105. 1961 (2) FLR 529.
106. 1978 3 SCR 334.
107. (1978) 3 SCR 334.
108. AIR 1971 SC 1997.
109. 1968 1 SCR 185.
110. 1975 3 SCR 619.
111. (1975) 2 SLR 36:1975 Lab IC 790 (Raj HC).
112. (1961) 2 SCR 679.
113. (1970) 1 SCR 678.
114. 1964 (8) FLR 128.
115. 1972 (24) FLR 321.
116. (1976) 1 SCR 427.
117. 1964 (8) FLR 128.
118. (1978) 3 SCR 334.
119. (1980) 5 CPD 34, 40.
120. 1964 (8) FLR 158.
121. 1964 (8) FLR 158.
122. AIR 1972 SC 2427.
123. 1968 2 SCR 575.
124. 1978 (37) FLR 280 (SC).
125. 1978 (36) FLR 266 (SC).
126. Supra.
127. (1978) 3 SCR 334.
128. (1978) 3 SCR 334.
129. (1978) 3 SCR 334.
130. 1964 (8) FLR 128.
131. 1964 (8) FLR 128.
132. 1964 (8) FLR 128.
133. 1964 (8) FLR 128.
134. 1970 (24) FLR 32: (1972) I SCR 790.
135. 1977 (55) FLR 246.
136. AIR 1970 Bom. 213.
137. 1964 (8) FLR 128.
138. 1975 (30) FLR 283 = (1975) 3 SCR 619.0
139. (1977 Lab IC 622 (Cal HC)).
140. 1951 SCR 848.
141. 1967 1 SCR 856.
142. 1977 1 LLJ 211:1978 Lab IC 46 (Mad HC).
143. 1961 1 SCR 341.
144. 1977 Lab IC 1072.
145. 1975 (30) FLR 133:(1975) 3 SCR 542.
 Collective Bargaining Agreement Issues 239

146. AIR 1976 SC 441:1976 (32) FLR 90:1976 LIC 315. The case was heard by Y.V. Chandrachud,
V.R. Krishna Iyer and A.C. Gupta.
147. Under Section 18(1) of the Industrial Disputes Act, 1947, a settlement arrived at by agreement between
the employer and workmen otherwise than in the course of conciliation proceedings shall be binding on
the parties to the agreement.
Further, Section 19(1) provides that a settlement shall come into operation on such a date as is agreed
upon by the parties to the dispute and if no date is agreed upon, on the date on which the memorandum
of settlement is signed by the parties to the dispute.
Sub-section (2) of the same section provides that such a settlement shall be binding for such a period as
is agreed upon by the parties, and if no such period is agreed upon, for a period of six months from the
date on which the memorandum of settlement is signed by the parties to the dispute, and shall continue
to be binding on the parties after the expiry of the period aforesaid until the expiry of two months from
the date on which a notice in writing of an intention to terminate the settlement is given by one of the
parties to the other party or parties to the settlement.
 Chapter 5

Maharashtra (Recognition of Trade Unions and

Prevention of Unfair Labour Practices) Act, 1972

The Recognition of Trade Unions: Procedural Requirements

During his tenure as a judge of the apex Court, Justice. Krishna Iyer had a single occasion
to deal with a labour legislation that applied only to a single Indian state. On that oc-
casion his judgement put an end to certain controversies of long standing surmounted by
High Court decisions after the enactment of the Maharashtra (Recognition of Trade
Unions and Prevention of Unfair Labour Practices) Act, 1972.
This legislation provides certain privileges for a trade union once it is adjudged a
recognised trade union under the Act. The process of acquiescence of recognition by a
trade union involves procedural as well as substantive requirements under the Act.

Forbes Forbes Campbell vs Engineering Mazdoor Sabha1

In this case, Justice V.R. Krishna Iyer, speaking for the majority, laid down certain norms
regarding compliance with procedural requirements.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

Brevity is a necessity in a judgment which proceeds substantially on a consensus among counsels

as regards the manner of disposal. Therefore we will be brief in narrating a few facts stating a
little law and proceeding straight to the directions to be issued in the light of the controversy
arising herein. However, we may indicate even here that there is one question of law which is
contentious on which we propose to indicate our view in a general way. This we do because
counsels on both sides have pressed that it will be helpful since the High Court has laid down its
interpretation with which we do not agree.
The Maharashtra (Recognition of Trade Unions and Prevention of Unfair Labour Practices)
Act, 1971, (for short, the ‘Act’) although passed by the Legislature in 1971, was, for inscrutable
reasons, brought into force on 8 September 1975. Whether this can be called laws delay or
implementation gap is a matter of phraseology but the fact is that when the Legislature makes
a law (especially, welfare law for the weaker section of the community) it is implicit that the
benefits of the legislation to the consumers therefore shall not be delayed by the Executive by
bringing it into force long years later. This is another dimension of laws delays not fully known
to the public.
 Recognition of Trade Unions and Prevention of Unfair Labour Practices 241

The respondent union applied for recognition under the Act, on 15 December 1975, to the
appropriate authority, viz., the Industrial Court. Admittedly the union then commanded the
requisite qualification of 30 per cent membership. But then there are other conditions also nec-
essary before an application for recognition can be accorded. At this stage, we may express our
pensive reflection on the fact that notwithstanding the direction in Section 11(2) that an appli-
cation for recognition shall be disposed of, as far as possible, within three months from the date
of receipt of the application this particular proceeding has been pending well beyond one year
for reasons which we need not investigate here. It is a bad omen for industrial processual justice.
When the application for recognition was pending, the employer moved the High Court for
issuance of an appropriate writ questioning the competence of the union to get recognition.
Two grounds were urged without success. The first was that the requirements of Form ‘A’ read
with rule 4 promulgated in exercise of the powers conferred by Section 61 had not been complied
with and for that reason alone the application was bound to be dismissed.
By way of aside we may mention that Section 12 provides that when an application from a
union for recognition is made notice thereof shall be given in the specified manner and it is
open to any other union or unions to raise objections and claim recognition provided the union
or unions could claim membership of employees in the concerned undertaking. In the present
case another such union appears to have raised such an objection and is represented before us by
Mr K. P. V. Menon.
The core of the dispute is as to whether Form ‘A’ should be so read as to insist upon the re-
jection of the application for recognition if the conditions contained in Columns 7 and 11(2)
therein are not complied with. We may read those conditions in Form ‘A’:

Condition 7: The constitution of the applicant union provides for the matters mentioned
in Section 19 of the Act. A copy of the constitution is attached.
Condition 11(2): The Executive Committee of the applicant union met on the following
dates during the twelve months preceding the date of the application.

Section 19 makes it obligatory upon a union seeking recognition under the Act to provide
for a few matters one of which is that:

An auditor appointed by the State Government may audit its account at least once in each
financial year.

All the points mentioned above have to be provided in the constitution of the applicant union.
So far as we are concerned, the applicant union i.e. the respondent before us, has amended its
constitution in terms of Section 19(4) although it is pointed out that there is some other litigation
bearing on this question. For the purpose of this case, however, we take it that the constitution
of the applicant union conforms to Section 19(4) of the Act and proceed on that footing. Al-
though there may be technical merit in the plea that until the Registrar of Trade Unions formally
approves this amendment of the union and registers it, it does not become part of the constitution.
Shri F. S. Nariman, appearing for the employer, has for the purpose of this case agreed that this
time infirmity need not stand in the way of the applicant union being qualified for recognition,
if, otherwise, it is eligible.
This takes us to a consideration of the other two questions we have already indicated. Thus,
has the union conformed to the requirements set out in clause 11(2) of Form ‘A’? Secondly, is
this conformance mandatory before an applicant can seek recognition? The High Court has taken
the view that it is not as if the union should have held the requisite meetings of the Executive
Committee as stipulated in clause 11(2) before the date of filing the application for recognition.
According to the High Court, Section 19(2) providing that the Executive Committee of the union
shall meet at intervals of not more than 3 months is not something to be fulfilled anterior to the
242 Social Justice and Labour Jurisprudence

date of the application and therefore it is not proper to reject an application made by the union
merely because its Executive Committee has not met at intervals of not more than 3 months
during the 12 months preceding the date of the application. Section 19(2), read with clause 11(2)
of Form ‘A’, prima facie suggests that any union which seeks recognition under this Act must
observe the conditions necessary therefor. One of the conditions necessary is, according to
Form A, the holding, within the 12 months preceding the date of the application, of meetings
of the Executive Committee in terms of Section 19(2). Shri Damania argues that the situation
would become unworkable if the construction that is suggested by the appellant’s counsel were
adopted. Form A cannot be given the status of a provision in the Act itself and, in any case,
applicants who have moved the Industrial Court within 12 months of the coming into force
of the Act cannot, ordinarily, be expected to comply with the provisions of Section 19(2) and
clause 11(2) of Form A. It is plausible to contend that Section 11(1) insists that the applicant
union should apply in the prescribed form for being registered as a recognised union, which
takes us to the prescribed form, i.e. Form A. Moreover, the expression ‘union which seeks rec-
ognition’ has also been emphasised before us. Taking an overall view of the provisions of law,
viz., Sections 11, 12 and 19 and rule 4 and Form A, which must all be read together, we are satis-
fied that any union which seeks recognition and applies in that behalf must, when it applies, be
able to convince the Industrial Court that it is qualified for recognition. This means that on or
about the date on which it seeks recognition, that is the date of the application or at least the
time when notice is served under Section 12, it possesses the percentage of members required
and has its constitution in conformity with Section 19 and rule 4 and otherwise has complied
with the requirements of Form A, in this particular case clause 11(2) of Form A. Of course,
we agree that Form A has to be read not rigidly but flexibly and with an amount of latitude.
In that sense, substantial compliance will be sufficient. To make our point we may illustrate:
supposing within 12 months prior to the application, meetings have been held as required by
Section 19(2) but a day or two this side or that, it has tripped that does not disqualify. It is also
possible to conceive of other inconsequential deviations. Such minor departures cannot have an
invalidatory effect. However, the requirements we are concerned with in the present case are
different. The constitution must provide for Government audit. This is mandatory. Likewise,
the rules of the union must provide for periodical meeting of the Executive Committee in terms
of Section 19(2), not meticulously but substantially in terms thereof. The hardship that is pointed
out by counsel for the respondent, at the most, operates for one year from the date of the coming
into force of the Act, and more than that period has already elapsed, So much so we are not
impressed that many unions are likely to be handicapped by such a construction as has appealed
to us.
The law as laid down by the High Court does not appear to us to be correct. We make it clear
that an applicant union must at the time of its application or within the period when Section 12
comes into play a constitution which is in accord with rule 4 and it must qualify as required
under Section 19(2). It must substantially fulfill the needs of clause 11(2) of Form A. Technical-
ities, however, should be overlooked in this area and the substance of the matter alone should be
focussed upon by the Tribunal.
Counsel for the respondent rightly pointed out that if applications made by the unions for
recognition within one year of the coming into force of the Act are rejected on the ground that
they have not complied with Form A as we have interpreted it there may be a bar for a fresh appli-
cation until the lapse of another year. We are clear in our minds that the proviso to Section 14(1)
shall not operate as a bar because the application for registration in not being considered on
merits and the bar is not attracted. Therefore, the apprehension of counsel for the respondent is
misplaced.
We may mention that counsel for both the unions assured the Court that there may not be
any disturbance to the industrial peace in the factory concerned. We need hardly say that the
 Recognition of Trade Unions and Prevention of Unfair Labour Practices 243

Management will also benefit by keeping, on its side, exercise of a similar restraint. We are not
implying by these observations one way or the other that either party has violated industrial
peace. That is a matter for separate investigation.
Now that we have stated the law governing the situation, we proceed, by consent of both
sides, to issues certain directions in this case. We are grateful to counsel that they have been able
to reach a consensus on the course of action to be adopted. In that light, we are updating the
situation, as it were, and the requirements expected of the applicant union will be related to
26 February 1977. It is agreed by both sides and Shri K.P.V. Menon, appearing for the other
union, that the Industrial Court be directed to make a report to this Court on certain specified
matters. The Industrial Court will direct the Investigating Officer (specified in Section 9) to en-
quire and make a report to it as to which of the two unions has the majority of members on its
rolls for the period of six months preceding 26 February 1977. The membership, of course,
will depend on the prescriptions in the law, such as regarding payment of subscription, etc. The
Investigating Officer will satisfy himself about the free choice of the members regarding their
steady allegiance to one union or the other. Secondly, the Industrial Court will also make a re-
port to this Court about the points mentioned in Sections 13(5) and (6). The respondent union,
as well as the F.F.C. Union and the employer, shall be heard by the Industrial Court briefly be-
fore a report is made to this Court. We clarify that while considering the question covered by
Section 12(6) of the Act the Industrial Court will confine itself to the period of 6 months imme-
diately preceding 28 February 1977.
The Industrial Court will make this report within two months from the date of receipt of the
order of this Court. The Investigating Officer’s report will also be forwarded by the Industrial
Court along with its report, together with any comments it wishes to make.
For the purpose of this case, the Industrial Court will proceed on the assumption that the
amendment of the respondent’s constitution regarding Government audit is already part of the
constitution.

NOTE

1. AIR 1978 SC 340. The case was heard by V.R. Krishna Iyer, R.S. Sarkaria and Jaswant Singh.
 Chapter 6

The Government’s Power of

Reference of Industrial Disputes

One of the most controversial areas of the Industrial Disputes Act, 1947, is the area
relating to the government’s power of reference of industrial disputes. The appropriate
government is vested with a discretionary power, which is purely administrative in nature.
The appropriate government is the sole arbiter in referring the disputes to various author-
ities under Section 10(1) of the Act.1 In this context the labour jurisprudence differs from
the general jurisprudence. The power of reference specified under Section 10 has
undergone a number of amendments since the date of its enactment. In fact, this is another
critical area under the Industrial Disputes Act, 1947. Justice V.R. Krishna Iyer had oppor-
tunities either to speak for the majority or to coordinate the majority decisions in resolving
many ticklish issues under this provision.

When is the Second Reference Valid?

Cox and Kings (Agents) vs Their Workmen and Others 2
In this case, the appellants dismissed from service three of their workmen after a domestic
enquiry conducted against them on certain charges. In May 1967, the Lieutenent Governor
of Delhi referred the case to the Labour Court, Delhi, under Section 10, read with Sec-
tion 12(5), of the ID Act, to determine:

Whether the termination of services of the three workmen shown in the order were unlawful
and unjustified, and if so, to what relief are these workmen entitled?

By an amendment of their written statement in February 1969, augmented by an

application dated 17 March 1971, the management raised a preliminary objection that
since no demand notice had been served on the management, no industrial dispute had
legally come into existence, and as such the reference was invalid and the labour court
had no jurisdiction to adjudicate it. By an order dated 27 September 1972, the labour
court accepted the objection, holding:

…that no industrial dispute came into existence before this reference, as the workmen have
failed to establish serving of demand on the management prior to this reference. The effect of
 Government’s Power of Reference of Industrial Disputes 245

this finding is that the reference could not have been made for adjudication and the same is
accordingly invalid and hence the question of deciding the issue as in the reference or other
issues does not arise as the industrial dispute under reference did not come into existence in ac-
cordance with law before this reference. The award is made accordingly.

Thereafter the workmen, on 25 October 1972, raised a dispute by serving demand

notices on the management. By his order dated 2 May 1973, the Lieutenent Governor,
Delhi, again made a reference to the labour court under the Act for adjudication of the
same matter relating to the termination of the services of the aforesaid workmen.
The management raised, inter alia, a preliminary objection that a second reference
within one year of the first ‘award’ dated 27 September 1972 was not competent in view
of what is contained in Section 19 of the Act.
By an order dated 2 May 1973, the labour court dismissed the preliminary objection.
After recording the evidence produced by the parties, the court held on the merits of the
case that the termination of the services of the three workmen was illegal and unjustified.
This award was made by the labour court on 1 May 1975.
The management impugned this award by filing a writ petition under Article 226 of
the Constitution in the High Court of Delhi. Only three contentions were canvassed by
the management at the preliminary hearing before the High Court: (a) The determination
dated 27 September 1972, by the labour court was an ‘award’ as defined in Section 2(b)
of the Act, and in view of subsections (3) of Section 19, it had to be in operation for a
period of one year. It could be terminated only by a notice given under subsections (4)
and (6) of Section 19. Since no such notice was given, the award continued to be in
operation. It was contended that the second award, dated 1 May 1975, could not have
been validly made during the period that the first award was in operation. (b) The demand
for reinstatement was not made by the workmen till 1972 and the labour court was not
justified in awarding them the relief of reinstatement together with compensation for
back wages from 1966 onwards. (c) The onus to show that the workmen had not obtained
alternative employment after their dismissal was on the workmen and this had not been
discharged. On the other hand, the labour court wrongfully disallowed the management
from adducing additional evidence to show that the workmen had obtained alternative
employment and, in consequence, were not entitled to back wages.
Regarding (a), the High Court held that since the ‘award’ dated 27 September 1972
was not one that imposed any continuing obligation on the parties, but had ended with
its pronouncement, nothing in sub-sections (3) and (6) of Section 19 was applicable to it.
As regards (b), the High Court held that once the dismissal of the workmen was found
illegal, it was inevitable to award the compensation from the dates of dismissal till they
found alternative employment or till the date of the award, as the case may be.
With regard to (c), the High Court said that the question of burden of proof as to who
is to prove whether the workmen did not get alternative employment for the period for
which back wages had been awarded to them could arise only if no evidence was given by
either party or if the evidence given by them was evenly balanced. Neither of these circum-
stances was present before the labour court and there was no good reason to disturb the
finding of facts recorded by the labour court on this point.
The High Court thus rejected all the three contentions and, in the result, dismissed
the writ petition in limine, with a speaking order.
246 Social Justice and Labour Jurisprudence

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE SARKARIA

Shri G.B. Pai has reagitated all the three points before us. He assails the findings of the
High Court, thereon.
Regarding point No. (i) Mr Pai’s argument is that the determination dated 27-9-1972, also,
was an ‘award’ within the second part of the definition of the term in Section 2(b) of the Act,
inasmuch as it determined question relating to an industrial dispute. Emphasis has also been
laid on the point that this ‘award’ dated 27-9-1972 was duly published by the Government
under Section 17(1) and had assumed finality under sub-section (2) of the same section. This
award dated 27-9-1972—proceeds the argument—had to remain operative under sub sec-
tion (3) of Section 19 for a period of one year from the date on which it became enforceable
under Section 17 A, i.e., a date one month after its publication. It is submitted that no second
Reference could be validly made by the Government during the period the first award remained
operative, and since the second Reference, dated 2-5-1973 was made before the expiry of such
period of the first award (which had been not terminated in the manner laid down in Section 19)
it was invalid and the consequential adjudication by the Labour Court on its basis was null and
void. In this connection, Counsel has relied upon a judgment of this Court in Management of
Bangalore, Woollen, Cotton & Silk Mills Co. Ltd vs The Workmen 3 wherein it was held that when
there is a subsisting award binding on the parties, the Tribunal has no jurisdiction to consider
the same points in a fresh reference. In that case the earlier award had not been terminated and the
Reference was therefore, held to be incompetent. Reference has also been made to a single
Bench judgment of the Allahabad High Court in Workmen of Swadeshi Cotton Mills Co. Ltd vs
Swadeshi Cotton Mills Co. Ltd., Kanpur.4
As against this, Shri M. K. Ramamurthi maintains that the Labour Court’s order, dated
1 May 1972, was not an ‘award’ within the definition of the term in Section 2(b) inasmuch as
it was not a determination, on merits, of any industrial dispute or of any question relating to an
industrial dispute. In this connection reliance has been placed on a judgment of this Court in
Civil Appeal No. 241 of 1964 Technological Institute of Textiles vs Its Workmen.5
Before dealing with the contentions canvassed, it will be worth while to notice the relevant
statutory provisions.
The terms ‘award’ and ‘industrial dispute’ have been defined in the Act as follows:

‘Award’ means an interim or a final determination of any industrial dispute or of any ques-
tion relating thereto by any Labour Court, Industrial Tribunal or National Industrial Tribunal
and includes an arbitration award made under Section 10A’ (vide Section 2[b]).
‘Industrial dispute’ means ‘any dispute or difference between employers and employers, or
between employers and workmen, or between workmen and workmen, which is connected
with the employment or non-employment or the terms of employment or with the conditions
of labour of any person’ (vide Section 2[k]).

Section 10 describes the matters which can be referred to Boards, Courts or Tribunals for ad-
judication. Only clause (c) of sub-section (1) is material for our purpose. It provides:

Where the appropriate Government is of opinion that any industrial dispute exists or is
apprehended. It may at any time by order in writing—
(a) …………. ……………..
(b) …………. ……………..
(c) refer the dispute or any matter appearing to be connected with, or relevant to the dispute,
if it relates to any matter specified in the Second Schedule to a Labour Court for
adjudication’.
 Government’s Power of Reference of Industrial Disputes 247

Sub-section (4) requires the Labour Court to confine its adjudication to those points of dis-
pute and matters incidental thereto which the appropriate Government has referred to it for
adjudicaton.
The material part of Section 19 reads as under:
(1) …………. ……………..
(2) …………. ……………..
(3) An award shall subject to the provisions of this section, remain in operation for a period
of one year from the date on which the award becomes enforceable under Section 17A;
Provided that the appropriate Government may reduce the said period and fix such period as
it thinks fit:
Provided further that the appropriate Government may, before the expiry of the said period,
extend the period of operation by any period not exceeding one year at a time as it thinks fit
so, however, that the total period of operation of any award does not exceed three years from
the date on which it came into operation.
Where the appropriate Government, whether of its own motion or on the application of
any party bound by the award, considers that since the award was made, there has been a
material change in the circumstances on which it was based, the appropriate Government
may refer the award or a part of it to a Labour Court or to a tribunal, if the award was that of
the tribunal or of a National Tribunal for decision whether the period of operation should
not, by reason of such change, be shortened and the decision of the Labour Court or the Tri-
bunal, as the case may be, on such reference shall be final.
Nothing contained in subsection (3) shall apply to any award which by its nature, terms or
other circumstances does not impose after it has been given effect to, any continuing obligation
on the parties bound by the award.
Not withstanding the expiry of the period of operation under subsection (3) the award
shall continue to be binding on the parties until a period of two months has elapsed from the
date on which notice is given by any party bound by the award to the other party or parties
intimating its intention to terminate the award.
No notice given under subsection (2) or subsection (6) shall have effect unless it is given
by a party representing the majority of persons bound by the settlement or award, as the case
may be.

There is no dispute that the order on the earlier Reference was made by the Labour Court on
27-9-1972, while the second Reference with the same terms of Reference to that Court was
made by the Government on 2-5-1973, i.e., within one year of the earlier order. It is common
ground that the period of one year for which an award normally remains in operation under sub
section (3) was not reduced or curtailed by the Government under Section 19 or under any
other provisions of the Act. It is further admitted between the parties that no notice was given
by any party of its intention to terminate the order dated 27-9-1972.
The controversy with regard to the first point therefore narrows down into the issue: ‘Whether
the determination dated 27-9-1972 of the Labour Court was an award as defined in Section 2(b)
of the Act?’
The definition of ‘award’ in Section 2(b) falls in two parts. The first part covers a determination,
final or interim, of any industrial dispute. The second part takes in a determination of any ques-
tion relating to an industrial dispute. But the basic postulate common to both the parts of the
definition is the existence of an industrial dispute, actual or apprehended. The ‘determination’
contemplated by the definitions of the industrial dispute or a question relating thereto, on merits.
It is to be noted further that Section 2 itself, expressly makes the definition subject to ‘anything
repugnant in the subject or context’. We have therefore to consider this definition in the context
of Section 19 and other related provisions of the Act.
248 Social Justice and Labour Jurisprudence

Mr Pai concedes that the order dated 27-9-1972 is not a determination of any industrial
dispute, as such, falling under the first part of the definition. However, his argument is that the
expression ‘or any question relating thereto’ in the second part of the definition is of wide amp-
litude and should be spaciously construed. It is maintained that a question, whether or not an
industrial dispute exists, will itself be a question relating to an industrial dispute within the in-
tendment of the second part of the definition.
The contention appears to be attractive but does not stand a close examination.
Sub-section (1) of Section 10 indicates when and what matters can be referred to the Labour
Court for adjudication. The sub section expressly makes formation of opinion by the appropriate
Government ‘that any industrial dispute exists or apprehended’ a condition precedent to the
exercise of the power of making a Reference. Sub-section (4) gives a mandate to the Labour
Court to confine its adjudication to those points of dispute which have been specified in the
Order of Reference, or are incidental thereto. From a conjoint reading of clause (b) of Section 2
and sub-sections (1) and (4) of Section 10, it is clear that in order to be an ‘award’ within the
second part of the definition, a determination must be (i) an adjudication of a question or point
relating to an industrial dispute, which has been specified in the Order of Reference or is incidental
thereto, and (ii) such adjudication must be one on merits.
Now, let us test the Labour Court’s order, dated 27-9-1972 in the light of the above enun-
ciation. That Order did not satisfy any of the criteria indicated above. It did not determine the
questions or points specified in the Government’s Order of Reference. Nor was it an adjudication
on merits of any industrial dispute or a question relating thereof. The only question determined
by the Order dated 27-9-1972, was about the existence of a preliminary fact viz. existence of an
industrial dispute which in the Labour Court’s opinion was a sine qua non for the validity of the
reference and exercise of further jurisdiction by the Court. Rightly or wrongly, the Court found
that this preliminary jurisdictional fact did not exist, because ‘no industrial dispute had come
into existence in accordance with the law’, and, in consequence, the Reference was in-valid and
the Court was not competent to enter upon the reference and determine the matter referred to
it. With this finding, the Court refused to go into the merits of the question referred to it. There
was no determination on merits of an industrial dispute or a question relating thereto.
We are therefore of opinion that the Labour Court’s determination dated 27-9-1972 did
not possess the attributes essential to bring it within the definition of an ‘award’. The mere fact
that this order was published by the Government under Section 17(1) of the Act did not confer
that status on it.
In the view we take we are fortified by the principle laid down by this Court in Technological
Institute of Textiles vs Its Workmen.6 In that case, there was a settlement which, in the absence of
necessary formalities, was not binding on the parties. Certain items of dispute were not pressed
and withdrawn under the terms of such settlement. In the subsequent Reference before the
Industrial Tribunal, some of the items of dispute were withdrawn and no award was made in
respect thereto. Thereafter, these items were referred for adjudication along with certain other
matters to the Tribunal. It was contended on behalf of the Management that subsequent Reference
with regard to the items which had been withdrawn and not pressed in the earlier award had
not been terminated in full. [Justice] Ramaswamy speaking for the Court, repelled this conten-
tion, with these observations:

It is manifest in the present case that there has been no adjudication on merits by the industrial
tribunal in the previous reference with regards to the matters covered by items (1) and (3) of
the present reference because the workman had withdrawn those matters from the purview
of the dispute. There was also no settlement, in Exhibit R. 4 because the demands in question
had been withdrawn by the workmen and there was no agreement between the parties in
 Government’s Power of Reference of Industrial Disputes 249

regard thereto. Our conclusion, therefore, is that the bar of Section 19 of the Industrial Dis-
putes Act does not operate with regard to the matters covered by items (1) and (3) of the
present reference and the argument put forward by the appellant on this aspect of the case
must be rejected.

Although the facts of the case before us are different, yet the principle enunciated therein viz.
that the bar of Section 19 operates only with regard to a determination made on merits is fully
applicable. By any reckoning, the decision dated 27-9-1972, of the Labour Court by its very
nature did not impose any continuing obligation on the parties bound by it. This was an add-
itional reason for holding that the second reference was not barred by anything contained in
sub-section (3) or other provisions of Section 19.
We have gone through the single Bench decision of the Allahabad High Court in Workmen of
Swadeshi Cotton Mills Co. Ltd.’s7 case. That decision is to the effect that the finding recorded by
the Labour Court that the matter referred to it for adjudication was not an industrial dispute as
defined in the Act, is itself a determination of a question relating to an industrial dispute and
would fall within the definition of the term ‘award’ under the Act. In our opinion, this is not a
correct statement of the Law on the point.
The next submission of Mr Pai is that since the demand for reinstatement was not duly
made by the workmen before 25-10-1972, the Courts below were not justified in awarding to
the workmen compensation for back wages from 1966 onwards.
On the other hand, Mr Ramamurthi maintains that such a claim was presumably agitated
by the workmen in proceedings before the Conciliation Officer in 1966. While conceding that
technically no demand notice for reinstatement was served by the workmen on the Management
before 25-10-1972, Counsel submits that the Management were aware of the workmen’s claim
to reinstatement since 1966, and in these circumstances, the Management should not be allowed
to take shelter behind this technical flaw, and deny just compensation to them from the date of
wrongful dismissal.
We have carefully considered the contentions advanced on both sides. After taking into con-
sideration all the circumstances of the case, we are of opinion that the Labour Court was not
justified in awarding compensation to the workmen, for wages relating to the period prior to
25-10-1972, i.e., the date on which the demand notices for reinstatement were served on the
Management. To this extent, we would accept the contention of the appellants.
The third contention of the appellants is that the onus of proving that they had not obtained
alternative employment elsewhere after the termination of their services was on the workmen,
and they had failed to discharge that onus.
We find no merits in this contention.
The question of onus oft loses its importance when both the parties adduce whatever evidence
they had to produce. In the instant case, both the parties led their evidence and closed their re-
spective cases. Subsequently, at a late stage, the Management made an application for adducing
additional evidence. The Labour Court declined that application. The High Court found—and
we think rightly, no good reason to interfere with the discretion of the Labour Court. It may be
remembered further, that this appeal arises out of a petition under Article 226 of the Constitution,
and in the exercise of that special jurisdiction, the High Court does not reopen a finding of fact
based on legal evidence. The finding of the Labour Court to the effect, that after their dismissal,
Ram Swarup Gupta was unable to find any alternative employment elsewhere, while Rawat was
able to find only intermittent employment elsewhere were based on evidence produced by the
parties. The High Court was therefore right in not interfering with those findings of fact.
It may be recalled that the Special leave to appeal in this case, was granted on the condition
that the appellants shall pay the costs of this appeal to the respondents in any events. We order
accordingly. Appeal dismissed.
250 Social Justice and Labour Jurisprudence

The Nature of Power Conferred on the Appropriate

Government under Section 10(1) of the Act

Two years after deciding the Cox and Kings case,8 the bench coordinated by Justice
V.R. Krishna Iyer had occasion to deal exhaustively with the nature and scope of the
powers of the appropriate government under Section 10 of the Act in the following case.

Avon Services Production Agencies vs Industrial Tribunal 9

THE FACTS OF THE CASE

The appellant company had set up two factories, one at Bombay and the other at Ballabhgarh.
The industrial dispute which was the subject matter of appeal related to the Ballabhgarh factory.
According to the appellant this factory, when commissioned in 1962, was divided into two
sections, now styled as two separate undertakings: (a) manufacturing section; and (b) packing
material making section. The manufacturing section comprised two sub-sections—the chemical
section i.e. Foam Compound manufacturing section, and the boiler section. The packing material
section was again composed of two sub-sections, one manufacturing containers and the other
painting the containers. Respondents 3 and 4, according to the appellant, were employed in the
painting section. Around 1964, the appellant decided to buy containers from the market and
consequently closed down its packing material making section but continued the painting sub-
section. On 13 July 1971, the appellant purportedly served notice on respondents 3 and 4 and
others, intimating them that the management had decided to close the painting section effective
13 July due to unavoidable circumstances and hence the services of the three workmen would
no longer be required and, therefore, they were retrenched. Even though it is alleged that the
notice was served upon the three workmen, the tribunal found that the notice never reached re-
spondents 3 and 4. According to the notice, the workmen concerned were also informed that
they should collect their dues under Section 25FFF of the Industrial Disputes Act, 1947, from
the office of the company. Subsequently, the trade union of the employees served a notice of
demand on 16 July 1971, inter alia, calling upon the appellants to reinstate respondents 3 and
4 and the third workman, and also to pay them full back wages. Subsequently, the Government
of Haryana referred the demands 2 to 9 to the industrial tribunal for adjudication. In respect of
demand No. 1, relating to the reinstatement of the three workmen in the painting section, the
reference was refused on the ground that there was no work for painting in the factory where
these two workmen were working as per the order dated 19 February 1972. The Government
of Haryana then, by its order dated 23 November 1972, referred the following dispute to the
industrial tribunal for adjudication:

Whether the retrenchment of respondents 3 and 4 was justified and in order? If not, to what
relief they are entitled?

The tribunal framed the following three issues:

1. Whether the present reference is bad in law for the reasons given in para No. 1 of the pre-
liminary objection in the written statement? (On management)
2. Whether the statement of claim filed on behalf of the workmen is not in order? (On
management)
 Government’s Power of Reference of Industrial Disputes 251

3. Whether the retrenchment of respondents 3 and 4 was justified and in order? If not, to
what relief they are entitled?

The management, in support of its contention covered by issue no. 1 urging that once the gov-
ernment declined to make a reference in respect of termination of services of respondents 3 and 4,
the government was not competent to refer the dispute for adjudication at a later date. The tri-
bunal negatived the contention, observing that there is abundant authority in support of the
proposition that the government, having once declined to make a reference, is not rendered in-
competent from making a reference of the same dispute at a later date.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE D.A. DESAI

Socio-economic justice, the corner-stone of industrial jurisprudence to be achieved by the process

of give and take, concessions and adjustments of conflicting claims would hardly advance if the
industrial dispute involved in this appeal by special leave brought by the appellant M/s. Avon
Services (Production Agencies) Pvt. Ltd., canvassing some technical legal nicety, rendering the
two employees jobless for more than seven years, is encouraged.
Mr O.P. Malhotra, learned counsel for the appellant, canvassed two contentions before us.
He submitted that the Government having declined to make a reference under Section 10(1) of
the Act in respect of termination of service of respondents 3 and 4 as per its order dated 19th
February 1972, Annexure P-2, the Government was not competent or had no power or authority
to make a reference in respect of the same dispute unless the Government must have come up
with some fresh or additional material which, when the validity of the reference was challenged,
must be disclosed or it must appear on the face of the reference itself.
Alternatively it was contended that after having declined to make a reference in respect of
termination of service of respondents 3 and 4, the Government was not competent to make a
reference of an entirely different dispute touching the question of reinstatement of respondents
3 and 4 which was materially different dispute from the one raised by the Union as per its char-
ter of demands Annexure P-1 dated 15th July 1971 because the demand as it now referred to
the tribunal was never raised before the management and, therefore, no such demand existed
which the Government could have referred to the Tribunal under Section 10(1) of the Act.
The refusal to refer the demand concerning respondents 3 and 4 has been the subject matter
of very serious submission on behalf of the company that the reference subsequently made by
the Government was invalid.
Section 10(1) of the Act confers power on the appropriate Government to refer at any time
any industrial dispute, which exists or is apprehended to the authorities mentioned in the sec-
tion for adjudication. The opinion which the appropriate Government is required to form before
referring the dispute to the appropriate authority is about the existence of a dispute or even if
the dispute has not arisen, it is apprehended as imminent and requires resolution in the interest
of industrial peace and harmony. Section 10(1) confers a discretionary power and this discretionary
power can be exercised on being satisfied that an industrial dispute exists or is apprehended.
There must be some material before the Government on the basis of which it forms an opinion
that an industrial dispute exists or is apprehended. The power conferred on the appropriate
Government is an administrative power and the action of the Government in making the refer-
ence is an administrative act. The formation of an opinion as to the factual existence of an
industrial dispute as a preliminary step to the discharge of its function does not make it any the
less administrative in character. Thus the jurisdictional facts on which the appropriate Govern-
ment may act are the formation of an opinion that an industrial dispute exists or is apprehended,
which undoubtedly is a subjective one, the next step of making reference is an administrative
act. The adequacy or sufficiency of the material on which the opinion was formed is beyond the
pale of judicial scrutiny. If the action of the Government in making the reference is impugned
252 Social Justice and Labour Jurisprudence

by a party it would be open to such a party to show that what was referred was not an industrial
dispute and that the tribunal had no jurisdiction to make the award but if the dispute was an in-
dustrial dispute, its factual existence and the expediency of making a reference in the circumstances
of a particular case are matters entirely for Government to decide upon, and it will not be com-
petent for the Court to hold the reference bad and quash the proceedings for want of jurisdic-
tion merely because there was, in its opinion, no subsequent material before Government on
which it could have come to an affirmative conclusion on those matters (see State of Madras vs
C. P. Sarathy10).
The contention, however, is that once the appropriate Government applies its mind to the
question of referring an industrial dispute to the appropriate authority and declines to make a
reference, it cannot subsequently change its mind and make the reference of the dispute unless
there is some fresh or additional material before it. It was said that once an industrial dispute is
raised and the government declines to make a reference, the opposite party is entitled to act on
the supposition that the dispute in question was not worth referring and such a dispute would
no more be in existence between the employee and the concerned employer and that the Gov-
ernment cannot spring a surprise by subsequently unilaterally making the reference without
any fresh or additional material being brought to its notice. Section 10(1) enables the appropriate
Government to make reference of an industrial dispute, which exists or is apprehended at any
time to one of the authorities mentioned in the section. How and in what manner or through
what machinery the Government is appraised of the dispute is hardly relevant. Section 12 casts
a duty upon the Conciliation Officer to hold conciliation proceedings in respect of the industrial
dispute that exists or is apprehended. It is mandatory for the Conciliation Officer to so hold the
conciliation proceedings where dispute relates to a public utility service and a strike notice has
been served under Section 22. The Conciliation officer must try to promote a settlement between
the parties and either he succeeds in bringing the parties to a settlement or fails in his attempt,
he must submit a report to the appropriate Government, but this procedure for promoting set-
tlement cannot come in the way of the appropriate Government making a reference even before
such a report is received. The only requirement for taking action under Section 10(1) is that
there must be some material before the Government which will enable the appropriate Govern-
ment to form an opinion that an industrial dispute exists or is apprehended. This is an admin-
istrative function of the Government as the expression is understood in contradistinction to
judicial or quasi-judicial function. Merely because the Government rejects a request for a reference
or declines to make a reference, it cannot be said that the industrial dispute has ceased to exist,
nor could it be said to be a review of any judicial or quasi-judicial order or determination. The
industrial disputes may nonetheless continue to remain in existence and if at a subsequent stage
the appropriate Government is satisfied that in the interest of industrial peace and for promoting
industrial harmony it is desirable to make a reference, the appropriate Government does not
lack power to do so under Section 10(1), nor is it precluded from making the reference on the
only ground that on an earlier occasion it had declined to make the reference. The expression ‘at
any time’ in Section 10(1) will clearly negative the contention that once the Government declines
to make a reference the power to make a reference under Section 10(1) in respect of the same
dispute gets exhausted. Such a construction would denude a very vital power conferred on the
Government in the interest of industrial peace and harmony and it need not be whittled down
by interpretative process. In Western India Match Co. Ltd vs Western India Match Co. Workers
Union11 an identical contention was raised in respect of a reference made under Section 4(k) of
the U.P. Industrial Disputes Act which is in pari material with Section 10(1) of the Act. Negativing
this contention, the Court observed as under:

In the light of the nature of the function of the Government and object for which the power
is conferred on it, it would be difficult to hold that once the Government has refused to refer,
 Government’s Power of Reference of Industrial Disputes 253

it cannot change its mind on a reconsideration of the matter either because new facts have
come to light or because it had misunderstood the existing facts or for any other relevant
consideration and decide to make the reference. But where it reconsiders its earlier decision
it can make the reference only if the dispute is an industrial one and either exists at that stage
or is apprehended and the reference it makes must be with regard to that and no other
industrial dispute.

It follows that the Government does not lack the power to make the reference in respect of
the same industrial dispute which it once declined to refer. But it was urged that the ratio of the
decision would show that the Government must have some fresh material made available to it,
subsequent to its refusal to make a reference for the formation of a fresh opinion, for making
the reference. It is not absolutely necessary that there ought to be some fresh material before the
government for reconsideration of its earlier decision. The Government may reconsider its
decision on account of some new facts brought to its notice or for any other relevant consideration
and such other relevant consideration may include the threat to industrial peace by the continued
existence of the industrial dispute without any attempt at resolving it and that a reference
would at least bring the parties to the talking table. A refusal of the appropriate Government to
make a reference is not indicative of an exercise of power under Section 10(1), the exercise of
the power would be a positive act of making a reference. Therefore, when the Government de-
clines to make a reference the source of power is neither dried up nor exhausted. It only indicates
that the Government for the time being refused to exercise the power but that does not denude
the power. The power to make the reference remains intact and can be exercised if the material
and relevant considerations for exercise of power are available; they being the continued existence
of the dispute and the wisdom of referring it, in the larger interest of industrial peace and har-
mony. Refusal to make the reference does not tantamount to saying that the dispute, if it at all
existed, stands resolved. On the contrary the refusal to make a reference not compelling the
parties to come to a talking table or before a quasi-judicial Tribunal would further accentuate
the feelings and a threat to direct action may become imminent and the Government may as
well reconsider the decision and make the reference. It is, therefore not possible to accept the
submission that if the Government had on an earlier occasion declined to make a reference un-
less it be shown that there was some fresh or additional material before the Government the
second reference would be incompetent. It has not been shown that the dispute had ceased to
exist and the very existence of the dispute enables the Government to exercise the power under
Section 10(1) and it has been rightly exercised. The view which we are taking is in accordance
with the decision of this Court in Binny Ltd vs Their Workmen12 wherein it was found that the
Government had declined to make a reference of the dispute on two previous occasions on
the basis of which it was contended that the reference was invalid. The contention was negatived
observing that the mere fact that on two occasions the Government had taken the view that no
reference was called for does not entitle the Court to conclude that there could be no cause for
a reference at a later date.
Alternatively it was contended that even if the appropriate Government has power to make
a reference after having once declined to make the reference, it can only refer that industrial dis-
pute which it had once declined to refer and no other dispute and that in this case the Government
has referred an entirely different dispute than the one raised by the Union and that in respect of
the referred dispute the demand having not been made from the employer was no such dispute
in existence and therefore, the reference was invalid. The contention in the form in which it is
now canvassed was not raised before the Industrial Tribunal and even before the High Court.
However, as we find no substance in the contention we would not reject it on the technical
ground that it was not raised before industrial Tribunal or the High Court.
254 Social Justice and Labour Jurisprudence

The Avon Employees Union by its notice of demand requested the appellant Company to
consider the demands set out in the notice. The relevant demand in the context is re-produced
below:

That our three companions Mohamed Yamin and Mohammed Yasin who had been working
in the above mentioned factory for the last 15/15 years and 8 years, their termination of ser-
vice and denying their gate-passes are illegal and against the principle of justice, therefore,
they be reinstated to their jobs and by giving back the full wages from the date of their ter-
mination injustice be ended.

The substance of the matter is that the Union complained about the termination of service
of the two named workmen who are the respondents 3 and 4 and one other whose services were
terminated by the appellant and which termination was styled as illegal and the crucial industrial
dispute was to reinstate them with full back wages and continuity of service. There were seven
other demands which we are not concerned. The appropriate Government while making the
reference, informed the Union that the demands 2 to 9 have been referred to Industrial Tribunal
and in respect of demand No. 1, the Government, while declining to make the reference, stated
its reasons as under:

There is no work for painting in the factory where these two workmen were working.

Subsequently the appropriate Government by its order dated 23-11-1972, referred the fol-
lowing dispute to the Industrial Tribunal for adjudication:

Whether the retrenchment of Sarvashri Mohamad Yamin and Mohamad Yasin was justified
and in order? If not, to what relief they are entitled?

The submission is that the Union espoused the cause of the aforementioned two workmen
respondents 3 and 4 complaining that the termination of their services is illegal and for rein-
statement and that demand made by the Union was not referred to the Industrial Tribunal by
the Government and subsequent to the decision of the Government respondents 3 and 4 did
not make any demand from the employer nor did they raise an industrial dispute with regard to
termination of their services and, therefore, the Government could not have referred an entirely
different demand in respect of respondents 3 and 4 and the reference was invalid. A mere com-
parison of the demand raised by the union and the demand subsequently referred to the Industrial
Tribunal would clearly negative the contention. The dispute arose from the termination of ser-
vices of respondents 3 and 4 and one other workman.
In this case the union complained about illegal termination of service and demanded rein-
statement with back wages. The Government subsequently made a reference about the validity
of the retrenchment and the relief to which the workmen would be entitled. It is thus crystal
clear that there was a demand about reinstatement, complaining about the illegality of termination
of service and the same has been referred to the tribunal. Therefore it is not possible to accept
the contention that on this account the reference is incompetent.

The Scope of the Power of Reference under Section 10(1)

The Indian Express Newspapers (Bombay) and another vs The Indian
Express Newspapers (Bombay) Employees’ Union and Others13
In this case, the Supreme Court considered the very competency of the appropriate govern-
ment in referring an issue relating to a wage structure that includes gratuity on the ground
 Government’s Power of Reference of Industrial Disputes 255

that it was beyond the jurisdiction of the tribunal due to the lack of precision in the terms
of the order of reference.

THE FACTS OF THE CASE

In this case, the reference to the National Tribunal under the Industrial Disputes Act, 1947, was
made in the following terms:

Whether the recommendations of the Wage Board for non-journalist employees as accepted
by the Government by its resolution No. WB-17 (7)/67, dated the 18th Nov. 1967, are un-
fair or unreasonable and if so, what modifications are required therein to ensure a fair and
just wage structure for the non-journalist, having due regard to the paying capacity of the
respective news paper establishments of employees engaged in comparable establishments.

The preamble to the reference stated that an industrial dispute existed with regard
to the implementation of the recommendations of the Wage Board for non-journalist
employees mentioned in the schedule.
The importance of this ratio lies in Justice V.R. Krishna Iyer’s art of interpretative pre-
sentation of the issue within the framework of the principles of statutory interpretation
while speaking for the majority, which ultimately rendered the crux of the matter so sim-
ple and understandable. This aspect should be recognised as a principle in dealing with
situations involving labour interests.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

A free press can summon its flaming vigour only if its journalistic and non-journalistic wings go
into full swing with courage and contentment to make the printed end-product that issues
daily from the machine, so that the office of education and information the Fourth Estate must
perform does not suffer. The community itself has vital concern in the working conditions of
the dual human groups whose invisible work is crystallised daily and moved into mass circulation.
In a democracy, news media and the men behind have a special value. Therefore, a few legislative
and non-legislative measures have taken care of the working conditions of the journalists and
the non-journalists. We are concerned here with non-journalists and that portion of an award
which has conferred standardised gratuity benefit on them.
The importance of the enthusiasm, integrity and thoroughness of the silent army, which
speaks daily in every issue of a newspaper, once underscored, the necessity for a square economic
deal to these hands argues itself. A Free Press serves the nation successfully when it serves its
family fairly. Even an army marches on its stomach. And retirement benefits bear upon anxiety
for the aging future in this mortal world and impact upon contentment in working life. Such is
the law of the tenses and human lot. Pressmen are no exception.
This national concern quickened the Government to make a reference to the Industrial Tri-
bunal of certain questions of economic justice concerning non-journalist employees. The issues
between leading members of the Press Proprietariat and the non-journalist Proletariat were
spelt out for adjudication in a Reference and lack of clarity in its drafting has led to the bone of
contention in this appeal. Perfunctory draftmanship has a great potential for creating disputes
even where there are none! This is Government’s unwitting contribution to the present litigation!
The National Tribunal, assisted by considerable submissions from learned counsel, produced a
massive award covering many topics, including gratuity, and all but one establishment viz the
appellant, have fallen in line and left the award unchallenged. The broad approach of the Tri-
bunal vis-a-vis gratuity is coloured by social justice and informed by indicia gathered from this
256 Social Justice and Labour Jurisprudence

Court’s dicta. Industrial jurisprudence is not static, rigid or textually cold but dynamic, bur-
geoning and warm with life. It answers in emphatic negative the biblical interrogation: What
man is there of you, whom if his son ask bread, will give him a stone? The Industrial Tribunals
of India, in areas unoccupied by precise block letter law, go by the Constitutional mandate of
social justice in the claims of the ‘little people’. That touchstone led to the award which, inter
alia, granted gratuity to non-journalists altho’ the positive evidence was little and the guidelines
faint. The compass of the acute dispute in this appeal is the very jurisdiction of the tribunal to
pronounce upon ‘gratuity’ the ground urged being that it falls outside the reference itself.
We may now set out the relevant reference to the National Tribunal:

Whether the recommendations of the Wage Board for non-journalist employees as accepted
by Government by its resolution No. WB-17 (7)/67, dated the 18th Nov. 1967, are unfair or
unreasonable and if so, what modifications are required therein to ensure a fair and just wage
structure for the non-journalists, having due regard to the paying capacity of the respective
newspaper establishment, the employers agreement and the emoluments of employees engaged
in comparable establishments.

Mr G.B. Pai in his very persuasive and pointed submission, rightly stressed that the Tribunal
had only a limited jurisdiction, trammelled by the terms of reference-not beyond, and in his view
the question of gratuity was outside the reference altogether. Were it so, that part of the award
was an exercise in gratuitous futility, being an ultra-jurisdictional generosity. Notwithstanding
Sri M.K. Ramamurthy’s assertion that this Court shall not go back upon what was throughout
understood by all before the Tribunal, we have to find jurisdictional justification in the Reference
itself, not in the brooding, perhaps blundering, consciousness of litigants. But we agree with Sri
Ramamurthy that liberality, not pedantry, must guide the construction of the language of the
reference (vide Express Newspapers Ltd. vs Workmen14). Once the real controversy is clear, the ver-
bal walls cannot narrow the natural ambit of the subject-matter; especially in an equitable juris-
diction unbound by processual blinkers and niceties of pleading.
Let us therefore face the only issue in the appeal—no other argument was urged—whether
the reference embraces gratuity. If it does not, no more arguments can salvage; if it does, no
more submission can scuttle. So the forensic focus must turn on the first term of reference
which, on a closer look, falls into three parts. This trichotomy once grasped the riddle of the case
stands resolved.
The preamble to the Reference sets the tone and lends the key and so a relevant excerpt may
lead kindly light:

Whereas the Central Government is of the opinion that an industrial dispute exists between
the employers and workmen in the newspaper establishments mentioned in the Annexure,
in respect of the implementation of the recommendations of the Wage Board for non-journalist
employees, as accepted by the Central Government by the Resolution No. WB-17(7)/67,
dated 18 November 1967, in regard to the matters mentioned in the Schedule.

It is plain that the Central Government was anxious to have the industrial dispute between the
employers and non-journalist employees settled. What the industrial dispute that existed and
needed solution was, could be dimly gathered from the ‘Whereas’ clause extracted above. The
dispute was ‘in respect of the implementation of the recommendations of the Wage Board for non-
journalist employees’ as accepted by the Central Government by its resolution of 18 November
1967, ‘in regard to matters mentioned in the Schedule’. So, the area of the dispute is prima
facie, co-extensive with the recommendations of the Wage Board for non-journalist employees
 Government’s Power of Reference of Industrial Disputes 257

and the topics covered thereby, particularised in the Schedule to the Reference. It is common
ground that the recommendations of the Wage Board for non-journalist employees did cover
gratuity. Of course, the ‘Whereas’ clause is not conclusive but suggestive. We have actually to go
to the Schedule which specificates the actual dispute referred for adjudication. The anatomy of
item 1 of the Schedule has now to be X-rayed. We have earlier quoted it, and its triple components
may now be separated. The first and the second parts are substantive and read thus:

(a) Whether the recommendations of the Wage Board for non-journalist employees as ac-
cepted by Government by its Resolution... are unfair or unreasonable; and
(b) If so, what modifications are required therein?

The third part is not a point for adjudication but a goal-setter, a delineation of the overall objec-
tive or rather the parameter which must be kept in view. That is to say, the Tribunal must first
adjudicate on the unfairness or unreasonableness of the recommendations of the Wage Board,
as accepted by the Government. It must further adjudicate on what modifications are required
in these recommendations, if it holds them unfair or unreasonable. To sum up the essentials of
the first term of reference and its scope, we think that the jurisdictional sweep of the Tribunal is
governed by the two parts we have set out. The recommendations made by the Wage Board and
accepted by the Government admittedly include gratuity. The Tribunal has, ex necessitate, to
decide whether this recommendation on gratuity is unjust or unreasonable. This is what it has
done. Secondly, it has to examine what modifications, if any, are justly necessary therein, i.e., in
the Wage Board gratuity. This again is what has been undertaken by the Tribunal. In this view
the next question is, what the purpose of the third limb of the reference can be. This is the bone
of contention, in one sense, between the two advocates. Certainly, it is not otiose and has a role.
In our view, it merely supplies the social objective of the adjudication on parts 1 and 2. It surely
obligates the Tribunal, while deciding points 1 and 2, to have a specific perspective. That perspec-
tive is that the non-journalist employees must be ensured a fair and just wage structure, having
due regard to the paying capacity of the establishment, the emoluments of employees in com-
parable concerns, etc. ‘A fair and just wage structure’ is not what the Tribunal is asked to decide
under the first term of reference. Under this head it is called upon to decide only two matters,
namely, the fairness/reasonableness or otherwise of the Wage Board’s recommendations regarding
gratuity, and, in the event of those recommendations being found to be unfair or unreasonable,
to decide what modifications are required ‘therein’? These modifications are geared to a certain
goal, are calculated to subserve a certain purpose, are intended to be oriented on a certain wel-
fare ground norm. What is that goal, that objective, that perspective? This is supplied by the last
part of reference No. 1. That is to say, the Tribunal will adjudicate on the first two items, rem-
embering that the end is the securing of a fair and just wage structure. Indeed, gratuity and its
quantum like other retirement benefits, has a bearing on the wage structure and vice versa. It is
true that the wage structure relates to the emoluments during service, while gratuity is a terminal
benefit or, rather, a retirement benefit. Although these two fall into different compartments,
they are inter-connected. A heavy wage scale may have some impact on the gratuity rate and a
large provision for gratuity may have its retroactive effect upon the wage structure. It is composite
equity writ on the economic life of the worker. We have said enough to indicate that the Tribunal
was well within its jurisdiction in deciding on ‘gratuity’, the function of the last limb, ‘a fair and
just wage structure’, being to shape the size of the gratuity, not to exclude gratuity from adjudica-
tion, to tailor it, not to throw it out.
This construction receives considerable confirmation from certain other aspects of the case.
For instance, the Wage Board has made recommendations on gratuity (paragraph 4. 28). Indeed,
item 2 of the reference to the Wage Board which covers non-journalist employees involves gratuity.
258 Social Justice and Labour Jurisprudence

The vital documents which impregnate the reference with content and meaning are the reference
to the Wage Board and the recommendations that followed, and both of them deal with gratuity.
We have more internal evidence to substantiate the soundness of our conclusion. The manage-
ment, in its Written Statement before the Tribunal, has contended that:

There was no justification for the Wage Board to apply the gratuity scheme as applicable to
working journalists, to all the non-journalist employees. The special benefits conferred upon
the Working Journalists under Act 45 of 1955 are highly excessive and unreasonable and in
fact, the Working Journalists have been treated as a favoured class. There is no other class of
employees in the country for whom such a Legislation has been enacted. It should have been
left to each newspaper establishment to evolve its own scheme of gratuity, if the circumstances
so permit and in accordance with its financial position and a scheme of gratuity applicable to
a particular highly paid class of employees should not have been extended to all non-journalist
employees.

Why did the management contend before the Tribunal that the Wage Board recommendation
of a gratuity scheme for non-journalist employees was unjustified? Why did they plead that
those special benefits were excessive and unreasonable? Why should they have urged that it
should have been left to each newspaper establishment to evolve its own scheme of gratuity and
that such a scheme should not have been extended to non-journalist employees since they were
highly paid? There is no explanation for this stance except that the management was trying
to convince the Tribunal that the Wage Board recommendation of gratuity was ‘unjust’ and
‘unreasonable’, which means that they also understood that the scheme of gratuity recommended
by the Wage Board was before the Tribunal for revision or modification.
Shri G. B. Pai urged that the workmen’s statement contained no reference to gratuity. May
be, they did not separately set up such a plea because others of their ilk in other newspaper
establishments had pleaded it. The Tribunal’s duty to decide a matter referred to it could not be
repelled merely because there was no separate plea by one or the many workmen’s groups about
gratuity.
There is other telling testimony that all the parties had proceeded on the clear footing that
gratuity was covered by the terms of reference. Shri M. K. Ramamurthy took us meticulously
through the bulky award which covered six leading newspaper establishments of India and the
workmen under them. Paragraph 16, for example, while quoting the Wage Board recommenda-
tions, refers to gratuity to non-journalist employees. Similarly, we find in paragraph 95, a specific
plea by the workmen, represented by the Hindustan Times Employees’ Union, having a bearing
on the gratuity scheme. Again in paragraph 114 the Tribunal refers to the contention of Mr Sen,
representing one of the newspaper establishments, criticising the gratuity recommendation of
the Wage Board as unfair and Mr Ramamurthy’s contrary stand that the gratuity scheme should
apply to journalists and non-journalists alike. Many other such references to arguments by
counsel before the Tribunal, with pointed references to the application of gratuity scheme to
non-journalist employees were spotlighted. We may mention a few illustratively. Paragraph 121
refers to the Written Statement of certain newspaper establishments giving reasons why payment
of gratuity should not be made applicable to non-journalist employees. Kindly look likewise at
para 140. It is interesting that on behalf of the workmen i.e. Indian Express Employees’ Union,
it is stated:

Moreover, no fringe benefits are also available to the workmen of the Indian Express in Delhi.
Even gratuity, which has been unanimously recommendable by the Wage Board and was
never a point of dispute, is being denied to the workmen.

The award in paragraph 163 and in paragraph 170, proceeds on the footing that the manage-
ment also made common cause against the gratuity scheme for non-journalist employees.
 Government’s Power of Reference of Industrial Disputes 259

Such doubts as may exist on this question are cleared by the Tribunal in paragraph 186,
which reads thus:
Having thus cleared the grounds of the preliminary objections, I now proceed to deliver my
award on merits. I first take up for consideration the first item of dispute in the reference
dated 17 September 1968, which again is the first item of dispute in the schedule of the Re-
ference, dated 7 October 1968, and also the first item of dispute in the schedule to the order
of reference dated 7 March 1969. The following may be taken to be the broad lines of criti-
cism by the management against the recommendations of the Wage Board:
(i) ………….……………..
(ii) ………….……………..
(iii) ………….……………..
(iv) ………….……………..
(v) ………….……………..
(vi) ………….……………..
(vii) Gratuity should not been left to the decision of the Supreme Court in the pending
appeal regarding gratuity scheme applicable to working journalists, as per the pro-
visions contained in the Working Journalists (Condition of Service) and Miscel-
laneous Provisions Act, 1955, because in that appeal the present disputants are not
parties.

So no remonstrance against consideration of the issue of gratuity as a jurisdictional issue is

raised there.
Having discussed the arguments of counsel on both sides and having dealt with various points
of reference, the learned Presiding Officer went on to consider the scheme of gratuity. Of course,
he mentioned the lack of evidence for a precise judgment and the absence of help from either
side to reach a reasoned conclusion:

My task is made more difficult because little evidence was led as to what should be the
gratuity scheme for non-journalist workmen. It was not to the interest of the management to
lead evidence because they would like very much to await final decision of the Supreme
Court on the point. The workmen had no concrete suggestion to offer. I have therefore, to
essay into unsurveyed expanse with neither a compass nor a guide. All that I can do is to bear
in mind the observations by the Supreme Court, on this topic, from time to time made and
to attempt a gratuity scheme within the framework of these observations.

Naturally, and, if we may say so, rightly, the Tribunal sought guidance from the principles laid
down by this Court on a blue-print for gratuity.
This longish discussion on gratuity could not have been a fruitless excursion and proves be-
yond reasonable doubt that the parties on both sides, at the level of pleadings, at the stage of
arguments and in the rival processes of contest, desiderated a decision on a gratuity scheme for
non-journalists. This bone of contention was included in the terms of reference (item 1). The
long submissions by many counsels on behalf of the employers and employees were not idle de-
bate. The plea for a full scheme of gratuity by the advocate for the workmen under the various
other newspaper establishments was not submissions in supererogation. There is no hint in the
Tribunal proceedings that a scheme of gratuity was outside the pale of the Tribunal. No such
objection was ever raised. Indeed, a tired Tribunal, confronted by enormous evidence and mara-
thon arguments, would not have painstakingly sifted the grounds, sorted the evidence, cited
the rulings and recorded the verdicts without being sure that all parties concerned and he him-
self understood the reference to include the matters contested before him, discussed by him and
decided in his award. The gratuity scheme for non-journalist workmen was one such and it is
bafflement to accept the submission that the learned Tribunal, a retired Judge of the High Court,
had ventured into an irrelevant terrain.
260 Social Justice and Labour Jurisprudence

Thus, our understanding of item I in the Schedule of Reference, our study of the proceedings
before the Tribunal and the reasoning in the Award converge to the only conclusion reasonably
available that the gratuity scheme for non-journalist workmen was covered by the reference. No
other point on the merits was argued although there was a feeble suggestion that the Award was
more liberal than should reasonably have been. In fairness, we must state that barring a passing
reference to this aspect, no serious contention was raised or, indeed, could be raised on the merits
of the matter. This Court lends no countenance to submissions on the merits in the absence of
flagrant violation of principles, gross travesty of justice and like extreme grounds, especially
when the appeal is against an Award by an Industrial Tribunal. In short, G. B. Pai would not
and could not canvass the factual finding. The appeals are dismissed.

The Precise Scope of Section 10(3)

Sub-section (3) of Section 10 of the Industrial Disputes Act empowers the appropriate
government to prohibit by order the continuance of any strike or lock-out in connection
with a dispute under reference to a board, labour court, tribunal or national tribunal that
was in existence on the date of the reference. An industrial dispute espoused by trade
unions or workmen may consist of a number of demands. If the appropriate government
refers only a few of the demands and leaves out the other demands, then the operation of
an order issued under Section 10(3) needs a clear interpretation so as to avoid the clutches
of Section 24 of the Act.
The words ‘which may be in existence on the date of reference’ refer to the strike or
lock-out that was in existence on the date of reference of the dispute with which it is con-
nected. The Dvision Bench of the Delhi High Court, in the case of the Workmen of Edward
Keventers vs the Delhi Administration15 took the view that if out of a number of demands,
only some are referred for adjudication, the continuance of the strike can be prohibited
only with reference to the disputes that have been referred for adjudication; the prohib-
ition of the continuance of a strike with respect to the matters that have not been referred
to adjudication was not warranted by sub-section (3) of Section 10 of the Act.
However, the Division Bench of the same High Court, in the case of the Keventers
Karmachari Sangh vs the Lieutenant Governor, Delhi,16 observed:

If even one of the demands has been referred as industrial dispute, the strike will be in connection
with such dispute and the power to prohibit the continuance of the strike can be exercised. Any
other interpretation is likely to lead to absurd results. Take a case where the notice of strike con-
tains demands only some of which can be referred as industrial disputes and others not. It can-
not be suggested that if the demands which cannot be referred as industrial disputes are not
referred, an order for prohibiting the continuance of the strike cannot be passed. Reference of
one demand as an industrial dispute makes the strike in connection with such dispute within
the meaning of the said sub-section.

Delhi Administration, Delhi vs the Workmen

of Edward Keventers and Another 17

Justice V.R. Krishna Iyer, speaking for the majority in the case, put a halt to this controversy
by projecting the true purpose of the provision here.
 Government’s Power of Reference of Industrial Disputes 261

THE FACTS OF THE CASE

This was an appeal against the decision of the Division Bench of the Delhi High Court in the
case of Workmen of Edward Keventers vs the Delhi administration.18 The appellant, the Delhi
administration, was faced with the question of referring several disputes—16 in number—for
adjudication, although many of them were perhaps covered by an earlier settlement.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

A very short question as to the scope of Section 10(3) of the Industrial Disputes Act, 1947,
arises for consideration in this appeal by special leave. The appellant, Delhi Administration, was
faced with the question of referring several disputes, 16 in number, for adjudication under
Section 10(1) of the Act. The workmen had raised all these disputes although many of them
were perhaps covered by an earlier settlement. We are not concerned with the facts of this par-
ticular case which have been set out at some length by the High Court in its judgment, but with
a narrow issue as to when the power to prohibit a strike, with which the State/appropriate Gov-
ernment is armed under Section 10(3) of the Act, can be put into operation. This turns on a
reasonable construction of the provision itself and the best beginning is to quote the section
itself. Section 10(3) runs thus:

Where an industrial dispute has been referred to a Board, (Labour Court, Tribunal or National
Tribunal) under this section, the appropriate Government may by order prohibit the con-
tinuance of any strike or lock-out in connection with such dispute which may be in existence
on the date of the reference.

A plain reading of the sub-section leaves no room for doubt in our mind that the High Court
has correctly interpreted it. Indeed, the learned Judges have gone into details, although we in
this affirming judgment desire to express ourselves only briefly. Two conditions are necessary to
make Section 10(3) applicable. There must be an industrial dispute existing and such existing
dispute must have been referred to a Board, Labour Court, Tribunal or National Tribunal under
this section, namely, Section 10(1). Section 10 stands as a self-contained Code, as it were, as far
as this subject-matter is concerned. The prohibitory power springs into existence only when
such dispute has been made the subject of reference under Section 10(1). What then is such
dispute? The suchness of the dispute is abundantly brought out in the preceding portion of the
sub-section. Clearly, there must be an industrial dispute in existence. Secondly, such dispute
must have been already referred for adjudication. Then, and then alone, the power to prohibit
in respect of such referred dispute can be exercised.
There is a distinction between strikes being illegal under other sections of the Act and penalties
being available against such illegal strikes on the one hand and strikes being contrary to Section
10(3) of the Act and liable to be prohibited thereunder. This distinction once grasped, the base-
lessness of the submission on behalf of the appellant necessarily follows.
Shri Aggarwal pressed before us a ruling reported in Keventers Karmachari Sangh vs Lt. Governor
of Delhi,19 decided by the Delhi High Court. Although the ratio there is contrary to the same
High Court’s ruling which is the subject-matter of the present appeal, we are obviously inclined
to adopt the reasoning of the judgment under appeal. Imagine twenty good grounds of dispute
being raised in a charter of demands by the workmen and the appropriate Government unilaterally
and subjectively deciding against the workmen on nineteen of them and referring only one for
adjudication. How can this result in the anomalous situation of the workmen being deprived of
their basic right to go on strike in support of those nineteen demands? This would be productive
not of industrial peace, which is the objective of the Industrial Disputes Act, but counter-productive
of such a purpose. If Government feels that it should prohibit a strike under Section 10(3) it
262 Social Justice and Labour Jurisprudence

must give scope for the merits of such a dispute or demand being gone into by some other
adjudicatory body by making a reference of all those demands under Section 10(1) as disputes.
In regard to such disputes as are not referred under Section 10(1), Section 10(3) cannot operate.
This stands to reason and justice and a demand which is suppressed by a prohibitory order and
is not allowed to be ventilated for adjudication before a Tribunal will explode into industrial
unrest and run contrary to the policy of industrial jurisprudence.
Thus, on principle and the text of the law, we are convinced that Section 10(3) comes into
play when the basis of the strike is covered by Section 10(1). Reference of a dispute and prohibition
of a strike on other demands is impermissible.
While we appreciate the strenuous efforts made by Shri Agarwal to support the judgment
and perhaps sympathize with him on the particular facts of this case, we cannot agree that hard
cases can be permitted to make bad law. The appeal is dismissed, but since the workmen for ob-
vious reasons have not been able to represent themselves in this Court, the normal penalty of
costs against the appellant who loses cannot follow. The appeal is dismissed, but for the reasons
above stated, there will be no order as to costs.

NOTES

1. A few states, such as Uttar Pradesh, Karnataka and Tamil Nadu, have gone in for amendments to the effect
that in the case of individual disputes covered under Section 2A of the Industrial Disputes Act, 1947, no
such reference will be required.
2. AIR 1977 SC 1666. This case was heard by V.R. Krishna Iyer, R.S. Sarkaria and Jaswant Singh and the
majority decision was delivered by Justice R.S. Sarkaria.
3. (1968) I SCR 581:AIR 1968 SC 585.
4. (1972) (42) FJR 255:1973 LIC 711 (All).
5. 1965 II LLJ 149 (SC).
6. 1965 II LLJ 149 SC.
7. (1972) (42) FJR 255:1973 LIC 711 (All).
8. AIR 1977 SC 1666. This case was heard by V.R. Krishna Iyer and D.A. Desai, and the majority decision
was delivered by Justice D.A. Desai.
9. AIR 1979 SC 176.
10. (1953) SCR 334.
11. AIR 1970 SC 1205.
12. AIR 1972 SC 1975.
13. AIR 1978 SC 1137. This case was heard by V.R. Krishna Iyer and Jaswant Singh.
14. AIR 1963 SC 569. p. 576.
15. 1969 ILR Del 767 (DB).
16. (1971) 2 LLJ 375 (Delhi) (DB).
17. AIR 1978 SC 976. This case was heard by V.R. Krishna Iyer and D.A. Desai.
18. 1969 ILR Del 767 (DB).
19. (1971) II LL J 375.
 Chapter 7

Industrial Adjudication: The Concept

The Industrial Disputes Act, 1947, is a special legislation aimed at resolving the industrial
conflicts between labour and capital. Industrial adjudication is a process or method by
which the Labour Court or Industrial Tribunal formulates its decisions for resolution
industrial disputes referred to it. It is pertinent to note that many of the most precious
rights of labour and capital owe their origin to industrial adjudication—namely—the right
of the labour to claim bonus, the right of dismissed or discharged workmen to reinstate-
ment, the right of employer to retrench or close the industry. Historically, the immediate
post-enactment regime indicates the immense contribution of industrial adjudication to
the growth of labour jurisprudence in India. The Industrial Disputes Act, 1947, leaves
every matter that affects labour-management relations in the event of failure of collective
negotiations to the realm of industrial adjudication for its resolution. Except in cases of
individual1 and other disputes,2 the jurisdiction of industrial adjudication stems from the
Order of Reference made by the appropriate Government under Section 10(1) of the Act.
In this context, whenever matters reach the apex Court on appeal of the awards of the
industrial tribunals, the Supreme Court carefully examined the crucial and critical issues
involved therein and cautiously interfered with the awards of the industrial tribunal.
However, Justice V.R. Krishna Iyer did have, on some occasions, to interfere with the awards
made by the industrial tribunals.
Indeed, even in cases where Justice V.R. Krishna Iyer disagrees with the award of the
industrial tribunal, it is only with pertinent legal reasoning and despite the fact that such
an award would be favourable to the workman.

The Concept of ‘Tribunal’

The industrial tribunals of India, in areas unoccupied by precise block letter law, go by
the Constitutional mandate of social justice on the claims of the ‘little people’.3 A ‘tribunal’
literally means a seat of justice. It may be that said justice is dispensed by a quasi-judicial
body, an arbitrator, a commission, a court or other adjudicatory organs created by the State.
The tribunal has the power and, indeed, the duty to X-ray the order of reference and to discover
its true nature, if the object and effect, if the attendant circumstances and the ulterior purpose
be to dismiss the employee because he is an evil to be eliminated.4

Interference with the Tribunal’s Award

The Supreme Court, when sitting on appeal, as a rule of practice is loath to interfere with
a finding of fact recorded by the trial court. But when such a finding is based on no
264 Social Justice and Labour Jurisprudence

evidence, or is the result of a misreading of the material evidence, or is so unreasonable or

grossly unjust that no reasonable person would judicially arrive at that conclusion, it is
the duty of the Supreme Court to interfere and set matters right.5

The Employers in Relation to Punjab National Bank vs Ghulam Dastagir 6

In this case the industrial dispute was between an individual driver (the respondent) and
the management of the Punjab National Bank, Calcutta Branch, and the reference was as
to the justifiability of the termination of the services of the respondent. The reference
assumed that the most contested point in the case was really whether the respondent was
employed by the said bank. By definition, a ‘workman’ means ‘any person employed in
any industry’ and hence the basic jurisdictional issue as to whether the respondent workman
was a person employed by the bank. If he was, his termination was illegal. If he was not,
the reference to the industrial tribunal was outside jurisdiction. The industrial tribunal
examined the matter at some length and came to the conclusion that the driver was em-
ployed by the bank. Consequentially, a direction for his reinstatement together with back
wages was made.
The Bank appealed to the Supreme Court against this decision.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

It is clear that the direction and control are the telling factors to decide as to whether the driver
in the present case is the employee of the Bank. This test does not include other factors also, and
indeed as Lord Macmillan in Mersey Docks and Harbour Board vs Coggins & Griffith Ltd,7 rightly
stressed, the question in each case turns on its own circumstances and decisions in other cases
are rather illustrative and not determinative. To crystallise critically and conclusively is baffling but
broad indications may be available from decisions. The ‘beedi cases’ turn on the reality of ‘inde-
pendent contractors’ standing in between the management and the beedi workers. The Court
in many such cases discovered that there was a common practice of using deceptive devices and
the so called independent contractors were really agents or workers of the management posing
as independent contractors for the purpose of circumventing the Factories Act and like statute
which compel managements to meet certain economic and social obligations towards the workers.
We have no doubt that if in this case there is evidence to show colourable device resorted to by
bank, our conclusion would have been adverse to the Management. On the other hand, the evi-
dence adduced before the Tribunal, oral and documentary, lead only to one conclusion, that the
Bank made available a certain allowance to facilitate the Area Manager privately to engage a
driver. Of course the jeep which he was to drive, its petrol and oil requirements and maintenance
all fell within the financial responsibility of the Bank. There is nothing on record to make out a
nexus between the Bank and the driver. There is nothing on record to indicate that the control
and direction of the driver vested in the Bank. After all, the evidence is clearly to the contrary.
In the absence of material to make out that the driver was employed by the Bank, was under its
direction and control, was paid his salary by the Bank and otherwise was included in the army
of employees in the establishment of the Bank, we cannot assume the crucial point, which re-
mains to be proved. We must remember that there is no case of camouflage or circumvention of
any statute. It is not unusual for public sector industry or a nationalised banking institution to
give allowances to its high level officers, leaving it to them to engage the services of drivers or
others for fulfilling the needs for which the allowances are meant. In this view, we are clear that
the award fails as it is unsupportable. We, therefore, reverse the award.
 Industrial Adjudication 265

Powers of the Labour Court to Give Appropriate Relief to a

Dismissed Workman under Schedule II, Item I of the Act

The employer in many cases tries to remove under the pretext of valid grounds, the
workmen who are actively involved in trade-union activities. On many occasions, the
employer terminates the services of workmen under the guise of discharge simpliciter,
when in fact such termination is coloured by ulterior motives. But the industrial tribunals
in a majority of cases examine such actions initiated by the employer carefully to uncover
the hidden motives of the employer. Here is a case that is typical of such veiled motives.

Michael and Another vs Johnson Pumps 8

In this case, the appellant, Michael, a permanent employee of proved efficiency and six
years’ standing, was given two ‘merit’ increments in appreciation of his service. But a
letter dated 2 September 1970 dismissed him from service, giving him one month’s pay
in lieu of notice and discharging him with a damning record as distinguished from simply
dismissing him for misconduct. The rival versions illumine the factual confrontation, the
resolution of which is no easy legal assay. The worker Michael, through his union, protested
against the ‘sack’ order as being a victimisation of a trade-union activist; but the manage-
ment remained heedless, conciliation attempts were fruitless and the dispute between the
union and the management was eventually referred by the Delhi administration to the
Labour Court for adjudication. The reference ran thus:

Whether the termination of services of Shri L. Michael is illegal and/or unjustified and, if so, to
what relief is he entitled and what directions are necessary in this respect?

Both sides stated their cases in their pleadings and the true nature of the conflict
emerged from these. The story set out by the employee in his statement before the Labour
Court was that although he was efficient, appreciated and awarded merit increments, the
management was antagonised by his active part in the formation of an employees’ union,
especially because verbal warnings by the regional manager against his unionist proclivities
were ignored. Michael became the treasurer of the union. This union chapter claimed its
price, for the management quietly terminated his services by a simple letter, which read:

We are sorry to advise that your services are no longer required by the Company. As such, this
letter may be treated as a notice for the termination of your services with immediate effect. As
for the terms of your employment letter, on termination of services you will be paid one month’s
salary extra. You may please call on the undersigned and have your accounts settled.

This act, claims the worker, was in flagrant violation of the elementary principles of
natural justice, since he was dismissed without assigning any reason and without giving
him an opportunity to defend himself. Thus, in his statement, he challenged the termin-
ation as ‘wrongful, malafide, illegal, and an act of victimisation’. The case of the man-
agement, as set up in its statement and as apparent from the discharge order, was that no
dismissal was involved, hence no enquiry necessary and no illegality ensued.
266 Social Justice and Labour Jurisprudence

The management claimed that its alleged annoyance with the workman over union
activities was a concoction by the workman in self-defence, as the management had not
even knowledge of the formation of the union. (This latter limb of the plea was, of course,
a little too naïve.) The warning by the regional manager was denied and the reference to
trade union activities by the worker was more ‘to create a ground for the workman’s claim
and has been levelled as a matter of habit and routine’. The basic plea of the management
was that the action being a simple termination without a ‘sting’, the process and conse-
quence of disciplinary action were not attracted.
The management, however, explained to the Court why the employee was discharged.
Michael had been employed as a receipt and despatch clerk in the office until 10 March
1970. As an insider with access to office correspondence, the employee—the management
claimed—misused his position by passing on ‘very important and secret information
about the affairs of the company to certain outsiders’. He was consequentially shifted to
the post of clerk handling posting of bills and collection of payments; but the workman,
although denied direct access to correspondence in the receipt and despatch section,
made attempt ‘to elicit information from the section with a view to pass it on to outsiders’.
The upshot of these activities, of which the management was alerted, was a loss of con-
fidence in the employee. This unreliability was addressed with non-injurious termination
of service by a bona fide order. Therefore, the action was claimed to be legal and immune
to judicial interference.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

Industrial law in India has many twilight patches, illustrated by the present appeal which projects
the problem of an employee whose services have been terminated simpliciter by the Management,
a pump manufacturing enterprise, issuing a notice ending the employment and offering one
month’s pay as authorised by the relevant Standing Orders. The thorny legal issue is whether
the ipse dixit of the employer that sufficient justification to jettison the latter without levelling
and proving the objectionable conduct, which has undermined his confidence, so that the tri-
bunal may be satisfied about the bona fides of the ‘firing’ as contrasted with the colourable exer-
cise of power hiding a not-so-innocuous purpose.
Two socially vital factors must inform the understanding and application of Industrial Juris-
prudence. The first is the Constitutional mandate of Part IV obligating the State to make pro-
vision for securing just and humane conditions of work. Security of employment is the first
requisite of a worker’s life. The second, equally axiomatic consideration is that a worker who
wilfully or anti-socially holds up the wheels of production or undermines the success of the
business is a high risk and deserves, in industrial interest, to be removed without tears. Legislation
and judicial interpretation have woven the legal fabric. We have to see whether on the facts of
the present case what the relevant law is, whether it has been applied by the Labour Court rightly
and whether the appellant has merit on his side, judged by the social conscience and judicial
construction of the law in this branch of discharge simpliciter versus disguised dismissal.
A few salient facts need emphasis before the principles of law are applied. The workman in
his statement stressed the case of malus animus due to his union activities, although he did
vaguely refer to the termination of service as wrongful and malafide. From this it cannot be
argued, as the Management sought to make out, that his denial of leaking out office secrets was
an after thought pleaded only in the rejoinder and therefore liable to be discredited. How could
the worker have a hunch about the management’s undisclosed ground for dismissal? When the
latter stated the reason which prompted this action for the first time before the Labour Court,
 Industrial Adjudication 267

the workman in his reply refuted this case. It is noteworthy that there is no speck of record or
any hint of written material in support of the story that the management had credible information
of the appellant betraying sensitive secrets of business. The letters sent by the union, and the
worker, requesting for reinstatement, were being ignored. The management could well have
disclosed their suspicion in reply and told the Union and the workman that they resorted to an
innocuous discharge to avoid punitive trauma. The management could have divulged in writing
to the Conciliation Officer their legitimate fears about the worker’s integrity and their considerate
action of simple termination. This too they failed to do. In their written statement, the manage-
ment asserted for the first time that the employee was an intractable smuggler of inside informa-
tion. The statement winds up with the legalistic plea: ‘the management had, in the meanwhile,
lost confidence in the workman’. This culminating collapse of trust is alleged to be the primary
cause for the discharge from employment.
At the time of evidence, the management led the evidence to the effect that the workman
joined as a pump operator in 1963, was promoted as clerk in 1967, that the suspicion of dis-
loyal communication arose for the first time in 1968 and yet ‘thereafter he was given two incre-
ments extra in addition to normal increments’. He was a hard working man and has a very good
memory but the suspicion was there.
These are the facts and the evidence in the case and it has been fairly conceded before the
Labour Court by the management that were the action regarded as punitive, it was bad, there
having been no enquiry whatever with liberty to the employee to meet the charge. But
the single slender stand on which the discharge was suspended was ‘loss of confidence’ of the
management in the employee. The Labour Court argued:

According to the management, as there was no proof with it for this suspicion, it could not
proceed against him departmentally and, in the circumstances, it was considered desirable to
terminate his services by passing an order of discharge without any stigma attached to it.

While on all hands it was agreed that the employee was efficient, the court took the view that
the motivation for the termination was the ‘suspicion which lurked in the mind of the Regional
Manager that information regarding tenders was being passed on by the workman’. We have to
find out whether the holding in the award that, on the materials above placed, the action could
be called colourable or saved as bona fide, could be castigated as achieving an illegitimate end or
supported as a premature but straightforward and harmless farewell. In short, was loss of con-
fidence a legal label affixed by the management to eject the workman, there being no other legal
method of accomplishing their wish to remove him for misconduct?
Two questions, therefore, fall for decision. Can a person, reasonably instructed in the law and
scrutinising with critical faculties the facts on record, come to the conclusion that the snapping
of the tie of master and servant in the present case was innocuous and bona fide or oblique
circumvention of the processual protection the law provides before a workman is dismissed for
misconduct?
We can discern harmony and consistency in case law from Chartered Bank9 and Murugan10
through Sudder Office11 and Air India Corporation.12 The social justice perspective and particular
facts are important, though. The plethora of precedents need not be covered in extenso as the
law laid down is the same except that judicial response to each case situation leads to emphasis
on different facets of the principle. Even so, some milestone decisions, if we may say so, may be
considered.
In Murugan Mills13 Justice Wanchoo, speaking for the Court, made the following observations:

The right of the employer to terminate the services of his workman under a standing order
like clause 17(a) in the present case, which amounts to a claim to hire and fire an employee as
268 Social Justice and Labour Jurisprudence

the employer pleases and thus completely negatives security of service which has been secured
to industrial employees through industrial adjudication, came up for consideration before
the Labour Appellate Tribunal in Buckingham and Carnatic Co. Ltd vs Workers of the Company.14
The matter then came up before this Court also in Chartered Bank vs Chartered Bank Employees
Union15 and the Management of U.B. Dutt and Co. vs Workmen of U.B. Dutt and Co,16 wherein
the view taken by the Labour Appellate Tribunal was approved and it was held that even in a
case like the present, the requirement of bona fides was essential and if the termination of
service was a colourable exercise of power or as a result of victimisation or un-fair labour
practice, the industrial tribunal would have the jurisdiction to intervene and set aside such
termination. The form of the order in such a case is not conclusive and the Tribunal can go
behind the order to find the reasons which led to the order and then consider for itself
whether the termination was a colourable exercise of unfair labour practice. If it came to the
conclusion that the termination was a colourable exercise of the power or was a result of vic-
timisation or unfair labour practice, it would have the jurisdiction to intervene and set aside
such termination.

In that case the form of the order had no foul trace, but before the Tribunal, dereliction of
duty and go-slow tactics were disclosed as the inarticulate reasons.
This Court ruled:

This clearly amounted to punishment for misconduct and therefore to pass an order under
Cl. 17(a) of the Standing Orders in such circumstances was clearly a colourable exercise of
the power to terminate the service of a workman under the provisions of the Standing Orders.

The appellant contended that for the proposition that even where a management had
the power to terminate the services of its employee without reasons but with notice pay, only
the colourable exercise of that power invalidated it, and the Court could probe beneath the sur-
face to check upon the bona fides behind the exercise of the power. If the reasons, including the
termination, were victimisation, unfair labour practice or misconduct, it was foul play to avoid
a fair enquiry and fall back upon the power to terminate simpliciter. There are myriad situations
where an employer may, in good faith, have to reduce his staff, even though he may have only a
good word for his employee. Simple termination is a weapon useable on such occasions and not
when the master is willing to strike but afraid to wound. We have been referred to the Bihar
State Road Transport Corporation case.17 The power of the Court to go behind language of the
order is reaffirmed there. In Sudder Office18 the Court apparently laid stress on the Management’s
right to terminate the services simpliciter under the terms of contract, where there was no lack
of bonafides, unfair labour practice or victimisation. It is significant that this Court used language
and laid down law very much like in the earlier cases and did refer to the precedents on the
point. For instance, Justice Vaidialingam there observed:

It is needless to point out that it has been held by this Court in The Chartered Bank, Bombay vs
The Chartered Bank Employees Union19 that if the termination of service is a colourable exer-
cise of the power vested in the management or as a result of victimisation or unfair labour
practice, the Industrial Tribunal would have jurisdiction to intervene and set aside such ter-
mination. In order to find out whether the order of termination is one of termination simpli-
citer under the provisions of contract or of standing orders, the tribunal has ample jurisdiction
to go into all the circumstances which led to the termination simpliciter.

The manner of dressing up an order does not matter. The Court will lift the veil to view the
reality or substance of the order. The Court, in that case, examined the circumstances in detail
 Industrial Adjudication 269

to see whether a dismissal for misconduct was being masked as a simple send off with a month’s
pay, and held ultimately:

We are satisfied that the Management has passed the order of termination simpliciter and the
order does not amount to one of dismissal as and by way of punishment.

Of course, loss of confidence in the workmen was alleged by the management and the Court
found that it was not a camouflage. It may be noticed that in that case the workman was being
entrusted with stores worth several lakhs of rupees, some goods were lost from the stores and
the Union was informed by the Management that it had lost confidence in the workmen. In the
written statement before the Labour Court, the management alleged that the workman was the
head godown-clerk who was the custodian of the company’s property, the post being one of
trust and confidence. It is noteworthy that in the High Court the workman did not even file a
counter-affidavit and the counsel for union and the workman agreed that the order of termination
was not a camouflage to cover up what really was an order of dismissal. He merely urged that
the termination of the services was really by way of dismissal. In this conspectus of circumstances,
this Court found that the Head Clerk, in charge of the engineering godown and responsible
for the maintenance of considerable stores, held a sensitive position. This Court observed:

The entire basis of the Labour Court’s award for holding that the order is one of dismissal is
its view that the management has invoked clause 9 to camouflage its action. When that
approach has been given up on behalf of the workman before the High Court, the reasoning
of the Labour Court falls to the ground and the High Court has acted within the jurisdiction
under Article 226 when it set aside the order of the Labour Court, especially when there has
been no finding of victimisation, unfair labour practices or mala fides recorded against the
management. To conclude, we are satisfied that the High Court was justified in setting aside
the order of the Labour Court.

We have gone into this decision at length to disabuse the impression that a new defence
mechanism to protect termination of service simpliciter, viz. loss of confidence, had been pro-
pounded in this ruling. We do not agree that any such innovation has been made. The Air India
Corporation case20 may seem to support the ‘no confidence’ doctrine, but a closer study contradicts
any such view. Of course, the management placed great reliance on this ruling. Needless to say,
this recognised the power of the Tribunal to go behind the form of the order, look at the sub-
stance and set aside what may masquerade as termination simpliciter, if in reality it cloaked a
dismissal for misconduct as ‘a colourable exercise of power by the management’. The Court re-
peated that an industrial employer cannot ‘hire and fire’ his workmen on the basis of an unfettered
right under the contract of employment. On the facts of the Air India case 21 the Court concluded
that it was ‘not possible to hold this order to be based on any conceivable misconduct’. Special
reference was made to the grave suspicion regarding the complainant’s private conduct with air-
hostesses. Where no misconduct spurs the action and a delicate unsuitability for the job vis-à-vis
the young woman in employment in the same firm is strongly suspected, resort to termination
simpliciter cannot be criticised as a mala fide machination. In that background, the action was
held to be bona fide and the overall unsuitability led to a loss of confidence in the employee.
Not that the loss of confidence was exalted as a ground, but the special circumstances of the case
exonerated bad faith in discharge simpliciter.
Before concluding the discussion, we may refer to the case of Delhi Transport Undertaking vs
Goel 22 adverted to by the Labour Court. Indeed, that decision turned on Regulation framed
under the Delhi Transport Authority Act, 1950 and not on pure industrial law or construction
of the Standing orders. Moreover, the Court, in that case, appears to have discussed rulings
under Article 311 also. However, on the facts of that case, the court was satisfied that the order
of termination was not a disguise or cloak for dismissing the employee and the ground given
270 Social Justice and Labour Jurisprudence

that he was a cantankerous person undesirable to be retained was good. We do not read the
Delhi Transport case 23 to depart from Murugan Mills24 case. Indeed, the latter did not, and
maybe could not, overhaul the former.
The above study of the chain of rulings brings out the futility of the contention that subsequent
to Murugan Mills25 case, colourable exercise of power has lost validity and loss of confidence has
gained ground. The law is simply this: The Tribunal has the power and, indeed, the duty to
X-ray the order and discover its true nature, if the object and effect, if the attendant circumstances
and the ulterior purpose be to dismiss the employee because he is an evil to be eliminated. But
if the management, to cover up the inability to establish by an enquiry, illegitimately but in-
geniously passes an innocent looking order of termination simpliciter, such action is bad and is
liable to be set aside. Loss of confidence is no new armour for the management, otherwise
security of tenure, ensured by the new industrial jurisprudence and authenticated by a catena of
cases of this Court, can be subverted by this neo-formula. Loss of confidence in the Law will be
the consequence of the loss of confidence doctrine.
In the light of what we have indicated, it is clear that loss of confidence is often a subjective
feeling or individual reaction to an objective set of facts and motivations. The Court is concerned
with the latter and not with the former, although circumstances may exist which justify a genuine
exercise of the power of simple termination. In a reasonable case of a confidential or responsible
post being misused or a sensitive or strategic position being abused, it may be a high risk to keep
the employee, once suspicion has started and a disciplinary enquiry cannot be forced on the
master. There, a termination simpliciter may be bona fide, not colourable, and loss of confidence
may be evidentiary of good faith of the employer.
In the present case, the catalogue of circumstances set out in the earlier part of the judgment
strikes a contrary note. The worker was not told when he wrote; the Union was not disclosed
when they demanded; the Labour Court was treated to verbal statements like very reliable sources
and other credulous phrases without a medium of evidence to prove bona fides. Some testimony
of unseemly attempts by the workman to get secrets outside his orbit, some indication of the
source of suspicion, some proof of the sensitive or strategic role of the employee, should and
would have been forthcoming had the case been bona fide. How contradictory that even when
a strong suspicion of leaking out sensitive secrets was being entertained about the employee, he
was being given special ipse loquitur. Circumstances militate against the ‘I say so’ of M.W. 1 that
the management had suffered an ineffable loss of confidence. To hit below the belt by trading
legal phrases is not Industrial Law. We are constrained to express ourselves unmistakably lest in-
dustrial unrest induced by wrongful termination based on convenient loss of confidence should
be generated.
Before we conclude we would like to add that an employer who believes or suspects that his
employee, particularly one holding a position of confidence, can, if the confidence and terms of
the employment permit, terminate his employment and discharge him without any stigma
attaching to the discharge. But such belief or suspicion of the employer should not be a mere
whim or fancy. It should be bona fide and reasonable. It must rest on some tangible basis and
the power has to be exercised by the employer objectively, in good faith, which means honestly,
with due care and prudence. If the exercise of such power is challenged on the ground of being
colourable or mala fide or an act of victimisation or unfair labour practice, the employer must
disclose to the Court the ground of his impugned action so that the same may be tested judicially.
In the instant case, this has not been done. There is only the ipso dixit of the employer that he
was suspecting since 1968 that the appellant was divulging secrets relating to his business. The
employer has not disclosed the grounds on which this suspicion arose in 1968. Further, after
1968, the appellant was given two extra increments, in addition to his normal increments, as
stated already, in appreciation of his hard work. This circumstance completely demolishes even
the whimsical and tenuous stand taken by the employer. It was manifest therefore that the im-
pugned action was not bona fide.
 Industrial Adjudication 271

It was urged by the counsel for the employer that the question whether or not the employer
had lost confidence in the employee was essentially one of fact, that this Court should not
disturb the finding of fact. This Court, in appeal, as a rule of practice, is loath to interfere with
a finding of fact recorded by that trial Court. But if such a finding is based on no evidence, or
is so unreasonable or grossly unjust that no reasonable person would judicially arrive at that
conclusion, it is the duty of this Court to interfere and set matters right. The case before us is
one such instance, where we are called upon to do so.
The Labour Court has misled itself on the law and we set aside its order. The workman will
be reinstated with back wages. However, the management will be free, if it has sufficient material
and it so advised, to proceed against the workman for misconduct or on other grounds valid
in law.

The merit of this case lies in understanding the reasoning involved in the decision,
since an employer may adopt this type of action under the specified guise to dispense
with the services of an employee in an easy manner. But the jurisprudence that was laid
down in this case would stand like a rock in resisting the prerogative of an employer’s
freedom to ‘hire and fire’ his workmen if undertaken without good faith.

Powers of the Labour Court to Give Appropriate Relief

to Laid-off Workmen where Chapters VA and VB of
the Industrial Disputes Act, 1947, Have No Application

We are highly appreciative of the opportunity to learn from the concurring view of Justice
V.R. Krishna Iyer that relate to the interpretation of the legislative framework of the
Industrial Disputes Act, 1947, especially Chapters VA and VB. In fact, his assertion was
that in cases where Chapters VA and VB of the Act are applicable, the law is restrictive in
providing the social security measures by way of compensation. But in cases, where these
chapters have no application, it is open for the labour courts or tribunals to award full
wages as compensation, in the absence of any agreement contrary to it in the standing
orders of the establishment.

The Workmen of the Firestone Tyre and Rubber Company of India, vs the
Firestone Tyre and Rubber Company 26
In this case, the Supreme Court considered the entitlement of workmen who were not
governed by the provisions of the Industrial Disputes Act, 1947, to lay-off compensation.

THE FACTS OF THE CASE

The respondent company in this appeal has its head office at Bombay. It manufactures tyres
at its Bombay factory and sells the tyres and other accessories in markets throughout the
country. The company has a distribution office at Nicholson Road, Delhi. There was a strike in
the Bombay factory from 3 March 1967 to 16 May 1967, and again from 4 October 1967. As
a result of the strike, there was a short supply of tyres etc. to the distribution office. In the Delhi
272 Social Justice and Labour Jurisprudence

office, there were 30 employees at the time. Of these, 17 workmen were laid off by the
management as per their notice dated 3 February 1968, which was to the following effect:

Management is unable to give employment to the following workmen due to much reduced
production in the company’s factory resulting from strike in one of the factory departments.
These workmen are, therefore, laid off in accordance with law with effect from 5 February
1968.

The lay-off of the 17 workmen whose names were mentioned in the notice was recalled by the
management on 22 April 1968. The workmen were not given wages or compensation for the
period of lay-off. An industrial dispute was raised and referred by the Delhi administration
on 17 April 1968, even when the lay-off was in oper-ation. The reference was in the following
terms:

Whether the action of the management to ‘lay off ’ 17 workmen with effect from 5 February
1968 is illegal and/or unjustified, and if so, to what relief are these workmen entitled?

The presiding officer of tribunal held that the workmen were not entitled to any lay-off
compensation. This is an appeal by their union.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE UNTWALIA

We were informed at the Bar that some of the workmen out of the batch of 17 have settled their
disputes with the management and their cases were not represented by the union in this appeal.
Hence this judgment will not affect the compromise or the settlement arrived at between the
management and some of the workmen.

The question which falls for our determination is whether the management had a right to lay
off their workmen and whether the workmen are entitled to claim wages or compensation.

The simple dictionary meaning according to the Concise Oxford Dictionary of the term ‘lay-
off ’ is ‘period during which a workman is temporarily discharged’. The term ‘lay-off ’ has been
well-known in the industrial arena. Disputes were often raised in relation to the ‘lay-off ’ of the
workmen in various industries. Sometimes compensation was awarded for the period of lay-off
but many a time when the lay-off was found to be justified workmen were not found entitled to
any wages or compensation. In Gaya Cotton & Jute Mills Ltd. vs Gaya Cotton & Jute Mills Labour
Union27 the standing orders of the company provided that the company could under certain
circumstances ‘stop any machine or machines or department or departments, wholly or partially
for any period or periods without notice or without compensation in lieu of notice’. In such a
situation for the closure of the factory for a certain period, no claim for compensation was al-
lowed by the Labour Appellate Tribunal of India. We are aware of the distinction between a lay-
off and a closure. But just to point out the history of the law we have referred to this case.28
Then came an amendment in the Industrial Disputes Act, 1947—hereinafter referred to as
the Act—by Act 43 of 1953. In Section 2, clause (kkk) was added to say:

‘Lay-off ’ (with its grammatical variations and cognate expressions) means the failure, refusal
or inability of an employer on account of shortage of coal, power or raw materials or the
accumulation of stocks or the breakdown of machinery or for any other reason to give employ-
ment to a workman whose name is borne on the muster rolls of his industrial establishment
and who has not been retrenched.
 Industrial Adjudication 273

Explanation:- Every workman whose name is borne on the muster rolls of the industrial
establishment and who presents himself for work at the establishment at the time appointed
for the purpose during normal working hours on any day and is not given employment by
the employer within two hours of his so presenting himself shall be deemed to have been laid
off for that day within the meaning of this clause:
Provided that if the workman, instead of being given employment at the commencement
of any shift for any day is asked to present himself for the purpose during the second half of
the shift for the day and is given employment then, he shall be deemed to have been laid off
only for one-half of that day:
Provided further that if he is not given any such employment even after so presenting him-
self, he shall not be deemed to have been laid off for the second half of the shift for the day
and shall be entitled to full basic wages and dearness allowance for that part of the day.

By the same Amending Act, Chapter VA was introduced in the Act to provide for lay-off and
retrenchment compensation. Section 25A excluded the industrial establishments in which less
than 50 workmen on an average per working day had been employed in the preceding calendar
month from the application of Sections 25C to 25E. Section 25C provides for the right of laid-
off workmen for compensation and broadly speaking compensation allowable is 50 per cent of
the total of the basic wages and dearness allowance that would have been payable to the workman
had he not been laid off. It would be noticed that the sections dealing with the matters of lay-off
in Chapter VA are not applicable to certain types of industrial establishments. The respondent
is one such establishment because it employed only 30 workmen at its Delhi office at the rele-
vant time. In such a situation the question beset with difficulty of solution is whether the laid-
off workmen were entitled to any compensation, if so, what?
We shall now read Section 25J. It says:

(1) The provisions of this Chapter shall have effect notwithstanding anything inconsistent
therewith contained in any other law including standing orders made under the Industrial
Employment (Standing Orders) Act, 1946:
Provided that where, under the provisions of any other Act or Rules, orders or notifications
issued thereunder or under any standing orders or under any award, contract of service
or otherwise, a workman is entitled to benefits in respect of any matter which are more
favourable to him than those to which he would be entitled under this Act, the workman
shall continue to be entitled to the more favourable benefits in respect of that matter,
notwithstanding that he receives benefits in respect of other matters under this Act.
(2) For the removal of doubts, it is hereby declared that nothing contained in this Chapter
shall be deemed to affect the provisions of any other law for the time being in force in
any State in so far as that law provides for the settlement of industrial disputes, but the
rights and liabilities of employers and workmen in so for as they relate to lay-off and re-
trenchment shall be determined in accordance with the provisions of this Chapter.

The effect of the provisions aforesaid is that for the period of lay-off in an industrial establish-
ment to which the said provisions apply, compensation will have to be paid in accordance with
Section 25C. But if a workman is entitled to benefits which are more favourable to him than
those provided in the Act, he shall continue to be entitled to the more favourable benefits. The
rights and liabilities of employers and workmen in so far as it relate to lay-off and retrenchment,
except as provided in Section 25J, have got to be determined in accordance with the provisions
of Chapter VA.
The ticklish question which does not admit of an easy answer is as to the source of the power
of management to lay off a workman. The employer has a right to terminate the services of a
workman. Therefore, his power to retrench presents no difficulty as retrenchment means the
termination by the employer of the service of a workman for any reason whatsoever as mentioned
274 Social Justice and Labour Jurisprudence

in clause (00) of Section 2 of the Act. But lay-off means the failure, refusal or inability of em-
ployer on account of contingencies mentioned in clause (kkk) to give employment to a workman
whose name is borne on the muster rolls of his industrial establishment. It has been called a
temporary discharge of the workman or a temporary suspension of his contract of service. Strictly
speaking, it is not so. It is merely a fact of temporary unemployment of the workman in the
work of the industrial establishment. Mr S.N. Andley submitted with reference to the explan-
ation and the provisos appended to clause (kkk) that the power to lay-off a workman is inherent
in the definition. We do not find any words in the definition clause to indicate the conferment
of any power on the employer to lay off a workman. His failure or inability to give employ-
ment by itself militates against the theory of conferment of power. The power to lay off for the
failure or inability to give employment has to be searched somewhere else. No section in the Act
confers this power.
There are two small matters which present some difficulty in the solution of the problem. In
clause (i) of the explanation appended to sub-section (2) of Section 25B the words used are: ‘he
has been laid off under an agreement or as permitted by standing orders made under the Industrial
Employment (Standing Orders) Act, 1946, or under this Act or under any other law applicable
to the industrial establishment’ indicating that a workman can be laid off under the Industrial
Disputes Act also. But it is strange to find that no section in Chapter VA in express language or
by necessary implication confers any power, even on the management of the industrial establish-
ment to which the relevant provisions are applicable, to lay off a workman. Clause (ii) of Section
25E says:

No compensation shall be paid to a workman who has been laid off—

If he does not present himself for work at the establishment at the appointed time during
normal working hours at least once a day.

This indicates that there is neither a temporary discharge of the workman nor a temporary sus-
pension of his contract of service. Under the general law of master and servant, an employer
may discharge an employee either temporarily or permanently but that cannot be without ad-
equate notice. Mere refusal or inability to give employment to the workman when he reports
for duty on one or more grounds mentioned in clause (kkk) of Section 2 is not a temporary dis-
charge of the workman. Such a power, therefore, must be found out from the terms of contract
of service or the standing orders governing the establishment. In the instant case the number of
workmen being only 30, there were no standing orders certified under the Industrial Employment
(Standing Orders) Act, 1946. Nor was there any term of contract of service conferring any such
right of lay-off. In such a situation the conclusions seem to be inescapable that the workmen
were laid off without any authority of law or the power in the management under the contract
of service. In industrial establishments where there is a power in the management to lay off a
workman and to which the provisions of Chapter VA apply, the question of payment of compen-
sation will be governed and determined by the said provisions. Otherwise Chapter VA is not a
complete Code as was argued on behalf of the respondent company in the matter of payment of
lay-off compensation. This case, therefore, goes out of Chapter VA. Ordinarily and generally
the workmen would be entitled to their full wages but in a reference made under Section 10(1)
of the Act, it is open to the tribunal or the court to award a lesser sum finding the justifiability
of the lay-off.
In Management of Hotel Imperial, New Delhi vs Hotel Workers’ Union29 in a case of suspension
of a workman it was said by Justice Wanchoo, as he then was, delivering the judgment on behalf
of the Court at page 482 (of SCR): (at p. 1345 of AIR):

Ordinarily, therefore, the absence of such power either as an express term in the contract or
in the rules framed under some statute would mean that the master would have no power to
 Industrial Adjudication 275

suspend a workman and even if he does so in the sense that he forbids the employee to work,
he will have to pay wages during the so-called period of suspension. Where, however, there is
power to suspend either in the contract of employment or in the statute or the rules framed
thereunder, the suspension has the effect of temporarily suspending the relation of master
and servant with the consequence that the servant is not bound to render service and the
master is not bound to pay.

The same principle was reiterated in V. P. Gindroniya vs State of Madhya Pradesh.30

We have referred to the suspension cases because in our opinion the principles governing the
case of lay-off are very akin to those applicable to a suspension case.
In Veiyra (M.A.) vs Fernandez31 a Bench of the Bombay High Court opined that under the
general law the employer was free to dispense with the services of a workman, but under the In-
dustrial Disputes Act he was under an obligation to lay him off; that being so, the action of lay-
off by the employer could not be questioned as being ultra vires. We do not think that the view
expressed by the Bombay High Court is correct.
There is an important decision of this Court in Workmen of Dewan Tea Estate vs Management32
on which reliance was placed heavily by Mr M.K. Ramamurthi appearing for the appellant
and also by Mr Andley for the respondent. One of the questions for consideration was whether
Section 25C of the Act recognises the common law right of the management to declare a lay-off
for reasons other than those specified in the relevant clause of the standing order. While consider-
ing this question, Justice Gajendragadkar, as he then was, said at page 554 (of SCR): (at p. 1461
of AIR)

The question which we are concerned with at this stage is whether it can be said that Section
25C recognises a common law right of the industrial employer to lay off his workmen. This
question must, in our opinion, be answered in the negative. When the laying off of the work-
men is referred to in Section 25C, it is the laying off as defined by Section 2(kkk) and so,
workmen who can claim the benefit of Section 25C must be workmen who are laid off and
laid off for reasons contemplated by Section 2(kkk); that is all that Section 25C means.

Then follows a sentence which was pressed into service by the respondent. It says:

If any case is not covered by the standing orders, it will necessarily be governed by the provisions
of the Act, and lay-off would be permissible only where one or the other of the factors men-
tioned by Section 2(kkk) is present, and for such lay-off compensation would be awarded
under Section 25C.

In our opinion, in the context, the sentence aforesaid means that if the power of lay-off is there
in the standing orders but the grounds of lay-off are not covered by them, rather, are governed
by the provisions of the Act, then lay-off would be permissible only on one or the other of the
factors mentioned in clause (kkk). Subsequent discussions at pages 558 and 559 (of SCR): (at
p. 1463 of AIR) lend ample support to the appellant’s argument that there is no provision in
the Act specifically providing that an employer would be entitled to lay off his workmen for the
reasons prescribed by Section 2 (kkk).
Mr Andley placed strong reliance upon the decision of this Court in Sanghi Jeevaraj Ghewar
Chand vs Secretary, Madras Chillies, Grain Kirana Merchants Workers’ Union.33 The statute under
consideration in this case was the Payment of Bonus Act, 1965 and it was held that the Act was
intended to be a comprehensive and exhaustive law dealing with the entire subject of bonus
of the persons to whom it should apply. The Bonus Act was not to apply to certain establish-
ments. Argument before the Court was that bonus was payable de hors the Act in such
276 Social Justice and Labour Jurisprudence

establishments also. This argument was repelled and in that connection it was observed at page
381 (of SCR): (at p. 540 of AIR):

It will be noticed that though the Industrial Disputes Act confers substantive rights on work-
men with regard to lay-off, retrenchment compensation, etc., it does not create or confer any
such statutory right as to payment of bonus. Bonus was so far the creature of industrial ad-
judication and was made payable by the employers under the machinery provided under that
Act and other corresponding Acts enacted for investigation and settlement of disputes rose
thereunder. There was, therefore, no question of Parliament having to delete or modify item 5
in the Third Schedule to Industrial Disputes Act or any such provision in any corresponding
Act or its having to exclude any right to bonus thereunder by any categorical exclusion in the
present case.

And finally it was held at page 385 (of SCR): (at p. 543 of AIR):

Considering the history of the legislation, the background and the circumstances in which
the Act was enacted, the object of the Act and its scheme, it is not possible to accept the con-
struction suggested on behalf of the respondents that the Act is not an exhaustive Act dealing
comprehensively with the subject-matter of bonus in all its aspects or that Parliament still left
it open to those to whom the Act does not apply by reason of its provisions either as to ex-
clusion or exemption to raise a dispute with regard to bonus through industrial adjudication
under the Industrial Disputes Act or other corresponding law.

In a case of compensation for lay-off the position is quite distinct and different. If the term of
contract of service or the statutory terms engrafted in the standing orders do not give the power
of lay-off to the employer, the employer will be bound to pay compensation for the period of
lay-off which ordinarily and generally would be equal to the full wages of the concerned workmen.
If, however, the terms of employment confer a right of lay-off on the management, then, in the
case of an industrial establishment which is governed by Chapter VA, compensation will be
payable in accordance with the provisions contained therein. But compensation or no com-
pensation will be payable in the case of an industrial establishment to which the provisions of
Chapter VA do not apply, and it will be so as per the terms of the employment.
In Kanhaiya Lal Gupta vs Ajeet Kumar Dey,34 a learned Single Judge of the Allahabad High
Court seems to have rightly held that in the absence of any term in the contract of service or in
the statute or in the statutory rules or standing orders an employer has no right to lay off a
workman without paying him wages. A learned Single Judge of the Punjab and Haryana High
Court took an identical view in the case of Steel and General Mills Co. Ltd. vs Additional District
Judge, Rohtak.35 The majority view of the Bombay High Court in K.T. Rolling Mills Private Ltd.
vs M.R. Meher,36 that it is not open to the industrial tribunal under the Act to award lay-off
compensation to workmen employed in an ‘industrial establishment’ to which Section 25-C
does not apply, is not correct. The source of the power of the employer to lay off workmen does
not seem to have been canvassed or discussed by the Bombay High Court in the said judgment.
In the case of the Delhi office of the respondent the tribunal has held that the lay-off was
justified. It was open to the tribunal to award a lesser amount of compensation than the full
wages. Instead of sending back the case to the tribunal, we direct that 75 per cent of the basic
wages and dearness allowance would be paid to the workmen concerned for the period of lay-
off. As we have said above this will not cover the case of those workmen who have settled or
compromised their disputes with the management.
Civil Appeal Nos. 1857–1859 (NL) of 1970
In these appeals the facts are identical to those in the other appeal. There were only 33 employees
in the Madras office of the respondent company. Certain workmen were laid off for identical
 Industrial Adjudication 277

reasons from 5 February 1968. The lay-off was lifted on 29 April 1968. The concerned workmen
filed petitions under Section 33C(2) of the Act for computation of their wages for the period of
lay-off. Holding that the lay-off was justified and valid the Presiding Officer of the Additional
Labour Court, Madras had dismissed their applications for salary and allowances for the period
of lay-off. Hence these appeals.
In a reference under Section 10(1) of the Act is open to the tribunal or the court to award
compensation which may not be equal to the full amount of basic wages and dearness allowance.
But no such power exists in the Labour Court under Section 33C(2) of the Act. Only the
money due has got to be quantified. If the lay-off could be held to be in accordance with the
terms of the contract of service, no compensation at all could be allowed under Section 33C(2)
of the Act, while, in the reference some compensation could be allowed. Similarly on the view
expressed above that the respondent company had no power to lay off any workmen, there is no
escape from the position that the entire sum payable to the laid-off workmen except the workmen
who have settled or compromised, has got to be computed and quantified under Section 33C(2)
of the Act for the period of lay-off.
For the reasons stated above all the appeals are allowed. In Civil Appeal No. 2307/1969 in
place of the order of the Tribunal, an order is made on the lines indicated above. And in Civil
Appeals 1857 to 1858/1970 the orders of the Labour Court are set aside and the cases of the
appellants are remitted back to that Court for computation and quantification of the sums pay-
able to the concerned workmen for the period of lay-off.

The Power of Tribunals to Scrutinise the Employer’s

Action under Section 33(2)

The insertion of Section 33 was by the Amendment Act of 1956. This section provides
basic protection to workers in the circumstances of their collective bargaining efforts
with the employer. The service conditions pertaining to workmen in an industry are a
gradual bargaining process. Workers are often very precariously placed when disputes
pertaining to the service conditions are admitted for adjudication. In the circumstances,
it is natural to assume that the employer may be prejudiced and may go to the extent of
denuding the workers of the opportunity to fight their case effectively. In this context,
the protection provided in Section 33 of the Act is significant.

Mahendra Singh Dhantwal vs Hindustan Motors 37

In this case, the Supreme Court considered the precise scope of Section 33 2(b) of the
Industrial Disputes Act, 1947.38 In view of the series of amendments to Section 33, the
Supreme Court had to consider precisely the scope of the powers of a tribunal in enter-
taining an application under Section 33 of the Act. This matter has much importance as
far as the interpretation is concerned.

THE FACTS OF THE CASE

This is an appeal at the instance of the workman on a certificate of the Calcutta High Court
from the decision of the Division Bench, reversing the earlier judgement and order of the
278 Social Justice and Labour Jurisprudence

learned single judge against the award of the industrial tribunal, made under Section 33A of the
Industrial Disputes Act.
The appellant was employed in the company since 3 August 1949. On 3 August 1956, the
workman entered into an agreement of service with the company, wherein the first clause reads
as follows:

The Employer agrees to and does hereby engage the services of the employee for a period of
5 years beginning with dated 1-6-1956 and thereafter until this agreement shall be determined
by either party hereto giving to the other 3 months’ notice in writing of such intended
termination.
Provided that in case employer finds the employee’s work satisfactory, employer shall have
the option to extend the period of service by a further term of 3 years.

The workman went on two months’ leave to Banaras for a change some time in 1960. He
requested for extension of leave for one month on medical grounds. He actually sent an appli-
cation on 8 August 1960, along with a medical certificate, praying for extension of his leave.
The company asked the workman to get himself examined by the company’s medical officer
within ten days. As the workman was lying ill at Banaras, he could not comply with the directions
of the company. On 5 September 1960, he sent another telegram, followed by a formal application
enclosing a medical certificate, for extension of his leave. On 15 September 1960, the company
sent a letter to him terminating his services on the ground of habitual absence, which is mis-
conduct under the company’s standing orders.
At the time of this termination, there was an industrial dispute pending between the company
and its workmen. Since the company did not ask for approval of its order from the industrial
tribunal, the workman made a complaint to the tribunal under Section 33A of the Act. The
company contested the application. The Tribunal made its award on 27 September 1962, ordering
restatement of the workman with 50 per cent of his back wages for the period of his forced
unemployment as compensation, with a direction that the award should be given effect to not
later than one month from the publication of the award, which was on 26 October 1962.
After a little over two months of the publication of the award—to be precise, on 4 February
1963—the company intimated to the workman to rejoin his service. The workman reported
for duty the following day, on 5 February 1963. On 16 February 1963, the company invoked
clause (1) of the agreement and terminated the services of the workman by paying three months’
salary in lieu of notice.
This is the second round of litigation with which the Court was concerned in this appeal.
Since an industrial dispute was pending even on the date of termination of his services and the
company did not apply to the tribunal for approval of the order, the workman again made a
complaint to the tribunal, as on the previous occasion, under Section 33A of the Act. The tri-
bunal accepted the complaint and held as follows:

In my opinion, the company has really dismissed the petitioner for a piece of conduct which
must have appeared as misconduct in the eye of the company.

The tribunal observed that the company, in substance, dismissed the workman for mis-
conduct since the workman became ‘odious to the company’ on account of his earlier success
before the tribunal in his application under Section 33A of the Act. The tribunal, therefore,
ordered his reinstatement, with full back wages for the period of his forced unemployment as
compensation. This time the company did not accept the award, although on the earlier occasion
the company did not choose to litigate and reinstated him as ordered by the tribunal.
The company moved the Calcutta High Court to quash the award. The learned single judge
refused to interfere with the award holding that ‘the reason might have been the old reason of
 Industrial Adjudication 279

dismissal’. Further, he observed that ‘the circumstances relied on by the Tribunal are not wholly
irrelevant and the inference drawn by the Tribunal cannot be characterised as unreasonable’.
The company appealed to the Division Bench of the High Court and the appeal was accepted.
It is very much relevant to have a look at the holding of the Division Bench, is very relevant,
which is as follows:

It may be that having regard to the sequence of events that took place in this case the ter-
mination of service of the respondent No. 1 by the letter of 16th February 1963 may be re-
garded as a colourable exercise of the power under the contract of employment or may even
be regarded as one of unfair labour practice or mala fide, but the discharge cannot be said to
be for any misconduct. There is no evidence for discharge on any specific misconduct. The
definite case of respondent No. 1 has been that it was by way of retaliatory measure that his
services were terminated. This may be true and may show that the action on the part of the
appellant company was mala fide. But until it is established that there has been a contravention
of Section 33 of the Act which would create jurisdiction in the Industrial Tribunal to entertain
an application under Section 33A, or in other words, unless it is established that there has
been discharge for misconduct, the tribunal had no jurisdiction to set aside the order of ter-
mination in an application under Section 33A.

On the application by the workman under Article 133(1) of the Constitution, the matter
reached the Supreme Court.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE P.K. GOSWAMI

We should at the outset observe that this is not an appeal against the award of the Industrial
Tribunal but is only directed against the judgment of the High Court under Article 226 of the
Constitution. In an application under Article 226 of the Constitution the High Court was con-
cerned only with the question of jurisdiction of the Tribunal in entertaining the application
under Section 33A of the Act. The question of jurisdiction again was intimately connected with
the question whether the termination of service was for misconduct of the workman. The learned
single Judge accepted the finding of the Tribunal when it held that the discharge was nothing
but dismissal for misconduct and in that view of the matter did not find any justification for
interfering with the award. According to the learned Judge, therefore, no question of lack of
jurisdiction of the Tribunal arose to merit interference with the award under Article 226 of the
Constitution.
The Division Bench, however, looked at the matter from a different view point. It assumed
that the action of the management was even mala fide and so it could be wrongful and in an
appropriate reference under Section 10 of the Act the workman might be able to get proper
relief. The High Court, however, came to the conclusion that since clause (1) of the agreement
was invoked by the employer it was not a case of discharge for misconduct and that being the
position the Tribunal had no jurisdiction to entertain the complaint under Section 33A even
though the action of the company might be as a result of unfair labour practice.
Mr Navnit Lal on behalf of the workman has assailed the conclusion of the Division Bench
while Mr Sen submits that the decision is legally unquestionable.
The question that arises for consideration relates to the applicability of the proviso to Sec-
tion 33(2)(b) of the Act as amended in 1956.39 Section 33(2)(b) at the material time reads as
follows:

33(2) During the pendency of any such proceeding in respect of an industrial dispute, the
employer may, in accordance with the standing orders applicable to a workman concerned in
such dispute.
280 Social Justice and Labour Jurisprudence

(b) for any misconduct not connected with the dispute, discharge or punish, whether by dis-
missal or otherwise, that workman:
Provided that no such workman shall be discharged or dismissed, unless he has been paid
wages for one month and an application has been made by the employer to the authority be-
fore which the proceeding is pending for approval of the action taken by the employer.

We may also read Section 33A of the act as that is the section under which the complaint was
originally made by the workman to the Industrial Tribunal.

33A: Where an employer contravenes the provisions of Section 33 during the pendency of
proceedings before a Labour Court, Tribunal or National Tribunal any employee aggrieved
by such contravention, may make a complaint in writing in the prescribed manner to such
Labour Court, Tribunal or National Tribunal and on receipt of such complaint that Labour
Court, Tribunal or National Tribunal shall adjudicate upon the complaint as if it were a dis-
pute referred to or pending before it, in accordance with the provisions of this Act and shall
submit its award to the appropriate Government and the provisions of this Act shall apply
accordingly.

It is clear that the foundation of jurisdiction of the Tribunal to entertain a complaint under
Section 33A is the contravention of Section 33 of the Act.
Section 33 may be contravened in a variety of ways. We are concerned in this appeal only
with one type of contravention, namely, that the employer did not make any application to the
Tribunal for approval of the order of termination of service of the workman. There is no dispute
between the parties in this appeal that there was an industrial dispute pending before the Tribunal
in which the workman was concerned and that the particular termination had nothing to do
with that dispute. The only point on which the parties differ is as to the nature of the order of
termination of service. The employer claims it to be a termination simpliciter in exercise of its
right under the contract. The workman on the other hand contends that termination of his ser-
vice was meted out as a punishment for avenging the defeat of the employer in an earlier litiga-
tion under Section 33A at the instance of the workman. In other words the workman contends
that the order, although purported, ex facie, to be a termination under the terms of the agreement,
is in truth and reality an order of dismissal of misconduct.
From the provisions of Section 33 it is manifest that punitive action by the employer in what-
ever form it may be passed is permissible against an ordinary workman, even during the pendency
of proceedings before the Tribunal provided that the employer pays one month’s wages and also
applies to the concerned Tribunal for approval of his action. Since the action is punitive, namely,
dismissal or discharge for misconduct, the Tribunal has to oversee the action to guarantee that
no unfair labour practice or victimisation has been practised thereby. If the procedure of fair
hearing has been observed the Tribunal has to find in an application under Section 33 that a
prima facie case is made out for dismissal. If, on the other hand, there is violation of the principles
of natural justice in the enquiry, the Tribunal can go into the whole question relating to the mis-
conduct and come to its own conclusion whether the same is established.
The employer has submitted that since the termination of the workman was in exercise of
the right under the written agreement it was not a case of discharge or dismissal for misconduct
and there was, therefore, no obligation on the employer to make an application under Section 33
of the Act and hence Section 33 has not been contravened and the application under Section 33A
is not maintainable.
The question that arises for decision in this appeal is whether if a particular order of termination
of service is not on account of misconduct and is merely a termination simpliciter the employer
is still required to make an application under Section 33 of the Act.
 Industrial Adjudication 281

We have no doubt in our mind that Section 33(2)(b) makes it obligatory upon the employer
to make an application to the Tribunal under the proviso only when he discharges or dismisses
a workman for misconduct.
It is submitted by Mr Sen that misconduct contemplated in Section 33(2)(b) must be a
misconduct enumerated in the standing orders of the company. We are unable to accept this
submission.
Standing orders of a company only describe certain cases of misconduct and the same cannot
be exhaustive of all the species of misconduct which a workman may commit. Even though a
given conduct may not come within the specific terms of misconduct described in the stand-
ing orders, it may still be a misconduct in the special facts of a case, which it may not be possible
to condone and for which the employer may take appropriate action. Ordinarily, the standing
orders may limit the concept but not invariably so.
When, therefore, the Tribunal has found as a fact after taking note of the history and the en-
tire circumstances of the case that the termination was on account of misconduct of the employee
it is difficult to hold that there is any manifest error of law committed by the Tribunal in reach-
ing that conclusion only because the misconduct, as found, is not within the four corners of the
description of the various misconducts mentioned in the company’s standing orders. It is not
possible, therefore, to accept the submission that the Tribunal committed an error of law or of
jurisdiction in entertaining the application under Section 33A.
Termination simpliciter or automatic termination of service under the conditions of service
or under the standing orders is outside the scope of Section 33 of the Act. This does not mean
that the employer has the last word about the termination of service of an employee and can get
away with it by describing it to be a simple termination in his letter of discharge addressed
to the employee. It is also not a correct proposition of law that in case of a complaint under
Section 33A the tribunal would be debarred from going into the question whether, notwith-
standing the form of the order, in substance, it is an action of dismissal for misconduct and not
termination simpliciter.
The possibility that in an appeal against the award of the Tribunal this Court may have taken
a different view about the termination does not affect the present case.
Mr Navnit Lal relied on a decision of the Supreme Court in the Management of Murugan
Mills Ltd. vs Industrial Tribunal Madras40 in support of his contention that even termination
simpliciter is within the sweep of Section 33. That was a case where the workman’s services were
terminated ‘because he deliberately adopted go-slow and was negligent in the discharge of his
duty’. The Supreme Court in that case observed thus:

His services were therefore terminated for dereliction of duty and go-slow in his work. This
clearly amounted to punishment for misconduct and therefore to pass an order under the
standing orders in such circumstances was clearly a colourable exercise of the power to terminate
the services of a workman under the provision of the Standing Orders.

Further the Court in the same case observed:

In these circumstances the case was clearly covered by Cl. (b) of Sec. 33(2) of the Act as the
services of the respondent were dispensed with during the pendency of a dispute by meting
out the punishment of discharge to him for misconduct.

The decision is, therefore, not an authority for the extreme proposition advanced by the appellant.
Mr Navnit Lal also drew our attention to two decisions of the Madras High Court in Shyamala
Studios vs Kannu Devar41 and Sri Rama Machinery Corporation (P) Ltd. Madras vs N.R. Murthi,42
282 Social Justice and Labour Jurisprudence

in support of the above submission. Although the decision of the Supreme Court in Murugan
Mills,43 case was noticed by the Madras High Court it does not appear to have correctly appre-
ciated the ratio decidendi of that judgment. We are unable to hold that the Supreme Court in
Murugan Mills44 case went to the extent of re-writing Section 33 by completely obliterating the
concept of misconduct of a workman for which alone in a limited way the right of action for
the employer is preserved during the span of pendency of proceedings before the Tribunal in the
interest of discipline. To the extent the Madras decisions state that termination of services need
not be for misconduct of the workman in order to attract Section 33(2)(b), we cannot agree.
If the Tribunal finds that a particular termination of service of a workman is in truth and
substance innocuous or in exercise of a bona fide right under the contract, Sction 33(2)(b) will
not be applicable and necessarily there will be no contravention of Section 33A of the Act.
In Air India Corporation, Bombay vs V. A. Rebello,45 this Court had to deal with the validity of
an award made under Section 33A although the Labour Court in that case had held that the
workman was guilty of misconduct and that his services were terminated for that reason. This
Court did not agree with the aforesaid conclusion and dismissed the workman’s petition under
Section 33A of the Act. In doing so this Court observed as follows:

It is noteworthy that the ban is imposed only in regard to action taken for misconduct,
whether connected or unconnected with the dispute. The employer is, therefore, free to take
action against his workmen if it is not based on any misconduct on their part.

We are, therefore, clearly of opinion that the single Judge is right in not interfering with the
award under Article 226 of the Constitution and the Division Bench is wrong in doing so.
It is true that on the face of the order of termination the company invoked clause (1) of the
agreement and even so it was open to the Tribunal to pierce the veil of the order and have a close
look at all the circumstances and come to a decision whether the order was passed on account
of certain misconduct. This is a finding of fact which could not be interfered with under Art-
icle 226 of the Constitution unless the conclusion is perverse, that is to say, based on no evidence
whatsoever. We are, however, unable to say so having regard to the facts and circumstances de-
scribed by the Tribunal in its order.
It is, however, unexceptionable that if an employer passes an order of termination of service
in exercise of his right under a contract or in accordance with the provision of the standing
orders and the Tribunal finds that the order is not on account of any misconduct, the question
of violation of Sec. 33 would not arise.
There remains, however, another aspect to which the Tribunal did not properly address. The
workman in this case had a contract of employment only for 8 years at the most. The reinstatement
in his case, therefore, cannot extend beyond a period of eight years from 1 June 1956 and the
contract of employment would have automatically terminated on 31 May 1964. The Tribunal
awarded reinstatement on 24 March 1964, when even the employer did not bring it to its
notice that the contract of employment would terminate in May 1964.
We cannot be oblivious to the plight of this workman in his unequal fight with a big company.
He was serving the company since 1949 for about eleven years when he was first dismissed in
1960. He has been involved in litigation since 1960 up-till today except for a lull for eleven days
on his reinstatement after the first award. Eleven years in actual service and sixteen years in liti-
gation is a doleful tale by itself.
We, therefore, feel that, in the interest of industrial peace and above all to draw a final curtain
to this unhappy litigation, we would be justified in quantifying the compensation payable to
the workman in this case to a sum of Rs 20,000 only in lieu of reinstatement with full back
wages as ordered by the Tribunal, which we accordingly order. We may also observe that Mr Sen,
 Industrial Adjudication 283

fairly enough, had made it clear before us in the course of hearing that even if the company suc-
ceeded in this Court it would be prepared to pay to the workman a sum of Rs 10,000 on com-
passionate grounds.

The Discharge of a Workman during the Pendency

of the Proceedings and the Powers of the Labour
Court to Provide Appropriate Relief

The public sector undertakings are the instrumentalities of the state under Article 12 of
the Constitution. The employment under the public undertakings is public employment
and public property. It is not only the undertakings but also the society which has a stake
in their proper and efficient working. Both discipline and devotion are necessary for effi-
ciency. To ensure both, the service conditions of those who work for them must be encour-
aging, certain and secured but not vague and whimsical.

Municipal Corporation of Delhi vs Rasal Singh and others 46

In this case, the tribunal was so harsh towards the conduct of the corporation that Justice
V.R. Krishna Iyer, speaking for the majority, went to the extent of diluting its observations
while upholding its award. Here, Justice Iyer clearly exhibits the trend of judicial restraint
on the part of the highest court of the land, in spite of the fact that the corporation’s ob-
lique motives are very clear.

THE FACTS OF THE CASE

The appellant is a public sector corporation which is supposedly a model employer. The appellees
are petty workers who have not been confirmed in the registers, but are on the payroll as casual,
though continuous, workers. The break is for a few days and the financial burden cast by the
award is around Rs 5,000. And yet, the ‘model employer’ has lavished on these hundred appeals
to the Supreme Court of India supposedly on principle.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

Poor reflection on ‘principles’ prompting public sector undertakings and on prudence in liti-
gation policy and outlay and the scant regard for the Supreme Court being approached only on
supreme issues. These observations are an expression of this court’s allergy to the frequency with
which, in the name of ‘principle’, the State and public sector institutions spiral up the litigation
ladder and spend considerable sums of public money in cases which should have been adjusted
by imaginative, conciliatory and wise attitudes, while professing profound concern for the welfare
of labour. An aware employer should be the last litigant, costs in court being unproductive and
even counter-productive.
The facts in the single dispute spread out into a hundred appeals are that the workers were
jettisoned for a few days and, later, re-adsorbed, thus depriving the workers of the small wages
for short spells. An industrial dispute was pending at this time relating to the status of the workers
as regular employees or only casual workers though ‘continuously on the muster rolls’. Discharge
of these workers during the pendency of the dispute before the Tribunal attracted Section 33 of
284 Social Justice and Labour Jurisprudence

the Act which was invoked by the affected workmen. The plea of the Municipal Corporation of
budgetary provision having petered out as justifying the non-employment was disbelieved by
the Tribunal. Oblique motives such as a clever move to avoid a continuous run of 240 days of
work which entails certain responsibilities were alleged by the workmen and upheld by the
Tribunal. But, having heard counsel on both sides, we are happy to hold that since the award is
essentially just it must stand and, while the Municipal Corporation has erred in refusing, from
whatever motive work for a few days, the Tribunal had read more into the mind of the Commis-
sioner than was warranted by the record. We are not satisfied that the appellant acted out of
improper objects and, to that extent, undo the damaging remarks in the award under appeal.
The workmen have since been held in the Industrial Dispute to be only casual labourers although
we hope this will be no weapon in the hands of the employer to breach fair norms. The wages
for the broken period will be paid by the appellant within one month; the injurious imputations
in the award against the Corporation are unnecessary for reaching the conclusion and we do
not regard it as fair to stamp the Corporation with unfair labour practice. These conclusions are
mutually satisfactory as attested by counsel on both sides and we too share in the happy ending
to a forensic saga of misfortune.
We affirm the award subject to the dilution of observations about the motives of the Corpor-
ation, and further direct payment of the sums directed by the award, together with costs.

Findings of the Labour Court with Respect

to Relief for a Dismissed Workman

A Labour Court or industrial tribunal, while dealing with the propriety of an employer in
initiating of disciplinary proceedings against a workman in respect of an act of misconduct,
is authorised to either sit in appeal over the findings of the enquiry committee, or to
examine the propriety of the ultimate order of dismissal passed by the employer. This was
addressed by the Supreme Court in the following case. While deciding this matter, the
Supreme Court based its decision by confining itself exclusively to the scope of the act of
‘misconduct’.

Lalla Ram vs the Management of DCM Chemical Works47

This appeal by special leave was directed against the judgement and order dated 19 Novem-
ber 1970 of the High Court of Delhi, setting aside the order dated 23 April 1969 of the
Additional Industrial Tribunal, Delhi, rejecting the first respondent’s application under
Section 33(2) of the Industrial Disputes Act, 1947, seeking approval of its order of the
appellant’s dismissal from service, passed during the pendency of an industrial dispute.

THE FACTS OF THE CASE

Behind the premises situated on Najafgarh Road, Delhi, of respondent No. 1, which is a unit of
the Delhi Cloth and General Mills Company Ltd, there on a plot of land admeasuring 181 acres,
ownership whereof was transferred in favour of the company by the erstwhile Delhi Improvement
Trust. The plot being adjacent to the premises of respondent 1, the same was being looked after
 Industrial Adjudication 285

by the management of the respondent, which also constructed some quarters there for the use
of its employees. There are also some jhuggies (hutments) standing on the land, in which live
172 families, out of which 70 are of the employees of respondent 1 and the rest are of some out-
siders. After taking over the watch and ward of the plot, the management of Respondent 1 posted
sentries to prevent encroachment and unauthorised construction on it. On the company’s taking
up construction of a boundary wall on the aforesaid plot in April or May 1967, the appellant, who
was the president (pradhan) of the Jhuggi Joupari Sudhar Sabha, and a few other jhuggi dwellers
brought a suit, being Suit 418 of 1967 in the court of the Sub-Judge, First Class, Delhi, for re-
straining the company and respondent 1 from constructing the boundary wall and from evicting
the jhuggies. On the basis of the voluntary statement made on behalf of the company to the effect
that it would not evict the appellant and his co-plaintiffs except by a due process of law, the sub-
judge issued a temporary injunction restraining the company and respondent 1 from evicting
the appellant and his co-plaintiffs except by a due process of law but refused their prayer for the
injunction restraining the company and respondent 1 from building the boundary wall.
The subjudge, however, directed the company and respondent 1 to leave a 10-feet wide gate for
the passage of the appellant and his co-plaintiffs. Aggrieved by the rejection of their prayer for an
injunction regarding construction of the boundary wall, the appellant and his co-plaintiffs pre-
ferred an appeal to the Senior Sub-Judge, Delhi, who dismissed the same.
On the evening of 2 March 1968, Shyam Singh, Assistant Security Officer in the employ of
Respondent 1, received a report that one Sheo Ram had started making an unauthorised con-
struction on the aforesaid plot. In the discharge of his official duties of preventing encroachment
and unauthorised construction on the immovable property belonging to the company, he pro-
ceeded to the spot accompanied by two members of his staff to investigate the matter. On
reaching the spot and finding Sheo Ram constructing a new jhuggi in front of his existing
jhuggi, Shyam Singh pleaded with the former and asked him to desist from constructing the
new jhuggi. While he was so engaged, the appellant, who was also an employee of respondent 1,
made his appearance along with 8–10 jhuggi dwellers and, adopting a very aggressive attitude,
intervened on behalf of Sheo Ram and questioned the authority of Shyam Singh, who was
senior to him, to make inquiries in regard to the construction during the pendency of the afore-
said litigation. He also manhandled Shyam Singh, hurled highly provocative invectives at him
and his companions, and made them to quit on pain of dire consequences. Unnerved by the
threats held out by the appellant, Shyam Singh left the place along with his security personnel
and hastened to make a report of the incident to his immediate superior, which led to the suspension
of the appellant and the issuing of a notice to him by the general manager of Respondent 1,
calling upon him to show cause as to why he should not be dismissed for his aforesaid mis-
behaviour towards and attempt to assault Shyam Singh, who was discharging his official duties,
which were acts subversive of discipline within the meaning of Standing Order 27(i), applicable
to him. The appellant submitted his explanation, denying the charges levelled against him and
questioning the authority of the respondent to charge-sheet him in respect of an incident which
was purely private. Not satisfied with the explanation tendered by the appellant, the management
detailed two of its officers to inquire into the aforesaid charges against the appellant. On com-
pletion of the inquiry in accordance with the standing orders, the enquiry officers submitted a
unanimous report, observing therein that it was not the appellant’s case that either Sheo Ram or
any other person was being evicted from any of the jhuggies standing on the area which was
admittedly known as ‘D.C.M. Chemical Works Jhuggi Area’; that it was clear that Dharam
Singh, a member of the watch and ward staff placed on duty to protect the property of the com-
pany, had noticed Sheo Ram constructing new walls in front of his jhuggi; that on reaching the
spot on the evening of 2 March 1968, Shyam Singh saw the freshly constructed walls of height
about 5 feet and some building material lying in front of Sheo Ram’s jhuggi and was accordingly
286 Social Justice and Labour Jurisprudence

justified in investigating the matter; that when Shyam Singh was telling Sheo Ram that he
should not construct a new jhuggi or extend the jhuggi, the appellant questioned the authority
of Shyam Singh and abused and manhandled him, and in so doing was guilty of mis-conduct
within the meaning of Standing Order 27(i). It would be profitable to refer to the concluding
portion of the report, which reads thus:

Shri Shyam Singh is a member of the Security Staff and a responsible officer of the Company.
Shri Shyam Singh is an officer of the Company and is senior to Shri Lalla Ram. In the dis-
charge of official duties of protecting the property of the Company and preventing its misuse,
if Shri Shyam Singh wanted to investigate into the matter reported to him by Shri Dharam
Singh he was perfectly within his rights. The action of Shri Lalla Ram is certainly not justified
in so far as he intervened and obstructed Shri Shyam and other security staff; and in the pro-
cess Shri Lalla Ram questioned the authority of a superior officer/security staff, called him
and his sepoys ‘goondas’, caught hold of him by his hand and pushed him and threatened
him... Shri Lalla Ram also said that they were not afraid of the uniform i.e. security staff, who
are meant for safeguarding the property of the Company and enforcing the discipline. Under
the circumstances, we conclude that Shri Lalla Ram committed the acts alleged against him,
namely, obstructing the assistant security officer in the discharge of official duties, and threaten-
ing him and catching hold of him by hand and thereby committed acts subversive of discipline,
a misconduct under the Standing Order 27(i). We find Shri Lalla Ram guilty of the charge.

Agreeing with the findings of the enquiry officers that the aforesaid acts committed by the
appellant were subversive of discipline and constituted misconduct as contemplated by Standing
Order 27(i), the general manager passed an order, on 2 May 1968, dismissing the appellant
from service. Since, however, an industrial dispute was pending, the general manager directed
the appellant to take his final dues together with one mouth’s pay in lieu of notice and made an
application on the same day to the Industrial Tribunal, Delhi, seeking its approval of the order
of the appellant’s dismissal, as required by Section 33(2)(b) of the Act.
While holding that the enquiry officers were not biased against the appellant; that there was
no violation of the principles of natural justice; and that it could not be said that the findings of
the enquiry officers were not based upon any evidence or that the same were perverse, the Add-
itional Industrial Tribunal, Delhi, refused—by its order dated 23 April 1969—to accord its ap-
proval to the appellant’s dismissal on the grounds that the disciplinary action taken against the
appellant was misconceived; and that since there was no rational connection between the employ-
ment of the appellant and Shyam Singh in regard to the affairs of D.C.M. Chemical Works, Standing
Order 27(i) was not attracted in the present case, which ‘was really a case of civil dispute between
the Company and Jhuggi dwellers who were long being pressurised to surrender possession of
the area to the Company and the machinery of security staff of D.C.M. Chemical Works was
pressed into service for that purpose’.
Aggrieved by the aforesaid order of the Additional Industrial Tribunal, respondent 1 moved
the High Court of Delhi under Article 226 of the Constitution. The High Court allowed the
petition, holding that since there was a clear finding by the enquiry officers about the existence
of a rational connection between the aforesaid incident and the duties of the appellant herein
and Shyam Singh, and there was nothing in the order of the tribunal to show that the enquiry
officers had arrived at that finding without any evidence, it was not open to the tribunal to come
to a different conclusion on the facts or to hold that the present was a case of victimisation and
then to refuse its approval. In view of this, the High Court quashed the order of the Additional
Industrial Tribunal and directed it to consider the aforesaid application of respondent 1 in the
light of its judgement. Not satisfied with this order, the appellant has come up in appeal to this
Court under Article 136 of the Constitution.
 Industrial Adjudication 287

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE JASWANT SINGH

Appearing for the appellant, Mr S.C. Agarwala has urged that since the quarrel between the
appellant and Shyam Singh was purely private and the misconduct attributed to the appellant
had no rational connection with his employment and that of Shyam Singh, the dismissal of the
appellant under Standing Order 27(i) was not valid and legal; that the additional Tribunal was
well within its authority to refuse to accord its approval to the action taken by the management
of Respondent 1 in dismissing the appellant and that the order under appeal which is erroneous
cannot be sustained. He has, in support of his contentions referred us to two decisions of this
Court in Tata Oil Mills Co. Ltd. vs Its Workmen48 and W.M. Agnani vs Badri Das.49
In Agnani’s50 case, this Court held as under:

It is true that if a domestic enquiry is properly held and the employer terminates the services
of his employee, the industrial tribunal dealing the industrial disputes arising out of such dis-
missal is not authorized to sit in appeal over the findings of the enquiry committee, or to ex-
amine the propriety of the ultimate order of dismissal passed by the employer.

Though it is true that private quarrel between an employee and a stranger with which the
employer is not concerned as in Agnani’s51 case falls outside the categories of misconduct, it can-
not be reasonably disputed that acts which are subversive of discipline amongst employees or
misconduct or misbehaviour by an employee which is directed against another employee of the
concern may in certain circumstances constitute misconduct so as to form the basis of an order
of dismissal or discharge. It cannot also be disputed that the extent of jurisdiction exercisable by
an approving authority under Section 33(2)(b) of the Act is very limited as has been clearly and
succinctly pointed out by this Court in a number of decisions. In The Lord Krishna Textile Mills vs
Its Workmen,52 this Court after referring to its earlier decisions and explaining the distinction
between ‘permission’ and ‘approval’ observed as follows…:

Therefore, putting it negatively the jurisdiction of the appropriate industrial authority in

holding an enquiry under Section 33(2)(b) cannot be wider and is, if at all, more limited,
than that permitted under Section 33(1) and in exercising its powers under Section 33(2) the
appropriate authority must bear in mind the departure deliberately made by the Legislature
in separating the two classes of cases falling under the two sub-sections, and in providing for
express permission in one case and only approval in the other. It is true that it would be com-
petent to the authority in a proper case to refuse to give approval, for Section 33(5) expressly
empowers the authority to pass such order in relation to the application made before it under
the proviso to Section 33(2)(b) as it may deem fit; it may either approve or refuse to approve;
it can, however, impose no conditions and pass no conditional order. In view of the limited
nature and extent of the enquiry permissible under Section 33(2)(b) all that the authority
can do in dealing with an employer’s application is to consider whether a prima facie case for
according approval is made out by him or not. If before dismissing an employee the employer
had held a proper domestic enquiry and has proceeded to pass the impugned order as a result
of the said enquiry, all that the authority can do is to enquire whether the conditions prescribed
by Section 33(2)(b) and the proviso are satisfied or not. Do the standing orders justify the
order of dismissal? Has an enquiry been held as provided by the Standing Orders? Have the
wages for the month been paid as required by the proviso?; and, has an application been
made as prescribed by the proviso?

In another case between P.H. Kalyani vs M/s. Air France, Calcutta,53 Justice Wanchoo… (as he
then was) speaking for a Bench of five Judges of this Court said:
288 Social Justice and Labour Jurisprudence

If the enquiry is not defective, the Labour Court has only to see whether there was a prima
facie case for dismissal, and whether the employer had come to the bona fide conclusion that
the employee was guilty of misconduct. Thereafter, on coming to the conclusion that the
employer has bona fide come to the conclusion that the employee was guilty, i.e. there was no
unfair labour practice and no victimization, the Labour Court would grant the approval which
would relate back to the date from which the employer had ordered the dismissal. If the en-
quiry is defective for any reason, the Labour Court would also have to consider for itself on the
evidence adduced before it whether the dismissal was justified. However on coming to the
conclusion on its own appraisal of evidence adduced before it that the dismissal was justified,
its approval of the order of dismissal made by the employer in a defective enquiry would still
relate back to the date when the order was made.

In Central Bank of India Ltd., New Delhi vs Shri Prakash Chand Jain,54 this Court laid down:

These decisions of this Court make it clear that when an industrial tribunal is asked to give
its approval to an order of dismissal under Section 33(2)(b) of the Act, it can disregard the
findings given by the Enquiry Officer only if the findings are perverse. The test of perversity
that is indicated in these cases is that the findings may not be supported by any legal evidence
at all… a finding by a domestic tribunal like an Enquiry Officer can be held to be perverse
in those cases also where the finding arrived at by the domestic tribunal is one at which no
reasonable person could have arrived on the material before it.

The position that emerges from the above quoted decisions of this Court may be stated thus:
In proceedings under Section 33(2)(b) of the Act, the jurisdiction of the Industrial Tribunal is
confined to the enquiry as to (i) whether a proper domestic enquiry in accordance with the
relevant rules/Standing Orders and Principles of natural justice has been held; (ii) whether a
prima facie case for dismissal based on legal evidence adduced before the domestic tribunal is
made out; (iii) whether the employer had come to a bona fide conclusion that the employee was
guilty and the dismissal did not amount to unfair labour practice and was not intended to vic-
timise the employee, regard being had to the position settled by the decisions of this Court in
Bengal Bhatdee Coal Co. vs Ram Prabesh Singh,55 Titaghur Paper Mills Co. Ltd. vs Ram Naresh
Kumar,56 Hind Construction & Engineering Co. Ltd. vs Their Workmen,57 Workmen of Messrs.
Firestone Tyre & Rubber Company of India (P) Ltd. vs Management58 and Eastern Electric & Trading
Co. vs Baldev Lal,59 that though generally speaking the award of punishment for misconduct
under the Standing Orders is a matter for the management to decide and the Tribunal is not
required to consider the propriety or adequacy of the punishment or whether it is excessive or
too severe yet an inference of mala fides may in certain cases be drawn from the imposition of
unduly harsh, severe, unconscionable or shockingly disproportionate punishment; (iv) whether
the employer has paid or offered to pay wages for one month to the employee and (v) whether
the employer has simultaneously or within such reasonably short time as to form part of the
same transaction applied to the authority before which the main industrial dispute is pending
for approval of the action taken by him. If these conditions are satisfied, the Industrial Tribunal
would grant the approval which would relate back to the date from which the employer had
ordered the dismissal. If however, the domestic enquiry suffers from any defect or infirmity, the
labour authority will have to find out on its own assessment of the evidence adduced before it
whether there was justification for dismissal and if it so finds it will grant approval of the order
of dismissal which would also relate back to the date when the order was passed provided the
employer had paid or offered to pay wages for one month to the employee and the employer
had within the time indicated above, applied to the authority before which the main industrial
dispute is pending for approval of the action taken by him.
 Industrial Adjudication 289

Let us now see whether the aforesaid requirements are satisfied in the present case or not. As
stated earlier the Enquiry Officers had after a regular enquiry properly made according to the
requirements of the Standing Orders and principles of natural justice, come to a categoric and
bona fide conclusion that the appellant obstructed Shyam Singh in the execution of his legitimate
official duties (of protecting the immovable property of the company and preventing its improper
and unauthorised use) by abusing, threatening and roughly handling him and thereby committed
misconduct as contemplated by Standing Order 27(i). The Industrial Tribunal had itself also
clearly found that the Enquiry officers were not biased against the appellant; that the domestic
enquiry held against the appellant was not violative of the principles of natural justice and that
it could not be said that the findings of Enquiry Officers were not based upon evidence or were
perverse. The material on record also disclosed that the employer paid one month’s wages to
the appellant and simultaneously made an application to the specified authority before which the
main industrial dispute was pending for grant of approval of the dismissal of the appellant. Fur-
ther the misconduct for which the disciplinary action was taken against the appellant was un-
doubtedly directed against Shyam Singh to prevent him from investigating into a matter relating
to immovable property belonging to the Company which he was bound to protect in discharge
of the duties which devolved upon him as a security officer. In face of all the aforesaid factors
which make out a strong prima facie case against the appellant, it is difficult to understand how
the Additional Industrial Tribunal could legitimately ignore the bona fide findings of the Enquiry
Officers which it had itself endorsed by holding that there was no rational nexus between the
appellant’s misconduct and his employment and that of Shyam Singh and withhold its approval
of the action taken by the management of Respondent 1. On a careful consideration of the entire
facts and circumstances of the case, we are therefore clearly of the view that the requisite nexus
was there and the Industrial Tribunal unauthorisedly assumed the role of an appellate authority
and exceeded the well-defined limits of its jurisdiction in refusing to accord its approval of the
action taken against the appellant by holding not on the basis of any legal evidence but purely
on the basis of conjectures and surmises that the present was a case of victimisation. We would
like to call attention at this stage to the decisions of this court in Tata Engineering & Locomotive
Co. Ltd. vs S.C. Prasad 60 and Hamdard Dawakhana Wakf vs Its Workmen,61 and reiterate and re-
emphasize that no question of victimisation or management having a bias against the appellant
can arise once it is held that the findings of misconduct alleged against the workman were pro-
perly arrived at and the domestic enquiry was in no way vitiated. We would also like to emphasize
that it is not necessary as stressed by the learned Counsel for the appellant that both the victim
and the delinquent workman should be engaged in the performance of their official duties when
the act which is the subject-matter of misconduct is said to have been committed. It is sufficient
if the victim and the delinquent workman are both employees of the same concern and the
misconduct is directed against the former while he is acting in the discharge of the duties im-
posed on him by virtue of his office. Thus the jurisdiction of the Industrial Tribunal being a
limited one, as stated above and all the essential requisites of the proviso to Section 33(2)(b) of
the act being present in the instant case, the Industrial Tribunal was not, in our opinion, justified
in withholding its approval and the High Court was perfectly right in passing the impugned
judgment and order.
We have disallowed costs to express our thought that notwithstanding the gravity of the mis-
conduct the management could be a little magnanimous while awarding punishment. The broad
guideline which persuaded us not to interfere was the reluctance of this court to demolish a
finding by the High Court unless there was something seriously wrong with it and our further
view that unless there is a serious error or infirmity, as we have indicated earlier, with the en-
quiry or the order by the disciplinary authority, the Tribunal should not interfere.
290 Social Justice and Labour Jurisprudence

The Rigidity of the Tribunals in Extending Equal Benefits

to the Same Class of Workmen: Validity
The Workmen Shift Incharge Sub-Station vs the Presiding Officer,
Additional Industrial Tribunal Delhi 62

In this case, Justice V.R. Krishna Iyer elaborated on the Constitutional philosophy en-
shrined in Part IV of the Constitution, when the industrial tribunal failed to adjudicate
the reasonable claim of a particular class of workmen who were placed in similar position
to that of the workmen who are better privileged with a caution to not have any pervading
application of this judgement in any further claims of these workers. The effort was only
to resolve the issue in a just way, without adding too much to it.

THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

This Civil Appeal springs from an award by the Delhi Industrial Tribunal which was challenged
by a small category of workmen who are 200 in number, the only financial impact whereof
would be around Rs 6,000. The industrial dispute which led to the award related to the year
1967 and it is unfortunate that the final adjudication of this dispute is being rendered as late as
1979. This provokes the comment that litigation is far too long lived to hold any realistic pro-
mise of fruits to the parties to the dispute.
The Delhi Electric Supply Undertaking employs various workmen under different categories.
One of these categories, working in the distribution centres, is known as shift in charge. These
workmen by qualification are matriculates with ITI certificates. There are three categories which
are more or less similar but graded one above the other, in this Department. The lowest is known
as attendants who are incharge of minor distribution centres. The highest are known as sub-
station chargemen who are incharge of very important sub-stations. In between, we have sub-
station shift incharge species with whom we are concerned.
Since the subject-matter, financial impact and the number involved are comparatively incon-
siderable, no detailed discussion is necessary for a decision. Broad considerations of equity and
industrial justice may guide us in reaching a conclusion. The workmen involved, namely shift
in-charge employees, have substantially the same qualifications as those who are paid higher.
What is more, their salaries are relatively poor. It is significant that a Committee had been ap-
pointed by the Undertaking where both sides were represented and the recommendations un-
animously made by that Committee have been accepted in all cases except in the case of the
shift incharge category. We are far from satisfied that any reasonable justification or understandable
classification will validate a differentiation in regard to these employees. Indeed, in the course of
the arguments, these striking equities emerged and we did suggest to counsels on both sides
that while we are keen on avoiding any consequential upsets in other categories, we regard the
implementation of the sub-committee’s recommendations eminently fair. Councils on both
sides apparently felt the force of our suggestion and took time for consultation with their respective
clients. Nothing has emerged out of such confabulations and so we proceed to decide the case
on merits.
Industrial justice is not an application of rigid formula but, in consonance with Part IV of
the Constitution, award of wages which are substantially just, subject, of course, to well recognised
principles evolved by this Court. Bearing in mind all these factors, we direct that the award of
the Tribunal be modified and the recommendations of the Sub-Committee where both sides
were represented be substituted. Since the period to which the dispute relates is quite long and
 Industrial Adjudication 291

many other wage increases have taken place, we do not think any possible repercussions will
ensue from such acceptance. We must make it perfectly plain that we treat this dispute as a spe-
cial case and adopt the course we have done largely influenced by the factor that there are only
a few involved and the financial impact is minimal. That is why we wish to emphasise that this
decision of ours cannot be the basis for any further claims by the same set of workmen or others
in the establishment. Counsel for the appellants assures us on behalf of the Union that no such
claim would be made or at all was likely. On this basis we allow the appeal and substitute for the
award of the Tribunal the recommendations of the Sub-Committee.

The Findings of the Labour Courts: Validity

Ameteep Machine Tools vs Labour Court63
In this case, the Supreme Court examined the correctness of the labour court’s findings in
the dismissal of a workman by the management. The appellant management was that of
a private limited company employing 250 workmen. Sadhu Singh (the second respondent)
was one of the workmen.

THE FACTS OF THE CASE

Demands by the workmen for an improvement in the conditions of their service led to conciliation
proceedings under the Industrial Disputes Act, 1947, and a settlement under Section 12 of the
Act in satisfaction of those demands was recorded by the conciliation officer. The settlement
included the provision that the workmen would not raise any demands involving further financial
burden on the appellant for a period of two years. Before the expiry of the said period, a fresh
demand was raised by the general labour union, asking for dearness allowance at 25 per cent.
The management objected to this demand. As a result, the workmen resorted to a ‘Sit-down’ strike
on 26 August 1970 which continued the next day. According to the appellant, on 27 August
1970, Sadhu Singh instigated the workmen to ‘down’ tools and go on a ‘sitdown’ strike. Successive
notices by the management on the same day failed to dissolve the strike. Charges were framed
alleging serious misconduct and a domestic enquiry was ordered against Sadhu Singh. It is stated
that the workman Sadhu Singh declined to accept the charge sheet and did not participate in
the inquiry. The inquiry officer found the strike was illegal, and found Sadhu Singh guilty of in-
stigating the workmen to go on strike; and besides, he was found guilty of loitering in the fac-
tory. The appellant accepted the findings and dismissed him from service with immediate effect.
Meanwhile, the management had taken action in dismissing other workmen also. The union
pressed the management to reinstate the dismissed workmen. Then once again, a fresh settlement
was arrived at under Section 12 of the Act on 21 November 1970, and it was agreed that the
dismissed workmen, including Sadhu Singh, should be regarded as retrenched from service.
The remaining workmen agreed to resume work unconditionally. The memorandum of settle-
ment was signed by the management on the one hand and by the individual workmen on the
other hand, but it was not signed by Sadhu Singh. A few days after, Singh wrote to the Labour
Commissioner, claiming that he was not a signatory to the settlement and that he would settle
his dispute himself with the management. The state government referred the dispute with regard
to the termination of Sadhu Singh’s service for adjudication to the labour court. The manage-
ment took the stand, on the facts found in the domestic inquiry report that the settlement dated
21 November 1970 was binding on Sadhu Singh. Sadhu Singh asserted that he was not guilty of
any misconduct on 27 August 1970 and also contended that the charge sheet had never been
served on him and therefore the ex parte domestic inquiry was vitiated. The Labour Court found
292 Social Justice and Labour Jurisprudence

that Sadhu Singh was not a signatory to the settlement of 21 November 1970, and was, therefore,
not bound by it. It found that the domestic inquiry was not proper inasmuch as notice of the
inquiry had failed to reach Sadhu Singh because it had been sent to the wrong address, thereby
preventing him from participating in the domestic inquiry. On the merits of the dispute, the
Labour Court found that Sadhu Singh had been ill from 24 August to 9 September 1970, and
that was established by a medical certificate which, on inquiry from the Employees State Insurance
Department, was found to be in order, and consequently it could not be believed that the work-
man had instigated or participated in the ‘tools-down’ and ‘sitdown’ strike. In support of its case
that Sadhu Singh was present within the factory premises on 27 August 1970, the management
placed its reliance on a document purporting to have been signed by the workman and setting
forth the assurance that he would conduct himself properly and be of good behaviour. The
Labour Court said that if the document were accepted as genuine, there was sufficient reason for
accepting the assurance and refraining from taking any action against the workman. The Labour
Court held that the dismissal was not justified and that Sadhu Singh was entitled to reinstate-
ment with continuity of previous service and full back wages. Against this award, the management
moved the matter before the High Court, which was also the appeal was dismissed.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY (THEN) JUSTICE R.S. PATHAK

The appellant challenged the award of the Labour Court on the ground that the settlement
dated 21-11-1970 was binding on Sadhu Singh and it was not open to him to resile from it. In
the present case, however, while several workmen signed the memorandum of settlement, Sadhu
Singh did not. It is also established that he did not authorise any of the other workmen to sign
the memorandum on his behalf. And what is of importance is that, as found by the Labour
Court, the demand that the dismissal of Sadhu Singh be set aside and that he should be reinstated
was never included in the charter of demands of the workmen which led to the conciliation of
such a demand. According to the Labour Court, that was the admitted position. Consequently,
the settlement of 21st November, 1970 can on no account be understood as covering and con-
cluding the demand for recalling the order dismissing Sadhu Singh. In the circumstances it
was open to Sadhu Singh to assail his dismissal from service and to contend that settlement of
21st November, 1970 did not bind him. The Labour Court was right in adjudicating on the
propriety of his dismissal and, having found that the dismissal was not justified, in granting
relief.
It was contended by the appellants that notice of the domestic inquiry was duly effected on
Sadhu Singh and the finding of the Labour Court to the contrary is erroneous. Plainly, the
question turns on the evidence on the record and we see no reason why the finding of the Labour
Court should not be accepted. Having reached the conclusion that the domestic inquiry, in the
circumstances, was improper it was open to the Labour Court to enter into the dispute on its
merits and pronounce its award. The finding that Sadhu Singh was ill and could not be said to
have instigated or participated in the strike on 27 August 1970 is a finding of fact which proceeds
from the material on the record.

Awarding Benefits to Workmen

who are not Parties to the Settlement: Validity

Certain basic welfare measures which are just and equitable should be made applicable to
all the working class working under the same umbrella, notwithstanding the fact that the
 Industrial Adjudication 293

terms of a settlement limit its application only to certain classes of workmen. One can, in
the following case, see the reaction of the higher courts in this context to such an attitude
held by the rich employer.

Hindustan Construction vs G.K. Patankar and Another 64

In this case, following a settlement with the workers employed in its various branches,
the appellant company paid these workers an amount equivalent to 6 per cent of their
total earnings for the financial year ending 31 July 1971, in addition to bonus at 4 per
cent of the annual earnings. The relevant paragraph of the memorandum of settlement
reads:

It was decided that although the workers were entitled to 4 per cent bonus under the Bonus
Act, it will be necessary to afford some relief to the workers. It was agreed that over and above
4 per cent bonus, the Hindustan Construction Company will pay additional amount of 6 per
cent Ex gratia to the workers for the year 1970–71 in the pay packet of June, 1971.

The workmen employed in the head office of the company at Bombay demanded that
they should also be paid an amount equivalent to 6 per cent of their total earnings for the
financial year ending 31 July 1971, in the addition to bonus at 4 per cent of the annual
earnings as had been paid to the other employees of the company. The company, by its
notice dated 14 March 1972, had notified that the workmen at the head office would be
paid bonus at 4 per cent of their total earnings for the year 1970–71. The dispute arising
on this demand by the head-office employees was referred for adjudication to the Industrial
Tribunal, Bombay. The tribunal, agreeing with the contention of the workers that what
was paid to the employees at the branch offices as an ex gratia amount was in fact nothing
but additional bonus for the year 1970–71, held that the demand was legal and proper
and directed the payment of bonus to the workers at the head office at the rate at which
it had been paid to the workers at the branch offices.
The company challenged the award before the High Court of Bombay. The High
Court rejected the petition summarily, with the following observations:

All contentions of the Company are technical. However, substantial justice has been done in
payment to Head Office Workmen in accordance with the application of the principle of
uniformity.
Hence this does not appear to be a matter for interference.

The company then took its appeal before the Supreme Court.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE GUPTA

Mr B. Sen, learned counsel for the appellant, contended that in the face of the clear statement
in the memorandum of settlement between the company and the Federation representing the
workers at the branches that what was being paid to them was an ex-gratia relief, the Tribunal
was wrong in holding that the amount paid was an additional bonus. It was submitted that the
Tribunal acted without jurisdiction in extending the benefit under the settlement to the workmen
at the head office who were not parties to the settlement. Further it was pointed out that these
workmen had no legal right to claim any additional amount as bonus in view of the admitted
fact that in the relevant accounting year the company had suffered a loss. It was argued that the
294 Social Justice and Labour Jurisprudence

Payment of Bonus Act, 1965 was complete code in regard to the subject of bonus and in terms
of Section 10 of the Act the workers were not entitled to any amount as bonus beyond the min-
imum 4 per cent in the year in question.
We do not however consider it necessary to decide whether the Tribunal was right in treating
the additional payment made to the workers at the branches as bonus as in our opinion, the
award has not occasioned a failure of justice and the High Court was not wrong in declining to
interfere on that ground. It appears that the company had spent about Rs 20 lakhs in giving
this additional relief to the workers at the branches numbering about 13,000. The workmen
at the head office are much fewer in number and the affidavit-in-opposition filed in this court
on their behalf states that extending the benefit to them would cost the company only Rs 1 lakh
more. The High Court found the extension of the benefit of the workers at the head office justi-
fied on the principle of uniformity which in this case serves to maintain industrial peace. In
these circumstances if the High Court refused to interfere on the ground that substantial justice
had been done, we find no reason to hold that the High Court had exercised its discretion arbi-
trarily. This Court has refused to interfere in similar circumstances in more than one case, though
the order complained of might suffer from some infirmity.65 We are not therefore inclined to
disturb the order made by the High Court, which we consider reasonable and proper in the cir-
cumstances of the case.

The Role of the Supreme Court in Interfering

with Respect to an Appeal against the Award

Industrial adjudication in India enjoys the reputation, of rendering precise awards in

respect of the industrial disputes referred before it. One can see, however, that in a very
limited way, the higher courts have interfered with awards made by industrial adjudication
in practice by way of special leave petitions under Article 136 of the Constitution. Where
the tribunal, on a consideration of all the materials placed before it and having regard to
the overall picture, comes to a conclusion, usually the higher courts have, however, shown
restraint in interfering with such awards. Where the Supreme Court interferes with an
award made by industrial adjudication, it is only for coherent reasons, involving questions
of law and interpretation. Circumspection and circumscription must therefore induce
the Supreme Court to interfere with an award under challenge only if extraordinary flaws
or grave injustice or other recognised grounds can be made out.

The Statesman Ltd vs its Workmen66

This was a case wherein the workers went on strike while a dispute, pertaining to the
issue of bonus, was already pending before the tribunal by raising a set of demands which
were purely justified and reasonable. In consequence of this illegal strike, the employer
declared a lock-out which was legal.67 But the workers requested the management in
writing to lift the lock-out on an assurance of good behaviour on demand. The management
continued to drag its feet on the matter, without paying any heed to the reply of the union.
Under these circumstances, the industrial tribunal justified the claims of the workers and
awarded them half their usual wages for the period of the lock-out. Challenging the
award of the industrial tribunal in this context under Article 136 of the Constitution, the
employer came before the apex Court.
 Industrial Adjudication 295

The Supreme Court, while deciding this case, laid down certain clear guidelines as to
when to interfere with awards made by industrial adjudication.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

There is a tragic touch in processual protraction as this little lis lasting a whole decade pathetically
illustrates. Such lingering legal machinery is bypassed by both sides in practice largely because,
by sheer slow motion, it denies relief when needed and drives parties to seek remedies by direct
action or political intervention. What elegant alibi can there be for the routine charter of demands
put forward in the middle of 1966, ripening into an industrial reference in November, 1966
after a flare-up of illegal strike and failure of conciliation, taking around three years for rendering
a short award and a little over five years for reviewing it in this Court? Law-makers whose vocal
concern for industrial peace and constitutional promises for the working class is being put to
the test by failure in the field will, we hope, alert themselves. Labour litigation can be a curse or
dread where one side is weak, as here, and has not been able to hire legal services but has been
made good by amicus curiae, and the other side, regardless of cost, is anxious to settle some
principle, as Counsel for the appellant impressed on us. We now move into the area of facts
which wears a jural apparel.
The narrative of necessary facts starts naturally with a bonus dispute in the Statesman Ltd.
(a newspaper with editions published in Calcutta and Delhi) which was referred to adjudication
in September, 1966 and was, admittedly, pending at a time when the Calcutta workers reportedly
resorted to rude tactics to press an earlier charter of demands presented to the management. On
20 September 1966, events reached a crescendo of illegal and disorderly strike at midday with
a reprisal of lock-out at midnight so soon as the administrative officer, with police assistance,
gained his freedom. Even in human affairs a storm is followed by a calm, may be. For, the two
unions, sobered, perhaps by this sudden action of the management, wrote the very next day
(September 21) to the employer requesting for lifting the lock-out, preferring peaceful resumption
of work and requiring at least an interim relief on the ‘economic’ demands. The letter speaks for
itself and may be read presently. The employer was not ready to accept this assurance. The lock-
out dragged on, despite the seeming offer of the olive branch by labour.
Mistrust on both sides is inevitable when estrangement vitiates relations and language is sus-
pect when bitterness is the rule of interpretation. Right or wrong, the management took the
view that the offer of good behaviour by the workers was conditional and not convincing, so
that the lock-out was not lifted for several days. The Deputy Commissioner of Labour, who had
interceded to conciliate, had unavailingly requested the management to lift the lock-out and
had found labour insisting on some interim ‘economic’ relief as a ground for withdrawal of the
strike. At certain stages of conflict in this world, face-saving becomes more important than heart-
searching. Life is not logic and prestige amends propriety.
The cold-war correspondence continued for a little while more, each blaming the other, till
at last the State, on 4 November 1966, referred six points of dispute to the Fifth Industrial Tri-
bunal, Calcutta, before whom the bonus dispute was already pending. Better sense on both
sides resulted in the termination of the strike and the closure, and work was resumed from
8 November 1966. The award that followed upon the dispute was rendered on 2 September
1969, nearly three years after the reference of the dispute.
One is led to wonder why there should have been so much delay, but the blame, if any, has to
be shared between the State Government and the Tribunal. For, after the Fifth Tribunal started
the enquiry and examined a few witnesses, the State Government ordered transfer of the industrial
dispute to another tribunal and, not surprisingly, omitted to communicate promptly the factum
of such transfer to the affected tribunal. Thus, although the order of transfer was made on
31 March 1967 the enquiry continued upto 22 April 1967. When actual notice of the transfer
296 Social Justice and Labour Jurisprudence

was received by the Fifth Tribunal on April 24, representation was made by it about the enquiry
having commenced and, naturally, Government retransferred the dispute to the same tribunal.
After this minor episode, of transfer and retransfer, the enquiry was continued and the award
made.
We are now concerned only with three disputes. Of the three issues, two deal with petty
items like warm coats for the subordinate staff and canteen allowance for the employees’ canteen
staff—financially too negligible to engage the attention of this Court. The other item, which is
meaty enough to merit our verdict, relates to the wages during the period of work stoppage from
20 September 1966 to 8 November 1966. The tribunal, considering, in its totality the facts and
circumstances of the case, the share of blame on the part of each party, the role of broad justice
in producing industrial peace and advertence to the relevant materials on record, held ‘that the
company should pay half the wages to the employees during the period from 20 September to
7 November 1966’.
The management, disappointed by this direction, as well as the orders regarding warm coats
and canteen allowance, has come directly to this Court securing special leave under Article 136.
Even though leave has been granted by this Court, the very width of its power under Article
136 is a warning against its freewheeling exercise save in grave situations. In Bengal Chemical 68
Justice Subbarao (as he then was) pointed out that:

The same principle should, therefore, be applied in exercising the power of interference with
the awards of tribunals irrespective of the fact that the question arises at the time of granting
special leave or at the time the appeal is disposed of. It would be illogical to apply two differ-
ent standards at two different stages of the same case. The same view was expressed by this
Court in Pritam Singh vs State of Madras,69 Hem Raj vs State of Ajmer70 and Sadhu Singh vs State
of Pepsu.71

From this it follows that when awards of industrial tribunals are challenged in this Court, we
have to apply those severe tests which have become part of the self-imposed restraints on its spe-
cial jurisdiction.
What are these self-created trammels upon the exercise of this Court’s power? The answer is
furnished by this Court in the Associated Cement Companies Ltd.72 Mathew, J. followed Bengal
Chemical (both these cases related to industrial awards challenged in appeal under Article 136
of the Constitution), where this Court had observed:

Though Article 136 is couched in widest terms, it is necessary for this Court to exercise its
discretionary jurisdiction only in cases where awards are made in violation of the principles
of natural justice causing substantial and grave injustice to parties or raising an important
principle of industrial law requiring elucidation and final decision by this Court or disclosing
such other exceptional or special circumstances which merit the consideration of this Court.

The learned Judge endorsed the view in these words:

The portion of the award with which we are concerned does not raise any important principle
of law requiring elucidation and final decision by this Court. Nor does it disclose any excep-
tional or special circumstances which merit decision by this Court. On a question like this,
where the tribunal, on a consideration of all the materials placed before it and having regard
to the overall picture came to a conclusion, we do not think this Court should interfere.

Circumspection and circumscription must therefore induce us to interfere with the award under
challenge only if extraordinary flaws or grave injustice or other recognised grounds are made
out. This perspective is sufficient in itself to dispose of the two tiny items of dispute bearing on
warm coats and canteen allowance. Even so, we will briefly refer to them.
 Industrial Adjudication 297

The canteen staff claimed allowance of 50 paise per working day. There are two canteens, one
for officers and the other for the subordinate staff. While the staff of the officers’ canteen are
drawing the dietary allowance of 50 paise, the employees of the staff canteen are denied this
paltry sum. There is no reasonable basis for this invidious treatment and we find no ground to
interfere with the tribunal’s direction that ‘the company should pay tiffin allowance at the rate
of 50 paise on working days of the employees in the staff canteen’. Of course, if they take free
food from the canteen they will be ineligible for the allowance since they cannot have both.
Equally untenable is the grievance against warm coats supplied to the subordinate staff. It is
common case that the management does supply warm coats to jamadars, gate-darwans and in-
spectors but does not extend this warm facility to darwans and delivery peons. Calcutta cold
does not spare either category and therefore no climatic distinction can be made between the
two. True it is that in the charter of demands warm coats were claimed only for those employees
who delivered newspapers. Even so the dispute referred to the tribunal is in wider terms and we
are satisfied the award calls for no interference when it states ‘that all the members of the sub-
ordinate staff should be supplied with warm coats’. Of course, it need hardly be said that these
employees cannot claim warm jerseys over and above coats.
The bone of contention between the parties bears upon the wages during the strike period.
We have already indicated that the award crystallizes a discretionary conclusion reached after a
survey of all the facts and animated by a sense of broad justice. The tribunal had something to
say against the workers and the management and felt impelled to state:

I find that both the parties were at fault. That being the position I am of opinion that both
the parties should be held responsible for the delay in the matter of the withdrawing of the
lock-out. In these circumstances, I am of opinion that the company should pay half the wages
to the employees during the period from 20 September 1966 to 7 November 1966.

Captious criticisms apart, the conspectus of relevant circumstances more or less bears out the
propriety of this direction.
The crucial issue is as to whether we have any material to castigate this conclusion as un-
conscionable or unjuristic, involving gross injustice, violating a well-established rule of law or
otherwise attracting our special responsibility to declare the law in a twilit area of public import-
ance to industrial life. We will examine the pertinent circumstances from this angle and it will
be evident that the more we ponder the subject the more we are satisfied about the legal soundness
and practical wisdom of the award, having in mind industrial peace as the goal.
The smouldering dispute between the management and the workers apparently burst into
flame on 20 September 1966. Going by the tribunal’s reading of the situation there was a strike
that day. The pendency of certain types of proceedings before a tribunal stamps a strike or lock-
out with illegality (Section 24).73 While Section 23 prohibits strikes and lock-outs when pro-
ceedings mentioned there are under way, Section 24(3) absolves a lock-out of illegality if it is
caused by an illegal strike. There surely was a pending industrial dispute when the unions
sprang the strike. Being therefore illegal, the lock-out that followed became a legal defensive
measure. So far is smooth sailing. But the management cannot behave unreasonably merely be-
cause the lock-out is born lawfully. If by subsequent conduct, imaginatively interpreted, the
unions have shown readiness to resume work peacefully, the refusal to restart the industry is not
right and the initial legitimacy of the lock-out loses its virtue by this blemished sequel. Nor can
any management expect, as feelings run high, charge-sheets in criminal courts are laid against
workers and they are otherwise afflicted by the pinch of unemployment, to get proof of good
behaviour beyond their written word. Nor can they realistically insist that they abandon their
demands for better benefits before the lock-out is lifted. In this hungry world the weaker many
cannot afford the luxury of finery in speech which the happier few can afford. In the rough and
tumble of industrial disputes conciliation is a necessary grace the stronger party, the socially
298 Social Justice and Labour Jurisprudence

conscious management, must cultivate and huff a flaw it must eschew. In the realistic temper of
bargaining between two wings of an industry—both managements and workers belong equally
to the industry, for if one owns the other produces—a feeling of partnership must prevail to
persuade the two sides to trust each rather than rush to find flaws in the language used. Such is
the spirit of give and take which must inform industrial negotiation if peace and production are
the bona fide end and national development the great concern. This broad philosophical approach
amply vindicates the justice of the tribunal’s impugned award.
To appreciate this view, a flashback into the events around and after 20 September 1966 is
helpful. The backdrop of law may be briefly recapitulated before going into factual details.
If the strike is illegal, wages during the period will ordinarily be negatived unless considerate
circumstances constrain a different course. Likewise, if the lock-out is illegal full wages for the
closure period shall have to be ‘forked out’, if one may use that expression. But in between lies
a grey area of twilit law. Strictly speaking, the whole field is left to the judicious discretion of the
tribunal. Where the strike is illegal and the sequel of a lock-out legal, we have to view the whole
course of developments and not stop with examining the initial legitimacy. If one side or other
behaves unreasonably or the overall interests of good industrial relations warrant the tribunal
making such directions regarding strike period wages as will meet with justice, fair play and
pragmatic wisdom, there is no error in doing so. His power is flexible.
We are heartened and strengthened in our approach by the decision in India Marine Service.74
There the Court noted that

the attitude of the company was a reasonable one and that it even proposed to the union and
through it to its workmen that work should go on, that the dispute should be taken before the
Conciliation Officer for conciliation and that in the meanwhile they were prepared to grant
some interim relief to the workmen. In our opinion, added the Court: While the strike
was unjustifiable, the lock-out when it was ordered on 13 November 1958, was justified. It
seems to us, however, that though the lock-out was justified at its commencement its con-
tinuance for 53 days was wholly unreasonable and, therefore, unjustified. In a case where a
strike is unjustified and is followed by a lock-out which has, because of its long duration,
become unjustified it would not be a proper course for an industrial tribunal to direct the
payment of the whole of the wages for the period of the lock-out. We would like to make it
clear that in a case where the strike is unjustified and the lock-out is justified the workmen
would not be entitled to any wages at all. Similarly where the strike is justified and the lock-
out is unjustified the workmen would be entitled to the entire wages for the period of strike
and lock-out. Where, however, a strike is unjustified and is followed by a lock-out which be-
comes unjustified, a case for apportionment of blame arises. In our opinion in the case before
us the blame for the situation which resulted after the strike and the lock-out can be appor-
tioned roughly half and half between the company and its workers. In the circumstances we
therefore direct that the workmen should get half their wages from 14 November 1958 to
3 January 1959 (both days inclusive).

The factual milieu surrounding the strike-lock-out complex, as neatly presented by Shri
Kapil Sibbal, shows how the flow of events exonerated the unions of serious impropriety and
the employer was trying to be too clever. When the workers struck, the management put up a
notice of closure wherein it was stated:

The stay-in-strike resorted to by the workmen is unjustified and illegal in view of the pendency
of the proceedings before the Fifth Industrial Tribunal and also violates the Code of Discipline.
The representatives of the unions were made aware of this fact when the management met
them to discuss their demands today.
 Industrial Adjudication 299

In the circumstances, the management has no option but to keep the establishment closed
until such time as the workmen assure the management of normal and peaceful resumption
of work.

The simple insistence of the management in the closure notice was an assurance from the
workmen ‘of normal and peaceful resumption of work’. No sooner was this notice put up than
the unions responded constructively, moderating the usual tantrums they are given to in an
atmosphere of conflict. The very next day after the closure, i.e., on September 21, the Secretary
of the union wrote back a letter wherein he stated inter alia:

While we deny the various allegations contained in your said Notice and hold you wholly
liable for the development on 20 September 1966 in suddenly advising your supervisory
staff to stop all processes of work from 12.30 p. m. and creating a confusion amongst the
workmen who were working all the time till then, presumably to prepare a ground for the
illegal lock-out since some days past as peaceful and constitutional movement of the unions
was there to your dislike, we should tell you here and now that no useful purpose will be
served by such blackmailing Notice far less the cause of the industrial peace and progress of a
reputable concern like ‘The Statesman’...
You know more than anybody else that your workmen are all peace-loving people and have
cooperated with you all along with respect and affection. You had never any occasion to find
fault with them for any indisciplined conduct. Our unions have also a long tradition of faith-
ful cooperation with the management in every hour of crisis and we are proud of our said
lofty tradition. There was no obstruction in the movement of anybody at any stage on Sep-
tember 20, 1966 as alleged or at all and the police ought not to have been invited in the office.
Considering everything we are of the opinion that no interest of the management or of the
workmen will be served by such acrimonious correspondence and any delay in the settlement
of the outstanding disputes will make the situation more complex.
You are therefore requested to withdraw your aforesaid Notice, arrange an immediate
sitting with us and meet the genuine grievances of the employees, if not in full at least as an
interim arrangement and note in this context if any assurance is necessary that all along as in
the past the workmen will maintain peace and work normally and peacefully unless they are
sufficiently provoked from your end. (emphasis added)

It is obvious that the tone of this reply is conciliatory and literally conforms to the demand
for the assurance from the workmen of peaceful and normal resumption of work. It is fair to
infer that the receipt of this letter should have persuaded the management, in a spirit of goodwill,
to lift the lock-out and give a trial to the workers’ willingness. Is not a worker’s word, until the
contrary is proved, as good as his bond? Moreover, a strike is called off when the strikers agree to
come back to work. Curiously enough, the management struck a discordant note in their letter
two days later. Instead of a favourable response, the appellant recited the old facts and concluded:

We have no intention of keeping the office closed longer than is necessary, and as soon as the
management is reasonably convinced that discipline and normal production will be maintained
and that there will be no recurrence of the acts of indiscipline which led to the illegal strike
and closure, we shall take steps to open the office.

The shift in stand is obvious. The first letter merely demanded of the workmen an assurance of
normal and peaceful resumption of work. When this was given the management quietly tilted
its stance and demanded that it should be ‘reasonably convinced that discipline and normal
production will be maintained and that there will be no recurrence of the acts of indiscipline…’
300 Social Justice and Labour Jurisprudence

The further letter of 31 October 1966 by the union highlights the anxiety of the workers for
resumption of work. Of course, the staying power of the workers is limited and wanes after a
time. Naturally, they press the management to withdraw the closure. The language of the letter
Exhibit E-7 is tellingly temperate… 31 October 1966

Assuming, though not conceding even by any stretch of imagination that there was an illegal
strike as alleged by you and the lock-out for 41 days till date after the unions’ unequivocal
assurance of peace and cooperation given to you on behalf of the workmen in their letter
dated 21 September 1966 in reply to your notice dated 20 September 1966 where you asked
for such an assurance. So far as the unions’ demands are concerned, they are only of incidental
nature because of the suffering thrust upon the workers on account of the unproved lock-
out. We want peace and climate where lock-out and strike will be a matter of the past. In that
spirit we have selected the least controversial 11 items out of all the items of demands for
immediate settlement. Hope you will appreciate the same by entering into a negotiated
settlement and we assure you that if necessary we shall not even fight the bonus case before
the tribunal if on that item also you agree to settle.

It was mentioned by Shri Sibbal that there were charge-sheets against the workers at the
instance of the management which embittered relations. There is also the reference in the evidence
of the Deputy Commissioner of Labour that the management was unwilling to lift the lockout
when requested and the workers were unwilling to withdraw the strike without settlement of
disputes. In an escalating situation of conflict, developments lead to deterioration of industrial
quiet and we have to look at the whole picture with realism.
There was a minor ripple of disputation as to whether the evidence recorded by the Fifth
Industrial Tribunal between the date when the transfer order was passed by the government and
the retransfer order made could be read as evidence. The tribunal has come to the same conclusion
both by excluding and by including such evidence in his verdict. Shri Kapil Sibbal has fairly
taken us through these materials to convince us that the verdict cannot be deflected by eliminating
or reading the disputed testimony. We feel satisfied that there is much to be said in favour of the
ultimate view taken by the tribunal that blameworthiness may be equally apportioned between
the parties. Had the management reacted with goodwill when the workers the very next day of-
fered to be peaceful and resume work, the prolonged situation of cessation of work could have
been saved. It is therefore a case which attracts Indian Marine Service.75 In that case also this
Court found it fair to direct that the workmen should get half the wages during the strike period.
The tribunal’s view is certainly not unreasonable. May be, it is a just solution. We hope that
both sides, after these long years, will bury the hatchet and work for the better efficiency and
greater status of a leading newspaper of India.
Having regard to the circumstances of the case, it is proper to direct that the appeal be dis-
missed but the parties will bear their respective costs. Before parting with this case we deem it
our duty to record our appreciation of the thoroughness of preparation of Shri Kapil Sibbal, a
young advocate of promise, who has assisted the Court as amicus curiae with precedential in-
dustry and persuasive felicity.

Indeed one may really have to go to the roots of the issue to understand the justifiability
of a strike or lock-out despite its legal vice. A lock-out declared in consequence of an
illegal strike is legal. But the question is, upto what point is it legal. During the pendency
of a lawful lock-out, if illegally striking workers assure resumption of work, can one call
the continuance of such a lock-out legal? How does one ascertain the end point of an ille-
gal strike when the employer is unwilling to open up work, since it is his pleasure under
the circumstances? Well, it is a question of fact, to be ascertained by examining material
 Industrial Adjudication 301

and constructive evidence. Under these circumstances, juridically the illegal strike ceases
to be in existence and the curtain is raised instead on an illegal lock-out. And from that
point such a lock-out fails to hold the status of a legal lock-out and assumes the status of
illegal lock-out, since it has prevailed during the pendency of the proceedings before
adjudication.

Illegal Termination: The Remedy

If the employer wrongfully interprets the standing orders applicable to his industrial
establishment and terminates a workman who has had an unblemished service record for
years, the proper remedy is only through adjudication. The industrial tribunal has rightly
interpretated the provision and interfered with the powers of the employer in one such
case.

Western India Match Company vs Third Industrial Tribunal,

West Bengal and Orissa76

In this case, the employer, after unsuccessfully contesting the award twice before the
High Court, brought the matter before the Supreme Court.
This was an appeal, by special leave, against a judgement of the High Court by way of
a writ appeal by a Division Bench which confirmed the judgement of a single judge,
who, in turn, refused to interfere with the award of the industrial tribunal.

THE FACTS OF THE CASE

The second respondent was an employee under the appellant company for a long number of
years. There was no blemish in his service, and Sachin Choudhury, counsel for the appellant,
has very fairly stated that there was no complaint against the services of the 2nd respondent
while he was employed by the company. But the second respondent fell ill and applied for leave.
It so happened that his illness persisted for a long time and the management, quite rightly, granted
him leave ‘from time to time’. On 4 November 1963, his leave expired and on 5 November
1963, the management, invoking a clause in the contract of employment, terminated his employ-
ment. It is that order of termination that was set aside by the industrial tribunal and affirmed
from court to court up to now. The particular clause in the contract which was relied on by the
management stated that:

It was open to the employer to determine the employment at any time without any notice or
payment in lieu of notice in the event of . . . you becoming from any cause incapacitated by
a longer period than two calendar months from properly discharging your duties.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

The courts below held, and quite rightly in our view, that since the employee was all along on
leave granted by the employer no question of incapacity or being incapacitated from properly
discharging his duties arose. It is obvious that when an employee is on leave he is not called
302 Social Justice and Labour Jurisprudence

upon to discharge any duties and, therefore, the question of the capacity to discharge duties
does not fall for consideration. The clause relied upon comes into play only when an employee
who has to discharge his duties fails to do so and the employer makes a judgment of the situation
and comes to the conclusion that it is on account of an incapacity which will last longer than
two months that the failure to discharge his duties has arisen. We are, therefore, satisfied that
the clauses could not have been invoked and the termination of service was bad in law.
Even so, the further question arises as to whether the employee should be recompensated
with full wages and other benefits until the date of reinstatement. We have to be realistic in this
jurisdiction although in industrial law when termination of service is found to be illegal, the
ordinary rule is reinstatement. We direct reinstatement in affirmance of the order passed by the
High Court and the Industrial Tribunal. But the High Court as well as the Industrial Tribunal
have also awarded full wages and other benefits during the period the employee’s services had
stood terminated. It is right for us to remember and Shri Sen Gupta has reminded us of the
proposition that sitting in appeal under Article 136 against an order of the High Court passed
under Article 226 we should not lightly interfere with the direction made in the judgment of
the High Court unless there is some substantial error, manifest injustice or exceptional circum-
stance. None having been pointed out, we affirm the finding of the High Court regarding payment
of back wages and other benefits up to the date the High Court passed its final order in Division
Bench, viz., 30 November 1971.
We are not fettered by this constraint in regard to the period since then. We must remember
the general principle that the act of the Court should not injure any party. The length of the
proceeding in this Court from 1971 to 1977 is the inevitable consequence of the back log in
this Court and not blamable on either side. In such a situation we must so mould the relief as
not to prejudice either party bearing in mind the equities of the case. We think that it would be
fair, having regard to overall circumstances of the case, that till the date of reinstatement, which
we fix as 1 December 1971, the management will pay the employee 50% of the wages including
the benefits that he may be eligible for had he continued in service from the date of High Court’s
judgment on 30 November 1971 with interest at 7% per annum. Pursuant to the interim order
of this Court certain sums have been paid by the appellant to the second respondent and while
computing the amount that is payable to the 2nd respondent credit shall be given for such
payments.

NOTES

1. The State of Bombay is an example in this context.

2. Only in respect of the states of Tamil Nadu, Karnataka and Andhra Pradesh and not in entirety of the
country. The state amendments in these states provide that where an industrial dispute is connected with
the individual workmen, under Section, 2A of the Industrial Disputes Act, such individual workmen shall
make an application in the prescribed manner directly before the Labour Court for the adjudication of the
dispute and, on receipt of such application, the Labour Court shall have the jurisdiction to adjudicate upon
the matter. And in such cases, it is deemed that the dispute has been referred in accordance with the pro-
visions of Section 10(1) of the Act.
3. Indian Express Newspapers (Bombay) vs Indian Express (Bombay) Employees Union. AIR 1978 SC 1137, at
para 3.
4. AIR 1975 SC 661.
5. AIR 1975 at para 23.
6. AIR 1978 SC 481. The facts of this have been dealt with thoroughly in Chapter 3. This case was heard by
V.R. Krishna Iyer and Jaswant Singh.
7. 1947 AC 1.
8. AIR 1975 SC 661. This case was heard by V.R. Krishna Iyer, Alagiriswam and R.S. Sarkaria.
 Industrial Adjudication 303

9. The Chartered Bank, Bombay, vs The Chartered Bank Employees’ Union. (1960) II LLJ 222:AIR 1960 SC
919.
10. (1965) 2 SCR 148:AIR 1965 SC 1496.
11. (1972) LIC 1262:(1971) 2 LLJ 620.
12. (1972) 3 SCR 605:AIR 1972 SC 1343.
13. (1965) 2 SCR 148:AIR 1965 SC 1496.
14. 1952 LAC 490.
15. (1960) II LLJ 222:AIR 1960 SC 919:(1960) 3 SCR 441.
16. 1962 3 (SCR) 822:AIR 1963 SC 411.
17. (1970) 3 SCR 708.
18. (1972) LIC 1262:(1971) 2 LLJ 620.
19. (1960) II LLJ 222:AIR 1960 SC 919:(1960) 3 SCR 441.
20. (1972) 3 SCR 606:AIR 1972 SC 1343.
21. (1972) 3 SCR 606:AIR 1972 SC 1343.
22. (1970) 2 LLJ 20:(1970) II LLJ 20.
23. (1970) 2 LLJ 20:(1970) II LLJ 20.
24. (1965) 2 SCR 148:AIR 1965 SC 1496.
25. (1965) 2 SCR 148:AIR 1965 SC 1496.
26. AIR 1976 SC 1775. The bench was presided by Justices V.R. Krishna Iyer and N.L. Untwalia. The majority
decision was delivered by Justice Untwalia.
27. 1952 2 Lab LJ 37 (L.A.T.I—Cal).
28. The definition of ‘lay-off ’ was inserted into the Act by the Amendment Act of 1953 and the definition of
‘closure’ was inserted through the Amendment Act 46 of 1982.
29. 1 SCR 476:AIR 1959 SC 1342.
30. 3 SCR 448:AIR 1970 SC 1494.
31. AIR 1957 Bom 100:(1956) 1LLJ 547.
32. AIR 1964 SC 1458:(1964) 5 SCR 548.
33. (1969) I SCR 366:AIR 1969 SC 530.
34. (1967) 2 LLJ 761 (All).
35. (1972) 1 LLJ 284:1971 LIC 1356.
36. AIR 1963 Bom 146.
37. AIR SC 2062. The case was heard by H.R. Khanna, V.R. Krishna Iyer and P.K. Goswami, and the majority
judgement was delivered by Justice P.K. Goswami.
38. Section 33 of the Act provides that:

(1) During the pendency of any conciliation proceeding before a conciliation officer or a Board or of
any proceeding before an arbitrator or a Labour Court or Tribunal or National Tribunal in respect of
an industrial dispute, no employer shall,
(a) in regard to any matter connected with the dispute, alter, to the prejudice of the workmen
concerned in such dispute, the conditions of service applicable to them immediately before the
commencement of such proceeding; or
(b) for any misconduct connected with the dispute, discharge or punish, whether by dismissal or
otherwise, any workmen concerned in such dispute, save with the express permission in writing
of the authority before which the proceeding is pending;
(2) During the pendency of any such proceeding in respect of an industrial dispute, the employer may,
in accordance with standing orders applicable to a workman concerned in such dispute or, where
there are no such standing orders, in accordance with the terms of the contract, whether express or
implied, between him and the workman,
(a) alter, in regard to any matter not connected with the dispute, the conditions of service applicable
to that workman immediately before the commencement of such proceeding; or
(b) for any misconduct not connected with the dispute, discharge or punish, whether by dismissal
or otherwise, that workman: provided that no such workman shall be discharged or dismissed,
304 Social Justice and Labour Jurisprudence

unless he has been paid wages for one month and an application has been made by the employer
to the authority before which the proceeding is pending for approval of the action taken by the
employer.
(3) Notwithstanding anything contained in sub-section (2), no employer shall, during the pendency of
any such proceeding in respect of an industrial dispute, take any action against any protected workman
concerned in such dispute,
(a) by altering, to the prejudice of such protected workman, the conditions of service applicable to
him immediately before the commencement of such proceeding; or
(b) by discharging or punishing, whether by dismissal or otherwise, such protected workman, save
with the express permission in writing of the authority before which the proceeding is pending.

Explanation: For the purposes of this sub-section a ‘protected workman’ in relation to an establishment,
means a workman who, being a member of the executive or other office bearer of a registered trade union
connected with the establishment, is recognized as such in accordance with rules made in this behalf.

(4) In every establishment, the number of workmen to be recognised as protected workmen for the pur-
poses of sub-section (3) shall be one per cent of the total number of workmen employed therein
subject to a minimum number of five protected workmen and a maximum number of one hundred
protected workmen and for the aforesaid purpose, the appropriate Government may make rules
providing for the distribution of such protected workmen among various trade unions, if any, con-
nected with the establishment and the manner in which the workmen may be chosen and recognised
as protected workmen.
(5) Where an employer makes an application to conciliation officer, Board, an arbitrator, a Labour
Court, Tribunal or National Tribunal under the proviso to sub-section (2) for approval of the action
taken by him, the authority concerned shall, without delay, hear such application and pass, within
a period of three months from the date of receipt of such application, such order in relation thereto
as it deems fit:
Provided that where any such authority considers it necessary or expedient so to do, it may, for
reasons to be recorded in writing, extend such period by such further periods as it may think fit:
Provided further that no proceedings before any such authority shall lapse merely on the ground
that any period specified in this sub-section had expired without such proceedings being completed.

39. For reasons best known to the party representing the workman, the matter relating to the violation of Sec-
tion 19 read with Section 29 was not advanced before the industrial tribunal, High Court or Supreme
Court. Even the Supreme Court did not touch this aspect, perhaps because the same was not placed before
the Court.
40. (1965) 2 SCR 148:AIR 1965 SC 1496.
41. (1966) II LLJ 428 (Mad).
42. (1966) II LLJ 899 (Mad).
43. AIR 1965 SC 1496.
44. AIR 1965 SC 1496.
45. (1972) 3 SCR 606:AIR 1972 SC 1343.
46. AIR 1976 SC 2454.
47. AIR 1978 SC 1004. This case was heard by V.R. Krishna Iyer and Jaswant Singh.
48. (1964) 7 SCR 555:AIR 1965 SC 155.
49. (1963) 1 LLJ 684.
50. (1963) 1 LLJ 684.
51. (1963) 1 LLJ 684.
52. (1961) 3 SCR 204:AIR 1961 SC 860.
53. (1963) I LLJ 697:AIR 1963 SC 1756.
54. AIR 1969 SC 983.
55. (1964) I SCR 709:AIR 1964 SC 486.
56. 1961 1 1LLJ 551.
57. (1965) 2 SCR 83:AIR 1965 SC 917.
 Industrial Adjudication 305

58. (1973) 3 SCR 587:AIR 1973 SC 1227.

59. 1975 LIC 1435:AIR 1975 SC 1892.
60. (1969) 2 LLJ 799.
61. (1962) 2 LLJ 772.
62. AIR 1980 SC 511. This case was heard by V.R. Krishna Iyer and R.S. Pathak.
63. AIR 1980 SC 2135. This case heard by V.R. Krishna Iyer and R.S. Pathak. The majority judgement was
delivered by Justice R.S. Pathak.
64. AIR 1976 SC 907. The case was heard by Y.V. Chandrachud, V.R. Krishna Iyer and A.C. Gupta. The
majority decision was delivered by Justice A.C. Gupta.
65. See the case of Balvantrai Chimanlal Trivede vs M.N. Nagrashna, C.A. No. 38 of 1958 decided on
29 October 1959 before the Supreme Court and that of A.M. Allison vs B.L. Sen. 1957 SCR 359:AIR
1957 SC 227.
66. AIR 1976 SC 758. This case was heard by V.R. Krishna Iyer, A.C. Gupta and N.L. Untwalia.
67. Under Section 24(3) of the Industrial Disputes Act, 1947, a lock-out declared in consequence of an illegal
strike shall not be deemed to be illegal.
68. (1959) Suppl. 2 SCR 136, at p. 141:AIR 1959 SC 633 at p. 635.
69. (1950) SCR 453:AIR 1950 SC 169.
70. (1954) SCR 1133:AIR 1954 SC 462.
71. AIR 1954 SC 271.
72. AIR 1972 SC 1552. p. 1554.
73. Section 22 of the Act provides that:

(1) No person employed in a public utility service shall go on strike in breach of contract—
(a) without giving to the employer notice of strike, as hereinafter provided, within six weeks before
striking; or
(b) within fourteen days of giving such notice; or
(c) before the expiry of the date of strike specified in any such notice as aforesaid; or
(d) during the pendency of any conciliation proceedings before a conciliation officer and seven
days after the conclusion of such proceedings.
(2) No employer carrying on any public utility service shall lock-out any of his workmen—
(a) without giving them notice of lock-out as hereinafter provided, within six weeks before locking-
out; or
(b) within fourteen days of giving such notice; or
(c) before the expiry of the date of lock-out specified in any such notice as aforesaid; or
(d) during the pendency of any conciliation proceedings before a conciliation officer and seven
days after the conclusion of such proceedings.
(3) The notice of lock-out or strike under this section shall not be necessary where there is already in
existence a strike or, as the case may be, lock-out in the public utility service, but the employer shall
send intimation of such lock-out or strike on the day on which it is declared, to such authority as
may be specified by the appropriate government either generally or for a particular area or for a
particular class of public utility services.
(4) The notice of strike referred to in sub-section (l) shall be given by such number of persons to such
person or persons and in such manner as may be prescribed.
(5) The notice of lock-out referred to in sub-section (2) shall be given in such manner as may be
prescribed.
(6) If on any day an employer receives from any person employed by him any such notices as are re-
ferred to in sub-section (1) or gives to any person employed by him any such notices as are referred
to in sub-section (2), he shall within five days thereof report to the appropriate government or to
such authority as that government may prescribe, the number of such notices received or given on
that day.

Section 23 of the Act on general prohibition of strikes and lock-outs states:

No workman who is employed in any industrial establishment shall go on strike in breach of contract
and no employer of any such workman shall declare a lock-out—
306 Social Justice and Labour Jurisprudence

(a) during the pendency of conciliation proceedings before a Board and seven days after the
conclusion of such proceedings;
(b) during the pendency of proceedings before (a Labour Court, Tribunal or National Tribunal)
and two months, after the conclusion of such proceedings;
([bb] during the pendency of arbitration proceedings before an arbitrator and two months after
the conclusion of such proceedings, where a notification has been issued under sub-section
[3A] of Section l0A; or)
(c) during any period in which a settlement or award is in operation, in respect of any of the mat-
ters covered by the settlement or award.

Section 24 of the Act on illegal strikes and lock-outs states:

(1) A strike or lock-out shall be illegal if—

(i) it is commenced or declared in contravention of Section 22 or Section 23; or
(ii) it is continued in contravention of an order made under sub-section (3) of Section 10 (or sub-
section [4A] of Section 10A).
(2) Where a strike or lock-out in pursuance of an industrial dispute has already commenced and is in
existence at the time of the reference of the dispute to a Board, an arbitrator, a Labour Court,
Tribunal or National Tribunal, the continuance of such strike or lock-out shall not be deemed to
be illegal, provided that such strike or lock-out was not at its commencement in contravention of
the provisions of this Act or the continuance thereof was not prohibited under sub-section (3) of
Section 10 or sub-section (4A) of Section 10A.
(3) A lock-out declared in consequence of an illegal strike or a strike declared in consequence of an
illegal lock-out shall not be deemed to be illegal.

74. (1963) 3 SCR 575:AIR 1963 SC 528.

75. AIR 1963 SC 528.
76. AIR 1978 SC 311.
 Chapter 8

Voluntary Arbitration as a
Mechanism for Dispute Settlement

The provisions relating to voluntary arbitration as a mechanism for dispute settlement

were not originally contained in the Industrial Disputes Act, 1947, when the law was
brought into force. They were introduced by the Amendment Act of 1957 because ad-
judication fell into disrepute as a mechanism for settling disputes due to the reasons of
cost and delay in rendering the justice to the parties. The fundamental theme for this new
mechanism put forward was that the parties could, at any time before the dispute was
referred to any authorities provided under the Act by the appropriate government under
Section 10(1), refer the dispute in writing to an arbitrator or arbitrators themselves. Since
the parties themselves voluntarily choose a person in whom they were assumed to have
trust and faith, his decision would be held satisfactory to both parties, so that there could
be a complete end and resolution of the dispute. Unfortunately, in respect of certain
major industrial disputes wherein the Arbitrators were voluntarily called upon by the
parties to resolve the matter, it has been proved that the decisions rendered by the arbitra-
tors were wrong. In both the cases discussed in this chapter, the arbitrators had to face the
wrath of the Supreme Court over their very approach in resolving the industrial disputes.
Of course, there are inherent vices in the very mechanism as provided in Section 10A,
but those issues have not figured before the apex Court in these two cases.

When Can an Arbitration Award be Set Aside?

Rohtas Industries vs Its Union1

In this case, Justice V.R. Krishna Iyer, speaking for the majority, dealt with the question
of an award made by an arbitrator under Section 10A became amenable to writ jurisdiction
under Article 226 of the Constitution.

THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

We permit ourselves a few preliminary observations disturbingly by the not altogether untypical
circumstances of these two appeals, before proceeding to state the facts, set out the submissions
and decide the points.
Industrial law in India has not fully lived up to the current challenge of industrial life both in
the substantive norms or regulations binding the three parties—the State, Management and
308 Social Justice and Labour Jurisprudence

Labour—and in the proccesual system which has baulked, by dawdling dysfunctions, early
finality and prompt remedy in a sensitive area where quick solution is of the very essence of real
justice. The legislative and the judicial process have promises to keep if positive industrial peace, in
tune with distributive economic justice and continuity of active production, were to be
accomplished. The architects of these processes will, we hopefully expect, fabricate creative
changes in the system, normative and adjectival.
The two appeals before us, passported by special leave under Art. 136 relate to an industrial
dispute with its roots in 1948, meandering along truce, union rivalry and the like, into strike
and settlements, the last of which led to an arbitration award in 1959 which, in turn, promoted
two writ petitions before the High Court. After a spell of a few years they ripened into a judge-
ment. Appeals to this court followed and, after long gestation of six years for preparation of
papers and a like period the cases are ready for final hearing or parturition in all 12 years after
the grant of leave. By this cumulative lapse of time the generation of workers who struck work
two decades ago have themselves all but retired, the representative Union itself which sponsored
the dispute has, the other side faintly states, ceased to command representative character, the
Managements themselves have, out of many motives, disclaimed the intention to recover the
huge sums awarded to them by the arbitrators and the only survival after death, as it were, is a
die-hard litigation tied up to a few near academic, but important, legal points for adjudication
by the highest Bench. On this elegiac note we will enter the relevant areas of facts and law since
we must decide cases brought before us, however stale the lis.
At this stage we may mention our strong feeling that where the superior courts, after hearing
full arguments, are clearly inclined to affirm the judgement under appeal for substantially similar
reasons as have weighed with the lower court, there is no need to give lengthy reasons for dis-
missing the appeal. Brevity, except in special cases, may well fill the bill where the fate is dismissed.
On this score we are disposed to make short shrift of the appeals with stating but the necessary
facts the points pressed have defeated condensation.
Two connected managements of industries in the same locality, who figure as appellants be-
fore us, had a running industrial dispute with their workers, which has had a long history mov-
ing in a zig-zag course and sicklied over by alleged internecine trade-union strife. There were
two trade unions which were perhaps of competitive strength and enjoying recognition. One of
them, the Rohtas Industries Mazdoor Sabha (for short the Mazdoor Sabha) was the representative
union during the relevant period while the other, the Rohtas Industries Seva Sangh (for brevity,
the Seva Sangh) was not a party before this court and so we are not concerned with it except for
the purpose of noticing its presence in the settlement of the dispute which starts the story so far
as the litigation is concerned. There was a strike in the industry (for our purpose the expression
embraces both the appellants) which came to an end by virtue of a memorandum of agreement
dated 2 October 1957, to which not merely the management but also the two registered unions
aforementioned and the two un-registered unions which had a lesser following, were party. The
terms of the said agreement provided inter alia that:

The employees’ claim for wages and salaries for the period of strike and the company’s for
compensation for losses due to strike shall be submitted for arbitration of Sri. J.N. Majumdar
and R.C. Mitter, Ex-High Court Judge and Ex-Members of the Labour Appellate Tribunal
of India as joint arbitrators and their decisions on the two questions shall be final and binding
on all the parties. (Clause 7 of agreement.)

This agreement was admittedly arrived at conciliation proceedings contemplated by the

Industrial Disputes Act, 1947 (for short, the Act), and the reference to arbitration spelt out in
clause 7 directly and admittedly fell under Section 10-A of the Act.
It is apparent that the arbitrators were seized of two questions: (a) the claim of the workers
for wages for the period of strike, and (b) the claim of management for compensation for its
 Voluntary Arbitration as a Mechanism for Dispute Settlement 309

losses flowing from the strike. The Board of arbitrators, two retired judges of the Calcutta High
Court—held extensive hearings spread over a year and a half, made a lengthy award marshalling
the evidence, adducing the reasons, discussing the law and recording its decision on the two
vital issues. At the end of the detailed and reasoned record of conclusions, the award runs thus:

Our award accordingly is:

(1) That the workmen participating in the strike are not entitled to wages and salaries
for the period of the strike.
(2) That the company do recover from the workmen participating in the strike, compen-
sation assessed at Rs 80,000 (rupees eighty thousand).
(3) That the workmen jointly and severally do pay to the company one-eight of the total
costs of the arbitration. In default of payment the company will be at liberty to re-
cover the same in such manner as it thinks fit. Subject to this the parties do bear their
respective costs.

The workmen were deprived of their wages during the period of the strike on the score that
it was an illegal strike. Both sides seem to have accepted this finding after an unsuccessful
challenge in the High Court and happily industrial peace is said to be prevailing currently.
What did hurt the Mazdoor Sangh more and what the management did try to have and to hold
as a bonanza was the second finding that the strikers, apart from forfeiting wages, do pay
compensation in the huge sum of Rs 6,90,000 in one case and Rs 80,000 in the other, for
the loss of profits suffered by the manufacturing business of the management, a pronouncement
unusual even according to counsel for the appellant although sustainable in law, according to
him. For the workers this unique direction of industrial law is fraught with ominous consternation
and dangerous detriment. The Mazdoor Sangh challenged the award as illegal and void by
filing two writ petitions but the High Court quashed that part of the award which directed
payment of compensation by the workers to the management and, as earlier pointed out, both
sides have chosen to abide by the award in the relation of the denial of wages during the strike
period.
The Main Points Urged:
The short but important issue, which has projected some serious questions of law, is as to
whether the impugned part of the award has been rightly voided by the High Court. We may as
well formulate them but highlight the only major submission that merits close examination,
dealing with the rest with terse sufficiency. In logical order, Counsel for the appellant urged
that: (1) (a) an award under Section 10A of the Act savours of a private arbitration and is not
amenable to correction under Article 226 of the Constitution. (b) Even if there be jurisdiction,
a discretionary desistence from its exercise is wise, proper and in consonance with the canons of
restraint this Court has set down. (2) The award of compensation by the arbitrators suffers from
no vice which can be regarded as a recognized ground for the High Court’s interference. (3) The
view of law taken by the High Court on (i) the supposed flaw in the award based on ‘mixed
motives’ for the offending strike; (ii) the exclusion of remedies other than under Section 26
of the Act; and (iii) the implied immunity from all legal proceedings against strikers allegedly
arising from Section 18 of the Trade Union Act, 1926 is wrong. A few other incidental arguments
have cropped up but the core contentions are what we have itemized above.
The expansive and extraordinary power of the High Courts under Article 2262 is as wide as
the amplitude of the language used indicates and so can affect any person—even a private
individual—and be available for any (other) purpose—even one for which another remedy may
exist. The amendment of Article 226 in 1963 inserting Article 226(1A) reiterates the targets of
the writ power as inclusive of any person by the expressive reference to ‘the residence of such
person’. But it is one thing to affirm the jurisdiction, another to authorise its free exercise like a
310 Social Justice and Labour Jurisprudence

bull in a china shop. This Court has spelt out wise and clear restraints on the use of this extra-
ordinary remedy and High Courts will not go beyond those wholesome inhibitions except
where the monstrosity of the situation or other exceptional circumstances cry for timely judicial
interdict or mandate. The mentor of law is justice and a potent drug should be judiciously
administered. Speaking in critical retrospect and portentous prospect, the writ power has, by
and large, been the people’s sentinel on the qui vive and to cut back on or liquidate that power
may cast a peril to human rights. We hold that the award here is not beyond the legal reach of
Article 226, although this power must be kept in severely judicious leash.
Many rulings of the High Courts, pro and con, were cited before us to that an award under
S. 10A of the Act is insulated from interference under the Art. 226 but we respectfully agree
with the observations of Justice Gagendragadkar (as he then was) in Engineering Mazdoor Sabha,3
which nails the argument against the existence of jurisdiction. The learned Judge clarified (at
p. 640 of SCR): (at p. 881 of AIR):

Article 226 under which a writ of certiorari can be issued in a appropriate case, is, in a sense,
wider than Article 136, because the power conferred on the High Courts to issue certain writs
is not conditioned or limited by the requirement that the said writs can be issued only against
the orders of courts or Tribunal under Article 226(1), an appropriate writ can be issued to
any person or authority, including in appropriate cases any Government, within the territories
prescribed. Therefore even if the arbitrator appointed under Section 10A is not a Tribunal
under Article 136 in a proper case, a writ may lie against his award under Article 226.

We agree that the position of an arbitrator under Section 10A of the Act (as it then stood)
vis-a-vis Article 227 might have been different. Today, however, such an arbitrator has power to
bind even those who are not parties to the reference or agreement and the whole exercise under
Section 10A as well as the source of the force of the award on publication derives from the stat-
ute.4 It is legitimate to regard such an arbitrator now as part of the methodology of the sovereign’s
dispensation of justice, thus falling within the rainbow of statutory tribunal amenable to judicial
review. This observation made en passant by us is induced by the discussion at the Bar and turns
on the amendments to Section 10A and cognate provisions like Section 23, by Act XXXVI
of 1964.
Should the Court invoke this high prerogative under Article 226 in the present case? That
depends. We will examine the grounds on which the High Court has, in the present case, ex-
cised a portion of the award as illegal, keeping in mind the settled rules governing judicial re-
view of private arbitrator’s awards. Suffice it to say, an award under Section 10A is not only not
invulnerable but more sensitively susceptible to the writ lancet being a quasi-statutory body’s
decision. Admittedly, such an award can be upset if an apparent error of law stains its face. The
distinction, in this area, between a private award and one under Section 10A is fine, but real.
However it makes slight practical difference in the present case; in other cases it may. The fur-
ther grounds for invalidating an award need not be considered as enough unto the day is the
evil thereof.
Thus, we arrive at a consideration of the appellant’s second submission, perhaps the most
significant in the case, that the High Court had no legitimate justification to jettison the compen-
sation portion of the award. Even here, we may state that Counsel for the appellants, right at
the outset, mollified possible judicial apprehensions springing from striking workers being held
liable for loss of management’s profits during the strike period by the assurance that the clients
were inclined to abandon realization of the entire compensation, even if this Court upheld that
part of the award in reversal of the judgment of the High Court—a generous realism. He fought
a battle for principle, not pecunia. We record this welcome fact and proceed on that footing.
 Voluntary Arbitration as a Mechanism for Dispute Settlement 311

The relevant law which is beyond controversy now has been clearly stated in Halsbury’s Laws of
England thus:

Error of Law on the face of award. — An arbitrator’s award may be set aside for error of law
appearing on the face of it, though the jurisdiction is not lightly to be exercised... The jurisdic-
tion is one that exists at common law independently of statute. In order to be a ground for
setting aside the award, an error in law on the face of the award must be such that there can
be found in the award, or in a document actually incorporated with it, some legal proposition
which is the basis of the award and which is erroneous.
...where the question referred for arbitration is a question of construction, which is, generally
speaking, a question of law, the arbitrator’s decision cannot be set aside only because the court
would itself have come to a different conclusion; but if it appears on the face of the award
that the arbitrators has proceeded illegally, as for instance, by deciding on evidence which
was not admissible, or on principles of construction which the law does not countenance,
there is error in law which may be ground for setting aside the award. (Para 623, p. 334, Vol. 2,
Fourth Edn.)

We adopt this as sound statement of the law. Not that English law binds us but that the juris-
prudence of judicial review in this branch is substantially common for Indian and Anglo-American
systems and so Halsbury has considerable persuasive value. The wider emergence of common
canons of judicial review is a welcome trend towards a one-world public law. Indeed, this Court
has relied on the leading English decisions in several cases. We may content ourselves with ad-
verting to Bungo Steel Furniture,5 and to the unreported decision Babu Ram.6 In simple terms,
the Court has to ask itself whether the arbitrator has not tied himself down to an obviously un-
sound legal proposition in reaching his verdict as appears from the face of the award. [Justice]
Bhargava, speaking for the majority, in Bungo Steel state the law:

It is now a well-settled principle that if an arbitrator, in deciding a dispute before him, does
not record his reasons and does not indicate the principles of law on which he has proceeded,
the award is not on that account vitiated. It is only when the arbitrator proceeds to give his
reasons or to lay down principles on which he has arrived at his decisions that the Court is
competent to examine whether he has proceeded contrary to law and is entitled to interfere
if such error in law is apparent on the face of the award itself. (pp. 640–41)

In Bharat Barrel & Drum Manufacturing Co.7 dealing with a private award and the conditions
necessary for exercise of writ jurisdiction to correct an error of law apparent on the record, did
not lay down the law differently from what we have delineated.
In one of the leading English cases Champsey Bhara & Co.8 followed in India, Lord Dunedin
defined, ‘error of law on the face of the award’ as ‘where the question of law necessarily arises on
the face of the award or upon some paper accompanying and forming part of the award’ and
said that then only the error of law therein would warrant judicial correction. The law Lord
expressed himself lucently when he stated:

An error in law on the face of the award means, in their Lordships’ view, that you can find in
award… some legal proposition which is the basis of the award and which you can then say
is erroneous.

[Justice] Williams, in the case of Hookinsons vs Feraie 9 hit the nail on the head by using the
telling test as firmly established, viz., where the question of law necessarily arises on the face of
the award. In this view the enquiry by the court before venturing to interfere is to ascertain
whether an erroneous legal proposition is the basis of the award. Nay, still less. Does a question
312 Social Justice and Labour Jurisprudence

of law (not even a proposition of law) necessarily arise on the award followed by a flaw some
finding explicit or visibly implicit? Then the court can correct.
Justice Tucker in James Clark10 formulates the law to mean that if the award were founded on a
finding which admits of only one proposition of law as its foundation and that law is erroneous
on its face, the Court has the power and, therefore, the duty to set right. While the Judge can-
not explore by chasing subterranean routes or ferret out by delving deep what lies buried in the
unspoken cerebration of the arbitrator and interfere with the award on the discovery of an error
of law by such adventure, it is within his purview to look closely at the face of the award to dis-
cern the law on which the arbitrator has acted if it is transparent, even translucent but lingering
between the lines or merely wearing a verbal veil. If by such an intelligent inspection of the mien
of the award—which is an index of the mind of the author—an error of law forming the basis of
the verdict is directly disclosed, the decision is liable to judicial demolition. In James Clark,11 the
issue was posed with considerable clarity and nicety. If, at its face value, the award appears to be
based on an erroneous finding of law alone, it must fail. The clincher is that the factual conclusion
involving a legal question must necessarily be wrong in point of law. Even though the award
contains no statement of the legal proposition if the facts found raise ‘a clear point of law which
is erroneous on the face of it’, the Court may rightly hold that an error of law on the face of the
award exists and invalidates.
Let us put the proposition more expressively and explicitly. What is important is a question
of law arising on the face of the facts found and its resolution ex facie or sub-silentio. The arbi-
trator may not state the law as such. Even then such cute silence confers no greater or subtler
immunity on the award than plain speech. The need for a speaking order, where considerable
numbers are affected in their substantial rights, may well be a facet of natural justice or fair
procedure, although, in this case, we do not have to go so far. If, as here, you find an erroneous
law as the necessary buckle between the facts found and the conclusions recorded, the award
bears its condemnation on its bosom. Not a reference in a narrative but a clear legal nexus be-
tween the facts and the finding. The law sets no premium on juggling with drafting the award
or hiding the legal error by blanking out. The inscrutable face of the sphinx has no better title to
invulnerability than a speaking face which is a candid index of the mind. We may, by way of
aside, express hopefully the view that a minimal judicialisation by statement, laconic or lengthy,
of the essential law that guides the decision is not only reasonable and desirable but has, over the
ages, been observed by arbitrators and quasi-judicial tribunals as a norm of processual justice.
We do not dilate on this part of the argument as we are satisfied that be the test the deeply em-
bedded rules to issue certiorari or the traditional grounds to set aside an arbitration award, ‘thin
partitions do their bounds divide’ on the facts and circumstances of the present case.
The decisive question now comes to the fore. Did the arbitrators commit an error of law on
the face of the award in the expanded sense we have explained? The basic facts found by the
arbitrators are beyond dispute and admit of a brief statement. We summarise the fact situation
succinctly and fairly when we state that according to the arbitrators, the strike in question was
in violation of Section 24 of the Act and therefore illegal. This illegal strike animated by inter-
union power struggle, inflicted losses on the management by forced closure. The loss flowing
from the strike was liable to be recompensed by award of damages. In this chain of reasoning is
necessarily involved the question of law as to whether an illegal strike causing loss of profit is a
delict justifying award of damages. The arbitrators held, yes. We hold this to be an unhappy
error of law—loudly obtrusive on the face of the award. We may as well set out, for the sake of
assurance, the simple steps in the logic of the arbitrators best expressed in their own words
which we excerpt:

(a) It is argued that strike is a legitimate weapon in the hands of workmen for redressal of
their grievances and if they are made liable for loss on account of strike then the basic idea
of strike as a means for having the grievances redressed will be taken away. The fallacy in
 Voluntary Arbitration as a Mechanism for Dispute Settlement 313

this argument is that it presupposes the strike not to be illegal and unjustified. In the pre-
sent case we found the strike to be otherwise. The workmen have got no right of getting
their grievances redressed by resorting to illegal means which is an offence.
(b) It has been argued that the claim for compensation is not an industrial dispute as defined
in the Industrial Dispute Act. Considering the issue of compensation in a watertight
compartment the argument might appear to be attractive. But, in our opinion, in this
case the claim for compensation by the company is a consequence flowing from an ad-
mitted industrial dispute, which in this case is whether the strike was illegal and/or un-
justified and as against the condition of service as laid down in the certified standing
order on which point our finding has been against the workmen...

The award of the tribunal, in its totality, is quite prolix, the reasons stated in arguing out its
conclusions many and thus it is just to state that in the present case the arbitrators—two retired
judges of the Calcutta High Court—have made a sufficiently speaking award both on facts and
on law. They have referred to the strike being illegal with specific reference to the provisions of
the Act, but faulted themselves in law by upholding a case for compensation as axiomatic
necessarily based on a rule of common law, i.e. English common law. The rule of common law
thus necessarily arising on the face of the award is a clear question of law.
What is the rule of common law? Counsel for the appellants inevitably relied on the tort of
‘conspiracy’ and referred us to Moghul Steam Ship Co;12 Alien vs Flood ;13 Quinn vs Leathem14 and
Sorrel vs Smith.15 These decisions of the English Courts are response to the societal requirements
of the industrial civilisation of the 19th century England. Trade and Industry on the laissez faire
doctrine flourished and the law of the torts was shaped to serve the economic interests of the
trading and industrial community. Political philosophy and economic necessity of the dominant
class animate legal theory. Naturally, the British law in this area protected business from the
operations of a combination of men, including workers, in certain circumstance. Whatever the
merits of the norms, violation of which constituted ‘conspiracy’ in English law, it is a problem
for creative Indian jurisprudence to consider, detached from Anglophonic inclination, how far
a mere combination of men working for furthering certain objectives can be prohibited as a tort
according to the Indian value system. Our Constitution guarantees the right to form associations,
not for gregarious pleasure, but to fight effectively for the redressal of grievances. Our Constitution
is sensitive to workers’ rights. Our story of freedom and social emancipation led by the Father of
the Nation has employed, from the highest of motives, combined action to resist evil and to
right wrong even if it meant loss of business profits for the liquor vendor, the brothel-keeper
and the foreign-cloth dealer. Without expatiating on these seminal factors, we may observe that
English history, political theory and life-style being different from Indian conditions replete
with organised boycotts and mass satyagrahas, we cannot incorporate English torts without any
adaptation into Indian law. A tort transplant into a social organism is as complex and careful an
operation as a heart-transplant into an individual organism, law being life’s instrumentality and
rejection of exotics being a natural tendency. Here, judges are sociological surgeons.
Let us examine ‘conspiracy’ in the English law of tort to see if even there it is possible to hold
that an illegal strike per se spells the wrong. We may state that till recently it could not be said
with any certainty that there was any such torts as ‘conspiracy’. Salmond thought that there was
not (see Salmond, Law of Torts, p. 505, 15th Edn.). It is interesting that in that edition of
Salmond, Mogul16 is linked up by the learned author with a capitalist economy. Be that as it
may, the common law of England today is more or less clear some rumblings notwithstanding:

A combination willfully to do an act causing damage to a man in his trade or other interests
is unlawful and if damage in fact is caused is actionable as a conspiracy. To this there is an ex-
ception where the defendants’ real and pre-dominant purpose is to advance their own lawful
314 Social Justice and Labour Jurisprudence

interests in matter in which they honestly believe that those interests would directly suffer if
the action against the plaintiff was not taken. In truth, the Crofter case has made Section 1 of
the Trade Disputes Act, 1906, largely unnecessary, for there will now be few conspiracies aris-
ing out of trade disputes which are protected at common law. (pp. 508–9, 15th Edn., Sweet
and Maxwell)

The essence of actionable conspiracy is best brought out by Salmond:

The tort is unusual because it emphasises the purpose of the defendants rather than the
results of their conduct. (p. 513, 15th Edn., Sweet and Maxwell)

Even then there are mixed motives. ‘Liability will depend on ascertaining which is the pre-
dominant object or the true motive or the real purpose of the defendant. Mere combination or
action, even if it be by illegal strike, may be far away from a ‘conspiracy’ in the sense of the law
because in all such case, except in conceivable exceptional instances, the object or motive is to
advance the workers’ interests or to steal a march over a rival union but never or rarely to des-
troy or damage the industry. It is difficult to fancy workers who live by working in the industry
combining to kill the goose that lays the golden eggs. The inevitable by-product of combination
for cessation of work may be loss to the management but the obvious intendment of such a col-
lective bargaining strategy is to force the employer to accept the demand of the workers for
betterment of their lot or redressal of injustice, not to inflict damage on the boss. In short, it is
far too recondite for an employer to urge that a strike, albeit illegal, was motivated by destruction
of the industry. A scorched earth policy may, in critical times of a war, be reluctantly adopted by
a people, but such an imputed motive is largely imaginary in strike situations. However, we are
clear in our minds that if some individuals destroy the plant or damage the machinery willfully
to cause loss to the employer, such individuals will be liable for the injury so caused. Sabotage is
no weapon in workers’ legal armoury.
The leading case of Sorrel vs Smith17 emphasizes that a combination of two or more persons
for the purpose of injuring a man in his trade is unlawful and, if it results in damage to him, is
actionable. The real purpose of the combination is the crucial test between innocence and
injury. It may well be that even where there is an offending object, it may be difficult for a court
to hold that there is tort if one may read into the facts an equal anxiety for the defendants to
promote their success which produces the plaintiff ’s extinction. There is a penumbral region, as
Lord Summer pointed out in Sorrel:18

How any definite line is to be drawn between acts, whose real purpose is to advance the de-
fendant’s interests, and acts, whose real purpose is to injure the plaintiff in his trade, is a thing
which I feel at present beyond my power.

It is absolutely plain that the tort of conspiracy necessarily involves advertence to and affirm-
ation of the object of the combination being the infliction of damage or distraction on the
plaintiff. The strike may be illegal but if the object is to bring the employer to terms with
the employees or to bully the rival trade union into submissions, there cannot be an actionable
combination in tort. In the present case, it is unfortunate that the arbitrators simply did not in-
vestigate or pass upon the object of the strike. If the strike is illegal, the tort of conspiracy is
made out, appears to be the opposition of law writ tersely into the award. On the other hand, it
is freely conceded by counsel for the appellant that the object was inter-union rivalry. There is
thus a clear lapse in the law on the part of the arbitrators manifest on the face of the award.
We have earlier referred to the need for a fresh look at conspiracy as a tort when we bodily
borrow the elements of English law and apply them to Indian law. It is as well that we notice
 Voluntary Arbitration as a Mechanism for Dispute Settlement 315

that even in England considerable criticism is mounting on the confused state of the law of
conspiracy. J.T. Cameron has argued (in 1965, Vol. 28, Modern Law Review, p. 448) that

experience has already shown that conspiracy is a hydra perfectly capable of growing two
heads to replace an amputated one, and the authorities contain material which could be used
to impose liability in very wide and varied circumstances. It is time therefore, to consider what
form legislation should take, and to urge that proper answer is to remove the tort of conspiracy
from the law altogether, and with the Rookes vs Barnard version of intimation, and to put in
its place a different basis of liability.
(Conspiracy and Intimidation: An Anti-Metaphysical Approach)

The author complains that the fundamental basis is unsatisfactory and uncertain and demands
that a complete rewriting of the principles on which the tort of conspiracy and intimidation is
necessary.
We may as well suggest that, to silence possible mischief flowing from the confused state of
the law and remembering how dangerous it would be if long, protracted, but technically illegal
strikes were to be followed by claims by managements for compensation for loss of profits, a
legislative reform and restatement of the law were undertaken at a time when the State is anxious
for industrial harmony consistent with workers’ welfare. This rather longish discussion has be-
come necessary because the problem is serious and sensitive and the law is somewhat slippery
even in England. We are convinced that the award is bad because the error of law is patent.
The High Court has touched upon another fatal frailty in the tenability of the award of com-
pensation for the loss of profits flowing from the illegal strike. We express our concurrence with
the High Court that the sole and whole foundation of the award of compensation by the arbi-
trators, ignoring the casual reference to an ulterior motive of inter-union rivalry, is squarely the
illegality of the strike. The workers went on strike claiming payment of bonus as crystallized by
the earlier settlement (dated 2 October 1957). There thus arose an industrial dispute within
Section 2(k) of the Act. Since conciliation proceedings were pending the strike was ipso jure il-
legal (Sections 23 and 24). The consequence, near or remote, of this combined cessation of
work caused loss to the management. Therefore the strikers were liable in damages to make
good the loss. Such is the logic of the award.
It is common case that the demands covered by the strike and the wages during the period of
the strike constitute an industrial dispute within the sense of Section 2(k) of the Act. Section
23, read with Section 24, it is agreed by both sides, makes the strike in question illegal. An
‘illegal strike’ is a creation of the Act. As we have pointed out earlier, the compensation claimed
and awarded is a direct reparation for the loss of profits of the employer caused by the illegal
strike. If so, it is contended by the respondents, the remedy for the illegal strike and its fallout
has to be sought within the statute and not de hors it. If this stand of the workers is right, the
remedy indicated in Section 26 of the Act, viz., and prosecution for starting and continuing an
illegal strike, is the designated statutory remedy. No other relief outside the Act can be claimed
on general principles of jurisprudence. The result is that the relief of compensation by proceedings
in arbitration is contrary to law and bad.
The Premier Automobiles19 case settles the legal issue involved in the above argument. The
Industrial Disputes Act is a comprehensive and self-contained code so for as it speaks and the
enforcement of rights created thereby can only be through the procedure laid down therein.
Neither the civil court nor any other tribunal or body can award relief. [Justice] Untwalia,
speaking for an unanimous court, has, in Premier Automobiles 20 observed:

The object of the Act, as its preamble indicates, is to make provision for the investigation
and settlement of industrial dispute, which means adjudication of such dispute also. The Act
316 Social Justice and Labour Jurisprudence

envisages collective bargaining, contracts between union representing the workmen and the
management, a matter which is outside the realm of the common law or the Indian law of
contract.

After sketching the scheme of the Act, the learned Judge stated the law thus:

…the civil court will have no jurisdiction to try and adjudicate upon an industrial dispute if
it concerned enforcement of certain right or liability created only under the Act.

∗ ∗

In Doe vs Bridges 21 are the famous and oft quoted words of [Chief Justice] Lord Tenterden,
saying:

Where an Act creates an obligation and enforces the performance in a specified manner, we
take it to be a general rule that performance cannot be enforced in any other.

Barraclough vs Brown and Ors,22 decided by the House of Lords is settled telling, particularly
Lord Watson’s statement of the law at p. 622:

The right and the remedy are given uno flatu and one cannot be dissociated from the other.

In short, the enforcement of a right or obligation under the Act must be by a remedy provided
uno flatu in the statute. To sum up, in the language of the Premier Automobiles Ltd:23

If the industrial dispute relates to the enforcement of a right or an obligation created under
the Act, then the only remedy available to the suitor is to get adjudication under the Act.

Since the Act which creates rights and remedies has to be considered as one homogeneous
whole, it has to be regarded uno flatu, in one breath, as it were. On this doctrinal basis, the
remedy for the illegal strike (a concept which is the creature not of the common law but of
Section 24 of the Act) has to be sought exclusively in Section 26 of the Act. The claim for com-
pensation and the award thereof in arbitral proceedings is invalid on its face—‘on its face’ we
say because this jurisdictional point has been considered by the arbitrators and decided by com-
mitting an ex facie legal error.
It was argued, and with force in our view, that the question of compensation by workers to
the management was wholly extraneous to the Act and therefore outside the jurisdiction of a
voluntary reference of industrial dispute under Section 10A. While we are not called upon to
pronounce conclusively on the contention, since we have expressed our concurrence with the
High Court on other grounds, we rest content with briefly sketching the reasoning and its ap-
parent tenability. The scheme of the Act, if we may silhouette it, is to codify the law bearing on
industrial dispute. The jurisdiction essence of proceedings under the Act is the presence of an
‘industrial dispute’. Strikes and lockouts stem from such disputes. The machinery for settlement
of such disputes at various stages is provided for by the Act. The statutory imprimatur is given
to settlement and awards, and norms of discipline during the pendency of proceedings are set
down in the Act. The prescriptions stipulated, as for example the prohibition of a strike, are
followed by penalties, if breached. Summary procedures for adjudication as to whether conditions
of service etc., of employees have been changed during the pendency of proceedings, special
provision for recovery of money due to workers from employers and other related regulations
are also written into the Act. Against this backdrop, we have to see whether a claim by an em-
ployer from his workmen of compensation consequent on any conduct of theirs comes within
 Voluntary Arbitration as a Mechanism for Dispute Settlement 317

the purview of the Act. Suffice it to say that a reference to arbitration under Section 10A is re-
stricted to existing or apprehended industrial disputes. Be it noted that we are not concerned
with a private arbitration, but a statutory one governed by the Industrial Disputes Act, deriving
its validity, enforceability and protective mantle during the pendency of the proceedings from
Section 10A. No industrial dispute, no valid arbitral reference. Once we grasp this truth, the rest
of the logic is simple. What is the industrial dispute in the present case? Everything that overflows
such disputes spills into areas where the arbitrator deriving authority under Section 10A has no
jurisdiction. The consent of the parties cannot create arbitral jurisdiction under the Act. In this
perspective, the claim for compensation can be a lawful subject for arbitration only if it can be
accommodated by the definition of ‘industrial dispute’ in Section 2(k). Undoubtedly this expres-
sion must receive a wide connotation, calculated as it is to produce industrial peace. Indeed, the
legislation substitutes for free bargaining between the parties a binding award; but what disputes
or differences fall within the scope of the Act? This matter fell for the consideration of the Fed-
eral Court in Western India Automobile Association.24 Without launching on a long discussion,
we may state that compensation for loss of business is not a dispute or difference between em-
ployers and workmen ‘which is connected with the employment or non-employment or the
terms of employment or with the conditions of labour, of any person’. We are unable to imagine
a tort liability or compensation claim based on loss of business being regarded as an industrial
dispute as defined in the Act, having regard to the language used, the setting and purpose of the
statute and the industrial flavour of the dispute as one between the management and workmen.
In this context, we are strengthened in our conclusion by the provisions of Section 33C which
provides for speedy recovery of money due to a workman from an employer under a settlement
or an award, but not for the converse case of money due to an employer from workmen. There
is no provision in the Act which contemplates a claim for money by an employer from the
workmen. And indeed, it may be a little startling to find such a provision, having regard to
workmen being the weaker section and Part IV of the Constitution being loaded in their favour.
The new light shed by the benign clauses of Part IV must illumine even pre-Independence stat-
utes in the interpretative process. As yet, and hopefully, claims by employers against workmen
on grounds of tortious liability have not found a place in the pharmacopoeia of Indian industrial
law. However, as earlier stated, we do not pronounce finally as it is not necessary.
There was argument at the Bar that the High Court was in error in relying on Section 18 of
the Trade Unions Act, 1926 to rebuff the claim for compensation. We have listened to the argu-
ments of Shri B.C. Ghosh in support of the view of the High Court, understood on a wider
basis. Nevertheless, we do not wish to rest our judgment on that ground. Counsel for the appel-
lants cited some decisions to show that an award falling outside the orbit of the Indian Arbitration
Act can be enforced by action in court. We do not think the problem so posed arises in the in-
stant case.

Arbitrator’s Ruling over the Justifiability of Mass

Termination by the Employer on Account of
Illegal Strike: Interference when Justified

Are we right in supporting the absolute freedom of the employer in terminating the
services of hundreds of workmen who have gone on illegal strike in respect of their reason-
able demands from the unwilling, profitable and sound employer? No doubt it is the em-
ployer’s prerogative, which the industrial law in India itself approves. But he can do so
318 Social Justice and Labour Jurisprudence

only by complying with the cardinal principles of natural justice as recognised in the
realm of industrial jurisprudence.

Gujarat Steel Tubes vs Its Mazdoor Sabha25

This was a case that came before the Supreme Court for consideration of the scope of the
powers of the arbitrator in exercising jurisdiction within the framework of the provisions
of Section 10A of the Industrial Disputes Act, 1947, and the prerogative of the employer
to do away with the services of workers in legitimate employment under the guise of dis-
charge simpliciter, when the case falls clearly under ‘discharge for misconduct’. Also, the
Court had to consider whether the arbitrator is empowered to discharge the powers pro-
vided under Section 11A of the Act.

THE FACTS OF THE CASE

An affluent management and an indigent workforce were the two wings of Gujarat Steel
Tubes, which manufactured steel tubes in the outskirts of Ahmedabad city and was scarred
by an industrial dispute, which resulted in these appeals. This company, started in 1960,
went into production in 1964 and waddled from infancy to adulthood with smiling pro-
fits and growling workers, punctuated by smouldering demands, strikes and settlements,
until there brewed a confrontation culminating in a head-on collision following upon
certain unhappy events. A total strike ensued, setting off a chain reaction that ended in a
wholesale termination of service of all the employees, followed by the recruitment of
fresh workmen, a de facto breakdown of the strike, and a dispute over the restoration to
service of the workmen removed. This cataclysmic episode and its sequel formed the basis
of arbitration and award under Section 10A, a writ petition and judgement, inevitably
spiralling up to the Supreme Court in two appeals—one by the management and the other
by the union—which were heard together and disposed of by a common judgement. The
arbitrator held the action of the management to be warranted, while the High Court
reversed the award and substantially directed reinstatement. The following was the Supreme
Court’s decision.

THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

Every litigation has a moral, and these appeals have many, the foremost being that the economics
of law is the essence of labour jurisprudence.
A few fundamental issues, factual and legal, on which bitter controversy raged at the bar,
settle the decisional fate of this case. A plethora of precedents has been cited and volumes of evi-
dence read for our consideration by both sides. But the jural resolution of labour disputes must
be sought in the law-life complex, beyond the factual blinkers of decided cases, beneath the
lexical littleness of statutory texts, in the economic basics of industrial justice which must enliven
the consciousness of the court and the corpus juris. This Court has developed labour law on this
broad basis and what this Court has declared holds good for the country. We must first fix the
founding faith in this juristic branch before unravelling the details of the particular case.
Viewing from this vantage point, it is relevant to note that the ethical roots of jurisprudence,
with economic overtones, are the elan vital of any country’s legal system. So it is that we begin
with two quotations—one from the Old Testament and the other from Gandhiji, the Indian
New Testament—as perspective-setters. After all, industrial law must set the moral-legal norms
 Voluntary Arbitration as a Mechanism for Dispute Settlement 319

for the modus vivendi between the partners in management, namely, Capital and Labour. Cain
retorted, when asked by God about his brother Abel, in the Old Testament, ‘Am I my brother’s
keeper?’ ‘Yes’ was the implicit answer in God’s curse of Cain. In the fraternal economics of
national production, worker is partner in this biblical spirit. In our society, Capital shall be the
brother and keeper of Labour and cannot disown this obligation, especially because Social
Justice and Articles 43 and 43A are constitutional mandates.
Gandhiji, to whom the Arbitrator has adverted in passing in his award, way back in March
1946, wrote on Capitalism and Strikes in the Harijan:

How should capital behave when labour strikes? This question is in the air and has great im-
portance at the present moment. One way is that of suppression named or nicknamed ‘American’.
It consists in suppression of labour through organised goondaism. Everybody would consider
this as wrong and destructive. The other way, right and honourable, consists in considering
every strike on its merits and giving labour its due not what capital considers as due, but
what labour itself would so consider and enlightened public opinion acclaims as just. Socialism
of my Conception (M.K. Gandhi) by Anand T. Hingorani, Bhartiya Vidya Bhavan.
In my opinion, employers and employed are equal partners, even if employees are not
considered superior. But what we see today is the reverse. The reason is that the employers
harness intelligence on their side. They have the superior advantage which concentration of
capital brings with it, and they know how to make use of it... Whilst capital in India is fairly
organised, labour is still in a more or less disorganised condition in spite of Unions and Fed-
eration. Therefore, it lacks the power that true combination gives (Ibid.).
Hence, my advice to the employers would be that they should willingly regard workers as
the real owners of the concerns which they fancy they have created...(Ibid.).

Tuned to these values are the policy directives in Articles 39, 41, 42, 43 and 43A. They speak
of the right to an adequate means of livelihood, the right to work, humane conditions of work,
living wage ensuring a decent standard of life and enjoyment of leisure and participation of
workers in management of industries. Dehors these mandates, law will fail functionally. Such is
the value-vision of Indian Industrial Jurisprudence, The matrix of facts—A pre-view:
The nidus of facts which enwomb the issues of law may be elaborated a little more at this
stage. In the vicinity of Ahmedabad city, the appellant is a prosperous engineering enterprise
which enjoys entrepreneurial excellence and employs over 800 workmen knit together into the
respondent Union called the Gujarat Steel Tubes Mazdoor Sabha (The Sabha, for short). Fortu-
nately, the industry has had an innings of escalating profits but the workmen have had a running
complaint of a raw deal. Frequent demands for better conditions, followed by negotiated settle-
ments, have been a lovely feature of this establishment, although the poignant fact remains that
till the dawn of the seventies, the gross wages of the workmen have hovered around a harrowing
hundred rupees or more in this thriving Ahmedabad industry.
The course of this precarious coexistence was often ruffled, and there was, now and then,
some flare-up leading to strike, conciliation and even reference under Section 10. When one
such reference was pending, another unconnected dispute arose which, after some twists and
turns, led to an industrial break-down and a total strike. The episodic stages of this bitter battle
will have to be narrated at length a little later. Suffice it to say that the Management jettisoned
all the 853 workmen and recruited some freshers to take their place and to keep the wheels of
production moving. In the war of attrition that ensued, Labour lost and capitulated to Capital.
At long last, between the two, a reference to arbitration of the disputes was agreed upon under
Section 10A of the Industrial Disputes Act, 1947 (the Act for short). The highlight of the dis-
pute referred for arbitration was whether the termination orders issued by the Management
against the workmen whose names were set out in the annexure to the reference were ‘legal, pro-
per and justified’; if not, whether the workmen were entitled to any reliefs including the relief of
320 Social Justice and Labour Jurisprudence

reinstatement with continuity of service and full back wages’. The arbitrator’s decision went
against the Sabha while, on a challenge under Article 226, the High Court’s judgment virtually
vindicated its stand. This is the hang of the case. The substantial appeal is by the Management
while the Sabha has a marginal quarrel over a portion of the judgment as disclosed in its appeal.
The ‘jetsam’ workmen, a few hundred in number, have been directed to be reinstated with full
or partial back pay and this is the bitter bone of contention.
A stage-by-stage recapitulation of the developments is important to get to grips with the core
controversy.
Shri Ashoke Sen, for the appellant-Management and Shri Tarkunde for the respondent—
Sabha, have extensively presented their rival versions with forceful erudition. Shri R.K. Garg—
of course—for some workmen—has invoked with passion the socialist thrust of the Constitution
as a substantive submission and, as justificatory of the workmen’s demands, relied on the glaring
contrast between the soaring profits and the sagging wages, while Shri Bhandare has pressed the
lachrymose case of the several hundreds of ‘interregnal’ employees whose removal from service,
on re-instatement of the old, might spell iniquity.

Olive Branch Approach:

At this stage we must disclose an effort at settlement we made with the hearty participation of
Sri Asoke Sen and Sri Tarkunde at the early stages of the hearing.
The golden rule for the judicial resolution of an industrial dispute is first to persuade fighting
parties, by judicious suggestions, into the peace-making zone, disentangle the differences, narrow
the mistrust gap and convert them, through consensual steps, into negotiated justice. Law is
not the last word in justice, especially social justice. Moreover, in our hierarchical court system,
the little man lives in the short run but most litigation lives in the long run. So it is that nego-
tiation first and adjudication next is a welcome formula for the Bench and the Bar, Management
and Union. This ‘olive branch’ approach brought the parties closer in our court and gave us a
better understanding of the problem, although we could not clinch a settlement. So we heard
the case in depth and felt that some of the legal issues did merit this court’s declaratory pronounce-
ment, settlement or no settlement. Mercifully counsel abbreviated their oral arguments into an
eight-day exercise, sparing us the sparring marathon of 28 laborious days through which the
case stretched out in the High Court.
Orality ad libitum may be the genius of Victorian era advocacy but in our ‘needy’ Republic
with crowded dockets, forensic brevity is a necessity. The Bench and the Bar must fabricate a
new Shorthand form of court methodology which will do justice to the pockets of the poor who
seek right and justice and to the limited judicial hours humanly available to the court if the
delivery system of justice is not to suffer obsolescence.
Proof of the ‘efficient’ management of the Gujarat Steel Tubes Ltd., is afforded by the testimony
of larger turnover and profits, year after year, from the beginning down to date. The mill was
commissioned in January 1964 but by the accounting year 1971–72 the turnover had leapt to
Rs 560 lakhs. It soared to Rupees 680 lakhs the next year, to Rs 1,136 lakhs the year after and
to Rs 20 crores in 1974–75: This enterprise entered the export trade and otherwise established
itself as a premier manufactory in the line. Steel shortage is the only shackle which hampers its
higher productivity. But its increasing shower of prosperity was a sharp contrast, according to
Sri Garg, to the share of the wage bill. The Worker started on a magnificent sum per mensem of
Rs 100 in toto even as late as 1970, although some workmen, with more service, were paid
somewhat higher. The extenuatory plea of the Management, justificatory of this parsimony,
was that other mill-hands were receiving more niggardly wages in comparable enterprises. Prob-
ably, unionisation, under these luridly low-paid circumstances, caught on and a workers’ union
was born somewhere around 1966. A sensible stroke of enlightened capitalism persuaded the
 Voluntary Arbitration as a Mechanism for Dispute Settlement 321

Management to enter into agreements with the Unions, somewhat improving emoluments and
ameliorating conditions. By 1968, the Sabha, a later union, came into being and commanded
the backing of all or most of the mill hands. By March 1969, the Sabha presented a charter of
demands, followed by resistance from the Management and strike by the workers. By July 1969,
a settlement with the Sabha was reached. Agreements relating to the various demands brought
quiet and respite to the industry although it proved temporary.
A vivid close-up of the sequence and consequence of the dramatic and traumatic events cul-
minating in the reference to arbitration and the impugned award is essential as factual founda-
tion for the decision of the issues. Even so, we must condense, since labyrinthine details are not
needed in a third tier judgment. Broad lines with the brush bring out the effect not minute etches
which encumber the picture.
An agreement of futuristic import with which we may begin the confrontational chronicle is
that of April 1970. Clause 6 thereof runs thus:

Management of the Company agrees to implement recommendations of the Central Wage

Board for Engineering Industries as and when finally declared and all the increments granted
to workmen from time to time under this agreement shall be adjusted with those recommenda-
tions provided that such adjustment shall not adversely affect the wages of workmen.

The engineering industry, where India is forging ahead, was apparently exploitative towards
labour, and to make amends for this unhealthy position, the Central Wage Board was appointed
in 1964 although it took six long years to recommend revision of wages to be implemented with
effect from 1-1-1969. Meanwhile, the masses of workers were living ‘below the bread line’.
Saintly patience in such a milieu was too much to expect from hungry demands and pressing
for the recommendations of the Wage Board to be converted into immediate cash. But, as we
will presently unravel, ‘Wage Board expectations’ were proving teasing illusions and premises of
unreality because of non-implementation, viewed from the Sabha’s angle. The Management,
on the other hand, had a contrary version which we will briefly consider. Luckily, agreed mini-
increases in wages were taking place during the years 1970, 1971 and 1972. Likewise, bonus
was also the subject of bargain and agreement. But in September 1971, an allegedly violent epi-
sode broke up the truce between the two, spawned criminal cases against workers, led to charges
of go-slow tactics and lock-outs and burst into suspension, discharge and dismissal of workmen.
The crisis was tided over by continued conciliations and two settlements. We are not directly
concerned with the cluster of clauses therein save one 64 workmen had been discharged or dis-
missed, of whom half the number were agreed to be reinstated. The fate of the other half (32
workers) was left for arbitration by the Industrial Tribunal. The dark clouds cleared for a while
but the sky turned murky over again, although the previous agreement had promised a long
spell of normalcy. The Sabha, in October 1972, met and resolved to raise demands of which the
principal ones were non-implementation of the Wage Board recommendations, bonus for 1971
and wages during the lock-out period. The primary pathology of industrial friction is attitudinal.
The Management could have (and, indeed, did, with a new Union) solved these problems had
they regarded the Sabha as partner, not saboteur. Had the bitter combativeness of the Sabha
been moderated, may be the showdown could have been averted.
Apportioning blame does not help now, but we refer to it here because Sri Ashoke Sen with
feeling fury fell foul of the criticism by the High Court that the Management had acted improperly
in insisting on arbitration, and argued that when parties disagreed, arbitral reference was the
only answer and the workers’ fanatical rejection of arbitration made no sense. We need not
delve into the details of the correspondence relied on by either side to reach the truth. For, the
Union’s case is that in the prior settlement between the two parties arbitral reference came only
after negotiations failed. That was why they pressed the Management to reason together, avoiding
wrestling with each other before a slow-moving umpire.
322 Social Justice and Labour Jurisprudence

Sri Tarkunde, for the Sabha, urged that the workmen were not intransigent but impatient
and pleaded for a negotiated settlement since the main point in dispute, namely, the imple-
mentation of the Central Engineering Wage Board’s recommendations, was too plain to admit
of difference, given good faith on both sides. We will examine the substance of this submission
later but it needs to be emphasised that workmen, surviving on starving wages and with notori-
ously fragile staying power, are in no mood for adjudicatory procedures, arbitral or other, if the
doors of negotiation are still ajar. The obvious reason for this attitude is that the litigative length
of the adjudicatory apparatus, be it the tribunal, the court or the arbitrator, is too lethargic and
long-winded for workmen without the wherewithal to survive and is beset with protracted
challenges either by way of appeal upon appeal or in the shape of writ petitions and, thereafter,
appeals upon appeals. The present case illustrates the point. Where workmen on hundred rupees
a month demand immediate negotiation the reason is that privations have no patience beyond a
point. Now and here, by negotiation, is the shop-floor clamour. In this very matter, although
the controversy before the arbitrator fell within a small compass, he took a year and ninety printed
pages to decide, inevitably followed by a few years and hundred and thirty printed pages of
judgment in the High Court and a longer spell in this Court with slightly lesser length of judg-
ment. Which workman under Third World conditions can withstand this wasting disease while
hunger leaves no option save to do or die? Raw life, not rigid logic, is the mother of law.
After the demands were raised by the Union, the main issue being implementation of the
Wage Board recommendations, a stream of correspondence, meetings and inchoate settlements
ensued, but the crucial question, which would have meant ‘cash and carry’ for the workman,
baffled solution. Do negotiate since the application of the Wage Board recommendations are
beyond ambiguity, was the Sabha’s peremptory plea. We differ; therefore, go to arbitration, was
the Management’s firm response. A stalemate descended on the scene.
No breakthrough being visible, the Sabha charged the Management by its letter of 25 January
1973 with breach of Clause 6 of the Agreement of 4 August 1972 which ran thus:

That the parties agree that for a period of 5 years from the date of this settlement all disputes
will be solved by mutual negotiations or, failing that, by joint arbitration under Section 10A
of the Industrial Disputes Act, 1947. Neither party shall take any direct action including go-
slow, strike and lock-out for a period of 5 years from the date of this settlement.

Various aspersions of anti-labour tactics were included in the Sabha’s letter but the most money-
loaded item was the grievance about the Wage Board recommendations. The temper, by now,
was tense.
The Management, on the same day (25 January 1973), set out its version on the notice board
and the High Court’s summary of it runs thus:

The notice stated that during the course of the meeting with the representatives of the Sabha
held on 20 January 1973 the Company had expressed its willingness to implement the Wage
Board recommendations according to its interpretation on and with effect from 1 January
1969 without prejudice to the rights and contentions of the workmen and leaving it open to
the parties to take the matter to arbitration for resolution of the points of dispute. The Sabha,
however, had turned down this suggestion and it came to the notice of the Company that
workmen were being instigated by making false representations. The Company clarified that
on and with effect from 1 January 1972 every workman would be entitled to the benefits of
Wage Board recommendations, irrespective of whether the concerned workman had put in
240 days attendance.

The Sabha’s answer was a strike two days later. This event of January 27 was countered
quickly by the Management restating its attitude on the Wage Board recommendations, asserting
 Voluntary Arbitration as a Mechanism for Dispute Settlement 323

that the strike was illegal and in breach of the settlement of 4 August 1972 and wholly unjusti-
fied because the offer of reference to arbitration, negotiations failing, had been spurned by the
Sabha. The notice wound up with a command and a caveat:

If the workmen do not immediately resume duty, the Company would not be under any
obligation to continue in service those 32 workmen who have been taken back in service
pursuant to the settlement dated 4 August 1972. Besides, if (the workmen) continue causing
loss to the Company from time to time in this manner, the Company will not also be bound
to implement the Wage Board recommendations on and with effect from 1 January 1969,
which may also be noted. The Company hereby withdraws all its proposals unless the workmen
withdraw the strike and resume work within two days.

This threat was dismissed by the workmen as a brutum fulmen and the strike continued. The
Management, therefore, came up on the notice board castigating the Sabha with irresponsible
obduracy in waging an illegal and unjustified strike. A warning of the shape of things to come
was given in this notice; the High Court has summed it up thus:

The Company gave intimation that in view of such obstinate attitude on the part of the
Sabha and the Workmen, it had decided to withdraw its earlier offer to implement the Wage
Board recommendations on and with effect from 1 January 1969 as already cautioned in the
notice dated 27 January 1973. The said decision must be taken to have been thereby commu-
nicated to the workmen and Sabha. The notice further stated that having regard to the
obdurate, unreasonable and illegal attitude adopted by the workmen and Sabha, the Company
had decided to take disciplinary proceedings against the defaulting workmen. In this connec-
tion, the attention of the workmen was drawn to the fact that the strike was illegal not only
because of the terms of the settlement dated 4 August 1972 but also because of the pendency
of the reference relating to reinstatement of 32 workmen before the Industrial Court, and
that, therefore, the Company was entitled to take disciplinary action against them. Finally,
the Company appealed to the workmen to withdraw their illegal and unjustified strike forth-
with and to resume work.

These exercises notwithstanding, the strike raged undaunted, the production was paralysed
and the Management retaliated by an elaborate notice which dilated on its preparedness to
negotiate or arbitrate and the Sabha’s unreason in rejecting this gesture and persisting on the
war path. The stern economic sanction was brought home in a critical paragraph:

By this final notice the workmen are informed that they should withdraw the strike and
resume work before Thursday, 15 February 1973. If the workmen resume duty accordingly,
the management would be still willing to pay salary according to the recommendations of
the Wage Board on and with effect from 1 January 1969. Furthermore, the management is
ready and willing to refer to the arbitration of the Industrial Tribunal the question as to
whether the management has implemented the settlement dated 4 August 1972 and all
other labour problems. In spite of this, if the workmen do not resume duty before Thursday,
15 February 1973, then the Company will terminate the services of all workmen who are on
strike and there-after it will run the factory by employing new workmen. All workmen may
take note of this fact.

The count-down thus began. 15 February 1973 arrived, and the Management struck the
fatal blow of discharging the strikers—all the labour force, 853 strong—and recruiting fresh
hands unless work was resumed by 19 February 1973.
324 Social Justice and Labour Jurisprudence

This public notice was allegedly sent to the Sabha and circulated to such workmen as hovered
around the factory. It is common case that the notice of 15 February 1973, was not sent to
individual workmen but was a signal for action. The drastic consequence of disobedience was
spelt out in no uncertain terms:

The workmen are hereby informed that they should resume duty on or before Monday,
19 February 1973 failing which the Management will presume that the workmen want to
continue their strike and do not wish to resume work until their demands as aforesaid are
accepted by the management.

Parallel negotiations were going on even while mailed fist manoeuvres were being played
up—thanks to the basic goodwill and tradition of dispute settlements that existed in this company.
Even amidst the clash of arms, bilateral diplomacy has a place in successful industrial relations.
The Management and the Sabha allowed the talks to continue which, at any rate, clarified the
area of discord. One thing that stood out of these palavers was that both sides affirmed the pre-
condition of negotiations before arbitration over differences although the content, accent and
connotation of ‘negotiations’ varied with each side. No tangible results flowed from these exercises
and the inevitable happened on 21 February 1973 when the Management blotted out the en-
tire lot of 853 workmen from the roster, by separate orders of discharge from service, couched
in identical terms. The essential terms read thus:

Your services are hereby terminated by giving you one month’s salary in lieu of one month’s
notice and accordingly you are discharged from service. You should collect immediately from
the cashier of the factory your one month’s notice-pay and due pay, leave entitlements and
gratuity, if you are entitled to the same. The payment will be made between 12 noon and
5 p.m. If and when you desire to be employed, you may apply in writing to the Company in
that behalf and on receipt of the application, a reply will be sent to you in the matter.

Casual workmen were issued separate but similar orders. The Management did record its
reasons for the action taken on 20 February 1973, and forwarded them to the Sabha and to the
individual workmen on request. The anatomy of this proceeding is of critical importance in
deciding the character of the action. Was it a harmless farewell to the workmen who were un-
willing to rejoin or a condign punishment of delinquent workmen?
The separate memorandum of reasons refers to the strike as illegal and unjustified and nar-
rates the hostile history of assault by workmen of the officers, their go-slow tactics and sabotage
activities, their contumacious conduct and a host of other perversities vindicating the drastic
action of determining the services of all the employees. The concluding portion reads partly
stern and partly non committal:

In the interest of the Company it is decided to terminate the services of all the workmen who
are on illegal and unjustified strike since 27 January 1973.
Under the circumstances, it is decided that the services of all the workmen who are on
illegal and unjustified strike should be terminated by way of discharge simpliciter. These
workmen, however, may be given opportunity to apply for employment in the Company and
in case applications are received for employment from such employees, such applications
may be considered on their merits later on.
It may be mentioned here that while arriving at the aforesaid decision to terminate the
services of the workmen, various documents, notices, correspondence with the Union and
others, records of production, etc. have been considered and therefore the same are treated as
part of the relevant evidence to come to the conclusion as aforesaid.
 Voluntary Arbitration as a Mechanism for Dispute Settlement 325

Final Conclusion:

The services of all the workmen who are on illegal and unjustified strike since 27-1-1973
should be terminated by way of discharge simpliciter and they should be offered all their
legal dues immediately.
The Administrative Manager is hereby directed to pass orders on individual workers as per
draft attached.

We thus reach the tragic crescendo when the Management and the workmen fell apart and
all the workmen’s services were severed. Whether each of these orders using, in the
contemporaneous reasons, the vocabulary of misconduct but, in the formal part, the expression
‘discharge simpliciter’, should be read softly as innocent termination or sternly as penal action is
one of the principal disputes demanding decision.
We may as well complete the procession of events before taking up the major controversies
decisive of the case. The total termination of the entire work force of 853 employees was un-
doubtedly a calamity of the first magnitude in a country of chronic unemployment and starving
wages. Nevertheless, under certain circumstances, discharge of employees may well be within
the powers of the Management subject to the provisions of the Act. With all the strikers struck
off the rolls there was for a time the silence of the grave. The conditional invitation to the em-
ployees to seek de novo employment by fresh applications which would be considered on their
merits, left the workers cold. So the factory remained closed until 28 April 1973 when, with
new workers recruited from the open market, production recommenced. Among the militants,
the morale which kept the strike going remained intact, but among the others the pressure to
report for employment became strong. Re-employment of discharged workmen began and
slowly snowballed, so that by 31 July 1973 a substantial number of 419 returned to the factory.
The crack of workmen’s morale was accelerated by escalating re-employment and the Man-
agement’s restoration of continuity of service and other benefits for re-employed hands. The
employer relied on this gesture as proof of his bona fides. Meanwhile, there were exchanges of
letters between and ‘trading’ of charges against each other. The Management alleged that the
strikers were violent and prevented loyalists’ return while the Sabha was bitter that goondas were
hired to break the strike and promote blacklegs. These imputations have a familiar ring and
their impact on the legality of the discharge of workmen falls for consideration a little later. The
stream of events flowed on. The Sabha protested that the Management was terrorising workmen,
exploiting their sagging spirit and illegally insisting on fresh applications for employment while
they were in law continuing in services. With more ‘old workers’ trickling back for work and
their discharge orders being cancelled, the strike became counter-productive. Many overtures
on both sides were made through letters but this epistolary futility failed to end the embroglio
and brought no bread. The worker wanted bread, job, and no pyrrhic victory.
A crescent of hope appeared on the industrial sky. The Management put out a ‘final offer’ on
31 May 1973, calling on all workmen to rejoin lest the remaining vacancies also should be filled
by fresh recruits. The Sabha responded with readiness to settle and sought some clarifications
and assurances. The employer informed:

Our offer is open till 10-6-1973. From 11-6-1973 we shall recruit new hands to the extent
necessary. Thereafter workers who will not have reported for work shall have no chance left
for re-employment with us.
We repeat that those workers who will report for work will be taken back in employment with
continuity of their services, that the orders of discharge passed against them on 21-2-1973
shall be treated as cancelled and they will also be paid the difference in wages from 1969 as
per the recommendations of the Wage Board.
326 Social Justice and Labour Jurisprudence

The Sabha was willing and wrote back on 8-6-73 but sought details about the attitude of
the Management to the many pending demands. Meanwhile, the sands of time were running
out and so the Sabha telegraphed on 9th June that the workers were willing to report for work
but were being refused work. They demanded the presence of an impartial observer. The reply
by the Management repelled these charges, but there was some thaw in the estrangement, since
the time for return to work of the strikers was extended up to 16-6-73. An apparent end to a long
strike was seemingly in sight with the Sabha sore but driven to surrender. On 13-6-73 the
Sabha Secretary wrote back:

This is a further opportunity to you even now to show your bona fides. If you confirm to
take all the workmen discharged on 21-2-1973 as stated in your various letters and to give
them intimation and reasonable time to join, I will see that your offer is accepted by the
workmen.

Here, at long last, was the Management willing to ‘welcome’ back all the former employees
and the Sabha limping back to the old wheels of work. Was the curtain being finally drawn on
the feud? Not so soon, in a world of bad blood and bad faith; or may be, new developments
make old offers obsolete and the expected end proves an illusion. Anyway, the victor was the
Management and the vanquished the Sabha and the re-employment proffered was watered
down. In our materialist cosmos, often Might is Right and victory dictates morality!
Hot upon the receipt of the Sabha’s letter accepting the offer the Management back-tracked
or had second thoughts on full re-employment. For, they replied with a long catalogue of the
Sabha’s sins, set out the story of compulsion to keep the production going and explained that
since new hands had come on the scene full re-employment was beyond them. In its new mood
of victorious righteousness, the Management modified the terms of intake of strikers and saddled
choosy conditions on such absorption suggestive of breaking the Sabha’s solidarity:

As on the present working of the Company, the Company may still need about 250 more
workers including those to be on the casual list as per the employment position prior to
the start of the strike.
You may, therefore, send to us immediately per return of post the list of the workers who can
and are willing to join duty immediately so as to enable us to select and employ the workmen
as per the requirement of the Company. Further, it would also be necessary for you to state in
your reply that you have called off the strike and have advised the workers to resume the
work as otherwise it is not clear from your letter as to whether you are still advocating the
continuance of the strike or that you have called off the strike. Therefore, unless we have a
very definite stand known from you on this issue, it may not be even now possible for us to
enter into any correspondence with you.
We may again stress that if your tactics of prolonging the issue by correspondence are continued
the management would be constrained to take new recruits and in that case, at a later date it
may not be even possible to employ as many workmen as may be possible to employ now.

Nothing is more galling, says Sri Tarkunde, than for a Union which has lost the battle and
offered to go back to work to be told that it should further humiliate itself by formally declaring
the calling off of the strike. Sentiment apart, the Sabha had agreed to go back, but then the
management cut down the number to be re-employed to 250 and, even this, on a selective basis.
This selection could well be to weed out Union activists or to drive a wedge among the Union
members. These sensitive thoughts and hard bargains kept the two apart. The Sabha, wounded
but not wiped out, did not eat the humble pie. The Management, on account of the intervening
recruitments and injuries inflicted by the strike, did not budge either.
At this point we find that out of 853 employees who had been sacked 419 had wandered
back by July 31, leaving 434 workmen as flotsam. Their reinstatement became the focus of an
 Voluntary Arbitration as a Mechanism for Dispute Settlement 327

industrial dispute raised by the Sabha. A few more were left out of this jobless mass, and through
the intercession of the Commissioner of Labour both sides agreed to resolve their disagreement
by arbitral reference under Section 10A of the Act, confining the dispute to reinstatement of
400 workmen discharged on 21 February 1973. A reference under Section 10A materialised.
The ‘Labour litigation’ began in May 1975 and becoming ‘at each remove a lengthening chain’
laboured from deck to deck and is coming to a close, hopefully, by this decision. Is legal justice
at such expensive length worth the candle or counterproductive of social justice? Is a streamlined
alternative beyond the creative genius of Law India?
An aside:
As urgent as an industrial revolution is an industrial law revolution, if the rule of law were at all
to serve as social engineering. The current forensic process needs thorough overhaul because it
is over-judicialised and under-professionalised, lacking in social orientation and shop-floor know-
how and, by its sheer slow motion and high price, defeats effective and equitable solution leav-
ing both Managements and Unions unhappy. If Parliament would heed, we stress this need.
Industrial justice desiderates specialised processual expertise and agencies.
This factual panorama, omitting a welter of debatable details and wealth of exciting embellish-
ments, being not germane to the essential issues, leads us to a formulation of the decisive questions
which alone need engage our discussion. The Management might have been right in its version
or the Sabha might have been wronged as it wails, but an objective assessment of the proven
facts and unbiased application of the declared law will yield the broad basis for working out a
just and legal solution. Here, it must be noticed that a new Union now exists even though its
numerical following is perhaps slender. We are not concerned whether it is the favoured child of
the Management, although it has received soft treatment in several settlements which have
somewhat benefited the whole work force and suggests a syndrome not unfamiliar among some
industrial bosses allergic to strong unions.
The central problem on the answer to which either the award of the arbitrator or the judgment
of the High Court can be sustained as sound is whether the discharge of the workmen en masse
was an innocuous termination or a disciplinary action. If the latter, the High Court’s reasoning
may broadly be invulnerable. Secondly, what has been mooted before us is a question as to
whether the evidence before the Arbitrator, even if accepted at its face value, establishes any
misconduct of any discharged workman and further whether the misconduct, if any, made out
is of such degree as to warrant punitive discharge. Of course, the scope of Section 11A as in-
cluding arbitrators, the power of arbitrators, given sufficiently wide terms of reference, to examine
the correctness and propriety of the punishment, inter alia, deserve examination. Likewise
the rules regarding reinstatement, retrenchment, back wages, and the like fall for subsidiary
consideration.
Prefatory to this discussion is the appreciation of the constitutional consciousness with regard
to Labour Law. The Constitution of India is not a non-aligned parchment but a partisan of
social justice with a direction and destination which it sets in the Preamble and Article 38, and
so, when we read the evidence, the rulings, the statute and the rival pleas, we must be guided by
the value set of the Constitution. We not only appraise Industrial Law from this perspective in
the disputes before us but also realise that ours is a mixed economy with capitalist mores, only
slowly wobbling towards a socialist order, notwithstanding Sri Garg’s thoughts. And, after all,
ideals apart, ‘law can never be higher than the economic order and the cultural development
of society brought to pass by that economic order’. The new jurisprudence in industrial rela-
tions must prudently be tuned to the wave-length of our constitutional values whose emphatic
expression is found in a passage quoted by Chief Justice Rajamannar of the Madras High Court.
The learned Judge observed: (Law and the People—A Collection of Essays by V. R. Krishna Iyer,
p. 36).
328 Social Justice and Labour Jurisprudence

The doctrine of ‘laissez faire’ which held sway in the world since the time of Adam Smith has
practically given place to a doctrine which emphasises the duty of the State to interfere in the
affairs of individuals in the interests of the social well-being of the entire community. As
Julian Huxley remarks in his essay on ‘Economic Man and Social Man’, ‘Many of our old
ideas must be retranslated, so to speak, into a new language. The democratic idea of freedom,
for instance, must lose its nineteenth century meaning of individual liberty in the economic
sphere, and become adjusted to new conception of social duties and responsibilities. When a
big employer talks about his democratic rights to individual freedom, meaning thereby a
claim to socially irresponsible control over a huge industrial concern and over the lives of tens
of thousands of human beings whom it happens to employ, he is talking in a dying language’.

Homo economicus can no longer warp the social order. Even so the Constitution is ambitiously
called socialist but realists will agree that a socialist transformation of the law of labour relations
is a slow though steady judicial desideratum. Until specific legislative mandates emerge from
Parliament the court may mould the old but not make the new law. ‘Interstitially, from the
molar to the molecular’ is the limited legislative role of the court; as Justice Holmes said and
Mr Justice Mathew quoted.
The Core question:
Right at the forefront falls the issue whether the orders of discharge are, as contended by Sri
Tarkunde, de facto dismissals, punitive in impact and, therefore, liable to be voided if the pro-
cedural imperatives for such disciplinary action are not complied with, even though draped in
silken phrases like ‘termination simpliciter’. It is common case that none of the processes implicit
in natural justice and mandated by the relevant standing orders have been complied with, were
we to construe the orders impugned as punishment by way of discharge or dismissal. But Sri
Asoke Sen impressively insists that the orders here are simple terminations with no punitive
component, as, on their face, the orders read. To interpret otherwise is to deny to the employer
the right not to dismiss but to discharge, when the law gives him the option.
An analysis of the standing orders in the background of disciplinary jurisprudence is necessitous
at this point of the case.
The Model Standing Orders prescribed under Section 15 of the Industrial Employment
(Standing Orders) Act, 1946 apply to this factory. Order 23, clauses (1) and (4), relate to
termination of employment of permanent workmen. Termination of their services on giving
the prescribed notice or wages in lieu of such notice is provided for. But clause (4A) requires
reasons for such termination of service of permanent workmen to be recorded and, if asked for,
communicated. This is obviously intended to discover the real reason for the discharge so that
remedies available may not be defeated by clever phraseology of orders of termination. Clause
(7) permits the services of non-permanent workmen to be terminated without notice except
when such temporary workmen are discharged by way of punishment. Punitive discharge is
prohibited unless opportunity to show cause against charges of misconduct is afforded (Standing
Order 25). Orders of termination of service have to be by the Manager and in writing and
copies of Orders shall be furnished to the workmen concerned. Standing Order 24 itemises the
acts and omissions which amount to misconduct:

According to clause (b) of the said Standing Order, going on an illegal strike or abetting,
inciting, instigating or acting in furtherance thereof amount to misconduct. Standing Order
25 provides for penalty imposable on a workman guilty of misconduct. Accordingly amongst
other punishments, a workman could be visited with the penalty of discharge under Order
23 or dismissal without notice for a misconduct (see sub-clauses [f ] and [g] of clause [1]).
Clause (3) provides that no order of dismissal under sub-clause (g) of clause (1) shall be made
 Voluntary Arbitration as a Mechanism for Dispute Settlement 329

except after holding an enquiry against the workmen concerned in respect of the alleged mis-
conduct in the manner set forth in clause (4). Clause (4) provides for giving to the concerned
workman a charge-sheet and an opportunity to answer the charge and the right to be defended
by a workman working in the same department as himself and production of witnesses and
cross-examination of witnesses on whom the charge rests. Under clause (6), in awarding
punishment the Manager has to take into account the gravity of the misconduct, the previous
record, if any, of the workman, and any other extenuating or aggravating circumstances.

The finding of the arbitrator that the workmen went on a strike which was illegal and in
which they had participated is not disputed. [Against] this background, the application of the
procedural imperatives before termination of services of the workmen, in the circumstances of
the present case, has to be judged. This, in turn, depends on the key finding as to whether the
discharge orders issued by the management were punitive or non-penal.
The anatomy of a dismissal order is not a mystery, once we agree that substance, not semblance,
governs the decision. Legal criteria are not so slippery that verbal manipulations may outwit the
court. Broadly stated, the face is the index to the mind and an order fair on its face may be taken
at its face value. But there is more to it than that, because sometimes words are designed to con-
ceal deeds by linguistic engineering. So it is beyond dispute that the form of the order, or the
language in which it is couched is not conclusive. The court will lift the veil to see the true na-
ture of the order.
Many situations arise where courts have been puzzled because the manifest language of the
termination order is equivocal or misleading and dismissals have been dressed up as simple ter-
mination. And so, judges have delved into distinctions between the motive and the foundation
of the order and a variety of other variations to discover the true effect of an order of termination.
Rulings are a maze on this question but, in sum, the conclusion is clear. If two factors co-exist,
an inference of punishment is reasonable though not inevitable. What are they?
If the severance of service is effected, the first condition is fulfilled and if the foundation or
causa causans of such severance is the servant’s misconduct, the second is fulfilled. If the basis or
foundation for the order of termination is clearly not turpitudinous or stigmatic or rooted in
misconduct or visited with evil pecuniary effects, then the inference of dismissal stands negated
and vice versa. These canons run right through the disciplinary branch of master and servant
jurisprudence, both under Article 311 and in other cases including workmen under managements.
The law cannot be stultified by verbal haberdashery because the court will lift the mask and
discover the true face. It is true that decisions of this court and of the High Courts since Dhingra’s 26
case have been at times obscure, if cited dehors the full facts. In Samsher Singh’s 27 case the un-
satisfactory state of the law was commented upon by one of us, per [Justice] Krishna Iyer, quot-
ing Dr Tripathi for support:

In some cases, the rule of guidance has been stated to be ‘the substance of the matter’ and the
‘foundation’ of the order. When does ‘motive’ trespass into ‘foundation’. When do we lift the
veil of form to touch the ‘substance’? When the Court says so. These ‘Freudian’ frontiers ob-
viously fail in the work-a-day world and Dr Tripathi’s observations in this context are not
without force. He says:
As already explained, in a situation where the order of termination purports to be a mere
order of discharge without stating the stigmatizing results of the departmental enquiry a
search for the ‘substance of the matter’ will be indistinguishable from a search for the
motive (real unrevealed object) of the order. Failure to appreciate this relationship between
motive (the real, but unrevealed object) and form (the apparent; or officially revealed
object) in the present context has led to an unreal inter-play of words and phrases wherein
symbols like ‘motive’, ‘substance’, ‘form’ or ‘direct’ parade in different combinations with-
out communicating precise situations or entities in the world of facts.
330 Social Justice and Labour Jurisprudence

The need, in this branch of jurisprudence, is not so much to reach perfect justice but to lay
down a plain test which the administrator and civil servant can understand without subtlety
and apply without difficulty. After all, between ‘unsuitability’ and ‘misconduct’, ‘thin partitions
do their bounds divide’. And over the years, in the rulings of this Court the accent has shifted,
the canons have varied and predictability has proved difficult because the play of legal light
and shade has been baffling. The learned Chief Justice has in his judgment, tackled this prob-
lem and explained the rule which must govern the determination of the question as to when
termination of service of a probationer can be said to amount to discharge simpliciter and
when it can be said to amount to punishment so as to attract the inhibition of Article 311.

Masters and servants cannot be permitted to play hide and seek with the law of dismissals
and the plain and proper criteria are not to be misdirected by terminological cover-ups or by ap-
peal to psychic processes but must be grounded on the substantive reason for the order, whether
disclosed or undisclosed. The Court will find out from other proceedings or documents connected
with the formal order of termination what the true ground for the termination is. If, thus scru-
tinised, the order has a punitive flavour in cause or consequence, it is dismissal. If it falls short of
this test, it cannot be called a punishment. To put it slightly differently, a termination effected
because the master is satisfied of the misconduct and of the consequent desirability of terminat-
ing the service of the delinquent servant, it is a dismissal, even if he had the right in law to ter-
minate with an innocent order under the standing order or otherwise. Whether, in such a case
the grounds are recorded in a different proceeding from the formal order does not detract from
its nature. Nor the fact that, after being satisfied of the guilt, the master abandons the enquiry
and proceeds to terminate. Given an alleged misconduct and a live nexus between it and the
termination of service the conclusion is dismissal, even if full benefits as on simple termination,
are given and non-injurious terminology is used.
On the contrary, even if there is suspicion of misconduct the master may say that he does not
wish to bother about it and may not go into his guilt but may feel like not keeping a man he is
not happy with. He may not like to investigate nor take the risk of continuing a dubious ser-
vant. Then it is not dismissal but termination simpliciter, if no injurious record of reasons or
punitive pecuniary cut-back on his full terminal benefits is found. For, in fact, misconduct is not
then the moving factor in the discharge. We need not chase other hypothetical situations here.
What is decisive is the plain reason for the discharge, not the strategy of a non-enquiry or
clever avoidance of stigmatising epithets. If the basis is not misconduct, the order is saved. In
Murugan Mills28 this Court observed:

The right of the employer to terminate the services of his workman under a standing order,
like clause 17(a) in the present case, which amounts to a claim ‘to hire and fire’ an employee
as the employer pleases and thus completely negatives security of service which has been
secured to industrial employees through industrial adjudication, came up for consideration
before the Labour Appellate Tribunal in Buckingham Carnatic Co. Ltd. vs Workers of the Co.29
The matter then came up before this Court also in Chartered Bank vs Chartered Bank Employees’
Union30 and The Management of U.B. Dutt and Co. vs Workmen of U.B. Dutt and Co.,31
wherein the view taken by Labour Appellate Tribunal was approved and it was held that even
in a case like the present the requirement of bona fides was essential and if the termination of
service was a colourable exercise of the power or as a result of victimisation or unfair labour
practice the industrial tribunal would have the jurisdiction to intervene and set aside such
termination. The form of the order in such a case is not conclusive and the tribunal can go
behind the order to find the reasons which led to the order and then consider for itself
whether the termination was a colourable exercise of the power or was a result of victimisation
or unfair labour practice. If it came to the conclusion that the termination was a colourable
exercise of the power or was a result of victimisation or unfair labour practice it would have
the jurisdiction to intervene and set aside such termination.
 Voluntary Arbitration as a Mechanism for Dispute Settlement 331

Again, in Chartered Bank vs Employees’ Union32 this Court emphasised:

...The form of the order of termination is not conclusive of the true nature of the order, for
it is possible that the form may be merely a camouflage for an order of misconduct. It is,
therefore, always open to the Tribunal to go behind the form and look at the substance and
if it comes to the conclusion, for example, that though in form the order amounts to termin-
ation simpliciter, it in reality cloaks a dismissal for misconduct, it will be open to it to set it
aside as a colourable exercise of the power.

A rain of rulings merely adds to the volume, not to the weight of the proposition, and so we
desist from citing all of them. A Bench of seven judges of this Court considered this precise point
in Shamshar Singh’s33 case, and Chief Justice Ray ruled:

The form of the order is not decisive as to whether the order is by way of punishment. Even
an innocuously worded order terminating the service may in the facts and circumstances of
the case establish that an enquiry into allegations of serious and grave character of misconduct
involving stigma has been made in infraction of the provision of Article 811. In such a case
the simplicity of the form of the order will not give any sanctity. That is exactly what has hap-
pened in the case of Ishwar Chand Agarwal. The order of termination is illegal and must be
set aside.

Simple Termination or Punitive Discharge?

We must scan the present order of discharge of 853 workmen and ask the right questions to
decide whether they are punishments or innocent terminations. Neither judicial naiveté nor
managerial ingenuity will put the court off the track of truth. What, then, are the diagnostic
factors in the orders under study?
An isolated reading of the formal notices terminating their services reveals no stigma, no
penalty, and no misconduct. They have just been told off. But the Management admits that as
required by the Standing Orders it has recorded reasons for the discharge. There, several pages
of damnatory conduct have been heaped on the workers collectively accounting for the resort of
the Management to the extreme step of discharging the whole lot, there being no alternative.
Sri A. K. Sen took us through the various appeals made by the Management, the losses sustained,
the many offers to negotiate and arbitrate, the Sabha’s deaf obduracy and resort to sudden strike
and violent tactics and, worst of all, its attempts to persuade the Central Government to take
over the factory as a ‘sick’ mill. These ordeals were described by Sri Asoke Sen graphically to
justify the submission that the Management had no choice, caught between Scylla of strike and
Charybdis of take over, but to get rid of the strikers and recruit new workers. If the employer
did not discharge the strikers they were adamant and would not return to work, and the very
closure compelled by the Sabha was being abused by it to tell the Central Government that for
three months there had been no production and so the mill qualified to be taken over as ‘sick’
under the Industries (Development and Regulation) Act. If the Management discharged the
workers to facilitate fresh recruitment and save the factory from statutory takeover the cry was
raised that the action was dismissal because an elaborate enquiry was not held. The Management
had avoided injury to the workmen, argued Sri Sen, by merely terminating their services without
resort to disciplinary action and recording the uncomplimentary grounds in a separate invisible
order. He also underscored the fact that the strike was illegal and unjustified, as concurrently
held by the Arbitrator and the High Court.
We agree that industrial law promotes industrial life, not industrial death, and realism is the
soul of legal dynamics. Any doctrine that destroys industrial progress interlaced with social
justice is lethal juristic and cannot be accepted. Each side has its own version of the role of the
332 Social Justice and Labour Jurisprudence

other which we must consider before holding either guilty. Sri Tarkunde told us the tale of woe
of the workmen. In a country where the despair of Government is appalling unemployment it
is a terrible tragedy to put to economic death 853 workmen. And for what? For insisting that
the pittance of Rs 100/- per month be raised in terms of the Central Wage Board recommenda-
tions, as long ago agreed to by the Management but put off by the tantalising but treacherous
offer of arbitration when the point admitted of easy negotiated solution. Arbitration looks nice,
but, since 1969, the hungry families have been yearning for a morsel more, he urged. Blood,
toil, sweat and tears for the workers and all the profits and production for the Management was
the industrial irony! Knowing that every arbitral or other adjudicatory agency in India, especially
when weak Labour is pitted against strong Capital in the sophisticated processual system,
consumes considerable time, the lowly working class is allergic to this dilatory offer of arbitration.
They just don’t survive to eat the fruits. Such was his case.
The story of violence was also refuted by Sri Tarkunde, since the boot was on the other
leg. Goondas were hired by the Management to sabotage the fundamental right to strike and
with broken hearts several of [the workers] surrendered. When at last the Sabha agreed to see
that all workmen reported for work within the extended time, the Management took to
the typical tactics of victimisation, of refusing work for all, as first offered, and of picking and
choosing even for the 250 vacancies. Moreover, other conditions were put upon the Sabha cal-
culated to break unionism which those familiar with trade union movements would painfully
appreciate. This insult and injury apart, the orders of termination were plainly dismissals for a
series of alleged misconducts which were chronicled in separate proceedings. The formal order
was like a decree, the grounds recorded contemporaneously were like the judgment, to use
court vocabulary. It was obvious that the foundation for the termination was the catena of
charges set out by the Management. The true character of the order could not be hidden by the
unfair device of keeping a separate record and omitting it from the formal communication. Law
is not such an ass as yet and if the intent and effect is damnatory the action is disciplinary.
Between these two competing cases, presented by counsel, we have to gravitate towards the
correct factual-legal conclusion. A number of peripheral controversies have been omitted from
this statement, for brevity’s sake. When two high tribunals have spread out the pros and cons it
is supererogation for this court to essay likewise, and miniaturization is a wise husbandry of
judicial resources. First, we must decide whether the order of termination was a punitive discharge
or a simple discharge.
Here we reach the dilemma of the law for discovering unfailing guidelines to distinguish be-
tween discharge simpliciter and dismissal sinister. The search for infallible formulae is vain and
only pragmatic humanism can help navigate towards just solutions. We have earlier explained
that from Dhingra’s34 case to Shamsher Singh’s35 case, the law has been dithering but some rough
and ready rules can be decocted to serve in most situations. Law, in this area, is a pragmatist, not
a philologist, and we have set out the dual diagnostic tests applicable in such cases.
It was not retrenchment, according to the Management. Then what was it? If there was work
to be done, why terminate services of workmen except as punishment? Because, argued Sri Sen,
the workers did not work, being on strike and the Management, bent on keeping the factory
going, needed workmen who work. To recruit fresh hands into the lists and to keep the old hands
on the roster was double burden, and, therefore, the strikers had to be eased out to yield place
to new recruits. The object was not to punish the workmen but to keep the factory working.
Accepting this plea, as it were, the award of the arbitrator has exonerated the Management of
the charge of dismissal while the High Court has held the action to be dismissal for misconduct
and therefore bad in law.
In our opinion, the facts of the case before us speak for themselves. Here are workmen, on
strike. The strike is illegal. The Management is hurt because production is paralysed. The strikers
allegedly indulge in objectionable activities. The exasperated Management hits back by ordering
 Voluntary Arbitration as a Mechanism for Dispute Settlement 333

their discharge for reasons set out in several pages in the appropriate contemporaneous proceeding.
Misconduct after misconduct is flung on the workers to justify the drastic action. In all conscience
and common sense, the discharge is the punishment for the misconduct. The Management
minces no words. What is explicitly stated, is not a colourless farewell to make way for fresh
hands to work the factory until the strike is settled but a hard hitting order with grounds of
guilt and penalty of removal.
The inference is inevitable, however ingenious the contrary argument, that precisely because
the Management found the workmen refractory in their misconduct they were sacked. Maybe
the Management had no other way of working the factory but that did not change the character
of the action taken. Once we hold the discharge punitive the necessary consequence is that en-
quiry before punishment was admittedly obligatory and confessedly not undertaken. The orders
were bad on this score alone.
Sri A.K. Sen urged that in a dismissal the employee is denied some of the retiral and other
benefits which he gets in a simple discharge, and here all the employees were offered their full
monetary benefits, so that it was wrong to classify the orders of discharge as punitive. Maybe, a
dismissed servant may well be disentitled to some, at least, of the financial benefits which his
counterpart who is simply discharged may draw. But that is not a conclusive test. Otherwise,
the master may ‘cashier’ his servant and camouflage it by offering full retiral benefits. Dismissal
is not discharge plus a price. The substance of the action is the litmus test. In the present case,
the penal core, ‘tied in tooth and claw’, shows up once we probe: and the non-committal frame
of the formal order is a disguise. For a poor workman loss of his job is a heavy penalty when in-
flicted for alleged misconduct, for he is so hungry that, in Gandhiji’s expressive words, he sees
God Himself in a loaf of bread.
Before we leave this part of the case, a reference to some industrial law aspects and cases may
be apposite though a little repetitive. Standing orders certified for an industrial undertaking or
the Model Standing Orders framed under the Industrial Employment Standing Orders Act
provide for discharge simpliciter, a term understood in contradistinction to punitive discharge
or discharge by way of penalty. It is not unknown that an employer resorts to camouflage by
garbing or cloaking a punitive discharge in the innocuous words of discharge simpliciter. Courts
have to interpose in order to ascertain whether the discharge is one simpliciter or a punitive dis-
charge, and in doing so, the veil of language is lifted and the realities perceived. In the initial
stages the controversy raised was whether the court/tribunal had any jurisdiction to lift such
a veil. Probe and penetrate so as to reveal the reality, but this controversy has been set at rest by
the decision in Western India Automobile Association vs Industrial Tribunal, Bombay.36 The wide
scope of the jurisdiction of industrial tribunal/court in this behalf is now well established. If
standing orders or the terms of contract permit the employer to terminate the services of his
employee by discharge simpliciter without assigning reasons, it would be open to him to take
recourse to the said term or condition and terminate the services of his employee but when the
validity of such termination is challenged in industrial adjudication it would be competent to
the industrial tribunal to enquire whether the impugned discharge has been effected in the
bona fide exercise of the power conferred by the terms of employment. If the discharge has been
ordered by the employer in bona fide exercise of his power, then the industrial tribunal may not
interfere with it; but the words used in the order of discharge and the form which it may have
taken are not conclusive in the matter and the industrial tribunal would be entitled to go be-
hind the words and form and decide whether the discharge is a discharge simpliciter or not. If
it appears that the purported exercise of power to terminate the services of the employee was in
fact the result of the misconduct alleged against him, then the tribunal would be justified in
dealing with the dispute on the basis that, despite its appearance to the contrary, the order of
discharge is in effect an order of dismissal. In the exercise of this power, the court/tribunal would
be entitled to interfere with the order in question (see Assam Oil Co. vs Its Workmen).37 In the
334 Social Justice and Labour Jurisprudence

matter of an order of discharge of an employee as understood within the meaning of the Indus-
trial Disputes Act the form of the order and the language in which it is couched are not decisive.
If the industrial court is satisfied that the order of discharge is punitive or that it amounts to
victimisation or unfair labour practice it is competent to the court/tribunal to set aside the
order in a proper case and direct reinstatement of the employee (see Tata Oil Mills Co. Ltd. vs
Workmen).38 The form used for terminating the service is not conclusive and the tribunal has
jurisdiction to enquire into the reasons which led to such termination. In the facts of the case it
was found that Standing Orders provided that an employee could ask for reasons for discharge
in the case of discharge simpliciter. Those reasons were given before the tribunal by the appellant,
viz., that the respondent’s services were terminated because he deliberately resorted to go-slow
and was negligent in the discharge of his duty. It was accordingly held that the services of the
employee were terminated for dereliction of duty and go-slow in his work which clearly amounted
to punishment for misconduct and, therefore, to pass an order under clause 17(a) of the Standing
Orders permitting discharge simpliciter in such circumstances was clearly a colourable exercise
of power to terminate services of a workman under the provisions of the Standing Orders. In
these circumstances, the tribunal would be justified in going behind the order and deciding for
itself whether the termination of the respondent’s services could be sustained vide Management
of Murugan Mills Ltd. vs Industrial Tribunal, Madras.39 This view was affirmed in Tata Engineering
and Locomotive Co. Ltd. vs S. C. Prasad.40 After approving the ratio in Murugan Mills41 case, this
Court in L. Michael vs Johnson Pumps India Ltd.42 observed that the manner of dressing up an
order did not matter. The slightly different observation in Workmen of Sudder Office Cinnamare
vs Management,43 was explained by the Court and it was further affirmed that since the decision
of this Court in Chartered Bank vs Chartered Bank Employees’ Union,44 it has taken the consistent
view that if the termination of service is a colourable exercise of power vested in the management
or is a result of victimisation or unfair labour practice, the court/tribunal would have jurisdiction
to intervene and set aside such termination. It was urged that a different view was taken by this
Court in Municipal Corporation of Greater Bombay vs P.S. Malvenkar.45 The employee in that
case was discharged from service by paying one month’s wages in lieu of notice. This action was
challenged by the employee before the Labour Court and it was contended that it was a punitive
discharge. The Corporation contended that under Standing Order No. 26 the Corporation had
the power to discharge but there was an obligation to give reasons if so demanded by the em-
ployee. The Corporation had also the power to discharge by way of punishment. The Court in
this connection observed as under:

Now one thing must be borne in mind that these are two distinct and independent powers
and as far as possible neither should be construed so as to emasculate the other or to render it
ineffective. One is the power to punish an employee for misconduct while the other is the
power to terminate simpliciter the service of an employee without any other adverse conse-
quence. Now, proviso (i) to clause (1) of Standing Order 26 requires that the reason for ter-
mination of the employment should be given in writing to the employee when exercising the
power of termination of service of the employee under Standing Order 26. Therefore, when
the service of an employee is terminated simpliciter under Standing Order 26, the reason for
such termination has to be given to the employee and this provision has been made in the
Standing Order with a view to ensuring that the management does not act in an arbitrary
manner. The management is required to articulate the reason which operated on its mind in
terminating the service of the employee. But merely because the reason for terminating the
service of the employee is required to be given and the reason must obviously not be arbitrary,
capricious or irrelevant—it would not necessarily in every case make the order of termination
punitive in character so as to require compliance with the requirement of clause (2) of Standing
Order 21 read with Standing Order 23. Otherwise, the power of termination of service of an
employee under Standing Order 26 would be rendered meaningless and futile, for in no case
 Voluntary Arbitration as a Mechanism for Dispute Settlement 335

it would be possible to exercise it. Of course if misconduct of the employee constitutes the
foundation for terminating his service, then even if the order of termination is purported to
be made under Standing Order 26, it may be liable to be regarded as punitive in character
attracting the procedure of clause (2) of Standing Order 21 read with Standing Order 23,
though even in such a case it may be argued that the management has not punished the em-
ployee but has merely terminated his service under Standing Order 26.

It does not purport to run counter to the established ratio that the form of the order is not
decisive and the Court can lift the veil. However, it may be noted that there was an alternative
contention before the Court that even if the order of discharge was considered punitive in char-
acter, the employer corporation had led evidence before the labour court to substantiate the
charge of misconduct and that finding was also affirmed.
We are satisfied that the Management, whatever its motives vis-a-vis keeping the stream of
production flowing, did remove from service, on punitive grounds, all the 853 workmen.
The law is trite that the Management may still ask for an opportunity to make out a case for
dismissal before the Tribunal. The refinements of industrial law in this branch need not detain
us because the arbitrator did investigate and hold that the workmen were guilty of misconduct
and the ‘sentence’ of dismissal was merited, even as the High Court did reappraise and reach, on
both counts, the reverse conclusion.
The Sweep of Article 226:
Once we assume that the jurisdiction of the arbitrator to enquire into the alleged misconduct
was exercised, was there any ground under Article 226 of the Constitution to demolish that
holding? Every wrong order cannot be righted merely because it is wrong. It can be quashed
only if it is vitiated by the fundamental flaws of gross miscarriage of justice, absence of legal evi-
dence, perverse misreading of facts, serious errors of law on the face of the order, jurisdictional
failure and the like.
While the remedy under Article 226 is extraordinary and is of Anglo-Saxon vintage, it is not
a carbon copy of English processes. Article 226 is a sparing surgery but the lancet operates where
injustice suppurates. While traditional restraints like availability of alternative remedy hold
back the court, and judicial power should not ordinarily rush in where the other two branches
fear to tread, judicial daring is not daunted where glaring injustice demands even affirmative
action. The wide words of Article 226 are designed for service of the lowly numbers in their
grievances if the subject belongs to the court’s province and the remedy is appropriate to the
judicial process. There is a native hue about Article 226, without being anglophilic or anglophobic
in attitude. Viewed from this jurisprudential perspective, we have to be cautious both in not
overstepping as if Article 226 were as large as an appeal and not failing to intervene where a
grave error has crept in. Moreover, we sit here in appeal over the High Court’s judgment. And
an appellate power interferes when the order appealed is not right but only when it is clearly
wrong. The difference is real, though fine.
What are the primary facts which have entered the Tribunal’s verdict in holding the strikers
guilty of misconduct meriting dismissal? We must pause to remove a confusion and emphasise
that the dismissal order is not against the Union but the individual workers. What did each one
do? Did his conduct, when sifted and scrutinised, have any exculpation or extenuation? Not
strikers in the mass, but each worker separately, must be regarded as the unit of disciplinary
action. Each one’s role and the degree of turpitude, his defence on guilt and punishment, must
be adjudged before economic death sentence is inflicted. A typical trial process instance will
illumine the point. Suppose there is case of arson and murder in a village because of communal
factions and a hundred men from the aggressive community are charged in court with serious
offences. Suppose further that convincing testimony of the provocation and aggression by that
community is produced. Can any single member of the violent community be convicted on
336 Social Justice and Labour Jurisprudence

‘mass’ evidence, without specific charges of participation or clear proof of constructive involve-
ment? Judicial perspicacity clears this common fallacy. It is dangerous to mass-convict on the
theory of community guilt. Anger sometimes brings in this error.
In our assessment, the arbitrator has been swayed by generalities where particularities alone
would have sufficed. A long story may be made short by skipping the details and focussing on
essentials. We must, in fairness, state that the arbitrator, an experienced and accepted tribunal
in labour disputes, has exhaustively brought into the Award all available details pro and con
with over-emphasis here and there. There are only a few confusions in his long award but,
regrettably, they happen to be on a few fundamentals. The foremost, of course, is a mix-up be-
tween mob-misconduct and individual guilt. The next is getting lost in the oceanic evidence
while navigating towards a specified port. The High Court too has excelled in marshalling the
details and handling the legal issues, although, even there, shortcomings on basic issues have been
pointed out by Sri A.K. Sen. We too are apt to err and reverse ourselves although we try our
best to avoid error. The Supreme Court is final not because it is infallible; it is infallible because
it is final. We propose to examine the essential issues from the perspective we have set out and
in their proper jurisprudential bearings.
If misconduct was basic to the discharge and no enquiry precedent to the dismissal was made
the story did not end there in favour of the workmen. The law is well settled that the Management
may still satisfy the tribunal about the misconduct.
As a fact the arbitrator held misconduct proved. He further found that the circumstances
justified dismissal though he decided the order to mean discharge simpliciter. Was misconduct
proved against each discharged worker at least before the arbitrator? If it was, did every worker
deserve punitive discharge?
Dual jurisdictional issues arise here which have been argued at some length before us. The
position taken up by Sri Sen was that the High Court could not, under Article 226, direct rein-
statement, and even if it felt that the arbitrator had gone wrong in refusing reinstatement, the
court could only demolish the order and direct the arbitrator to reconsider the issue. What be-
longed, as a discretionary power, to a tribunal or other adjudicatory body, could not be wrested
by the writ court. To put it pithily, regarding the relief of reinstatement, the arbitrator could but
would not and the High Court would but could not. (We will deal later with the point that the
arbitrator had himself no power under Section 11A of the Act but did have it in view of the
wide terms of reference.)
The basis of this submission, as we conceive it, is the traditional limitations woven around
high prerogative writs. Without examining the correctness of this limitation, we disregard it
because while Article 226 has been inspired by the royal writs its sweep and scope exceed hide-
bound British processes of yore. We are what we are because our Constitution framers have felt
the need for a pervasive reserve power in the higher judiciary to right wrongs under our conditions.
Heritage cannot hamstring nor custom constrict where the language used is wisely wide. The
British paradigms are not necessarily models in the Indian Republic. So broad are the expressive
expressions designedly used in Article 226 that any order which should have been made by the
lower authority could be made by the High Court. The very width of the power and the dis-
inclination to meddle, except where gross injustice or fatal illegality and the like are present,
inhibit the exercise but do not abolish the power.
We may dilate a little more on Article 226 vis-à-vis awards of arbitrators. The first limb of the
argument is that when there is a voluntary joint submission of an industrial dispute to an arbi-
trator named by them under Section 10A of the Industrial Disputes Act, he does not function
as a Tribunal and is not amenable to the jurisdiction of that Court under Article 227 or under
Article 226. Without further elaboration this contention can be negatived on a decision of this
Court in Rohtas Industries Ltd. vs Rohtas Industries Staff Union.46 This Court observed that as the
arbitrator under Section 10A has the power to bind even those who are not parties to the refer-
ence or agreement and the whole exercise under Section 10A as well as the source of the force of
 Voluntary Arbitration as a Mechanism for Dispute Settlement 337

the award on publication derived from the statute, it is legitimate to regard such an arbitrator
now as part of the infra-structure of the sovereign’s dispensation of justice, thus falling within
the rainbow of statutory tribunals amenable to judicial review.
The second limb of the argument was that a writ of certiorari could not be issued to correct
errors of facts. In this connection after affirming the ratio in Engineering Mazdoor Sabha vs
Hind Cycle Ltd,47 this Court observes that what is important is a question of law arising on the
face of the facts found and its resolution ex facie or sub silentio. The Arbitrator may not state the
law as such; even then such acute silence confers no greater or subtler immunity on the award than
plain speech. We do not dilate on this part of the argument as we are satisfied that be the test
the deeply embedded rules to issue certiorari or the traditional grounds to set aside an arbi-
tration award, ‘thin partition do their bounds divide’ on the facts and circumstances of the pre-
sent case. Broadly stated, the principle of law is that the jurisdiction of the High Court under
Article 226 of the Constitution is limited to holding the judicial or quasi-judicial tribunals or
administrative bodies exercising the quasi-judicial powers within the leading strings of legality
and to see that they do not exceed their statutory jurisdiction and correctly administer the law
laid down by the statute under which they act. So long as the hierarchy of officers and appellate
authorities created by the statute function within their ambit the manner in which they do so
can be no ground for interference. The powers of judicial supervision of the High Court under
Article 227 of the Constitution (as it then stood) are not greater than those under Article 226
and it must be limited to seeing that a tribunal functions within the limits of its authority (see
Nagendra Nath Bora vs Commr. of Hills Division & Appeals, Assam).48 This led to a proposition
that in exercising jurisdiction under Article 226 the High Court is not constituted as a court of
appeal over the decision of authorities, administrative or quasi-judicial. Adequacy or sufficiency
of evidence is not its meat. It is not the function of a High Court in a petition for a writ under
Article 226 to review the evidence and to arrive at an independent finding on the evidence. (See
State of Andhra Pradesh vs S. Sree Rama Rao).49 A Constitution Bench of this Court in P. H. Kalyani
vs Air France, Calcutta,50 succinctly set out the limits of the jurisdiction of the High Court in
dealing with a writ petition. It was said that in order to justify a writ of certiorari it must be
shown that an order suffers from an error apparent on the face of the record. It was further
pointed out that if the finding of fact is made by the impugned order and it is shown that it
suffers from an error of law and not of fact, a writ under Article 226 would issue, and, while so
saying, the decision in Nagendra Nath Bora’s51 case was affirmed. Following the aforementioned
decision, the Gujarat High Court in Navinchandra vs Manager, Ahmedabad Co-op. Department
Stores Ltd.,52 observed that the amended Article 226 would enable the High Court to interfere
with an award of the industrial adjudicator if that is based on a complete misconception of law
or it is based on no evidence or that no reasonable man would come to the conclusion to which
the arbitrator has arrived.
Even apart from, but while approving, the Gujarat ruling in (1978) 19 Guj LR 108 cited be-
fore us, we are satisfied that the writ power is larger, given illegality and injustice, even if its use
is severely discretionary, as decided cases have repeatedly laid down. We overrule the objection
of invalidity of the High Court’s order for want of power.
The more serious question is whether the arbitrator had the plenitude of power to re-examine
the punishment imposed by the Management, even if he disagreed with its severity. In this case
the arbitrator expressed himself as concurring with the punishment. But if he had disagreed,
as the High Court, in his place, did, could be have interfered? Armed with the language of Sec-
tion 11A, which confers wide original power to the tribunal to re-fix the ‘sentence’, Sri Sen argued
that an arbitrator was uncovered by this new section. So, even if he would, he would not. And,
in this case if he could, he would not. There the matter ended, was the argument. We disagree.
Even if he could, he would not, true; but that did not preclude the High Court from reviewing
the order in exercise of its extraordinary constitutional power. Moreover, Section 11A did clothe
the arbitrator with similar power as tribunals, despite the doubt created by the abstruse absence
338 Social Justice and Labour Jurisprudence

of specific mention of ‘arbitrator’ in Section 11A. This position needs closer examination and
turns on interpretational limitations. At this stage, to facilitate the discussion, we may read the
provision:

Section 11A: Where an industrial dispute relating to the discharge or dismissal of a workman
has been referred to a Labour Court. Tribunal or National Tribunal for adjudication and, in
the course of the adjudication proceedings, the Labour Court, Tribunal or National Tribunal,
as the case may be, is satisfied that the order of discharge or dismissal was not justified, it
may, by its award, set aside the order of discharge or dismissal and direct reinstatement of the
workman on such terms and conditions, if any, as it thinks fit, or give such other relief to
the workman on such terms and conditions, if any, as it thinks fit, or give such other relief to
the workman, including the award of any lesser punishment in lieu of discharge or dismissal
as the circumstances of the case may require;
Provided that in any proceeding under this section the Labour Court, Tribunal or National
Tribunal, as the case may be, shall rely on the materials on record and shall not take any fresh
evidence in relation to the matter.

Section 11A was introduced in purported implementation of the I.L.O. recommendation which
expressly referred, inter alia, to arbitrators. The Statement of Objects and Reasons which illumines
the words of the legislative text when it is half-lit, even if it cannot directly supplement the
Section, does speak of the I.L.O. recommendations, and in terms of tribunals and arbitrators.
When it came to drafting Section 11A, the word ‘arbitrator’ was missing. Was this of deliberate
legislative design to deprive arbitrators, who discharge identical functions as tribunals under the
Industrial Disputes Act, of some vital powers which vested in their tribunal brethren? For what
mystic purpose could such distinction be? Functionally, tribunals and arbitrators belong to the
same brood. The entire scheme, from its I.L.O. genesis, through the Objects and Reasons, fit in
only with arbitrators being covered by Section 11A, unless Parliament cheated itself and the
nation by proclaiming a great purpose essential to industrial justice and, for no rhyme or reason
and wittingly or unwittingly, withdrawing one vital word. Every reason for clothing tribunals
with Section 11A powers applies a fortiori to arbitrators. Then why omit? Could it be synoptic
omission which did not affect the semantics because a tribunal, in its wider connotation, embraced
every adjudicatory organ including an arbitrator? An economy of words is a legislative risk be-
fore a judiciary accustomed to the Anglo-Saxon meticulousness in drafting. We may easily see
meaning by one construction. A ‘tribunal’ is merely a seat of justice or a judicial body with juris-
diction to render justice. If an arbitrator fulfils this functional role—and he does—how can he
be excluded from the scope of the expression? A caste distinction between courts, tribunals,
arbitrators and others is functionally fallacious and, in our context, stems from confusion. The
section makes only a hierarchical, not functional, difference by speaking of tribunals and national
tribunals. So we see no ground to truncate the natural meaning of ‘tribunal’ on the supposed
intent of Parliament to omit irrationally the category of adjudicatory organs known as arbitrators.
To cut down is to cripple and the art of interpretation makes whole, not mutilates[;] furthers
the expressed purpose, not hampers by narrow literality.
Section 2(r) defines Tribunal thus:

‘Tribunal’ means an Industrial Tribunal constituted under Section 7A and includes an Indus-
trial Tribunal constituted before the 10th day of March, 1957, under this Act;

Prima facie it is a different category from arbitrators but all statutory definitions are subject to
contextual changes. It is perfectly open to the court to give the natural meaning to a word de-
fined in the Act if the context in which it appears suggests a departure from the definition be-
cause then there is something repugnant in the subject or context.
 Voluntary Arbitration as a Mechanism for Dispute Settlement 339

Then what is the natural meaning of the expression Tribunal? A tribunal literally means a
seat of justice. Maybe, justice is dispensed by a quasi-judicial body, an arbitrator, a commission,
a court or other adjudicatory organ created by the State. All these are tribunals and naturally
the import of the word embraces an arbitration tribunal. Stroud’s Judicial Dictionary (Vol. 4
p. 3093) speaks of ‘tribunal’ in this wider sense and quoted Fry, L. J. in Dawkins v. Rokeby,53
Affirmed, [1875] 7 HL 744):

I accept that, with this qualification that I do not like the word ‘tribunal’. The word is am-
biguous, because it has not like ‘courts’ any ascertainable meaning in English law (Royal
Acquarium vs Parkinson,54 cited Court).

There is a reference to the Bishop’s Commission of enquiry as a judicial tribunal and, significantly,
specific mention has been made in these terms.

Disputes between employers and employees are referred to such tribunals as the Civil Service
Arbitration Tribunal, National Arbitration Tribunal and the Industrial Disputes Tribunal.
(Stroud’s Judicial Dictionary, p. 3094).

We have hardly any doubt that ‘tribunal’ simpliciter has a sweeping signification and does
not exclude ‘arbitrator’.
Here we come upon a fundamental dilemma of interpretative technology vis-a-vis the judicative
faculty. What are the limits of statutory construction? Does creativity in his jurisprudential area
permit travel into semantic engineering as substitute for verbalism? It is increasingly important
for developing countries, where legislative transformation of the economic order is an urgent
item on the national agenda, to have the judiciary play a meaningful role in the constitutional
revolution without ferreting out flaws in the draftsman, once the object and effect are plain.
Judges may not be too ‘Anglophonic’ lest the system fail.
It is edifying to recall from Robert Stevens’ Law and Politics of the House of Lords as a judi-
cial body:

Moreover, Macmillan, who began to specialize in the increasingly frequent tax appeals, con-
tinued to develop this highly artificial approach. In Inland Revenue Commrs. vs Ayrshire Em-
ployers Mutual Insurance Association,55 when Parliament had clearly intended to make the
annual surpluses of mutual insurance companies subject to tax, Macmillan found a particularly
formalistic argument to show that this had not been the effect of Section 31 of the Finance
Act of 1933. He was then happily able to announce, ‘The Legislature has plainly missed
fire’.56 Of this decision Lord Diplock was later to say that ‘if, as in this case, the Courts can
identify the target of Parliamentary legislation their proper function is to see that it is hit; not
merely to record that it has been missed. Here is judicial legislation at its worst’.57

We would rather adopt Lord Diplock’s thought and have the court help hit the legislative
target, within limits, than sigh relief that the legislative fire has missed the bull’s eye. Of course,
the social philosophy of the Constitution has, as ruled by this court in several cases, a role in
interpretative enlightenment and judicial value vision.
We may reinforce this liberal rule of statutory construction, being a matter of importance in
the daily work of the Court, by reference even to Roman Law from Justinian’s days down to the
American Supreme Court. ‘Not all special cases can be contained in the laws and resolutions of
the Senate’, said the Roman jurist Jullianus, ‘but where their meaning is manifest in some case,
the one who exercises jurisdiction must apply the provision analogously and in this way administer
justice’.58 Pro. Bodenheimer has explained that Civil Law does not regard words as the sole basis
340 Social Justice and Labour Jurisprudence

of law but allows it to be modified by purpose. Celsus added the following admonition to these
general principles of interpretation: ‘The laws should be liberally interpreted, in order that their
intent be preserved’.59

Samuel Thorne has shown that, during certain periods of English medieval history, the
position of the Common Law towards the construction of statutes was similar to the general
attitude of the Roman and Civil Law. Statutes were frequently extended to situations not
expressly covered by them.60

Plowden pointed out that ‘when the words of a statute enact one thing, they enact all other
things which are in the like degree’.61 Plowden demonstrated that a statutory remedy at that
time was deemed to be merely illustrative of other analogous cases that deserved to be governed
by the same principle.

Our law (like all others) consists of two parts, viz. of body and soul, the letter of the law is the
body of the law, and the sense and reason of the law is the soul of the law... And it often
happens that when you know the letter, you know not the sense, for sometimes the sense is
more confined and contracted than the letter, and sometimes it is more large and extensive.62

Prof. Bodenheimer states that the American trend is towards a purpose-oriented rather than a
plain-meaning rule in its rigid orthodoxy. In United States vs American Trucking Association,63
the U.S. Supreme Court wrote:

When the plain meaning has led to absurd or futile results... this Court has looked beyond
the words to the purpose of the Act. Frequently, however, even when the plain meaning did
not produce absurd results but merely an unreasonable one ‘plainly at variance with the pol-
icy of the legislation as a whole’, this Court has followed that purpose rather than the literal
words. When aid to construction of the meaning of words, as used in the statute is available,
there can certainly be no ‘rule of law’ which forbids its use, however clear the words may be
on ‘superficial examination’.

In the present case, as the narration of the facts unfolded, the reference of the dispute was to
an arbitrator. He reinvestigated and reassessed the evidence bearing on the guilt of the discharged
workmen after giving an opportunity to both sides to adduce evidence thereon. Admittedly, he
had this power. But had he the follow-up power, if he held the men guilty of punitive misconduct,
to reweigh the quantum of punishment having regard to the degree of culpability? This juris-
diction he enjoys if Section 11A includes ‘arbitrators’. This, in turn, flows from our inference as
to whether the word ‘tribunal’ takes in an adjudicatory organ like the arbitrator. It is plain that
the expression ‘arbitrator’ is not expressly mentioned in Section 11A. Nevertheless, if the meaning
of the word ‘tribunal’ is wider rather than narrower, it will embrace ‘arbitrator’ as well. That is
how the dynamics of interpretation are, in one sense, decisive of the fate of the present appeal.
Competing interpretative angles have contended for judicial acceptance. English preferences
apart, Indian sociolegal conditions must decide the choice in each situation. Sometimes judges
are prone to castigate creative interpretation in preference to petrified literality by stating that
judges declare the law and cannot make law. The reply to this frozen faith is best borne out by
Lord Radcliffe’s blunt words:

There was never a more sterile controversy than that upon the question whether a judge
makes law. Of course he does. How can he help it?... Judicial law is always a reinterpretation
of principles in the light of new combinations of facts... (J)udges do not reverse principles,
once well established, but they do modify them, extend them, restrict them and even deny
their application to the combination in hand.64
 Voluntary Arbitration as a Mechanism for Dispute Settlement 341

Lord Devlin, in his ‘Samples of Lawmaking’, agreed that judges are fashioners of law, if not cre-
ators out of material supplied to them, and went on to observe:

If the House of Lords did not treat itself as bound by its own decisions, it might do its own
lopping and pruning... and perhaps even a little grafting, instead of leaving all that to the
legislature. But it could not greatly alter the shape of the tree.65

Even so eminent a judge as Lord Reid leaned to the view that the law should be developed
since it was not static and, in this limited sense, judges are lawmakers although this view prevented
‘technical minded Judges (from pressing) precedents to their logical conclusions’.66 On the
whole, a just and humanist interpretative technique, meaning permitting, is the best. We do
not mean to conclude that judges can take liberties with language ad libitum and it is wholesome
to be cautious, as Lord Reid, in Shaw vs D.P.P,67 warned: ‘Where Parliament fears to tread it is
not for the courts to rush in.’
We are persuaded that there is much to learn from Lord Denning’s consistent refrain about
the inevitable creative element in the judicial process in the interpretative area. We permit our-
selves a quote from Lord Denning because Shri A. K. Sen did draw our attention to straightening
the creases as permissible but not stitching the cloth, making a critical reference to the controversial
activism of which Lord Denning was a leading light:

The truth is that the law is uncertain. It does not cover all the situations that may arise. Time
and again practitioners and judges are faced with new situations where the decision may go
either way. No one can tell what the law is until the courts decide it. The judges do everyday
make law, though it is almost heresy to say so. If the truth is recognised then we may hope to
escape from the dead hand of the past and consciously mould new principles to meet the
needs of the present.

Mr Justice Mathew in Kesavananda Bharti’s 68 case referred with approval—and so do we—to

the observations of Justice Holmes:69

I recognize without hesitation that judges do and must legislate, but they can do so only
interstitially; they are confined from molar to molecular motions.

Arthur Selwyn Miller writes: ‘Some have called it (the Supreme Court) the highest legislative
chamber in the nation. Although there is no question that the Court can and does make law,
and does so routinely...’70
Assuming the above approach to be too creatively novel for traditionalism, let us approach
the same problem from a conventional angle authenticated by case-law. The question of con-
struction of Section 11A was argued at length, as to whether an omission of any reference to
arbitrator appointed under Section 10A in Section 11A would suggest that the arbitrator under
Section 10A, notwithstanding the terms of reference, would not enjoy the power conferred on
all conceivable industrial adjudicators under Section 11A. It was said, after referring to the
Objects and Reasons in respect of the bill which was moved to enact Section 11A in the Industrial
Disputes Act, that while the I.L.O. had indicated that an arbitrator selected by the parties for
adjudication of industrial dispute must be invested with power by appropriate legislation as
found in Section 11A, the Parliament, while enacting the section, in its wisdom, did not include
the arbitrator even though other adjudicators of industrial disputes have been conferred such
power and, therefore, it is a case of casus omissus. Reliance was placed on Gladstone vs Bower,71
where the question arose whether a reference to a tenancy from year to year in Section 2(1) of
the Agricultural Holdings Act, 1948 would also cover a tenancy for 18 months which could be
342 Social Justice and Labour Jurisprudence

terminated at the end of the first year. The submission was that even though no notice was ne-
cessary at common law because the tenancy would automatically terminate at the expiry of the
specified period of tenancy, the tenancy took effect as tenancy from year to year by virtue of
Section 2(1) of the Act so that it continued until terminated by notice to quit and, therefore,
the landlord was not entitled to possession without notice. It was further contended that if a
tenancy from year to year was to get the protection of the Act, it is inconceivable that tenancy
for a longer duration would not qualify for that protection. Court of Appeal negatived this con-
tention holding that this is a case simply of casus omissus and the Act is defective. The court
further held that if it were ever permissible for the Court to repair a defective Act of Parliament,
the Court would be very glad to do so in this case so far as the Court could. The Court will
always allow the intention of a statute to override the defects of wording, but the Court’s ability
to do so is limited by the recognised canons of interpretation. The Court may, for example, pre-
fer an alternative construction which is less well fitted to the words but better fitted to the in-
tention of the Act. But here, for the reasons given by the learned Judge, there is no alternative
construction; it is simply a case of something being overlooked. The Court cannot legislate for
a casus omissus. To do so would be to usurp the function of the legislature (see Magor & St.
Mellons Rural District Council vs Newport Corporation).72 Where the statute’s meaning is clear
and explicit, words cannot be interpolated. Even where the meaning of the statute is clear and
sensible, either with or without the omitted word, interpolation is improper, since the primary
source of the legislative intent is in the language of the statute (see Crawford’s ‘Construction of
Statutes’, 1940 Edn, p. 269 extracted in S. Narayanaswami vs G. Panneerselvam, AIR 1972 SC
2284, para 20). Undoubtedly, the Court cannot put into the Act words which are not expressed,
and which cannot reasonably be implied on any recognised principles of construction. That
would be a work of legislation, not of construction, and outside the province of the Court (see
Kamalaranjan vs Secy. of State).73 Similarly, where the words of the statute are clear, it would not
be open to the Court, in order to obtain a desired result, either to omit or add to the words of
the statute. This is not the function of the Court charged with a duty of construction. This ap-
proach has, however, undergone a sea change as expressed by Denning, L.J. in Seaford Court
Estates Ltd. vs Asher,74 wherein he observed as under:

When a defect appears, a judge cannot simply fold his hands and blame the draftsman. H e
must set to work on the constructive task of finding the intention of Parliament... and then
he must supplement the written words so as to give ‘force and life’ to the intention of legis-
lature... A judge should ask himself the question how, if the makers of the Act had themselves
come across this ruck in the texture of it, they would have straightened it out? He must then
do as they would have done. A judge must not alter the material of which the Act is woven,
but he can and should iron out the creases.

Approved in State of Bihar vs Dr Asis Kumar Mukherjee.75 The old order changeth, yielding
place to new.
This long excursion has become important because, once in a while, social legislation which
requires sharing of social philosophy between the Parliament and the Judiciary meets with its
Waterloo in the higher courts because the true role of interpretation shifts from judge to judge.
We are clearly of the view that statutory construction which fulfils the mandate of the statute
must find favour with the judges, except where the words and the context rebel against such
flexibility. We would prefer to be liberal rather than lexical when reading the meaning of industrial
legislation which develops from day to day in the growing economy of India. The necessary
conclusion from this discussion is that the expression ‘tribunal’ includes, in the statutory setting,
an arbitrator also. Contemporaneous para-legislative material may legitimately be consulted
when a word of wider import and of marginal obscurity needs to be interpreted. So viewed, we
are not in a ‘sound-proof system’ and the I.L.O. recommendation accepted by India and the
 Voluntary Arbitration as a Mechanism for Dispute Settlement 343

Object and Reasons of the amending Act leave no doubt about the sense, policy and purpose.
Therefore Section 11A applies to the arbitrator in the present case and he has the power to ex-
amine whether the punishment imposed in the instant case is excessive. So has the High Court,
if the Award suffers from a fundamental flaw.
A study of the lengthy award discloses no mention of Section 11A, and presumably, the au-
thority was unmindful of that provision while rendering the verdict. In a limited sense, even
prior to Section 11A, there was jurisdiction for a labour tribunal, including an arbitrator, to go
into the punitive aspect of the Management’s order. This Court has, in a catena of cases, held
that a mala fide punishment is bad in law and when the punishment is grotesquely condign or
perversely harsh or glaringly discriminatory, an easy inference of bad faith, unfair labour practice
or victimisation arises. The wider power to examine or prescribe the correct punishment belongs
to the tribunal/arbitrator even under Section 11 if no enquiry (or a defective enquiry which is
bad and, therefore, can be equated with a ‘no enquiry’ situation) has been held by the Manage-
ment. For then there is no extant order of guilt or punishment and the tribunal determines it
afresh. In such a virgin situation, both culpability and quantification of punishment are within
the jurisdiction of the tribunal/arbitrator. The present is such a case.
Volleys of rulings from both sides were fired during arguments, the target being the limited
area of the tribunal’s power to overturn the quantum of punishment awarded by the Management.
We do not think it necessary to regurgitate all that has been said by this Court up to now, since
it is sufficient to bring out the correct law in the light of the leading citations. It is incontrovertible
that where, as here, no enquiry has been held by the Management, entire subject is at large and
both guilt and punishment, in equal measure, may be determined, without inhibition of juris-
diction, by the tribunal.
Lastly, as rightly urged by counsel for the Sabha, an arbitrator has all the powers the terms of
reference, to which both sides are party, confer. Here, admittedly, the reference is very widely
worded and includes the nature of the punishment. The law and the facts do not call for further
elaboration and we hold that, in any view, the arbitrator had the authority to investigate into
the propriety of the discharge and the veracity of the misconduct. Even if Section 11A is not
applicable, an arbitrator under Section 10A is bound to act in the spirit of the legislation under
which he is to function. A commercial arbitrator who derives his jurisdiction from the terms of
reference will, by necessary implication, be bound to decide according to law and, when one
says ‘according to law’, it only means existing law and the law laid down by the Supreme Court
being the law of the land, an Arbitrator under Section 10A will have to decide keeping in view
the spirit of Section 11A (see Union of India vs Bungo Steel Furniture Pvt. Ltd.).76 The jurisdictional
hurdles being thus cleared, we may handle the basic facts and the divergencies between the
Arbitrator and the High Court before moulding the final relief.
Prefatory to the discussion about the factum of misconduct and its sequel, we must remind
ourselves that the strike was illegal, having been launched when another industrial dispute was
pending adjudication. Section 23(a) appears, at a verbal level, to convey such a meaning, al-
though the ambit of sub-clause (a) may have to be investigated fully in some appropriate case in
the light of its scheme and rationale. It looks strange that the pendency of a reference on a tiny
or obscure industrial dispute—and they often pend too long—should block strikes on totally
unconnected yet substantial and righteous demands. The Constitutional implications and practical
complications of such a veto of a valuable right to strike often leads not to industrial peace but
to seething unrest and lawless strikes. But in the present case, both before the arbitrator and High
Court, the parties have proceeded on the agreed footing that the strike was illegal under Sec-
tion 23(a). We do not reopen the issue at this late stage and assume the illegality of the strike.
The Fatal Flaw in the Award:
The Achilles heel of the arbitrator’s award is where he makes, as a substitute for specific and
individuated findings of guilt and appropriate penalty vis-a-vis each workman, a wholesale survey
344 Social Justice and Labour Jurisprudence

of the march of events, from tension to breakdown, from fair settlement to illegal and unjustified
strike, from futility of negotiation to readiness for arbitration, from offer of full re-employment
to partial taking back on application by workmen in sack cloth and ashes, by picking and
choosing after a humble declaration that the strike has been formally buried, from episodes of
violence and paralysis of production to backstage manoeuvres to get the factory taken over as a
‘sick mill’, and after a full glimpse of this scenario, holds that the Sabha was always in the wrong,
and inevitably, the Management was surely reasonable and, ergo, every employee must indi-
vidually bear the cross of misconduct and suffer dismissal for the sins of the Sabha leadership—
its secretary was not an employee of the mill—by some sub-conscious doctrine of guilt by asso-
ciation! Non Sequitur.
Each link in the chain of facts has been challenged by the respondents, but let us assume them
to be true, to test the strength of the legal fibre of the verdict. (We may mention by way of aside
that the Company seems to be a well managed one.)
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 the disciplinary jurisdiction is that no worker shall be dismissed 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 arbi-
trator 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?
What, at long last, is the answer to the only pertinent question in a disciplinary proceeding,
viz. what is the specific misconduct against the particular workman who is to lose his job and
what is his punitive desert? Here you can’t generalise any more than a sessions judge can, by
holding a faction responsible for a massacre, sentence every denizen of that faction’s village to
death penalty. The legal error is fundamental, although lay instinct may not be outraged. What
did worker A do? Did he join the strike or remain at home for fear of vengeance against blacklegs
in a para-violent situation? Life and limb are dearer than loyalty, to the common run of men,
and discretion is the better part of valour. Surely, the Sabha complained of Management’s goondas
and the latter sought police aid against the unruly core of strikers. In between, the ordinary
rustic workmen might not have desired to be branded blacklegs or become martyrs and would
not have reported for work. If not being heroic in daring to break through the strike cordon—
illegal though the strike be—were misconduct, the conclusion would have been different. Not
reporting for work does not lead to an irrebuttable presumption of active participation in the
strike. More is needed to bring home the mens rea and that burden is on the prosecutor, to wit,
the Management. Huddling together the eventful history of deteriorating industrial relations
and perverse leadership of the Sabha is no charge against a single worker whose job is at stake on
dismissal. What did he do? Even when lawyers did go on strike in the higher courts or organize
a boycott, legally or illegally, even top law officers of the Central Govt. did not attend court,
argued Shri Tarkunde, and if they did not boycott but merely did not attend, could workers
beneath the bread line be made of sterner stuff. There is force in this pragmatic approach. The
strike being illegal is a non-issue at this level. The focus is on active participation. Mere absence,
without more, may not compel the conclusion of involvement.
Likewise, the further blot on the strike, of being unjustified, even if true, cuts no ice. Unjusti-
fied, let us assume; so what? The real question is, did the individual worker, who was to pay the
penalty, actively involve himself in this unjustified misadventure? Or did he merely remain a
quiescent non-worker during that explosive period? Even if he was a passive striker, that did not
visit him with the vice of activism in running an unjustified strike. In the absence of proof of being
 Voluntary Arbitration as a Mechanism for Dispute Settlement 345

militant participant, the punishment may differ. To dismiss a worker, in an economy cursed by
massive unemployment, is a draconian measure as a last resort. Rulings of this Court have held
that the degree of culpability and the quantum of punishment turn on the level of participation
in the unjustified strike. Regrettably, no individualised enquiry has been made by the Arbitrator
into this significant component of delinquency. Did any dismissed worker instigate, sabotage
or indulge in vandalism or violence?
The Management’s necessity to move the mill into production for fear of being branded a
‘sick unit’ is understandable. Of course, collective strike is economic pressure by cessation of
work and not exchange of pleasantries. It means embarrassing business. Such a quandary cannot
alter the law. Here the legal confusion is obvious. No inquest into the Management’s recruitment
of fresh hands is being made at this stage. The inquiry is into the personal turpitudes of particular
workmen in propelling an illegal and unjustified strike and the proof of their separate part
therein meriting dismissal. The despair of the Management cannot, by specious transformation
of logic, be converted into the despair of each of the 853 workmen. Sympathies shall not push
one into fallacies.
We may now concretise this generalised criticism of the otherwise well-covered award. The
crowd of documents and carping attitudes must have added to the strain on the Arbitrator:

A voluminous record of documents and correspondence has been produced before me by

both sides. There have been allegations and counter allegations made by both sides not only
against each other but even against the Police, the Department of Labour and persons in
Authority. The history has been sought to be traced right from the inception of the Company
in 1966 or 1967, by the Company to show that their conduct has been always proper and
above reproach and by Sabha to establish that not only the Gujarat Steel Tubes Ltd. were not
fair to the employees but that every action of theirs good or bad was ill-motivated, was
executed with some sinister ulterior motives.

The Award set out the history of the Company, its vicissitudes, the hills and valleys, the lights
and shadows, of industrial relations with mob fury and lock-outs and allied episodes often end-
ing in settlements and pious pledges. Then the Arbitrator stressed Clause 6 of the Agreement
of December 1971, which bespoke a no-strike zone for five years. There was reference to the
Management’s promise to implement the Wage Board recommendations. The Arbitrator was
upset that despite Clause 6, a strike was launched, but was not disturbed that despite the Wage
Board proposals, negotiations were being baulked and an interminable arbitral alternative was
being offered by the Management. He exclaimed:

If such a settlement arrived at was not respected and implemented the machinery provided
by Law would lose all meaning and so also the sanctity of the word of the Management or the
word of the union. It is, therefore, essential to ascertain who was responsible for the breach of
the agreement so solemnly entered into. Serious breach by management is alleged, and this is
given as a reason or is made as an excuse for getting rid of the obligations arising out of the
agreement which specifically could not be terminated for five years.

The narration continues and the following conclusion is reached:

It is thus very clear that the company had fully discharged its obligation under the allegation
made by the Sabha of the company having made a breach thereof is not correct.

We thus see that at this stage, the arbitrator has merely made a generalised approach as if a com-
mission of inquiry were going into the conduct of the Management and the Sabha to discover
346 Social Justice and Labour Jurisprudence

who was blameworthy in the imbroglio. The award then swiveled round to a study of the case
of the Sabha vis-a-vis the triple grievances the Sabha had:

I shall first deal with the grievance regarding demands for implementation of the recommenda-
tions of the Wage Board.

The long and sterile correspondence was set out and the arbitrator arrived at the conclusion
that the insistence on reference to arbitration as against negotiation was justified on the part
of the Management:

I, therefore, have accepted the version of the Management and disbelieved the motivated
denial of the Sabha in this respect.

The culmination of the protracted discussion on the atmosphere and environment, rather
than on the actual charge against each worker, was recorded in the Award:

I have exhaustively, perhaps more exhaustively than even necessary, dealt with the allegations
made by the Sabha that the Management had committed breach of agreement by refusing to
accede to the demand of the Sabha for implementation of recommendations of the Wage
Board. There appears to be no doubt that the Management had agreed to implement the rec-
ommendation of the Wage Board. There is also not the least doubt the Management was ready
and willing to implement the recommendations of the Wage Board it was because it was pre-
vented by the Sabha from doing so.

An analysis of the Management’s conduct in the matter of non-implementation of the Wage

Board recommendation was thereafter made by the Arbitrator and he wound up thus:

I am satisfied that the Company had not committed any breach of the settlement dated
4-8-1972 at least so far as implementation of the recommendations of the Wage Board is
concerned.

The question of bonus for the year 1971 was also considered and dismissed and the Sabha’s
case to that extent was negatived. Again, the plea for wages for the period of the lock-out was
also negatived with the observations:

I fail to see how the Sabha can allege breach of the agreement dated 4-8-1972 in view of the
clear unequivocal terms contained in Clause 4 of that Agreement.

In this strain the Award continued and the refrain was the same that the Sabha was in the
wrong. The Award even went to the exaggerated extent of morbidly holding that the workers
were wearing printed badges which, along with other circumstances, amounted to a breach of
the agreement!
The Award then moved on to the strike of 27 January 1973 because it led to the dismissal of
all the workmen. Until this stage, the arbitrator was merely painting the background and, at
any rate, did not engage himself in isolating or identifying any worker or any misconduct. He
merely denounced the Sabha, which is neither here nor there, in the matter of disciplinary pro-
ceedings against each individual workman. He missed the meat of the matter. The relevant por-
tion of the Award based on generalisation proved this error:

I am concerned herein with the question whether the discharge or dismissal of the 400 work-
men was legal and proper or not and what relief to grant to them.
 Voluntary Arbitration as a Mechanism for Dispute Settlement 347

Approached from any point of view the action of the Company appears to me to be legal,
proper and justified and the demands on behalf of these workmen must be rejected.

A condemnation of the Sabha and an approval of the Management’s handling of the strike
are miles away from the issue on hand.
We observe here also an unfortunate failure to separate and scan the evidence with specific
reference to charges against individual workman. On the contrary, all that we find in the award is
an autopsy of the strike by the Sabha and a study of its allegedly perverse postures. A disciplinary
inquiry resulting in punishment of particular delinquents cannot but be illegal if the evidence
is of mass misconduct by unspecified strikers led by leaders who are perhaps not even work-
men. We are constrained to state that pointed consideration of facts which make any of the 400
workmen guilty is a search in vain. The award being ex facie blank from this vital angle, the ver-
dict must prima facie rank as void since vicarious guilt must be brought home against the
actively participating members of a collectivity by positive testimony, not by hunch, suspicion
or occult intuition. The short position is this. Is there a punishment of any workman? If yes, has
it been preceded by an enquiry? If not, does the Management desire to prove the charge before
the tribunal? If yes, what is the evidence, against whom, of what misconduct? If individuated
proof be forthcoming and relates to an illegal strike, the further probe is this: was the strike un-
justified? If yes, was the accused worker an active participant therein? If yes, what role did he
play and of what acts was he author? Then alone the stage is set for a just punishment. These
exercises, as an assembly-line process, are fundamental. Generalisation of a violent strike, of a
vicious Union leadership, of strikers fanatically or foolishly or out of fear failing to report for
work are good background material. Beyond that, these must be identified by a rational process,
the workmen, their individual delinquency and the sentence according to their sin. Sans that,
the dismissal is bad. Viewed from this perspective, the Award fails.
The Arbitrator comes to grips with the core question of discharge simpliciter versus dismissal
as punishment but not with the identification of delinquents and delinquency. After referring
to Order 23 of the Model Standing Orders, he goes on to state the law correctly by extracting
observations from the Assam Oil Company77 case.
Another vital facet of industrial law is that when no enquiry has been held by the manage-
ment before imposing a punishment (or the enquiry held is defective and bad), the whole field
of delinquency and consequent penalty is at large for the tribunal. Several rulings support this
logic. We are constrained to hold that a certain observation made per incuriam by Mr Justice
Vaidyalingam, strongly relied on by Sri A.K. Sen, does not accurately represent the law, although
the learned Judge had earlier stated the law and case-law correctly, if we may say so with respect.
A selective study of the case-law is proper at this place. Before we do this, a few words on the
basis of the right to strike and progressive legal thinking led by constitutional guidelines is ne-
cessitous. The right to unionise, the right to strike as part of collective bargaining and, subject to
the legality and humanity of the situation, the right of the weaker group, viz., labour, to pressure
the stronger party, viz., capital, to negotiate and render justice, are processes recognised by in-
dustrial jurisprudence and supported by Social Justice. While society itself, in its basic needs of
existence, may not be held to ransom in the name of the right to bargain and strikers must obey
civilised norms in the battle and not be vulgar or violent hoodlums. Industry, represented by in-
transigent managements, may well be made to reel into reason by the strike weapon and cannot
then squeal or wail and complain of loss of profits or other ill-effects but must negotiate or get
a reference made. The broad basis is that workers are weaker although they are the producers
and their struggle to better their lot has the sanction of the rule of law. Unions and strikes are no
more conspiracies than professions and political parties are, and, being far weaker, need succour.
Part IV of the Constitution, read with Article 19, sows the seeds of this burgeoning jurisprudence.
The Gandhian quote at the beginning of this judgment sets the tone of economic equity in
348 Social Justice and Labour Jurisprudence

industry. Of course, adventurist, extremist, extraneously inspired and puerile strikes, absurdly
insane persistence and violent or scorched earth policies boomerang and are anathema for the
law. Within these parameters the right to strike is integral to collective bargaining.
Responsible trade unionism is an instrument of concerted action and the laissez faire law that
all strikes are ipso facto conspiracies is no longer current coin even in Adam Smith’s English
country. Lord Chorley, in Modern Law Review, Vol. 28, 1965, p. 451, is quoted as saying that
law must be altered as a consequence of Rookes vs Barnard,78 so as to remove the effects of deci-
sions of conspiracy and intimidation. He goes on to state that Allen vs Flood79 and Quinn v.
Leathem,80 taking the conspiratorial view, must never be permitted to be quoted in courts. In
contrast, reference was made to Willis on Constitutional Law, pp. 878–79, wherein the Supreme
Court of America reflects the impact of capitalistic development and the economic views of
the judges and the fact that the judges are members of a social order and a social product and
the decisions are due more to the capitalistic system and the world of ideas in which the judges
live. Our Constitution is clear in its mandate, what with Article 39A superadded, and we have
to act in tune with the values enshrined therein.
The benign attitude towards strike being what we have outlined, the further question arises
whether in the light of the accepted finding that the strike as such was illegal and, further, was
unjustified, all the strikers should face the penalty of dismissal or whether individual cases with
special reference to active participation in the strike, should be considered. A rapid but relevant
glance at the decided cases may yield dividends. In India General Navigation and Rly. Co. Ltd. vs
Their Workmen,81 this Court did observe that if a strike is illegal, it cannot be called ‘perfectly
justified’. But, between ‘perfectly justified’ and ‘unjustified’, the neighbourhood is distant. Mere
illegality of the strike does not per se spell unjustifiability. For in Crompton Greaves Ltd. vs Work-
men,82 this Court held that even if a strike be illegal, it cannot be castigated as unjustified, unless
the reasons for it are entirely perverse or unreasonable—an aspect which has to be decided on
the facts and circumstances of each case. In that decision, this Court awarded wages during the
strike period because the Management failed to prove that the workmen resorted to force and
violence. Even in India General Navigation and Rly. Co. Ltd.,83 where the strike was illegal and
affected a public utility service, this Court observed that ‘the only question of practical importance
which may arise in the case of an illegal strike would be the kind or quantum of punishment,
and that, of course, has to be modulated in accordance with the facts and circumstances of each
case... There may be reasons for distinguishing the case of those who may have acted as mere
dumb-driven cattle from those who have taken an active part in fomenting the trouble and in-
stigating workmen to join such a strike, or have taken recourse to violence.’
The court, after holding that the strike was illegal ‘and that it was not even justified’, made a
pregnant observation:

To determine the question of punishment, a clear distinction has to be made between those
workmen who not only joined in such a strike, but also took part in obstructing the loyal
workmen from carrying on their work, or took part in violent demonstrations, or acted in
defiance of law and order, on the one hand, and those workmen who were more or less silent
participators in such a strike on the other hand. It is not in the interest of the industry that
there should be a wholesale dismissal of all the workmen who merely participated in such a
strike. It is certainly not in the interest of the workmen themselves. An Industrial Tribunal,
therefore, has to consider the question of punishment, keeping in view the overriding con-
sideration of the full and efficient working of the Industry as a whole. The punishment of
dismissal or termination of services, has, therefore, to be imposed on such workmen as had
not only participated in the illegal strike, but had fomented it, and had been guilty of violence
or doing acts detrimental to the maintenance of law and order in the locality where work had
to be carried on.
 Voluntary Arbitration as a Mechanism for Dispute Settlement 349

After noticing the distinction between peaceful strikers and violent strikers, [Justice] Sinha,
in that case, observed:
It must be clearly understood by those who take part in an illegal strike that thereby they
make themselves liable to be dealt with by their employers. There may be reasons for dis-
tinguishing the case of those who may have acted as mere dumb driven cattle from those who
have taken an active part in fomenting the trouble and instigating workmen to join such a
strike, or have taken recourse to violence.

The same line of dichotomy is kept up:

Both the types of workmen may have been equally guilty of participation in the illegal strike,
but it is manifest that both are not liable to the same kind of punishment.

Significantly, the Court stressed the need for individual charge-sheet being delivered to individual
workmen so that the degree of misconduct of each and the punitive deserts of each may be sep-
arately considered. We may as well refer to a few more rulings since considerable argument was
expended on this point.
This Court, in Burn & Co. Ltd. vs Their Workmen,84 clearly laid down that mere participation
in the strike would not justify the suspension or dismissal of workmen, particularly where no
clear distinction can be made between those persons and the very large number of workmen
who had been taken back into service although they had participated in the strike. After referring
to the ratio in Burn & Co. Ltd.85 case, this Court in Bata Shoe Co. (P) Ltd. vs D. N. Ganguly,86
observed that there is no doubt that if an employer makes an unreasonable discrimination in
the matter of taking back employees, there may in certain circumstances be reason for the in-
dustrial tribunal to interfere; but the circumstances of each case have to be examined before the
tribunal can interfere with the order of the employer in a properly held managerial inquiry on
the ground of discrimination. The Court then proceeded to determine the facts placed before
it. Sri Sen specifically pointed out that in the Bata Shoe Co.’s87 case, this Court distinguished the
decision in India General Navigation & Rly. Co. Ltd.88 and observed that the decision in that case
was on the facts placed before the Court. In fact, Bata Shoe Co.’s89 case does not lay down any
distinct proposition about the treatment to be meted out to participants in strike and actually it
is a decision on its own facts.
In The Swadeshi Industries Ltd vs Its Workmen,90 the Management, after holding that the strike
was illegal, terminated the services of 230 workmen without framing any charge-sheet or holding
any enquiry. It was contended that the strike was not legal. The Court observed that collective
bargaining for securing improvement on matters like basic pay, dearness allowance, bonus, pro-
vident fund and gratuity leave and holidays was the primary object of a trade union and when
demands like these were put forward and thereafter a strike was resorted to in an attempt to in-
duce the company to agree to the demands or at least to open negotiations, the strike must prima
facie be considered justified. As the order of termination was found to be illegal, it was held that
reinstatement with back wages must follow as a matter of course, not necessarily because new
hands had not been inducted.
In I.M.H. Press, Delhi vs Addl. Industrial Tribunal Delhi,91 this Court was called upon to
examine the ratio in Model Mills92 case and India General Navigation & Rly. Co. Ltd.93 case, and
this Court in terms affirmed the ratio in India General Navigation & Railway Co. Ltd,94 observing
that mere taking part in an illegal strike without anything further would not justify the dismissal
of all the workmen taking part in the strike.
In Indian Iron & Steel Co. Ltd. vs Their Workmen,95 this Court observed that the management
of a concern has power to direct its own internal administration and discipline, but the power
is not unlimited and when a dispute arises, Industrial Tribunals have been given the power
to see whether the termination of service of a workman is justified and to give appropriate relief.
350 Social Justice and Labour Jurisprudence

It may be noticed that the decision is prior to introduction of Section 11A. It would thus
appear that the important effect of omission to hold an enquiry was merely this that the tribunal
would have to consider not only whether there was a prima facie case but would decide for itself
on the evidence adduced whether the charges have been made out. A defective enquiry in this
connection stood on the same footing as no enquiry and in either case the tribunal would have
jurisdiction to go into the entire matter and the employer would have to satisfy the tribunal that
on the facts the order of dismissal or discharge was proper. (See Workmen of Motipur Sugar
Factory (Pvt.) Ltd. vs Motipur Sugar Factory,96 and Provincial Transport Service vs State Industrial
Court.)97 Once, therefore, it was held that the enquiry was not proper, it was irrelevant whether
the workman withdrew from the enquiry or participated in it, the decision had to be on appraisal
of evidence, and if it was found that the enquiry was not proper the whole case was open before
the labour court to decide for itself whether the charge of misconduct was proved and what
punishment should be awarded (see Imperial Tobacco Company of India Ltd. vs Its Workmen).98
As against the above propositions, Sri Sen relied upon the observations of this Court in
Oriental Textile Finishing Mills, Amritsar vs Labour Court, Jullundur.99 We fail to see how it runs
counter to the established principle. The Court, in fact, held that even where the strike is illegal,
before any action was taken with a view to punishing the strikers a domestic enquiry must be
held. Even though the Standing Orders prescribing enquiry before punishment did not provide
for any such enquiry the Court held that nonetheless a domestic enquiry should have been held
in order to entitle the management to dispense with the service of the workman on the ground
of misconduct, viz., participation in the illegal strike. After so saying, the Court agreed with the
view of the Court in India General Navigation & Rly. Co. Ltd. case100 and reaffirmed the principle
that mere taking part in an illegal strike without anything further would not necessarily justify
the dismissal of all the workers taking part in the strike and that if the employer, before dismissing
a workman, gave him sufficient opportunity of explaining his conduct and no question of mala
fides or victimisation arose, it was not for the tribunal in adjudicating the propriety of such dis-
missal to look into the sufficiency or otherwise of the evidence led before the enquiry officer or
insist on the same degree of proof as was required in a court of law, as if it were sitting in appeal
over the decision of the employer.
Another aspect of this case emphasised that it could not be dogmatised as a matter of law that
an overt act such as intimidation or instigation of violence was necessary in order to justify ter-
mination of service for participating in an illegal strike. On the facts of that case, even though it
was found that no domestic enquiry was held, reinstatement was refused on the ground that
misconduct was made out.
Sri Sen, of course, relied on this judgment to show that where a strike was resorted to and the
workers were called upon to join service within the stipulated time, on their failure it was open
to the company to employ new hands. This is reading more into the ruling than is warranted.
We cannot agree that mere failure to report for duty, when a strike is on, necessarily means
misconduct. Many a workman, as a matter of prudence, may not take the risk of facing the
militant workmen or the Management’s hirelings for fear, especially when there is evidence
in the case from the Sabha that the Management had hired goondas and from the Manage-
ment that the striking vanguard was violent. It is also possible, in the absence of evidence to the
contrary, that several workmen might not be posted with the Management’s notice of recall or
the terms on which they were being recalled. In this view, we are not able to uphold the conclusion
of the arbitrator that the punishment of dismissal was appropriate for the entire mass of workmen
whose only guilt, as proved, was nothing more than passive participation in the illegal and un-
justified strike by not reporting for duty. The verdict is inevitable that the discharge is wrongful.
The only comment we reluctantly make about the otherwise thorough award of the Arbitrator
is that omnibus rhetoric about the obnoxious behaviour of a class may not make-do for hard
proof of specific acts of particular persons where a punitive jurisdiction is exercised.
 Voluntary Arbitration as a Mechanism for Dispute Settlement 351

What, then, is the normal rule in the case of wrongful dismissal when the workmen claim rein-
statement with full back wages? The High Court has held the discharge wrongful and directed
restoration with an equitable amount of back wages. The following rulings of this Court, et al.,
deal with this subject:
The recent case of Hindustan Tin Works vs Its Employees,101 sets out the rule on reinstatement
and back wages when the order of discharge is demolished:

It is no more open to debate that in the field of industrial jurisprudence a declaration can be
given that the termination of service is bad and the workman continues to be in service. The
spectre of common law doctrine that contract of personal service cannot be specifically enforced
or the doctrine of mitigation of damages does not haunt this branch of law. The relief of
reinstatement with continuity of service can be granted where termination of service is found
to be invalid. It would mean that the employer has taken away illegally the right to work of the
workman contrary to the relevant law or in breach of contract and simultaneously deprived
the workman of his earnings. If thus the employer is found to be in the wrong as a result of
which the workman is directed to be reinstated, the employer could not shirk his responsibility
of paying the wages which the workman has been deprived of by the illegal or invalid action
of the employer. Speaking realistically, where termination of service is questioned as invalid or
illegal and the workman has to go through the gamut of litigation, his capacity to sustain
himself throughout the protracted litigation is itself such an awesome factor that he may not
survive to see the day when law’s proverbial delay has become stupefying. If after such a pro-
tracted time and energy consuming litigation, during which period the workman just sustains
himself, ultimately he is to be told that though he will be reinstated, he will be denied the
back wages which would be due to him, the workman would be subjected to a sort of penalty
for no fault of his and it is wholly undeserved. Ordinarily, therefore, a workman whose
service has been illegally terminated would be entitled to full back wages except to the extent
he was gainfully employed during the enforced idleness. That is the normal rule. Any other
view would be a premium on the unwarranted litigative activity of the employer. If the em-
ployer terminates the service illegally and the termination is motivated as in this case, viz., to
resist the workman’s demand for revision of wages, the termination may well amount to un-
fair labour practice. In such circumstances reinstatement being the normal rule it should be
followed with full back wages. Articles 41 and 43 of the Constitution would assist us in
reaching a just conclusion in this respect... In the very nature of things there cannot be a
strait-jacket formula for awarding relief of back wages. All relevant considerations will enter
the verdict. More or less, it would be a motion, addressed to the discretion of the Tribunal.
Full back wages would be the normal rule and the party objecting to it must establish the cir-
cumstances necessitating departure. At that stage the Tribunal will exercise its discretion
keeping in view all the relevant circumstances.

Dealing with the complex of considerations bearing on payment of back wages, the new
perspective emerging from Article 43A cannot be missed, as explained in Hindustan Tin Works.102
Labour is no more a mere factor in production but a partner in industry, conceptually speaking,
and less than full back wages is a sacrifice by those who can best (least?) afford and cannot be
demanded by those who least sacrifice their large ‘wages’ though can best afford, if financial
constraint is the ground urged by the latter (Management) as inability to pay full back pay to
the former. The morality of law and the constitutional mutation implied in Article 43A bring
about a new equation in industrial relations. Anyway, in the Hindustan Tin Works case, 75 per
cent of the past wages was directed to be paid. Travelling over the same ground by going through
every precedent is supererogatory and we hold the rule is simple that the discretion to deny
reinstatement or pare down the quantum of back wages is absent save for exceptional reasons.
352 Social Justice and Labour Jurisprudence

It must be added however that particular circumstances of each case may induce the court to
modify the direction in regard to the quantum of back wages payable as happened in the India
General Navigation and Railway Co. Ltd. vs Their Workmen.103 We may, therefore, have to consider,
when finally moulding the relief, what, in this case, we should do regarding reinstatement and
back wages.
A Sum-up:
We may now crystallise our conclusions in the light of the long discussion. The basic assumption
we make is that the strike was not only illegal but also unjustified. On the latter part, a contrary
view cannot be ruled out in the circumstances present but we do not re-investigate the issue
since the High Court has proceeded on what both sides have taken for granted. The Management,
in our view, did punish its 853 workmen when it discharged them for reasons of misconduct set
out in separate but integrated proceedings, even though, with legal finesse, the formal order was
phrased in harmless verbalism. But fine words butter no parsnips, and law, in its intelligent
honesty, must be blunt and when it sees a spade, must call it a spade. The action taken under
the general law or the standing orders was illegal in the absence of individualised charge-sheets,
proper hearing and personalised punishment, if found guilty. None of these steps having been
taken, the discharge orders were still-born. But the Management could, as in this case it did,
offer to make out the delinquency of the employees and the arbitrator had, in such cases, the
full jurisdiction to adjudge de novo both guilt and punishment. We hold that Section 11A does
take in an arbitrator too, and, in this case, the arbitral reference, apart from Section 11A, is
plenary in scope.
In the second chapter of our sum-up, the first thing we decide is that Article 226, however
restrictive in practice, is a power wide enough, in all conscience, to be a friend in need when the
summons comes in a crisis from a victim of i2njustice; and, more importantly, this extraordinary
reserve power is unsheathed to grant final relief without necessary recourse to a remand. What
the tribunal may, in its discretion, do, the High Court too, under Article 226, can, if facts com-
pel, do. Secondly, we hold that the Award suffers from a fundamental flaw that it equates an
illegal and unjustified strike with brazen misconduct by every workman without so much as
identification of the charge against each, the part of each, the punishment for each, after adverting
to the gravamen of his misconduct meriting dismissal. Passive participation in a strike which is
both illegal and unjustified does not ipso facto invite dismissal or punitive discharge. There must
be active individual excess such as master-minding the unjustified aspects of the strike, e.g., vio-
lence, sabotage or other reprehensible role. Absent such gravamen in the accusation, the extreme
economic penalty of discharge is wrong. An indicator of the absence of such grievous guilt is
that the Management, after stating in strong terms all the sins of the workmen, took back over
400 of them as they trickled back slowly and beyond the time set, with continuity of service,
suggestive of the dubiety of the inflated accusations and awareness of the minor role of the mass
of workmen in the lingering strike. Furthermore, even though all sanctions short of punitive
discharge may be employed by a Management, in our current conditions of massive unemploy-
ment, low wages and high cost of living, dismissal of several hundreds, with disastrous impact
on numerous families, is of such sensitive social concern that, save in exceptional situations, the
law will inhibit such a lethal step for the peace of the industry, the welfare of the workmen and
the broader justice that transcends transient disputes. The human dimensions have decisional
relevance. We hold the discharge orders, though approved by the Arbitrator, invalid.
The last part of our conclusions relates to the relief which must be fashioned with an eye on
mutual equities. We cannot ignore a few raw realities, since law is not dogmatics but pragmatics,
without temporising on principle. The Management’s limitations in absorbing all the large
number of discharged employees all at once when steel, the raw material, is scarce is a problem.
Likewise, their inability to pay huge sums by way of back wages or otherwise, without crippling
 Voluntary Arbitration as a Mechanism for Dispute Settlement 353

the progress of the industry, cannot be overlooked but cannot be overplayed after Hindustan
Tin Works.104 Another factor which cannot be wished away is the presence of over a couple of
hundred workmen, with varying lengths of service, who may have to be sacked if the old workmen
are to be brought back. It is a problem of humanist justice. Lastly, the rugged fact of life must
not be missed that some of the workmen, during the long years of desperate litigation, might
have sought jobs elsewhere and most of them perhaps have, for sheer survival, made at least a
starving wage during the prolonged idle interval. This factor too is a weak consideration, tested
by the reasoning in Hindustan Tin Works.105 Moreover, rationalisation of re-absorption of the re-
moved workmen requires attention to the classification of permanent workmen and their casual
counterparts. Every proposal must be bottomed on the basic economic fact that the beneficiaries
are from the many below the destitution line. This Court has, in a very different context though,
drawn attention to the Gandhian guideline:

Whenever you are in doubt... apply the following test. Recall the face of the poorest and the
weakest man whom you may have seen, and ask yourself if the step you contemplate is going
to be of any use to him.

It is apt here.
This perspective informs our decision. What did the High Court do regarding reinstatement
and should we modify and why? If the discharge is bad, reinstatement is the rule. In India
General Navigation,106 Punjab National Bank,107 and Swadeshi Industries,108 et al, restoration,
despite large numbers, was directed. But most rules have exceptions wrought by the pressure of
life and Oriental was relied on to contend that reinstatement must be denied. There is force in
the High Court’s reasoning to distinguish Oriental, as we hinted earlier, and we quote:

There were only 22 workmen involved in that case. The management had made genuine and
persistent efforts to persuade the concerned workmen to call off the strike and join work.
Those efforts were made at three different stages, namely, (1) immediately after the workers
went on the lightning strike and before charge-sheets were issued (2) after the charges were
dropped and individual notices were sent to the workmen asking them to resume work by
specified dates and (3) after the orders of termination were served and conciliation proceedings
were commenced pursuant to the demand notice. But this is not all. Even the Labour Officer
and Labour Inspector had tried to persuade the concerned workmen to join duty before the
charge-sheets came to be issued. As against these repeated bona fide attempts on the part of
the management and an outside agency to persuade the erring workmen, they not only did
not resume work but also failed to acknowledge or send a reply to the individual notices
served upon them requesting them to resume work and they appear to have made it a condition
precedent to their joining duty that the suspended workmen should also be taken back. Even
under such circumstances, the management did not straightway terminate their services but
gave individual notices requiring the concerned workmen to show cause why their names
should not be struck off and asked them to submit their reply by a certain date. Even those
notices were not replied. It is only thereafter that the services of the concerned workmen
came to be terminated. It is against this background that the Supreme Court held that there
was ‘a persistent and obdurate refusal by the workmen to join duty’ notwithstanding the fact
that ‘the management has done everything possible to persuade them and give them oppor-
tunities to come back to work’ and that they had without any sufficient cause refused to do
so, which constituted ‘misconduct’ so as to ‘justify the termination of their services’.
...If the workmen had been approached individually, not only those amongst them who were
unwilling to join strike but were prevented from joining work would have taken courage to
resume duty, but even those amongst them who were undecided could also have been won
over. That apart, those notices, as their contents disclose, were hardly persuasive efforts. They
354 Social Justice and Labour Jurisprudence

were a mixture of ultimatums, threats, complaints and indictment of the workmen and the
Sabha. Was it, therefore, a genuine effort on the part of a keenly desirous employer to offer an
olive branch? In Oriental, orders of termination were passed only after giving individual no-
tices to the concerned workmen to show cause why their names should not be struck off.
Besides, those notices were given after charges formally served upon each workman earlier
were dropped and persuasive efforts made in the meantime had failed. None of those steps
was taken herein. All that happened was that in one of the notices meant for mass consumption
and circulation, such intimation was given.

Even so, during the several years of the pendency of the dispute, surely some workmen would
have secured employment elsewhere as was conceded by counsel at a certain stage, and it is not
equitable to recall them merely to vindicate the law especially when new workmen already in
precarious service may have to be evicted to accommodate them. In the course of the debate at
the bar we gained the impression that somewhere around a hundred workmen are likely to be
alternatively employed. Hopefully, there is no hazard in this guess.
Another facet of the relief turns on the demand for full back wages. Certainly, the normal
rule, on reinstatement, is full back wages since the order of termination is non est. Lad’s109 case
and Panitole Tea Estate’s110 case. Even so, the industrial court may well slice off a part if the work-
men are not wholly blameless or the strike is illegal and unjustified. To what extent wages for
the long interregnum should be paid is, therefore, a variable dependant on a complex of circum-
stances (see for example [1967] 15 Fac LR 395 paras 3 and 4) (SC).
We are mindful of the submission of Sri Tarkunde, urged in the connected appeal by the Sabha,
that where no enquiry has preceded a punitive discharge and the tribunal, for the first time, up-
holds the punishment this Court has in D. C. Roy vs Presiding Officer, Madhya Pradesh Industrial
Court, Indore,111 taken the view that full wages must be paid until the date of the award. There
cannot be any relation back of the date of dismissal to when the Management passed the void
order.
Kalyani112 was cited to support the view of relation back of the Award to the date of the em-
ployer’s termination orders. We do not agree that the ratio of Kalyani113 corroborates the pro-
position propounded. Jurisprudentially, approval is not creative but confirmatory and therefore
relates back. A void dismissal is just void and does not exist. If the Tribunal, for the first time,
passes an order recording a finding of misconduct and thus breathes life into the dead shell of
the Management’s order, pre-dating of the nativity does not arise. The reference to Sasa Musa114
in Kalyani115 enlightens this position. The latter case of D.C. Roy vs Presiding Officer, Madhya
Pradesh Industrial Court, Indore116 specifically refers to Kalyani’s117 case and Sasa Musa’s118 case and
holds that where the Management discharges a workman by an order which is void for want of
an enquiry or for blatant violation of rules of natural justice, the relation-back doctrine cannot
be invoked. The jurisprudential difference between a void order, which by a subsequent judicial
resuscitation comes into being de novo, and an order which may suffer from some defects but is
not still-born or void and all that is needed in the law to make it good is a subsequent approval
by a tribunal, which is granted, cannot be obfuscated.
We agree that the law stated in D.C. Roy119 is correct but now that the termination orders are
being set aside, the problem does not present itself directly. Even the other alternative submission
of Sri Tarkunde that if the plea of the Management that the order is a discharge simpliciter were
to be accepted, the result is a retrenchment within the meaning of Section 2(oo), which, in this
case, is in violation of Section 25F and therefore bad, is not a point urged earlier. We are dis-
posed to stand by the view that discharge, even where it is not occasioned by a surplus of hands,
will be retrenchment, having regard to the breadth of the definition and its annotation in
(1977) 1 SCR 586: (AIR 1977 SC 31). But the milieu in which the order was passed in February
1973 is not fully available, viewed from this new angle. So we decline to go into that contention.
 Voluntary Arbitration as a Mechanism for Dispute Settlement 355

Final Relief:
We are concerned with 400 workmen, some of whom have been claimed by death or other
irreversible causes—casualties of litigative longevity! 370 workmen are left behind, of whom
239 are admittedly permanent. We have already stated that 100, out of them, are probably fixed
up elsewhere. So, we exclude them and direct that the remaining 139 alone will be reinstated. A
list of the aforesaid 100 workmen will be furnished to the Management by the Sabha within
two weeks from today. That shall be accepted as correct and final.
While reinstatement is refused for these 100 workmen, when shall they be deemed to have
ceased to be in service for drawal of terminal benefits? Their discharge orders having been
quashed, they remain in service until today. We concluded the arguments on 3 August 1979
and on the eve of the closure of counsel’s submissions certain inconclusive settlement proposals
were discussed. We, therefore, consider 3 August 1979 as a pivotal point in the calendar with
reference to which the final relief may be moulded. We direct that the 100 workmen for whom
reinstatement is being refused will be treated as in service until 3 August 1979 on which date
they will be deemed to have been retrenched. We direct this step with a view to pragmatise the
situation in working out the equities. These 100 will draw all terminal benefits plus 75 per cent
of the back wages. This scaling down of back pay is consistent with the assumption that somewhere
in the past they had secured alternative employment. The long years and the large sum payable
also persuade us to make this minor cut. Of course, in addition, they will be entitled to retrench-
ment benefits under Section 25F of the Act, and one month’s notice pay.
The remaining 139 will be awarded 50 per cent of the back wages since we are restoring
them. The High Court has adopted this measure and so we do not depart from it. The case of
the hundred stands on a slightly different footing, because some compensation in lieu of refusal
of reinstatement is due to them and that also has entered our reckoning while fixing 75 per cent
for them. The computation of the wages will be such as they would have drawn had they con-
tinued in service and on that the cut directed will be applied.
We have disposed of the case of the permanent workmen except to clarify that in their case
continuity of service will be maintained and accrual of benefits on that footing reckoned. The
next category relates to casual employees, 131 in number of whom 57 have less than nine months’
service. The policy of the Act draws a distinction between those with service of 240 days and
more and others with less. The casuals with less than nine months service are 57 in number
and we do not think that this fugitive service should qualify for reinstatement especially when
we find a number of intermediate recruits, with longer though untenable service, have to be
baled out.
We decline reinstatement of these 57 hands. The other 74 must be reinstated although notion-
ally but wrongly they are shown as casual. In the ‘life’ sense, all mortals are casuals but in the
legal sense, those with a record of 240 days on the rolls are a class who have rights under indus-
trial law. We direct the 74 long-term casuals aforesaid to be reinstated but not the 57 short-term
ones. To this extent, we vary the High Court’s order.
We adopt the directive of the High Court regarding the back wages to both categories of
casuals except that for the lesser class of 57 casuals, a flat sum of Rs 1,000 more will be paid as
a token compensation in lieu of reinstatement. The reinstated casuals (74 of them) will be put
back as casuals but will be confirmed within six months from the date of rejoining since it is
meaningless to keep them as casual labourers when they are, by sheer length of service, on the
regular rolls.
Two issues remain. When the workmen to be retaken and what is to happen in the meanwhile?
How is the amount payable by the Management to be discharged and on what terms? Many
years have flowed by, thanks to the long-drawn-out litigation. Further delay in putting back the
workers will be unfair. But the Management pleads that steel shortage cuts into the flesh of the
factory’s expansion, without which additional intake of workers is beyond their budget unless
considerable time for re-absorption were given. But the lot of the workmen is unspeakable
356 Social Justice and Labour Jurisprudence

while the overall assets and outlook of the Company are commendable enough to bear an
increased wage bill. Dives cannot complain when Lazarus asks for more crumbs. Even if a slight
slant be made in favour of the Management, the direction to them to take back, in order of
seniority, the first 70 out of the 139 permanent workmen on or before 31 December 1979 and
the rest on or before 31 March 1980 is the least that is just. Until those dates the workmen will
be paid 2/3rd of their wages as now due. Of course, if any workman fails to report for work
within 15 days of service of written notice to him, with simultaneous copy to the Sabha, he will
not be eligible for any more reinstatement or wages.
The back wages run into a large sum but a good part has been paid under the stay order of
this Court. We make it clear that the payments made will be given credit and the balance if paid
as directed below and within the time specified will not carry interest. If default is made, the
sums in default will carry 10 per cent interest.
The figures of amounts due will be worked out by both sides and put into Court in 10 days
from now. Half the amount determined by the Court, after perusing both statements, will be
paid directly to the workmen or deposited with the Industrial Tribunal who will give notice and
make disbursements, on or before 31-3-1980 and the other half on or before 30-9-1980.
The conclusions may be capsulated for easier consumption:
1. Out of 370 workmen directed to be reinstated by the High Court, 239 are permanent. It is
assumed that 100 have found alternative employment and are not interested any more in
reinstatement and they are to be excluded from the direction of reinstatement. The Company
must, therefore, reinstate 139 permanent workmen and the list of 100 workmen who are
not to be reinstated would be supplied by the Sabha within two weeks from the date of this
judgment. The discharge order in respect of 100 workmen hereinbefore mentioned would
be set aside and they are deemed to be in service till 3 August 1979, when they will be re-
trenched and they will be paid retrenchment compensation as provided in Section 25F plus
one month’s pay in lieu of notice, the compensation to be worked out on the basis of the
wages that will be admissible under the recommendations of the Engineering Wage Board as
applicable to the Company. This amount will be paid in lieu of reinstatement and they will
also be paid 75 per cent of the back wages.
2. The remaining 139 permanent employees would be paid 50 per cent of the back wages as
directed by the High Court.
3. 70 out of 139 permanent workmen directed to be reinstated should be provided actual em-
ployment on or before 31 December 1979, and the rest on or before 31 March 1980. Dur-
ing this period and till the actual reinstatement each one of these 139 workmen should be
paid 2/3 of the monthly wages from 9 August 1979, when the hearing in this case concluded.
50 per cent of the amount that becomes payable to each workman under the directions
hereinabove given will be paid on or before 31 March 1980, and the balance on or before
30 September 1980, and till then the amount will carry interest at the rate of 10 per cent.
4. In respect of casual workmen whose service was less than 9 months on the date of dismissal
it would not be proper to grant reinstatement. They are 57 in number. The remaining casual
workmen 74 in number shall be reinstated. In case of 57 casual workmen to whom rein-
statement is refused, the direction of the High Court is confirmed with the further addition
that each one will be paid Rs 1,000 over and above the amount payable under the direction
of the High Court and this would be in lieu of reinstatement. Casual workmen 74 in number
and having service of more than 9 months on the date of dismissal will be treated as confirmed
within six months of the date of their rejoining and they will be offered reinstatement by
31 March 1980, and the High Court’s direction for back wages in their respect is confirmed.
With these modifications, we dismiss both the appeals. The Management-appellant will pay
the costs of the Sabha-respondent, advocates fee being fixed at Rs 5,000/-.
 Voluntary Arbitration as a Mechanism for Dispute Settlement 357

An afterword:
This litigation, involving many workmen living precariously on poor wages amidst agonising
inflation and a Management whose young budget, what with steel scarcity, may well be shaken
by the burden of arrears, points to the chronic pathology of our Justice System—the intractable
and escalating backlog in the Forensic Assembly Line that slowly spins Injustice out of Justice
and effectually wears down or keeps out the weaker sector of Indian life. This trauma is felt
more poignantly in Labour litigation and the legislature fails functionally if it dawdles to radicalise,
streamline and simplify the conflict resolution procedures so as to be credibly available to the
common people who make up the lower bracket of the nation. The stakes are large, the peril is
grave, the evils are worse than the prognostics of Prof. Laurence Tribe (of the Harvard Law School):

If court backlogs grow at their present rate, our children may not be able to bring a lawsuit to
a conclusion within their lifetime. Legal claims might then be willed on, generation to gen-
eration, like hillbilly feuds; and the burdens of pressing them would be contracted like a
hereditary disease.

Law may be guilty of double injustice when it is too late and too costly for it holds out re-
medial hopes which peter out into sour dupes and bleeds the anaemic litigant of his little cash
only to tantalise him into a system equal in form but unequal in fact. The price of this promise
of unreality may be the search by the lowly for the reality of revolutionary alternatives. Compelled
by the crisis in the Justice System, we sound this sombre judicial note.
We direct payments and reinstatements as spelt out earlier, within the specificated time, and,
hopefully, leave the case with the thought that, given better rapport between the partners in
production, the galvanic Gujarat Steel Tubes Ltd. will forge ahead as a paradigm for the rest.

NOTES

1. AIR 1976 SC 425. This case was heard by V.R. Krishna Iyer and A.C. Gupta.
2. Article 226 of the Constitution of India provides:

(1) Not withstanding anything in article 32, every High Court shall have power, throughout the territories
in relation to which it exercises jurisdiction, to issue to any person or authority, including in appropriate
cases, any Government, within those territories directions, orders or writs, including writs in the nature
of habeas corpus, mandamus, prohibition, quo warranto and certiorari, or any of them, for the enforce-
ment of any of the rights conferred by Part III and for any other purpose.
(2) The power conferred by clause (1) to issue directions, orders or writs to any Government, authority or
person may also be exercised by any High Court exercising jurisdiction in relation to the territories
within which the cause of action wholly or in part, arises for the exercise of such power, notwithstand-
ing that the seat of such Government or authority or the residence of such person is not within those
territories.
(3) Where any party against whom an interim order, whether by way of injunction or stay or in any other
manner, is made on, or in any proceedings relating to, a petition under clause (1), without—
(a) Furnishing to such party copies of such petition and all documents in support of the pleas for such
interim order; and
(b) Giving such party an opportunity of being heard,
makes an application to the High Court for the vacation of such order and furnishes a copy of such appli-
cation to the party in whose favour such order has been made or the counsel of such party, the High Court
shall dispose of the application within a period of two weeks from the date on which it is received or from
the date on which the copy of such application is so furnished, whichever is later, or where the High Court
is closed on the last day of that period, before the expiry of the next day afterwards on which the High Court
is open; and if the application is not so disposed of, the interim order shall on the expiry of that period, or,
as the case may be, the expiry of the said next day, stand vacated.
358 Social Justice and Labour Jurisprudence

(4) The power conferred on a High Court by this article shall not be in derogation of the power conferred
on the Supreme Court by clause (2) of article 32.
3. Engineering Mazdoor Sabha vs Hind Cycles. (1962) 2 LLJ 760, 796 (SC):(1963) Supp. ISCR 625.
4. Section 18 of the Industrial Disputes Act, 1947, provides that:

(1) A settlement arrived at by agreement between the employer and workman otherwise than in the course
of conciliation proceeding shall be binding on the parties to the agreement.
(2) Subject to the provisions of sub-section (3), an arbitration award which has become enforceable shall
be binding on the parties to the agreement who referred the dispute to arbitration.
(3) A settlement arrived at in the course of conciliation proceedings under this Act or an arbitration award
in a case where notification has been issued under sub-section (3A) of Section 10 A or an award of a
Labour Court, Tribunal or National Tribunal which has become enforceable shall be binding on—
(a) All parties to the industrial dispute;
(b) All other parties summoned to appear in the proceedings as parties to the dispute, unless the Board,
arbitrator, Labour Court, Tribunal or National Tribunal, as the case may be, records the opinion
that they were so summoned without proper cause;
(c) Where a party referred to in clause (a) or clause (b) is an employer, his heirs, successors or assigns in
respect of the establishment to which the dispute relates;
(d) Where a party referred to in clause (a) or in clause (b) is composed of workmen, all persons who
were employed in the establishment or part of the establishment, as the case may be, to which the
dispute relates on the date of the dispute and all persons who subsequently become employed in
that establishment or part.
5. (1967) 1 SCR 633:AIR 1967 SC 378.
6. CA No. 107 of 1966 decided on 27 November 1968 (SC).
7. AIR 1967 SC 361.
8. 50 IA 324.
9. (1857) 3 CB (NS) 189.
10. (1944) 1 KB 566.
11. (1944) I KB 566.
12. 1892 AC 25.
13. 1898 AC 1.
14. 1901 AC 495.
15. 1925 AC 700.
16. 1892 AC 25.
17. 1925 AC 700.
18. 1925 AC 700.
19. AIR 1975 SC 2238.
20. AIR 1975 SC 2238.
21. (1831) 1 B & Ad 847 (2), 859:9 LJ OS KB 113:199 ER 1001.
22. 1897 AC 615.
23. AIR 1975 SC 2238.
24. (1949) 1 LLJ 245.
25. AIR 1980 SC 1896. This case was heard by V.R. Krishna Iyer, D.A. Desai and A.D. Koshal. A.D. Koshal
delivered a dissenting opinion.
26. 1958 SCR 828:AIR 1958 SC 36.
27. Samsher Singh vs State of Punjab. (1975) I SCR 814:AIR 1974 SC 2192.
28. (1965) 2 SCR 148:AIR 1965 SC 1496.
29. 1952 LAC 490.
30. (1960) 3 SCR 441:AIR 1960 SC 919.
31. 1962 Supp (2) SCR 822:AIR 1963 SC 411.
32. (1960) 3 SCR 441:AIR 1960 SC 919.
33. Samsher Singh vs State of Punjab. (1975) I SCR 814:AIR 1974 SC 2192.
34. 1958 SCR 828:AIR 1958 SC 36.
35. Samsher Singh vs State of Punjab. (1975) I SCR 814:AIR 1974 SC 2192.
36. 1949 FCR 321:AIR 1949 FC 111.
 Voluntary Arbitration as a Mechanism for Dispute Settlement 359

37. (1960) 3 SCR 457 at p. 462:AIR 1960 SC 1264.

38. (1964) 2 SCR at p. 180.
39. (1965) 2 SCR 148 at p. 152:AIR 1965 SC 1496.
40. (1969) 8 SCR 372 at 378.
41. (1965) 2 SCR 148:AIR 1965 SC 1496.
42. (1975) 3 SCR 489:AIR 1975 SC 661.
43. 1972 LIC 1262 SC:(1971) 2 LLJ 620.
44. (1960) 3 SCR 441:AIR 1978 SC 919.
45. (1978) 3 SCR 1000:AIR 1978 SC 1380.
46. (1976) (1) SCR 625:AIR 1976 SC 425.
47. 1963 Supp (1) SCR 625:AIR 1963 SC 874.
48. 1958 SCR 1240:AIR 1958 SC 398.
49. (1964) 3 SCR 25 at p. 33:AIR 1963 SC 1723.
50. (1964) 2 SCR 104:AIR 1963 SC 1756.
51. 1958 SCR 1240:AIR 1958 SC 398.
52. (1978) 19 Guj LR 108 at p. 140.
53. (1873) 8 QB 255.
54. (1892) 1 QB 431.
55. (1946) 1 All ER 637.
56. (1946) 1 All ER at p. 641.
57. William John Kenneth Diplock—The Courts as Legislators: Being the Presidential Address of the Rt. Hon. Sir
Kenneth Diplock. Van Riebeeck Society Publications.
58. Edgar Bodenheimer, 1962. Jurisprudence: The Philosophy and Method of the Law. Harvard University Press,
p. 474.
59. Ibid.
60. Ibid., p. 414.
61. Ibid., p. 415.
62. Ibid., pp. 115–16.
63. (1940) 310 US 534 at pp. 543–44.
64. Robert Stevens. Law and Politics, The House of Lords as a Judicial Body—1800–1976. p. 447.
65. Devlin. Samples of Law-making. p. 116.
66. Stevens. Judge as Law Maker. pp. 28–470.
67. 1962 AC 220 at p. 275.
68. (1973) Supp SCR 1:AIR 1973 SC 1461.
69. Edgar Bodenheimer, 1962. ‘Sources and Techniques of the Law’ Jurisprudence: The Philosophy and Method of
the Law. Harvard University Press.
70. Arthur Selwyn Miller, 1978. The Supreme Court, Myth and Reality. Greenwood Press, p. 133.
71. (1960) 3 All ER 353.
72. 1952 AC 189.
73. AIR 1938 PC 281 at p. 283.
74. (1949) 2 All ER 155 at p. 164.
75. (1975) 2 SCR 894 at p. 902:AIR 1975 SC 192.
76. (1967) I SCR 324:AIR 1967 SC 1032.
77. AIR 1960 SC 1264.
78. (1964) 1 All ER 367.
79. (1898 AC 1).
80. (1901 AC 495).
81. AIR 1960 SC 219.
82. AIR 1978 SC 1489.
83. AIR 1960 SC 219.
84. AIR 1959 SC 259.
85. AIR 1959 SC 259.
86. (1961) 3 SCR 308:AIR 1961 SC 1158.
87. (1961) 3 SCR 308:AIR 1961 SC 1158.
88. AIR 1960 SC 219.
89. (1961) 3 SCR 308:AIR 1961 SC 1158.
360 Social Justice and Labour Jurisprudence

90. AIR 1960 SC 1258.

91. AIR 1961 SC 1168.
92. AIR 1958 SC 311.
93. AIR 1960 SC 219.
94. AIR 1960 SC 219.
95. 1958 SCR 667 at p. 685:AIR 1958 SC 130.
96. (1965) 3 SCR 588 at p. 597: AIR 1965 SC 1803.
97. (1968) 3 SCR 650:AIR 1963 SC 114.
98. AIR 1962 SC 1348.
99. (1972) 1 SCR 490:AIR 1972 SC 277.
100. AIR 1960 SC 219.
101. 1978 LIC 1667:AIR 1979 SC 75 at pp. 77–78.
102. 1978 LIC 1667:AIR 1979 SC 75.
103. AIR 1960 SC 219.
104. AIR 1979 SC 75.
105. AIR 1979 SC 75.
106. AIR 1960 SC 219.
107. AIR 1960 SC 160.
108. AIR 1960 SC 1258.
109. (1979) 1 SCC 590:AIR 1979 SC 582.
110. (1971) 3 SCR 774:AIR 1971 SC 2171.
111. (1976) 3 SCR 801:AIR 1976 SC 1760.
112. (1963) I LLJ 679:AIR 1963 SC 1756.
113. (1963) I LLJ 679:AIR 1963 SC 1756.
114. AIR 1959 SC 923.
115. (1963) I LLJ 679:AIR 1963 SC 1756.
116. (1976) 3 SCR 801:AIR 1976 SC 1760.
117. (1963) I LLJ 679:AIR 1963 SC 1756.
118. AIR 1959 SC 923.
119. (1976) 3 SCR 801:AIR 1976 SC 1760.
 Chapter 9

Industrial Employment (Standing Orders) Act, 1946

The purpose of the Industrial Employment (Standing Orders) Act, 1946, is to define the
terms and conditions of employment of workmen with precision and clarity. The standing
orders of a particular establishment are prima facie useful to the workmen since by these
they know their status of employment that is, whether they are permanent or temporary
employees. The standing orders also provide for matters of discharge, disciplinary action,
holidays and leave, and so on. This Act applies in the first instance to every industrial
establishment wherein 100 or more workmen are employed which includes factories and
railways, mines, quarries and oil fields, tramways or motor or omnibus services, docks,
wharves and jetties, inland steam vessels, plantations and workshops. The appropriate
government is competent to extend the Act to other classes of industrial establishments
or to grant exemptions where necessary by notification.1 Conflicts often arise however,
between the workmen and the employer in cases where Section 13B of the Act operates.2

Service Conditions: The Scope of the Standing Orders Act

The U.P. State Electricity Board and Another vs

Hari Shanker Jain and Others 3

In this case, the Supreme Court had to consider the scope and operation of Section 13B
of the Act in respect of statutory corporations owned by the state.

THE JUDGEMENT DELIVERED BY JUSTICE O. CHINNAPPA REDDY

The case is primarily concerned with the age of retirement of two obscure workmen but it raises
the questions of general importance concerning workmen employed by most statutory bodies
and corporations. It is on such chance cases that the development of our law depends.
The two workmen were originally employed by Messrs Seth Ram Gopal and Partners who
were licensees for the distribution of electricity under the Indian Electricity Act, 1910. There
were certified Standing Orders for the industrial establishment of M/s. Seth Ram Gopal and
Partners. The certified Standing Orders did not prescribe any age of superannuation for the em-
ployees. That, according to the workmen, meant that they could continue to work as long as
they were fit and able to discharge their duties. The electricity undertaking of M/s. Seth Ram
Gopal and Partners was purchased by the U.P. State Electricity Board, with effect from
362 Social Justice and Labour Jurisprudence

15-12-1964, under the provision of the Electricity (Supply) Act, 1948. The employees of Seth
Ram Gopal and Partners became the employees of U.P. State Electricity Board. The U.P. State
Electricity Board, which it is no longer disputed is an industrial establishment to which the
Industrial Employment (Standing Orders) Act, 1946, applies, neither made nor got certified
any Standing Orders as it was bound so to do under that Act. But it is evident, though not
admitted, from two letters, one from the Superintending Engineer in reply to a letter dated
31-12-1966 from the Executive Engineer and the other from the Certifying Officer for Standing
Orders and Labour Commissioner to the General Secretary of the Employees Union that the
Board and the workmen considered the certified Standing Orders of the establishment of Seth
Ram Gopal and Partners as applicable to them even after the purchase of the undertaking by
the Board. This, however, is not very material. The Board, as we said earlier, made and got
certified no Standing Orders either in regard to age of superannuation or in regard to any other
matter mentioned in the schedule to the Standing Orders Act. We may mention here that by
reason of a notification dated 17-11-1959 ‘age of superannuation or retirement, rate of pension
or any other facility which the employers may like to extend or may be agreed upon between
the parties’ is one of the matters in respect of which an employer to whom the Standing Orders
Act applies is bound to make Standing Orders and get them certified. However, on 28 May
1970, the Governor of Uttar Pradesh notified, under Section 13-B of the Industrial Employment
(Standing Orders) Act, 1946, a regulation made by the U.P. State Electricity Board under Sec-
tion 79(c) of the Electricity (Supply) Act, 1948. The notification was as follows:

In pursuance of the provision of Section 13-B of the Industrial Employment (Standing Orders)
Act, 1946 (Act No. 20 of 1946), the Governor is pleased to notify in the official Gazette that
U.P. State Electricity Board has made the following Regulations under sub-section (c) of
Section 79 of the Electricity (Supply) Act, 1948 (Act No. 54 of 1948):

Notwithstanding any rule or an order or practice hitherto followed, the date of compulsory
retirement of an employee of the Board will be the date on which he attains the age of 58
years; provided that—

(i) in the case of the inferior servants of the Board, whose counterparts under State
Government are at present entitled to serve up to the age of 60 years, the age of com-
pulsory retirement will be the date on which they attain the age of 60 years.
(ii) the Board or its subordinate appointing authority may require an employee to retire
after he attains or has attained the age of 55 years on the three months’ notice or
three months’ salary in lieu thereof without assigning any reason.

Acting in pursuance of this regulation as notified by the Governor, the Board sought to
retire the two respondents on 2 July 1972 and 7 July 1972 respectively on their attaining the
age of 58 years. The respondents thereupon filed a writ petition in the Allahabad High Court
challenging the regulation made by the Board and its notification by the Governor. Their con-
tention was that the Board was not competent to make a regulation in respect of a matter
covered by the Industrial Employment (Standing Orders) Act. The writ petition was dismissed
by a learned Single Judge. The respondents preferred a special appeal and the Division Bench
which heard the Special Appeal in the first instance referred the following three questions to a
Full Bench:

(1) Whether the Industrial Employment (Standing Orders) Act, 1946 applies to the Industrial
establishments of the State Electricity Board?
(2) Whether the Standing Orders framed for an industrial establishment of an electrical
undertaking cease to be operative on the purchase of the undertaking by the Board or on
the framing of regulations under Section 79(c) of the Electricity (Supply) Act, 1948?
 Industrial Employment (Standing Orders) Act, 1946 363

(3) Whether Section 13-B of the Industrial Employment (Standing Orders) Act, 1946,
applies only to industrial establishments of the Government or also to other industrial
establishments?

The Full Bench answered the questions as follows:

(1) The Industrial Employment (Standing Orders) Act, 1946 applies to the industrial
establishments of the State Electricity Board;
(2) The Standing Orders framed in an industrial establishment by an electrical undertaking
do not cease to be operative on the purchase of the undertaking by the Board or on
framing of the regulations under Section 79(c) of the Electricity (Supply) Act, 1948.
(3) Section 13-B of the Industrial Employment (Standing Orders) Act, 1946, applies only
to the industrial establishments of the Government and to no other establishments.

Following the opinion of the Full Bench, the Division Bench allowed the Special Appeal and
issued a writ quashing the notification dated 28 May 1970 and directing the U.P. State Electricity
Board not to enforce the regulation against the appellants before them. The U.P. State Electricity
Board having obtained a certificate from the High Court under Article 133(1) of the Constitution
has preferred this appeal.
Shri G. B. Pai, learned Counsel for the appellant did not canvass the correctness of the an-
swer of the Full Bench to the first question referred to it. He confined his attack to the answers
to the second and third questions. Relying upon the decisions of this Court in Sukhdev Singh vs
Bhagat Ram4, and Rajasthan Electricity Board vs Mohan Lal,5 Shri Pai argued that the U.P. State
Electricity Board was an authority within the meaning of Article 12 of the Constitution and
that the regulations made by the Board under Section 79(c) of the Act had the ‘full force and
effect of the statute and the force of law’ so as to displace, override or supersede Standing Orders
made and certified under the Industrial Employment (Standing Orders) Act, which, he submitted
were mere contractual conditions of service subjected to a quasi-judicial process and which,
therefore, could not take precedence over legislatively processed regulations. The learned Counsel
further submitted that Section 79(c) of the Electricity Supply Act was a special law and that it
prevailed over the provisions of the Industrial Employment (Standing Orders) Act. Alternately,
he submitted, the notifying of the regulation regarding age of superannuation under Section
13-B of the Industrial Employment (Standing Orders) Act excluded the applicability of that
Act in regard to the subject of age of superannuation. He urged that Section 13-B was not con-
fined in its application to Government undertakings only or to cases where there were com-
prehensive sets of rules, as was thought by the High Court.
Shri P.K. Garg, for the workmen contended that the Industrial Employment (Standing
Orders) Act was an act specially designed to define and secure reasonable conditions of service
for workmen in industrial establishments employing one hundred or more workmen and to
that end to compel employers to make Standing reference to its subject-matter. The Electricity
(Supply) Act, on the other hand, was intended ‘to provide for the rationalisation of the production
and supply of electricity, and generally for taking measures conducive to electrical development’.
It was not specially designed to define the conditions of service of employees of Electricity
Boards or to displace the Standing Orders Act. The power given to an Electricity Board under
Section 79(c) to make regulations providing for ‘the duties of officers and servants of the Board
and their salaries, allowances and other conditions of service’ was no more than the usual,
general power possessed by every employer. Shri Garg argued that the Industrial Employment
Standing Orders Act, was a special Act which dealt with the special subject of conditions of
employment of workmen in industrial establishments and, therefore, in the matter of conditions
of employment of workmen in industrial establishments, it prevailed over the provisions of the
Electricity (Supply) Act. He urged that under Section 13-B of the Standing Orders Act, Govern-
ment undertakings which had a comprehensive set of rules alone could be excluded from the
364 Social Justice and Labour Jurisprudence

applicability of the Act. He submitted that to permit a single rule or regulation made for a
limited purpose to be notified under Section 13-B would have the disastrous effect of excluding
the applicability of the whole of the Standing Orders Act.
Before examining the rival contentions, we remind ourselves that the Constitution has
expressed a deep concern for the welfare of workers and has provided in Article 42 that the State
shall make provision for securing just and humane conditions of work and in Article 43 that the
State shall endeavour to secure, by suitable legislation or economic organisation or in any other
way, to all workers agricultural, industrial or otherwise, work, a living wage, conditions of work
ensuring a decent standard of life and full enjoyment of leisure, etc. These are among the ‘Directive
Principles of State Policy’. The mandate of Article 37 of the Constitution is that while the Dir-
ective Principles of State Policy shall not be enforceable by any Court, the principles are ‘never-
theless fundamental in the governance of the country’, and ‘it shall be the duty of the State to
apply these principles in making laws’. Addressed to Courts, what the injunction means is that
while Courts are not free to direct the making of legislation, Courts are bound to evolve, affirm
and adopt principles of interpretation which will further and not hinder the goals set out in the
Directive Principles of State Policy. This command of the Constitution must be ever present in
the minds of judges when interpreting statutes which concern themselves directly or indirectly
with matters set out in the Directive Principles of State Policy.
Let us now examine the various statutory provisions in their proper context with a view to
resolve the problem before us. First, the Industrial Employment (Standing Orders) Act, 1946.
Before the passing of the Act, conditions of service of industrial employees were invariably ill-
defined and were hardly ever known with even a slight degree of precision to the employees.
There was no uniformity of conditions of service for employees discharging identical duties in
the same establishment. Conditions of service were generally ad-hoc and the result of oral ar-
rangements which left the employees at the mercy of the employer. With the growth of the
trade union movement and the right of collective bargaining, employees started putting forth
their demands to end this sad and confusing state of affairs. Recognizing the rough deal that
was being given to workers by employers who would not define their conditions of service and
the inevitability of industrial strife in such a situation, the legislature intervened and enacted
the Industrial Employment (Standing Orders) Act. It was stated in the statement of objects
and reasons:

Experience has shown that ‘Standing Orders’, defining the conditions of recruitment,
discharge, disciplinary, action, holidays, leave, etc., go a long way towards minimizing friction
between the management and workers in industrial undertakings. Discussion on the subject
at the tripartite Indian Labour Conferences revealed a consensus of opinion in favour of
legislation. The Bill accordingly seeks to provide for the framing of ‘Standing Orders’ in all
industrial establishments employing one hundred and more workers.

It was, therefore, considered, as stated in the preamble, ‘expedient to require employers in

industrial establishments to define with sufficient precision the conditions of employment under
them and to make the said conditions known to workmen employed by them’. The scheme of
the Act, as amended in 1956 and as it now stands, requires every employer of an industrial
establishment as defined in the Act to submit to the Certifying Officer draft standing Orders,
that is, ‘Rules relating to matters set out in the Schedule’, proposed by him for adoption in his
industrial establishment. This is mandatory. It has to be done within six months after the com-
mencement of the Act. Failure to do so is punishable and is further made a continuing offence.
The draft Standing Orders are required to cover every matter set out in the schedule. The Sched-
ule enumerates the matters to be provided in the Standing Orders and they include classification
of workmen, shift working, attendance and late coming, leave and holidays, termination of em-
ployment, suspension or dismissal for misconduct, means of redress for wronged workmen, etc.
Item 11 of the Schedule is ‘Any other matter which may be prescribed’. By a notification dated
 Industrial Employment (Standing Orders) Act, 1946 365

17 November 1959 the Government of Uttar Pradesh has prescribed ‘Age of superannuation
or retirement, rate of pension or any other facility which the employer may like to extend or
may be agreed upon between the parties’ as a matter requiring to be provided in the Standing
Orders. On receipt of the draft Standing Orders from the employer, the Certifying Officer is
required to forward a copy of the same to the trade union concerned or the workmen inviting
them to prefer objections, if any. Thereafter the Certifying Officer is required to give a hearing
to the employer and the trade union or workmen as the case may be and to decide ‘whether or
not any modification of or addition to the draft submitted be the employer is necessary to
render the draft Standing Orders certifiable under the Act’. Standing Orders are certifiable
under the Act only if provision is made therein for every matter set out in the schedule, if they
are in conformity with the provisions of the Act and if the Certifying Officer adjudicated them
as fair and reasonable. The Certifying Officer is invested with the powers of a Civil Court for
the purposes of receiving evidence, administering oaths, enforcing the attendance of witnesses,
etc. The order of the Certifying Officer is subject to an appeal to the prescribed appellate
authority. The Standing Orders as finally certified are required to be entered in a register
maintained by the Certifying Officer. The employer is required to prominently post the Certified
Standing Orders on special boards maintained for that purpose. This is the broad scheme of the
Act. The Act also provides for exemptions. About that, later. The Act, as originally enacted,
precluded the Certifying Officer from adjudicating upon the fairness or reasonableness of the
Draft Standing Orders submitted by the employer but an amendment introduced in 1956 now
casts a duty upon the Certifying Officer to adjudicate upon the fairness or reasonableness of the
draft Standing Orders. The scheme of the Act has been sufficiently explained by this Court in
Associated Cement Co. Ltd. P.D. Vyas,6 Rohtak Hissar District Electricity Supply Co. Ltd. vs State of
U.P.,7 and Western India Match Co. Ltd. vs Workmen.8 The Industrial Employment (Standing
Orders) Act is thus seen to be an Act specially designed to define the terms of employment of
workmen in industrial establishments, to give the workmen a collective voice in defining the
terms of employment and to subject the terms of employment to the scrutiny of quasi-judicial
authorities by the application of the test of fairness and reasonableness. It is an Act giving recog-
nition and form to hard-won and precious rights of workmen. We have no hesitation in saying
that it is a special Act expressly and exclusively dealing with the schedule—enumerated conditions
of service of workmen in industrial establishments.
Turning next to the Electricity Supply Act, it is, as its preamble says, ‘An Act to provide for
the rationalization of the production and supply of electricity, and generally for taking measures
conducive to electrical development’. The statement of objects and reasons and a glance at the
various provisions of the Act show that the primary object of the Act is to provide for the coord-
inated, efficient and economic development of electricity in India on a regional basis consistent
with the needs of the entire region including semi-urban and rural areas. Chapter II of the Act
provides for the constitution of the Central Electricity Authority and Chapter III for the con-
stitution of State Electricity Boards. Chapter IV prescribes the powers and duties of State Elec-
tricity Boards, and Chapter V the Board’s works and trading procedure. Chapter VI deals with
the Board’s Finance, Accounts and Audit. Chapter VII (from Section 70 to Section 83) which
is headed ‘Miscellaneous’ contains various miscellaneous provisions amongst which are Section 78
which empowers the Government to make rules and Section 79 which empowers the Board to
make regulations in respect of matters specified in clauses (a) to (k) of that section. Clause (c) of
Section 79 is ‘the duties of Officers and servants of the Board, and their salaries, allowances and
other conditions of service’. This, of course, is no more than the ordinary general power, with
which every employer is invested in the first instance, to regulate the conditions of service of his
employees. It is an ancillary or incidental power of every employer. The Electricity Supply Act
does not presume to be an Act to regulate the conditions of service of the employees of State Elec-
tricity Boards. It is an Act to regulate the coordinated development of electricity. It is a special
Act in regard to the subject of development of electricity, even as the Industrial Employment
(Standing Orders) Act is a special act in regard to the subject of conditions of service of workmen
366 Social Justice and Labour Jurisprudence

in industrial establishments. If Section 79(c) of the Electricity Supply Act generally provides for
the making of regulations providing for the conditions of service of the employees of the Board,
it can only be regarded as a general provision which must yield to the special provisions of the
Industrial Employment (Standing Orders) Act in respect of matters covered by the latter Act.
The maxim ‘Generalia specialibus non derogant’ is quite well-known. The rule flowing from
the maxim has been explained in Mary Seward vs The Owner of the ‘Vera Cruz’,9 as follows:

Now if anything be certain it is this, that where there are general words in a later Act capable
of reasonable and sensible application without extending them to subjects specially dealt
with by earlier legislation, you are not to hold that earlier and special legislation indirectly
repealed, altered, or derogated from merely by force of such general words, without any indi-
cation of a particular intention to do so.

The question in Seward vs The Owner of the ‘Vera Cruz’,10 was whether Section 7 of the Ad-
miralty Court Act of 1861, which gave jurisdiction to that Court over ‘any claim for damage
done by any ship’ also gave jurisdiction over claims for loss of life which would otherwise come
under the Fatal Accidents Act. It was held that the general words of Section 7 of the Admiralty
Court Act did not exclude the applicability of the Fatal Accidents Act and therefore, the Admiralty
Court had no jurisdiction to entertain a claim for damages for loss of life.
The reason for the rule that a general provision should yield to a specific provision is this: In
passing a special Act, Parliament devotes its entire consideration to a particular subject. When a
general Act is subsequently passed, it is logical to presume that Parliament has not repealed or
modified the former special Act unless it appears that the Special Act again received consideration
from Parliament. Vide London and Blackwall Railway vs Limehouse District Board of Works11 and
Thorpe vs Adam.12 In J.K. Cotton Spinning and Weaving Mills Co. Ltd. vs State of U.P,13 this
Court observed (at p. 1174):

The rule that general provisions should yield to specific provision is not an arbitrary principle
made by lawyers and judges but springs from the common understanding of men and women
that when the same person gives two directions, one covering a large number of matters in
general and another to only some of them his intention is that these latter directions should
prevail as regards these while as regards all the rest the earlier direction should have effect.

We have already shown that the Industrial Employment (Standing Orders) Act is a special
Act dealing with a specific subject, namely the conditions of service, enumerated in the schedule,
of workmen in industrial establishments. It is impossible to conceive that Parliament sought to
abrogate the provisions of the Industrial Employment (Standing Order) Act embodying as they
do hard-won and precious rights of workmen and prescribing as they do an elaborate procedure,
including a quasi-judicial determination, by a general, incidental provision like Section 79(c) of
the Electricity (Supply) Act. It is obvious that Parliament did not have before it the Standing
Orders Act when it passed the Electricity Supply Act and Parliament never meant that the
Standing Orders Act should stand pro tanto repealed by Section 79(c) of the Electricity Supply
Act. We are clearly of the view that the provisions of the Standing Orders Act must prevail over
Section 79(c) of the Electricity Supply Act, in regard of matters to which the Standing Orders
Act applies.
Shri G. B. Pai, relying on what was said in the Rajasthan State Electricity Board case14 and
Sukhdev Singh15 case argued that the regulations made under Section 79(c) of the Electricity
Supply Act being statutory in nature stood on so high a pedestal as to override, by their very
nature, the Standing Orders made under the Standing Orders Act. The observations in the
Rajasthan State Electricity Board 16 case, on which he relied, are:

The state, as defined in Article 12, is thus comprehended to include bodies created for the
purpose of promoting the educational and economic interest of the people. The State, as
 Industrial Employment (Standing Orders) Act, 1946 367

constituted by our Constitution, is further specifically empowered under Article 298 to carry
on any trade or business. The circumstance that the Board under the Electricity Supply Act
is required to carry on some activities of the nature of trade or commerce does not, therefore,
give any indication that the Board must be excluded from the scope of the word ‘state’ as
used in Article 12. On the other hand, there are provisions in the Electricity Supply Act
which clearly show that the powers conferred on the Board include power to give directions,
the disobedience of which is punishable as a criminal offence. In these circumstances, we do
not consider it at all necessary to examine the cases cited by Mr Desai to urge before us that
the Board cannot be held to be an agent or instrument of the Government. The Board was
clearly an authority to which the provisions of Part III of the Constitution were applicable.

And in Sukhdev Singh’s17 case:

Rules, regulations, schemes, bye-laws, orders made under statutory powers are all comprised
in delegated legislation:

Subordinate legislation has, if validly made, the full force and effect of a Statute.
Rules and Regulations of the Oil and Natural Gas Commission, Life Insurance Cor-
poration, Industrial Finance Corporation have the force of law.
The employees of these statutory bodies have a statutory status and they are entitled to
a declaration of being in employment when their dismissal or removal is in contravention
of statutory provisions.
These statutory bodies are authorities within the meaning of Article 12 of the Constitution.

The propositions that Statutory Bodies are ‘authorities’ within the meaning of Article 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 undoubt-
edly have. The question is not whether the regulations made under Section 79 have the force of
law; again, they undoubtedly have. The question is whether Section 79(c) of the Electricity
Supply Act is a general law and therefore, regulation cannot be made under it in respect of
matters covered by the Industrial Employment (Standing Orders) Act, a special law. That question
we have answered and the answer to that question makes irrelevant the submissions based on
the statutory status of the employees and the statutory force of the regulations.
Next, we turn to the submission based on the notification made under Section 13B of the
Standing Orders Act. Section 13B reads as follows:

13B. Nothing in this Act shall apply to an industrial establishment in so far as the workmen
employed therein are persons to whom the Fundamental and Supplementary Rules, Civil
Services (Classification, Control and Appeal) Rules, Civil Service (Temporary Service) Rules,
Revised Leave Rules, Civil Service Regulations, Civilians in Defence Service (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.

The notification made by the Government has already been extracted by us. Some doubts
were expressed whether the U.P. State Electricity Board had in fact made the regulation and
whether the Government merely notified the regulation without applying its mind. The learned
Counsel appearing for the Board and the Government placed before us the relevant records
and note-files and we are satisfied that the Board did make the regulation and the Government
did apply its mind.
368 Social Justice and Labour Jurisprudence

The High Court expressed the views that the expression ‘any other rules or regulations’
should be read ejusdem generis with the expressions ‘Fundamental and Supplementary Rules’,
‘Civil Service, Control, Classification and Appeal Rules’, etc. So read, it was said, the provisions
of Section 13-B could only be applied to industrial establishments in which the workmen em-
ployed could properly be described as Government servants. We are unable to agree that the
application of the ejusdem generis rule leads to any such result. The true scope of the rule of
ejusdem generis is that words of general nature following specific and particular words should
be construed as limited to things which are of the same nature as those specified. But the rule is
one which has to be ‘applied with caution and not pushed too far’. It is a rule which must be
confined to narrow bounds so as not to unduly or unnecessarily limit general and comprehensive
words. If a broad-based genus could consistently be discovered, there is no warrant to cut down
general words to dwarf size. If giant it cannot be, dwarf it need not be. It is true that in Section
13-B the species specifically mentioned happens to be Government servants. But they also
possess this common characteristic that they are all public servants enjoying a statutory status,
and governed by statutory rules and regulations. If the Legislature intended to confine the ap-
plicability of Section 13-B to industrial undertakings employing Government servants only
nothing was easier than to say so instead of referring to various rules specifically and following
it up with a general expression like the one before us. The words ‘rules and regulations’ have
come to acquire a special meaning when used in statutes. They are used to describe subordinate
legislation made by authorities to whom the statute delegates that function. The words can
have no other meaning in Section 13-B. Therefore, the expression ‘workmen... to whom... any
other rules or regulations that may be notified in this behalf ’ means, in the context of Section
13-B, workmen enjoying a statutory status, in respect of whose conditions of service the relevant
statute authorizes the making of rules or regulations. The expression cannot be construed so
narrowly as to mean Government servants only; nor can it be construed so broadly as to mean
workmen employed by whomsoever including private employers, so long as their conditions of
service are notified by the Government under Section 13-B.
Shri Garg relied on certain observations of the Madras High Court in Raman Nambissan vs
State Electricity Board,18 and Thiruvenkataswami vs Coimbatore Municipality.19 In Raman
Nambissan20 case it was held that the mere fact that the Electricity Board had adopted the rules
and regulations of the Government of Madras as its transitory rules and regulations did not
bring the workmen employed in industrial establishments under the Board within the mischief
of Section 13-B of the Industrial Employment (Standing Orders) Act. In Thiruvenkataswami’s21
case it was held that rules made by the Government under the District Municipalities Act could
not be considered to be rules notified under Section 13-B of the Standing Orders Act merely
because the rules were made by the Government and published in Government Gazette. We
agree with the conclusions in both cases. In Thiruvenkataswami’s 22 case [Justice] Kailasam, also
observed that the Industrial Employment (Standing Orders) Act was a special act relating ex-
clusively 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: ‘Section 13-B cannot be availed of for purposes of fram-
ing 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 authorized to frame rules and regulations relating to the conditions of
employment in industrial establishments.’ There we disagree. Our disagreement however is
only in regard to industrial establishments under Statutory Corporations which are authorized
by statute to make rules and regulations and not in regard to those under Statutory Corporations
not so authorized, nor in regard to those under private management. Our reasons are mentioned
in the previous paragraph.
Shri Garg suggested that the rules and regulations specific mention of which has been made
in Section 13-B were all comprehensive sets of rules and, therefore, ‘any other rules or regulations’
 Industrial Employment (Standing Orders) Act, 1946 369

that might be notified by the Government should also satisfy the test of comprehensiveness. He
argued that a single rule or regulation could not be notified under Section 13-B as it would be
too much to say, he said, that the notifying of a single rule or regulation would exclude the ap-
plicability of all the provisions of the Standing Orders Act. We do not think that the notifying
of one or many regulations has the effect that Shri Garg apprehends it has. The words ‘Nothing
in this Act shall apply’ are not to be interpreted too literally as to lead to absurd results and to
what the Legislature never intended. In our view the only reasonable construction that we can
put upon the language of Section 13-B is that a rule or regulation, if notified by the Government,
will exclude the applicability of the Act to the extent that the rule or regulation covers the field.
To that extent and to that extent only ‘nothing in the Act shall apply’. To understand Section
13-B in any other manner will lead to unjust and uncontemplated results. For instance, most of
the Service Rules and Regulations expressly mentioned in Section 13-B do not deal with a large
number of the matters enumerated in the schedule such as ‘Manner of intimating to workmen
periods and hour of work, holidays, pay-days and wage rates’, ‘shift working’, ‘Attendance and
late coming’, conditions of, procedure in applying for, and the authority which may grant leave
and holidays’, ‘Closing and reopening of Sections of the industrial establishments and temporary
stoppages of work and the rights and liabilities of the employer and workmen arising therefrom,
etc. To exclude the applicability of Standing Orders relating to all these matters because the
Fundamental Rules, the Civil Services Rules or the Civil Services Control, (Classification, Control
and Appeal) Rules provide for a few matters like ‘Classification of workmen’ or ‘suspension or
dismissal for misconduct’ would be to reverse the processes of history, apart from leading to
unjust and untoward results. It will place workmen once again at the mercy of the employer be
he ever so benign and it will certainly promote industrial strife. We have indicated what accord-
ing to us is the proper construction of Section 13-B. That is the only construction which gives
meaning and sense to Section 13-B and that is a construction which can legitimately be said
to conform to the Directive Principles of State Policy proclaimed in Articles 42 and 43 of the
Constitution.
We, therefore hold that the Industrial Employment (Standing Orders) Act, 1946 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 no effect unless such regulations are either notified
by the Government under Section 13-B or certified by the Certifying officer under Section 5 of
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 of which
regulations have been made by the Board, the Industrial Employment (Standing Orders) Act
shall continue to apply. In regard to age of the superannuation having been duly notified by the
Government, the regulation shall have effect notwithstanding the fact it is a matter which could
be the subject matter of standing orders under the Industrial Employment Standing Orders
Act. The respondents were therefore properly retired at the age of 58 years. The appeal is therefore
allowed.

Modification of Standing Orders: The

Views of the Supreme Court

The power to frame model standing orders within the framework of the standing orders
specified in Schedule I of the Industrial Employment (Standing Orders) Act, 1946, is in
the realm of the employer, subject to scrutiny by the certifying officer, under the Act.
370 Social Justice and Labour Jurisprudence

Modification of the standing orders would arise only on the basis of the certifying officer’s
directions and at the interference of the Labour Court (the appellate authority).

Ghaziabad Engineering Company vs

the Certifying Officer and Another 23

In this case, the Supreme Court had to interfere in providing finality to a modified standing
order.

THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

This appeal by special leave raises a short question which has been decided adverse to the
appellant by the Certifying Officer, Kanpur and the Industrial Tribunal which is the appellate
authority. The narrow point that falls for decision is as to whether the modification of the
Standing Orders under the Industrial Employment (Standing Orders) Act, 1946 and the rules
framed thereunder was illegally made by the Certifying Officer. The modification itself related
to grant of six days’ casual leave (on a paid basis) to the workers in the appellant’s factory in
Ghaziabad. The Certifying Officer has considered this grant of casual leave as fair and reasonable
having regard to the prevalent practice in the neighbouring industries of this industrial belt and
also paying attention to the financial position of the appellant’s undertaking. For this purpose
he has relied upon the fact that 20% bonus was paid under the Payment of Bonus Act, 1965
and has further stated that certain other factories have been giving paid casual leave for their
workers. These facts persuaded him to grant the modification although reducing the number of
days to six as against twelve which the workers originally claimed.
The Appellate Authority concurred by a separate discussion in the same conclusion. We are
requested by Shri Gupta to reverse this concurrent finding of fact on two grounds. He states
that the undertaking of the appellant is a losing proposition and relies upon certain balance
sheets stated to have been produced before the Certifying Officer. He also argues that there is
no positive material to make out that other industries in the locality are granting casual leave to
their workers.
These are pure questions of fact and this Court’s jurisdiction under Art. 136 cannot be ex-
ploited for canvassing points such as these. It is clear that the modification was within the
jurisdiction of the Certifying Officer and he has not contravened any provision of the Act or
any Statute. The Factories Act, 1948 prescribes in Section 79(1) a certain number of days’ leave
but this is the minimum and not the maximum as had been indicated in this Court’s ruling in
Alembic Chemical Works Co Ltd vs Workmen.24 Moreover, the model Standing Orders as well as
the Schedule to the Industrial Employment (Standing Orders) Act, 1946 deal with casual leave.
In this view there is nothing illegal in the order impugned nor are we satisfied that there is any-
thing shockingly violative of fairness or justice. It is a notorious fact that casual leave is not an
automatic advantage to the total number of days leave that a worker is entitled. It is only in the
event of sudden emergencies that casual leave is allowed and so the grievance of the appellant is
exaggerated, if not imaginary. Apart from this, it is elementary that unforeseen circumstances
may unexpectedly crop up necessitating sudden absence of an employee, be he in Government
service or any other office or in an industrial undertaking. The whole concept of casual leave is
calculated to provide for contingencies.
We see nothing unfair in the Certifying Officer according six days by way of casual leave to
the workers. After all the contentment of the workers is an essential component of their efficiency
and if the Certifying Officer and the Appellate Authority who deal regularly with such matters
 Industrial Employment (Standing Orders) Act, 1946 371

have felt that his step was fair and nothing is shown to our satisfaction that there is anything
grossly unfair about this modification, we should not interfere by exercise of the special jurisdiction
of this Court.
The third point put forward by Shri Gupta was that according to the Appellate Tribunal, the
current trend is to grant an overall maximum of thirty days leave while in this case if the casual
leave is also taken into account it may extend to 33½ days leave. As pointed out earlier, casual
leave is not a matter of right and a man may not get casual leave unless circumstances are sud-
den or which in the ordinary course cannot be met by taking regular leave. Secondly, we are not
satisfied that the current trend in a particular area or industry has the force of law. It may have
persuasive value but not more. That is why after taking note of that circumstance, the Tribunal
has still chosen to affirm the claim for 6 days casual leave. After all the excess is around three
days in a year.
We, therefore, dismiss the appeal, but, in the circumstance, without costs.

NOTES

1. The proviso to Section 1(3) of the Act provides that the appropriate government may, after giving not less
than two months’ notice of its intention to do so, by notification in the official gazette, apply the provisions
of this Act to any industrial establishment employing less than 100 persons, specifying this new lower
number in the notification.
2. Section 13B of the Act provides that nothing in this Act shall apply to an industrial establishment insofar
as the workmen employed therein are persons to whom the Fundamental and Supplementary Rules, Civil
Services (Classification, Control and Appeal) Rules, Civil Services (Temporary Services) Rules, Revised
Leave Rules, Civil Service Regulations, Civilians in Defence Service (Classification, Control and Appeal)
Rules or the Indian Railway Establishment Code, or any other rules or regulations as may be notified in
this behalf by the appropriate government in the official gazette, apply.
Section 14 of the Act provides that the appropriate government may, by notification in the official
gazette, exempt, conditionally or unconditionally, any industrial establishment or class of industrial
establishments from all or any of the provisions of this Act.
3. AIR 1979 SC 65. This case was heard by V.R. Krishna Iyer, D.A. Desai and O. Chinnappa Reddy, J.J.
4. AIR 1975 SC 1331.
5. AIR 1967 SC 1857.
6. AIR 1960 SC 665.
7. (1966) 2 SCR 863.
8. AIR 1973 SC 2650.
9. (1884) 10 AC 59 at 68.
10. (1884) 10 AC 59.
11. 26 LJ Ch 164:69 ER 1048.
12. (1871) LR 6 CP 125).
13. AIR 1961 SC 1170.
14. AIR 1967 SC 1857.
15. AIR 1975 SC 1331.
16. AIR 1967 SC 1857.
17. AIR 1975 SC 1331.
18. (1967) 1 LLJ 252.
19. (1968) 1 LLJ 361.
20. (1967) 1 LLJ 252.
21. (1968) 1 LLJ 252.
22. (1968) 1 LLJ 361.
23. AIR 1978 SC 769. The case was heard by V.R. Krishna Iyer and Jaswant Singh.
24. AIR 1961 SC 647.
 Chapter 10

Change of Service Conditions:

Restrictions on the Freedom of the Employer

The matters relating to change of service conditions as applicable to any workman are
dealt under the Industrial Disputes Act, 1947, mainly under two different circumstances.
They are:

1. Any change in the conditions of service applicable to any workman in respect of any
matter specified in the Fourth Schedule,1 and
2. Conditions of service to remain unchanged under certain circumstances during pendency
of proceedings before a conciliation officer or a board or of any proceeding before an
arbitrator or a Labour Court, tribunal or national tribunal in respect of an industrial
dispute and in other circumstances.2

The industrial law of the country, i.e., the Industrial Disputes Act, 1947, provides an
important relief to the disputing workmen, which is analogous to the provision of a stay
order or injunction under the civil law of the country. Many a time the workmen raise
their voices against the hard treatment of the employer in meting out proper terms and
conditions of employment to them. In such situations, if the industrial dispute takes
recourse to proceedings under the Industrial Disputes Act, 1947, there is every possibility
that the employer may easily, with the power of his might, effect changes in the service
conditions of the workmen so as to have a prejudicial effect on workers’ rights in the
pending proceedings. Precisely for this reason, the provisions under Sections 33 and 33A
render in practice a stay order with respect to the service conditions of the workmen,
against the employer’s right to dispose of his labour as he wills. If one conducts a deeper
study into these aspects, the law that is, the Industrial Disputes Act, 1947—leaves certain
pertinent questions unanswered in this context.

Notice of Change Exclusively under Section 9A

As stated already, Section 9A of the Act imposes appropriate restrictions on the employer’s
freedom in effecting changes in the conditions of service applicable to any workman in
respect of any matter specified in the Fourth Schedule. In substance, the Fourth Schedule
covers every aspect of the interests of the workmen as far as their terms and conditions of
employment are concerned.
 Change of Service Conditions 373

The Management of the Indian Oil Corporation vs its Workmen3

In this case, the Supreme Court had to consider the correctness of the award of an industrial
tribunal in restoring a compensatory allowance to the workmen for the employer’s
noncompliance with the provisions of Section 9A of the Act.
This was an appeal by special leave against the award dated 22 October 1969 by
R. Medhi, Presiding Officer, Industrial Tribunal, Gauhati, on a reference made to the tri-
bunal by the Government of Assam by virtue of its notification No. FLR 46/61/194,
dated 14 July 1965, in view of an industrial dispute having existed between the parties.
The appellant was the management of the Indian Oil Corporation, which had taken,
over what was known as the Assam Oil Refineries, situated at Gauhati. The reference to
the tribunal was made by the government in the following circumstances.

THE FACTS OF THE CASE

By virtue of a notification dated 3 September 1957, the Central Government granted com-
pensatory allowance according to certain rates to all Central Government employees posted
throughout Assam.
The appellant had set up the refinery some time in the year 1959 and, in view of the circular
of the Central Government referred to above, the management thought it fit in the circumstances
to grant compensatory allowance to all its employees sometime in September 1959. The grant
of compensatory allowance was not made through any standing orders or through any circular,
but it is alleged to have been given as an implied condition of service. Thereafter, there was an-
other notification by the Central Government, dated 8 December 1960, by which it was provided
that employees in receipt of the compensatory allowance, would be given the option to choose
the house rent allowance or compensatory allowance but would not be entitled to draw both.
This order was to remain in force for five years. By virtue of another notification dated 9 August
1965, the Central Government further made it clear that the employees of the Central Govern-
ment would have to draw either compensatory allowance at the existing rates or the house rent
allowance, but not both. In view, however, of the notification dated 8 December 1960 alluded
to above, the management thought that the contents of the circular were binding on the company
and, therefore, they unilaterally, without giving any notice to the workers, withdrew the con-
cession of the compensatory allowance which had been granted to the workers in September
1959. This concession was withdrawn with effect from July 1960. The workers moved the gov-
ernment to make a reference to the tribunal because a dispute arose between the parties regarding
the competency of the appellant to withdraw the concession unilaterally. The government made
a reference to the industrial tribunal, which held that there was a dispute between the parties
and, as Section 9A of the Industrial Disputes Act, 1947 (hereinafter referred to as ‘the Act’), has
not been complied with by the company, the management was not legally entitled to withdraw
the concession of the compensatory allowance granted to the employees. The award of the in-
dustrial tribunal was published by the Government of Assam in the Gazette dated 14 July 1965.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE FAZL ALI

Dr Anand Prakash, counsel for the appellant, made the following three contentions before us:

(1) that the compensatory allowance was given purely on the basis of the Central Government
circular dated 3 September 1957, on the distinct understanding that it was a temporary
374 Social Justice and Labour Jurisprudence

measure which could be withdrawn at the will of the employer and did not amount to a
condition of service at all;
(2) that even if the provisions of Section 9A of the Act applied, since the management had
substituted the house rent allowance for compensatory allowance the workers were not
adversely affected and, therefore it was not necessary to give any notice to them before
withdrawing the concession of the compensatory allowance; and
(3) that even if the provisions of Section 9A of the Act were not complied with, the Tribunal
should have at least gone into the question on merits instead of basing its award on the
question of applicability of Section 9A of the Act.

Before, however, dealing with the contentions raised before us, it may be necessary to mention
a few admitted facts. In the first place it is the admitted case of the parties that the circulars of
the Central Government were not binding on the appellant Corporation but the Corporation
chose to follow them in its own wisdom. Secondly, it is also admitted that at the time when the
concession of compensatory allowance was granted to the employees of the Corporation, there
was nothing to show that it was given only by way of an interim measure which could be with-
drawn at the will of the employer. Thirdly, it is also not disputed that before withdrawing the
concession of the compensatory allowance in August, 1960 the appellant gave any notice to the
workers, nor did it consult them in any way before depriving them of the concession originally
granted by the employer. In fact the Tribunal has found very clearly that the act of the Corporation
in granting the Assam Compensatory Allowance was an independent one and made out of their
own volition, though the circulars of the Central Government may have been one of the factors
that swayed the decision of the management. It is against the background of these admitted
facts and the circumstances that we have to examine the contentions raised by Counsel for the
appellant in this appeal.
As regards the first contention that the concession of the compensatory allowance was granted
to the workers by way of a temporary measure and would not amount to a condition of service,
we find absolutely no material on the record to support the same. There is no evidence to show
that the management before granting the concession of the compensatory allowance had in any
way indicated to the workers that this was only a stop-gap arrangement which could be withdrawn
after housing subsidy was granted. Even before the unilateral withdrawal of the concession
granted by the appellant no notice was given to the workers nor were they taken into confidence,
nor any attempt was made to open a dialogue with them on this question. Indeed if the circulars
of the Central Government are admittedly not binding on the Corporation, then we are unable
to appreciate the stand taken by the appellant that the management unilaterally withdrew the
concession merely because of the Central Government circulars. So far as the compensatory
allowance is concerned it was given in order to enable the workers to meet the high cost of living
in a far-fetched and backward area like Assam. It had absolutely no casual connection with the
housing subsidy or house rent allowance which was a different type of concession. Furthermore,
the grant of compensatory allowance by the appellant was indeed a very charitable act which
showed that the employers were extremely sympathetic towards the needs of their workers. In
these circumstances we have no hesitation in holding that the grant of compensatory allowance
was undoubtedly an implied condition of service so as to attract the mandatory provisions of
Section 9A of the Act which runs thus:

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 proposed to be effected; or
(b) within twenty-one days of giving such notice:
 Change of Service Conditions 375

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 which the
Fundamental and Supplementary Rules, Civil Service (Classification, Control and
Appeal) Rules, Civil Services (Temporary Service) Rules, Revised Leave Rules, Civil
Services 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.)

An analysis of Section 9A of the Act clearly shows that this provision comes into operation
the moment the employer proposes to change any condition of service applicable to any workman,
and once this is done twenty-one days’ notice has to be given to the workmen. This admittedly
was not done in this case. By withdrawing the Assam Compensatory Allowance the employers
undoubtedly effected substantial change in the conditions of service, because the workmen
were deprived of the compensatory allowance for all times to come.
Dr Anand Prakash however relied on a few decisions in support of the fact that such a
change in the conditions of service does not amount to any change as contemplated by Section 9A
of the Act. Reliance was placed on a decision of the Andhra Pradesh High Court in Workmen of
Hindustan Shipyard (Private) Ltd. vs Industrial Tribunal, Hyderabad 4 In our opinion the facts of
that case are clearly distinguishable from the facts in the present case. In that case a concession
was granted to the employees to attend the office half an hour late due to wartime emergency,
but this concession was conditional on the reservation of the right to change the office hours
and it was open to the employer to take a different decision. Secondly, the working hours being
fixed at 6½ hours were below the maximum prescribed by the Factories Act which were 8 hours
and, therefore, there was no adverse change in the conditions of service. Finally in this case
there was a clear finding given by the learned Judge that the concession would not amount to a
condition of service. In this connection, Jaganmohan Reddy, J., observed as follows:

In this case as it cannot be said that the concession which they were enjoying in the winter
month was a privilege to which they were entitled before the Act came into force in February,
1948. I have already stated that the concession was subject to the condition of its withdrawal
unilaterally and cannot, therefore, be said to have conferred any right on the employees to
enjoy it as such.
... further that Section 9A came into play only when the conditions of service were altered,
but the workmen having agreed to the reservation of the employer to alter it, they have made
the right to alter it also a condition of service and therefore the action in accordance with the
said right can give no cause for complaint.

In the instant case we have already held that the grant of compensatory allowance cannot be
construed to be merely an interim measure, but having regard to the circumstances in which
this concession was given will amount to an implied condition of service.
Reliance was also placed on a decision by this Court in Bhiwani Textile Mills vs Their Workmen,5
where this Court observed as follows:

Sri G.B. Pai, on behalf of the mills, and Sri M.S.M. Sastri and Y. Kumar, for the two unions
representing the workmen, stated before us that the parties are agreed that this direction
given in the award may be deleted as no party objects to its deletion. Consequently, we need
not go into the question whether the tribunal was in law competent to make such a direction
in the award or not ...
376 Social Justice and Labour Jurisprudence

In view of this agreement between the parties, the only question that remains for decision
by us is whether the tribunal was right in directing that workmen, who do duty on any
Sunday, will be entitled to an extra payment of 20 per cent of their consolidated wages for
that Sunday.

A perusal of the observations made by this Court would clearly show that the case before this
Court proceeded on the basis of a consent order as agreed to by the counsels for the parties.
Secondly, the question for decision was whether the workmen were entitled to additional payment
for working on Sundays even if they were given another off day as a substitute for Sunday. The
Court pointed out that this could not be treated as a condition of service because all that the
workmen were entitled to was that they should take at least one day off in a week and this
facility was not disturbed but instead of giving Sunday off they were given some other day as
weekly off. In these circumstances this case also does not assist the appellant.
Dr Anand Prakash also cited a decision in Oil & Natural Gas Commission vs Workmen.6 In
this case also there was a finding of fact by this Court that there was nothing to show that 6½ hours
per day was a condition of service. In this connection, the Court observed as follows:

In our opinion on the facts and circumstances of this case it cannot be said that 6½ working
hours a day was a term of service, for the simple reason that it was only during a period of the
first six months, when the factory was being constructed at the site of the workshop that, due
to shortage of accommodation, the administrative office was, as an interim arrangement,
temporarily located in tents at a place about 2 km. away, that the staff in this office was not
required to work for more than 6½ hours per day. There is no evidence that 6½ hours per
day was a condition of services; neither is there any such term of service in their letters of
appointment, nor is such a term of service otherwise discernible from other material on the
record.

In view of our finding, however, that the grant of the Assam Compensatory Allowance was
undoubtedly a condition of service and this case has absolutely no application.
Reliance was placed on a decision of this Court in Hindustan Lever Ltd. vs Ram Mohan
Ray 7... for the proposition that withdrawal of the concession of the compensatory allowance
did not adversely affect the service conditions of the workmen. In this case, this Court observed
as follows:

As regards item 11 it was urged that as one department out of three has been abolished this
item applies. Though to bring the matter under this item the workmen are not required to
show that there is increase in the workload, it must be remembered that the 4th schedule
relates to conditions of service for change of which notice is to be given and Section 9A re-
quires the employer to give notice under that section to the workmen likely to be affected by
such change. The word ‘affected’ in the circumstances could only refer to the workers being
adversely affected and unless it could be shown that the abolition of one department has
adversely affected the workers it cannot be brought under item 11. The same consideration
applied to the question of change in usage under item 8.

It is true that this Court held on the fact of that case that the Company had abolished one
department, but as the workload was not increased the workers were not adversely affected and
the abolition of one department could not be brought under item 11. The contingency contem-
plated in the aforesaid case, however, cannot be equated with the present case by virtue of the
unilateral deprivation of the compensatory allowance which was received by the employees by
the withdrawal of which they were undoubtedly prejudiced. It cannot be contended that the
 Change of Service Conditions 377

sudden withdrawal of a substantial concession in the conditions of service would not materially
or adversely affect the workmen. We are therefore, of the opinion that the aforesaid case also
does not support the contention of the learned Counsel for the appellant.
On the other hand Mr Sen Gupta appearing for the respondents drew our attention to the
decision of this Court in M/s Tata Iron and Steel Co. Ltd. vs Workmen,8 where this Court, while
pointing out the object of Section 9A, observed as follows:

The real object and purpose of enacting Section 9A seems to be to afford an opportunity to
the workmen to consider the effect of the proposed change and, if necessary, to represent
their point of view on the proposal. Such consultation further serves to stimulate a feeling of
common joint interest of the management and the workmen in the industrial progress and
increased productivity. This approach on the part of the industrial employer would reflect his
harmonious and sympathetic co-operation in improving the status and dignity of the industrial
employee in accordance with the egalitarian and progressive trend of our industrial juris-
prudence, which strives to treat the capital and labour as co-sharers and to break away from
the tradition of labour’s subservience to capital.

The observations made by this Court lay down the real test as to the circumstances in which
Section 9A would apply. In the instant case, however, we are satisfied (1) that the grant of the
compensatory allowance was an implied condition of service; and (2) that by withdrawing
this allowance the employer sought to effect a change which adversely and materially affected
the service conditions of the workmen. In these circumstances, therefore, Section 9A of the Act
was clearly applicable and the non-compliance with the provisions of this section would undoubt-
edly raise a serious dispute between the parties so as to give jurisdiction to the Tribunal to give
the award. If the appellant wanted to withdraw the Assam Compensatory Allowance it should
have given notice to the workmen, negotiated the matter with them and arrived at some settle-
ment instead of withdrawing the compensatory allowance overnight.
It was also contended that the compensatory allowance was only an allowance given in sub-
stitution for housing subsidy. We are, however, unable to agree with this contention. Mr Sen
Gupta appearing for the respondents rightly pointed out that there is a well-knit and a clear
distinction between the compensatory allowance and a housing subsidy or house rent allowance.
This distinction is clearly brought out by the Second Pay Commission’s Report (1957–59), in
which the Commission observed as follows:

The compensatory allowances considered here fall into three broad groups: (i) allowances to
meet the high cost of living in certain specially costly cities and other local areas, including
hill stations where special requirements such as additional warm clothing and fuel, etc., add
to the cost of living; (ii) those to compensate for the hardship of service in certain areas, e.g.
areas which have a bad climate, or are remote and difficult of access; and (iii) allowances
granted in areas, e.g. field service areas, where because of special conditions of living or ser-
vice, an employee cannot, besides other disadvantages, have his family with him. There are
cases in which more than one of these conditions for grant of a compensatory allowance are
fulfilled.

The Second Pay Commission also observed:

The rent concessions dealt with here are of two kinds: (i) provision of rent free quarters or
grant of a house rent allowance in lieu thereof; and (ii) grant of a house rent allowance in
certain classes of cities to compensate the employees concerned for the specially high rents
that have to be paid in those cities. The former is allowed only to such staff as are required to
reside on the premises where they have to work, and is thus intended to be a facility necessary
378 Social Justice and Labour Jurisprudence

to enable an employee to discharge his duties. In some cases, it is a supplement to pay, or sub-
stitute for special pay, etc., which would have been granted but for the existing of that con-
cession. In either case, it is not related to the expensiveness of a locality. The latter, on the
other hand, is a compensatory or a sort of a dearness allowance intended to cover not the
high cost of living as a whole but the prevailing high cost of residential accommodation; and
it has no relationship to the nature of an employee’s duties.

The observations made by the Second Pay Commission throw light on this question. In fact
the compensatory allowance and housing subsidy are two different and separate categories of
the terms of service conditions and they cannot be clubbed together, nor can the one be made
dependent on the other. The object of these two concessions is quite different and both of them
serve quite different purposes.
It was next contended that even if Section 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 Section 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 Section 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
Section 9A of the Act applied and had not been complied with by the appellant.
It was also faintly suggested that there was no question of a customary claim or usage because
the period during which the compensatory allowance was granted and withdrawn was too
short. It is, however, not necessary to take any notice of this argument, because Counsel for the
respondents Mr Sen Gupta fairly conceded that he had not based his claim on any customary
claim at all. It was argued by Mr Sen Gupta that after the Central Government notification of
3 September 1957, the appellant took an independent and voluntary decision on their own to
give the facility of the Assam Compensatory Allowance as an implied term of the contract and
having done so they could not wriggle out from the provisions of Section 9A of the Act.
Thus all the contentions raised by the appellant fail and the appeal is dismissed, but in the
circumstances of this case we leave the parties to bear their own costs.

Pendency of Proceedings before the

Conciliation Officer: Duties under Section 33(1)(a)

Section 33(5) of the Act concedes equal powers to the conciliation officer, board, arbitrator,
Labour Court, tribunal or national tribunal in respect of an application made by the em-
ployer under the proviso to sub-section (2) of Section 33 for approval of the action taken
by the employer. The authority concerned shall, without delay, hear such application and
pass such order in relation thereto as it deems fit. Inclusion of conciliation proceedings
before the conciliation officer or the board in Section 33 may apparently go against the
spirit of the mechanism envisaged under the Industrial Disputes Act, 1947: As such,
the role of conciliation under the Act is purely persuasive, but not imposing, and under
the circumstance, such power lacks the status of quasi-judicial character. But the language
used in sub-section 5 of Section 33 sounds a different note and this was considered by the
Supreme Court in this case.
 Change of Service Conditions 379

N.M. Desai vs the Testeels and Another 9

THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

The brief facts are that a certain employee of the first respondent was sought to be dismissed by
it at a time when there was an industrial dispute pending conciliation. So, the Management
sought the approval of the Conciliation Officer as required by the proviso to Section 33(2) of
the Industrial Disputes Act 1947. The appellant officer passed an order refusing approval but
assigning no reasons whatever. The aggrieved Management challenged the said order on the
score that a quasi-judicial power could not be exercised without complying with the obligation
to pass a speaking order. The question was considered at great length by a full Bench of the
High Court of Gujarat to which it was referred. The conclusion arrived at was that the order
was void because every order passed by a quasi-judicial authority should contain order on the
face of the order. In this view, the High Court set aside the order and remitted the matter back
to the Conciliation Officer. All this took place way back in 1969.
The Court held that the proposition of law which appealed to the High Court is not wrong.
It follows that the order of the Conciliation Officer impugned is bad and the appeal must fail.
It transpires that the respondent Management has since reached a settlement of the dispute
with the employee concerned and so the question itself has become purely academic. The re-
spondent has not entered appearance either.

Termination during Pendency of Proceedings: Validity

Section 33(2) empowers the employer to discharge or punish, whether by dismissal or

otherwise, a workman who is a party in the pending proceedings of an industrial dispute
before a Labour Court or tribunal for any misconduct not connected with the dispute after
obtaining approval for this action from the authority before which the dispute is pending.
Where an application is made by the employer for an approval of action taken under
Section 33(2)(b), is the tribunal empowered to go into the whole question relating to the
misconduct and come to its own conclusion and provide an appropriate relief to the con-
cerned workman in the circumstances?

Mahendra Singh Dhantwal vs Hindusthan Motors Ltd 10

In this case, the Supreme Court had to consider the precise scope of the powers of the
tribunal under Section 33(5), read with Section 33(2)(b) of the Act.
This is an appeal at the instance of the workman on a certificate from the Calcutta
High Court against the decision of the Division Bench reversing the earlier judgment
and order of the learned single Judge against the award of the Industrial Tribunal, made
under Section 33A of the Industrial Disputes Act.
The appellant workman had been employed in the company since 3 August 1949. On
3 August 1956, the workman entered into an agreement of service with the company,
wherein the first clause reads as follows:

The Employer agrees to and does hereby engage the services of the employee for a period
of 5 years beginning with dated 1-6-1956 and thereafter until this agreement shall be
380 Social Justice and Labour Jurisprudence

determined by either party hereto giving to the other 3 months’ notice in writing of such
intended termination.
Provided that in case employer finds the employee’s work satisfactory, employer shall have
the option to extend the period of service by a further term of 3 years.

The workman went on two months’ leave to Banaras for a change sometime in 1960.
He requested for extension of leave for one month on medical grounds. He actually sent
an application on 8 August 1960, along with a medical certificate praying for extension
of his leave. The company asked the workman to get himself examined by the company’s
medical officer within ten days. As the workman was lying ill at Banaras, he could not
com-ply with the directions of the company. On 5 September 1960, he sent another tele-
gram followed by a formal application enclosing a medical certificate for extension of his
leave. On 15 September 1960, the company sent a letter to him terminating his services
on the ground of habitual absence which is misconduct under the company’s standing
orders.
At the time of this termination there was an industrial dispute pending between the
company and its workmen. Since the company did not ask for approval of its order from
the Industrial Tribunal the workman made a complaint to the Tribunal under Section 33A
of the Act. The Company contested the application. The Tribunal made its award on
27 September 1962, ordering reinstatement of the workman with 50% of his back wages
for the period of his forced unemployment as compensation with a direction that the
award should be given effect to not later than one month of the publication of the award
which was on 26 October 1962.
After a little over two months of the publication of the award, to be precise, on 4 Feb-
ruary 1963, the company intimated to the workman to rejoin his service. The workman
reported for duty the following day on 5 February 1963. On 16 February 1963, the com-
pany invoked clause (1) of the agreement and terminated the services of the workman by
paying three months’ salary in lieu of notice.
This is the second round of litigation with which the Court was concerned in this
appeal. Since an industrial dispute was pending even on the date of termination of his
services and the Company did not apply to the Tribunal for approval of the order, the
workman made a complaint to the Tribunal, as on the previous occasion, under Section
33A of the Act. The Tribunal accepted the complaint and held as follows:

In my opinion, the company has really dismissed the petitioner for a piece of conduct which
must have appeared as misconduct in the eye of the company.

The Tribunal observed that the company in substance dismissed the workman for
misconduct since the workman became ‘odious to the company’ on account of his earlier
success before the Tribunal in his application under Section 33A of the Act. The Tribunal,
therefore ordered his reinstatement with full back wages for the period of his forced
unemployment as compensation. This time the company did not accept the award although
on the earlier occasion the company did not choose to litigate and reinstated him as
ordered by the Tribunal.
The Company moved the Calcutta High Court to quash the award. The learned single
Judge refused to interfere with the award holding that ‘the reason might have been the
old reason of dismissal…’ The learned Judge further observed that ‘the circumstances
 Change of Service Conditions 381

relied on by the Tribunal are not wholly irrelevant and the inference drawn by the Tribunal
cannot be characterised as unreasonable’.
The company appealed to the Division Bench of the High Court and the appeal was
accepted. It is very much relevant to have a look at the holding of the Division Bench,
which is as follows:

It may be that having regard to the sequence of events that took place in this case the termination
of service of the respondent No. 1 by the letter of 16th February 1963 may be regarded as a
colourable exercise of the power under the contract of employment or may even be regarded as
one of unfair labour practice or mala fide, but the discharge cannot be said to be for any
misconduct. There is no evidence for discharge on any specific misconduct. The definite case of
respondent No. 1 has been that it was by way of retaliatory measure that his services were
terminated. This may be true and may show that the action on the part of the appellant company
was mala fide. But until it is established that there has been a contravention of Section 33 of the
Act which would create jurisdiction in the Industrial Tribunal to entertain an application under
Section 33A, or in other words, unless it is established that there has been discharge for
misconduct, the tribunal had no jurisdiction to set aside the order of termination in an application
under Section 33A.

On the application by the workman under Article 133(1) of the Constitution the
matter reached the Supreme Court.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE GOSWAMI

We should at the outset observe that this is not an appeal against the award of the Industrial
Tribunal but is only directed against the judgment of the High Court under Article 226 of the
Constitution. In an application under Article 226 of the Constitution the High Court was con-
cerned only with the question of jurisdiction of the Tribunal in entertaining the application
under Section 33A of the Act. The question of jurisdiction again was intimately connected with
the question whether the termination of service was for misconduct of the workman. The
learned single Judge accepted the finding of the Tribunal when it held that the discharge was
nothing but dismissal for misconduct and in that view of the matter did not find any justification
for interfering with the award. According to the learned Judge, therefore, no question of lack of
jurisdiction of the Tribunal arose to merit interference with the award under Article 226 of the
Constitution.
The Division Bench, however, looked at the matter from a different view point. It assumed
that the action of the management was even mala fide and so it could be wrongful and in an
appropriate reference under Section 10 of the Act the workman might be able to get proper
relief. The High Court, however, came to the conclusion that since clause (1) of the agreement
was invoked by the employer it was not a case of discharge for misconduct and that being the
position the Tribunal had no jurisdiction to entertain the complaint under Section 33A even
though the action of the company might be as a result of unfair labour practice.
The question that arises for consideration relates to the applicability of the proviso to Sec-
tion 33(2)(b) of the Act as amended in 1956.11 Section 33(2)(b) at the material time reads as
follows:—

33(2) During the pendency of any such proceeding in respect of an industrial dispute, the
employer may, in accordance with the standing orders applicable to a workman concerned in
such dispute.
382 Social Justice and Labour Jurisprudence

(b) for any misconduct not connected with the dispute, discharge or punish, whether by
dismissal or otherwise, that workman:

Provided that no such workman shall be discharged or dismissed, unless he has been paid
wages for one month and an application has been made by the employer to the authority
before which the proceeding is pending for approval of the action taken by the employer.

We may also read Section 33A of the act as that is the section under which the complaint
was originally made by the workman to the Industrial Tribunal.

33A: ‘Where an employer contravenes the provisions of the Section 33 during the pendency
of proceedings before a Labour Court, Tribunal or National Tribunal any employee aggrieved
by such contravention, may make a complaint in writing in the prescribed manner to such
Labour Court, Tribunal or National Tribunal and on receipt of such complaint that Labour
Court, Tribunal or National Tribunal shall adjudicate upon the complaint as if it were a dis-
pute referred to or pending before it, in accordance with the provisions of this Act and shall
submit its award to the appropriate Government and the provisions of this Act shall apply
accordingly.’

It is clear that the foundation of jurisdiction of the Tribunal to entertain a complaint under
Section 33A is the contravention of Section 33 of the Act.
Section 33 may be contravened in a variety of ways. We are concerned in this appeal only
with one type of contravention, namely, that the employer did not make any application to the
Tribunal for approval of the order of termination of service of the workman. There is no dispute
between the parties in this appeal that there was an industrial dispute pending before the Tribunal
in which the workman was concerned and that the particular termination had nothing to do
with that dispute. The only point on which the parties differ is as to the nature of the order of
termination of service. The employer claims it to be a termination simpliciter in exercise of its
right under the contract. The workman on the other hand contends that termination of his ser-
vice was meted out as a punishment for avenging the defeat of the employer in an earlier liti-
gation under Section 33A at the instance of the workman. In other words the workman contends
that the order although purported, ex facie, to be a termination under the terms of the agreement,
is in truth and reality an order of dismissal of misconduct.
From the provisions of Section 33 it is manifest that punitive action by the employer in
whatever form it may be passed is permissible against an ordinary workman, even during the
pendency of proceedings before the Tribunal provided that the employer pays one month’s
wages and also applies to the concerned Tribunal for approval of his action. Since the action is
punitive, namely, dismissal or discharge for misconduct, the Tribunal has to oversee the action
to guarantee that no unfair labour practice or victimisation has been practised thereby. If the
procedure of fair hearing has been observed the Tribunal has to find in an application under Sec-
tion 33 that a prima facie case is made out for dismissal. If, on the other hand, there is violation
of the principles of natural justice in the enquiry, the Tribunal can go into the whole question
relating to the misconduct and come to its own conclusion whether the same is established.
The employer has submitted that since the termination of the workman is in exercise of the
right under the written agreement it was not a case of discharge or dismissal for misconduct and
there was, therefore, no obligation on the employer to make an application under Section 33 of
the Act and hence Section 33 has not been contravened and the application under Section 33A
is not maintainable. Misconduct contemplated in Section 33(2)(b) must be a misconduct
enumerated in the standing orders of the company.
The question that arises for decision in this appeal is whether if a particular order of termin-
ation of service is not on account of misconduct and is merely a termination simpliciter the
employer is still required to make an application under Section 33 of the Act.
 Change of Service Conditions 383

Standing orders of a company only describe certain cases of misconduct and the same cannot
be exhaustive of all the species of misconduct which a workman may commit. Even though a
given conduct may not come within the specific terms of misconduct described in the standing
orders, it may still be misconduct in the special facts of a case, which it may not be possible to
condone and for which the employer may take appropriate action. Ordinarily, the standing
orders may limit the concept but not invariably so.
When, therefore, the Tribunal has found as a fact after taking note of the history and the
entire circumstances of the case that the termination was on account of misconduct of the
employee it is difficult to hold that there is any manifest error of law committed by the Tribunal
in reaching that conclusion only because the misconduct, as found, is not within the four
corners of the description of the various misconducts mentioned in the company’s standing
orders. It is not possible, therefore, to accept the submission that the Tribunal committed an
error of law or of jurisdiction in entertaining the application under Section 33A.
Termination simpliciter or automatic termination of service under the conditions of service
or under the standing orders is outside the scope of Section 33 of the Act. This does not mean
that the employer has the last word about the termination of service of an employee and can get
away with it by describing it to be a simple termination in his letter of discharge addressed to
the employee. It is also not a correct proposition of law that in case of a complaint under Sec-
tion 33A the tribunal would be debarred from going into the question whether, notwithstanding
the form of the order, in substance, it is an action of dismissal for misconduct and not termination
simpliciter.
The appellant relied on a decision of the Supreme Court in The Management of Murugan
Mills Ltd. vs Industrial Tribunal Madras12 in support of his contention that even termination
simpliciter is within the sweep of Section 33. That was a case where the workman’s services were
terminated ‘because he deliberately adopted go-slow and was negligent in the discharge of his
duty’. The Court in that case observed thus:

His services were therefore terminated for dereliction of duty and go-slow in his work. This
clearly amounted to punishment for misconduct and therefore to pass an order under the
standing orders in such circumstances was clearly a colourable exercise of the power to terminate
the services of a workman under the provision of the Standing Orders.

Further the Court in the same case observed:

In these circumstances the case was clearly covered by Cl. (b) of Section 33(2) of the Act as
the services of the respondent were dispensed with during the pendency of a dispute by
meting out the punishment of discharge to him for misconduct.

The decision is, therefore, not an authority for the extreme proposition advanced by the appellant.
The possibility that in an appeal against the award of the Tribunal, this Court may have
taken a different view about the termination does not affect the present issue.
It is interesting to examine at this stage that the Supreme Court has legitimately disproved
the ratio laid down by the Madras High Court in Shyamala Studios vs Kannu Devar13 and Sri
Rama Machinery Corporation (P) Ltd. Madras vs N.R. Murthi14 after having noticing the Supreme
Court decision in Murugan Mills15 case.
The Court in this context observed that although the decision of the Supreme Court in
Murugan Mills’16 case was noticed by the Madras High Court it does not appear to have correctly
appreciated the ratio decidendi of that judgment. We are unable to hold that the Supreme
Court in Murugan Mills17 case went to the extent of re-writing Section 33 by completely obliter-
ating the concept of misconduct of a workman for which alone in a limited way the right of
action for the employer is preserved during the span of pendency of proceedings before the
384 Social Justice and Labour Jurisprudence

Tribunal in the interest of discipline. To the extent the Madras decisions state that termination
of services need not be for misconduct of the workman in order to attract Section 33(2)(b), we
cannot agree.
If the Tribunal finds that a particular termination of service of a workman is in truth and
substance innocuous or in exercise of a bona fide right under the contract, Section 33(2)(b) will
not be applicable and necessarily there will be no contravention of Section 33A of the Act.
It is true that on the face of the order of termination the company invoked clause (1) of the
agreement and even so it was open to the Tribunal to pierce the veil of the order and have a close
look at all the circumstances and come to a decision whether the order was passed on account of
certain misconduct. This is a finding of fact which could not be interfered with under Article 226
of the Constitution unless the conclusion is perverse, that is to say, based on no evidence whatsoever.
We are, however, unable to say so having regard to the facts and circumstances described by the
Tribunal in its order.
It is, however, unexceptionable that if an employer passes an order of termination of service
in exercise of his right under a contract or in accordance with the provision of the standing
orders and the Tribunal finds that the order is not on account of any misconduct, the question
of violation of Section 33 would not arise.

Solicitium for Unequal Fight:

The workman had a contract of employment only for 8 years at the most. The reinstatement
in his case, therefore, cannot extend beyond a period of eight years from 1 June 1956 and the
contract of employment would have automatically terminated on 31 May 1964. The Tribunal
awarded reinstatement on 24 March 1964, when even the employer did not bring it to its
notice that the contract of employment would terminate in May 1964.

In this context it was observed:

We cannot be oblivious to the plight of this workman in his unequal fight with a big company.
He was serving the company since 1949 for about eleven years when he was first dismissed in
1960. He has been involved in litigation since 1960 up-till today except for a lull for eleven
days on his reinstatement after the first award. Eleven years in actual service and sixteen years
in litigation is a doleful tale by itself. We, therefore, feel that, in the interest of industrial
peace and above all to draw a final curtain to this unhappy litigation, we would be justified in
quantifying the compensation payable to the workman in this case to a sum of Rs 20,000
only in lieu of reinstatement with full back wages as ordered by the Tribunal, which we
accordingly order. We may also observe that Mr Sen, fairly enough, had made it clear before
us in the course of hearing that even if the company succeeded in this Court it would be pre-
pared to pay to the workman a sum of Rs 10,000 on compassionate grounds.

The Role of the Labour Court or Tribunal in

Adjudicating Matters under Sections 33(2) and 33(3)

Sections 33(1), (2) and (3) constitute the mandatory provisions wherein the employer has
to obtain permission from the appropriate authority while altering the service conditions
prejudicially to the interests of the employees who are parties to a dispute and also in ter-
minating the services of persons involved in the dispute under certain circumstances.
 Change of Service Conditions 385

Any technical flaw in making such an application for permission within the scope of this
section must not render the whole action taken by the employer as non-compliance with
the provisions of Section 33. The Labour Court or the tribunal charged with the duty of
administering justice has to remember that it is not the form but the substance of the
matter that has to be looked into and the parties cannot be penalised for inadvertent
errors committed by them in the conduct of their cases.

Management of the Borpukhurie Tea Estate vs the Presiding Officer,

Industrial Tribunal, Assam, and Another 18

In this case, the Supreme Court expressed its discontent over the manner in which the
industrial tribunal had exercised its functions under Section 33 of the Act, solely confining
itself to technicalities.
This case came before the court as an appeal by special leave directed against the
judgement and order dated 18 September 1970 of the High Court of Assam and Nagaland,
passed as Civil Rule 236 of 1967.

THE FACTS OF THE CASE

Naresh Kumar Ganguli, respondent 2 (hereafter referred to as ‘the respondent’), was employed
by the Borpukhurie Tea Estate belonging to the Bishnauth Tea Company (which was engaged
in the cultivation and manufacture of tea and employed a large number of workmen of various
categories to carry on its business) as Second Clerk and was recognised as a ‘Protected workman’
within the meaning of Section 33(3) of the Industrial Disputes Act, 1947 (hereafter referred to
as ‘the Act’). On 11 September 1966, the Company’s cheque No. 53, which allegedly bore a
forged signature of the manager of the Borpukhurie Tea Estate, was encashed at a local bankers.
On enquiry, Mansid Munda, the factory chowkidar, stated that the cheque was cashed under
the instructions of the respondent and that the proceeds thereof, amounting to Rs 680, were
handed over to the latter at the tea-garden office. As this act of the respondent prima facie con-
stituted grave misconduct under clause 10(a)(2) of the standing orders of the establishment, a
charge- sheet was served on him on 19 September 1966, accusing him of obtaining money
through Mansid Munda from the local banker by forging the manager’s signatures on the aforesaid
cheque and calling upon him to submit his explanation with regard to this matter, which he did
on 22 September 1966. As the explanation tendered by the respondent (which was one of
denial) was found to be unsatisfactory, an enquiry into the charge was held by Mr R.R.L.
Pennell, the superintendent of the company. The respondent, who was present throughout the
enquiry, was afforded opportunity to cross-examine the witness produced on behalf of the com-
pany and to produce evidence in his own defence. At the conclusion of the enquiry, the enquiry
officer submitted his report, stating that the material adduced in the course of the enquiry
proved that the respondent was guilty of grave misconduct as envisaged by the relevant clause of
the standing orders. The management, therefore, decided to dismiss the respondent from service.
As the respondent was a workman and an industrial dispute, being reference 35 of 1964, was
pending before the Industrial Tribunal, Assam, at Gauhati, the management could not straight-
away dismiss the respondent. Accordingly, by its letter dated 10 November 1966, the management
informed the respondent that he had been found guilty of the charge contained in the charge
sheet served on him on 19 September 1966 and that he would be dismissed from service of
the company, but that the punishment would not be put into effect pending the orders of the
386 Social Justice and Labour Jurisprudence

competent authority under Section 33 of the Act, and in the meantime, he would remain under
suspension....
On 24 December 1966, the respondent filed a complaint before the industrial tribunal under
Section 33A of the Act, alleging contravention of the provisions of Section 33 by the appellant
company and praying for a decision in the matter. On 27 June 1967, when its original application
under Section 33(2)(b) of the Act was still pending, the appellant company made an application
to the industrial tribunal, praying that the said application be treated as one under Section 33(3)(b)
of the Act. This application is reproduced below for facility of reference:

(1) That in submitting the application under Section 33(2)(b) of the Industrial Disputes
Act there was a technical error made unintentionally by the applicant.
(2) That a reading of the application will clearly indicate that the Management in fact in-
tended to comply with the provisions of Section 33(3) of the Act and not of Section
33(2) of the said Act, although the application is described as such.
(3) That even the Management’s letter dated 10 November 1966 addressed to Sri N.K.
Ganguli will also indicate that action was being taken under Section 33(3) of the I.D.
Act.

It is, therefore, prayed that the Hon’ble Tribunal may be pleased to treat the application as
one under Section 33(3) of the Industrial Disputes Act.
By his order dated 10 July 1967, the presiding officer of the industrial tribunal refused to
treat the management’s original application under Section 33(2) of the Act as one under Section
33(3)(b) of the Act and rejected the same as not maintainable, holding that the management
had violated the provisions of the Act in dismissing the respondent, who was admittedly a pro-
tected workman ‘without obtaining the permission from the Tribunal’. Aggrieved by this order,
the management filed an application before the High Court under Article 226 of the Constitution,
seeking issuance of a writ of certiorari or mandamus, or any other appropriate writ, quashing the
tribunal’s order. However, this was dismissed with the observation that the punishment of dis-
missal having already been inflicted without complying with the provisions of Section 33(3)(b)
of the Act, an ex post facto permission could not be granted. It was in appeal against this order
that the management has come up in the Supreme Court.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE JASWANT SINGH

Appearing in support of the appeal, Mr Nariman has urged that though it may be open to an
Industrial Tribunal to withhold the permission contemplated by Section 33(3)(b) of the Act if
it finds that an employer has not been able to make out a prima facie case justifying dismissal of
a workman or if it finds that there is material to establish that the employer was guilty of unfair
labour practice or victimisation, there was no justification in the instant case for the Industrial
Tribunal to hold that the appellant had violated the provisions of Section 33(3)(b) of the Act
or to refuse to accede to the prayer of the appellant to treat its original application dated 10
November 1966 as one under Section 33(3)(b) of the Act ignoring the real substance thereof.
We find considerable force in the submissions made by Mr Nariman. The facts and circum-
stances of the case specially the underlined portions of the correspondence reproduced above
i.e. the appellant’s very first letter dated 10 November 1966 to the respondent which expressly
stated that as the latter had been found guilty after due enquiry, he would be dismissed from
service of the Company but the punishment would not be put into effect pending orders of the
competent authority under Section 33 of the Act and in the mean time he would remain under
suspension, and the respondent’s own application dated 17 November 1966 to the Management
for permission to avail of the privileges of rations, etc. in connection with his service on the plea
that he had not ‘yet’ been dismissed as also the averments in the ultimate part of paragraph 10
 Change of Service Conditions 387

of the appellant’s application dated 10 November 1966 to the Industrial Tribunal to the effect
that the respondent workman had been informed that the appellant had decided that he should
be dismissed for misconduct under clause 10(a)(2) of the Standing Orders but until permission
of the Tribunal is received, he would be under suspension clearly show that the appellant had
not dismissed the respondent but had only decided to dismiss him, and the Industrial Tribunal
and the High Court were manifestly wrong in making deduction to the contrary. It is unfortunate
that both the Industrial Tribunal and the High Court tried to clutch at some stray words here
and there to justify rejection of the appellant’s prayer to treat its original application as one under
Section 33 (3)(b) of the Act and in so doing missed the real pith and substance of the application.
The courts charged with the duty of administering justice have to remember that it is not the
form but the substance of the matter that has to be looked to and the parties cannot be penalised
for inadvertent errors committed by them in the conduct of their cases. The following observa-
tions made by this Court in Western India Match Company Ltd. vs Their Workmen 19 are apposite
in this connection:

Again, as in most questions which come before the Courts, it is the substance which matters
and not the form; and every fact and circumstance relevant to the ascertainment of the
substance deserve careful attention.

It is equally important for the courts to remember that it is necessary sometimes in appropriate
case for promotion of justice to construe the pleadings not too technically or in a pedantic man-
ner but fairly and reasonably.
Keeping in view therefore the totality of the facts and circumstances of the case and the pur-
port of the observations of this Court in Patna Electric Supply Co. Ltd., Patna vs Bali Rai20 to the
effect that the Labour Courts and Tribunals are competent to allow the parties when they are
not actuated by any oblique motive to modify their pleadings to subserve the interests of justice,
we are of the view that the present one is an eminently fit case in which the Industrial Tribunal
should treat the appellant’s original application which was in fact and in substance for permission
as one under Section 33(3)(b) of the Act and dispose of the same in conformity with law after
going into the following points:

(1) Whether it is conclusively proved that the signatures of the Manager of the Borpukhurie
Tea Estate on the aforesaid cheque 53 were forged?
(2) What became of the report which appears to have been made by the appellant to the
police in respect of the said cheque and what is the impact of the result of that report on
the truth or otherwise of the alleged forgery?
(3) Whether a prima facie case for dismissal of the respondent is made out by the appellant?
(4) Whether the appellant’s decision to dismiss the respondent was bona-fide or was it an
outcome of any unfair labour practice or victimisation?
(5) Whether the respondent was entitled to any payment in the interregnum between the
conclusion of the enquiry and the final order of the Tribunal?

Accordingly, we allow the appeal, quash the aforesaid orders of the Industrial Tribunal and
the High Court and remit the case to the former with the direction to treat the appellant’s afore-
said application date 10 November 1966 as one under Section 33(3)(b) of the Act and to dis-
pose of the same with utmost despatch not exceeding six months of receipt of the order, after
going into the points set out above. The parties shall be allowed to adduce such evidence as they
may like in respect of the aforesaid points. The costs of this appeal shall be paid by the appellant
to the second respondent workman which is quantified at Rs 1500. The order in C.M.P. 5411
of 1971 dated 14 January 1972 shall stand.
388 Social Justice and Labour Jurisprudence

Application for Approval of an Act of Dismissal

for Misconduct: The Scope for Interference

Where an application has been preferred by an employer seeking an approval of the

tribunal for the action initiated under Section 33(2)(b) of the Industrial Disputes Act,
1947, the tribunal, basing on evidence, reach to a conclusion that there was a grave vio-
lation of the principles of natural justice by the employer in initiating such action, can
reject the approval as required.

Shankar Chakravarti vs Britannia Biscuit Company and Another 21

In the following case the employer not only denied the workman a hearing, but also failed
before the tribunal to avail the opportunity to prove the case against the workman. But
he pleaded the same before the Division Bench of the High Court at the stage of Letters
Patent Appeal which was granted by the High Court. The reaction of the Supreme Court
to this event was significant.

THE FACTS OF THE CASE

The appellant joined service with the first respondent company (‘company’ for short) in August
1963 and was confirmed in service in March 1964. In October 1970, the appellant was drawing
a composite salary of Rs 180. An industrial dispute touching the workmen of the company was
pending before the industrial tribunal when the events leading to the present appeal occurred.
On 1 October 1970, around 5 p.m., the appellant was alleged to have hoisted two red flags atop
the branch office building, simultaneously shouting inflammatory slogans. He was alleged to
have threatened the shift manager, Manik Mukherjee, who was on duty at the time. The incident
was reported to the police. The respondent, the employer, felt aggrieved by the indiscipline ex-
hibited by the appellant and decided to hold a disciplinary enquiry, as a first step towards which,
a chargesheet dated 1 October 1970, was served on the appellant, calling upon him to submit
his explanation within three days from the receipt of the chargesheet. In the meantime, on
3 October 1970, the first respondent (the company) declared a lock-out. The appellant submitted
his explanation on 10 October 1970, denying all the charges and complaining that as he was a
trade-union leader, he was being singled out for victimisation. On the same day, the appellant
was arrested by the police and a criminal case was lodged against him, of which he was acquitted
by the magistrate on 2 December 1970. It happened that the management did not proceed with
the enquiry till as late as 30 June 1971, when the appellant was informed that the enquiry would
be held on 8 July 1971. In the meantime, the appellant had been detained under the Prevention
of Violence Act, 1970, with the result that when he received intimation of the date on which
the enquiry was to be held, he informed the company that as he was in detention and would
not be able to attend the enquiry and so sought an adjournment. Adjournment appears to have
been granted, but a fresh notice was served upon the appellant, in jail, calling him to appear
before the enquiry officer on 15 September 1971: but as the appellant was still in detention, he
could not avail of this opportunity. Consequently, on 16 September 1971, the enquiry proceeded
ex parte. The enquiry officer held the charges proved and on the report of the enquiry officer, the
management of the company dismissed the appellant from service and gave him one month’s
wages in lieu of notice. Since an industrial dispute between the workmen of the company and
the company was then pending before the industrial tribunal, an application was made under
 Change of Service Conditions 389

Section 33(2)(b) of the Industrial Disputes Act 1947 (the ‘Act’ for short), seeking the approval
of the industrial tribunal for the management’s action. This case came to be registered as Case
No. 128 of 1971 under Section 33(2)(b) of the Act before the Third Industrial Tribunal, West
Bengal.
On a notice issued by the industrial tribunal, the appellant was produced before the tribunal,
from jail custody and he submitted his written statement. The tribunal then proceeded to adju-
dicate upon the dispute. The tribunal was of the opinion that the enquiry was conducted in
violation of the principles of natural justice and hence vitiated. Accordingly, by its award dated
15 September 1973, the tribunal rejected the application for approval of the action terminating
the service of the appellant by the company and declined to grant its approval to the same.
The company preferred a writ petition under Articles 226 and 227 of the Constitution to
the High Court of Calcutta. The single judge of the High Court before whom the writ petition
came up for hearing dismissed the petition, observing that the enquiry was not held according
to the principles of natural justice and the order terminating the service made in such an enquiry
was invalid and of no effect, and that the industrial tribunal was fully justified in declining to
grant approval of such an action. It may be specifically mentioned that no contention was
raised at this time before the judge that no opportunity had been afforded to the company to
lead evidence in proof of charges after the domestic enquiry was found to be defective. However,
the company than preferred a letters patent appeal, which came to be No. 80 of 1974, to this
effect.
A Division Bench of the Calcutta High Court held that after the industrial tribunal adjudicated
upon the preliminary issue—whether the enquiry was in accordance with the principles of
natural justice—and had held against the company, it was incumbent upon the industrial tribunal
to give an opportunity to the employer to lead evidence to prove the charges alleged against the
workman and as the issue of the validity of the enquiry was not decided as a preliminary issue
and as thereafter no opportunity was given to the employer, it would be necessary to remand
the matter to the industrial tribunal again, giving an opportunity to the employer to adduce
further evidence, if so advised, and then to finally let the tribunal dispose of the application
made by the employer under Section 33(2)(b).

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE D.A. DESAI

The hollow plea of the employer of an alleged denial of an opportunity (never claimed at
any stage except in Letters Patent Appeal) to substantiate an alleged misconduct of the
workman by evidence aliened has been responsible for dragging a tiny dispute rendering
the workman jobless for an unusually long period of more than 7 years to this apex Court.

The present appeal by special leave is filed by aggrieved workman. While granting leave this
Court limited it to the question as to whether the principle in Cooper Engineering Ltd. vs P.P.
Mundha,22 applies to a situation where the management seeks approval of an order of dismissal
under Section 33(2)(b) of the Act. That necessitates ascertainment of the principle enunciated
by this Court in Cooper Engineering Ltd.23 case.
Before the contention raised in this appeal is adverted to, the limited nature of the controversy
must be put in focus to avoid deviation from the central issue.
The challenge to penal termination of service of a workman by the employer whose under-
taking is governed by the Act is likely to come before a Labour Court or Industrial Tribunal or
National Tribunal for adjudication either by way of a reference under Section 10 or by way of
an application by the employer under Section 33. Preceding domestic enquiry is implicit in both
the situations. Where a workman is accused of misconduct a domestic enquiry has to be held
390 Social Justice and Labour Jurisprudence

against him in accordance with the provisions contained in the standing orders governing
the industrial establishment or in the absence of such standing orders in accordance with the
principles of natural justice. After such a domestic enquiry is held it would be open to the em-
ployer to impose a penalty including one of termination of service howsoever styled. If at the
time of imposition of penalty no other industrial dispute between the employer and its workmen
as comprehended by Section 33 is pending before any of the authorities mentioned in that
section it would be open to the workman to approach the appropriate Government to refer the
industrial dispute arising out of termination of his service to an appropriate authority under the
Act. But if at the relevant time a situation obtains such as is comprehended by Section 33,
namely, pendency of a conciliation proceeding before a conciliation officer or a Board or of any
proceeding before an arbitrator or a Labour Court or Tribunal or National Tribunal in respect
of an industrial dispute touching the workmen of the employer, the employer before his order
terminating service of the workman becomes effective has to seek either prior permission or
subsequent approval of the action, as the case may be, under Section 33.
When the dispute comes before the Industrial Tribunal by way of a reference under Sec-
tion 10 it is the aggrieved workman who has sought adjudication of the industrial dispute aris-
ing from the termination of his service. When the matter comes before the appropriate authority
under Section 33 it is the employer who has moved for permission or approval of its intended
action.
Where the reference is at the instance of a workman under Section 10 the Tribunal would
call upon the workman to file his statement of claim and thereafter the employer would be
called upon to file its written statement. Rule 10-B of the Industrial Disputes (Central) Rules,
1957 provides that within two weeks of the date of receipt of the order of reference, the party
representing workmen and the employer involved in the dispute shall file with the concerned
authority a statement of demands relating only to the issues as are included in the order of refer-
ence and shall also forward a copy of such statement to each one of the opposite parties involved
in the said dispute. Similarly, when the employer seeks permission for taking the intended ac-
tion or seeks approval of the action taken by it under Section 33 it has to make an application
as provided by rule 60 in either Form J or K as the case may be. Both the forms require that the
necessity for and circumstances in which the proposed action is taken or is intended to be taken
must be clearly and specifically set out and either express permission should be sought before
taking the intended action or an approval of the already taken action must be sought.
The matter in this case came before the Tribunal upon an application made by the company
under Section 33(2)(b) seeking approval of its action terminating service of the appellant. A
copy of the application is not put on record of this appeal. However, it was stated at the Bar that
in the application charges preferred against the appellant were set out. The fact that an enquiry
and upon the findings recorded in the enquiry, order terminating the service of the workman
was passed has also been set out in the application. The Tribunal was called upon to accord its
approval to the action. The appellant appeared before the Tribunal and contested this application
totally denying the charges.
It must be specifically noticed that the first respondent company in its application seeking
approval of its action has set out in its application the charges preferred by it and the domestic
enquiry held in respect of the charges. A prayer was made in the application that its action ter-
minating service of the appellant be approved. Nowhere in this application either in express
terms or by implication it was averred that in the event the Tribunal comes to the conclusion
that the enquiry was defective, the employer first respondent company proposes to offer evidence
for substantiating the charges. Neither such an averment was made in the application made to
the Industrial Tribunal but till the Industrial Tribunal concluded its proceedings by saying that
the matter is set down for making the Award any oral or written application ... made on behalf
of the company that over and above the record of enquiry it proposed to lead evidence in its
possession in respect of the charges to substantiate the same to the satisfaction of the Tribunal.
 Change of Service Conditions 391

Not only no such request was made at any time before the Award was made by the Industrial
Tribunal but no such contention appears to have been taken before the learned Single Judge of
the Calcutta High Court in writ petition filed by the company questioning the validity and cor-
rectness of the award made by the Industrial Tribunal declining to grant approval. Such an
opportunity was sought for the first time before the Appellate Bench of the Calcutta High Court
at the hearing of the Letters Patent Appeal preferred by the company.
Mr Tarkunde, learned Counsel for the company formulated his contention thus: When an
industrial dispute touching the punitive termination of service of a workman is brought before
the Labour Court or the Industrial Tribunal, either under Section 10 or Section 33 of the Act,
irrespective of the fact whether the employer has made any express or implied request in its ap-
plication or in the course of proceedings either orally or in writing, the Labour Court or the
Industrial Tribunal must as an obligation in law at the initial stage of the proceeding frame a
preliminary issue as to whether the domestic enquiry was in fact held and, if held, was in ac-
cordance with the standing orders or the principles of natural justice or was in any manner de-
fective. If this issue, urged Mr Tarkunde, is answered in favour of the workman and against the
employer, a preliminary finding to that effect should be recorded and then notwithstanding the
fact that the employer has not made any request in its original application or in the course of
proceedings before the Tribunal it is the duty and obligation of the Tribunal to call upon the
employer by giving it a specific opportunity to lead evidence if it so chooses to do, to substantiate
the charges preferred against the workman. Failure to give such an opportunity either on request
of the employer or suo moto by the Tribunal, the proceedings would be vitiated. According to
Mr Tarkunde this proposition is no more res integra and is concluded by the decision of this
Court in Cooper Engineering Ltd 24 case.
As this contention was sought to be substantiated on some of the cases decided by this Court
it would be advantageous to examine the proposition first on precedent and then, if it is open,
on principle.
In Bharat Sugar Mills Ltd. vs Shri Jai Singh,25 the matter came before this Court questioning
an Award of the Industrial Tribunal by which the Tribunal declined to grant permission under
Section 33 except in respect of one workman holding that the domestic enquiry was not proper
and that the employer was guilty of mala fide conduct and victimisation. Before this Court the
workman contended that once the domestic enquiry was found to be improper, the Tribunal
had to dismiss the application and it could not take independent evidence and arrive at a find-
ing of its own as to the guilt of the workman. It may be mentioned that there was no preliminary
issue framed in this case by the Tribunal about the validity of the enquiry. Yet the employer had
adduced evidence to substantiate the charges against the workman simultaneously relying upon
the papers of domestic enquiry. Negativing this contention of the workman this Court observed
as under:

Where there has been a proper enquiry by the management itself the Tribunal, it has been
settled by a number of decisions of this Court, has to accept the findings arrived at in that
enquiry unless it is perverse and should give the permission asked for unless it has reason to
believe that the management is guilty of victimisation or has been guilty of unfair labour
practice or is acting mala fide. But the mere fact that no enquiry has been held or that the en-
quiry has not been properly conducted cannot absolve the Tribunal of its duty to decide
whether the case that the workman has been guilty of the alleged misconduct has been made
out. The proper way for performing this duty where there has not been a proper enquiry by
the management is for the Tribunal to take evidence of both sides in respect of the alleged
misconduct. When such evidence is adduced before the Tribunal the management is deprived
of the benefit of having the findings of the domestic tribunal being accepted as prima facie
proof of the alleged misconduct unless the finding is perverse and has to prove to the satisfaction
of the Tribunal itself that the workman was guilty of the alleged misconduct. We do not
392 Social Justice and Labour Jurisprudence

think it either just to the management or indeed even fair to the workman himself that in
such a case the Industrial Tribunal should refuse to take evidence and thereby drive the man-
agement to make a further application for permission after holding a proper enquiry and
deprive the workman of the benefit of the Tribunal itself being satisfied on evidence adduced
before it that he was guilty of the alleged misconduct.

This question again surfaced in Management of Ritz Theatre (P) Ltd. vs Its Workmen.26 The
matter came before this Court challenging an award of the Industrial Tribunal by which the
Industrial Tribunal in a reference under Section 10 directed reinstatement of two workmen
who were dismissed after holding a domestic enquiry against them. When the matter was before
the Tribunal the employer relied not only on the papers of domestic enquiry but 11 witnesses
were examined on behalf of the employer and an equal number of witnesses was examined on
behalf of the workmen. In the appeal by the employer a contention was raised on behalf of the
workmen that once the employer adduced evidence before the Industrial Tribunal to substantiate
the charges against the workmen, that by itself would amount to a concession on behalf of the
employer that the enquiry held by it was not proper or was defective and, therefore, the employer
cannot then rely upon the fact that the enquiry being proper the Tribunal cannot go into the
merits of the case. Negativing this contention after referring to Bharat Sugar Mills27 case, this
Court expressed an opinion that there is no authority for the proposition that whenever the
employer seeks to lead additional evidence before the Tribunal in respect of dismissal of its
employee it must necessarily follow that he has given up his stand based on the previous depart-
mental enquiry and the Tribunal is entitled to examine the dispute on merits itself and on the
principles of fair play and justice the proposition is unsound. In reaching this conclusion this
Court made some pertinent observations which may be extracted:

If the view taken by the Tribunal was held to be correct, it would lead to this anomaly that
the employer would be precluded from justifying the dismissal of his employee by leading
additional evidence unless he takes the risk of inviting the Tribunal to deal with the merits for
itself, because as soon as he asks for permission to lead additional evidence, it would follow
that he gives up his stand based on the holding of the domestic enquiry. Otherwise, it may
have to be held that in all such cases no evidence should be led on the merits unless the issue
about the enquiry is tried as a preliminary issue. If the finding on that preliminary issue is in
favour of the employer, then, no additional evidence need be cited by the employer; if the
finding on the said issue is against him; permission will have to be given to the employer to
cite additional evidence, instead of following such an elaborate and somewhat cumbersome
procedure; if the employer seeks to lead evidence in addition to the evidence adduced at the
departmental enquiry and the employees are also given an opportunity to lead additional
evidence, it would be open to the Tribunal first to consider the preliminary issue and then to
proceed to deal with the merits in case the preliminary issue is decided against the employer.
That, in our opinion, is the true and correct legal position in this matter.

It may be noted that in this case evidence was adduced by the employer before any preliminary
finding was recorded on the validity of the enquiry. In fact, application for adducing additional
evidence was made by the employer much before the Tribunal proceeded to examine the validity
of the enquiry and evidence was recorded before recording a preliminary finding that the enquiry
was improper or defective. The observations in this case have to be understood in the context of
the facts found.
In Workmen vs Motipur Sugar Factory,28 the workmen contended before this Court that as
respondent employer held no enquiry as required by the standing orders before dispensing with
the services of the appellants by way of discharge on the grounds that the appellants had resorted
to ‘go slow’ in the sugar factory, the Tribunal in a reference under Section 10 of the Act was in
 Change of Service Conditions 393

error in holding that the appellants had in fact resorted to ‘go-slow’ tactics and the respondent
was justified in discharging them from service. The specific contention raised was that where no
domestic enquiry is held before terminating services of a workman as required by the standing
orders all that the Tribunal was concerned with was to decide whether the discharge of the
workman was justified or not and that it was no part of the duty of the Tribunal to decide that
there was go-slow which would justify the order of discharge. Negativing this contention, the
Court held as under:

It is now well-settled by a number of decisions of this Court that where an employer has
failed to make an enquiry before dismissing or discharging a workman it is open to him to
justify the action before the Tribunal by leading all relevant evidence before it. In such a case
the employer would not have the benefit which he had in cases where domestic inquiries
have been held. The entire matter would be open before the Tribunal which will have juris-
diction not only to go into the limited questions open to a Tribunal where domestic inquiry
has been properly held (see Indian Iron & Steel Co. vs Their Workmen)29 but also to satisfy
itself on the facts adduced before it by the employer whether the dismissal or discharge was
justified. We may in this connection refer to M/s. Sasa Musa Sugar Works (P) Ltd. vs Shobrati
Khan MA,30 Phulbari Tea Estate vs Its Workmen31 and The Punjab National Bank Limited vs
Its Workmen.32 These three cases were further considered by this Court in Bharat Sugar
Mills Ltd. vs Shri Jai Singh,33 and reference was also made to the decision of the Labour
Appellate Tribunal in Shri Ram Swarath Sinha vs Belcund Sugar Co.34 It was pointed out that
‘the important effect of omission to hold an enquiry was merely this: that the Tribunal would
not have to consider only whether there was a prima facie case but would decide for itself on
the evidence adduced whether the charges have really been made out’. It is true that three of
these cases, except Phulbari Tea Estate case,35 were on applications under Section 33 of the
Industrial Disputes Act, 1947. But in principle we see no difference whether the matter
comes before the Tribunal for approval under Section 33 or on a reference under Section 10
of the Industrial Disputes Act, 1947. In either case if the enquiry is defective or if no enquiry
has been held as required by standing orders, the entire case would be open before the Tribunal
and the employer would have to justify on facts as well that its order of dismissal or discharge
was proper. Phulbari Tea Estate,36 was on a reference under Section 10, and the same principle
was applied there also, the only difference being that in that case, there was an enquiry
though it was defective. A defective enquiry in our opinion stands on the same footing as no
enquiry and in either case the Tribunal would have jurisdiction to go into the facts and the
employer would have to satisfy the Tribunal that on facts the order of dismissal or discharge
was proper.

The Court rejected the contention that as there was no enquiry in this case it was not open
to the respondent company to justify the discharge before the Tribunal. It may be noted that in
the situation as was disclosed in this case there was no question of deciding a preliminary issue
and then giving an opportunity to the employer to adduce additional evidence justifying the
punitive action on merits. This Court went into the allegations of go-slow tactics resorted to by
the workmen as canvassed on behalf the employer and agreed with the finding of the Tribunal
that the allegations were proved and accordingly upheld the order of discharge and affirmed the
Award.
In State Bank of India vs R. K. Jain,37 in a reference made by the Central Government the
Industrial Tribunal held that the respondent R.K. Jain was not afforded a reasonable opportunity
to produce evidence in his defence during the enquiry and that the management was not justified
in terminating his service on the basis of the report of the enquiry officer. This Award was
questioned in an appeal to this Court, inter alia, on the ground that even assuming that the
domestic enquiry conducted by the bank was in any manner vitiated, the Tribunal erred in law
394 Social Justice and Labour Jurisprudence

in not giving an opportunity to the management to adduce evidence before the Tribunal to
establish the validity of the order of discharge. The contention in terms raised was that the
Tribunal has first to consider whether the domestic enquiry on the basis of which the order of
termination has been passed has been conducted properly and bona fide by the management
and if it comes to the conclusion that the domestic enquiry is vitiated, it is only then that the
stage is set for giving an opportunity to the management to adduce evidence before the Tribunal
to support the order of termination. In support of this contention reliance was placed on the
decision of a Division Bench of the Orissa High Court in M/s. Hindustan Steel Ltd. vs Their
Workmen.38 A contrary view taken by the Madhya Pradesh High Court in Madhya Pradesh State
Road Transport Corporation vs Industrial Court, Madhya Pradesh 39 was also brought to the notice
of the court. Attention of the court was also drawn to a decision of a learned Single Judge of the
Delhi High Court in Prem Nath Motors Workshop Pvt. Ltd. vs Industrial Tribunal Delhi,40 which
accepted the view of the Madhya Pradesh High Court. The conflict of decisions may be noticed
first. The Orissa High Court was of the opinion that there was no obligation in law on the part
of the Labour Court to indicate its mind about the infirmities in the enquiry at any stage before
it gave its findings and the Award. Contrary view expressed by the Madhya Pradesh and Delhi
High Courts was that it is a healthy practice that after coming to the conclusion that the do-
mestic enquiry was not proper the Industrial Tribunal or Labour Court should give an opportunity
to the employer to produce evidence to satisfy the authority that the action taken by it is
justified. Thus this Court in R.K. Jain41 case was clearly seized of the conflict of opinion and the
controversy raised was whether there was any obligation in law on the Industrial Tribunal or the
Labour Court, notwithstanding that no such request was made by the employer, to call upon
the employer to adduce additional evidence to sustain the charges after a formal preliminary
order is recorded that either there was no domestic enquiry or the one held was defective.
Negativing this contention this Court held as under:

It should be remembered that when order of punishment by way of dismissal or termination

of service is effected by the management, the issue that is referred is whether the management
was justified in discharging and terminating the service of the workman concerned and whether
the workman is entitled to any relief. In the present case, the actual issue that was referred for
adjudication to the Industrial Tribunal has already been quoted in the earlier part of the
judgment. There may be cases where an inquiry has been held preceding the order of termin-
ation or there may have been no inquiry at all. But the dispute that will be referred is not
whether the domestic inquiry has been conducted properly or not by the management, but
the larger question whether the order of termination, dismissal or the order imposing punish-
ment on the workman concerned is justified. Under those circumstances it is the right of the
workman to plead all infirmities in the domestic inquiry, if one has been held and also to
attack the order on all grounds available to him in law and on facts. Similarly the management
has also a right to defend the action taken by it on the ground that a proper domestic inquiry
has been held by it on the basis of which the order impugned has been passed. It is also open
to the management to justify on facts that the order passed by it was proper. But the point to
be noted is that the inquiry that is conducted by the Tribunal is composite inquiry regarding
the order which is under challenge. If the management defends its action solely on the basis
that the domestic inquiry held by it is proper and valid and if the Tribunal holds against the
management on that point, the management will fail. On the other hand, if the management
relies not only on the validity of the domestic inquiry, but also adduces evidence before the
Tribunal justifying its action, it is open to the Tribunal to accept the evidence adduced by the
management and hold in its favour even if its finding is against the management regarding
the validity of the domestic inquiry. It is essentially a matter for the management to decide
about the stand that it proposes to take before the Tribunal. It may be emphasised that it
is the right of the management to sustain its order by adducing also independent evidence
 Change of Service Conditions 395

before the Tribunal. It is a right given to the management and it is for the management to
avail itself of the said opportunity.

The Court also in terms held that by and large this Court was in agreement with the view
expressed by the Orissa High Court meaning thereby that no such obligation in law is fastened
on the Labour Court or the Industrial Tribunal to indicate its mind about the infirmities in the
enquiry before it gave its finding and the award and then calling upon the employer to start the
next round of leading evidence in its attempt to sustain the charges alleged against the workman.
If the matter were to rest here, the contention of the appellant must fail on precedent. But it
was urged that the point has been re-examined in later cases to which we may now turn.
In Delhi Cloth and General Mills Co. vs Ludh Budh Singh42 the appellant company questioned
the correctness of the decision of the Industrial Tribunal refusing permission to dismiss the res-
pondent as he was held guilty of misconduct in a domestic enquiry conducted by the appellant.
The question of seeking permission arose because Section 33 was attracted as an industrial dis-
pute between the appellant company and its workmen was then pending before the Industrial
Tribunal. Before the Tribunal pronounced its order rejecting the application for permission
under Section 33, an application was made on the day next after the date on which the respondent
filed his written statement before the Tribunal requesting in clear and unambiguous terms the
Tribunal that in case the Tribunal held that the enquiry conducted by it was defective, it should
be given an opportunity to adduce evidence before the Tribunal to justify the action proposed
to be taken against the respondent. Neither party examined any witness before the Tribunal.
The appellant merely produced the papers of enquiry. The Tribunal reached the conclusion that
the enquiry proceedings had not been conducted against the respondent in accordance with the
principles of natural justice and that the findings recorded by the enquiry officer were not in
accordance with the evidence adduced before him. In accordance with these findings the Tribunal
concluded that the appellant had not made out a case for permission for dismissing the respondent
and the application was rejected. It may be noticed that there was no reference to the application
made by the appellant for adducing additional evidence in the order rejecting permission and
no order appears to have been made on the application whether it was granted or rejected. Be-
fore this Court the appellant contended that the Tribunal was in error in law in not permitting
the appellant to adduce evidence before it, to justify the action proposed to be taken against the
respondent. After an exhaustive review of the decisions bearing on the question and affirming
the ratio in R.K. Jain case,43 this Court extracted the emerging principles from the review of
decisions. Propositions 4, 5 and 6 would be relevant for the present discussion. They are as
under:

(4) When a domestic enquiry has been held by the management and the management relies
on the same, it is open to the latter to request the Tribunal to try the validity of the do-
mestic enquiry as a preliminary issue and also ask for an opportunity to adduce evidence
before the Tribunal, if the finding on the preliminary issue is against the management.
However elaborate and cumbersome the procedure may be, under such circumstances,
it is open to the Tribunal to deal, in the first instance, as a preliminary issue the validity
of the domestic enquiry. If its finding on the preliminary issue is in favour of the man-
agement, then no additional evidence need be cited by the management. But, if the
finding on the preliminary issue is against the management, the Tribunal will have to
give the employer an opportunity to cite additional evidence and also give a similar op-
portunity to the employee to lead evidence contra, as the request to adduce evidence had
been made by the management to the Tribunal during the course of the proceedings and
before the trial has come to an end. When the preliminary issue is decided against the
management and the latter leads evidence before the Tribunal, the position, under such
circumstances, will be, that the management is deprived of the benefit of having the
396 Social Justice and Labour Jurisprudence

finding of the domestic Tribunal being accepted as prima facie proof of the alleged
misconduct. On the other hand, the management will have to prove, by adducing proper
evidence, that the workman is guilty of misconduct and that the action taken by it is
proper. It will not be just and fair either to the management or to the workman that the
Tribunal should refuse to take evidence and thereby ask the management to make a fur-
ther application, after holding a proper enquiry, and deprive the workman of the benefit
of the Tribunal itself being satisfied, on evidence adduced before it, that he was or was
not guilty of the alleged misconduct.
(5) The management has got a right to attempt to sustain its order by adducing independent
evidence before the Tribunal. But the management should avail itself of the said oppor-
tunity by making a suitable request to the Tribunal before the proceedings are closed. If
no such opportunity has been availed of, or asked for by the management, before the
proceedings are closed, the employer can make no grievance that the Tribunal did not
provide such an opportunity. The Tribunal will have before it only the enquiry proceedings
and it has to decide whether the proceedings have been held properly and the findings
recorded therein are also proper.
(6) If the employer relies only on the domestic enquiry and does not simultaneously lead
additional evidence or ask for an opportunity during the pendency of the proceedings
to adduce such evidence, the duty of the Tribunal is only to consider the validity of the
domestic enquiry as well as the finding recorded therein and decide the matter. If the
Tribunal decides that the domestic enquiry has not been held properly, it is not its func-
tion to invite suo motu the employer to adduce evidence before it to justify the action
taken by it.

The point worthy of note is that the contention of the appellant that there is something like
an obligatory duty of the Industrial Tribunal to call upon the employer to adduce additional
evidence if it so chooses after recording a specific finding on the preliminary issue whether there
was no enquiry or the one held was defective has been, in terms and demonstrably negative. As
a corollary a principle was enunciated that such an opportunity should be availed of by the em-
ployer by making a suitable request to the Tribunal before the proceedings are closed. If no such
opportunity has been asked for by the management before the proceedings are closed, the em-
ployer can make no grievance that the Tribunal did not provide such an opportunity. The ghost
of any obligatory duty cast on a quasi-judicial authority, viz., Labour Court or Industrial Tribunal
to notify one of the parties to the proceedings before it, what it should do or what are its rights
and by what procedure it should prove its case, even when the party is a well entrenched employer,
ably assisted by the best available talent in the legal profession, was laid to rest. We would pre-
sently examine Cooper Engineering Ltd.44 case, where the employer made some attempt to infuse
life into that ghost but that decision rests on the facts of the case. In this case the fact that before
the final order was pronounced by the Tribunal a written request was made on behalf of the em-
ployer for adducing additional evidence to sustain the charge on which the Tribunal appears to
have passed no order, was held insufficient by this Court to entertain a contention that the em-
ployer was denied any such opportunity.
Reference was next made to Workmen vs Messrs. Firestone Tyre and Rubber Company of
India (P) Ltd.45 Contention raised therein was that by the introduction of Section 11-A with its
proviso in the Act the Legislature has once and for ever put its final seal upon the controversy
whether the employer who has failed to hold proper, legal and valid domestic enquiry before
taking punitive action, was entitled to adduce fresh evidence when the matter is brought be-
fore the Labour Court or the Industrial Tribunal either under Section 10 or under Section 33 of
the Act. The proviso to Section 11-A provides that the Labour Court or the Industrial Tribunal
in a proceeding under Section 11-A shall rely only on the materials on record and shall not take
any fresh evidence in relation to the matter. This contention was in terms negatived by this
 Change of Service Conditions 397

Court observing that at the time of introducing Section 11-A in the Act the Legislature must
have been aware of the long line of decisions of this Court enunciating several principles bearing
on the subject and therefore it is difficult to accept that by a single stroke of pen by the expression
used in the proviso of Section 11-A all these principles were set at naught. This Court then ex-
haustively reviewed all the previous decisions bearing on the subject and formulated the principles
emerging therefrom. The relevant principles are 4, 6, 7 and 8. They read as under:

(4) Even if no enquiry has been held by an employer or if the enquiry held by him is found
to be defective, the Tribunal in order to satisfy itself about the legality and validity of the
order, has to give an opportunity to the employer and employee to adduce evidence
before it. It is open to the employer to adduce evidence for the first time justifying his
action, and it is open to the employee and adduce.
(5) .......
(6) The Tribunal gets jurisdiction to consider the evidence placed before it for the first time
in justification of the action taken only if no enquiry has been held or after the enquiry
conducted by an employer is found to be defective.
(7) It was never been recognised that the Tribunal should straight away, without anything
more, direct reinstatement of a dismissed or discharged employee, once it is found that
no domestic enquiry has been held or the said enquiry is found to be defective.
(8) An employer, who wants to avail himself of the opportunity of adducing evidence for
the first time before the Tribunal to justify his action, should ask for it at the appropriate
stage. If such an opportunity is asked for, the Tribunal has no power to refuse. The giv-
ing of an opportunity to an employer to adduce evidence for the first time before the
Tribunal is in the interest of both the management and the employee and to enable the
Tribunal itself to be satisfied about the alleged misconduct.

The noticeable feature of principle 8 is that an employer who wants to avail himself of the
opportunity of adducing evidence of the first time before the Tribunal to justify his action
should ask for it at the appropriate stage. If any such opportunity has been asked for the Tribunal
has no power to refuse. But it is not for a moment suggested that there is some duty or obligation
as a matter of law cast upon the Tribunal to call upon the employer to adduce additional evid-
ence even if no such opportunity is sought by the employer. At page 610 the Court has observed
that the stage at which the employer has to ask for such an opportunity has been pointed out by
the Court in Delhi Cloth & General Mills Co. case46 and the ratio of the decision was affirmed.
In the quest of the principle bearing on the subject we come to the last decision relying on
which the Division Bench of the Calcutta High Court in Letters Patent Appeal allowed a con-
tention to be raised for the first time and remanded the matter back to the Industrial Tribunal.
It was said that the point decided by the Division Bench of the Calcutta High Court is no more
res integra and is concluded by the decision in Cooper Engineering Ltd.47 case. In that case the
workman was dismissed by the employer and an industrial dispute arising out of the termination
of service was referred to the Labour Court. The Labour Court found that the domestic enquiry
was defective and directed reinstatement of the workman. In appeal by the employer company
it was contended that the Labour Court failed to give an opportunity to the employer to adduce
additional evidence to sustain the charge after recording a finding that the domestic enquiry
held by the employer was defective. This Court referred to propositions nos. 4, 5 and 6 in the
Delhi Cloth and General Mills Co.48 case and propositions nos. 4, 6, 7 and 8 in the case of Messrs.
Firestone Tyre and Rubber Co. of India (P) Ltd.49 case and posed to itself a question as to what is
the appropriate stage, specifically adverted to in the Delhi Cloth and General Mills Co.50 case
when the Court is not required to seriously consider that the opportunity should be given to
the employer to adduce evidence. The Court then recorded its opinion as under:

We are, therefore, clearly of opinion that when a case of dismissal or discharge of an employee
is referred for industrial adjudication the Labour Court should first decide as a preliminary
398 Social Justice and Labour Jurisprudence

issue whether the domestic enquiry has violated the principles of natural justice. When there
is no domestic enquiry or defective enquiry is admitted by the employer, there will be no dif-
ficulty. But when the matter is in controversy between the parties that question must be
decided as a preliminary issue. On that decision being pronounced it will be for the manage-
ment to decide whether it will adduce any evidence before the Labour Court. If it chooses
not to adduce any evidence, it will not be thereafter permissible in any proceedings to raise
the issue.

It was contended that this Court has in unambiguous and incontrovertible terms laid down
that there is an obligatory duty in law fastened on the Labour Court or the Industrial Tribunal
dealing with a case of punitive termination of service either under Section 10 or Section 33 of
the Act, irrespective of the fact whether there is any such request to that effect or not, to raise a
preliminary issue as to whether domestic enquiry allowed to have been held by the employer is
proper or defective and then record a formal finding on it and if the finding is in favour of the
workman the employer should be called upon which must demonstrate on record, without
waiting for any such request or demand or pleading from the employer, to adduce further evid-
ence to sustain the charge of misconduct if it so chooses to do. We are afraid that much is being
read into the observation of this Court which is not either expressly or by necessary implication
stated. There is nothing to suggest that in Cooper Engineering Ltd.51 case this Court specifically
overruled the decision in R.K. Jain52 case where the Court in terms negatived the contention of
the employer that there is an obligatory duty in law on the Labour Court or the Industrial Tri-
bunal to give an opportunity to the employer irrespective of the fact whether it is asked for or
not to adduce additional evidence after recording a finding on the preliminary issue that either
no domestic enquiry was held or the one held was defective. It would be advantageous to refer
to an observation of this Court in Delhi Cloth and General Mills Co.53 case at page 53 where after
examining the ratio of the decision in R.K. Jain54 case this Court held that there was no question
of opportunity to adduce evidence having been denied by the Tribunal as the appellant therein
had made no such request and that the contention that the Tribunal should have given an op-
portunity suo moto to adduce evidence was not accepted in the circumstances of that case. This
observation in fact rejects the contention that there is any such obligatory duty cast by law on
the Labour Court or the Industrial Tribunal to give such an opportunity to the employer and
then leave it to the sweet will of the employer either to avail it or not. This view in R.K. Jain55
case was reaffirmed in Delhi Cloth and General Mills Co.56 case and there is nothing in the deci-
sion in Cooper Engineering Ltd.57 case that that case overrules the two earlier decisions. It was
not possible so to do because the decision in the Ritz Theatre case wherein even though the ap-
plication for adducing additional evidence was given before the Tribunal passed its final order,
this Court declined to interfere saying that such a request was made at a very late stage and that
is the decision of three judges and the decision in Cooper Engineering Ltd.58 case is equally a
decision of three judges. Further, the decision in Cooper Engineering Ltd.59 case does not propose
to depart from the ratio of the earlier decisions because this Court merely posed a question to
itself as to what is the appropriate stage at which the opportunity has to be given to the employer
to adduce additional evidence, if it so chooses to do. Merely the stage is indicated, namely, the
stage after decision on the preliminary issue about the validity of the enquiry. Cooper Engineering
Ltd.60 case is not an authority for the proposition in every case coming before the Labour Court
or Industrial Tribunal under Section 10 or Section 33 of the Act complaining about the punitive
termination of service following a domestic enquiry that the Court or Tribunal as a matter of
law must first frame a preliminary issue and proceed to decide the validity or otherwise of the
enquiry and then serve a fresh notice on the employer by calling upon the employer to adduce
further evidence to sustain the charges if it so chooses to do. No section of the Act or the Rules
framed thereunder was read to pin-point such an obligatory duty in law upon the Labour
 Change of Service Conditions 399

Court or the Industrial Tribunal. No decision was relied upon to show that such is the duty of
the Labour Court or the Industrial Tribunal. This Court merely indicated the stage where such
opportunity should be given meaning thereby if and when it is sought. This reading of the de-
cision in Cooper Engineering Ltd.61 case is consistent with the decision in Ritz Theatre 62 case
because there as the application for permission to adduce additional evidence was made at a late
stage the Tribunal rejected it and this Court declined to interfere. Now, if the ratio of the Cooper
Engineering Ltd.63 case is to be read to the effect that in every case as therein indicated it is an
obligatory duty of the Industrial Tribunal or the Labour Court to give an opportunity after
recording the finding on the preliminary issue adverse to the employer to adduce additional
evidence it would run counter to the decision in Ritz Theatre64 case. Such is not the ratio in
Cooper Engineering Ltd.65 case. When read in the context of the propositions called out in Delhi
Cloth & General Mills Co.66 case and the Firestone Tyre & Rubber Co. of India (P) Ltd.67 case, the
decision in Cooper Engineering Ltd.68 case merely indicates the stage at which an opportunity is
to be given but it must not be overlooked that the opportunity has to be asked for. Earlier clear-
cut pronouncements of the Court in R. K. Jain69 case and Delhi Cloth and General Mills Co.70
case that this right to adduce additional evidence is a right of the management or the employer
and it is to be availed of by a request at appropriate stage and there is no duty in law cast on the
Industrial Tribunal or the Labour Court suo moto to give such an opportunity notwithstanding
the fact that none was ever asked for are not even departed from. When we examine the matter
on principle we would point out that a quasi-judicial Tribunal is under no such obligation to
acquaint parties appearing before it about their rights more so in an adversary system which
these quasi-judicial Tribunals have adopted. Therefore, it is crystal clear that the rights which
the employer has in law to adduce additional evidence in a proceeding before the Labour Court
or Industrial Tribunal either under Section 10 or Section 33 of the Act questioning the legality
of the order terminating service must be availed of by the employer by making a proper request
at the time when it files its statement of claim or written statement or makes an application
seeking either permission to take a certain action or seeking approval of the action taken by it.
If such a request is made in the statement of claim, application or written statement, the Labour
Court or the Industrial Tribunal must give such an opportunity. If the request is made before
the proceedings are concluded the Labour Court or the Industrial Tribunal should ordinarily
grant the opportunity to adduce evidence. But if no such request is made at any stage of the
proceedings, there is no duty in law on the Labour Court or the Industrial Tribunal to give such
an opportunity and if there is no such obligatory duty in law failure to give any such opportunity
cannot and would not vitiate the proceedings.
Having examined the matter on precedent it would be worthwhile to examine the matter on
principle. The Labour Court or Industrial Tribunal to which either a reference under Section
10 or an application under Section 33 for permission to take an intended action or approval of
an action already taken is made, would be exercising quasi-judicial powers, which would imply
that a certain content of the judicial power of the State is vested in it and it is called upon to
exercise it (see Bharat Bank Ltd. vs Employees of Bharat Bank Ltd ).71 A quasi-judicial decision pre-
supposes an existing dispute between two or more parties and involves presentation of their case
by the parties to the dispute and if the dispute between them is on a question of fact, the ascer-
tainment of the fact by means of evidence adduced by the parties to the dispute and often with
the assistance of arguments by or on behalf of the parties on the evidence (see Cooper vs Wilson).72
Parties are arrayed before these quasi-judicial Tribunals either upon a reference under Section
10 or Section 33. There is thus a lis between the parties. There would be assertion and denial of
facts on either side. With the permission of the Tribunal and consent of the opposite side,
parties are entitled to appear through legal practitioners before these quasi-judicial Tribunals.
The system adopted by these Tribunals is an adversary system, a word as understood in contra-
distinction to the inquisitorial system. This also becomes clear from rule 10-B(1) of the Industrial
400 Social Justice and Labour Jurisprudence

Disputes (Central) Rules, 1957, which provides that when a reference is made to the Labour
Court or Industrial Tribunal, within two weeks of the date of receipt of the order of reference
the parties representing the workmen and the employer involved in the dispute shall file with
the Labour Court or the Industrial Tribunal a statement of demands relying only upon issues
which are included in the order of reference and shall also forward a copy of such statement to
each one of the opposite parties involved in the dispute. Sub-rule (2) provides that within two
weeks of receipt of the statement referred to in sub-rule (1) the opposite party shall file its
rejoinder with the Labour Court or the Industrial Tribunal as the case may be and simultaneously
forward a copy thereof to the other party. Sub-rule (4) provides that the hearing of the dispute
shall ordinarily be continued from day-to-day and arguments shall follow immediately after the
closing of the evidence. Sub-rule (6) casts a duty on the Labour Court or the Industrial Tribunal,
as the case may be, to make a memorandum of the substance of the proceedings of what the
witnesses depose and such memorandum shall be written and signed by the Presiding Officer.
Rule 15 confers power to admit or call for evidence. Rule 16 enables the Labour Court or
Industrial Tribunal to administer oath. Rule 60 prescribes the form of application to be made
under Section 33. The application has to be in Form J or K, as the case may be, and has to be on
verification. The cause-title in the prescribed form requires that the applicant and the opposite
party should be specifically described in the application. These forms are more or less analogous
to a plaint in a suit and the reply to be filed would take more or less the form of a written
statement. Where the parties are at variance for facility of disposal, issues will have to be framed.
It is open to it to frame an issue and dispose it of as a preliminary issue as held in M/s. Dalmia
Dadri Cement Ltd. vs Its Workmen.73 Parties have to lead evidence. Section 11-C confers power
of a civil court under the Code of Civil Procedure on the Labour Court or Industrial Tribunal in
respect of matters therein specified. The Labour Court or Tribunal would then proceed to
decide the lis between the parties. It has to decide the lis on the evidence adduced before it.
While it may not be hide bound by the rules prescribed in the Evidence Act it is nonetheless a
quasi-judicial Tribunal proceeding to adjudicate upon a lis between the parties arrayed before it
and must decide the matter on the evidence produced by the parties before it. It would not
be open to it to decide the lis on any extraneous considerations. Justice, equity and good con-
science will inform its adjudication. Therefore, the Labour Court or the Industrial Tribunal has
all the trappings of a Court.
If such be the duties and functions of the Industrial Tribunal or the Labour Court, any party
appearing before it must make a claim or demur the claim of the other side and when there is a
burden upon it to prove or establish the fact so as to invite a decision in its favour, it has to lead
evidence. The quasi-judicial tribunal is not required to advise the party either about its rights or
what it should do or omit to do. Obligation to lead evidence to establish an allegation made by a
party is on the party making the allegation. The test would be who would fail if no evidence is
led. It must seek an opportunity to lead evidence and lead evidence. A contention to substantiate
which evidence is necessary has to be pleaded. If there is no pleading raising a contention there is
no question of substantiating such a non-existing contention by evidence. It is well settled that
allegation which is not pleaded, even if there is evidence in support of it, cannot be examined
because the other side has no notice of it and if entertained it would be tantamount to granting
an unfair advantage to the first mentioned party. We are not unmindful of the fact that pleadings
before such bodies have not to be read strictly, but it is equally true that the pleadings must be
such as to give sufficient notice to the other party of the case it is called upon to meet. This view
expressed in Tin Printers (Private) Ltd. vs Industrial Tribunal,74 commends to us. The rules of
fair play demand where a party seeks to establish a contention which if proved would be suffi-
cient to deny relief to the opposite side, such a contention has to be specifically pleaded and
then proved. But if there is no pleading there is no question of proving something which is not
pleaded. This is very elementary.
 Change of Service Conditions 401

Can it for a moment be suggested that this elementary principle does not inform industrial
adjudication? The answer must be an emphatic ‘no’.
The employer terminates the services of a workman. That termination raises an industrial
dispute either by way of an application under Section 33 of the Act by the employer or by way
of a reference by the appropriate Government under Section 10. If an application is made by
the employer as it is required to be made in the prescribed form all facts are required to be
pleaded, if a relief is asked for in the alternative that it has to be pleaded. In an application
under Section 33 the employer has to plead that a domestic enquiry has been held and it is legal
and valid. In the alternative it must plead that if the Labour Court or Industrial Tribunal comes
to the conclusion that either there was no enquiry or the one held was defective, the employer
would adduce evidence to substantiate the charges of misconduct alleged against the workman.
Now, if no such pleading is put forth either at the initial stage or during the pendency of the
proceedings there arises no question of a sort of advisory role of the Labour Court or the Indus-
trial Tribunal, unintended by the Act, to advise the employer, a party much better off than the
workman, to inform it about its rights, namely, right to lead additional evidence, and then give
an opportunity which was never sought. This runs counter to the grain of industrial jurisprudence.
Undoubtedly, if such a pleading is raised and an opportunity is sought, it is to be given but if
there is no such pleading either in the original application or in the statement of claim or writ-
ten statement or by way of an application during the pendency of the proceeding there is no
duty cast by law or by the rules of justice, reason and fair play that a quasi-judicial Tribunal like
the Industrial Tribunal or the Labour Court should adopt an advisory role by informing the
employer of its rights, namely, the right to adduce additional evidence to substantiate the charges
when it failed to make good the domestic enquiry and then to give an opportunity to it to ad-
duce additional evidence. This, apart from being unfair to the workman, is against the principles
or rules governing the procedure to be adopted by quasi-judicial Tribunal, against the grain of
adversary system and against the principles governing the decision of a lis between the parties
arrayed before a quasi-judicial Tribunal.
Having given our most anxious consideration to the question raised before us, and minutely
examining the decision in Cooper Engineering Ltd.75 case to ascertain the ratio as well as the
question raised both on precedent and on principle, it is undeniable that there is no duty cast
on the Industrial Tribunal or the Labour Court while adjudication upon a penal termination of
service of a workman either under Section 10 or under Section 33 to call upon the employer to
adduce additional evidence to substantiate the charge of misconduct by giving some specific
opportunity after decision on the preliminary issue whether the domestic enquiry was at all
held, or if held, was defective, in favour of the workman. Cooper Engineering Ltd.76 case merely
specifies the stage at which such opportunity is to be given, if sought. It is both the right and
obligation of the employer, if it so chooses, to adduce additional evidence to substantiate the
charges of misconduct. It is for the employer to avail of such opportunity by a specific pleading
or by specific request. If such an opportunity is sought in the course of the proceeding the In-
dustrial Tribunal or the Labour Court, as the case may be, should grant the opportunity to lead
additional evidence to substantiate the charges. But if no such opportunity is sought nor there
is any pleading to that effect no duty is cast on the Labour Court or the Industrial Tribunal suo
moto to call upon the employer to adduce additional evidence to substantiate the charges.
Viewed from this angle, in the present case there was neither a pleading in which any such
claim for adducing additional evidence was made, nor any request was made before the Industrial
Tribunal till the proceedings were adjourned for making the Award and till the Award was
made. The case squarely falls within the ratio of Delhi Cloth and General Mills Co.77 case. There-
fore, the Division Bench of the Calcutta High Court was clearly in error in granting such a non-
sought opportunity at the stage of the Letters Patent Appeal.
Accordingly, this appeal is allowed and the judgment of the Calcutta High Court in Letters
Patent Appeal No. 80 of 1974 is set aside and the Award of the Industrial Tribunal is restored,
with costs quantified at Rs 2,000.
402 Social Justice and Labour Jurisprudence

Action Amounting to Change of Conditions of Service

during Pendency of Proceedings: The Amount of Relief

Sub-section (2) of Section 33 empowers the employer to alter the service conditions to
the prejudice of the disputing workmen during the pendency of proceedings not connected
with the dispute, in accordance with the standing orders applicable to such workmen,
with the approval of the authority before which the proceeding is pending in cases that
relate to the discharge or dismissal of such workmen. The scope of the standing orders is
very much relevant in invoking the power under this sub-section. Whether a particular
action, resulting in discharge or dismissal, initiated by the employer is within the scope of
the standing orders applicable in the establishment is always a question of fact or inter-
pretation. The Supreme Court had occasion to deal with this aspect in the following case:

G.T. Lad and Others vs Chemicals and Fibres India78

This appeal by special leave was directed against the common award dated 27 February 1976 of
the Industrial Tribunal, Maharashtra, Bombay, rejecting—as not maintainable—complaints
Nos 48 of 1973 to 63 of 1973 made by the appellants against the respondent (hereafter referred
to for brevity as ‘the Company’) under Section 33A of the Industrial Disputes Act, 1947 (here-
after called ‘the Act’) in Reference (IT) No. 336 of 1972.

THE FACTS OF THE CASE

The appellants (hereafter described as ‘workmen’) were employees of the company. During the
pendency of Reference 336 of 1972 before the Second Labour Court, Bombay, for adjudication
of a dispute, 334 workmen of the company, including the appellants, went on an indefinite,
peaceful strike with effect from 30 August 1972, pursuant to the strike notice given to the com-
pany by their registered union called ‘The Association of Chemical Workers’, in support of
its demand for the reinstatement of three of the union leaders who had been dismissed by
the company. On the same date, 30 August 1972, the company put up a notice stating that the
strike embarked upon by the workmen was illegal and those participating in the said strike were
liable to disciplinary action for misconduct as per the company’s Certified Standing Orders
22(b) and 24(a). On 7 September 1972, the company issued notices to the appellants and 10
others, asking them to report for duty on or before 18 September 1972, failing which their
absence would be construed as voluntary abandonment of service and their names would be
struck off the muster rolls of the company. On 19 September 1972, the company sent separate
communications to the appellants and 10 others informing them that since ‘by not reporting
for duty they had confirmed its presumption that they were no longer interested to continue in
service of the Company and had totally abandoned the company’s service’, their names had
been struck off from the rolls of the company from that date. Along with its communication,
the company sent a cheque to each one of the appellants for the amount due to him on account
of gratuity, leave salary, and one month’s salary in lieu of notice. On 26 September 1972, the
appellants wrote to the company returning the cheques sent by the company and stating that its
letter dated 7 September 1972, which had reached them only on 20 September 1972, had al-
ready been replied to by a letter dated 21 September 1972, stating that they were interested in
the service of the company and had neither voluntarily abandoned the service of the company
nor did they wish to do so, and that they would report for work the moment the strike was
 Change of Service Conditions 403

called off by their union. On 23 October 1972, the company wrote to the appellants acknow-
ledging their letter dated 26 September 1972, but stating therein that it did not wish to revise
its earlier decision under which their names had been struck off the rolls. It is to be noted that
in its letter the company did not refute the averment made by the appellants in their letter
dated 26 September 1972, that the Company’s letter dated 7 September 1972, had reached
them only on 20 September 1972. On the same day, 26 September 1972, the appellants’ union
wrote to the Labour Commissioner, complaining of the arbitrary termination of service of
25 workmen (including the appellants) and emphasising that they had not abandoned service.
On 2 October 1972, the appellants and the other striking workmen addressed letters to the
works manager of the company, protesting against the action of the company in removing
them from service and asserting that the said action was by way of victimisation over their par-
ticipation in the strike. On 30 March 1973, the union made a formal demand calling upon the
company to reinstate the appellants and others who had been removed from service on the
ground that they had abandoned their service. On 19 May 1973, certain proposals for settlement
were made on behalf of the employees whose services were terminated by the company and
requests made to the company for the reinstatement of the appellants and 10 other workmen.
On 5 July 1973, the union wrote a letter to the Assistant Commissioner of Labour, Naupada,
soliciting his intervention in the dispute concerning the reinstatement of the 16 employees, in-
cluding the appellants. The Assistant Commissioner thereupon summoned the parties to a
discussion on 19 July 1973, but his attempts at conciliation did not bear any fruit. Thereafter,
the appellants made their complaints before the industrial tribunal, with the result.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE JASWANT SINGH

Appearing in support of the appeal Mr Ramamurti has vehemently urged that the action of the
Company in removing the names of the appellants from its rolls was illegal and arbitrary, that
the appellants had not abandoned the Company’s service, that at any rate the termination of
their services could only be in terms of the Company’s standing orders and since the standing
orders did not provide for treating the workmen as having abandoned service in case they were
absent in connection with the notified strike, the Company’s action was manifestly illegal and
invalid.
Three questions arise for consideration in this case, namely:

(1) What is the true meaning of the expression ‘abandonment of service’;

(2) Whether in the circumstances of the case it could be said that the appellants had volun-
tarily abandoned the service of the Company; and
(3) Whether the action of the Company in removing the names of the appellants from its
rolls on the presumption that they had abandoned service would constitute a change in
the conditions of service of the appellants?

We will deal with these questions seriatim:

Re Question No. 1: In the Act, we do not find any definition of the expression ‘abandonment
of service’. In the absence of any clue as to the meaning of the said expression, we have to de-
pend on meaning assigned to it in the dictionary of English language. In the unabridged edition
of the Random House Dictionary, the word ‘abandon’ has been explained as meaning ‘to leave
completely and finally; forsake utterly; to relinquish, renounce; to give up all concern in some-
thing’. According to the Dictionary of English Law by Earl Jowitt (1959 edition) ‘abandonment’
means ‘relinquishment of an interest or claim’. According to Black’s Law Dictionary, ‘abandon-
ment’ when used in relation to an office means ‘voluntary relinquishment’. It must be total and
under such circumstances as clearly to indicate an absolute relinquishment. The failure to perform
404 Social Justice and Labour Jurisprudence

the duties pertaining to the office must be with actual or imputed intention, on the part of the
officer to abandon and relinquish the office. The intention may be inferred from the acts and
conduct of the party, and is a question of fact. Temporary absence is not ordinarily sufficient to
constitute an ‘abandonment of office’.
From the connotations reproduced above it clearly follows that to constitute abandonment,
there must be total or complete giving up of duties so as to indicate an intention not to resume
the same. In Buckingham & Carnatic Co. vs Venkatiah,79 it was observed by this Court that
under common law an inference that an employee has abandoned or relinquished service is not
easily drawn unless from the length of absence and from other surrounding circumstances an
inference to that effect can be legitimately drawn and it can be assumed that the employee in-
tended to abandon service. Abandonment or relinquishment of service is always a question of
intention, and normally, such an intention cannot be attributed to a employee without adequate
evidence in that behalf. Thus, whether there has been a voluntary abandonment of service or
not is a question of fact which has to be determined in the light of the surrounding circumstances
of each case.

Re Question No. 2: This takes us to the consideration of the second question, namely, whether
in the circumstances of the instant case, it could be said that the appellants had voluntarily
abandoned the service of the Company. It may be recalled that the appellants had along with
229 other workmen gone on indefinite and peaceful strike (which ended on 22 October 1972)
in response to the strike notice given by the union to the Company to press its demand for
reinstatement of its three dismissed leaders and had not only by their letters dated 21 September
1972 and September 26, 1972 unequivocally intimated to the Company that they did not
intend to abandon the service but had also returned the cheques sent to them by the Company
on account of their leave salary, gratuity, etc. The appellants’ stand that the letter of the Company
dated 7 September 1972 was received by them on 20 September 1972 and not earlier was never
denied or refuted by the Company in the correspondence that passed between the parties.
Thus, there was nothing in the surrounding circumstances or the conduct of the appellants
indicating or suggesting an intention on their part to abandon service which in view of the ratio
of Gopal Chandra Misra80 case, can be legitimately said to mean to detach, unfasten, undo or
untie the binding knot or link which holds one to the office and the obligations and privileges
that go with it. Their absence from duty was purely temporary and could, by no stretch of
imagination, be construed as voluntary abandonment by them of the Company’s service. In
Express Newspapers (P) Limited vs Michael Marx,81 which is on all fours with the present case, it
was held that if the employees absent themselves from the work because of strike in enforcement
of their demands, there can be no question of abandonment of employment by them. In the
present case also, the appellants’ absence from duty was because of their peaceful strike to en-
force their demand. Accordingly, we are of the view that there was no abandonment of service
on the part of the appellants.

Re Question No. 3: Let us now advert to the last but the most crucial question, namely, whether
the action of the Company in removing the names of the appellants from its rolls during the
pendency of the proceedings before the Labour Court in respect of the industrial dispute on the
presumption that they had abandoned Company’s service constituted an alteration in the con-
ditions of service applicable to them immediately before the commencement of the said pro-
ceedings which prejudiciously affected them. Although the learned Counsel appearing on behalf
of the respondent has taken us through the certified standing orders as applicable to the appellants,
he has not been able to point out anything therein to indicate that the Company could terminate
the services of the appellants on the ground of abandonment of service because of their going
on strike in enforcement of their demands. Thus, there being no provision in the certified
standing orders by virtue of which the Company could have terminated the services of the
appellants in the aforesaid circumstances, the impugned action on the part of the Company
 Change of Service Conditions 405

clearly amounted to a change in the conditions of service of the appellants during the admitted
pendency of the industrial dispute before the Labour Court which adversely affected them and
could not be countenanced. We are fortified in this view by the aforesaid decision of this Court
in Express Newspapers (P) Limited vs Michael Mark,82 where repelling an identical contention to
the effect that the failure of the workmen to return to work by a notified date clearly implied
abandonment of their employment, it was held that the management cannot, by imposing a
new terms of employment, unilaterally convert the absence of work into abandonment of employ-
ment. It was further held in that decision that if the strike was in fact illegal, the management
could take disciplinary action against the employees under the standing orders and dismiss
them. If that were done, the strikers would not have been entitled to any compensation under
standing orders but that was not what the appellants purported to do and the respondents were,
therefore, entitled to relief.
For the foregoing reasons, we are unable to uphold the impugned action of the Company
and the award under appeal which are manifestly illegal. In the result, we allow the appeal, set
aside the aforesaid award of the Industrial Tribunal and direct the Company to reinstate the ap-
pellants. The appellants shall also be entitled to the costs of appeal.
A point which requires to be clarified and has been brought to the notice of the Court after
the judgment was delivered relates to back wages from 19 September 1972 to the date of rein-
statement. The rule in such cases is that where reinstatement has been directed by the Court,
the entire back wages must follow as a matter of course. Of course there is a discretion in the
Court having regard to special circumstances if any to modify this normal rule. In the present
case the period stretches over six years and Shri Sachin Chaudhary brings to our notice the fact
that back wages have to be computed, if ordered in full, on a much higher scale because of two
settlements which have raised the scales of wages substantially. While there is no case specifically
put forward that the workmen concerned have been employed elsewhere during this period,
still we take a total view of the whole case and direct that for the entire period from 1972 to the
date of reinstatement, 75 per cent of the wages will be paid to all the workmen concerned on
the scales and revised scales as the case may be.

NOTES

1. Section 9A of the Act provides that:

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 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 which the Fundamental and
Supplementary Rules, Civil Service (Classification, Control and Appeal) Rules, Civil Services (Tem-
porary Service) Rules, Revised Leave Rules, Civil Services 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.

2. Section 33 of the Act provides that:

(1) During the pendency of any conciliation proceeding before a conciliation officer or a Board or of
any proceeding before an Arbitrator or a Labour Court or Tribunal or National Tribunal in respect
of an industrial dispute, no employer shall—
406 Social Justice and Labour Jurisprudence

(a) regard to any matter connected with the dispute, alter, to the prejudice of the workmen
concerned in such dispute, the conditions of service applicable to them immediately before
the commencement of such proceeding; or
(b) for any misconduct connected with the dispute, discharge or punish, whether by dismissal
or otherwise, any workmen concerned in such dispute, save with the express permission in
writing of the authority before which the proceeding is pending;
(2) During the pendency of any such proceeding in respect to an industrial dispute, the employer may,
in accordance with standing orders applicable to a workman concerned in such dispute or where
there is no such standing orders, in accordance with the terms of the contract, whether express or
implied, between him and the workman—
(a) alter, in regard to any matter not connected with the dispute, the conditions of service ap-
plicable to that workman immediately before the commencement of such proceeding; or
(b) for any misconduct not connected with the dispute, discharge or punish, whether by dis-
missal or otherwise, that workman:
Provided that no such workman shall be discharged or dismissed, unless he has been paid wages for one
month and an application has been made by the employer to the authority before which the proceeding is
pending for approval of the action taken by the employer.
(3) Notwithstanding anything contained in sub-section (2) no employer shall, during the pendency of
any such proceeding in respect of any industrial dispute, take any action against any protected
workman concerned in such dispute—
(a) by altering, to the prejudice of such protected workman, the conditions of service applicable
to him immediately before the commencement of such proceedings; or
(b) by discharging or punishing, whether by dismissal or otherwise, such protected workman,
save with the express permission in writing of the authority before which the proceeding is
pending.
Explanation: For the purposes of this sub-section a ‘protected workman’ in relation to an establishment,
means a workman who, being a member of the executive or other office bearer of a registered trade union
connected with the establishment, is recognized as such in accordance with rules made in this behalf.
(4) In every establishment, the number of workmen to be recognized as protected workmen for the
purposes of sub-section (3) shall be one per cent of the total number of workmen employed therein
subject to a minimum number of five protected workmen and a maximum number of one hundred
protected workmen and for the aforesaid purpose, the appropriate government may make rules
providing for the distribution of such protected workmen among various trade unions, if any, con-
nected with the establishment and the manner in which the workmen may be chosen and recognized
as protected workmen.
(5) Where an employer makes an application to a conciliation officer, Board, an Arbitrator, a Labour
Court, Tribunal or National Tribunal under the proviso to sub-section (2) for approval of the
action taken by him, the authority concerned shall, without delay, hear such application and pass
within a period of three months from the date of receipt of such application, such order in relation
thereto as it deems fit:
Provided that where any such authority considers it necessary or expedient so to do, it may, for reasons to
be recorded in writing, extend such period by such further periods as it may think fit:
Provided further that no proceedings before any such authority shall lapse merely on the ground that
any period specified in this sub-section had expired without such proceedings being completed.
Further Section 33A provides that
where an employer contravenes the provisions of Section 33 during the pendency of proceedings before
a conciliation officer, Board, an arbitrator, Labour Court, Tribunal or National Tribunal, any employee
aggrieved by such contravention may in writing make a complaint in the prescribed manner—

(a) to such conciliation officer or Board, and the conciliation officer or Board shall take such
complaint into account in mediating in, and promoting the settlement of, such industrial
dispute; and
 Change of Service Conditions 407

(b) to such arbitrator, Labour Court, Tribunal or National Tribunal and on receipt of such
complaint, the said authority shall adjudicate upon the complaint as if it were a dispute referred
to or pending before it, in accordance with the provisions of this Act, and shall submit his or
its award to the appropriate Government and the provisions of this Act shall apply accordingly.

3. AIR 1975 SC 1856. The case was heard by V.R. Krishna Iyer, A.N. Ray, S. Murtaza Fazl Ali and K.K.
Mathew. The majority judgement was delivered by Justice Fazl Ali.
4. (1961) 2 LLJ 526 (AP.).
5. (1969) 2 LLJ 739 SC.
6. AIR 1973 SC 968.
7. AIR 1972 SC 1156.
8. AIR 1972 SC 1917.
9. AIR 1980 SC 2124. The case was heard by V.R. Krishna Iyer and A.C. Gupta. The majority judgement
was delivered by Justice V.R. Krishna Iyer.
10. AIR 1976 SC 2062. The case was heard by H.R. Khanna, V.R. Krishna Iyer and P.K. Goswame, and the
majority decision was delivered by Justice Goswami.
11. For the reasons best known to the party Workman, the matter relating to the violation of Section 19 read
with Section 29 was not advanced either before the Industrial Tribunal, High Court or Supreme Court.
Even Supreme Court did not touch this aspect since the same perhaps was not placed before the Court.
12. AIR 1965 SC 1496.
13. (1966) II LLJ 428 (Mad).
14. (1966) II LLJ 899 (Mad).
15. AIR 1965 SC 1496.
16. AIR 1965 SC 1496.
17. AIR 1965 SC 1496.
18. AIR 1978 SC 992. The case was heard by V.R. Krishna Iyer and Jaswant Singh, JJ. The majority judgement
was delivered by Justice Jaswant Singh.
19. (1963) 2 LLJ 459.
20. AIR 1958 SC 204.
21. AIR 1979 SC 1652. The case was heard by Justices V.R. Krishna Iyer, D.A. Desai and A.D. Koshal. The
majority judgement was delivered by Justice D.A. Desai.
22. (1976) 1 SCR 361:1975 LIC 1441.
23. (1976) 1 SCR 361:1975 LIC 1441.
24. (1976) 1 SCR 361:AIR 1975 SC 1441.
25. (1962) 3 SCR 684.
26. AIR 1963 SC 295.
27. (1962) 3 SCR 684.
28. AIR 1965 SC 1803.
29. (1958) SCR 667:AIR 1953 SC 130.
30. AIR 1959 SC 923.
31. (1960) 1 SCR 32:AIR 1959 SC 1111.
32. (1960) 1 SCR 806:AIR 1960 SC 160.
33. (1962) 3 SCR 684.
34. (1954) Lab AC 697.
35. (1960) 1 SCR 32:AIR 1959 SC 1111.
36. (1960) 1 SCR 32:AIR 1959 SC 1111.
37. (1972) 1 SCR 755:(1972 Lab IC 13).
38. 1970 Lab IC 102.
39. 1970 Lab IC 510.
40. (1971) 22 Fac LR 370.
41. (1972) 1 SCR 755: (1972 Lab IC 13).
42. 1972 Lab IC 573.
43. (1972) 1 SCR 755: (1972 Lab IC 13).
44. (1975 Lab IC 1441) (SC).
45. 1973 Lab IC 851.
46. (1972) Lab IC 573 (SC).
47. (1975 Lab IC 1441) (SC).
408 Social Justice and Labour Jurisprudence

48. (1972 Lab IC 573) (SC).

49. (1973 Lab IC 851).
50. (1972 Lab IC 573) (SC).
51. (1975 Lab IC 1441).
52. (1972 Lab IC 13).
53. (1972 Lab IC 573).
54. (1972) 1 SCR 755:(1972 Lab IC 13).
55. (1972) 1 SCR 755:(1972 Lab IC 13).
56. (1972 Lab IC 573).
57. (1975 Lab IC 1441) (SC).
58. (1975 Lab IC 1441) (SC).
59. (1975 Lab IC 1441) (SC).
60. (1975 Lab IC 1441) (SC).
61. (1975 Lab IC 1441) (SC).
62. AIR 1963 SC 295.
63. (1975 Lab IC 1441) (SC).
64. AIR 1963 SC 295.
65. (1975 Lab IC 1441) (SC).
66. (1972 Lab IC 573) (SC).
67. (1973 Lab IC 851) (SC).
68. (1975 Lab IC 1441) (SC).
69. (1972) 1 SCR 755:(1972 Lab IC 13).
70. (1972 Lab IC 573) (SC).
71. AIR 1950 SC 188.
72. (1937) 2 KB 309.
73. 1970 Lab IC 350 (Punj).
74. (1967) 2 Lab LJ 677.
75. 1975 Lab IC 1441.
76. 1975 Lab IC 1441.
77. (1972) LIC 573 SC.
78. AIR 1979 SC 582. The case was heard by V.R. Krishna Iyer, Jaswant Singh and A.D Koshal. The majority
judgement was delivered by Justice Jaswant Singh.
79. AIR 1964 SC 1272.
80. AIR 1978 SC 548.
81. AIR 1963 SC 1141
82. (1963) 3 SCR 405:AIR 1963 SC 1141.
 Chapter 11

Disciplinary Proceedings

One area in the realm of the industrial law of the country that has grown up totally outside
the framework of labour legislations is the law relating to ‘disciplinary proceedings’. Under
the guise of ‘disciplinary proceedings’, the employer can dispense with the services of his
workmen permanently. The Industrial Employment (Standing Orders) Act, 1946, and
the Industrial Disputes Act, 1947, are the prime legislations that ensure security and con-
tinuity of employment for an industrial worker. This aspect is also known as the concept
of ‘regulation of employment’ in industrial relations. Both these legislations are totally
silent as far as the regulation of the entry point of a workman into employment is con-
cerned. But once the workman is taken into employment by an employer, these legislations
serve as a mechanism for the ‘regulation of employment’. These two legislations provide
various remedies to aggrieved workmen for the redressal of their grievances against actions
initiated by an employer on this score.
The Industrial Employment (Standing Orders) Act, 1946, in its schedule, provides the
matters to be contained in the standing orders of an establishment under the Act.1 More
relevant in the context are the matters specified in items 8 and 9 of the schedule. Suspension
or dismissal for misconduct and the acts and omissions which constitute misconduct are
very much relevant to the matters of ‘disciplinary proceedings’. The Industrial Employment
(Standing Orders) Central Rules, 1946, under rule 17, provides various acts and omissions
that constitute ‘misconduct’.2
The Industrial Disputes Act, 1947, under the Second Schedule, in item 3 specifies the
matters relating to the discharge or dismissal of workmen, including reinstatement of, or
grant of relief to workmen wrongfully dismissed, within the jurisdiction of labour courts
and industrial tribunals under the Act. Further, Section 11A of the Act provides:3

Where an industrial dispute relating to the discharge or dismissal of a workman has been referred
to a Labour Court, Tribunal or National Tribunal for adjudication and, in the course of the ad-
judication proceedings, the Labour Court, Tribunal or National Tribunal, as the case may be, is
satisfied that the order of discharge or dismissal was not justified, it may, by its award, set aside
the order of discharge or dismissal and direct reinstatement of the workman on such terms and
conditions, if any, as it thinks fit, or give such other relief to the workman including the award
of any lesser punishment in lieu of discharge or dismissal as the circumstances of the case may
require.

The discharge or dismissal of a workman must be preceded by either the examination

of the terms and conditions of employment based on which the workman is employed or
a fair enquiry conducted by the employer in accordance with norms recognised thereunder.
410 Social Justice and Labour Jurisprudence

The industrial tribunals in India in the early stages only asserted themselves with this
power which in fact had been approved by the higher judiciary. Since then, voluminous
amounts of jurisprudence have evolved thereunder by industrial adjudication and sup-
plemented by the higher judiciary. The law is so meticulous that even a tiny lapse on the
part of the employer in affording a ‘fair hearing’ to the delinquent workman would render
the whole process of the proceedings void.

Reopening of Disciplinary Proceedings: The Rule

Chanan Singh vs the Registrar, Co-operative Societies, Punjab and Others4

In this case, the Supreme Court made it very clear when an aggrieved workman may ap-
proach the judiciary in the event of the initiation of disciplinary proceedings against him
by his employer.

THE FACTS OF THE CASE

The appellant had been an employee of the second respondent. A notice was issued to him to
show cause why disciplinary action should not be taken against him for certain items of mis-
conduct imputed to him. The erstwhile secretary of the bank, Daljit Singh, enquired into the
allegations. Thereafter, on 1 April 1975, the secretary issued a notice to the appellant to show
cause why his next increment should not be stopped by way of punishment. A reply was sent by
the appellant by way of explanation and the secretary, accepting the explanation, dropped the
proceedings by the order dated 9 April 1975 (Annexure III). Thereafter, the managing director,
taking the view that Daljit Singh, the secretary, had no power to inflict any punishment on the
employee of the bank and that, therefore, the proceedings culminating in the exoneration of
the appellant were invalid, issued a fresh memorandum, which concluded thus:

After considering the said enquiry report along with other relevant documents, I am pro-
visionally of the view to impose upon you a penalty of dismissal from bank services. Before
doing so, you are asked to show cause within 21 days from the receipt of this memorandum
why on account of finding of the said enquiry Officer, into the charges, you should not be
dismissed from the bank service. In case no reply is received within the prescribed period, it
will be presumed that you have no reply in this behalf and the proposed punishment will be
imposed.

The appellant was also suspended on 7 July 1975.

Thereupon, a writ petition under Articles 226 and 227 was moved by the appellant, challenging
the revival of the proceedings against him as illegal and opposed to natural justice.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

The first point raised in objection by the second respondent is that the writ petition is pre-
mature since no action has been taken finally against the appellant, the disciplinary proceedings
 Disciplinary Proceedings 411

are still pending and the explanation of the appellant under consideration. It is only in the event
of the appellant being punished that any grievance can arise for him to be agitated in the proper
forum.
Other obstacles in the ways of granting the appellant relief were also urged before the High
Court and before us but we are not inclined to investigate them for the short reason that the
writ petition was in any case premature. No punitive action has yet been taken. It is difficult to
state, apart from speculation, what the outcome of the proceedings will be. In case the appellant
is punished, it is certainly open to him either to file an appeal as provided in the relevant rules
or to take other action that he may be advised to resort to. It is not for us, at the moment, to
consider whether a writ petition will lie or whether an industrial dispute should be raised or
whether an appeal to the competent authority under the rules is the proper remedy, although
these are issues which merit serious consideration.
We are satisfied that, enough unto the day being the evil thereof, we need not dwell on prob-
lems which do not arise in the light of the view we take that there is no present grievance of
punitive action which can be ventilated in Court. After all, even the question of jurisdiction to
reopen what is claimed to be a closed enquiry will, and must, be considered by the Managing
Director. On this score, we dismiss the appeal but, in the circumstances, without costs.
Before parting with this case, we would like to make it clear that counsel for the co-operative
bank has not been able to show any power to suspend an employee pending an enquiry. If that
be so, the suspension of the appellant is plainly without the pale of law and he would be entitled
to his salary during the period till final orders are passed. Since the matter has been pending
long enough, we are assured by counsel for the respondent that final order may be passed within
one month from today.

Cases where the Act of Misconduct

is Not So Serious: The Relief

In cases where the alleged act of misconduct is not so serious, the Supreme Court, taking
the circumstances into consideration, has summarily dispensed with the cases without
even discussing the facts involved. This is what is being depicted in this case.

Kamalprasad vs the Central India Spinning Weaving

and MFG Company and Another 5

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

We heard the appeal to some extent but at an intermediate point felt that the subject matter
involved only one workman and the alleged misconduct resulting in dismissal was not so serious,
although he was dismissed by the Management and his dismissal though upset by the Labour
Court was reversed by the Industrial Court and challenged unsuccessfully in the High Court. On
a suggestion from us, counsel for the Management, Mr Bobde agrees that the respondent would
pay the appellant a sum of Rs 10,000 within one month from today as an ex gratia payment.
The costs which we direct the respondent to pay the appellant, the appeal being one regarding
a single workman will be assessed at Rs 2,000. With these directions, we dispose of the appeal.
412 Social Justice and Labour Jurisprudence

Termination on Grounds of Loss of Confidence: Discharge

Simpliciter or Discharge for Misconduct

The question whether the termination of a workman by an employer amounts to dis-

charge simpliciter or discharge for misconduct was considered by the Supreme Court in
the following case.

Michael and Another vs Johnson Pumps6

The appellant Michael, a permanent employee of proved efficiency and six years’ standing, was
appreciatively given two ‘merit’ increments. But a letter of 2-09-1970, told him off service giv-
ing him one month’s notice-pay discharging him with damning, as distinguished from dismissing
him for misconduct. The rival versions illumine the factual confrontation, the resolution of
which is no easy legal essay. The worker, Michael, through his Union, protested against the
‘sack’ order as victimisation of a trade union activist but the Management was heedless, con-
ciliation was fruitless and the dispute between the Union and the Management was eventually
referred by the Delhi Administration to the Labour Court for adjudication. The reference ran
thus:

Whether the termination of services of Shri L. Michael is illegal and/or unjustified and, if so,
to what relief is he entitled and what directions are necessary in this respect?

Both sides stated their cases in their pleadings and the true nature of the conflict emerges
from them. The story set out by the employee in his statement before the Labour Court was
that although he was efficient, appreciated and awarded merit increments, the Management
was antagonized by his active part in the formation of an Employees’ Union, especially because
oral warnings by the Regional Manager against his unionist proclivity was ignored. Michael
became the treasurer of the Union. This Union chapter claimed its price, for the Management
quietly terminated his services by simple letter which reads:

We are sorry to advise that your services are no longer required by the Company. As such,
this letter may be treated as a notice for the termination of your services with immediate
effect. As for the terms of your employment letter, on termination of services you will be paid
one month’s salary extra. You may please call on the undersigned and have your accounts
settled.

This act, claims the worker, was in flagrant violation of elementary principles of natural justice
without assigning any reason and without giving him an opportunity to defend himself. This,
in his statement, he challenged the termination as ‘wrongful, malafide, illegal, and an act of vic-
timisation’. The counter case of the management set up in its statement, as was apparent from
the discharge order, was that no dismissal was involved, no enquiry necessary and no illegality
invalidates.
The Management claimed that the alleged annoyance with the workman for union activity
was a concoction in self-defence, as the Management had not even knowledge of the formation
of the Union. This latter of limb of the plea is a little too naïve. The warning by the Regional
Manager was denied and the reference to trade union activities by the worker was more ‘to
create a ground for the workman’s claim and has been levelled as a matter of habit and routine’.
The basic plea of the management was that the action being a simple termination without a
sting, the process and consequence of a disciplinary action were not attracted.
 Disciplinary Proceedings 413

The Management, however, took the Court into confidence to explain why the employee was
discharged. He was employed as a Receipt and Despatch Clerk in the office upto 10-3-1970.
As an insider with access to office correspondence the employee misused his position by passing
on ‘very important and secret information about the affairs of the company to certain outsiders’.
He was consequentially shifted to the post of clerk handling posting of bills and collection of
payments but the workman, although denied direct access to correspondence in the Receipt
and Despatch section, made attempt ‘to elicit information from the section with a view to pass
it on to outsiders’. The upshot of these activities of which the management was alerted was a
loss of confidence in the employee. This unreliability was visited with non-injurious termination
of service by a bona fide order. Therefore, the action was claimed to be legal and immune to
judicial interference.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

Industrial law in India has many twilight patches, illustrated by the present appeal which projects
the problem of an employee whose services have been terminated simpliciter by the Management,
a pump manufacturing enterprise, issuing a notice ending the employment and offering one
month’s pay as authorised by the relevant Standing Orders. The thorny legal issue is whether
the ipse dixit of the employer that sufficient justification to jettison the latter without levelling
and proving the objectionable conduct which has undermined his confidence so that the tribunal
may be satisfied about the bona fides of the ‘firing’ as contrasted with the colourable exercise of
power hiding a not-so-innocuous purpose.
Two socially vital factors must inform the understanding and application of Industrial Juris-
prudence. The first is the Constitutional mandate of Part IV obligating the State to make pro-
vision for securing just and humane conditions of work. Security of employment is the first
requisite of a worker’s life. The second equally axiomatic consideration is that a worker who
wilfully or anti-socially holds up the wheels of production or undermines the success of the
business is a high risk and deserves, in industrial interest, to be removed without tears. Legislation
and judicial interpretation have woven the legal fabric. We have to see whether on the facts of
the present case what the relevant law is, whether it has been applied by the Labour Court
rightly and whether the appellant has merit on his side, judged by the social conscience and
judicial construction of the law in this branch of discharge simpliciter versus disguised dismissal.
A few salient facts need emphasis before the principles of law are applied. The workman in his
statement stressed the case of malus animus due to his union activities, although he did vaguely
refer to the termination of service as wrongful and malafide. From this it cannot be argued, as
the Management sought to make out, that his denial of leaking out office secrets was an after
thought pleaded only in the rejoinder and therefore liable to be discredited. How could the
worker have a hunch about the management’s undisclosed ground for dismissal? When the
latter stated the reason which prompted this action for the first time before the Labour Court,
the workman in his reply refuted this case. It is noteworthy that there is no speck of record or
any hint of written material in support of the story that the management had credible information
of the appellant betraying sensitive secrets of business. The letters sent by the union, and the
worker requesting for reinstatement were being ignored. The management could well have
disclosed their suspicion in reply and told the Union and the workman that they resorted to an
innocuous discharge to avoid punitive trauma. The management could have divulged in writing
to the Conciliation Officer their legitimate fears about the worker’s integrity and their considerate
action of simple termination. This too they failed to do. In their written statement the manage-
ment asserted for the first time that the employee was an intractable smuggler of inside infor-
mation. The statement winds up with the legalistic plea: ‘the management had, in the meanwhile,
lost confidence in the workman’. This culminating collapse of trust is alleged to be the primary
cause for the discharge from employment.
414 Social Justice and Labour Jurisprudence

At the time of evidence the management led the evidence to the effect that the workman joined
as a pump operator in 1963, was promoted as clerk in 1967, that the suspicion of disloyal com-
munication arose for the first time in 1968 and yet ‘thereafter he was given two increments extra
in addition to normal increments’. He was a hard working man and has a very good memory
but the suspicion was there.
These are the facts and the evidence in the case and it has been fairly conceded before
the Labour Court by the management that were the action regarded as punitive it was bad,
there having been no enquiry whatever with liberty to the employee to meet the charge. But the
single slender stand on which the discharge was suspended was ‘loss of confidence’ of the man-
agement in the employee. The Labour Court argued:

According to the management, as there was no proof with it for this suspicion it could not
proceed against him departmentally and, in the circumstances, it was considered desirable to
terminate his services by passing an order of discharge without any stigma attached to it.

While on all hands it was agreed that the employee was efficient, the court took the view that
the motivation for the termination was the ‘suspicion which lurked in the mind of the Regional
Manager that information regarding tenders was being passed on by the workman’. We have to
find out whether the holding in the award that, on the materials above placed, the action could
be called colourable or saved as bona fide, could be castigated as achieving an illegitimate end or
supported as a premature but straightforward and harmless farewell. In short, was loss of con-
fidence a legal label affixed by the management to eject the workman, there being no other legal
method of accomplishing their wish to remove him for misconduct?
Two questions, therefore, fall for decision. Can a person, reasonably instructed in the law and
scrutinising with critical faculties the facts on record, come to the conclusion that the snapping
of the tie of master and servant in the present case was innocuous and bona fide or oblique
circumvention of the processual protection the law provides before a workman is dismissed for
misconduct?
We can discern harmony and consistency in case law from Chartered Bank7 and Murugan8
through Sudder Office9 and Air India Corporation.10 The social justice perspective and particular
facts are important though. The plethora of precedents need not be covered in extenso as the law
laid down is the same except that judicial response to each case situation leads to emphasis on
different facets of the principle. Even so some milestone decisions, if we may say so, may be
considered.
In Murugan Mills11 Wanchoo, J, speaking for the Court made the following observations:

The right of the employer to terminate the services of his workman under a standing order
like clause 17(a) in the present case, which amounts to a claim to hire and fire an employee
as the employer pleases and thus completely negatives security of service which has been
secured to industrial employees through industrial adjudication, came up for consideration
before the Labour Appellate Tribunal in Buckingham and Carnatic Co. Ltd vs Workers of the
Company12 The matter then came up before this Court also in Chartered Bank vs Chartered
Bank Employees Union13 and the Management of U.B. Dutt and Co. vs Workmen of U.B. Dutt
and Co,14 wherein the view taken by the Labour Appellate Tribunal was approved and it was
held that even in a case like the present the requirement of bona fides was essential and if the
termination of service was a colourable exercise of the power or as a result of victimisation or
unfair labour practice the industrial tribunal would have the jurisdiction to intervene and set
aside such termination. The form of the order in such a case is not conclusive and the Tribunal
can go behind the order to find the reasons which led to the order and then consider for itself
whether the termination was a colourable exercise of unfair labour practice. If it came to the
 Disciplinary Proceedings 415

conclusion that the termination was a colourable exercise of the power or was a result of vic-
timisation or unfair labour practice, it would have the jurisdiction to intervene and set aside
such termination.

In that case the form of the order had no foul trace, but before the Tribunal dereliction of
duty and go-slow tactics were disclosed as the inarticulate reasons.
This Court ruled:

This clearly amounted to punishment for misconduct and therefore to pass an order under
Cl. 17(a) of the Standing Orders in such circumstances was clearly a colourable exercise of
the power to terminate the service of a workman under the provisions of the Standing Orders.

The appellant contended that for the proposition that even where a management had
the power to terminate the services of its employee without reasons but with notice pay only the
colourable exercise of that power invalidated it, and the Court could probe beneath the surface
to check upon the bona fides behind the exercise of the power. If the reasons including the ter-
mination were victimisation, unfair labour practice or misconduct, it was foul play to avoid a
fair enquiry and fall back upon the power to terminate simpliciter. There are myriad situations
where an employer may, in good faith, have to reduce his staff, even though he may have only a
good word for his employee. Simple termination is a weapon useable on such occasions and not
when the master is willing to strike but afraid to wound. We have been referred to the Bihar
State Road Transport Corporation case.15 The power of the Court to go behind language of the
order is reaffirmed there. In Sudder Office16 the Court apparently laid stress on the Management’s
right to terminate the services simpliciter under the terms of contract, where there was no lack
of bonafides, unfair labour practice or victimisation. It is significant that this Court used language
and laid down law very much like in the earlier cases and did refer to the precedents on the
point. For instance, Vaidialingam, J there observed:

It is needless to point out that it has been held by this Court in The Chartered Bank, Bombay
vs The Chartered Bank Employees Union17 that if the termination of service is a colourable ex-
ercise of the power vested in the management or as a result of victimisation or unfair labour
practice, the Industrial Tribunal would have jurisdiction to intervene and set aside such ter-
mination. In order to find out whether the order of termination is one of termination simpli-
citer under the provisions of contract or of standing orders, the tribunal has ample jurisdiction
to go into all the circumstances which led to the termination simpliciter.

The manner of dressing up an order does not matter. The Court will lift the veil to view the
reality or substance of the order. The Court, in that case, examined the circumstances in detail
to see whether a dismissal for misconduct was being masked as a simple send off with a month’s
pay, and held ultimately:

We are satisfied that the Management has passed the order of termination simpliciter and
the order does not amount to one of dismissal as and by way of punishment.

Of course, loss of confidence in the workmen was alleged by the management and the Court
found that it was not a camouflage. It may be noticed that in that case the workman was being
entrusted with stores worth several lakhs of rupees, some goods were lost from the stores and
the Union was informed by the Management that it had lost confidence in the workmen. In the
written statement before the Labour Court the management alleged that the workman was the
head godown-clerk who was the custodian of the company’s property the post being one of
trust and confidence. It is noteworthy that in the High Court the workman did not even file a
416 Social Justice and Labour Jurisprudence

counter-affidavit and the counsel for union and the workman agreed that the order of termination
was not a camouflage to cover up what really was an order of dismissal. He merely urged that
the termination of the services was really by way of dismissal. In this conspectus of circumstances,
this Court found that the Head Clerk in charge of the engineering godown and responsible
for the maintenance of considerable stores, held a sensitive position. This Court observed:

The entire basis of the Labour Court’s award for holding that the order is one of dismissal is
its view that the management has invoked clause 9 to camouflage its action. When that ap-
proach has been given up on behalf of the workman before the High Court the reasoning of
the Labour Court falls to the ground and the High Court has acted within the jurisdiction
under Article 226 when it set aside the order of the Labour Court especially when there has
been no finding of victimisation, unfair labour practices or mala fides recorded, against the
management. To conclude, we are satisfied that the High Court was justified in setting aside
the order of the Labour Court.

We have gone into this decision at length to disabuse the impression that a new defence
mechanism to protect termination of service simpliciter, viz. loss of confidence, had been pro-
pounded in this ruling. We do not agree that any such innovation has been made. The Air India
Corporation case18 may seem to support the ‘no confidence’ doctrine, but a closer study contradicts
any such view. Of course, the management placed great reliance on this ruling. Needless to say,
this recognised the power of the Tribunal to go behind the form of the order, look at the sub-
stance and set aside what may masquerade as termination simpliciter, if in reality it cloaked a
dismissal for misconduct as ‘a colourable exercise of power by the management’. The Court
repeated that an industrial employer cannot ‘hire and fire’ his workmen on the basis of an un-
fettered right under the contract of employment. On the facts of the Air India case19 the Court
concluded that it was ‘not possible to hold this order to be based on any conceivable misconduct’.
Special reference was made to the grave suspicion regarding the complainant’s private conduct
with air-hostesses. Where no misconduct spurs the action and a delicate unsuitability for the
job vis-à-vis the young woman in employment in the same firm is strongly suspected, resort to
termination simpliciter cannot be criticised as a mala fide machination. In that background,
the action was held to be bona fide and the overall unsuitability led to a loss of confidence in the
employee. Not that the loss of confidence was exalted as a ground but the special circumstances
of the case exonerated bad faith in discharge simpliciter.
Before concluding the discussion, we may refer to the case of Delhi Transport Undertaking vs
Goel 20 adverted to by the Labour Court. Indeed that decision turned on Regulation framed
under the Delhi Transport Authority Act, 1950 and not on pure industrial law or construction
of the Standing orders. Moreover, the Court, in that case, appears to have discussed rulings under
Article 311 also. However, on the facts of that case, the court was satisfied that the order of
termination was not a disguise or cloak for dismissing the employee and the ground given that
he was a cantankerous person undesirable to be retained was good. We do not read the Delhi
Transport case 21 to depart from Murugan Mills 22 case. Indeed the latter did not, and may be
could not, overall the former.
The above study of the chain of rulings brings out the futility of the contention that subsequent
to Murugan Mills 23 case colourable exercise of power has lost validity and loss of confidence has
gained ground. The law is simply this: The Tribunal has the power and, indeed, the duty to X-ray
the order and discover its true nature, if the object and effect, if the attendant circumstances
and the ulterior purpose be to dismiss the employee because he is an evil to be eliminated. But
if the management, to cover up the inability to establish by an enquiry, illegitimately but ingeni-
ously passes an innocent looking order of termination simpliciter such action is bad and is liable
to be set aside. Loss of confidence is no new armour for the management, otherwise security of
tenure, ensured by the new industrial jurisprudence and authenticated by a catena of cases of
 Disciplinary Proceedings 417

this Court, can be subverted by this neo-formula. Loss of confidence in the Law will be the con-
sequence of the loss of confidence doctrine.
In the light of what we have indicated, it is clear that loss of confidence is often a subjective
feeling or individual reaction to an objective set of facts and motivations. The Court is concerned
with the latter and not with the former, although circumstances may exist which justify a genuine
exercise of the power of simple termination. In a reasonable case of a confidential or responsible
post being misused or a sensitive or strategic position being abused, it may be a high risk to keep
the employee, once suspicion has started and a disciplinary enquiry cannot be forced on the
master. There, a termination simpliciter may be bona fide not colourable, and loss of confidence
may be evidentiary of good faith of the employer.
In the present case, the catalogue of circumstances set out in the earlier part of the judgment
strikes a contrary note. The worker was not told when he wrote; the Union was not disclosed
when they demanded; the Labour Court was treated to verbal statements like very reliable
sources and other credulous phrases without a medium of evidence to prove bona fides. Some
testimony of unseemly attempts by the workman to get secrets outside his orbit some indication
of the source of suspicion, some proof of the sensitive or strategic role of the employee, should
and would have been forthcoming had the case been bona fide. How contradictory, that even
when a strong suspicion of leaking out sensitive secrets was being entertained about the employee
he was being given special ipse loquitur. Circumstances militate against the ‘I say so’ of M.W. 1
that the management had suffered an ineffable loss of confidence. To hit below the belt by trad-
ing legal phrases is not Industrial Law. We are constrained to express ourselves unmistakably lest
industrial unrest induced by wrongful termination based on convenient loss of confidence should
be generated.
Before we conclude we would like to add that an employer who believes or suspects that his
employee, particularly one holding a position of confidence, can, if the confidence and terms of
the employment permit, terminate his employment and discharge him without any stigma at-
taching to the discharge. But such belief or suspicion of the employer should not be a mere
whim or fancy. It should be bona fide and reasonable. It must rest on some tangible basis and
the power has to be exercised by the employer objectively, in good faith, which means honestly
with due care and prudence. If the exercise of such power is challenged on the ground of being
colourable or mala fide or an act of victimisation or unfair labour practice, the employer must
disclose to the Court the ground of his impugned action so that the same may be tested judicially.
In the instant case this has not been done. There is only the ipso dixit of the employer that he
was suspecting since 1968 that the appellant was divulging secrets relating to his business. The
employer has not disclosed the grounds on which this suspicion arose in 1968. Further, after
1968, the appellant was given two extra increments, in addition to his normal increments, as
stated already, in appreciation of his hard work. This circumstance completely demolishes even
the whimsical and tenuous stand taken by the employer. It was manifest therefore that the im-
pugned action was not bona fide.
It was urged by for the employer that the question whether or not the employer had lost con-
fidence in the employee, was essentially one of fact that this Court should not disturb the find-
ing of fact. This Court, in appeal, as a rule of practice, is loath to interfere with a finding of fact
recorded by that trial Court. But if such a finding is based on no evidence, or is so unreasonable
or grossly unjust that no reasonable person would judicially arrive at that conclusion, it is the
duty of this Court to interfere and set matters right. The case before us is one such instance,
where we are called upon to do so.
The Labour Court has misled itself on the law and we set aside its order. The workman will
be reinstated with back wages. However, the management will be free, if there is sufficient ma-
terial and it so advised, to proceed against the workman for misconduct or on other grounds
valid in law.
This case is an example to restrict the employer’s freedom to ‘hire and fire’ his workmen.
418 Social Justice and Labour Jurisprudence

Mass Termination without Enquiry: The Approach

The power to terminate the services of workmen for indulging in acts of misconduct is
without any doubt in the employer’s power, as provided under the standing orders applic-
able to his establishment. In some cases, though, it is an apparent fact that the delinquent
workmen were involved in the act of misconduct en masse, yet the employer cannot in-
flict the economic death of dismissal in one stroke of a pen without holding proper en-
quiry in respect of each workman to prove his guilt. Justice V.R. Krishna Iyer, speaking
for the majority, made this aspect amply clear in the following case.

Gujarat Steel Tubes and Others vs Gujarat Steel Tubes

Mazdoor Sabha and Others 24
THE FACTS OF THE CASE

An affluent Management and an indigent work force are the two wings of the Gujarat Steel
Tubes Ltd. which manufactures steel tubes in the outskirts of Ahmedabad city and is scarred by
an industrial dispute resulting in these appeals. This industry, started in 1960, went into pro-
duction since 1964 and waggled from infancy to adulthood with smiling profits and growling
workers, punctuated by smouldering demands, strikes and settlements, until there brewed a
confrontation culminating in a head-on collision following upon certain unhappy happenings.
A total strike ensued, whose chain reaction was a wholesale termination of all the employees,
followed by fresh recruitment of workmen, de facto breakdown of the strike and dispute over
restoration of the removed workmen. This cataclysmic episode and its sequel formed the basis
of a Section 10A arbitration and award, a writ petition and judgment, inevitably spiralling up
to this Court in two appeals—one by the Management and the other by the Union—which
have been heard together and are being disposed of by this common judgment. The arbitrator
held the action of the Management warranted while the High Court reversed the Award and
substantially directed reinstatement.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

Every litigation has a moral and, these appeals have many, the foremost being that the economics
of law is the essence of labour jurisprudence.
A few fundamental issues, factual and legal, on which bitter controversy raged at the bar,
settle the decisional fate of this case. A plethora of precedents has been cited and volumes of evi-
dence read for our consideration by both sides. But the jural resolution of labour disputes must
be sought in the law-life complex, beyond the factual blinkers of decided cases, beneath the
lexical littleness of statutory texts, in the economic basics of industrial justice which must enliven
the consciousness of the court and the corpus juris. This Court has developed labour law on this
broad basis and what this Court has declared holds good for the country. We must first fix the
founding faith in this juristic branch before unravelling the details of the particular case.
Viewing from this vantage point, it is relevant to note that the ethical roots of jurisprudence,
with economic overtones, are the elan vital of any country’s legal system. So it is that we begin
with two quotations—one from the Old Testament and the other from Gandhiji, the Indian
New Testament—as perspective-setters. After all, industrial law must set the moral-legal norms
for the modus vivendi between the partners in management, namely, Capital and Labour. Cain
retorted, when asked by God about his brother Abel, in the Old Testament, ‘Am I my brother’s
 Disciplinary Proceedings 419

keeper?’ ‘Yes’ was the implicit answer in God’s curse of Cain. In the fraternal economics of
national production, worker is partner in this biblical spirit. In our society, Capital shall be the
brother and keeper of Labour and cannot disown this obligation, especially because Social Just-
ice and Articles 43 and 43A are constitutional mandates.
Gandhiji, to whom the Arbitrator has adverted in passing in his award, way back in March
1946, wrote on Capitalism and Strikes in the Harijan:

How should capital behave when labour strikes? This question is in the air and has great im-
portance at the present moment. One way is that of suppression named or nicknamed
‘American’. It consists in suppression of labour through organised goondaism. Everybody
would consider this as wrong and destructive. The other way, right and honourable, consists
in considering every strike on its merits and giving labour its due not what capital considers as
due, but what labour itself would so consider and enlightened public opinion acclaims as just.
In my opinion, employers and employed are equal partners, even if employees are not con-
sidered superior. But what we see today is the reverse. The reason is that the employers harness
intelligence on their side. They have the superior advantage which concentration of capital
brings with it, and they know how to make use of it.... Whilst capital in India is fairly
organised, labour is still in a more or less disorganised condition in spite of Unions and
Federation. Therefore, it lacks the power that true combination gives.
Hence, my advice to the employers would be that they should willingly regard workers as
the real owners of the concerns which they fancy they have created.... Socialism of my
Conception (M. K. Gandhi) by Anand T. Hingorani, Bhartiya Vidya Bhavan.

Tuned to these values are the policy directives in Articles 39, 41, 42, 43 and 43A. They speak
of the right to an adequate means of livelihood, the right to work, humane conditions of work,
living wage ensuring a decent standard of life and enjoyment of leisure and participation of
workers in management of industries. Dehors these mandates, law will fail functionally. Such is
the value-vision of Indian Industrial Jurisprudence.
The nidus of facts which enwomb the issues of law may be elaborated a little more at this
stage. In the vicinity of Ahmedabad city, the appellant is a prosperous engineering enterprise
which enjoys entrepreneurial excellence and employs over 800 workmen knit together into the
respondent Union called the Gujarat Steel Tubes Mazdoor Sabha (the Sabha, for short). Fortu-
nately, the industry has had an innings of escalating profits but the workmen have had a running
complaint of a raw deal. Frequent demands for better conditions, followed by negotiated settle-
ments, have been a lovely feature of this establishment, although the poignant fact remains that
till the dawn of the seventies, the gross wages of the workmen have hovered around a harrowing
hundred rupees or more in this thriving Ahmedabad industry.
The course of this precarious coexistence was often ruffled, and there was, now and then,
some flare-up leading to strike, conciliation and even reference under Section 10. When one
such reference was pending, another unconnected dispute arose which, after some twists and
turns, led to an industrial break-down and a total strike. The episodic stages of this bitter battle
will have to be narrated at length a little later. Suffice it to say that the Management jettisoned
all the 853 workmen and recruited some freshers to take their place and to keep the wheels of
production moving. In the war of attrition that ensued, Labour lost and capitulated to Capital.
At long last, between the two, a reference to arbitration of the disputes was agreed upon under
Section 10A of the Industrial Disputes Act, 1947 (the Act for short). The highlight of the dis-
pute referred for arbitration was whether the termination orders issued by the Management
against the workmen whose names were set out in the annexure to the reference were “legal,
proper and justified;” if not, whether the workmen were entitled to any reliefs including the
relief of reinstatement with continuity of service and full back wages.’ The arbitrator’s decision
went against the Sabha while, on a challenge under Article 226, the High Court’s judgment vir-
tually vindicated its stand. This is the hang of the case. The substantial appeal is by the Management
420 Social Justice and Labour Jurisprudence

while the Sabha has a marginal quarrel over a portion of the judgment as disclosed in its appeal.
The ‘jetsam’ workmen, a few hundred in number, have been directed to be reinstated with full
or partial back pay and this is the bitter bone of contention.
A stage-by-stage recapitulation of the developments is important to get to grips with the core
controversy.
Shri Ashoke Sen, for the appellant-Management and Shri Tarkunde for the respondent—
Sabha, have extensively presented their rival versions with forceful erudition. Shri R. K. Garg,—
of course,— for some workmen—has invoked with passion the socialist thrust of the Constitution
as a substantive submission and, as justificatory of the workmen’s demands, relied on the glaring
contrast between the soaring profits and the sagging wages, while Shri Bhandare has pressed the
lachrymose case of the several hundreds of ‘interregnal’ employees whose removal from service,
on re-instatement of the old, might spell iniquity.
Olive Branch Approach:
At this stage we must disclose an effort at settlement we made with the hearty participation of
Sri Asoke Sen and Sri Tarkunde at the early stages of the hearing.
The golden rule for the judicial resolution of an industrial dispute is first to persuade fighting
parties, by judicious suggestions, into the peace-making zone, disentangle the differences, narrow
the mistrust gap and convert them, through consensual steps, into negotiated justice. Law is
not the last word in justice, especially social justice. Moreover, in our hierarchical court system,
the little man lives in the short run but most litigation lives in the long run. So, it is that nego-
tiation first and adjudication next is a welcome formula for the Bench and the Bar, Management
and Union. This ‘olive branch’ approach brought the parties closer in our court and gave us a
better understanding of the problem, although we could not clinch a settlement. So we heard
the case in depth and felt that some of the legal issues did merit this court’s declaratory pro-
nouncement, settlement or no settlement. Mercifully counsel abbreviated their oral arguments
into an eight-day exercise, sparing us the sparring marathon of 28 laborious days through which
the case stretched out in the High Court.
Orality ad libitum may be the genius of Victorian era advocacy but in our ‘needy’ Republic
with crowded dockets, forensic brevity is a necessity. The ‘Bench and the Bar must fabricate a
new Shorthand form of court methodology which will do justice to the pockets of the poor who
seek right and justice and to the limited judicial hours humanly available to the court if the de-
livery system of justice is not to suffer absolescence. The facts:
Back to the Central Facts:
Proof of the ‘efficient’ management of the Gujarat Steel Tubes Ltd., is afforded by the testimony
of larger turnover and profits, year after year, from the beginning down to date. The mill was
commissioned in January 1964 but by the accounting year 1971–72 the turnover had leapt to
Rs 560 lakhs. It soared to Rupees 680 lakhs the next year, to Rs 1,136 lakhs the year after and
to Rs 20 crores in 1974–75: This enterprise entered the export trade and otherwise established
itself as a premier manufactory in the line. Steel shortage is the only shackle which hampers its
higher productivity. But its increasing shower of prosperity was a sharp contrast, according to
Sri Garg, to the share of the wage bill. The Worker started on a magnificent sum per mensem of
Rs 100 in toto even as late as 1970, although some workmen, with more service, were paid
somewhat higher. The extenuatory plea of the Management, justificatory of this parsimony,
was that other mill-hands were receiving more niggardly wages in comparable enterprises. Prob-
ably, unionisation, under these luridly low-paid circumstances, caught on and a workers’ union
was born somewhere around 1966. A sensible stroke of enlightened capitalism persuaded the
Management to enter into agreements with the Unions, somewhat improving emoluments and
ameliorating conditions. By 1968, the Sabha, a later union came into being and commanded
 Disciplinary Proceedings 421

the backing of all or most of the mill hands. By March, 1969, the Sabha presented a charter of
demands, followed by resistance from the Management and strike by the workers. By July,
1969, a settlement with the Sabha was reached. Agreements relating to the various demands
brought quiet and respite to the industry although it proved temporary.
A vivid close-up of the sequence and consequence of the dramatic and traumatic events cul-
minating in the reference to arbitration and the impugned award is essential as factual foundation
for the decision of the issues. Even so, we must condense, since labyrinthine details are not
needed in a third tier judgment. Broad lines with the brush bring out the effect not minute
etches which encumber the picture.
An agreement of futuristic import with which we may begin the confrontational chronicle is
that of April 1970. Clause 6 thereof runs thus:

Management of the Company agrees to implement recommendations of the Central Wage

Board for Engineering Industries as and when finally declared and all the increments granted
to workmen from time to time under this agreement shall be adjusted with those recommenda-
tions provided that such adjustment shall not adversely affect the wages of workmen.

The engineering industry, where India is forging ahead, was apparently exploitative towards
labour, and to make amends for this unhealthy position, the Central Wage Board was appointed
in 1964 although it took six long years to recommend revision of wages to be implemented with
effect from 1-1-1969. Meanwhile, the masses of workers were living ‘below the bread line’.
Saintly patience in such a milieu was too much to expect from hungry demands and pressing
for the recommendations of the Wage Board to be converted into immediate cash. But, as we
will presently unravel, ‘Wage Board expectations’ were proving teasing illusions and premises of
unreality because of non-implementation, viewed from the Sabha’s angle. The Management,
on the other hand, had a contrary version which we will briefly consider. Luckily, agreed mini-
increases in wages were taking place during the years 1970, 1971 and 1972. Likewise, bonus
was also the subject of bargain and agreement. But in September 1971, an allegedly violent
episode broke up the truce between the two, spawned criminal cases against workers, led to
charges of go-slow tactics and lock-outs and burst into suspension, discharge and dismissal of
workmen.
The crisis was tided over by continued conciliations and two settlements. We are not directly
concerned with the cluster of clauses therein save one 64 workmen had been discharged or dis-
missed, of whom half the number were agreed to be reinstated. The fate of the other half (32
workers) was left for arbitration by the Industrial Tribunal. The dark clouds cleared for a while
but the sky turned murky over again, although the previous agreement had promised a long
spell of normalcy. The Sabha, in October 1972, met and resolved to raise demands of which the
principal ones were non-implementation of the Wage Board recommendations, bonus for 1971
and wages during the lock-out period. The primary pathology of industrial friction is attitudinal.
The Management could have (and, indeed, did, with a new Union) solved these problems had
they regarded the Sabha as partner, not saboteur. Had the bitter combativeness of the Sabha
been moderated, may be the showdown could have been averted.
Apportioning blame does not help now, but we refer to it here because Sri Ashoke Sen with
feeling fury fell foul of the criticism by the High Court that the Management had acted improperly
in insisting on arbitration, and argued that when parties disagreed, arbitral reference was the
only answer and the workers’ fanatical rejection of arbitration made no sense. We need not
delve into the details of the correspondence relied on by either side to reach the truth. For, the
Union’s case is that in the prior settlement between the two parties arbitral reference came only
after negotiations failed. That was why they pressed the Management to reason together, avoiding
wrestling with each other before a slow-moving umpire.
422 Social Justice and Labour Jurisprudence

Sri Tarkunde, for the Sabha, urged that the workmen were not intransigent but impatient
and pleaded for a negotiated settlement since the main point in dispute, namely, the imple-
mentation of the Central Engineering Wage Board’s recommendations, was too plain to admit
of difference, given good faith on both sides. We will examine the substance of this submission
later but it needs to be emphasised that workmen, surviving on starving wages and with notori-
ously fragile staying power, are in no mood for adjudicatory procedures, arbitral or other, if the
doors of negotiation are still ajar. The obvious reason for this attitude is that the litigative length
of the adjudicatory apparatus, be it the tribunal, the court or the arbitrator, is too lethargic and
long-winded for workmen without the wherewithal to survive and is beset with protracted
challenges either by way of appeal upon appeal or in the shape of writ petitions and, thereafter,
appeals upon appeals. The present case illustrates the point. Where workmen on hundred rupees
a month demand immediate negotiation the reason is that privations have no patience beyond a
point. Now and here, by negotiation, is the shop-floor clamour. In this very matter, although
the controversy before the arbitrator fell within a small compass, he took a year and ninety printed
pages to decide, inevitably followed by a few years and hundred and thirty printed pages of
judgment in the High Court and a longer spell in this Court with slightly lesser length of judg-
ment. Which workman under Third World conditions can withstand this wasting disease while
hunger leaves no option save to do or die? Raw life, not rigid logic, is the mother of law.
After the demands were raised by the Union, the main issue being implementation of the
Wage Board recommendations, a stream of correspondence, meetings and inchoate settlements
ensued, but the crucial question, which would have meant ‘cash and carry’ for the workman,
baffled solution. Do negotiate since the application of the Wage Board recommendations are
beyond ambiguity, was the Sabha’s peremptory plea. We differ; therefore, go to arbitration, was
the Management’s firm response. A stalemate descended on the scene.
No breakthrough being visible, the Sabha charged the Management by its letter of 25 January
1973 with breach of Clause 6 of the Agreement of 4 August 1972 which ran thus:

That the parties agree that for a period of 5 years from the date of this settlement all disputes
will be solved by mutual negotiations or, failing that, by joint arbitration under Section 10A
of the Industrial Disputes Act, 1947. Neither party shall take any direct action including go-
slow, strike and lock-out for a period of 5 years from the date of this settlement.

Various aspersions of anti-labour tactics were included in the Sabha’s letter but the most money-
loaded item was the grievance about the Wage Board recommendations. The temper, by now,
was tense.
The Management, on the same day (25 January 1973), set out its version on the notice board
and the High Court’s summary of it runs thus:

The notice stated that during the course of the meeting with the representatives of the
Sabha held on 20 January 1973 the Company had expressed its willingness to implement
the Wage Board recommendations according to its interpretation on and with effect from
1 January 1969 without prejudice to the rights and contentions of the workmen and leaving
it open to the parties to take the matter to arbitration for resolution of the points of dispute.
The Sabha, however, had turned down this suggestion and it came to the notice of the Com-
pany that workmen were being instigated by making false representations. The Company
clarified that on and with effect from 1 January 1972 every workman would be entitled to
the benefits of Wage Board recommendations, irrespective of whether the concerned workman
had put in 240 days attendance.

The Sabha’s answer was a strike two days later. This event of January 27 was countered quickly
by the Management restating its attitude on the Wage Board recommendations, asserting that
 Disciplinary Proceedings 423

the strike was illegal and in breach of the settlement of 4 August 1972 and wholly unjustified
because the offer of reference to arbitration, negotiations failing, had been spurned by the
Sabha. The notice wound up with a command and a caveat:

If the workmen do not immediately resume duty, the Company would not be under any
obligation to continue in service those 32 workmen who have been taken back in service
pursuant to the settlement dated 4 August 1972. Besides, if (the workmen) continue causing
loss to the Company from time to time in this manner, the Company will not also be bound
to implement the Wage Board recommendations on and with effect from 1 January 1969,
which may also be noted. The Company hereby withdraws all its proposals unless the workmen
withdraw the strike and resume work within two days.

This threat was dismissed by the workmen as a brutum fulmen and the strike continued.
The Management, therefore, came up on the notice board castigating the Sabha with irresponsible
obduracy in waging an illegal and unjustified strike. A warning of the shape of things to come
was given in this notice; the High Court has summed it up thus:

The Company gave intimation that in view of such obstinate attitude on the part of the
Sabha and the Workmen, it had decided to withdraw its earlier offer to implement the Wage
Board recommendations on and with effect from 1 January 1969 as already cautioned in
the notice dated 27 January 1973. The said decision must be taken to have been thereby
communicated to the workmen and Sabha. The notice further stated that having regard to
the obdurate, unreasonable and illegal attitude adopted by the workmen and Sabha, the
Company had decided to take disciplinary proceedings against the defaulting workmen. In
this connection, the attention of the workmen was drawn to the fact that the strike was
illegal not only because of the terms of the settlement dated 4 August 1972 but also because
of the pendency of the reference relating to reinstatement of 32 workmen before the Indus-
trial Court and, that, therefore, the Company was entitled to take disciplinary action against
them. Finally, the Company appealed to the workmen to withdraw their illegal and unjustified
strike forthwith and to resume work.

These exercises notwithstanding, the strike raged undaunted, the production was paralysed
and the Management retaliated by an elaborate notice which dilated on its preparedness to
negotiate or arbitrate and the Sabha’s unreason in rejecting this gesture and persisting on the
war path. The stern economic sanction was brought home in a critical paragraph:

By this final notice the workmen are informed that they should withdraw the strike and
resume work before Thursday, 15 February 1973. If the workmen resume duty accordingly,
the management would be still willing to pay salary according to the recommendations of
the Wage Board on and with effect from 1 January 1969. Furthermore, the management is
ready and willing to refer to the arbitration of the Industrial Tribunal the question as to whether
the management has implemented the settlement dated 4 August 1972 and all other labour
problems. In spite of this, if the workmen do not resume duty before Thursday, 15 February
1973, then the Company will terminate the services of all workmen who are on strike and
thereafter it will run the factory by employing new workmen. All workmen may take note of
this fact.

The count-down thus began. 15 February 1973 arrived, and the Management struck the
fatal blow of discharging the strikers—all the labour force, 853 strong—and recruiting fresh
hands unless work was resumed by 19 February 1973.
424 Social Justice and Labour Jurisprudence

This public notice was allegedly sent to the Sabha and circulated to such workmen as hovered
around the factory, It is common case that the notice of 15 February 1973, was not sent to
individual workmen but was a signal for action. The drastic consequence of disobedience was
spelt out in no uncertain terms:

The workmen are hereby informed that they should resume duty on or before Monday,
19 February 1973 failing which the Management will presume that the workmen want to
continue their strike and do not wish to resume work until their demands as aforesaid are
accepted by the management.

Parallel negotiations were going on even while mailed fist manoeuvres were being played
up—thanks to the basic goodwill and tradition of dispute settlements that existed in this company.
Even amidst the clash of arms, bilateral diplomacy has a place in successful industrial relations.
The Management and the Sabha allowed the talks to continue which, at any rate, clarified the
area of discord. One thing that stood out of these palavers was that both sides affirmed the pre-
condition of negotiations before arbitration over differences although the content, accent and
connotation of ‘negotiations’ varied with each side. No tangible results flowed from these exercises
and the inevitable happened on 21 February 1973 when the Management blotted out the en-
tire lot of 853 workmen from the roster, by separate orders of discharge from service, couched
in identical terms. The essential terms read thus:

Your services are hereby terminated by giving you one month’s salary in lieu of one month’s
notice and accordingly you are discharged from service. You should collect immediately from
the cashier of the factory your one month’s notice-pay and due pay, leave entitlements and
gratuity, if you are entitled to the same. The payment will be made between 12 noon and
5 p.m. If and when you desire to be employed, you may apply in writing to the Company in
that behalf and on receipt of the application, a reply will be sent to you in the matter.

Casual workmen were issued separate but similar orders. The Management did record its
reasons for the action taken, on 20 February 1973 and forwarded them to the Sabha and to the
individual workmen on request. The anatomy of this proceeding is of critical importance in
deciding the character of the action. Was it a harmless farewell to the workmen who were un-
willing to rejoin or a condign punishment of delinquent workmen?
The separate memorandum of reasons refers to the strike as illegal and unjustified and narrates
the hostile history of assault by workmen of the officers, their go-slow tactics and sabotage
activities, their contumacious conduct and a host of other perversities vindicating the drastic
action of determining the services of all the employees. The concluding portion reads partly
stern and partly non committal:

In the interest of the Company it is decided to terminate the services of all the workmen who
are on illegal and unjustified strike since 27th January, 1973.

Under the circumstances, it is decided that the services of all the workmen who are on illegal
and unjustified strike should be terminated by way of discharge simpliciter. These workmen,
however, may be given opportunity to apply for employment in the Company and in case ap-
plications are received for employment from such employees, such applications may be considered
on their merits later on.
It may be mentioned here that while arriving at the aforesaid decision to terminate the services
of the workmen, various documents, notices, correspondence with the Union and others, records
of production, etc. have been considered and therefore the same are treated as part of the rele-
vant evidence to come to the conclusion as aforesaid.
 Disciplinary Proceedings 425

Final Conclusion:
The services of all the workmen who are on illegal and unjustified strike since 27-1-1973
should be terminated by way of discharge simpliciter and they should be offered all their
legal dues immediately.
The Administrative Manager is hereby directed to pass orders on individual workers as per
draft attached.

We thus reach the tragic crescendo when the Management and the workmen fell apart and
all the workmen’s services were severed. Whether each of these orders using, in the contem-
poraneous reasons, the vocabulary of misconduct but, in the formal part, the expression ‘discharge
simpliciter’, should be read softly as innocent termination or sternly as penal action, is one of
the principal disputes demanding decision.
We may as well complete the procession of events before taking up the major controversies
decisive of the case. The total termination of the entire work force of 853 employees was un-
doubtedly a calamity of the first magnitude in a country of chronic unemployment and starving
wages. Nevertheless, under certain circumstances, discharge of employees may well be within
the powers of the Management subject to the provisions of the Act. With all the strikers struck
off the rolls there was for a time the silence of the grave. The conditional invitation to the em-
ployees to seek de novo employment by fresh applications which would be considered on their
merits, left the workers cold. So the factory remained closed until 28 April 1973 when, with
new workers recruited from the open market, production recommenced. Among the militants,
the morale which kept the strike going, remained intact but among the others the pressure to
report for employment became strong. Re-employment of discharged workmen began and
slowly snowballed, so that by 31 July 1973 a substantial number of 419 returned to the factory.
The crack of workmen’s morale was accelerated by escalating re-employment and the Manage-
ment’s restoration of continuity of service and other benefits for re-employed hands. The employer
relied on this gesture as proof of his bona fides. Meanwhile, there were exchanges of letters be-
tween and ‘trading’ of charges against each other. The Management alleged that the strikers
were violent and prevented loyalists’ return while the Sabha was bitter that goondas were hired
to break the strike and promote blacklegs. These imputations have a familiar ring and their im-
pact on the legality of the discharge of workmen falls for consideration a little later. The stream
of events flowed on. The Sabha protested that the Management was terrorising workmen, ex-
ploiting their sagging spirit and illegally insisting on fresh applications for employment while
they were in law continuing in services. With more ‘old workers’ trickling back for work and
their discharge orders being cancelled, the strike became counter-productive. Many overtures
on both sides were made through letters but this epistolary futility failed to end the embroglio
and brought no bread. The worker wanted bread, job, and no pyrrhic victory.
A crescent of hope appeared on the industrial sky. The Management put out a ‘final offer’ on
31 May 1973, calling on all workmen to rejoin lest the remaining vacancies also should be filled
by fresh recruits. The Sabha responded with readiness to settle and sought some clarifications
and assurances. The employer informed:

Our offer is open till 10-6-1973. From 11-6-1973 we shall recruit new hands to the extent
necessary. Thereafter workers who will not have reported for work shall have no chance left
for re-employment with us.
We repeat that those workers who will report for work will be taken back in employment with
continuity of their services, that the orders of discharge passed against them on 21-2-1973
shall be treated as cancelled and they will also be paid the difference in wages from 1969 as
per the recommendations of the Wage Board.
426 Social Justice and Labour Jurisprudence

The Sabha was willing and wrote back on 8 June 1973 but sought details about the attitude
of the Management to the many pending demands. Meanwhile, the sands of time were running
out and so the Sabha telegraphed on 9th June that the workers were willing to report for work
but were being refused work. They demanded the presence of an impartial observer. The reply
by the Management repelled these charges, but there was some thaw in the estrangement, since
the time for return to work of the strikers was extended up to 16-6-73. An apparent end to a
long strike was seemingly in sight with the Sabha sore but driven to surrender. On 13-6-73 the
Sabha Secretary wrote back:

This is a further opportunity to you even now to show your bona fides. If you confirm to
take all the workmen discharged on 21-2-1973 as stated in your various letters and to give
them intimation and reasonable time to join, I will see that your offer is accepted by the
workmen.

Here, at long last, was the Management willing to ‘welcome’ back all the former employees
and the Sabha limping back to the old wheels of work. Was the curtain being finally drawn on
the feud? Not so soon, in a world of bad blood and bad faith; or may be, new developments
make old offers obsolete and the expected end proves an illusion. Anyway, the victor was the
Management and the vanquished the Sabha and the re-employment proffered was watered
down. In our materialist cosmos, often Might is Right and victory dictates morality!
Hot upon the receipt of the Sabha’s letter accepting the offer the Management back-tracked
or had second thoughts on full re-employment. For, they replied with a long catalogue of the
Sabha’s sins, set out the story of compulsion to keep the production going and explained that
since new hands had come on the scene full re-employment was beyond them. In its new mood
of victorious righteousness, the Management modified the terms of intake of strikers and saddled
choosy conditions on such absorption suggestive of breaking the Sabha’s solidarity:

As on the present working of the Company, the Company may still need about 250 more
workers including those to be on the casual list as per the employment position prior to the
start of the strike.
Yon may, therefore, send to us immediately per return of post the list of the workers who
can and are willing to join duty immediately so as to enable us to select and employ the work-
men as per the requirement of the Company. Further, it would also be necessary for you to
state in your reply that you have called off the strike and have advised the workers to resume
the work as otherwise it is not clear from your letter as to whether you are still advocating the
continuance of the strike or that you have called off the strike. Therefore, unless we have a
very definite stand known from you on this issue, it may not be even now possible for us to
enter into any correspondence with you.
We may again stress that if your tactics of prolonging the issue by correspondence are con-
tinued the management would be constrained to take new recruits and in that case, at a later date
it may not be even possible to employ as many workmen as may be possible to employ now.”

Nothing is more galling, says Sri Tarkunde, than for a Union which has lost the battle and
offered to go back to work to be told that it should further humiliate itself by formally declar-
ing the calling off of the strike. Sentiment apart, the Sabha had agreed to go back, but then
the management cut down the number to be re-employed to 250 and, even this, on a selective
basis. This selection could well be to weed out Union activists or to drive a wedge among the
Union members. These sensitive thoughts and hard bargains kept the two apart. The Sabha,
wounded but not wiped out, did not eat the humble pie. The Management, on account of the
intervening recruitments and injuries inflicted by the strike, did not budge either.
 Disciplinary Proceedings 427

At this point we find that out of 853 employees who had been sacked 419 had wandered
back by July 31, leaving 434 workmen as flotsam. Their reinstatement became the focus of an
industrial dispute raised by the Sabha. A few more were left out of this jobless mass, and through
the intercession of the Commissioner of Labour both sides agreed to resolve their disagreement
by arbitral reference under Section 10A of the Act, confining the dispute to reinstatement of
400 workmen discharged on 21 February 1973. A reference under Section 10A materialised.
The ‘Labour litigation’ began in May 1975 and becoming ‘at each remove a lengthening chain’
laboured from deck to deck and is coming to a close, hopefully, by this decision. Is legal justice
at such expensive length worth the candle or counterproductive of social justice? Is a streamlined
alternative beyond the creative genius of Law India?
An Aside:
As urgent as an industrial revolution is an industrial law revolution, if the rule of law were at all
to serve as social engineering. The current forensic process needs thorough overhaul because it
is over-judicialised and under-professionalised, lacking in social orientation and shop-floor know-
how and, by its sheer slow motion and high price, defeats effective and equitable solution
leaving both Managements and Unions unhappy. If Parliament would heed, we stress this need.
Industrial Justice desiderates specialised processual expertise and agencies.
This factual panorama, omitting a welter of debatable details and wealth of exciting embellish-
ments, being not germane to the essential issues, leads us to a formulation of the decisive questions
which alone need engage our discussion. The Management might have been right in its version
or the Sabha might have been wronged as it wails, but an objective assessment of the proven
facts and unbiased application of the declared law will yield the broad basis for working out a
just and legal solution. Here, it must be noticed that a new Union now exists even though its
numerical following is perhaps slender. We are not concerned whether it is the favoured child of
the Management, although it has received soft treatment in several settlements which have
somewhat benefited the whole work force and suggests a syndrome not unfamiliar among some
industrial bosses allergic to strong unions.
The central problem on the answer to which either the award of the arbitrator or the judgment
of the High Court can be sustained as sound is whether the discharge of the workmen en masse
was an innocuous termination or a disciplinary action. If the latter, the High Court’s reasoning
may broadly be invulnerable. Secondly, what has been mooted before us is a question as to
whether the evidence before the Arbitrator even if accepted at its face value, establishes any mis-
conduct of any discharged workman and further whether the misconduct, if any, made out is of
such degree as to warrant punitive discharge. Of course, the scope of Section 11A as including
arbitrators, the power of arbitrators, given sufficiently wide terms of reference, to examine the
correctness and propriety of the punishment, inter alia, deserve examination. Likewise the rules
regarding reinstatement, retrenchment, back wages and the like, fall for subsidiary consideration.
Prefatory to this discussion is the appreciation or the constitutional consciousness with regard
to Labour Law. The Constitution of India is not a non-aligned parchment but a partisan of
social justice with a direction and destination which it sets in the Preamble and Article 38, and
so, when we read the evidence, the rulings, the statute and the rival pleas we must be guided by
the value set of the Constitution. We not only appraise Industrial Law from this perspective in
the disputes before us but also realise that ours is a mixed economy with capitalist mores, only
slowly wobbling towards a socialist order, notwithstanding Sri Garg’s thoughts. And, after all,
ideals apart, ‘law can never be higher than the economic order and the cultural development of
society brought to pass by that economic order’. The new jurisprudence in industrial relations
must prudently be tuned to the wave-length of our constitutional values whose emphatic ex-
pression is found in a passage quoted by Chief Justice Rajamannar of the Madras High Court.
The learned Judge observed: [Law and the People—A Collection of Essays by V.R. Krishna Iyer,
p. 36].
428 Social Justice and Labour Jurisprudence

The doctrine of ‘laissez faire’ which held sway in the world since the time of Adam Smith has
practically given place to a doctrine which emphasises the duty of the State to interfere in the
affairs of individuals in the interests of the social well-being of the entire community. As
Julian Huxley remarks in his essay on ‘Economic Man and Social Man’, Many of our old
ideas must be retranslated, so to speak, into a new language. The democratic idea of freedom,
for instance, must lose its nineteenth century meaning of individual liberty in the economic
sphere, and become adjusted to new conception of social duties and responsibilities. When a
big employer talks about his democratic rights to individual freedom, meaning thereby a
claim to socially irresponsible control over a huge industrial concern and over the lives of tens
of thousands of human beings whom it happens to employ, he is talking in a dying language.

Homo economicus can no longer warp the social order. Even so the Constitution is ambitiously
called socialist but realists will agree that a socialist transformation of the law of labour relations
is a slow though steady judicial desideratum. Until specific legislative mandates emerge from
Parliament the court may mould the old but not make the new law. ‘Interstitially, from the
molar to the molecular’ is the limited legislative role of the court; as Justice Holmes said and
Mr Justice Mathew quoted.
The Core Question:
Right at the forefront falls the issue whether the orders of discharge are, as contended by Sri
Tarkunde, de facto dismissals, punitive in impact and, therefore, liable to be voided if the pro-
cedural imperatives for such disciplinary action are not complied with, even though draped in
silken phrases like ‘termination simpliciter’. It is common case that none of the processes implicit
in natural justice and mandated by the relevant standing orders have been complied with, were
we to construe the orders impugned as punishment by way of discharge or dismissal. But Sri
Asoke Sen impressively insists that the orders here are simple terminations with no punitive
component, as, on their face, the orders read. To interpret otherwise is to deny to the employer
the right, not to dismiss but to discharge, when the law gives him the option.
An analysis of the standing orders in the background of disciplinary jurisprudence is necessitous
at this point of the case.
The Model Standing Orders prescribed under Section 15 of the Industrial Employment
(Standing Orders) Act, 1946 apply to this factory. Order 23, clauses (1) and (4), relate to
termination of employment of permanent workmen. Termination of their services on giving
the prescribed notice or wages in lieu of such notice is provided for. But clause (4A) requires
reasons for such termination of service of permanent workmen to be recorded and, if asked for,
communicated, This is obviously intended to discover the real reason for the discharge so that
remedies available may not be defeated by clever phraseology of orders of termination. Clause
(7) permits the services of non-permanent workmen to be terminated without notice except
when such temporary workmen are discharged by way of punishment. Punitive discharge is
prohibited unless opportunity to show cause against charges of misconduct is afforded (Standing
Order 25). Orders of termination of service have to be by the Manager and in writing and
copies of Orders shall be furnished to the workmen concerned. Standing Order 24 itemises the
acts and omissions which amount to misconduct:

According to clause (b) of the said Standing Order, going on an illegal strike or abetting,
inciting, instigating or acting in furtherance thereof amount to misconduct. Standing Order
25 provides for penalty imposable on a workman guilty of misconduct. Accordingly amongst
other punishments, a workman could be visited with the penalty of discharge under Order
23 or dismissal without notice for a misconduct (see sub-clauses [f ] and [g] of clause [1]).
Clause (3) provides that no order of dismissal under sub-clause (g) of Clause (1) shall be made
except after holding an enquiry against the workmen concerned in respect of the alleged
 Disciplinary Proceedings 429

misconduct in the manner set forth in clause (4). Clause (4) provides for giving to the con-
cerned workman a charge-sheet and an opportunity to answer the charge and the right to be
defended by a workman working in the same department as himself and production of witnesses
and cross-examination of witnesses on whom the charge rests. Under clause (6), in awarding
punishment the Manager has to take into account the gravity of the misconduct, the previous
record, if any, of the workman, and any other extenuating or aggravating circumstances.

The finding of the arbitrator that the workmen went on a strike which was illegal and in
which they had participated is not disputed. In this background, the application of the procedural
imperatives before termination of services of the workmen, in the circumstances of the present
case, has to be judged. This, in turn, depends on the key finding as to whether the discharge
orders issued by the management were punitive or non-penal.
The anatomy of a dismissal order is not a mystery, once we agree that substance, not semblance,
governs the decision. Legal criteria are not so slippery that verbal manipulations may outwit the
court. Broadly stated, the face is the index to the mind and an order fair on its face may be taken
at its face value. But there is more to it than that, because sometimes words are designed to con-
ceal deeds by linguistic engineering. So it is beyond dispute that the form of the order, or the
language in which it is couched is not conclusive. The court will lift the veil to see the true na-
ture of the order.
Many situations arise where courts have been puzzled because the manifest language of the
termination order is equivocal or misleading and dismissals have been dressed up as simple ter-
mination. And so, judges have delved into distinctions between the motive and the foundation
of the order and a variety of other variations to discover the true effect of an order of termination.
Rulings are a maze on this question but, in sum, the conclusion is clear. If two factors co-exist,
an inference of punishment is reasonable though not inevitable. What are they?
If the severance of service is effected, the first condition is fulfilled and if the foundation or
causa causans of such severance is the servant’s misconduct the second is fulfilled. If the basis or
foundation for the order of termination is clearly not turpitudinous or stigmatic or rooted in
misconduct or visited with evil pecuniary effects, then the inference of dismissal stands negated
and vice versa. These canons run right through the disciplinary branch of master and servant
jurisprudence, both under Article 311 and in other cases including workmen under managements.
The law cannot be stultified by verbal haberdashery because the court will lift the mask and
discover the true face. It is true that decisions of this court and of the High Courts since Dhingra’s 25
case have been at times obscure, if cited dehors the full facts. In Samsher Singh’s 26 case the un-
satisfactory state of the law was commented upon by one of us, per Krishna Iyer, J., quoting
Dr. Tripathi for support:

In some cases, the rule of guidance has been stated to be ‘the substance of the matter’ and
the ‘foundation’ of the order. When does ‘motive’ trespass into ‘foundation’. When do we lift
the veil of form to touch the ‘substance’? When the Court says so. These ‘Freudian’ frontiers
obviously fail in the work-a-day world and Dr Tripathi’s observations in this context are not
without force. He says:
As already explained, in a situation where the order of termination purports to be a mere
order of discharge without stating the stigmatizing results of the departmental enquiry a
search for the ‘substance of the matter’ will be indistinguishable from a search for the motive
(real unrevealed object) of the order. Failure to appreciate this relationship between motive
(the real, but unrevealed object) and form (the apparent; or officially revealed object) in
the present context has led to an unreal inter-play of words and phrases wherein symbols like
‘motive’, ‘substance’ ‘form’ or ‘direct’ parade in different combinations without communicating
precise situations or entities in the world of facts.
430 Social Justice and Labour Jurisprudence

The need, in this branch of jurisprudence, is not so much to reach perfect justice but to lay
down a plain test which the administrator and civil servant can understand without subtlety
and apply without difficulty. After all, between ‘unsuitability’ and ‘misconduct’ thin partitions
do their bounds divide’. And over the years, in the rulings of this Court the accent has shifted,
the canons have varied and predictability has proved difficult because the play of legal light
and shade has been baffling. The learned Chief Justice has in his judgment, tackled this prob-
lem and explained the rule which must govern the determination of the question as to when
termination of service of a probationer can be said to amount to discharge simpliciter and
when it can be said to amount to punishment so as to attract the inhibition of Article 311.

Masters and servants cannot be permitted to play hide and seek with the law of dismissals
and the plain and proper criteria are not to be misdirected by terminological cover-ups or by ap-
peal to psychic processes but must be grounded on the substantive reason for the order, whether
disclosed or undisclosed. The Court will find out from other proceedings or documents connected
with the formal order of termination what the true ground for the termination is. If, thus scru-
tinised, the order has a punitive flavour in cause or consequence, it is dismissal. If it falls short of
this test, it cannot be called a punishment. To put it slightly differently, a termination effected
because the master is satisfied of the misconduct and of the consequent desirability of terminating
the service of the delinquent servant, it is a dismissal, even if he had the right in law to terminate
with an innocent order under the standing order or otherwise. Whether, in such a case the
grounds are recorded in a different proceeding from the formal order does not detract from its
nature. Nor the fact that, after being satisfied of the guilt, the master abandons the enquiry and
proceeds to terminate. Given an alleged misconduct and a live nexus between it and the termin-
ation of service the conclusion is dismissal, even if full benefits as on simple termination, are given
and non-injurious terminology is used.
On the contrary, even if there is suspicion of misconduct the master may say that he does not
wish to bother about it and may not go into his guilt but may feel like not keeping a man he is
not happy with. He may not like to investigate nor take the risk of continuing a dubious ser-
vant. Then it is not dismissal but termination simpliciter, if no injurious record of reasons or
punitive pecuniary cut-back on his full terminal benefits is found. For, in fact, misconduct is
not then the moving factor in the discharge. We need not chase other hypothetical situations
here.
What is decisive is the plain reason for the discharge, not the strategy of a non-enquiry or
clever avoidance of stigmatising epithets. If the basis is not misconduct, the order is saved. In
Murugan Mills27 this Court observed:

The right of the employer to terminate the services of his workman under a standing order,
like clause 17(a) in the present case, which amounts to a claim “to hire and fire” an employee
as the employer pleases and thus completely negatives security of service which has been
secured to industrial employees through industrial adjudication, came up for consideration
before the Labour Appellate Tribunal in Buckingham Carnatic Co. Ltd. vs Workers of the Co.28
The matter then came up before this Court also in Chartered Bank vs Chartered Bank Employees’
Union 29 and the Management of U.B. Dutt and Co. vs Workmen of U.B. Dutt and Co.,30
wherein the view taken by Labour Appellate Tribunal was approved and it was held that even
in a case like the present the requirement of bona fides was essential and if the termination of
service was a colourable exercise of the power or as a result of victimisation or unfair labour
practice the industrial tribunal would have the jurisdiction to intervene and set aside such
termination. The form of the order in such a case is not conclusive and the tribunal can go
behind the order to find the reasons which led to the order and then consider for itself
whether the termination was a colourable exercise of the power or was a result of victimisation
 Disciplinary Proceedings 431

or unfair labour practice. If it came to the conclusion that the termination was a colourable
exercise of the power or was a result of victimisation or unfair labour practice it would have
the jurisdiction to intervene and set aside such termination.
Again, in Chartered Bank vs Employees’ Union31 this Court emphasised:
...The form of the order of termination is not conclusive of the true nature of the order, for it
is possible that the form may be merely a camouflage for an order of misconduct. It is,
therefore, always open to the Tribunal to go behind the form and look at the substance and
if it comes to the conclusion, for example, that though in form the order amounts to ter-
mination simpliciter, it in reality cloaks a dismissal for misconduct, it will be open to it to set
it aside as a colourable exercise of the power.

A rain of rulings merely adds to the volume, not to the weight of the proposition, and so we
desist from citing all of them. A Bench of seven judges of this Court considered this precise
point in Shamsher Singh’s32 case, and Chief Justice Ray ruled:

The form of the order is not decisive as to whether the order is by way of punishment. Even
an innocuously worded order terminating the service may in the facts and circumstances of
the case establish that an enquiry into allegations of serious and grave character of misconduct
involving stigma has been made in infraction of the provision of Article 811. In such a case
the simplicity of the form of the order will not give any sanctity. That is exactly what has hap-
pened in the case of Ishwar Chand Agarwal. The Order of termination is illegal and must be
set aside.
Simple Termination or Punitive Discharge?
We must scan the present order of discharge of 853 workmen and ask the right questions to
decide whether they are punishments or innocent terminations. Neither judicial naiveté nor
managerial ingenuity will put the court off the track of truth. What, then, are the diagnostic
factors in the orders under study?
An isolated reading of the formal notices terminating their services reveals no stigma, no
penalty, and no misconduct. They have just been told off. But the Management admits that as
required by the Standing Orders it has recorded reasons for the discharge. There, several pages
of damnatory conduct have been heaped on the workers collectively accounting for the resort of
the Management to the extreme step of discharging the whole lot, there being no alternative.
Sri A.K. Sen took us through the various appeals made by the Management, the losses sustained,
the many offers to negotiate and arbitrate, the Sabha’s deaf obduracy and resort to sudden strike
and violent tactics and, worst of all, its attempts to persuade the Central Government to take
over the factory as a ‘sick’ mill. These ordeals were described by Sri Asoke Sen graphically to
justify the submission that the Management had no choice, caught between Scylla of strike and
Charybdis of take over, but to get rid of the strikers and recruit new workers. If the employer
did not discharge the strikers they were adamant and would not return to work, and the very
closure compelled by the Sabha was being abused by it to tell the Central Government that for
three months there had been no production and so the mill qualified to be taken over as ‘sick’
under the Industries (Development and Regulation) Act. If the Management discharged the
workers to facilitate fresh recruitment and save the factory from statutory takeover the cry was
raised that the action was dismissal because an elaborate enquiry was not held. The Management
had avoided injury to the workmen, argued Sri Sen, by merely terminating their services without
resort to disciplinary action and recording the uncomplimentary grounds in a separate invisible
order. He also underscored the fact that the strike was illegal and unjustified, as concurrently
held by the Arbitrator and the High Court.
We agree that industrial law promotes industrial life, not industrial death, and realism is the
soul of legal dynamics. Any doctrine that destroys industrial progress interlaced with social justice
432 Social Justice and Labour Jurisprudence

is lethal juristic and cannot be accepted. Each side has its own version of the role of the other
which we must consider before holding either guilty. Sri Tarkunde told us the tale of woe of the
workmen. In a country where the despair of Government is appalling unemployment it is a ter-
rible tragedy to put to economic death 853 workmen. And for what? For insisting that the pit-
tance of Rs 100 per month be raised in terms of the Central Wage Board recommendations,
as long ago agreed to by the Management but put off by the tantalising but treacherous offer of
arbitration when the point admitted of easy negotiated solution. Arbitration looks nice, but,
since 1969, the hungry families have been yearning for a morsel more, he urged. Blood, toil,
sweat and tears for the workers and all the profits and production for the Management was the
industrial irony! Knowing that every arbitral or other adjudicatory agency in India, especially
when weak Labour is pitted against strong Capital in the sophisticated processual system, con-
sumes considerable time, the lowly working class is allergic to this dilatory offer of arbitration.
They just don’t survive to eat the fruits. Such was his case.
The story of violence was also refuted by Sri Tarkunde, since the boot was on the other leg.
Goondas were hired by the Management to sabotage the fundamental right to strike and with
broken hearts several of them surrendered. When at last, the Sabha agreed to see that all workmen
reported for work within the extended time, the Management took to the typical tactics of vic-
timisation, of refusing work for all, as first offered, and of picking and choosing even for the
250 vacancies. Moreover, other conditions were put upon the Sabha calculated to break unionism
which those familiar with trade union movements would painfully appreciate. This insult and
injury apart, the orders of termination were plainly dismissals for a series of alleged miscon-
ducts which were chronicled in separate proceedings. The formal order was like a decree, the
grounds recorded contemporaneously were like the judgment, to use court vocabulary. It was
obvious that the foundation for the termination was the catena of charges set out by the Man-
agement. The true character of the order could not be hidden by the unfair device of keeping a
separate record and omitting it from the formal communication. Law is not such an ass as yet
and if the intent and effect is damnatory the action is disciplinary.
Between these two competing cases, presented by counsel, we have to gravitate towards the
correct factual-legal conclusion. A number of peripheral controversies have been omitted from
this statement, for brevity’s sake. When two high tribunals have spread out the pros and cons it
is supererogation for this court to essay likewise, and miniaturization is a wise husbandry of
judicial resources. First, we must decide whether the order of termination was a punitive discharge
or a simple discharge.
Here we reach the dilemma of the law for discovering unfailing guidelines to distinguish be-
tween discharge simpliciter and dismissal sinister. The search for infallible formulae is vain and
only pragmatic humanism can help navigate towards just solutions. We have earlier explained
that from Dhingra’s 33 case, to Shamsher Singh’s34 case, the law has been dithering but some rough
and ready rules can be decocted to serve in most situations. Law, in this area, is a pragmatist, not
a philologist, and we have set out the dual diagnostic tests applicable in such cases.
It was not retrenchment, according to the Management. Then what was it? If there was work
to be done, why terminate services of workmen except as punishment? Because, argued Sri Sen,
the workers did not work, being on strike and the Management, bent on keeping the factory
going, needed workmen who work. To recruit fresh hands into the lists and to keep the old hands
on the roster was double burden, and, therefore, the strikers had to be eased out to yield place
to new recruits. The object was not to punish the workmen but to keep the factory working.
Accepting this plea, as it were, the award of the arbitrator has exonerated the Management of
the charge of dismissal while the High Court has held the action to be dismissal for misconduct
and therefore bad in law.
In our opinion, the facts of the case before us speak for themselves. Here are workmen, on
strike. The strike is illegal. The Management is hurt because production is paralysed. The strikers
allegedly indulge in objectionable activities. The exasperated Management hits back by ordering
 Disciplinary Proceedings 433

their discharge for reasons set out in several pages in the appropriate contemporaneous proceeding.
Misconduct after misconduct is flung on the workers to justify the drastic action. In all conscience
and common sense, the discharge is the punishment for the misconduct. The Management
minces no words. What is explicitly stated, is not a colourless farewell to make way for fresh
hands to work the factory until the strike is settled but a hard hitting order with grounds of guilt
and penalty of removal.
The inference is inevitable, however ingenious the contrary argument, that precisely because
the Management found the workmen refractory in their misconduct they were sacked. Maybe
the Management had no other way of working the factory but that did not change the character
of the action taken. Once we hold the discharge punitive the necessary consequence is that
enquiry before punishment was admittedly obligatory and confessedly not undertaken. The
orders were bad on this score alone.
Sri A.K. Sen urged that in a dismissal the employee is denied some of the retiral and other
benefits which he gets in a simple discharge, and here all the employees were offered their full
monetary benefits, so that it was wrong to classify the orders of discharge as punitive. Maybe, a
dismissed servant may well be disentitled to some, at least, of the financial benefits which his
counterpart who is simply discharged may draw. But that is not a conclusive test. Otherwise,
the master may ‘cashier’ his servant and camouflage it by offering full retiral benefits. Dismissal
is not discharge plus a price. The substance of the action is the litmus test. In the present case,
the penal core, ‘tied in tooth and claw’, shows up once we probe: and the non-committal frame
of the formal order is a disguise. For a poor workman loss of his job is a heavy penalty when
inflicted for alleged misconduct, for he is so hungry that, in Gandhiji’s expressive words, he sees
God Himself in a loaf of bread.
Before we leave this part of the case, a reference to some industrial law aspects and cases may
be apposite though a little repetitive. Standing orders certified for an industrial undertaking or
the Model Standing Orders framed under the Industrial Employment Standing Orders Act
provide for discharge simpliciter, a term understood in contradistinction to punitive discharge
or discharge by way of penalty. It is not unknown that an employer resorts to camouflage by
garbing or cloaking a punitive discharge in the innocuous words of discharge simpliciter. Courts
have to interpose in order to ascertain whether the discharge is one simpliciter or a punitive dis-
charge, and in doing so, the veil of language is lifted and the realities perceived. In the initial
stages the controversy raised was whether the court/tribunal had any jurisdiction to lift such a
veil. Probe and penetrate so as to reveal the reality, but this controversy has been set at rest by
the decision in Western India Automobile Association vs Industrial Tribunal, Bombay.35 The wide
scope of the jurisdiction of industrial tribunal/court in this behalf is now well established. If
standing orders or the terms of contract permit the employer to terminate the services of his
employee by discharge simpliciter without assigning reasons, it would be open to him to take
recourse to the said term or condition and terminate the services of his employee but when the
validity of such termination is challenged in industrial adjudication it would be competent to
the industrial tribunal to enquire whether the impugned discharge has been effected in the
bona fide exercise of the power conferred by the terms of employment. If the discharge has been
ordered by the employer in bona fide exercise of his power, then the industrial tribunal may not
interfere with it; but the words used in the order of discharge and the form which it may have
taken are not conclusive in the matter and the industrial tribunal would be entitled to go be-
hind the words and form and decide whether the discharge is a discharge simpliciter or not. If
it appears that the purported exercise of power to terminate the services of the employee was in
fact the result of the misconduct alleged against him, then the tribunal would be justified in
dealing with the dispute on the basis that, despite its appearance to the contrary, the order of
discharge is in effect an order of dismissal. In the exercise of this power, the court/tribunal
would be entitled to interfere with the order in question, (see Assam Oil Co. vs Its Workmen).36 In
the matter of an order of discharge of an employee as understood within the meaning of the
434 Social Justice and Labour Jurisprudence

Industrial Disputes Act the form of the order and the language in which it is couched are not
decisive. If the industrial court is satisfied that the order of discharge is punitive or that it
amounts to victimisation or unfair labour practice it is competent to the court/tribunal to set
aside the order in a proper case and direct reinstatement of the employee (see Tata Oil Mills Co.
Ltd. vs Workmen).37 The form used for terminating the service is not conclusive and the tribunal
has jurisdiction to enquire into the reasons which led to such termination. In the facts of the
case it was found that Standing Orders provided that an employee could ask for reasons for
discharge in the case of discharge simpliciter. Those reasons were given before the tribunal by
the appellant, viz., that the respondent’s services were terminated because he deliberately resorted
to go-slow and was negligent in the discharge of his duty. It was accordingly held that the
services of the employee were terminated for dereliction of duty and go-slow in his work which
clearly amounted to punishment for misconduct and, therefore, to pass an order under clause
17(a) of the Standing Orders permitting discharge simpliciter in such circumstances was clearly
a colourable exercise of power to terminate services of a workman under the provisions of the
Standing Orders. In these circumstances, the tribunal would be justified in going behind the
order and deciding for itself whether the termination of the respondent’s services could be sus-
tained (vide Management of Murugan Mills Ltd. vs Industrial Tribunal, Madras38). This view was
affirmed in Tata Engineering and Locomotive Co. Ltd. vs S.C. Prasad.39 After approving the ratio
in Murugan Mills40 case, this Court in L. Michael vs Johnson Pumps India Ltd.41 observed that
the manner of dressing up an order did not matter. The slightly different observation in Work-
men of Sudder Office Cinnamare vs Management,42 was explained by the Court and it was further
affirmed that since the decision of this Court in Chartered Bank vs Chartered Bank Employees’
Union,43 it has taken the consistent view that if the termination of service is a colourable exercise
of power vested in the management or is a result of victimisation or unfair labour practice, the
court/tribunal would have jurisdiction to intervene and set aside such termination. It was urged
that a different view was taken by this Court in Municipal Corporation of Greater Bombay vs
P. S. Malvenkar.44 The employee in that case was discharged from service by paying one month’s
wages in lieu of notice. This action was challenged by the employee before the Labour Court
and it was contended that it was a punitive discharge. The Corporation contended that under
Standing Order No. 26 the Corporation had the power to discharge but there was an obligation
to give reasons if so demanded by the employee. The Corporation had also the power to discharge
by way of punishment. The Court in this connection observed as under:

Now one thing must be borne in mind that these are two distinct and independent powers
and as far as possible neither should be construed so as to emasculate the other or to render it
ineffective. One is the power to punish an employee for misconduct while the other is the
power to terminate simpliciter the service of an employee without any other adverse conse-
quence. Now, proviso (i) to clause (1) of Standing Order 26 requires that the reason for ter-
mination of the employment should be given in writing to the employee when exercising the
power of termination of service of the employee under Standing Order 26. Therefore, when
the service of an employee is terminated simpliciter under Standing Order 26, the reason for
such termination has to be given to the employee and this provision has been made in the
Standing Order with a view to ensuring that the management does not act in an arbitrary
manner. The management is required to articulate the reason which operated on its mind in
terminating the service of the employee. But merely because the reason for terminating the
service of the employee is required to be given and the reason must obviously not be arbitrary,
capricious or irrelevant—it would not necessarily in every case make the order of termination
punitive in character so as to require compliance with the requirement of clause (2) of Standing
Order 21 read with Standing Order 23. Otherwise, the power of termination of service of an
employee under Standing Order 26 would be rendered meaningless and futile, for in no case
it would be possible to exercise it. Of course if misconduct of the employee constitutes the
 Disciplinary Proceedings 435

foundation for terminating his service, then even if the order of termination is purported to
be made under Standing Order 26, it may be liable to be regarded as punitive in character
attracting the procedure of clause (2) of Standing Order 21 read with Standing Order 23,
though even in such a case it may be argued that the management has not punished the em-
ployee but has merely terminated his service under Standing Order 26.

It does not purport to run counter to the established ratio that the form of the order is not
decisive and the Court can lift the veil. However, it may be noted that there was an alternative
contention before the Court that even if the order of discharge was considered punitive in char-
acter, the employer corporation had led evidence before the Labour Court to substantiate the
charge of misconduct and that finding was also affirmed.
We are satisfied that the Management, whatever its motives vis-à-vis keeping the stream of
production flowing, did remove from service, on punitive grounds, all the 853 workmen.
The law is trite that the Management may still ask for an opportunity to make out a case for
dismissal before the Tribunal. The refinements of industrial law in this branch need not detain
us because the arbitrator did investigate and hold that the workmen were guilty of misconduct
and the ‘sentence’ of dismissal was merited, even as the High Court did reappraise and reach, on
both counts, the reverse conclusion.
The more serious question is whether the arbitrator had the plenitude of power to re-examine
the punishment imposed by the Management, even if he disagreed with its severity. In this case
the arbitrator expressed himself as concurring with the punishment. But if he had disagreed,
as the High Court, in his place did, could be have interfered? Armed with the language of Sec-
tion 11A, which confers wide original power to the tribunal to re-fix the ‘sentence’, Sri Sen argued
that an arbitrator was uncovered by this new Section. So, even if he would, he would not. And,
in this case if he could, he would not. There the matter ended, was the argument. We disagree.
Even if he could, he would not, true; but that did not preclude the High Court from reviewing
the order in exercise of its extraordinary constitutional power. Moreover, Section 11A did clothe
the arbitrator with similar power as tribunals, despite the doubt created by the abstruse absence
of specific mention of ‘arbitrator’ in Section 11A. This position needs closer examination and
turns on interpretational limitations. At this stage, to facilitate the discussion, we may read the
provision:

Section 11A: Where an industrial dispute relating to the discharge or dismissal of a workman
has been referred to a Labour Court. Tribunal or National Tribunal for adjudication and, in
the course of the adjudication proceedings, the Labour Court, Tribunal or National Tribunal,
as the case may be, is satisfied that the order of discharge or dismissal was not justified, it
may, by its award, set aside the order of discharge or dismissal and direct reinstatement of the
workman on such terms and conditions, if any, as it thinks fit, or give such other relief to
the workman on such terms and conditions, if any, as it thinks fit, or give such other relief to
the workman, including the award of any lesser punishment in lieu of discharge or dismissal
as the circumstances of the case may require;
Provided that in any proceeding under this section the Labour Court, Tribunal or National
Tribunal as the case may be, shall rely on the materials on record and shall not take any fresh
evidence in relation to the matter.

Section 11A was introduced in purported implementation of the I.L.O. recommendation

which expressly referred, inter alia to arbitrators. The Statement of Objects and Reasons which
illumines the words of the legislative text when it is half-lit, even if it cannot directly supplement
the Section, does speak of the I.L.O. recommendations and, in terms of tribunals and arbitrators.
When it came to drafting Section 11A the word ‘arbitrator’ was missing. Was this of deliberate
legislative design to deprive arbitrators, who discharge identical functions as tribunals under the
436 Social Justice and Labour Jurisprudence

Industrial Disputes Act, of some vital powers which vested in their tribunal brethren? For what
mystic purpose could such distinction be? Functionally, tribunals and arbitrators belong to the
same brood. The entire scheme, from its I.L.O. genesis, through the Objects and Reasons, fit
in only with arbitrators being covered by Section 11A, unless Parliament cheated itself and the
nation by proclaiming a great purpose essential to industrial justice and, for no rhyme or reason
and wittingly or unwittingly, withdrawing one vital word. Every reason for clothing tribunals
with Section 11A powers applies a fortiori to arbitrators. Then why omit? Could it be synoptic
omission which did not affect the semantics because a tribunal, in its wider connotation, embraced
every adjudicatory organ including an arbitrator? An economy of words is a legislative risk be-
fore a judiciary accustomed to the Anglo-Saxon meticulousness in drafting. We may easily see
meaning by one construction. A ‘tribunal’ is merely a seat of justice or a judicial body with juris-
diction to render justice. If an arbitrator fulfils this functional role—and he does—how can he
be excluded from the scope of the expression? A caste distinction between courts, tribunals,
arbitrators and others, is functionally fallacious and, in our context, stems from confusion. The
Section makes only a hierarchical, not functional, difference by speaking of tribunals and national
tribunals. So we see no ground to truncate the natural meaning of ‘tribunal’ on the supposed
intent of Parliament to omit irrationally the category of adjudicatory organs known as arbitrators.
To cut down is to cripple and the art of interpretation makes whole, not mutilates, furthers the
expressed purpose, not hampers by narrow literality.
Section 2(r) defines Tribunal thus:

‘Tribunal’ means an Industrial Tribunal constituted under Section 7A and includes an

Industrial Tribunal constituted before the 10th day of March, 1957, under this Act;

Prima facie it is a different category from arbitrators but all statutory definitions are subject to
contextual changes. It is perfectly open to the court to give the natural meaning to a word de-
fined in the Act if the context in which it appears suggests a departure from the definition
because then there is something repugnant in the subject or context.
Then what is the natural meaning of the expression Tribunal”? A tribunal literally means a
seat of justice. Maybe, justice is dispensed by a quasi-judicial body, an arbitrator, a commission,
a court or other adjudicatory organ created by the State. All these are tribunals and naturally the
import of the word embraces an arbitration tribunal. Stroud’s Judicial Dictionary (Vol. 4, p. 3093)
speaks of ‘tribunal’ in this wider sense and quoted Fry, L.J. in Dawkins v. Rokeby,45 Affirmed,
(1875) 7 HL 744:

I accept that, with this qualification that I do not like the word ‘tribunal’. The word is am-
biguous, because it has not like ‘courts’ any ascertainable meaning in English law (Royal
Acquarium vs Parkinson, [1892] 1 QB 431, cited Court).

There is a reference to the Bishop’s Commission of enquiry as a judicial tribunal and, signifi-
cantly, specific mention has been made in these terms.

Disputes between employers and employees are referred to such tribunals as the Civil Service
Arbitration Tribunal, National Arbitration Tribunal and the Industrial Disputes Tribunal.
(Stroud’s Judicial Dictionary, p. 3094).

We have hardly any doubt that ‘tribunal’ simpliciter has a sweeping signification and does
not exclude ‘arbitrator’.
Here we come upon a fundamental dilemma of interpretative technology vis-à-vis the judicative
faculty. What are the limits of statutory construction? Does creativity in his jurisprudential area
permit travel into semantic engineering as substitute for verbalism? It is increasingly important
 Disciplinary Proceedings 437

for developing countries, where legislative transformation of the economic order is an urgent
item on the national agenda, to have the judiciary play a meaningful role in the constitutional
revolution without ferreting out flaws in the draftsman, once the object and effect are plain.
Judges may not be too ‘Anglophonic’ lest the system fail.
It is edifying to recall from Robert Stevens’ Law and Politics of the House of Lords as a judicial
body:

Moreover, Macmillan, who began to specialize in the increasingly frequent tax appeals, con-
tinued to develop this highly artificial approach. In Inland Revenue Commrs. vs Ayrshire Em-
ployers Mutual Insurance Association,46 when Parliament had clearly intended to make the
annual surpluses of mutual insurance companies subject to tax, Macmillan found a particularly
formalistic argument to show that this had not been the effect of Section 31 of the Finance
Act of 1933. He was then happily able to announce, ‘The Legislature has plainly missed
fire.’47 Of this decision Lord Diplock was later to say that ‘if, as in this case, the Courts can
identify the target of Parliamentary legislation their proper function is to see that it is hit; not
merely to record that it has been missed. Here is judicial legislation at its worst.’
Sir Kenneth Diplock—The Courts as Legislators, 10.

We would rather adopt Lord Diplock’s thought and have the court help hit the legislative tar-
get, within limits, than sigh relief that the legislative fire has missed the bull’s eye. Of course, the
social philosophy of the Constitution has, as ruled by this court in several cases, a role in inter-
pretative enlightenment and judicial value vision.
We may reinforce this liberal rule of statutory construction, being a matter of importance in
the daily work of the Court, by reference even to Roman Law from Justinian’s days down to the
American Supreme Court. ‘Not all special cases can be contained in the laws and resolutions of
the Senate’, said the Roman jurist Jullianus. ‘but where their meaning is manifest in some case,
the one who exercises jurisdiction must apply the provision analogously and in this way administer
justice.’48 Prof. Bodenheimer has explained that Civil Law does not regard words as the sole
basis of law but allows it to be modified by purpose. Celsus added the following admonition to
these general principles of interpretation: ‘The laws should be liberally interpreted, in order
that their intent be preserved’.49
‘Samuel Thorne has shown that, during certain periods of English medieval history, the pos-
ition of the Common Law towards the construction of statutes was similar to the general attitude
of the Roman and Civil Law. Statutes were frequently extended to situations not expressly covered
by them.’50
Plowden pointed out that ‘when the words of a statute enact one thing, they enact all other
things which are in the like degree.’51 Plowden demonstrated that a statutory remedy at that
time was deemed to be merely illustrative of other analogous cases that deserved to be governed
by the same principle.
‘Our law (like all others) consists of two parts, viz. of body and soul, the letter of the law is
the body of the law, and the sense and reason of the law is the soul of the law......And it often
happens that when you know the letter, you know not the sense, for sometimes the sense is
more confined and contracted than the letter, and sometimes it is more large and extensive.’52
Prof. Bodenheimer states that the American trend is towards a purpose-oriented rather than
a plain-meaning rule in its rigid orthodoxy. In United States vs American Trucking Association,53
the U.S. Supreme Court wrote:

When the plain meaning has led to absurd or futile results... this Court has looked beyond
the words to the purpose of the Act. Frequently, however, even when the plain meaning did
not produce absurd results but merely an unreasonable one ‘plainly at variance with the
438 Social Justice and Labour Jurisprudence

policy of the legislation as a whole’ this Court has followed that purpose rather than the literal
words. When aid to construction of the meaning of words, as used in the statute is available,
there can certainly be no ‘rule of law’ which forbids its use, however clear the words may be
on ‘superficial examination’.

In the present case, as the narration of the facts unfolded, the reference of the dispute was to
an arbitrator. He reinvestigated and reassessed the evidence bearing on the guilt of the discharged
workmen after giving an opportunity to both sides to adduce evidence thereon. Admittedly, he
had this power. But had he the follow-up power, if he held the men guilty of punitive misconduct,
to reweigh the quantum of punishment having regard to the degree of culpability? This juris-
diction he enjoys if Section 11A includes ‘arbitrators’. This, in turn, flows from our inference as
to whether the word ‘tribunal’ takes in an adjudicatory organ like the arbitrator. It is plain that
the expression ‘arbitrator’ is not expressly mentioned in Section 11A. Nevertheless, if the meaning
of the word tribunal’ is wider rather than narrower, it will embrace arbitrator as well. That is
how the dynamics of interpretation are, in one sense, decisive of the fate of the present appeal.
Competing interpretative angles have contended for judicial acceptance. English preferences
apart, Indian sociolegal conditions must decide the choice in each situation. Sometimes Judges
are prone to castigate creative interpretation in preference to petrified literality by stating that
Judges declare the law and cannot make law. The reply to this frozen faith is best borne out by
Lord Radcliffe’s blunt words:

There was never a more sterile controversy than that upon the question whether a judge
makes law. Of course he does. How can he help it?... Judicial law is always a reinterpretation
of principles in the light of new combinations of facts... ( J)udges do not reverse principles,
once well established, but they do modify them, extend them, restrict them and even deny
their application to the combination in hand.54

Lord Devlin in his “Samples of Lawmaking”, agreed that Judges are fashioners of law, if not
creators out of material supplied to them and went on to observe:

If the House of Lords did not treat itself as bound by its own decisions, it might do its own
lopping and pruning... and perhaps even a little grafting, instead of leaving all that to the
legislature. But it could not greatly alter the shape of the tree.55

Even so eminent a Judge as Lord Reid leaned to the view that the law should be developed
since it was not static and, in this limited sense, Judges are lawmakers although this view prevented
‘technical minded Judges (from pressing) precedents to their logical conclusions’.56 On the
whole, a just and humanist interpretative technique, meaning permitting, is the best. We do
not mean to conclude that Judges can take liberties with language ad libitum and it is wholesome
to be cautious as Lord Reid in Shaw vs D.P.P.,57 warned: ‘Where Parliament fears to tread it is
not for the courts to rush in’.
We are persuaded that there is much to learn from Lord Denning’s consistent refrain about
the inevitable creative element in the judicial process in the interpretative area. We permit
ourselves a quote from Lord Denning because Shri A.K. Sen did draw our attention to straighten-
ing the creases as permissible but not stitching the cloth, making a critical reference to the con-
troversial activism of which Lord Denning was a leading light:

The truth is that the law is uncertain. It does not cover all the situations that may arise.
Time and again practitioners and judges are faced with new situations where the decision
may go either way. No one can tell what the law is until the courts decide it. The Judges do
 Disciplinary Proceedings 439

everyday make law, though it is almost heresy to say so. If the truth is recognised then we may
hope to escape from the dead hand of the past and consciously mould new principles to meet
the needs of the present.

Mr Justice Mathew in Kesavananda Bharti’s58 case referred with approval—and so do we—to

the observations of Justice Holmes:59

I recognize without hesitation that judges do and must legislate, but they can do so only
interstitially; they are contined from molar to molecular motions.

Arthur Selwyn Miller writes; ‘Some have called it (the Supreme Court) the highest legislative
chamber in the nation. Although there is no question that the Court can and does make law,
and does so routinely....’60
Assuming the above approach to be too creatively novel for traditionalism, let us approach
the same problem from a conventional angle authenticated by case-law. The question of construc-
tion of Section 11A was argued at length, as to whether an omission of any reference to arbitrator
appointed under Section 10A in Section 11A would suggest that the arbitrator under Section
10A, notwithstanding the terms of reference, would not enjoy the power conferred on all con-
ceivable industrial adjudicators under Section 11A. It was said, after referring to the Objects and
Reasons in respect of the bill which was moved to enact Section 11A in the Industrial Disputes
Act, that while the I.L.O. had indicated that an arbitrator selected by the parties for adjudication
of industrial dispute must be invested with power by appropriate legislation as found in Section
11A, the Parliament, while enacting the section in its wisdom, did not include the arbitrator
even though other adjudicators of industrial disputes have been conferred such power and,
therefore, it is a case of casus omissus. Reliance was placed on Gladstone vs Bower,61 where the
question arose whether a reference to a tenancy from year to year in Section 2 (1) of the Agricultural
Holdings Act, 1948 would also cover a tenancy for 18 months which could be terminated at the
end of the first year. The submission was that even though no notice was necessary at common
law because the tenancy would automatically terminate at the expiry of the specified period of
tenancy, the tenancy took effect as tenancy from year to year by virtue of Section 2(1) of the Act
so that it continued until terminated by notice to quit and, therefore the landlord was not en-
titled to possession without notice. It was further contended that if a tenancy from year to year
was to get the protection of the Act it is inconceivable that tenancy for a longer duration would
not qualify for that protection. Court of Appeal negatived this contention holding that this is a
case simply of casus omissus and the Act is defective. The court further held that if it were ever
permissible for the Court to repair a defective Act of Parliament, the Court would be very glad
to do so in this case so far as the Court could. The Court will always allow the intention of a
statute to override the defects of wording but the Court’s ability to do so is limited by the rec-
ognised canons of interpretation. The Court may, for example, prefer an alternative construction
which is less well fitted to the words but better fitted to the intention of the Act. But here, for
the reasons given by the learned Judge, there is no alternative construction; it is simply a case of
something being overlooked. The Court cannot legislate for a casus omissus. To do so would be
to usurp the function of the legislature (see Magor & St. Mellons Rural District Council vs Newport
Corporation).62 Where the Statute’s meaning is clear and explicit, words cannot be interpolated.
Even where the meaning of the statute is clear and sensible, either with or without the omitted
word, interpolation is improper, since the primary source of the legislative intent is in the lan-
guage of the statute (see Crawford’s Construction of Statutes, 1940 Edn., p. 269 extracted in
S. Narayanaswami vs G. Panneerselvam, AIR 1972 SC 2284, para 20). Undoubtedly, the Court
cannot put into the Act words which are not expressed, and which cannot reasonably be implied
on any recognised principles of construction. That would be a work of legislation, not of construc-
tion, and outside the province of the Court (see Kamalaranjan vs Secy., of State).63 Similarly, where
440 Social Justice and Labour Jurisprudence

the words of the statute are clear it would not be open to the Court in order to obtain a desired
result either to omit or add to the words of the statute. This is not the function of the Court
charged with a duty of construction. This approach has, however, undergone a sea change as
expressed by Denning, L.J. in Seaford Court Estates Ltd. vs Asher,64 wherein he observed as
under:

When a defect appears a Judge cannot simply fold his hands and blame the draftsman. He
must set to work on the constructive task of finding the intention of Parliament... and then
he must supplement the written words so as to give ‘force and life’ to the intention of legis-
lature... A judge should ask himself the question how, if the makers of the Act had themselves
come across this ruck in the texture of it, they would have straightened it out? He must then
do as they would have done. A Judge must not alter the material of which the Act is woven,
but he can and should iron out the creases.

Approved in State of Bihar vs Dr Asis Kumar Mukherjee.65 The old order changeth, yielding
place to new.
This long excursion has become important because, once in a while, social legislation which
requires sharing of social philosophy between the Parliament and the Judiciary meets with its
Waterloo in the higher courts because the true role of interpretation shifts from Judge to Judge.
We are clearly of the view that statutory construction which fulfils the mandate of the statute
must find favour with the Judges, except where the words and the context rebel against such
flexibility. We would prefer to be liberal rather than lexical when reading the meaning of industrial
legislation which develops from day to day in the growing economy of India. The necessary
conclusion from this discussion is that the expression ‘tribunal’ includes, in the statutory setting,
an arbitrator also. Contemporaneous para-legislative material may legitimately be consulted
when a word of wider import and of marginal obscurity needs to be interpreted. So viewed, we
are not in a ‘sound-proof system’ and the I.L.O. recommendation accepted by India and the
Object and Reasons of the amending Act leave no doubt about the sense, policy and purpose.
Therefore Section 11A applies to the arbitrator in the present case and he has the power to
examine whether the punishment imposed in the instant case is excessive. So has the High
Court, if the Award suffers from a fundamental flaw.
A study of the lengthy award discloses no mention of Section 11A, and presumably, the au-
thority was unmindful of that provision while rendering the verdict. In a limited sense, even
prior to Section 11A, there was jurisdiction for a labour tribunal, including an arbitrator, to go
into the punitive aspect of the Management’s order. This Court has, in a catena of cases, held
that a mala fide punishment is bad in law and when the punishment is grotesquely condign or
perversely harsh or glaringly discriminatory, an easy inference of bad faith, unfair labour practice
or victimisation arises. The wider power to examine or prescribe the correct punishment belongs
to the tribunal/arbitrator even under Section 11 if no enquiry (or a defective enquiry which is
bad and, therefore, can be equated with a ‘no enquiry’ situation) has been held by the Manage-
ment. For, then, there is no extant order of guilt or punishment and the tribunal determines it
afresh. In such a virgin situation both culpability and quantification of punishment are within
the jurisdiction of the tribunal/arbitrator. The present is such a case.
Volleys of rulings from both sides were fired during arguments, the target being the limited
area of the tribunal’s power to overturn the quantum of punishment awarded by the Management.
We do not think it necessary to regurgitate all that has been said by this Court up to now, since
it is sufficient to bring out the correct law in the light of the leading citations. It is incontrovertible
that where, as here, no enquiry has been held by the Management, entire subject is at large and
both guilt and punishment, in equal measure, may be determined, without inhibition of juris-
diction, by the tribunal.
 Disciplinary Proceedings 441

Lastly, as rightly urged by counsel for the Sabha, an arbitrator has all the powers the terms of
reference, to which both sides are party, confer. Here, admittedly, the reference is very widely
worded and includes the nature of the punishment. The law and the facts do not call for further
elaboration and we hold that, in any view the arbitrator had the authority to investigate into the
propriety of the discharge and the veracity of the misconduct. Even if Section 11A is not applicable,
an Arbitrator under Section 10A is bound to act in the spirit of the legislation under which he
is to function. A commercial arbitrator who derives his jurisdiction from the terms of reference
will by necessary implication, be bound to decide according to law and, when one says ‘according
to law’, it only means existing law and the law laid down by the Supreme Court being the law
of the land, an Arbitrator under Section 10A will have to decide keeping in view the spirit of
Section 11A (see Union of India vs Bungo Steel Furniture Pvt. Ltd.).66 The jurisdictional hurdles
being thus cleared, we may handle the basic facts and the divergencies between the Arbitrator
and the High Court before moulding the final relief.
Prefatory to the discussion about the factum of misconduct and its sequel, we must remind
ourselves that the strike was illegal, having been launched when another industrial dispute was
pending adjudication. Section 23 (a) appears, at a verbal level, to convey such a meaning although
the ambit of sub-clause (a) may have to be investigated fully in some appropriate case in the
light of its scheme and rationale. It looks strange that the pendency of a reference on a tiny or
obscure industrial dispute—and they often pend too long—should block strikes on totally un-
connected yet substantial and righteous demands. The constitutional implications and practical
complications of such a veto of a valuable right to strike often leads not to industrial peace but
to seething unrest and lawless strikes. But in the present case, both before the arbitrator and
High Court, the parties have proceeded, on the agreed footing that the strike was illegal under
Section 23 (a). We do not reopen the issue at this late stage and assume the illegality of the strike.
The Fatal Flaw in the Award:
The Achilles heel of the arbitrator’s award is where he makes, as a substitute for specific and
individuated findings of guilt and appropriate penalty vis-a-vis each workman, a wholesale
survey of the march of events, from tension to breakdown, from fair settlement to illegal and
unjustified strike, from futility of negotiation to readiness for arbitration, from offer of full re-
employment to partial taking back on application by workmen in sack cloth and ashes, by picking
and choosing after a humble declaration that the strike has been formally buried, from episodes
of violence and paralysis of production to backstage manoeuvres to get the factory taken over as
a ‘sick mill’, and after a full glimpse of this scenario, holds that the Sabha was always in the
wrong, and inevitably, the Management was surely reasonable and, ergo, every employee must
individually bear the cross of misconduct and suffer dismissal for the sins of the Sabha leadership—
its secretary was not an employee of the mill—by some sub-conscious doctrine of guilt by asso-
ciation! Non Sequitur.
Each link in the chain of facts has been challenged by the respondents but let us assume them
to be true, to test the strength of the legal fibre of the verdict. (We may mention by way of aside,
that the Company seems to be a well managed one.)
The cardinal distinction in our punitive jurisprudence between a commission or 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 the disciplinary jurisdiction is that no worker shall be dismissed 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?
442 Social Justice and Labour Jurisprudence

What, at long last, is the answer to the only pertinent question in a disciplinary proceeding
viz. what is the specific misconduct against the particular workman who is to lose his job and
what is his punitive desert? Here you can’t generalise any more than a sessions judge can, by
holding a faction responsible for a massacre, sentence every denizen of that faction’s village to
death penalty. The legal error is fundamental, although lay instinct may not be outraged. What
did worker A do? Did he join the strike or remain at home for fear of vengeance against blacklegs
in a para-violent situation? Life and limb are dearer than loyalty, to the common run of men,
and discretion is the better part of valour. Surely, the Sabha complained of Management’s goondas
and the latter sought police aid against the unruly core of strikers. In between, the ordinary
rustic workmen might not have desired to be branded blacklegs or become martyrs and would
not have reported for work. If not being heroic in daring to break through the strike cordon—
illegal though the strike be—were misconduct, the conclusion would have been different. Not
reporting for work does not lead to an irrebuttable presumption of active participation in the
strike. More is needed to bring home the mens rea and that burden is on the prosecutor, to wit
the Management. Huddling together the eventful history of deteriorating industrial relations
and perverse leadership of the Sabha is no charge against a single worker whose job is at stake on
dismissal. What did he do? Even when lawyers did go on strike in the higher Courts or organize
a boycott, legally or illegally, even top law officers of the Central Govt. did not attend court,
argued Shri Tarkunde, and if they did not boycott but merely did not attend, could workers
beneath the bread line be made of sterner stuff. There is force in this pragmatic approach. The
strike being illegal is a non-issue at this level. The focus is on active participation. Mere absence,
without more, may not compel the conclusion of involvement.
Likewise, the further blot on the strike, of being unjustified, even if true, cuts no ice. Unjusti-
fied, let us assume; so what? The real question is, did the individual worker, who was to pay the
penalty, actively involve himself in this unjustified misadventure? Or did he merely remain a
quiescent non-worker during that explosive period? Even if he was a passive striker, that did not
visit him with the vice of activism in running an unjustified strike. In the absence of proof of being
militant participant the punishment may differ. To dismiss a worker, in an economy cursed by
massive unemployment, is a draconian measure as a last resort. Rulings of this Court have held
that the degree of culpability and the quantum of punishment turn on the level of participation
in the unjustified strike. Regrettably, no individualised enquiry has been made by the Arbitrator
into this significant component of delinquency. Did any dismissed worker instigate, sabotage
or indulge in vandalism or violence?
The Management’s necessity to move the mill into production for fear of being branded a
‘sick unit’ is understandable. Of course, collective strike is economic pressure by cessation of
work and not exchange of pleasantries. It means embarrassing business. Such a quandary cannot
alter the law. Here the legal confusion is obvious. No inquest into the Management’s recruitment
of fresh hands is being made at this stage. The inquiry is into the personal turpitudes of particular
workmen in propelling an illegal and unjustified strike and the proof of their separate part
therein meriting dismissal. The despair of the Management cannot, by specious transformation
of logic, be converted into the despair of each of the 853 workmen. Sympathies shall not push
one into fallacies.
We may now concretise this generalised criticism of the otherwise well-covered award. The
crowd of documents and carping attitudes must have added to the strain on the Arbitrator:

A voluminous record of documents and correspondence has been produced before me by

both sides. There have been allegations and counter allegations made by both sides not only
against each other but even against the Police, the Department of Labour and persons in
Authority. The history has been sought to be traced right from the inception of the Company
in 1966 or 1967, by the Company to show that their conduct has been always proper and
 Disciplinary Proceedings 443

above reproach and by Sabha to establish that not only the Gujarat Steel Tubes Ltd. were not
fair to the employees but that every action of theirs good or bad was ill-motivated, was
executed with some sinister ulterior motives.

The Award set out the history of the Company, its vicissitudes, the hills and valleys, the lights
and shadows, of industrial relations with mob fury and lock-outs and allied episodes often
ending in settlements and pious pledges. Then the Arbitrator stressed Clause 6 of the Agreement
of December, 1971 which bespoke a no-strike zone for five years. There was reference to the
Management’s promise to implement the Wage Board recommendations. The Arbitrator was
upset that despite Clause 6, a strike was launched but was not disturbed that despite the Wage
Board proposals, negotiations were being baulked and an interminable arbitral alternative was
being offered by the Management. He exclaimed:

If such a settlement arrived at was not respected and implemented the machinery provided
by Law would lose all meaning and so also the sanctity of the word of the Management or the
word of the union. It is, therefore, essential to ascertain who was responsible for the breach of
the agreement so solemnly entered into. Serious breach by management is alleged, and this is
given as a reason or is made as an excuse for getting rid of the obligations arising out of the
agreement which specifically could not be terminated for five years.

The narration continues and the following conclusion is reached:

It is thus very clear that the company had fully discharged its obligation under the allegation
made by the Sabha of the company having made a breach thereof is not correct.

We thus see that at this stage, the arbitrator has merely made a generalised approach as if
a commission of inquiry were going into the conduct of the Management and the Sabha to dis-
cover who was blameworthy in the imbroglio. The award then swiveled round to a study of the
case of the Sabha vis-à-vis the triple grievances, the Sabha had:

I shall first deal with the grievance regarding demands for implementation of the recommenda-
tions of the Wage Board.

The long and sterile correspondence was set out and the arbitrator arrived at the conclusion
that the insistence on reference to arbitration as against negotiation was justified on the part of
the Management:

I, therefore, have accepted the version of the Management and disbelieved the motivated
denial of the Sabha in this respect.

The culmination of the protracted discussion on the atmosphere and environment, rather
than on the actual charge against each worker, was recorded in the Award:

I have exhaustively, perhaps more exhaustively than even necessary, dealt with the allegations
made by the Sabha that the Management had committed breach of agreement by refusing to
accede to the demand of the Sabha for implementation of recommendations of the Wage
Board. There appears to be no doubt that the Management had agreed to implement the re-
commendation of the Wage Board: There is also not the least doubt the Management was
ready and willing to implement the recommendations of the Wage Board it was because it
was prevented by the Sabha from doing so.
444 Social Justice and Labour Jurisprudence

An analysis of the Management’s conduct in the matter of non-implementation of the Wage

Board recommendation was thereafter made by the Arbitrator and he wound up thus:

I am satisfied that the Company had not committed any breach of the settlement dated
4-8-1972 at least so far as implementation of the recommendations of the Wage Board is
concerned.

The question of bonus for the year 1971 was also considered and dismissed and the Sabha’s
case to that extent was negatived. Again, the plea for wages for the period of the lock-out was
also negatived with the observations:

I fail to see how the Sabha can allege breach of the agreement dated 4-8-1972 in view of the
clear unequivocal terms contained in Clause 4 of that Agreement.

In this strain the Award continued and the refrain was the same that the Sabha was in the
wrong. The Award even went to the exaggerated extent of morbidly holding that the workers
were wearing printed badges which, along with other circumstances, amounted to a breach of
the agreement!
The Award then moved on to the strike of 27 January 1973 because it led to the dismissal of
all the workmen. Until this stage, the arbitrator was merely painting the background and, at
any rate, did not engage himself in isolating or identifying any worker or any misconduct. He
merely denounced the Sabha, which is neither here nor there, in the matter of disciplinary pro-
ceedings against each individual workman. He missed the meat of the matter. The relevant por-
tion of the Award based on generalisation proved this error:

I am concerned herein with the question whether the discharge or dismissal of the 400
workmen was legal and proper or not and what relief to grant to them.
Approached from any point of view the action of the Company appears to me to be legal,
proper and justified and the demands on behalf of these workmen must be rejected.
A condemnation of the Sabha and an approval of the Management’s handling of the strike
are miles away from the issue on hand.

We observe here also an unfortunate failure to separate and scan the evidence with specific
reference to charges against individual workman. On the contrary, all that we find in the award
is an autopsy of the strike by the Sabha and a study of its allegedly perverse postures. A disciplinary
inquiry resulting in punishment of particular delinquents cannot but be illegal if the evidence is
of mass misconduct by unspecified strikers led by leaders who are perhaps not even workmen.
We are constrained to state that pointed consideration of facts which make any of the 400
workmen guilty, is a search in vain. The award being ex facie blank from this vital angle, the
verdict must prima facie rank as void since vicarious guilt must be brought home against the
actively participating members of a collectivity by positive testimony, not by hunch, suspicion
or occult intuition. The short position is this. Is there a punishment of any workman? If yes, has
it been preceded by an enquiry? If not, does the Management desire to prove the charge before
the tribunal? If yes, what is the evidence, against whom, of what misconduct? If individuated
proof be forthcoming and relates to an illegal strike, the further probe is this: was the strike un-
justified? If yes, was the accused worker an active participant therein? If yes, what role did he
play and of what acts was he author? Then alone the stage is set for a just punishment. These ex-
ercises, as an assembly-line process are fundamental. Generalisation of a violent strike of a
vicious Union leadership, of strikers fanatically or foolishly or out of fear, failing to report for
work, are good background material. Beyond that, these must be identified by a rational process,
the workmen, their individual delinquency and the sentence according to their sin. Sans that,
the dismissal is bad. Viewed from this perspective, the Award fails.
 Disciplinary Proceedings 445

The Arbitrator comes to grips with the core question of discharge simpliciter versus dismissal
as punishment but not with the identification of delinquents and delinquency. After referring
to Order 23 of the Model Standing Orders he goes on to state the law correctly by extracting
observations from the Assam Oil Company67 case.
Another vital facet of industrial law is that when no enquiry has been held by the Manage-
ment before imposing a punishment (or the enquiry held is defective and bad), the whole field
of delinquency and consequent penalty is at large for the tribunal. Several rulings support this
logic. We are constrained to hold that a certain observation made per incuriam by Mr Justice
Vaidyalingam, strongly relied on by Sri A. K. Sen, does not accurately represent the law, although
the learned Judge had earlier stated the law and case-law correctly, if we may say so with respect.
A selective study of the case-law is proper at this place. Before we do this, a few words on the
basis of the right to strike and progressive legal thinking led by constitutional guidelines is ne-
cessitous. The right to unionise, the right to strike as part of collective bargaining and, subject to
the legality and humanity of the situation, the right of the weaker group, viz., labour, to pressure
the stronger party, viz., capital, to negotiate and render justice, are processes recognised by in-
dustrial jurisprudence and supported by Social Justice. While society itself, in its basic needs of
existence, may not be held to ransom in the name of the right to bargain and strikers must obey
civilised norms in the battle and not be vulgar or violent hoodlums. Industry, represented by
intransigent Managements, may well be made to reel into reason by the strike weapon and can-
not then squeal or wail and complain of loss of profits or other ill-effects but must negotiate or
get a reference made. The broad basis is that workers are weaker although they are the producers
and their struggle to better their lot has the sanction of the rule of law. Unions and strikes are no
more conspiracies than professions and political parties are, and, being far weaker, need succour.
Part IV of the Constitution, read with Article 19, sows the seeds of this burgeoning jurisprudence.
The Gandhian quote at the beginning of this judgment sets the tone of economic equity in
Industry. Of course, adventurist, extremist, extraneously inspired and puerile strikes, absurdly
insane persistence and violent or scorched earth policies boomerang and are anathema for the
law. Within these parameters the right to strike is integral to collective bargaining.
Responsible trade unionism is an instrument of concerted action and the laissez faire law that
all strikes are ipso facto conspiracies is no longer current coin even in Adam Smith’s English
country. Lord Chorley, in Modern Law Review, Vol. 28, 1965, p. 451, is quoted as saying that
law must be altered as a consequence of Rookes vs Barnard,68 so as to remove the effects of deci-
sions of conspiracy and intimidation. He goes on to state that Allen vs Flood 69 and Quinn vs
Leathem70 taking the conspiratorial view must never be permitted to be quoted in courts. In
contrast, reference was made to Willis on Constitutional Law, pp. 878–79, wherein the Supreme
Court of America reflects the impact of capitalistic development and the economic views of
the judges and the fact that the judges are members of a social order and a social product and
the decisions are due more to the capitalistic system and the world of ideas in which the judges
live. Our Constitution is clear in its mandate, what with Article 39A superadded and we have to
act in tune with the values enshrined therein.
The benign attitude towards strike being what we have outlined, the further question arises
whether in the light of the accepted finding that the strike as such was illegal and, further, was
unjustified, all the strikers should face the penalty of dismissal or whether individual cases with
special reference to active participation in the strike, should be considered. A rapid but relevant
glance at the decided cases may yield dividends. In India General Navigation and Rly. Co. Ltd. vs
Their Workmen,71 this Court did observe that if a strike is illegal, it cannot be called ‘perfectly
justified’. But, between ‘perfectly justified’ and ‘unjustified’ the neighbourhood is distant. Mere
illegality of the strike does not per se spell unjustifiability. For in Crompton Greaves Ltd. vs Work-
men72 this Court held that even if a strike be illegal, it cannot be castigated as unjustified, unless
the reasons for it are entirely perverse or unreasonable—an aspect which has to be decided on
the facts and circumstances of each case. In that decision, this Court awarded wages during the
446 Social Justice and Labour Jurisprudence

strike period because the Management failed to prove that the workmen resorted to force and
violence. Even in India General Navigation and Rly. Co. Ltd.73 where the strike was illegal and
affected a public utility service, this Court observed that “the only question of practical importance
which may arise in the case of an illegal strike, would be the kind or quantum of punishment,
and that, of course, has to be modulated in accordance with the facts and circumstances of each
case.... There may be reasons for distinguishing the case of those who may have acted as mere
dumb-driven cattle from those who have taken an active part in fomenting the trouble and
instigating workmen to join such a strike, or have taken recourse to violence.”
The court after holding that the strike was illegal “and that it was not even justified” made a
pregnant observation:

To determine the question of punishment, a clear distinction has to be made between those
workmen who not only joined in such a strike, but also took part in obstructing the loyal
workmen from carrying on their work, or took part in violent demonstrations, or acted in
defiance of law and order, on the one hand, and those workmen who were more or less silent
participators in such a strike on the other hand. It is not in the interest of the industry that
there should be a wholesale dismissal of all the workmen who merely participated in such a
strike. It is certainly not in the interest of the workmen themselves. An Industrial Tribunal,
therefore, has to consider the question of punishment, keeping in view the overriding con-
sideration of the full and efficient working of the Industry as a whole. The punishment of
dismissal or termination of services, has, therefore, to be imposed on such workmen as had
not only participated in the illegal strike, but had fomented it, and had been guilty of violence
or doing acts detrimental to the maintenance of law and order in the locality where work had
to be carried on. After noticing the distinction between peaceful strikers and violent strikers,
Sinha, J., in that case, observed:
It must be clearly understood by those who take part in an illegal strike that thereby they
make themselves liable to be dealt with by their employers. There may be reasons for dis-
tinguishing the case of those who may have acted as mere dumb driven cattle from those who
have taken an active part in fomenting the trouble and instigating workmen to join such a
strike, or have taken recourse to violence. The same line of dichotomy is kept up:
Both the types of workmen may have been equally guilty of participation in the illegal strike,
but it is manifest that both are not liable to the same kind of punishment.

Significantly, the Court stressed the need for individual charge-sheet being delivered to individual
workmen so that the degree of misconduct of each and the punitive deserts of each may be sep-
arately considered. We may as well refer to a few more rulings since considerable argument was
expended on this point.
This Court in Burn & Co. Ltd. vs Their Workmen,74 clearly laid down that mere participation
in the strike would not justify the suspension or dismissal of workmen particularly where no
clear distinction can be made between those persons and the very large number of workmen
who had been taken back into service although they had participated in the strike. After referring
to the ratio in Burn & Co. Ltd.75 case, this Court in Bata Shoe Co. (P) Ltd. vs D.N. Ganguly,76
observed that there is no doubt that if an employer makes an unreasonable discrimination in
the matter of taking back employees there may in certain circumstances be reason for the industrial
tribunal to interfere; but the circumstances of each case have to be examined before the tribunal
can interfere with the order of the employer in a properly held managerial inquiry on the ground
of discrimination. The Court then proceeded to determine the facts placed before it. Sri Sen
specifically pointed out that in the Bata Shoe Co.’s77 case this Court distinguished the decision in
India General Navigation & Rly. Co. Ltd.78 and observed that the decision in that case was on the
 Disciplinary Proceedings 447

facts placed before the Court. In fact, Bata Shoe Co.’s79 case does not lay down any distinct pro-
position about the treatment to be meted out to participants in strike and actually it is a decision
on its own facts.
In the Swadeshi Industries Ltd vs Its Workmen,80 the Management, after holding that the strike
was illegal, terminated the services of 230 workmen without framing any charge-sheet or holding
any enquiry. It was contended that the strike was not legal. The Court observed that collective
bargaining for securing improvement on matters like basic pay, dearness allowance, bonus, pro-
vident fund and gratuity leave and holidays was the primary object of a trade union and when
demands like these were put forward and thereafter a strike was resorted to in an attempt to
induce the company to agree to the demands or at least to open negotiations the strike must
prima facie be considered justified. As the order of termination was found to be illegal it was
held that reinstatement with back wages must follow as a matter of course, not necessarily be-
cause new hands! had not been inducted.
In I.M.H. Press, Delhi vs Addl. Industrial Tribunal Delhi,81 this Court was called upon to
examine the ratio in Model Mills82 case, and India General Navigation & Rly. Co. Ltd.83 case and
this Court in terms affirmed the ratio in India General Navigation & Railway Co. Ltd,84 observing
that mere taking part in an illegal strike without anything further would not justify the dismissal
of all the workmen taking part in the strike.
In Indian Iron & Steel Co. Ltd. vs Their Workmen,85 this Court observed that the management
of a concern has power to direct its own internal administration and discipline but the power is
not unlimited and when a dispute arises, Industrial Tribunals have been given the power to see
whether the termination of service of a workman is justified and to give appropriate relief. It may
be noticed that the decision is prior to introduction of Section 11A. It would thus appear that
the important effect of omission to hold an enquiry was merely this that the tribunal would
have to consider not only whether there was a prima facie case but would decide for itself on the
evidence adduced whether the charges have been made out. A defective enquiry in this connection
stood on the same footing as no enquiry and in either case the tribunal would have jurisdiction
to go into the entire matter and the employer would have to satisfy the tribunal that on the facts
the order of dismissal or discharge was proper (see Workmen of Motipur Sugar Factory [Pvt.] Ltd.
vs Motipur Sugar Factory,86 and Provincial Transport Service vs State Industrial Court).87 Once,
therefore, it was held that the enquiry was not proper, it was irrelevant whether the workman
withdrew from the enquiry or participated in it, the decision had to be on appraisal of evidence,
and if it was found that the enquiry was not proper the whole case was open before the Labour
Court to decide for itself whether the charge of misconduct was proved and what punishment
should be awarded (see Imperial Tobacco Company of India Ltd. vs Its Workmen).88
As against the above propositions, Sri Sen relied upon the observations of this Court in
Oriental Textile Finishing Mills, Amritsar vs Labour Court, Jullundur.89 We fail to see how it runs
counter to the established principle. The Court, in fact, held that even where the strike is illegal,
before any action was taken with a view to punishing the strikers a domestic enquiry must be
held. Even though the Standing Orders prescribing enquiry before punishment did not provide
for any such enquiry the Court held that nonetheless a domestic enquiry should have been held
in order to entitle the management to dispense with the service of the workman on the ground
of misconduct, viz., participation in the illegal strike. After so saying, the Court agreed with the
view of the Court in India General Navigation & Rly. Co. Ltd. case90 and reaffirmed the principle
that mere taking part in an illegal strike without anything further would not necessarily justify
the dismissal of all the workers taking part in the strike and that if the employer, before dismissing
a workman, gave him sufficient opportunity of explaining his conduct and no question of mala
fides or victimisation arose, it was not for the tribunal in adjudicating the propriety of such dis-
missal to look into the sufficiency or otherwise of the evidence led before the enquiry officer or
insist on the same degree of proof as was required in a court of law, as if it were sitting in appeal
over the decision of the employer.
448 Social Justice and Labour Jurisprudence

Another aspect of this case emphasised that it could not be dogmatised as a matter of law that
an overt act such as intimidation or instigation of violence was necessary in order to justify
termination of service for participating in an illegal strike. On the facts of that case, even though
it was found that no domestic enquiry was held, reinstatement was refused on the ground that
misconduct was made out.
Sri Sen, of course, relied on this judgment to show that where a strike was resorted to and the
workers were called upon to join service within the stipulated time, on their failure it was open
to the company to employ new hands. This is reading more into the ruling than is warranted.
We cannot agree that mere failure to report for duty, when a strike is on, necessarily means
misconduct. Many a workman, as a matter of prudence, may not take the risk of facing the
militant workmen or the Management’s hirelings for fear, especially when there is evidence in
the case from the Sabha that the Management had hired goondas and from the Management
that the striking vanguard was violent. It is also possible, in the absence of evidence to the
contrary that several workmen might not be posted with the Management’s notice of recall or
the terms on which they were being recalled. In this view, we are not able to uphold the conclusion
of the arbitrator that the punishment of dismissal was appropriate for the entire mass of workmen
whose only guilt, as proved was nothing more than passive participation in the illegal and un-
justified strike by not reporting for duty. The verdict is inevitable that the discharge is wrongful.
The only comment we reluctantly make about the otherwise thorough award of the Arbitrator
is that omnibus rhetoric about the obnoxious behaviour of a class may not make-do for hard
proof of specific acts of particular persons where a punitive jurisdiction is exercised.
What, then, is the normal rule in the case of wrongful dismissal when the workmen claim re-
instatement with full back wages? The High Court has held the discharge wrongful and directed
restoration with an equitable amount of back wages. The following rulings of this Court, et al,
deal with this subject:
The recent case of Hindustan Tin Works vs Its Employees,91 sets out the rule on reinstatement
and back wages when the order of discharge is demolished:

It is no more open to debate that in the field of industrial jurisprudence a declaration can be
given that the termination of service is bad and the workman continues to be in service. The
spectre of common law doctrine that contract of personal service cannot be specifically enforced
or the doctrine of mitigation of damages does not haunt this branch of law. The relief of
reinstatement with continuity of service can be granted where termination of service is found
to be invalid. It would mean that the employer has taken away illegally the right to work of the
workman contrary to the relevant law or in breach of contract and simultaneously deprived
the workman of his earnings. If thus the employer is found to be in the wrong as a result of
which the workman is directed to be reinstated, the employer could not shirk his responsibility
of paying the wages which the workman has been deprived of by the illegal or invalid action of
the employer. Speaking realistically, where termination of service is questioned as invalid or
illegal and the workman has to go through the gamut of litigation, his capacity to sustain
himself throughout the protracted litigation is itself such an awesome factor that he may not
survive to see the day when law’s proverbial delay has become stupefying. If after such a pro-
tracted time and energy consuming litigation during which period the workman just sustains
himself, ultimately he is to be told that though he will be reinstated, he will be denied the
back wages which would be due to him, the workman would be subjected to a sort of penalty
for no fault of his and it is wholly undeserved. Ordinarily, therefore, a workman whose ser-
vice has been illegally terminated would be entitled to full back wages except to the extent he
was gainfully employed during the enforced idleness. That is the normal rule. Any other view
would be a premium on the unwarranted litigative activity of the employer. If the employer
terminates the service illegally and the termination is motivated as in this case, viz., to resist
the workman’s demand for revision of wages, the termination may well amount to unfair
 Disciplinary Proceedings 449

labour practice. In such circumstances reinstatement being the normal rule it should be fol-
lowed with full back wages. Articles 41 and 43 of the Constitution would assist us in reaching
a just conclusion in this respect.... In the very nature of things there cannot be a strait-jacket
formula for awarding relief of back wages. All relevant considerations will enter the verdict.
More or less, it would be a motion, addressed to the discretion of the Tribunal. Full back wages
would be the normal rule and the party objecting to it must establish the circumstances ne-
cesessitating departure. At that stage the Tribunal will exercise its discretion keeping in view
all the relevant circumstances.

Dealing with the complex of considerations bearing on payment of back wages the new per-
spective emerging from Article 43A cannot be missed, as explained in Hindustan Tin Works.92
Labour is no more a mere factor in production but a partner in Industry, conceptually speaking
and less than full back wages is a sacrifice by those who can best (least?) afford and cannot be
demanded by those, who least sacrifice their large ‘wages’ though can best afford, if financial
constraint is the ground urged by the latter (Management) as inability to pay full back pay to
the former. The morality of law and the constitutional mutation implied in Article 43A bring
about a new equation in industrial relations. Anyway, in the Hindustan Tin Works case, 75 per
cent of the past wages was directed to be paid. Travelling over the same ground by going through
every precedent is supererogatory and we hold the rule is simple that the discretion to deny re-
instatement or pare down the quantum of back wages is absent save for exceptional reasons.
It must be added however that particular circumstances of each case may induce the court to
modify the direction in regard to the quantum of back wages payable as happened in the India
General Navigation and Railway Co. Ltd. vs Their Workmen.93 We may, therefore, have to consider,
when finally moulding the relief, what, in this case, we should do regarding reinstatement and
back wages.
A Sum-up:
We may now crystallise our conclusions in the light of the long discussion. The basic assumption
we make is that the strike was not only illegal but also unjustified. On the latter part, a contrary
view cannot be ruled out in the circumstances present but we do not re-investigate the issue
since the High Court has proceeded on what both sides have taken for granted. The Management,
in our view, did punish its 853 workmen when it discharged them for reasons of misconduct set
out in separate but integrated proceedings, even though, with legal finesse, the formal order was
phrased in harmless verbalism. But fine words butter no parsnips, and law, in its intelligent
honesty, must be blunt and when it sees a spade, must call it a spade. The action taken under
the general law or the standing orders, was illegal in the absence of individualised charge-sheets,
proper hearing and personalised punishment, if found guilty. None of these steps having been
taken, the discharge orders were still-born. But the Management could, as in this case it did, of-
fer to make out the delinquency of the employees and the arbitrator had, in such cases, the full
jurisdiction to adjudge de novo both guilt and punishment. We hold that Section 11A does take
in an arbitrator too, and, in this case, the arbitral reference, apart from Section 11A, is plenary
in scope.
In the second chapter of our sum-up, the first thing we decide is that Article 226, however
restrictive in practice, is a power wide enough, in all conscience, to be a friend in need when the
summons comes in a crisis from a victim of injustice; and, more importantly, this extraordinary
reserve power is unsheathed to grant final relief without necessary recourse to a remand. What
the tribunal may, in its discretion, do, the High Court too, under Article 226, can, if facts com-
pel, do. Secondly, we hold that the Award suffers from a fundamental flaw that it equates an
illegal and unjustified strike with brazen misconduct by every workman without so much as
identification of the charge against each, the part of each, the punishment for each, after adverting
to the gravamen of his misconduct meriting dismissal. Passive participation in a strike which is
450 Social Justice and Labour Jurisprudence

both illegal and unjustified does not ipso facto invite dismissal or punitive discharge. There must
be active individual excess such as master-minding the unjustified aspects of the strike, e.g.,
violence, sabotage or other reprehensible role. Absent such gravamen in the accusation, the
extreme economic penalty of discharge is wrong. An indicator of the absence of such grievous
guilt is that the Management, after stating in strong terms all the sins of the workmen, took
back over 400 of them as they trickled back slowly and beyond the time set, with continuity of
service, suggestive of the dubiety of the inflated accusations and awareness of the minor role
of the mass of workmen in the lingering strike. Furthermore, even though all sanctions short of
punitive discharge may be employed by a Management, in our current conditions of massive
unemployment, low wages and high cost of living, dismissal of several hundreds, with disastrous
impact on numerous families, is of such sensitive social concern that, save in exceptional situations,
the law will inhibit such a lethal step for the peace of the Industry, the welfare of the workmen
and the broader justice that transcends transient disputes. The human dimensions have decisional
relevance. We hold the discharge orders, though approved by the Arbitrator, invalid.
The last part of our conclusions relates to the relief which must be fashioned with an eye on
mutual equities. We cannot ignore a few raw realities since law is not dogmatics but pragmatics,
without temporising on principle. The Management’s limitations in absorbing all the large
number of discharged employees all at once when, steel, the raw material, is scarce, is a problem.
Likewise, their inability to pay huge sums by way of back wages or otherwise, without crippling
the progress of the industry, cannot be overlooked but cannot be overplayed after Hindustan
Tin Works.94 Another factor which cannot be wished away is the presence of over a couple of
hundred workmen, with varying lengths of service, who may have to be sacked if the old workmen
are to be brought back. It is a problem of humanist justice. Lastly, the rugged fact of life must not
be missed that some of the workmen during the long years of desperate litigation, might have
sought jobs elsewhere and most of them perhaps have, for sheer survival, made at least a starving
wage during the prolonged idle interval. This factor too is a weak consideration, tested by the
reasoning in Hindustan Tin Works.95 Moreover, rationalisation of re-absorption of the removed
workmen requires attention to the classification of permanent workmen and their casual counter-
parts. Every proposal must be bottomed on the basic economic fact that the beneficiaries are
from the many below the destitution line. This Court has, in a very different context though
has drawn attention to the Gandhian guideline:

Whenever you are in doubt... apply the following test. Recall the face of the poorest and the
weakest man whom you may have seen, and ask yourself, if the step you contemplate is going
to be of any use to him.

It is apt here.

This perspective informs our decision. What did the High Court do regarding reinstatement
and should we modify and why? If the discharge is bad, reinstatement is the rule. In India Gen-
eral Navigation,96 Punjab National Bank,97 and Swadeshi Industries,98 et al, restoration, despite
large numbers, was directed. But most rules have exceptions wrought by the pressure of life and
Oriental was relied on to contend that reinstatement must be denied. There is force in the High
Court’s reasoning to distinguish Oriental, as we hinted earlier and we quote:

There were only 22 workmen involved in that case. The management had made genuine
and persistent efforts to persuade the concerned workmen to call off the strike and join work.
Those efforts were made at three different stages, namely, (1) immediately after the workers
went on the lightning strike and before charge-sheets were issued (2) after the charges were
dropped and individual notices were sent to the workmen asking them to resume work by
specified dates and (3) after the orders of termination were served and conciliation proceedings
 Disciplinary Proceedings 451

were commenced pursuant to the demand notice. But this is not all. Even the Labour Officer
and Labour Inspector had tried to persuade the concerned workmen to join duty before the
charge-sheets came to be issued. As against these repeated bona fide attempts on the part of
the management and an outside agency to persuade the erring workmen, they not only did
not resume work but also failed to acknowledge or send a reply to the individual notices
served upon them requesting them to resume work and they appear to have made it a condition
precedent to their joining duty that the suspended workmen should also be taken back. Even
under such circumstances, the management did not straightway terminate their services but
gave individual notices requiring the concerned workmen to show cause why their names
should not be struck off and asked them to submit their reply by a certain date. Even those
notices were not replied. It is only thereafter that the services of the concerned workmen
came to be terminated. It is against this background that the Supreme Court held that there
was ‘a persistent and obdurate refusal by the workmen to join duty’ notwithstanding the
fact that ‘the management has done everything possible to persuade them and give them
opportunities to come back to work’ and that they had without any sufficient cause refused
to do so which constituted ‘misconduct’ so as to ‘justify the termination of their services.’

.... If the workmen had been approached individually, not only those amongst them who were
unwilling to join strike but were prevented from joining work would have taken courage to
resume duty but even those amongst them who were undecided could also have been won over.
That apart, those notices, as their contents disclose, were hardly persuasive efforts. They were
a mixture of ultimatums, threats, complaints and indictment of the workmen and the Sabha.
Was it, therefore, a genuine effort on the part of a keenly desirous employer to offer an olive
branch? In Oriental, orders of termination were passed only after giving individual notices to
the concerned workmen to show cause why their names should not be struck off. Besides, those
notices were given after charges formally served upon each workman earlier were dropped and
persuasive efforts made in the meantime had failed. None of those steps was taken herein. All
that happened was that in one of the notices meant for mass consumption and circulation, such
intimation was given.
Even so, during the several years of the pendency of the dispute, surely some workmen would
have secured employment elsewhere as was conceded by counsel at a certain stage, and it is not
equitable to recall them merely to vindicate the law especially when new workmen already in
precarious service may have to be evicted to accommodate them. In the course of the debate at
the bar we gained the impression that somewhere around a hundred workmen are likely to be
alternatively employed. Hopefully, there is no hazard in this guess.
Another facet of the relief turns on the demand for full back wages. Certainly, the normal
rule, on reinstatement, is full back wages since the order of termination is non est. Lad’s99 case
and Panitole Tea Estate’s100 case. Even so, the industrial court may well slice off a part if the work-
men are not wholly blameless or the strike is illegal and unjustified. To what extent wages for the
long interregnum should be paid is, therefore, a variable dependant on a complex of circum-
stances (see for example, [1967] 15 Fac LR 395 paras 3 and 4) (SC).
We are mindful of the submission of Sri Tarkunde, urged in the connected appeal by the
Sabha, that where no enquiry has preceded a punitive discharge and the tribunal, for the first
time, upholds the punishment this Court has in D.C. Roy vs Presiding Officer, Madhya Pradesh
Industrial Court, Indore,101 taken the view that full wages must be paid until the date of the award.
There cannot be any relation back of the date of dismissal to when the Management passed the
void order.
Kalyani102 was cited to support the view of relation back of the Award to the date of the em-
ployer’s termination orders. We do not agree that the ratio of Kalyani103 corroborates the pro-
position propounded. Jurisprudentially, approval is not creative but confirmatory and therefore
452 Social Justice and Labour Jurisprudence

relates back. A void dismissal is just void and does not exist. If the Tribunal, for the first time,
passes an order recording a finding of misconduct and thus breathes life into the dead shell of
the Management’s order, pre-dating of the nativity does not arise. The reference to Sasa Musa104
in Kalyani105 enlightens this position. The latter case of D.C. Roy vs Presiding Officer, Madhya
Pradesh Industrial Court, Indore106 specifically refers to Kalyani’s107 case and Sasa Musa’s108 case
and holds that where the Management discharges a workman by an order which is void for
want of an enquiry or for blatant violation of rules of natural justice, the relation-back doctrine
cannot be invoked. The jurisprudential difference between a void order, which by a subsequent
judicial resuscitation comes into being de novo, and an order, which may suffer from some
defects but is not still-born or void and all that is needed in the law to make it good is a subse-
quent approval by a tribunal which is granted, cannot be obfuscated.
We agree that the law stated in D.C. Roy109 is correct but now that the termination orders are
being set aside, the problem does not present itself directly. Even the other alternative submission
of Sri Tarkunde that if the plea of the Management that the order is a discharge simpliciter were
to be accepted, the result is a retrenchment within the meaning of Section 2(oo) which, in this
case, is in violation of Section 25F and therefore bad, is not a point urged earlier. We are disposed
to stand by the view that discharge, even where it is not occasioned by a surplus of hands, will
be retrenchment, having regard to the breadth of the definition and its annotation in (1977)
1 SCR 586: (AIR 1977 SC 81). But the milieu in which the order was passed in February 1973
is not fully available, viewed from this new angle. So we decline to go into that contention.
Final Relief:
We are concerned with 400 workmen, some of whom have been claimed by death or other
irreversible causes—casualties of litigative longevity! 370 workmen are left behind, of whom
239 are admittedly permanent. We have already stated that 100, out of them, are probably fixed
up elsewhere. So, we exclude them and direct that the remaining 139 alone will be reinstated. A
list of the aforesaid 100 workmen will be furnished to the Management by the Sabha within
two weeks from today. That shall be accepted as correct and final.
While reinstatement is refused for these 100 workmen, when shall they be deemed to have
ceased to be in service for drawal of terminal benefits? Their discharge orders having been
quashed, they remain in service until today. We concluded the arguments on Aug. 3, 1979 and
on the eve of the closure of counsel’s submissions certain inconclusive settlement proposals were
discussed. We, therefore, consider 3 August 1979 as a pivotal point in the calendar with reference
to which the final relief may be moulded. We direct that the 100 workmen for whom rein-
statement is being refused will be treated as in service until 3 August 1979 on which date they
will be deemed to have been retrenched. We direct this step with a view to pragmatise the situ-
ation in working out the equities. These 100 will draw all terminal benefits plus 75 per cent of
the back wages. This scaling down of back pay is consistent with the assumption that somewhere
in the past they had secured alternative employment. The long years and the large sum payable
also persuade us to make this minor cut. Of course, in addition, they will be entitled to retrench-
ment benefits under Section 25F of the Act, and one month’s notice pay.
The remaining 139 will be awarded 50 per cent of the back wages since we are restoring
them. The High Court has adopted this measure and so we do not depart from it. The case of
the hundred stands on a slightly different footing, because some compensation in lieu of refusal
of reinstatement is due to them and that also has entered our reckoning while fixing 75 per cent
for them. The computation of the wages will be such as they would have drawn had they con-
tinued in service and on that the cut directed will be applied.
We have disposed of the case of the permanent workmen except to clarify that in their case
continuity of service will be maintained and accrual of benefits on that footing reckoned. The
next category relates to casual employees, 131 in number of whom 57 have less than nine months’
 Disciplinary Proceedings 453

service. The policy of the Act draws a distinction between those with service of 240 days and
more and others with less. The casuals with less than nine months service are 57 in number and
we do not think that this fugitive service should qualify for reinstatement especially when
we find a number of intermediate recruits, with longer though untenable service, have to be
baled out.
We decline reinstatement of these 57 hands. The other 74 must be reinstated although no-
tionally but wrongly they are shown as casual. In the ‘life’ sense, all mortals are casuals but in the
legal sense, those with a record of 240 days on the rolls, are a class who have rights under indus-
trial law. We direct the 74 long-term casuals aforesaid to be reinstated but not the 57 short-term
ones. To this extent, we vary the High Court’s order.
We adopt the directive of the High Court regarding the back wages to both categories of
casuals except that for the lesser class of 57 casuals, a flat sum of Rs 1,000 more will be paid as
a token compensation in lieu of reinstatement. The reinstated casuals (74 of them) will be put
back as casuals but will be confirmed within six months from the date of rejoining since it is
meaningless to keep them as casual labourers when they are, by sheer length of service, on the
regular rolls.
Two issues remain. When are the workmen to be retaken and what is to happen in the mean-
while? How is the amount payable by the Management to be discharged and on what terms?
Many years have flowed by, thanks to the long-drawn-out litigation. Further delay in putting
back the workers will be unfair. But the Management pleads that steel shortage cuts into the flesh
of the factory’s expansion, without which additional intake of workers is beyond their budget
unless considerable time for re-absorption were given. But the lot of the workmen is unspeakable
while the overall assets and outlook of the Company are commendable enough to bear an in-
creased wage bill. Dives cannot complain when Lazarus asks for more crumbs. Even if a slight
slant be made in favour of the Management, the direction to them to take back, in order of
seniority, the first 70 out of the 139 permanent workmen on or before 31 December 1979 and
the rest on or before 31 March 1980 is the least that is just. Until those dates the workmen will
be paid 2/3rd of their wages as now due. Of course, if any workman fails to report for work
within 15 days of service of written notice to him, with simultaneous copy to the Sabha, he will
not be eligible for any more reinstatement or wages.
The back wages run into a large sum but a good part has been paid under the stay order of
this Court. We make it clear that the payments made will be given credit and the balance if paid
as directed below and within the time specified will not carry interest. If default is made, the
sums in default will carry 10 per cent interest.
The figures of amounts due will be worked out by both sides and put into Court in 10 days
from now. Half the amount determined by the Court, after perusing both statements, will be
paid directly to the workmen or deposited with the Industrial Tribunal who will give notice and
make disbursements, on or before 31-3-1980 and the other half on or before 30-9-1980.
The conclusions may be capsulated for easier consumption:
1. Out of 370 workmen directed to be reinstated by the High Court, 239 are permanent. It is
assumed that 100 have found alternative employment and are not interested any more in
reinstatement and they are to be excluded from the direction of reinstatement. The Company
must, therefore, reinstate 139 permanent workmen and the list of 100 workmen who are
not to be reinstated would be supplied by the Sabha within two weeks from the date of this
judgment. The discharge order in respect of 100 workmen hereinbefore mentioned would
be set aside and they are deemed to be in service till 3 August 1979, when they will be re-
trenched and they will be paid retrenchment compensation as provided in Section 25F plus
one month’s pay in lieu of notice, the compensation to be worked out on the basis of the
454 Social Justice and Labour Jurisprudence

wages that will be admissible under the recommendations of the Engineering Wage Board as
applicable to the Company. This amount will be paid in lieu of reinstatement and they will
also be paid 75 per cent of the back wages.
2. The remaining 139 permanent employees would be paid 50 per cent of the back wages as
directed by the High Court.
3. 70 out of 139 permanent workmen directed to be reinstated should be provided actual em-
ployment on or before 31 December 1979, and the rest on or before 31 March 1980.
During this period and till the actual reinstatement each one of these 139 workmen should
be paid 2/3 of the monthly wages from 9 August 1979, when the hearing in this case con-
cluded. 50 per cent of the amount that becomes payable to each workman under the directions
hereinabove given will be paid on or before 31 March 1980, and the balance on or before
30 September 1980, and till then the amount will carry interest at the rate of 10 per cent.
4. In respect of casual workmen whose service was less than 9 months on the date of dismissal
it would not be proper to grant reinstatement. They are 57 in number. The remaining casual
workmen 74 in number shall be reinstated. In case of 57 casual workmen to whom reinstate-
ment is refused, the direction of the High Court is confirmed with the further addition that
each one will be paid Rs 1,000 over and above the amount payable under the direction of
the High Court and this would be in lieu of reinstatement. Casual workmen 74 in number
and having service of more than 9 months on the date of dismissal will be treated as confirmed
within six months of the date of their rejoining and they will be offered reinstatement by 31
March 1980, and the High Court’s direction for back wages in their respect is confirmed.
With these modifications, we dismiss both the appeals. The Management-appellant will pay
the costs of the Sabha-respondent, advocates fee being fixed at Rs 5,000.
An Afterword:
This litigation, involving many workmen living precariously on poor wages amidst agonising
inflation and a Management whose young budget, what with steel scarcity, may well be shaken
by the burden of arrears, points to the chronic pathology of our Justice System—the intractable
and escalating backlog in the Forensic Assembly Line that slowly spins Injustice out of Justice
and effectually wears down or keeps out the weaker sector of Indian life. This trauma is felt
more poignantly in Labour litigation and the legislature fails functionally if it dawdles to radicalise,
streamline and simplify the conflict resolution procedures so as to be credibly available to the
common people who make up the lower bracket of the nation. The stakes are large, the peril is
grave, the evils are worse than the prognostics of Prof. Laurence Tribe (of the Harvard Law School):

If court backlogs grow at their present rate, our children may not be able to bring a lawsuit
to a conclusion within their lifetime. Legal claims might then be willed on, generation to
generation, like hillbilly feuds; and the burdens of pressing them would be contracted like a
hereditary disease.

Law may be guilty of double injustice when it is too late and too costly for it holds out remedial
hopes which peter out into sour dupes and bleeds the anaemic litigant of his little cash only to
tantalise him into a system equal in form but unequal in fact. The price of this promise of un-
reality may be the search by the lowly for the reality of revolutionary alternatives. Compelled by
the crisis in the Justice System, we sound this sombre judicial note.
We direct payments and reinstatements as spelt out earlier, within the specificated time, and,
hopefully, leave the case with the thought that, given better rapport between the partners in
production, the galvanic Gujarat Steel Tubes Ltd., will forge ahead as a paradigm for the rest.
 Disciplinary Proceedings 455

NOTES

1. The schedule of the Act provides for the following matters to be considered in the standing orders of a
company under the Act:

i. Classification of workmen, e.g., whether permanent, temporary, apprentices, probationers, or badlies.

ii. Manner of intimating to workmen periods and hours of work, holidays, paydays and wage rates.
iii. Shift working.
iv. Attendance and late coming.
v. Conditions of, procedure in applying for, and the authority which may grant leave and holidays.
vi. Requirement to enter premises by certain gates, and liability to search.
vii. Closing and reopening of sections of the industrial establishment, and temporary stoppages of
work and the rights and liabilities of the employer and workmen arising therefrom.
viii. Termination of employment, and the notice thereof to be given by employer and workmen.
ix. Suspension or dismissal for misconduct, and acts or omissions which constitute misconduct.
x. Means of redress for workmen against unfair treatment or wrongful exactions by the employer or
his agents or servants.
xi. Any other matter which may be prescribed.

2. Rule 17(1) provides that: A workman may be suspended by the employer pending investigation or
departmental enquiry and shall be paid subsistence allowance in accordance with the provisions of Section
10A of the Act. The employer shall normally complete the enquiry within 10 days. The payment of sub-
sistence allowance shall be subject to the workman not taking any employment elsewhere during the
period of suspension.
3. Inserted by the Amendment Act of 1971. Even prior to this amendment, the higher courts in India have
accorded this power to the labour courts and the tribunals.
4. AIR 1976 SC 1821.
5. AIR 1978 SC 473.
6. AIR 1975 SC 661. This case was heard by V.R. Krishna Iyer, Alagiriswam and R.S. Sarkaria.
7. The Chartered Bank, Bombay vs The Chartered Bank Employees’ Union. (1960) II LLJ 222:AIR 1960 SC 919.
8. (1965) 2 SCR 148:AIR 1965 SC 1496.
9. (1972) LIC 1262:(1971) 2 LLJ 620.
10. (1972) 3 SCR 605:AIR 1972 SC 1343.
11. (1965) 2 SCR 148:AIR 1965 SC 1496.
12. 1952 LAC 490.
13. (1960) II LLJ 222:AIR 1960 SC 919:(1960) 3 SCR 441.
14. 1962 3 (SCR) 822:AIR 1963 SC 411.
15. (1970) 3 SCR 708.
16. (1972) LIC 1262:(1971) 2 LLJ 620.
17. (1960) II LLJ 222:AIR 1960 SC 919:(1960) 3 SCR 441.
18. (1972) 3 SCR 606:AIR 1972 SC 1343.
19. (1972) 3 SCR 606:AIR 1972 SC 1343.
20. (1970) 2 LLJ 20(1970) II LLJ 20.
21. (1970) 2 LLJ 20(1970) II LLJ 20.
22. (1965) 2 SCR 148:AIR 1965 SC 1496.
23. (1965) 2 SCR 148:AIR 1965 SC 1496.
24. AIR 1980 SC 1896.
25. 1958 SCR 828:AIR 1958 SC 36.
26. Samsher Singh vs State of Punjab. (1975) I SCR 814:AIR 1974 SC 2192.
27. (1965) 2 SCR 148:AIR 1965 SC 1496.
28. 1952 LAC 490.
29. (1960) 3 SCR 441:AIR 1960 SC 919.
30. 1962 Supp (2) SCR 822:AIR 1963 SC 411.
31. (1960) 3 SCR 441:AIR 1960 SC 919.
456 Social Justice and Labour Jurisprudence

32. Samsher Singh vs State of Punjab. (1975) I SCR 814:AIR 1974 SC 2192.
33. 1958 SCR 828:AIR 1958 SC 36.
34. Samsher Singh vs State of Punjab. (1975) I SCR 814:AIR 1974 SC 2192.
35. 1949 FCR 321:AIR 1949 FC 111.
36. (1960) 3 SCR 457 at p. 462:AIR 1960 SC 1264.
37. (1964) 2 SCR at 180.
38. (1965) 2 SCR 148 at p. 152:AIR 1965 SC 1496.
39. (1969) 8 SCR 372 at 378.
40. (1965) 2 SCR 148:AIR 1965 SC 1496.
41. (1975) 3 SCR 489:AIR 1975 SC 661.
42. 1972 LIC 1262 SC:(1971) 2 LLJ 620.
43. (1960) 3 SCR 441:AIR 1978 SC 919.
44. (1978) 3 SCR 1000:AIR 1978 SC 1380.
45. (1873) 8 QB 255.
46. (1946) 1 All ER 637.
47. (1946) 1 All ER at 641.
48. Jurisprudence—The Philosophy and Method of the Law by Edgar Bodenheimer at p. 474.
49. Id.
50. Jurisprudence—The Philosophy and Method of the Law by Edgar Bodenheimer at p. 414.
51. Id at 415.
52. Id at 115–116.
53. (1940) 310 US 534 at pp. 543–544.
54. Robert Stevens—Law and Politics, The House of Lords as a Judicial Body 1800–1976 p. 447.
55. Devlin—Samples of Law-making. p. 116.
56. Judge as Law Maker p. 28–470 (Stevens).
57. 1962 AC 220 at p. 275.
58. (1973) Supp SCR 1:AIR 1973 SC 1461.
59. Sources and Techniques of the Law ‘Jurisprudence’ by Edgar Bodenheimer.
60. Arthur Selwyn Miller: The Supreme Court, Myth and Reality, p. 133.
61. (1960) 3 All ER 353.
62. 1952 AC 189.
63. AIR 1938 PC 281 at p. 283.
64. (1949) 2 All ER 155 at p. 164.
65. (1975) 2 SCR 894 at p. 902:AIR 1975 SC 192.
66. (1967) I SCR 324:AIR 1967 SC 1032.
67. AIR 1960 SC 1264.
68. (1964) 1 All ER 367.
69. (1898 AC 1).
70. (1901 AC 495).
71. AIR 1960 SC 219.
72. AIR 1978 SC 1489.
73. AIR 1960 SC 219.
74. AIR 1959 SC 259.
75. AIR 1959 SC 259.
76. (1961) 3 SCR 308:AIR 1961 SC 1158.
77. (1961) 3 SCR 308:AIR 1961 SC 1158.
78. AIR 1960 SC 219.
79. (1961) 3 SCR 308:AIR 1961 SC 1158.
80. AIR 1960 SC 1258.
81. AIR 1961 SC 1168.
82. AIR 1958 SC 311.
83. AIR 1960 SC 219.
84. AIR 1960 SC 219.
85. 1958 SCR 667 at p. 685:AIR 1958 SC 130.
86. (1965) 3 SCR 588 at 597:AIR 1965 SC 1803.
87. (1968) 3 SCR 650:AIR 1963 SC 114.
 Disciplinary Proceedings 457

88. AIR 1962 SC 1348.

89. (1972) 1 SCR 490:AIR 1972 SC 277.
90. AIR 1960 SC 219.
91. 1978 LIC 1667:AIR 1979 SC 75 at pp. 77–78.
92. 1978 LIC 1667:AIR 1979 SC 75.
93. AIR 1960 SC 219.
94. AIR 1979 SC 75.
95. AIR 1979 SC 75.
96. AIR 1960 SC 219.
97. AIR 1960 SC 160.
98. AIR 1960 SC 1258.
99. (1979) 1 SCC 590:AIR 1979 SC 582.
100. (1971) 3 SCR 774:AIR 1971 SC 2171.
101. (1976) 3 SCR 801:AIR 1976 SC 1760.
102. (1963) I LLJ 679:AIR 1963 SC 1756.
103. (1963) I LLJ 679:AIR 1963 SC 1756.
104. AIR 1959 SC 923.
105. (1963) I LLJ 679:AIR 1963 SC 1756.
106. (1976) 3 SCR 801:AIR 1976 SC 1760.
107. (1963) I LLJ 679:AIR 1963 SC 1756.
108. AIR 1959 SC 923.
109. (1976) 3 SCR 801:AIR 1976 SC 1760.
 Chapter 12

Lay-off and Retrenchment

The provisions relating to lay-off and retrenchment were inserted into the Industrial
Disputes Act, 1947, by the Amendment Act of 1953. The provisions relating to closure of
an undertaking were similarly inserted into the legislation by the Amendment Act of 1956.
Later in 1982, these areas underwent several amendments pertaining to aspects relating
to the definitions clause, restrictions and amount of compensation. Perhaps India is unique
in the world in requiring the prior permission of the State in certain circumstances for
lay-off, retrenchment or closure by an employer. The underlying philosophy is that when
the State is providing every facility to an employer to start an industry, it is incumbent
upon the employer to be under the State’s control in respect of these eventualities. Also,
the law aims to provide some amount of social security to the workers, who may be
rendered jobless either temporarily or permanently, in order to preserve their purchasing
power.
The law relating to lay-off, retrenchment and closure has been subjected to judicial
scrutiny from time to time and has undergone various judicial interpretations. This area
has proved to be most controversial, because it interferes with the freedom of the employer
to dispose of his capital and labour as he wills.
Basically, the Industrial Disputes Act, 1947, deals with these areas under two chapters—
namely, Chapter VA and Chapter VB. The fundamental difference between these two
chapters is that in respect of the undertakings covered by Chapter VB, prior permission
from the State is a must in the event of lay-off,1 retrenchment or closure by the employer.

The Law Relating to Retrenchment

The term ‘lay-off ’2 has been defined in the Act as defining a circumstance where the em-
ployer shows his refusal or inability, for the reasons stated, to give employment to a
workman whose name is borne in the muster rolls of the industrial establishment. The
establishments covered both under Chapter VA and Chapter VB are required to provide
compensation in the manner provided in the Act to the laid-off workmen during the lay-
off period.3 The underlying implication in restricting the compensation to an amount
not equivalent to full wages under these two chapters is because of the number of persons
employed by the employer in these establishments. In case of establishments to which
these two chapters do not apply and in the absence of any agreement conferring any right
of lay-off, the situation in providing lay-off compensation differs.
 Lay-off and Retrenchment 459

Workmen of Firestone Tyre and Rubber Company of India vs

The Firestone Tyre and Rubber Company 4

THE FACTS OF THE CASE

In this case, the respondent company had its head office at Bombay. It manufactured tyres at its
Bombay factory and sold the tyres and other accessories in markets throughout the country.
The company also had a distribution office at Nicholson Road, Delhi. There was a strike in the
Bombay factory from 3 March 1967 to 16 May 1967, and again from 4 October 1967. As a
result of the strike, there was a short supply of tyres and other products to the distribution
office. In the Delhi office, there were 30 employees at the relevant time. Of these, 17 workmen
were laid off by the management as per a notice dated 3 February 1968, which was to the fol-
lowing effect:

Management is unable to give employment to the following workmen due to much reduced
production in the company’s factory resulting from strike in one of the factory departments.
These workmen are, therefore, laid off in accordance with law with effect from 5 Feb-
ruary 1968.

The lay-off of the 17 workmen whose names were mentioned in the notice was recalled by
the management on 22 April 1968. The workmen were not given their wages or compensation
for the period of lay-off.
An industrial dispute was raised and referred by the Delhi administration on 17 April 1968,
while the lay-off was in operation. The reference was in the following terms:

Whether the action of the management to ‘lay off ’ 17 workmen with effect from 5 February
1968 is illegal and/or unjustified, and if so, to what relief are these workmen entitled?

The presiding officer of the Additional Industrial Tribunal, Delhi, held that the work-
men were not entitled to any lay-off compensation. Hence this was an appeal to the
Supreme Court by their union.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE N.L. UNTWALIA

We were informed at the Bar that some of the workmen out of the batch of 17 have settled their
disputes with the management and their cases were not represented by the union in this appeal.
Hence this judgment will not affect the compromise or the settlement arrived at between the
management and some of the workmen.
The question which falls for our determination is whether the management had a right to
lay off their workmen and whether the workmen are entitled to claim wages or compensation.
The simple dictionary meaning according to the Concise Oxford Dictionary of the term
‘lay-off ’ is a ‘period during which a workman is temporarily discharged’. The term ‘lay-off ’ has
been well-known in the industrial arena. Disputes were often raised in relation to the ‘lay-off ’
of the workmen in various industries. Sometimes compensation was awarded for the period of
lay-off but many a time when the lay-off was found to be justified workmen were not found
entitled to any wages or compensation. In Gaya Cotton & Jute Mills Ltd. vs Gaya Cotton & Jute
Mills Labour Union5 the standing orders of the company provided that the company could
under certain circumstances:

Stop any machine or machines or department or departments, wholly or partially for any
period or periods without notice or without compensation in lieu of notice.
460 Social Justice and Labour Jurisprudence

In such a situation for the closure of the factory for a certain period, no claim for compensation
was allowed by the Labour Appellate Tribunal of India. We are aware of the distinction between
a lay-off and a closure. But just to point out the history of the law we have referred to this case.
Then came an amendment in the Industrial Disputes Act, 1947—hereinafter referred to as
the Act—by Act 43 of 1953. In Section 2, clause (kkk) was added to say:

‘Lay-off ’ (with its grammatical variations and cognate expressions) means the failure, refusal
or inability of an employer on account of shortage of coal, power or raw materials or the ac-
cumulation of stocks or the breakdown of machinery or for any other reason to give employ-
ment to a workman whose name is borne on the muster rolls of his industrial establishment
and who has not been retrenched.
Explanation: Every workman whose name is borne on the muster rolls of the industrial
establishment and who presents himself for work at the establishment at the time appointed
for the purpose during normal working hours on any day and is not given employment by
the employer within two hours of his so presenting himself shall be deemed to have been laid
off for that day within the meaning of this clause:
Provided that if the workman, instead of being given employment at the commencement of
any shift for any day is asked to present himself for the purpose during the second half of the
shift for the day and is given employment then, he shall be deemed to have been laid off only
for one-half of that day:
Provided further that if he is not given any such employment even after so presenting himself,
he shall not be deemed to have been laid off for the second half of the shift for the day and
shall be entitled to full basic wages and dearness allowance for that part of the day:

By the same Amending Act, Chapter VA was introduced in the Act to provide for lay-off and
retrenchment compensation. Section 25A excluded the industrial establishments in which less
than 50 workmen on an average per working day had been employed in the preceding calendar
month from the application of Section 25C to 25E. Section 25C provides for the right of laid-
off workmen for compensation and broadly speaking compensation allowable is 50 per cent of
the total of the basic wages and dearness allowance that would have been payable to the workman
had he not been laid off. It would be noticed that the sections dealing with the matters of lay-off
in Chapter VA are not applicable to certain types of industrial establishments. The respondent
is one such establishment because it employed only 30 workmen at its Delhi office at the relev-
ant time. In such a situation the question beset with difficulty of solution is whether the laid-off
workmen were entitled to any compensation, if so, what?
We shall now read Section 25J. It says:

(1) The provisions of this Chapter shall have effect notwithstanding anything inconsistent
therewith contained in any other law including standing orders made under the Industrial
Employment (Standing Orders) Act, 1946:
Provided that where under the provisions of any other Act or Rules, orders or noti-
fications issued there under or under any standing orders or under any award, contract
of service or otherwise, a workman is entitled to benefits in respect of any matter which
are more favourable to him than those to which he would be entitled under this Act, the
workman shall continue to be entitled to the more favourable benefits in respect of that
matter, notwithstanding that he receives benefits in respect of other matters under this
Act.
(2) For the removal of doubts, it is hereby declared that nothing contained in this Chapter
shall be deemed to affect the provisions of any other law for the time being in force in
any State in so far as that law provides for the settlement of industrial disputes, but the
rights and liabilities of employers and workmen in so for as they relate to lay-off and
retrenchment shall be determined in accordance with the provisions of this Chapter.
 Lay-off and Retrenchment 461

The effect of the provisions aforesaid is that for the period of lay-off in an industrial estab-
lishment to which the said provisions apply, compensation will have to be paid in accordance
with Section 25C. But if a workman is entitled to benefits which are more favourable to him
than those provided in the Act, he shall continue to be entitled to the more favourable benefits.
The rights and liabilities of employers and workmen in so far as it relate to lay-off and
retrenchment, except as provided in Section 25J, have got to be determined in accordance with
the provisions of Chapter VA.
The ticklish question which does not admit of an easy answer is as to the source of the power
of management to lay off a workman. The employer has a right to terminate the services of a
workman. Therefore, his power to retrench presents no difficulty as retrenchment means the
termination by the employer of the service of a workman for any reason whatsoever as mentioned
in clause (00) of Section 2 of the Act. But lay-off means the failure, refusal or inability of em-
ployer on account of contingencies mentioned in clause (kkk) to give employment to a workman
whose name is borne on the muster rolls of his industrial establishment. It has been called a
temporary discharge of the workman or a temporary suspension of his contract of service.
Strictly speaking, it is not so. It is merely a fact of temporary unemployment of the workman in
the work of the industrial establishment. Mr S.N. Andley submitted with reference to the ex-
planation and the provisos appended to clause (kkk) that the power to lay of a workman is
inherent in the definition. We do not find any words in the definition clause to indicate the
conferment of any power on the employer to lay off a workman. His failure or inability to give
employment by itself militates against the theory of conferment of power. The power to lay off
for the failure or inability to give employment has to be searched somewhere else. No section in
the Act confers this power.
There are two small matters which present some difficulty in the solution of the problem. In
clause (i) of the explanation appended to sub-section (2) of Section 25B the words used are, “he
has been laid off under an agreement or as permitted by standing orders made under the Industrial
Employment (Standing Orders) Act, 1946, or under this Act or under any other law applicable
to the industrial establishment”, indicating that a workman can be laid off under the Industrial
Disputes Act also. But it is strange to find that no section in Chapter VA in express language or
by necessary implication confers any power, even on the management of the industrial
establishment to which the relevant provisions are applicable, to lay off a workman, Clause (ii)
of Section 25E says:

No compensation shall be paid to a workman who has been laid-off—

If he does not present himself for work at the establishment at the appointed time during
normal working hours at least once a day.

This indicates that there is neither a temporary discharge of the workman nor a temporary
suspension of his contract of service. Under the general law of master and servant, an employer
may discharge an employee either temporarily or permanently but that cannot be without ad-
equate notice. Mere refusal or inability to give employment to the workman when he reports for
duty on one or more grounds mentioned in clause (kkk) of Section 2 is not a temporary discharge
of the workman. Such a power, therefore, must be found out from the terms of contract of
service or the standing orders governing the establishment. In the instant case the number of
workman being only 30, there were no standing orders certified under the Industrial Employment
(Standing Orders) Act, 1946. Nor was there any term of contract of service conferring any such
right of lay-off. In such a situation the conclusions seems to be inescapable that the workmen
were laid off without any authority of law or the power in the management under the contract
of service. In industrial establishments where there is a power in the management to lay off a
workman and to which the provisions of Chapter VA apply, the question of payment of compen-
sation will be governed and determined by the said provisions. Otherwise Chapter VA is not a
462 Social Justice and Labour Jurisprudence

complete Code as was argued on behalf of the respondent company in the matter of payment of
lay-off compensation. This case, therefore goes out of Chapter VA. Ordinarily and generally the
workmen would be entitled to their full wages but in a reference made under Section 10 (1) of
the Act, it is open to the tribunal or the court to award a lesser sum finding the justifiability of
the lay-off.
In Management of Hotel Imperial, New Delhi vs Hotel Workers’ Union6 in a case of suspension
of a workman it was said by Wanchoo, J. as he then was, delivering the judgment on behalf of
the Court at page 482:

Ordinarily, therefore, the absence of such power either as an express term in the contract or
in the rules framed under some statute would mean that the master would have no power to
suspend a workman and even if he does so in the sense that he forbids the employee to work,
he will have to pay wages during the so-called period of suspension. Where, however, there is
power to suspend either in the contract of employment or in the statute or the rules framed
thereunder, the suspension has the effect of temporarily suspending the relation of master
and servant with the consequence that the servant is not bound to render service and the
master is not bound to pay.

The same principle was reiterated in V.P. Gindroniya vs State of Madhya Pradesh7

We have referred to the suspension cases because in our opinion the principles governing the
case of lay-off are very akin to those applicable to a suspension case.
In Veiyra (M.A.) vs Fernandez (C.P.),8 a Bench of the Bombay High Court opined that under
the general law the employer was free to dispense with the services of a workman, but under the
Industrial Disputes Act he was under an obligation to lay him off; that being so, the action of
lay-off by the employer could not be questioned as being ultra vires. We do not think that the
view expressed by the Bombay High Court is correct.
There is an important decision of this Court in Workmen of Dewan Tea Estate vs Management9
on which reliance was placed heavily by Mr M.K. Ramamurthi appearing for the appellant and
also by Mr Andley for the respondent. One of the questions for consideration was whether
Section 25C of the Act recognises the common law right of the management to declare lay-off
for reasons other than those specified in the relevant clause of the standing order. While con-
sidering this question, Gajendragadkar, J. as he then was, said at page 554:

The question which we are concerned with at this stage is whether it can be said that Sec-
tion 25C recognises a common law right of the industrial employer to lay off his workmen.
This question must, in our opinion, be answered in the negative. When the laying off of the
workmen is referred to in Section 25C, it is the laying off as defined by Section 2(kkk) and
so, workmen who can claim the benefit of Section 25C must be workmen who are laid off
and laid off for reasons contemplated by Section 2(kkk); that is all that Section 25C means.

Then follows a sentence, which was pressed into service by the respondent. It says:

If any case is not covered by the standing orders, it will necessarily be governed by the pro-
visions of the Act, and lay-off would be permissible only where one or the other of the factors
mentioned by Section 2(kkk) is present, and for such lay-off compensation would
be awarded under Section 25C.

In our opinion, in the context, the sentence aforesaid means that if the power of lay-off is
there in the standing orders but the grounds of lay-off are not covered by them, rather, are
governed by the provisions of the Act, and then lay-off would be permissible only on one or the
other of the factors mentioned in clause (kkk). Subsequent discussions at pages 558 and 559
 Lay-off and Retrenchment 463

lend ample support to the appellant’s argument that there is no provision in the Act specifically
providing that an employer would be entitled to lay off his workmen for the reasons prescribed
by Section 2(kkk).
Mr Andley placed strong reliance upon the decision of this Court in Sanghi Jeevaraj Ghewar
Chand vs Secretary, Madras Chillies, Grain Kirana Merchants Workers’ Union.10 The statute under
consideration in this case was the Payment of Bonus Act, 1965 and it was held that the Act was
intended to be a comprehensive and exhaustive law dealing with the entire subject of bonus of
the persons to whom it should apply. The Bonus Act was not to apply to certain establishments.
Argument before the Court was that bonus was payable de hors the Act in such establishments
also. This argument was repelled and in that connection it was observed at page 381:

It will be noticed that though the Industrial Disputes Act confers substantive rights on
workmen with regard to lay-off, retrenchment compensation, etc., it does not create or confer
any such statutory right as to payment of bonus. Bonus was so far the creature of industrial
adjudication and was made payable by the employers under the machinery provided under
that Act and other corresponding Acts enacted for investigation and settlement of disputes
rose there under. There was, therefore, no question of Parliament having to delete or modify
item 5 in the Third Schedule to Industrial Disputes Act or any such provision in any corres-
ponding Act or its having to exclude any right to bonus there under by any categorical ex-
clusion in the present case.

And finally it was held at page 385:11

Considering the history of the legislation, the background and the circumstances in which
the Act was enacted, the object of the Act and its scheme, it is not possible to accept the
construction suggested on behalf of the respondents that the Act is not an exhaustive Act
dealing comprehensively with the subject-matter of bonus in all its aspects or that Parliament
still left it open to those to whom the Act does not apply by reason of its provisions either as
to exclusion or exemption to raise a dispute with regard to bonus through industrial adjudica-
tion under the Industrial Disputes Act or other corresponding law.

In a case of compensation for lay-off the position is quite distinct and different. If the term
of contract of service or the statutory terms engrafted in the standing orders do not give the
power of lay-off to the employer, the employer will be bound to pay compensation for the
period of lay-off which ordinarily and generally would be equal to the full wages of the concerned
workmen. If, however, the terms of employment confer a right of lay-off on the management,
then, in the case of an industrial establishment which is governed by Chapter VA, compensation
will be payable in accordance with the provisions contained therein. But compensation or no
compensation will be payable in the case of an industrial establishment to which the provisions
of Chapter VA do not apply, and it will be so as per the terms of the employment.
In Kanhaiya Lal Gupta vs Ajeet Kumar Dey12 a learned Single Judge of the Allahabad High
Court seems to have rightly held that in the absence of any term in the contract of service or in
the statute or in the statutory rules or standing orders an employer has no right to lay off a
workman without paying him wages. A learned Single Judge of the Punjab and Haryana High
Court took an identical view in the case of Steel and General Mills Co. Ltd. vs Additional District
Judge, Rohtak13 (Punjab and Haryana). The majority view of the Bombay High Court in K.T.
Rolling Mills Private Ltd. vs M.R. Meher14 that it is not open to the industrial tribunal under the
Act to award lay-off compensation to workmen employed in an ‘industrial establishment’ to
which Section 25-C does not apply, is not correct. The source of the power of the employer to
lay-off workmen does not seem to have been canvassed or discussed by the Bombay High Court
in the said judgment.
464 Social Justice and Labour Jurisprudence

In the case of the Delhi office of the respondent the tribunal has held that the lay-off was
justified. It was open to the tribunal to award a lesser amount of compensation than the full
wages. Instead of sending back the case to the tribunal, we direct that 75 per cent of the basic
wages and dearness allowance would be paid to the workmen concerned for the period of lay-
off. As we have said above this will not cover the case of those workmen who have settled or
compromised their disputes with the management.
Civil Appeal Nos. 1857–1859 (NL) of 1970
In these appeals the facts are identical to those in the other appeal. There were only 33 em-
ployees in the Madras office of the respondent company. Certain workmen were laid off for
identical reasons from 5 February 1968. The lay-off was lifted on 29 April 1968. The concerned
workmen filed petitions under Section 33C(2) of the Act for computation of their wages for
the period of lay-off. Holding that the lay-off was justified and valid the Presiding Officer of the
Additional Labour Court, Madras had dismissed their applications for salary and allowances for
the period of lay-off. Hence these appeals.
In a reference under Section 10(1) of the Act it is open to the tribunal or the court to award
compensation which may not be equal to the full amount of basic wages and dearness allowance.
But no such power exists in the Labour Court under Section 33C(2) of the Act. Only the
money due has got to be quantified. If the lay-off could be held to be in accordance with the
terms of the contract of service, no compensation at all could be allowed under Section 33C(2)
of the Act, while, in the reference some compensation could be allowed. Similarly on the view
expressed above that the respondent company had no power to lay off any workmen, there is no
escape from the position that the entire sum payable to the laid-off workmen except the workmen
who have settled or compromised, has got to be computed and quantified under Section 33C(2)
of the Act for the period of lay-off.
For the reasons stated above all the appeals are allowed in Civil Appeal Nos. 1857 to 1859 of
1970 the orders of the Labour Court are set aside and the cases of the appellants are remitted
back to that court for computation and quantification of the sums payable to the concerned
workmen for the period of lay-off. There will be no order as to costs in any of the appeals.

Closure and Retrenchment: The Distinction

The definition of ‘closure’ under Section 2(cc) and the definition of ‘industrial establish-
ment or undertaking’ under Section 2(ka) of the Act were inserted by the Amendment
Act of 1982. Prior to this amendment, the Supreme Court had occasion to distinguish
between ‘retrenchment’ and ‘closure’ in the case we shall now discuss, where the issue was
closure of a section of the establishment. Perhaps it was this decision of the apex Court
that led to an amendment to the Act subsequently. In order to avoid the repetition of the
case, only the relevant issues are dealt with here.

Avon Services Production Agencies vs the Industrial Tribunal 15

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE DESAI

Socio-economic justice, the corner-stone of industrial jurisprudence to be achieved by the process

of give and take, concessions and adjustments of conflicting claims would hardly advances if the
industrial dispute involved in this appeal by special leave brought by the appellant M/s. Avon
Services (Production Agencies) Pvt. Ltd. canvassing some technical legal nicety rendering the
 Lay-off and Retrenchment 465

two employees jobless for more than seven years is encouraged. A brief recital of few facts
touching upon the controversy would reveal the arena of dispute. The appellant is a private
Limited Company incorporated under the Companies Act, 1956, and is engaged in the business
of manufacturing Fire Fighters Foam Compound. It has set up two factories, one at Bombay
and other at Ballabhgarh. The industrial dispute which is the subject-matter of appeal relates to
Ballabhgarh factory. According to the appellant this factory, when commissioned in 1962, was
divided into two sections, now styled as two separate undertakings: (i) manufacturing section;
and (ii) packing material making section. The manufacturing section comprised two sub-sections,
viz., the chemical section, i.e. Foam Compound manufacturing section, and boiler section. The
packing material section was again composed of two sub-sections, one manufacturing containers,
and the other painting of the containers. Respondents 3 and 4 according to the appellant were
employed in the painting section. Around 1964 the appellant decided to buy containers from
the market and consequently closed down its packing material making section but continued
the painting sub-section. On 13 July 1971 the appellant purported to serve a notice on respon-
dents 3 and 4 and one Mr Ramni intimating them that the management has decided to close
the painting section effective from 13 July 1971 due to unavoidable circumstances and hence
the services of the three workmen would no longer be required and, therefore, they are retrenched.
Even though it is alleged that notice was served upon the three workmen, the Tribunal found
that the notice never reached respondents 3 and 4. By the notice the workmen concerned were
also informed that they should collect their dues under section 25FFF of the Industrial Disputes
Act, 1947, from the office of the Company. Since 13 July 1971 respondents 3 and 4 have been
denied employment by the appellant. A Trade Union of the employees of the appellant affiliated
to Bharatiya Mazdoor Sangh served a notice of demand, Annexure P-1 dated 16 July 1971
inter alia calling upon the appellant to reinstate respondents 3 and 4 and the third workman
and also to pay them full back wages. On 19 February 1972 as per Annexure P-2, the Secretary
to the Government of Haryana, Labour and Employment Department, intimated to the President
of the Union that from amongst the demands contained in Annexure P-1, Demands 2 to 9
have been referred to Industrial Tribunal for adjudication. In respect of demand 1 relating to
the reinstatement of the three workmen in the painting section, the reference was refused on
the ground that there was no work for painting in the factory where these two workmen were
working. This refusal to refer the demand concerning respondents 3 and 4 has been the subject-
matter of a very serious submission on behalf of the Company that the reference subsequently
made by the Government was invalid. To proceed further with the narrative, subsequently the
Government of Haryana by its Order dated 23 November 1972 referred the following dispute
to the Industrial Tribunal for adjudication:

Whether the retrenchment of Sarvashri Mohammed Yamin and Mohammad Yasin was
justified and in order? If not, to what relief they are entitled?

The Tribunal registered the reference at No. 81/72 and proceeded to adjudicate upon the
dispute. Three issues were raised before the tribunal and it is necessary to set down the three
issues here in order to point out that one of the contentions raised at the hearing of this appeal
was never put forth before the Tribunal. The issues framed by the Tribunal are:

1. Whether the retrenchment of Sarvashri Mohammed Yamin and Mohammad Yasin was
justified and in order? If not, to what relief they are entitled?

The contention is that the Tribunal was in error in holding that respondents 3 and 4 were
retrenched from service and, their case would be governed by Section 25F while in fact the
services of respondents 3 and 4 were terminated on account of closure of the painting undertaking
of the appellant-company and, therefore, the case would be governed by Section 25FFF and
466 Social Justice and Labour Jurisprudence

failure to pay compensation and notice charges simultaneously with termination of service
being not a pre-requisite, the termination would neither be illegal nor invalid.
Section 25F prescribes conditions precedent to retrenchment of workmen. The conditions
precedent are (a) giving of one month’s notice in writing to the workmen sought to be retrenched
indicating the reasons for retrenchment and the retrenchment can be brought about on the
expiry of the notice period or on payment of wages in lieu of such notice for the period of
notice; (b) payment of retrenchment compensation as per the formula prescribed therein. No
notice to the workman would be necessary if the retrenchment is under an agreement which
specifies a date for the termination of service. Section 25FFF prescribes liability of an employer
to pay compensation to workmen in case of closing down of undertaking. The relevant portion
of Section 25FFF reads as under:

25FFF. (1) 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, as if the workman had
been retrenched:

Provided that where the undertaking is closed down on account of unavoidable

circumstances beyond the control of the employer, the compensation to be paid to the
workman under clause (b) of Section 25F, shall not exceed his average pay for three months.

A comparison of the language employed in Section 25F and Section 25FFF(1) would bring
about in bold relief the difference between the phraseology employed by the Legislature and its
impact on the resultant rights of the workmen. Under Section 25F a workman employed in an
industrial undertaking cannot be retrenched by the employer until the payment is made as
provided in clauses (a) and (b). Section 25FFF(1) provides that the workman shall be entitled
to notice and compensation in accordance with the provisions of Section 25F if the undertaking
is closed for any reason, as if the workman has been retrenched. Taking note of this difference in
language, this Court in State of Bombay vs The Hospital Mazdoor Sabha16 held that the failure to
comply with the provision prescribing conditions precedent for valid retrenchment in Section
25F renders the order of retrenchment invalid and inoperative. Expounding this position, Con-
stitution Bench of this Court in Hatisingh Mfg. Co. Ltd. vs Union of India,17 held that the Legis-
lature has not sought to place closure of an undertaking on the same footing as retrenchment
under Section 25F. By Section 25F a prohibition against retrenchment until the conditions pre-
scribed by that section are fulfilled, is imposed; by Section 25FFF (1) termination of employment
on closure of the undertaking without payment of compensation and without either serving
notice or paying wages in lieu of notice is not prohibited. Payment of compensation and payment
of wages for the period of notice are not, therefore, conditions precedent to closure.
Is this then a case of retrenchment or closure? What constitutes retrenchment is no more
res integra. In State Bank of India vs N. Sundara Money,18 one of us, Krishna Iyer, J., examined the
definition of the expression ‘retrenchment’ under Section 2(oo) to ascertain the elements which
constitute retrenchment. It was observed as under:

A break-down of Section 2(oo) unmistakably expands the semantics of retrenchment.

‘Termination ... for any reason whatsoever’ are the key words. Whatever the reason, every ter-
mination spells retrenchment. So the sole question is—has the employee’s service been ter-
minated? Verbal apparel apart, the substance is decisive. A termination takes place where a
term expires either by the active step of the master or the running out of the stipulated term.
To protect the weak against the strong this policy of comprehensive definition has been ef-
fectuated. Termination embraces not merely the act of termination by the employer, but the
 Lay-off and Retrenchment 467

fact of termination howsoever produced. May be, the present may be a hard case, but we can
visualise abuses by employers, by suitable verbal devices, circumventing the armour of Section
25F and Section 2(oo). Without speculating on possibilities, we may agree that ‘retrenchment’
is no longer terra incognita but area covered by an expensive definition. It means ‘to end,
conclude, cease’.

As against this, reference was made to Management of Hindustan Steel Ltd. vs The Workmen,19
wherein the management contended that it is a case of closure and the workmen contended
that the termination was on account of retrenchment. The entire decision turns on the facts of the
case. Hindustan Steel Ltd. had set up what was described as Ranchi Housing Project and
this Project was completed in 1966. After completion of the residuary work, the services of
certain employees were terminated. This termination was questioned alleging that it was a case
of retrenchment and as the condition precedent was not complied with, the retrenchment was
invalid. The employer contended that it is a case of closure and payment of compensation was
not a condition precedent and did not invalidate the termination of service. This Court held
that the word ‘undertaking’ as used in Section 25FFF appears to have been used in its ordinary
sense connoting thereby any work, enterprise, project or business undertaking. It is not intended
to cover the entire industry or business of the employer. Even closure or stoppage of a part of
the business or activities of the employer would seem in law to be covered by this sub-section.
The question has to be decided on the facts of each case. Examining the facts of the case, this
Court came to the conclusion that it was a case of closure.
In the present case the appellant attempted to serve notice dated 13 July 1971 on respondents
3 and 4 and one Mr Ramni. In this notice it was stated that the management has decided to
close the painting section with effect from Tuesday, 13 July 1971 due to unavoidable circum-
stances and the services of the workmen mentioned in the notice would no longer be required
and hence they are retrenched. The workmen were informed that they should collect their dues
under Section 25FFF from the office of the Company.
The tenor of the notice clearly indicates that workmen were rendered surplus and they were
retrenched. It is thus on the admission of appellant a case of retrenchment.
It was, however, urged that notice refers to Section 25FFF and therefore employer intended
it to be a notice of termination of service consequent upon closure of painting undertaking.
Now, even if a closure of an undertaking as contemplated by Section 25FFF need not necessarily
comprehend a closure of the entire undertaking and a closure of a distinct and separate unit of
the undertaking would also be covered by Section 25FFF, the question is—whether painting
sub-section was itself an undertaking?
The expression ‘undertaking’ is not defined in the Act. It also finds its place in the definition of
the expression ‘industry’ in Section 2(j). While ascertaining the amplitude of the expression
‘undertaking’ in the definition of the expression ‘industry’, noscitur a sociis cannon of construction
was invoked and a restricted meaning was assigned to it in Bangalore Water Supply and Sewerage
Board vs A. Rajappa.20 While thus reading down the expression, in the context of Section 25FFF
it must mean a separate and distinct business or commercial or trading or industrial activity. It
cannot comprehend an infinitesimally small part of a manufacturing process.
The Tribunal found that the alleged retrenchment notice was not served upon the workmen
and that finding was not controverted by pointing out some evidence which may point to the
contrary. The notice expressly states that the workmen are retrenched though it simultaneously
states that the action is taken under Section 25FFF. But if the Company had a container making
section which was closed way back in 1964 and yet these three workmen who used to paint the
containers were retained, it cannot be said that painting section was a recognized sub-section
eligible for being styled as a part of the undertaking. If such mini-classification is permitted it
would enable the employer to flout Section 25F with impunity. These workmen appear not to
have been employed initially as painters. They were doing some other work from which they
468 Social Justice and Labour Jurisprudence

were brought to painting section. They could have as well been absorbed in some other work
which they were capable of doing as observed by the Tribunal. If painting was no more undertaken
as one of the separate jobs, the workmen would become surplus and they could be retrenched
after paying compensation as required by Section 25F. To style a job of a particular worker
doing a specific work in the process of manufacture as in itself an undertaking is to give meaning
to the expression ‘undertaking’ which it hardly connotes. An employer may stop a certain work
which was part of an undertaking but which could not be classified as an independent under-
taking, the stoppage of work in this context would not amount to closure of the undertaking.
The three workmen were doing work of painting the containers. No records were shown that
there was a separate establishment, that it was a separate sub-section or that it had some separate
supervisory arrangement. In fact, once the container-making section was closed down, the
three painters became part and parcel of the manufacturing process and if the painting work
was not available for them they could have been assigned some other work and even if they had
to be retrenched as surplus, the case would squarely fall in Section 25F and not be covered by
Section 25FFF, on a specious plea of closure of an undertaking. The Tribunal in our opinion
was right in holding that this was a case of retrenchment and as conditions precedent was not
complied with, the retrenchment was invalid and the relief of reinstatement with full back
wages was amply deserved.

The Definition of Retrenchment

under Section 2(oo)

The definition of the term ‘retrenchment’ was inserted into the Act by an amendment in
the year 1953. The erstwhile Section 2(oo) defines ‘retrenchment’ as:

... the termination by the employer of the service of a workman for any reason whatsoever otherwise
than as a punishment inflicted by way of disciplinary action, but does not include-

(a) voluntary retirement of the workman; or

(b) retirement of the workman on reaching the age of superannuation if the contract of
employment between the employer and the workman concerned contains a stipulation
in that behalf; or
(c) termination of the service of a workman on the ground of continued ill-health....

This new definition created flutters in the judiciary from the period after 1953. From
a plain reading of the definition, it is very clear that termination for any reason whatsoever
except under four circumstances stated in the section, is ipso facto ‘retrenchment’. The
intentions of Parliament were very clear in its providing such a comprehensive description
of the circumstances of ‘retrenchment’. What the law intends is very clear: that termination
for any reason whatsoever, whatever may be the verbal attachments to the letter of appoint-
ment or contract, if such termination does not fall under any of the four exempted cases,
certainly it is an act of ‘retrenchment’ by the employer.
Justice V.R. Krishna Iyer clearly emphasised this view of the legislature’s intention in
this case by clearly observing the prevailing ratio thereunder.
 Lay-off and Retrenchment 469

State Bank of India vs N. Sundara Money 21

THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

The appellant employer, undaunted by a double defeat at both tiers in the High Court, has
appealed against the adverse judgments, by certificate, on the only ground that there was no
retrenchment of the respondent-employee [within the meaning of Section 2 (oo) of the Industrial
Disputes Act, 1947 (Act XIV of 1947) (hereinafter called the Act)] and, consequently, the latter
was ineligible to the statutory compensation the non-payment of which, along with the
termination of service, nullified the termination itself. The end result was that the Division
Bench of the Court ruled that the respondent ‘was entitled to retrenchment compensation’,
which not having been paid, ‘the termination would be invalid’. The subtle legal issue, substantial
in its financial impact, is whether Section 25F read with Section 2(oo), vis-a-vis a short employment,
casts a lethal spell on the cessation of service for non-compliance with the condition precedent set
out in the provision.
The Certificate:
The certificate issued by the High Court under Article 133(1) is bad on its face, according to
Counsel for the respondent and the appeal consequently incompetent. We are inclined to agree
that the grant of a constitutional passport to the Supreme Court by the High Court is not a
matter of easy insouciance but anxious advertence to the dual vital requirements built into
Article 133(1) by specific amendment. Failure here stultifies the scheme of the article and floods
this Court with cases of lesser magnitude with illegitimate entry. A substantial question of law
of general importance is a sine qua non to certify fitness for hearing by the apex Court. Nay,
more; the question, however important and substantial, must be such pervasive import and
deep significance that in the High Court’s judgment it imperatively needs to be settled at the
national level by the highest bench. The crux of the matter has been correctly set out in a deci-
sion Union of India vs Hafiz Mohd.,22 said of the Delhi High Court in words which find our
approval:

A certificate can be granted only if the case involves a question of law

(i) which is not only substantial but is also of general importance; and
(ii) the said question, in our opinion, needs to be decided by the Supreme Court.

It has to be noted that all the above requirements should be satisfied before a certificate can
be granted. It means that it is not sufficient if the case involves a substantial question of law of
general importance but in addition to it the High Court should be of the opinion that such
question needs to be decided by the Supreme Court. Further, the word ‘needs’ suggests that
there has to be a necessity for a decision by the Supreme Court on the question, and such a
necessity can be said to exist when, for instance, two views are possible regarding the question
and High Court takes one of the said views. Such a necessity can also be said to exist when a
different view has been expressed by another High Court.
It is but fair to add an implied but important footnote that while exercising the wider power
under Article 136, this Court must have due regard to the constitutional limitations on Article
133(1) and owe allegiance to those restraints save in exceptional cases.
This view of the certificate would have put the lid on this appeal but on hearing Counsel we
feel that the omission of the High Court to assess the case explicitly from this angle does not
disable us from granting special leave, if applied for. So much so Counsels have proceeded to
argue on the merits, the penumbral area of industrial law covered by the subject-matter being
one which cannot be left in legal twilight.
470 Social Justice and Labour Jurisprudence

THE FACTS OF THE CASE

One of the two employees involved in these appeals has been reabsorbed in service and his
case is therefore of lesser import, but the other is still out in the cold and his legal fate falls for
examination in the matrix of facts which we proceed to state. This respondent was appointed
off and on, by the State Bank of India between 31 July 1973 (1972) and 29 August 1973. The
intermittent breaks notwithstanding, his total number of days of employment answered the
test of ‘deemed’ continuous service within Section 25B(2) and both sides accept that fact situation.
But the order of appointment, which bears in its bosom the ‘good bye’ to the employee after a
few days, calls for construction in the light of Section 2(oo) and Section 25F and we may as well
read it here:

(1) The appointment is purely a temporary one for a period of 9 days but may be terminated
earlier, without assigning any reason thereof at the bank’s discretion;
(2) The employment, unless terminated earlier, will automatically cease at the expiry of the
period, i.e., 18-11-1972.

This nine day’s employment, tacked on to what has gone before, has ripened to a continuous
service for a year on the antecedent arithmetic of 240 days of broken bits of service.
The skiagram of the employment order must now be studied to ascertain which of the rival
meanings Counsel have pressed deserves preference. Statutory construction, when courts con-
sider welfare legislation with an economic justice bias, cannot turn on cold print glorified as
grammatical construction but on teleological purpose and protective intendment. Here Sec-
tions 25F, 25B and 2(oo) have a workers’ mission and in input of Part IV of the Constitution
also underscores this benignant approach. While canons of traditional sanctity cannot wholly
govern, courts cannot go haywire in interpreting provisions, ignoring the text and context. With
this guideline before us, we seek to decode the implications of the order of appointment. But
before doing so, an analysis of the legal components of Section 25F will facilitate the diagnostic
task.
The leading case on this facet of law is The Hospital Mazdoor Sabha, State of Bombay vs
Hospital Mazdoor Sabha,23 [Justice] Gajendragadkar (as he then was) observed:

Section 25F(b) provides that no workman employed in any industry who has been in con-
tinuous service for not less than one year under an employer shall be retrenched by that
employer until he has been paid at the time of retrenchment compensation which shall be
equivalent to fifteen days’ average pay for every completed year of service or any part thereof
in excess of six months. Clauses (a) and (e) of the said section prescribe similar conditions but
we are not concerned with them. On a plain reading of Section 25F(b) it is clear that the re-
quirement prescribed by it is a condition precedent for the retrenchment of the workman.
The section provides that no workman shall be retrenched until the condition in question
has been satisfied. It is difficult to accede to the argument that when the section imposes in
mandatory terms a condition precedent, non-compliance with the said condition would not
render the impugned retrenchment invalid. . . failure to comply with the said provision
renders the impugned orders invalid and inoperative.

Without further ado, we reach the conclusion that if the workman swims into the harbour
of Section 25F, he cannot be retrenched without payment, at the time of retrenchment, compen-
sation computed as prescribed therein read with Section 25B(2). But, argues the appellant, all
these obligations flow only out of retrenchment, not termination outside that species of snapping
employment. What, then, is retrenchment? The key to this vexed question is to be found in
Section 2(oo) which reads thus:
 Lay-off and Retrenchment 471

2. (oo) ‘retrenchment’ means the termination by the employer of the service of a workman
for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary
action, but does not include—

(a) voluntary retirement of the workman; or

(b) retirement of the workman on reaching the age of superannuation if the contract of
employment between the employer and the workman concerned contains a stipulation
in that behalf; or
(c) termination of the service of a workman on the ground of continued ill-health;24

For any reason whatsoever-very wide and almost admitting of no exception. Still, the employer
urges that when the order of appointment carries an automatic cessation of service, the period
of employment works itself out by efflux of time, not by act of employer. Such cases are outside
the concept of ‘retrenchment’ and cannot entail the burden-some condition of Section 25F. Of
course, that a ‘nine-days’ employment, hedged in with an express condition of temporariness
and automatic cessation, may look like being in a different street (if we may use a colloquialism)
from telling a man off by retrenching him. To retrench is to cut down. You cannot retrench
without trenching or cutting. But dictionaries are not dictators of statutory construction where
the benignant mood of a law and, more emphatically, the definition clause furnish a different
denotation. Section 2(oo) is the master of the situation and the Court cannot truncate its
amplitude.
A breakdown of Section 2(oo) unmistakably expands the semantics of retrenchment. ‘Termin-
ation. . . for any reason whatsoever’ are the key words. Whatever the reason, every termination
spells retrenchment. So the sole question is, has the employee’s service been terminated? Verbal
apparel apart, the substance is decisive. A termination takes place where a term expires either by
the active step of the master or the running out of the stipulated term. To protect the weak
against the strong this policy of comprehensive definition has been effectuated. Termination
embraces not merely the act of termination by the employer, but the fact of termination howsoever
produced. Maybe, the present may be a hard case, but we can visualise abuses by employers, by
suitable verbal devices, circumventing the armour of Section 25F and Section 2(oo). Without
speculating on possibilities, we may agree that ‘retrenchment’ is no longer terra incognita but
area covered by an expansive definition. It means ‘to end, conclude, cease’. In the present case
the employment ceased, concluded, ended on the expiration of nine days—automatically maybe,
but cessation all the same. That to write into the order of appointment the date of termin-
ation confers no moksha from Section 25F(b) is inferable from the proviso to Section 25F(1)
(Section 25F[a]?). True, the section speaks of retrenchment by the employer and it is urged
that some act of volition by the employer to bring about the termination is essential to attract
Section 25F and automatic extinguishment of service by effluxion of time cannot be sufficient.
An English case R. vs Secretary of State 25 was relied on, where Lord Denning, M. R. observed:

I think that the word ‘terminate’ or ‘termination’ is by itself ambiguous. It can refer to either
of two things - either to termination by notice or to termination by effluxion of time. It is
often used in that dual sense in landlord and tenant and in master and servant cases. But
there are several indications in this paragraph to show that it refers here only to termination
by notice.

Buckley, L.J. concurred and said:

In my judgment the words are not capable of bearing that meaning. As Counsel for the
Secretary of State has pointed out, the verb ‘terminate’ can be used either transitively or in-
transitively. A contract may be said to terminate when it comes to an end by effluxion of
time, or it may be said to be terminated when it is determined at notice or otherwise by some
472 Social Justice and Labour Jurisprudence

act of one of the parties. Here in my judgment the word ‘terminated’ is used in this passage
in para 190 in the transitive sense, and it postulates some act by somebody which is to bring
the appointment to an end, and is not applicable to a case in which the appointment comes
to an end merely by effluxion of time.

Words of multiple import have to be winnowed judicially to suit the social philosophy of the
statute. So screened, we hold that the transitive and intransitive senses are covered in the current
context. Moreover, an employer terminates employment not merely by passing an order as the
service runs. He can do so by writing a composite order, one giving employment and the other
ending or limiting it. A separate, subsequent determination is not the sole magnetic pull of the
provision. A pre-emptive provision to terminate is struck by the same vice as the post-appointment
termination. Dexterity of diction cannot defeat the articulated conscience of the provision.
What follows? Had the State Bank known the law and acted on it, half-a-month’s pay would
have concluded the story. But that did not happen. And now, some years have passed and the
bank has to pay for no service rendered. Even so, hard cases cannot make bad law. Reinstatement
is the necessary relief that follows. At what point? In the particular facts and circumstances of
this case, the respondent shall be put back where he left off, but his new salary will be what he
would draw were he to be appointed in the same post today de novo. As for benefits, it any,
flowing from service he will be ranked below all permanent employees in that cadre and will be
deemed to be a temporary hand upto now. He will not be allowed to claim any advantages in
the matter of seniority or other priority inter se among temporary employees on the ground
that his retrenchment is being declared invalid by this Court. Not that we are laying down any
general proposition of law, but make this direction in the special circumstances of the case. As
for the respondent’s emoluments, he will have to pursue other remedies, if any.
We substantially dismiss the appeal (C.A. No. 934 of 1975) subject to the slight modification
made above. There was some intervening suggestion for settlement of the dispute but it fell
through. We are persuaded to make the observation based on that circumstance that social jus-
tice has two sides, occasionally, one party or the other makes myopic mistakes resulting in further
litigation.
Subject to the above observations, the appeal is dismissed. The parties will bear their costs
throughout, although, in cases like this, where the law is not free from obscurity and needs this
Court’s pronouncement and one of the affected parties is weak, being a worker, the costs must
come out of public funds as suggested in Trustees of Port of Bombay vs Premier Automobiles Ltd.26
The State, we hope, will constitute a suitors’ fund which will take care of hardships and public
interest in the area of necessary litigation.
In C.A. No. 933 of 1975 the respondent has been re-employed by the appellant although in
his case also we declare, for reasons already given and subject to the same norms till his absorption
that the retrenchment is invalid. The costs, in this appeal, will be borne by each of the parties.
Cases of this type are not new before the apex Court. But this was a celebrity due to the
reason of number of days the Respondent has put up.

The Definition of Retrenchment under the

Payment of Gratuity Act, 1972: Interpretation

State of Punjab vs Labour Court, Jullundur, and Others 27

In this case, the Supreme Court had to consider the scope of the definition of ‘retirement’
for the purposes of gratuity payable to the terminated workmen who, after having availed
retrenchment compensation under the Industrial Disputes Act, 1947, subsequently claimed
 Lay-off and Retrenchment 473

gratuity from the employer. In spite of the fact that the award of the Labour Court had
been upheld by the High Court, the apex Court reversed the order by interpretating aptly
the spirit of the provisions of the Payment of Gratuity Act, 1972, as far as the forum for
redressal of claims under the Act is concerned.

In this appeal by special leave, the state of Punjab appealed against the judgement and order of
the High Court of Punjab and Haryana refusing to quash an order under Section 33-C(2) of
the Industrial Disputes Act, 1947, for payment of gratuity to the respondents under the Payment
of Gratuity Act, 1972.

THE FACTS OF THE CASE

The Hydel Department of the Government of Punjab had undertaken a project described as
the ‘Hydel Upper Bari Doab Construction Project’. Respondents 2 to 8 were employed as
work-charged employees. On completion of the work assigned to them, they were retrenched
and retrenchment compensation was paid to them. The respondent employees claimed that
they were also entitled to gratuity, bonus and certain other allowances and benefits. The gratuity
was claimed under the Payment of Gratuity Act, 1972. The claim being disputed, the respondents
applied under Section 33-C(2) of the Industrial Disputes Act, 1947, to the Labour Court,
Jullundur. The Labour Court passed an order dated 30 April 1975 saying that the respondents
were entitled to the gratuity claimed by them but not to bonus or other allowances and benefits.
A writ petition filed by the appellant was dismissed in limine by the High Court of Punjab and
Haryana.
In this appeal, the learned Additional Solicitor-General contends on behalf of the appellant
that the Payment of Gratuity Act, 1972 cannot be invoked by the respondents because the Pro-
ject does not fall within the scope of Section 1(3) of that Act. Section 1(3) provides that the Act
will apply to:

(a) every factory, mine, oilfield, plantation, port and railway company;
(b) every shop or establishment within the meaning of any law for the time being in force in
relation to shops and establishments in a State, in which ten or more persons are employed,
or were employed, on any day of the preceding twelve months;
(c) such other establishments or class of establishments, in which ten or more employees
are employed, or were employed, on any day of the preceding twelve months, as the
Central Government may, by notification, specify in this behalf.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE R.S. PATHAK

According to the parties, it is clause (b) alone which needs to be considered for deciding whether
the Act applies to the Project. The Labour Court has held that the Project is an establishment
within the meaning of the Payment of Wages Act, Section 2(ii)(g) of which defines an ‘industrial
establishment’ to mean any ‘establishment in which any work relating to the construction, de-
velopment or maintenance of buildings, roads, bridges or canals, 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’. It is urged for the
appellant that the Payment of Wages Act is not an enactment contemplated by Section 1(3)(b),
of the Payment of Gratuity Act. The Payment of Wages Act, it is pointed out, is a Central en-
actment and Section 1(3)(b), it is said, refers to a law enacted by the State legislature. We are
unable to accept the contention. Section 1(3)(b) speaks of ‘any law for the time being in force in
relation to shops and establishments in a State’. There can be no dispute that the Payment of
Wages Act is in force in the State of Punjab. Then, it is submitted, the Payment of Wages Act is
not a law in relation to ‘shops and establishments’. As to that, the Payment of Wages Act is a
474 Social Justice and Labour Jurisprudence

statute which, while it may not relate to shops, relates to a class of establishments, that is to say,
industrial establishments. But, it is contended, the law referred to under Section 1(3)(b) must
be a law which relates to both shops and establishments such as the Punjab Shops and Commercial
Establishments Act, 1958. It is difficult to accept that contention because there is no warrant
for so limiting the meaning of the expression ‘law’ in Section 1(3)(b). The expression is compre-
hensive in its scope, and can mean a law in relation to shops as well as separately, a law in rela-
tion to establishments, or a law in relation to shops and commercial establishments and a law in
relation to non-commercial establishments. Had Section 1(3)(b) intended to refer to a single
enactment, surely the appellant would have been able to point to such a statute, that is to say, a
statute relating to shops and establishments, both commercial and non-commercial. The Punjab
Shops and Commercial Establishments Act does not relate to all kinds of establishments. Besides
shops, it relates to commercial establishments alone. Had the intention of Parliament been,
when enacting Section 1(3)(b), to refer to a law relating to commercial establishments, it would
not have left the expression ‘establishments’ unqualified. We have carefully, examined the various
provisions of the Payment of Gratuity Act, and we are unable to discern any reason for giving
the limited meaning to Section 1(3)(b) urged before us on behalf of the appellant. Section
1(3)(b) applies to every establishment within the meaning of any law for the time being in force
in relation to establishments in a State. Such an establishment would include an industrial es-
tablishment within the meaning of Section 2(ii)(g) of the Payment of Wages Act. Accordingly,
we are of opinion that the Payment of Gratuity Act applies to an 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 Hydel Upper Bari Doab Construction Project is such an establish-
ment, and the Payment of Gratuity Act applies to it.
The second contention on behalf of the appellant is that retrenchment does not fall within
Section 4(1) of the Payment of Gratuity Act, under which gratuity is payable to an employee on
the termination of his employment. The termination envisaged occurs either

(a) on his superannuation, or

(b) on his retirement or resignation, or
(c) on his death or disablement due to accident or disease.

Having regard to the definition of ‘superannuation’ in Section 2(r) of the Act, it is clear that
the case is not under clause (a). Nor, admittedly, is it a case which falls under clause (c). As re-
gards clause (b), it is not a case of resignation. The only question is whether it can be regarded
under clause (b) as a case of retirement. The expression ‘retirement’ has been defined by Section
2(q) to mean ‘termination of the service of an employee otherwise than on superannuation’.
The definition is framed in the widest terms. Except for superannuation, any termination of
service would amount to ‘retirement’ for the purposes of the Act. Retrenchment is a termination
of service. It is immaterial that the termination is occasioned by the need to discharge surplus
labour. That retrenchment implies the discharge of surplus labour was explained in Barsi Light
Railway Co. Ltd. vs K.N. Joglekar.28 Nonetheless, it amounts to termination of service. We are of
opinion that the retrenchment of the employee respondents falls within the scope of Section
4(1) of the Payment of Gratuity Act, and the employee respondents are, therefore, entitled to
gratuity under that provision.
The third contention raised by the appellant is that the employee respondents were not
entitled to apply under Section 33C(2) of the Industrial Disputes Act, 1947 for payment of the
gratuity, and should have, if at all, applied under the provisions of the Payment of Gratuity Act.
It is urged that the Payment of Gratuity Act is a self-contained code incorporating all the
essential provisions relating to payment of gratuity which can be claimed under that Act, and its
 Lay-off and Retrenchment 475

provisions impliedly exclude recourse to any other statute for that purpose. The contention has
force and must be accepted. A careful perusal of the relevant provisions of the Payment of
Gratuity Act shows that Parliament has enacted a closely knit scheme providing for payment of
gratuity. A controlling authority is appointed by the appropriate government under Section 3,
and Parliament has made him responsible for the administration of the entire Act. In what
event gratuity will become payable and how it will be quantified are detailed in Section 4.
Section 7(1) entitles a person eligible for payment of gratuity to apply in that behalf to the
employer. Under Section 7(2), the employer is obliged, as soon as gratuity becomes payable and
whether an application has or has not been made for payment of gratuity, to determine the
amount of gratuity and inform the person to whom the gratuity is payable specifying the amount
of gratuity so determined. He is obliged, by virtue of the same provision, to inform the controlling
authority also, thus ensuring that the controlling authority is seized at all times of information
in regard to gratuity as, it becomes payable. If a dispute is raised in regard to the amount of
gratuity payable or as to the admissibility of any claim to gratuity, or as to the person entitled to
receive the gratuity. Section 7(4)(a) requires the employer to deposit with the controlling authority
such amount as he admits to be payable by him as gratuity. The controlling authority is
empowered, under Section 7(4)(b), to enter upon an adjudication of the dispute, and after due
inquiry, and after giving the parties to the dispute a reasonable opportunity of being heard, he
is required to determine the amount of gratuity payable. In this regard, the controlling authority
has all the powers as are vested in a court while trying a suit under the Code of Civil Procedure,
1908 in respect of obtaining evidentiary material and the recording of evidence. The amount
deposited by the employer with the controlling authority as the admitted amount of gratuity
will be paid over by the controlling authority to the employee or his nominee or heir. Section 7(7)
provides an appeal against the order of the controlling authority under Section 7(4) to the ap-
propriate Government or such other authority as may be specified by the appropriate Government
in that behalf. The appropriate government or the appellate authority is empowered under Sec-
tion 7(8), after giving the parties to the appeal a reasonable opportunity of being heard, to confirm,
modify or reverse the decision of the controlling authority. Where the amount of gratuity payable
is not paid by the employer within the prescribed time, the controlling authority is required by
Section 8, on application made to it by the aggrieved person, to issue a certificate for that amount
to the Collector. The Collector thereupon is empowered to recover the amount of gratuity,
together with compound interest thereon at the rate of nine percent per annum from the date
of expiry of the prescribed time, as arrears of land revenue, and pay the same to the person en-
titled thereto.
It is apparent that the Payment of Gratuity Act enacts complete Code containing detailed
provisions covering all the essential features of a scheme for payment of gratuity. It creates the
right to payment of gratuity, indicates when the right will accrue, and lays down the principles
for quantification of the gratuity. It provides further for recovery of the amount, and contains
an especial provision that compound interest at nine percent per annum will be payable on
delayed payment. For the enforcement of its provisions, the Act provides for the appointment
of a controlling authority, which is entrusted with the task of administering the Act. The fulfilment
of the rights and obligations of the parties are made his responsibility, and he has been invested
with amplitude of power of the full discharge of that responsibility. Any error committed by
him can be corrected in appeal by the appropriate Government or an appellate authority particu-
larly constituted under the Act.
Upon all these considerations, the conclusion is inescapable that parliament intended that
proceedings for payment of gratuity due under the Payment of Gratuity Act must be taken
under that Act and not under any other. That being so, it must be held that the applications
filed by the employee-respondents under Section 33-C(2) of the Industrial Disputes Act did
not lie, and the Labour Court had no jurisdiction to entertain and dispose of them. On that
ground, this appeal must succeed.
476 Social Justice and Labour Jurisprudence

In the circumstances, it is not necessary to notice the further submission on behalf of the
appellant that where a serious disputes exists in regard to the basis of a claim for payment of
gratuity, no proceedings will lie under Section 33-C(2) of the Industrial Disputes Act.
The appeal is allowed, and the order dated 30 April 1975 of the Labour Court, Jullundur is
quashed. Having regard to the terms on which special leave was granted by this court to the
appellant, the appellant shall pay to the employee-respondents their costs of this appeal.
At this stage we put to the learned Solicitor-General, who appeared for the State whether in
the special circumstances it was not fair that the entire amount be paid by the appellant to the
employees without driving them to a separate proceeding. He has fairly stated that the appellant
is willing to do so and the sole object of this litigation was to have the law clarified. We, therefore,
direct the appellant to pay to the employee respondents within one month from today the
amounts that may be due to them, if they have not already been paid.

The Scope of ‘Retrenchment’ that Includes

All Kinds of Termination

Time and again the question of interpretation of the term ‘retrenchment’ under Section
2(oo) of the Act has figured before the judiciary as far as the expression ‘termination of
service for any reason whatsoever’ is concerned. The apex Court has consistently maintained
the status quo in this regard.

Santosh Gupta vs State Bank of Patiala 29

Though this case stood at the very threshold part of employment, yet the Court presented
its view with clear reasoning after considering the prevailing ratio in the context.

THE FACTS OF THE CASE

Santosh Gupta, the appellant—‘workman’ (in fact, a woman), was employed in the State Bank
of Patiala, the Mall, Patiala, from 13 July 1973 to 21 August 1974, at which time her services
were terminated. Though there were some breaks in service for a few days, those breaks were
not relevant for the purpose of deciding this case, though the judiciary did have to advert to
them in another connection. Despite the breaks, the ‘workman’ had admittedly worked for 240
days in the year till 21 August 1974.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE CHINNAPPA REDDY

According to the workman, the termination of her services was ‘retrenchment’ within the mean-
ing of that expression in Section 2(oo) of the Industrial Disputes Act 1947, since it did not fall
within any of the 3 excepted cases mentioned in Section 2(oo). Since there was ‘retrenchment’,
it was bad for non-compliance with the provisions of Section 25-F of the Industrial Disputes
Act. On the other hand the contention of the management was that the termination of services
was not due to discharge of surplus labour. It was due to the failure of the workman to pass the
test which would have enabled her to be confirmed in the service. Therefore, it was not
retrenchment within the meaning of Section 2(oo) of the Industrial Disputes Act.
 Lay-off and Retrenchment 477

Section 25-F prescribes that no workman employed in any industry who has been in con-
tinuous service for not less than one year shall be retrenched by the employer until—(a) the
workman has been given one month’s notice in writing indicating the reasons for retrenchment
and the period of notice has expired, or the workman has been paid, in lieu of such notice,
wages for the period of the notice; (b) the workman has been paid at the time of retrenchment,
compensation which shall be equivalent to fifteen days average pay for every completed year of
continuance service or any part thereof in excess of six months and (c) notice in the prescribed
manner is served on the appropriate Government or any such authority as may be specified by
the appropriate Government by notification in the official Gazette. There is a proviso to clause
(a) which dispenses with the necessity for the notice contemplated by the clause if the retrench-
ment is under an agreement which specifies the date for the termination of service.
The expression retrenchment is specially defined by Section 2(oo) of the Act and is as
follows:

‘retrenchment’ means the termination by the employer of the service of a workman for any
reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action,
but does not include

(a) voluntary retirement of the workman; or

(b) retirement of the workman on reaching the age of superannuation if the contract of
employment between the employer and the workman concerned contains a stipulation
in that behalf; or
(c) termination of the service of a workman on the ground of continued ill-health.

In Hariprasad Shivshankar Shukla vs A. D. Divakar,30 the Supreme Court took the view that
the word ‘retrenchment’ as defined in Section 2(oo) did not include termination of services of
all workmen on a bona fide closure of an industry or on change of ownership of management of
the industry. In order to provide for the situations which the Supreme Court held were not
covered by the definition of the expression ‘retrenchment’, the Parliament added Section 25-FF
and Section 25-FFF providing for the payment of compensation to the workmen in case of
transfer of undertakings and in case of closure of undertakings respectively.
If the definition of ‘retrenchment’ is looked at unaided and unhampered by precedent, one
is at once struck by the remarkably wide language employed and particularly by the use of the
words ‘termination..... for any reason whatsoever’. The definition expressly excludes termination
of service as a ‘punishment inflicted by way of disciplinary action’. The definition does not
include, so it expressly says, voluntary retrenchment of the workmen or retrenchment of the
workmen on reaching the age of superannuation or termination of the service of the workmen
on the ground of continuous ill-health. Voluntary retrenchment of a workman or retrenchment
of the workman on reaching the age of superannuation can hardly be described as termination,
by the employer, of the service of a workman. Yet, the Legislature took special care to mention
that they were not included within the meaning of ‘termination by the employer of the service
of a workman for any reason whatsoever’. This, in our opinion, emphasizes the broad inter-
pretation to be given to the expression ‘retrenchment’. In our view if due weight is given to the
words ‘the termination by the employer of the service of a workman for any reason whatsoever’
and if the words ‘for any reason whatsoever’ are understood to mean what they plainly say it is
difficult to escape the conclusion that the expression ‘retrenchment’ must include every termin-
ation of the service of a workman by an act of the employer. The underlying assumption, of
course, is that the undertaking is running as an undertaking and the employer continues, as an
employer but where either on account of transfer of the undertaking or on account of the
closure of the undertaking the basic assumption disappears, there can be no question of
478 Social Justice and Labour Jurisprudence

‘retrenchment’ within the meaning of the definition contained in Section 2(oo). This came to
be realised as a result of the decision of this Court in Hariprasad case.31 The Parliament then
stepped in and introduced Sections 25-FF and 25-FFF by providing that compensation shall be
payable to workmen in case of transfer of undertaking or closure of undertaking as if the workmen
had been retrenched. We may rightly say that the termination of the service of a workman on
the transfer or closure of an undertaking was treated by Parliament as ‘deemed retrenchment’.
The effect was that every case of termination of service by act of employer even if such termination
was a consequence of transfer or closure of the undertaking was to be treated as ‘retrenchment’
for the purposes of notice, compensation etc. Whatever doubts might have existed before Parlia-
ment enacted Section 25-FF and 25-FFF about the width of Section 25-F there cannot be any
doubt that the expression ‘termination of service’ for any reason whatsoever’ now covers every
kind of termination of service except those not expressly included in Section 25-F or not expressly
provided for by other provisions of the Act such as Sections 25-FF and 25-FFF.
In interpreting these provisions i.e., Sections 25-F, 25-FF and 25-FFF, one must not ignore
their object. The manifest object of these provisions is to so compensate the workmen for loss of
employment as to provide him the wherewithal to subsist until he finds fresh employment. The
non-inclusion of ‘voluntary retirement of the workmen’, ‘retirement of workmen on reaching
the age of superannuation’, ‘termination of the service of a workman on the ground of con-
tinued ill-health’ in the definition of ‘retrenchment’ clearly indicate and emphasize what we
have said about the true object of 25-F, 25-FF and 25-FFF and the nature of the compensation
provided by those provisions. The nature of retrenchment compensation has been explained in
Indian Hume Pipe Co. Ltd. vs Workmen,32 as follows:

As the expression ‘retrenchment compensation’ indicates it is compensation paid to a workman

on his retrenchment and it is intended to give him some relief and to soften the rigour of
hardship which retrenchment inevitably causes. The retrenched workman is, suddenly and
without his fault, thrown on the street and has to face the grim problem of unemployment.
At the commencement of his employment a workman naturally expects and looks forward to
security of service spread over a long period; but retrenchment destroys his hopes and expect-
ations. The object of retrenchment compensation is to give partial protection to the retrenched
employee and his family to enable them to tide over the hard period of unemployment.

Once the object of Sections 25-F, 25-FF and 25-FFF is understood and the true nature of
the compensation which those provisions provide is realised it is difficult to make any distinctions
between termination of service for one reason and termination of service for another.
Dr Anand Prakash wants us to hold that notwithstanding the comprehensive language of
the definition of ‘retrenchment’ in Section 2(oo), the expression continues to retain its original
meaning which was, according to the counsel, discharge from service on account of ‘surplusage’.
It is impossible to accept his submission. If the submission is right, there was no need to define
the expression ‘retrenchment’, and in such wide terms. We cannot assume that the Parliament
was undertaking an exercise in futility to give a long-winded definition and merely to say that
the expression means what it always meant.
Let us now examine the precedents of this Court to discover whether the true position in
law is to what has been stated by us in the previous paragraphs. The earliest of the cases of this
Court to which our attention was invited was Hariprasad case.33 That was a case which was
decided before Sections 25-FF and 25-FFF were brought on the statute book. In fact it was a
consequence of that decision that the Industrial Disputes Act had to be amended and these
two provisions came to be introduced into the Act. The question which arose for a decision in
that case was stated by the learned Judges themselves as follows:

The question, however, before us is—does this definition merely give effect to the ordinary,
accepted notion of retrenchment in an existing or running industry by embodying the notion
 Lay-off and Retrenchment 479

in apt and readily intelligible words or does it go so far beyond the accepted notion of retrench-
ment as to include the termination of services of all workmen in an industry when the
industry itself ceases to exist on a bona fide closure or discontinuance of his business by the
employer.

The question so stated was answered by the learned Judges in the following way:

In the absence of any compelling words to indicate that the intention was even to include a
bona fide closure of the whole business, it would, we think, be divorcing the expression al-
together from the context to give it such a wide meaning as is contended for by learned
counsel for the respondents... it would be against the entire scheme of the Act to give the
definition clause relating to retrenchment such a meaning as would include within the
definition termination of service of all workmen by the employer when the business itself
ceases to exist.

It is true that there are some observations which, if not properly understood with reference
to the question at issue, seemingly support the submission of Dr Anand Parkash that ‘termination
of service for any reason whatsoever’ means no more and no less than discharge of a labour force
which is a surplusage. The misunderstanding of the observations and the resulting confusion
stem from not appreciating (1) the real question which was posed and answered by the learned
Judges and (2) that the reference to ‘discharge on account of surplusage’ was illustrative and not
exhaustive and by way of contrast with discharge on account of transfer or closure of business.
Management of Willcox Buckwell India Ltd. vs Jagannath34 and Employers in Relation to Digwadih
Colliery vs Their Workmen35 were both cases where the termination of the workmen from service
was on account of ‘surplusage’ and, therefore, the cases were clear cases of retrenchment. They
do not throw any light on the question now at issue.
In State Bank of India vs Shri N. Sundara Money,36 a Bench of three Judges of this Court
consisting of Chandrachud, J. (as he then was), Krishna Iyer, J., and Gupta, J., considered the
question whether Section 25-F of the Industrial Disputes Act was attracted to a case where the
order of appointment carried an automatic cessation of service, the period of employment
working itself out by efflux of time and not by an act of employer. Krishna Iyer, J., who spoke
for the Court observed:

‘Termination’... for any reason whatsoever’ are the key words. Whatever the reason, every ter-
mination spells retrenchment. So the sole question is, has the employee’s service been ter-
minated? Verbal apparel apart, the substance is decisive. A termination takes place where a
term expires either by the active step of the master or the running out of the stipulated term.
To protect the weak against the strong this policy of comprehensive definition has been
effectuated. Termination embraces not merely the act of termination by the employer, but
the fact of termination howsoever produced... True, the section speaks of retrenchment by
the employer and it is urged that some act of volition by the employer to bring about the ter-
mination is essential to attract Section 25-F and automatic extinguishment of service by
effluxion of time cannot be sufficient... Words of multiple import have to be winnowed judi-
cially to suit the social philosophy of the statute. So screened, we hold that the transitive and
intransitive senses are covered in the current context. Moreover, an employer terminates em-
ployment not merely by passing an order as the service runs. He can do so by writing a com-
posite order, one giving employment and the other ending or limiting it. A separate, subsequent
determination is not the sole magnetic pull of the provision. A pre-emptive provision to
terminate is struck by the same vice as the post-appointment termination. Dexterity of diction
cannot defeat the articulated conscience of the provision.
480 Social Justice and Labour Jurisprudence

In Hindusthan Steel Ltd. vs Presiding Officer, Labour Court, Orissa,37 the question again arose
whether termination of service by efflux of time was termination of service within the definition
of retrenchment in Section 2(oo) of the Industrial Disputes Act. Both the earlier decisions of the
Court in Hariprasad Shivshankar Shukla vs A.D. Divikar 38 and State Bank of India vs N. Sundara
Money39 were considered. There was also a request that N. Sundara Money 40case conflicted with
the decision in Hariprasad Shivshankar Shukla vs A. D. Divikar41 and therefore required recon-
sideration. A Bench of three Judges of this Court consisting of Chandrachud J. (as he then was),
Goswami, J. and Gupta, J., held that there was nothing in Hariprasad Shivshankar Shukla vs
A.D. Divikar42, which was inconsistent with the decision in N. Sundara Money43 case. They held
that the decision in Hariprasad Shivshankar44 case was that the words ‘for any reason whatsoever’
used in the definition of retrenchment would not include a bona fide closure of the whole busi-
ness because it would be against the entire scheme of the Act. The learned Judges then observed
that, on the fact before them to give full effect to the words “for any reason whatsoever” would
be consistent with the scope and purpose of Section 25 of the Industrial Disputes Act and not
contrary of the scheme of the Act. In Delhi Cloth & General Mills Ltd. vs Shambhu Nath
Mukherjee,45 Goswani, Shinghal and Jaswant Singh, JJ. held that striking off the name of a
workman from the rolls by the management was termination of the service which was retrench-
ment within the meaning of Section 2(oo) of the Industrial Disputes Act.
Dr Anand Parkash cited before us the decision of a Full Bench of the Kerala High Court in
L. Robert D’Souza vs Executive Engineer, Southern Rly.46 and some other cases decided by other
High Courts purporting to follow the decision of this Court in Hariprasad Shivshankar Shukla
vs A.D. Divikar47 case. Shukla48 case, we have explained. The ratio of Shukla49 case, in fact, has
already been explained in Hindusthan Steel Ltd. vs The Presiding Officer, Labour Court Orissa.50
The decisions in Hindusthan Steel Ltd. vs The Presiding Officer, Labour Court, Orissa,51 and State
Bank of India vs N. Sundara Money52 have, in our view, properly explained Shukla53 case and
have laid down the correct law. The decision of the Kerala High Court in L. Robert D’Souza vs
Executive Engineer, Southern Rly.54 and the other decisions of the other High Courts to similar
effect, viz. Managing Director, National Garage vs J. Gonsalves, Goodlass Nerolac Paints (P) Ltd. vs
Chief Commissioner,55 and Rajasthan S.E.B. vs Labour Court,56 are, therefore, overruled. We
held, as a result of our discussion, that the discharge of the workman on the ground [that]
she did not pass the test which would have enabled her to be confirmed was ‘retrenchment’
within the meaning of Section 2(oo) and, therefore, the requirements of Section 25-F has to be
complied with. The order of the Presiding Officer, Central Government Industrial Tribunal-
cum-Labour Court, New Delhi, is set aside and the appellant is directed to be reinstated with
full back wages. The appellant is entitled to her costs.

The Procedure for Retrenchment: The Approach

Sections 25G and 25H of the Act provide for the manner in which retrenchment has to
be carried out and the manner in which the re-employment of retrenched workmen has
to be considered. Any deviation from this principle must be on coherent reasons only,
which are to be substantiated with all the necessary evidence before the tribunal and not
before the appellate court. The Supreme Court reiterated this view in a clear manner in
the following case.
 Lay-off and Retrenchment 481

Workmen of Sudder Workshop of Jorehaut Tea vs

Management of Jorehaut Tea57

THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

These two appeals, turning on the validity of the retrenchment of 23 workmen way back in
1966, are amenable to common disposal. Mr Phadke, appearing for the Management, argued
straight to the point, so did Shri Mridul, with the result that we could get the hang of the case
without much wrestling with time or getting paper-logged. Since, in substance, we are inclined
to leave undisturbed the award of the Industrial Tribunal, affirmed, as it were, by the High
Court, both these appeals will be given short shrift with brief reasons.
The facts, to the extent necessary to appreciate the issues canvassed, are brief. The Management
of a tea plantation by the name Jorehaut Tea Co. Ltd. retrenched 23 workmen, 16 of whom
were paid retrenchment compensation allegedly in terms of Section 25-F of the Industrial
Disputes Act (for short, the Act) and in the order of ‘last come, first go’, while the services of the
other seven were terminated, although on payment of retrenchment compensation, allegedly in
breach of Section 25-G of the Act, i.e., out of turn. The dispute that was raised was decided by
the Tribunal who upheld the validity of the retrenchment of the 16 but set aside the termination
of the other 7. Consequently it directed their reinstatement with some back wages. The award
granted the following relief:

In respect of the workmen, viz., Sri Bhogeswar Saikia, Sri Kandeswar Bora, Sri Gunai Bora,
Sri Pramodhar Sarma, Sri Allauddin Ahmed, Sri Devan Sarma and Sri Harlalal Biswas whose
retrenchment has been found to be not justified, they are entitled to reinstatement with con-
tinuity of service. Those workmen have not come forward to say that they remained unem-
ployed from the date of their retrenchment. In the circumstances of the case, I think they
may be given wages at half the rate from the date of retrenchment till the date of publication
of the award in the Gazette.

We may first dispose of the workers’ appeal. In all, 23 persons were retrenched. In respect of
16 the rule of ‘last come, first go’ was applied. Thus homage was paid to Section 25-G of the
Act. But then, the workmen in their appeal contended before us that Section 25-F had been
breached and, therefore, the termination was bad in law. The management’s case is that, as a
fact, all or most of them had been reinstated when fresh vacancies has arisen, although neither
party is able to assert with certainty this case of reinstatement. That apart, if there be non-
compliance with Section 25-F, the law is plain that the retrenchment is bad. However, when
probed further as to how Section 25-F had been violated, Shri Mridul argued that the amount
paid by way of retrenchment compensation envisaged in Section 25-F fell short of what was
legally due and hence there was non-compliance. Under more searching interrogation, Shri
Mridul stated that the compensation had been computed on the basis of wages previously paid
and in derogation of the Wage Board Award which had been implemented by the Management
with effect from 1 April 1966. The retrenchment was on 5 November 1966, i.e., months after
1 April 1966. Therefore, the revised pay-scales as per the Wage Board Award should have been
adopted in calculating the retrenchment compensation.
This spinal flaw rendered the tender of compensation insufficient and, therefore, the retrench-
ment itself was invalid. May be, there is apparent force in this contention. But Shri Phadke
countered it by saying that it was not open to the workmen to spring a surprise on the Manage-
ment especially when the question was one of fact. He urged that before the tribunal no plea
482 Social Justice and Labour Jurisprudence

based on the Wage Board Award was made and it was quite possible that the Management
would have adequately met the contention if such a plea had been raised. The fact is that before
the tribunal the contention pressed before us was neither pleaded nor proved. There is no hint
of it in the award. In the High Court this new plea based on the facts was not permitted. Had
there been some foundation laid at least in the written statement of the workmen, we might
have been inclined to explore the tenability of the plea, especially because there is no dispute
about the Wage Board Award and the fact that it had been given effect to from April 1, 1966
and the further fact that in the retrenchment notice the wages were not calculated according to
the Wage Board’s Award. It must be remembered, however, that the Wage Board’s Award was
subsequent to the retrenchment although retrospectively applied and the workmen had accepted
the retrenchment compensation on the wages prevalent at the time of the retrenchment. In the
absence of any basis for this new plea we are unable to reopen an ancient matter of 1966 and,
agreeing with the High Court, dismiss the appeal. But the 16 workmen, being eligible admittedly
for the Wage Board scale, will be paid the difference for the period between 1 April 1966 to
5 November 1966.
Now, we will take up the merits of the Management’s appeal which relates to the retrenchment
of seven workmen. Admittedly, the rule in Section 25-G of the Act, which postulates that
ordinarily ‘last come, first go’ will be the methodology of retrenchment, has not been complied
with, provided we treat all the workmen in the category as one group. It makes for better
appreciation of the point if we read Section 25-G at this stage:

Where any workman in an industrial establishment, who is a citizen of India, is to be retrenched

and he belongs to a particular category of workmen in that establishment, in the absence of
any agreement between the employer and the workman in this behalf, the employer shall
ordinarily retrench the workman who was the last person to be employed in that category
unless for reasons to be recorded the employer retrenches any other workman.

The keynote thought of the provision, even on a bare reading, is evident. The rule is that the
employer shall retrench the workman who came last, first, popularly known as ‘last come, first
go’. Of course, it is not an inflexible rule and extraordinary situations may justify variations. For
instance, a junior recruit who has a special qualification needed by the employer may be retained
even though another who is one-up is retrenched. There must be a valid reason for this deviation,
and obviously, the burden is on the Management to substantiate the special ground for departure
from the rule.
Shri Phadke brought to our notice the decision in Om Oil & Oilseeds Exchange Ltd., Delhi vs
Their Workmen58 to make out that it was not a universal principle which could not be departed
from by the Management that the last should go first. The Management had a discretion provided
it acted bona fide and on good grounds. Shah, J., in that very ruling, while agreeing that a
breach of the rule could not be assumed as prompted by mala fides or induced by unfair labour
practice merely because of a departure or deviation, further observed that the tribunal had to
determine in each case whether the Management had acted fairly and not with ulterior motive.
The crucial consideration next mentioned by the learned Judge is that the Management’s decision
to depart from the rule must be for valid and justifiable reasons, in which case ‘the senior em-
ployee may be retrenched before his junior in employment’. Surely, valid and justifiable reasons
are for the Management to make out, and if made out, Section 25-G will be vindicated and not
violated. Indeed, that very decision stresses the necessity for valid and good grounds for varying
the ordinary rule of ‘last come, first go’. There is none made out here, nor even alleged, except
the only plea that the retrenchment was done in compliance with Section 25-G grade wise.
Absence of mala fides by itself is no absolution from the rule in Section 25-G. Affirmatively,
some valid and justifiable grounds must be proved by the Management to be exonerated from
the ‘last come, first go’ principle.
 Lay-off and Retrenchment 483

It must be remembered that the above provision which we have quoted insists on the rule
being applied category wise. That is to say, those who fall in the same category shall suffer
retrenchment only in accordance with the principle of last come first go. The short point raised
is that the seven workmen are not in the same category. The finding of the tribunal, concurred
in by the High Court is that they fell in the same category. We quote the award:

It will be seen that when there is no trade test or anything to mark efficiency, there is no basis
for placing the workmen in different grades and when all the workmen of the same category
are to do the same work inasmuch as by the management’s own evidence there is no grade
wise allocation of duty within the same category. Although in the evidence the Management
wanted to justify their departure from the principle of ‘last come first go’ there is nothing to
show that such a reason was recorded for deviating from the principle. In the circumstances
of the case it cannot be said that the Management’s selection of persons to be retrenched
leaving the junior most in some category was justified and the reason now adduced for deviating
from the principle cannot be accepted in the absence of the reason being not recorded at the
time of retrenchment. Further it will be also noticed that although there is classification of
workman into grades (?) within the category, there is nothing to distinguish one workman
of one grade from another workman of another grade inasmuch as there is no allocation of
duties amongst the workmen of different grades in the category.

The seniority list is the same, which is a telling circumstance to show that they fell in the
same category. Grading for purposes of scales of pay and like considerations will not create new
categorisation. It is a confusion or unwarranted circumvention to contend that within the same
category if grades for scales of pay, based on length of service, etc., are evolved, that process
amounts to creation of separate categories. This fallacy has been rightly negatived by a detailed
discussion in the award. The High Court has avoided the pitfall and we decline to accept the
submission. The result is that the award must hold good in regard to the illegally retrenched
seven workmen.
What remains to be considered is the last submission of Shri Phadke that the engineering
establishment wherein those seven workmen are to be reinstated is no longer in existence. Further,
he pleads that on account of long lapse of time on account of the pendency of the appeal in this
Court the compensation payable by way of full wages may amount to a huge sum disproportionate
to the deviance from the law. He, therefore, pleads for moulding the relief less harshly.
We cannot sympathise with a party who gambles in litigation to put off the evil day and
when that day arrives prays to be saved from his own gamble. The award had given convincing
reasons for reinstatement and even reduced the back wages to half. Still, the workmen were
dragged to the High Court and, worse, when worsted there, were driven from Assam to Delhi
to defend their pittance. The logistics of litigation for indigent workmen is a burden the Manage-
ment tried to use any a convert blackmail through the judicial process. Misplaced sympathy is
mirage justice.
We cannot agree. When so, we take note of the inordinate delay due to long pendency
which is part of the pathology of processual justice in the Supreme Court. So we direct that half
the back wages between the date of retrenchment and the publication of the award shall be
paid, as directed in the Award itself. For the post-award period, full wages will be paid until the
High Court’s judgment on 13 April 1971 and thereafter 75% of the wages will be paid until
30 April 1980.
Counsel contends that the workshop is not in existence now and reinstatement is physically
impossible. Sri Mridul, for the workmen, states that a just solution by the court in the given
circumstances is acceptable. We direct that, in lieu of reinstatement, one year’s wages, calculated
on the scale sanctioned by the Wage Board recommendations, for each such workman be paid.
484 Social Justice and Labour Jurisprudence

All the sums, if not paid before 15 May 1980, shall carry 12% interest. And upto 15 May 1980
they shall carry 9% interest in suppression of the interim order dated 5 May 1972. Rough and
ready justice, for want of full information, is not satisfactory but cannot be helped.

We dismiss the workmen’s appeal. No costs. We dismiss the Management’s appeal, subject to
the above directions, with costs quantified at Rs 5,000.

NOTES

1. Under Section 25M of the Act, the employer must obtain post facto permission from the appropriate
government if the lay-off is due to shortage of power or a natural calamity, and in the case of a mine, if the
lay-off is due to a fire, flood, excess of inflammable gas or explosion.
2. Under Section 2(kkk) of the Act, ‘lay-off ’ means the failure, refusal or inability of an employer on account
of shortage of coal, power or raw materials or the accumulation of stocks or the breakdown of machinery
or a natural calamity or any other connected reason to give employment to a workman whose name is
borne on the muster rolls of his industrial establishment and who has not been retrenched.
3. Section 25C of the Act provides that:whenever a workman (other than a badli workman or a casual workman)
whose name is borne on the muster rolls of an industrial establishment and who has completed not less
than one year of continuous service under an employer is laid-off, whether continuously or intermittently,
he shall be paid by the employer for all days during which he is so laid-off, except for such weekly holidays
as may intervene, compensation which shall be equal to fifty per cent, of the total of the basic wages and
dearness allowance that would have been payable to him had he not been so laid-off.
Provided that if during any period of twelve months, a workman is so laid-off for more than forty-five
days, no such compensation shall be payable in respect of any period of the lay-off after the expiry of the
first forty-five days, if there is an agreement to that effect between the workman and the employer…
4. AIR 1976 SC 1775. This case was heard by V.R. Krishna Iyer and N.L. Untwalia.
5. 1952 2 Lab LJ 37.
6. 1 SCR 476:AIR 1959 SC 1342.
7. 3 SCR 448:AIR 1970 SC 1494.
8. AIR 1957 Bom. 100:(1976) 1 Lab LJ 547.
9. (1964) 5 SCR 548:AIR 1964 SC 1458.
10. (1969) 1 SCC 366:AIR 1969 SC 530.
11. (1969) 1 SCC 366:AIR 1969 SC 530.
12. (1967) 2 LLJ 761 (All).
13. (1972) 1 LLJ 284.
14. AIR 1963 Bom 146.
15. AIR 1979 SC 170.
16. 2 SCR 866 P. 871:AIR 1960 SC 610 p. 612, 613.
17. 3 SCR 528:AIR 1960 SC 923.
18. AIR 1976 SC 1111.
19. 3 SCR 303:AIR 1973 SC 878.
20. (1978) 3 SCR 207:AIR 1978 SC 548.
21. AIR 1976 SC 1111. This case was heard by V.R. Krishna Iyer, Y.V. Chandrachud and A.C. Gupta.
22. ILR (1973) 2 Delhi 673 at 676:AIR 1975 Delhi 77 at 79.
23. 1960 2 SCR 866, 871–872:AIR 1960 SC 610, 613.
24. After the judgement of the Supreme Court in this case, the definition of the term ‘retrenchment’ in
Section 2(oo) of the Act underwent amendment in the year 1982, and now reads as follows:

‘retrenchments’ means the termination by the employer of the service of a workman for any reason
whatsoever, otherwise than as a punishment inflicted by way of disciplinary action, but does not include-

(a) voluntary retirement of the workman; or

(b) retirement of the workman on reaching the age of superannuation if the contract of employment
between the employer and the workman concerned contains a stipulation in that behalf; or
 Lay-off and Retrenchment 485

([bb] termination of the service of the workman as a result of the non-renewal of the contract of
employment between the employer and the workman concerned on its expiry or of such contract
being terminated under a stipulation on that behalf contained therein) or
(c) termination of the service of a workman on the ground of continued ill-health;

25. 1973 2 All ER 103.

26. (1974) 4 SCC 710:AIR 1974 SC 923.
27. AIR 1979 SC 1981. This case was heard by V.R. Krishna Iyer and R.S. Pathak.
28. AIR 1957 SC 121:(1957) 1 LLJ 243:(1956–57) 11 FJR 317.
29. AIR 1980 SC 1219. This case was heard by V.R. Krishna Iyer and O. Chinnappa Reddy.
30. 1957 SCR 121.
31. 1957 SCR 121.
32. AIR 1960 SC 251:(1960) 2 SCR 32.
33. 1957 SCR 121.
34. AIR 1964 SC 1166.
35. (1965) 3 SCR 448:AIR 1966 SC 75.
36. AIR 1976 SC 1111.
37. (1977) I SCR 586:AIR 1977 SC 31.
38. 1957 SCR 121.
39. AIR 1976 SC 1111.
40 AIR 1976 SC 1111.
41. 1957 SCR 121.
42. 1957 SCR 121.
43. AIR 1976 SC 1111.
44. 1957 SCR 121.
45. (1976) I SCR 591:AIR 1978 SC 8.
46. (1979) I LLJ 211 (Ker).
47. (1957) SCR 121.
48. (1957) SCR 121.
49. (1957) SCR 121.
50. (1977) 1 SCR 586:AIR 1977 SC 31.
51. (1957) 1 SCR 586:AIR 1977 SC 31.
52. AIR 1976 SC 1111.
53. (1957) SCR 121.
54. (1979) I LLJ 211 (Ker).
55. (1967) ILLJ 545 (Pun).
56. (1966) I LLJ 38 (Raj).
57. AIR 1980 SC 1454. This case was heard by V.R. Krishna Iyer and O. Chinappa Reddy.
58. (1966) Supp. SCR. 74:AIR 1966 SC 1657.
 Chapter 13

Labour Employed through

Middlemen—their Rights

The system of employment of labour on a contract basis through a middleman is not a

new phenomenon in India. The Contract Labour (Regulation and Abolition) Act, 1970,
was enacted with the dual object of prohibiting employment of labour through middlemen
wherever practicable and in cases where the system could not be altogether abolished, of
regulating the system by ensuring certain minimum welfare amenities to the workmen.
But this Act applies only to establishments where 20 or more persons are employed as
contract labour. In cases where contract labour is employed within the scope of the pro-
visions of the Act, the power to abolish the system lies only with the appropriate government
specified under the Act.1 The relevant issue that stands for consideration is the absorption
of the erstwhile contract labour as regular employees of the principal employer when
once the system is abolished.

The Entitlement of Contract Labour to be Absorbed

as Regular Employees
Hussain Bhai vs the Alath Factory Thezhilali Union,
Kozhikode and Others 2
As far as the absorption of contract labour as regular employees of the principal employer
is concerned, in a situation where either the provisions of the Contract Labour (Regulation
& Abolition) Act, 1970, are defeated in the employment of such labour or have no appli-
cation, a clear ratio exists as laid down by the apex Court.
In this case, speaking for the majority, Justice V.R. Krishna Iyer propounded a valuable
point of jurisprudence regarding situations where labour is employed by a principal em-
ployer through a middlemen. Even today, this judgement remains an authority for decid-
ing cases relating to the employment of contract labour either outside the scope of the
provisions or defeating the provisions of the Contract Labour (Regulation & Abolition)
Act, 1970.

THE FACTS OF THE CASE

The petitioner is a factory-owner manufacturing ropes. A number of workmen were

engaged to make ropes from within the factory, but these workmen, according to the
 Labour Employed through Middlemen—their Rights 487

petitioner, were hired by contractors who had executed agreements with the petitioner to
get such work done. Therefore, the petitioner contended that the workmen were not his
workmen but the contractors’ workmen. The industrial award, made on a reference by
the state government, was attacked on this ground. The learned single judge of the High
Court, in an elaborate judgement, rightly held that the petitioner was the employer and the
members of the respondent union were employees under the petitioner. A Division Bench
upheld this stand and the petitioner has sought special leave from this Court.

THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

It is not in dispute that 29 workmen were denied employment which led to the reference. It is
not in dispute that the work done by these workmen was an integral part of the industry con-
cerned; that the raw material was supplied by the Management; that the factory premises belonged
to the Management; that the equipment used also belonged to the Management and that the
finished product was taken by the Management for its own trade. The workmen were broadly
under the control of the Management and defective articles were directed to be rectified by the
Management. This concatenation of circumstances is conclusive of the question. Nevertheless,
this issue is being raised time and again and so we proceed to pass a speaking order. We should
have thought that even cases where this impressive array of factors were not present, would have
persuaded an industrial court to the conclusion that the economic reality was employer-employee
relationship and, therefore, the industrial law was compulsively applicable. Even so, let us look
at the issue afresh.
Who is an employee, in Labour Law? That is the short, die-hard question raised here but
covered by this Court’s earlier decisions. Like the High Court, we give short shrift to the con-
tention that the petitioner had entered into agreements with intermediate contractors who had
hired the respondent-Union’s intermediate workmen and so no direct employer-employee
vinculum juris existed between the petitioner and the workmen.
This argument is impeccable in laissez faire economics ‘red in tooth and claw’ and under the
Contract Act rooted in English Common Law. But the human gap of a century yawns between
this strict doctrine and industrial jurisprudence. The source and strength of the industrial branch
of Third World Jurisprudence is social justice proclaimed in the Preamble to the Constitution.
This Court in Ganesh Beedi’s case has raised on British and American rulings to hold that mere
contracts are not decisive and the complex of considerations relevant to the relationship is dif-
ferent. Indian Justice, beyond Atlantic liberalism, has a rule of law which runs to the aid of the
rule of life. And life, in conditions of poverty aplenty, is livelihood, and livelihood is work with
wages. Raw societal realities, not fine-spun legal niceties, not competitive market economics but
complex protective principle, shape the law when the weaker, working class sector needs succour
for livelihood through labour. The conceptual confusion between the classical law of contracts
and the special branch of law sensitive to exploitative situations accounts for the submission
that the High Court is in error in its holding against the petitioner.
The true test may, with brevity, be indicated once again. Where a worker or group of workers
labours to produce goods or services and these goods or services are for the business of another,
that other is, in fact, the employer. He has economic control over the workers’ subsistence, skill,
and continued employment. If he, for any reason, chokes off, the worker is, virtually, laid off.
The presence of intermediate contractors with whom alone the workers have immediate or
direct relationship ex contractu is of no consequence when, on lifting the veil or looking at the
conspectus of factors governing employment, we discern the naked truth, though draped in dif-
ferent perfect paper arrangement, that the real employer is the Management, not the imme-
diate contractor. Myriad devices, half-hidden in fold after fold of legal form depending on the
488 Social Justice and Labour Jurisprudence

degree of concealment needed, the type of industry, the local conditions and the like may be re-
sorted to when labour legislation casts welfare obligations on the real employer, based on Articles
38, 39, 42, 43 and 43-A of the Constitution. The court must be astute to avoid the mischief and
achieve the purpose of the law and not be misled by the maya of legal appearances.
If the livelihood of the workmen substantially depends on labour rendered to produce goods
and services for the benefit and satisfaction of an enterprise, the absence of direct relationship
or the presence of dubious intermediaries or the make-believe trappings of detachment from
the Management cannot snap the real life-bond. The story may vary but the inference defies in-
genuity. The liability cannot be shaken off.

Of course, if there is total dissociation in fact between the disowning Management

and the aggrieved workmen, the employment is, in substance and in real-life terms, by
another. The management’s adventitious connections cannot ripen into real employment.

THE HUSSAIN BHAI RATIO IN SUBSEQUENT DECISIONS

This judgement and the observations made thereunder by Justice V.R. Krishna Iyer were
cited as authority and relied upon by the Supreme Court in the cases of the Secretary,
Haryana State Electricity Board vs Suresh and others,3 and in Bharat Heavy Electricals vs the
State of Uttar Pradesh and Others.4

In the case of the Secretary, Haryana State Electricity Board,5 it was held that the doctrine of
equality as enshrined in the Constitution promised an egalitarian society and the Contract
Labour (Regulation & Abolition) Act, 1970, is the resultant effect of such a Constitutional
mandate having its due focus in the perspective. The draconian concept of law is no longer
available for the purpose of interpreting a social and beneficial piece of legislation, especially on
the wake of the new millennium. The democratic polity ought to survive with full vigour:
socialist status as enshrined in the Constitution ought to be given its full play and it is in this
perspective the question arises—is it permissible in the new millennium to decry the cry of the
labour force desirous of absorption after working for more than 240 days in an establishment
and hav-ing their working supervised and administered by an agency within the meaning of
Article 12 of the Constitution. The answer cannot possibly be in the affirmative. In this context,
the Supreme Court recalled the observation of this Court in the Hussainbhai case.

The true test may, with brevity, be indicated once again. Where a worker or group of workers
labours to produce goods or services and these goods or services are for the business of another,
that other is, in fact, the employer. He has economic control over the worker’s subsistence, skill,
and continued employment. If he, for any reason, chokes off, the worker is, virtually, laid off.
The presence of intermediate contractors with whom alone the workers have immediate or
direct relationship ex contractu is of no consequence when, on lifting the veil or looking at
the conspectus of factors governing employment, we discern the naked truth, though draped in
different perfect paper arrangement, that the real employer is the Management, not the imme-
diate contractor. Myriad devices, half-hidden in fold after fold of legal form depending on
the degree of concealment needed, the type of industry, the local conditions and the like may
be resorted to when labour legislation casts welfare obligations on the real employer, based on
Articles, 38, 39, 42, 43 and 43-A of the Constitution. The court must be astute to avoid the
mischief and achieve the purpose of the law and not be misled by the maya of legal appearances.

Had there been any genuine contract labour system prevailing with the appellant board,
then obviously it would have to be abolished as per Section 10 of the Act, after following the
procedure laid down therein. However, on the facts of the present case, there was no genuine
 Labour Employed through Middlemen—their Rights 489

contract system prevailing at the relevant time wherein the Board could have acted as only the
principal employer and a licensed contractor employing labour on his own account, more when
the Board at the relevant time was not a principal employer and the so-called contract was not
with a licensed contractor under the Act. The inevitable conclusion is that the so-called contract
system was a mere camouflage, a smoke screen, and disguised in an almost transparent veil, which
could easily be pierced, and the real contractual relationship between the Board on the one hand
and the employees on the other could be clearly visualized.
In the case of Bharat Heavy Electricals,6 then, it was held that where a workman–labour is
engaged to produce goods or services and these goods or services are for the business of another,
that other is the employer. The work of the respondent workmen is not totally disassociated
in fact between them and the appellant to say that they were not employees of the appellant.
If the respondent workmen as a matter of fact were employed with the appellant to work in his
premises—and which in fact is found established after removing the mask or façade of make-
believe employment under the contractor, the appellant cannot escape its liability.

NOTES

1. Section 10 of the Act provides:

(1) Notwithstanding anything contained in this Act, the appropriate Government may, after consultation
with the Central Board or, as the case may be a State Board, prohibit, by notification in the Official
Gazette, employment of contract labour in any process, operation or other work in any establishment.
(2) Before issuing any notification under sub-section (1) in relation to an establishment, the appropriate
Government shall regard to the condition of work and benefits provided for the contract labour in
that establishment and other relevant factors, such as
(a) whether the process, operation or other work is incidental to, or necessary for the industry, trade,
business, manufacture or occupation that is carried on in the establishment;
(b) whether it is of perennial nature, that is to say, it is of sufficient duration having regard to the
nature of industry, trade, business, manufacture or occupation carried on in that establishment;
(c) whether it is done ordinarily through regular workmen in that establishment or an establishment
similar thereto;
(d) whether it is sufficient to employ considerable number of whole-time workmen.
Explanation: If a question arises whether any process or operation or of work is of perennial nature, the
decision of the appropriate Government thereon shall be final.
2. (1978) 4 SCC 257. The case was heard by V.R. Krishna Iyer, D.A. Desai and O. Chinnappa Reddy, and the
majority judgement was delivered by Justice V.R. Krishna Iyer.
3. AIR 1999 SC 116. The case was presided over by two judges.
4. (2003) 6 SCC 528. The case was presided over by two judges.
5. AIR 1999 SC 116.
6. (2003) 6 SCC 528.
 Chapter 14

Wages and Monetary Benefits

The most controversial issue in industrial relations is that of wages. Wages form the pivot
around which all industrial conflicts revolve. As far as workers in the organised sector are
concerned, legislation pertaining to wages deals only with the regulation1 aspect, leaving
the determination of actual wage levels to the parties themselves. Of course, the Minimum
Wages Act, 1948, by and large is confined to the sweated industries. This Act empowers
the appropriate government to fix and to revise the minimum rates of wages for employ-
ments specified in the Schedule of the Act.2 The Act, under Section 4, provides the con-
stituents of such minimum wages.3

Payment of Tips to Hotel Staff: Whether

a Part of the Dearness Allowance

In the following case, the Supreme Court had to consider whether the tips paid by cus-
tomers to workers in hotels forms part of their dearness allowance or not.

The Rambagh Palace Hotel, Jaipur, vs the Rajasthan

Hotel Workers Union, Jaipur4

THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

The appellant the Management of the Rambagh Palace Hotel, Jaipur has attacked the award
made by the Industrial Tribunal, Rajasthan in favour of the workers of the hotel in the dispute
raised on the score that the price index having gone up the workers were entitled to adequate
compensation by way of dearness allowance. Very fairly, advocate appearing for the appellant
has confined his ground of challenge to one point. He states that the Industrial Tribunal while
it has reduced the award of dearness allowance considerably vis-à-vis the demand put forward,
after taking into consideration various circumstances like free food and accommodation, the
Tribunal has failed to bear in mind the circumstance that tips in the shape of half the salary
are also being distributed by the Management to the workers. He has brought to the notice the
decision of this court in Management of Wenger and Co. vs Workmen,5 where it has been pointed
out that while the right to treat the tips received by the waiters may not be wholly irrelevant
to the decision of the question about the matter of D.A., it would not be right either to make a
calculation about the tips received and treat the said amount as a substitute either wholly or
partially for the D.A. itself. The proper approach, according to this court, is for the tribunal to
 Wages and Monetary Benefits 491

bear in mind the fact that tips are received and make some suitable adjustment in that behalf.
According to counsel, the payment of tips has been lost sight of by the tribunal and therefore
the order making award by way of dearness allowance should be interfered with and modified
to some extent.
We regret and are unable to agree with the counsel on this point. It is well known that in im-
portant hotels in the country—the appellant is now a five star hotel—the customers are of the
affluent variety and pay tips either to the waiters directly or in the shape of service charges or
otherwise to the Management along with the bill for the items consumed. In short, the true
character of tips cannot be treated as any payment made by the Management out of its pocket
but a transfer of what is collected to the staff as it is intended by the payer to be so distributed.
It may also happen that more money comes in by way of tips into the pockets of the Management
than is distributed by it. We cannot therefore consider the receipt of the tips by the staff as any-
thing like a payment made by the Management to its employees warranting consideration
by the Tribunal to depress the award of dearness allowance. Of course, it is a factor which may
perhaps be in the mind of the Tribunal when it finalized the actual figures. There is no reason
for us to think that although not specifically put down in his order, the Tribunal has lost sight of
this circumstance. For this reason, we think that there is no ground for interference with the award
of the Industrial Tribunal. The appeal was dismissed and there was no order as to the costs.

Running Allowance: Whether Wages

The Payment of Wages Act, 1936, was enacted with the sole intention of eliminating the
evil of illegal deductions and delay in payment of wages by employers in certain estab-
lishments. The Act contains a detailed mechanism that defines the term ‘wages’ and pro-
vides the authorised deductions to be made by the employer from the wages of employed
persons. In the event of any grievance, the Act provides an authority for the redressal of
such grievances pertaining to the payment of wages. Often the judiciary has come across
the issues pertaining to the scope of the powers of such an authority and the scope of the
term ‘wages’ as defined in the Act.

Dilbagh Rai Jerry vs Union of India6

In this case, the Supreme Court had to deal with certain issues relating to question of law
under the Payment of Wages Act. The beauty of this case lies in the concurring (with the
majority judgement) but special observation made by Justice V.R. Krishna Iyer with
regard to the conduct of the State as an entrepreneur in dragging the matter ultimately to
the summit Court.

THE FACTS OF THE CASE

The appellant was a Guard ‘C’ grade in the Northern Railway. He was confirmed in that post
in 1952. On 3 April 1955, an incident took place at the railway station, Kalka, as a result of
which he was prosecuted for an offence under Section 509 of the Penal Code. The Additional
District Magistrate, Ambala, convicted him on 29 December 1955 to three months’ simple
imprisonment. His appeal was dismissed by the Court of Sessions. In revision, the High Court
of Punjab, on 5 March 1956, maintained his conviction but reduced the sentence.
492 Social Justice and Labour Jurisprudence

On 2 April 1956, the appellant received a communication from the Divisional Personnel
Officer, Northern Railway that he had been dismissed from service by the Divisional Super-
intendent with effect from 31 March 1956.
In an appeal by special leave, this Court, set aside the conviction of the appellant and acquit-
ted him by its judgement dated 7 March 1957. Thereafter, the appellant filed a writ petition in
the High Court of Punjab under Article 226 of the Constitution, impugning the order of his
dismissal. The High Court, by its judgement dated 2 September 1958, issued a writ directing
the respondents to treat the dismissal of the appellant wholly void and ineffective. Pursuant to
that direction, on 26 December 1958, the appellant received a letter from Divisional Personnel
Officer that he had been reinstated in the post of a guard of ‘C’ grade and that the matter of his
back wages for the period between the date of his dismissal and the date of reinstatement would
be decided later on. By another letter of 13 February 1959, the same officer informed the appel-
lant that the period from the date of his dismissal to the date of his reinstatement would be
treated as leave due. The appellant on 11 March 1959 was paid Rs 81.51 as his entire wages for
the period ending 7 March 1959.
On 13 August 1959, the appellant made an application under Section 15(2) of the Payment
of Wages Act (hereafter referred to as ‘the Act’) before the prescribed authority, claiming a sum
of Rs 9015.60 plus 12 times the said amount as compensation from the respondents. In addition,
travelling allowance was claimed. Later an attempt was made to amend the application and
replace ‘travelling allowance’ with ‘running allowance’. The authority did not permit the appellant
to do so, as he had failed to amend in time despite the order of the court.
The respondent resisted the appellant’s claims on various grounds, including that of limita-
tion. By an order dated 7 August 1963, the authority directed respondent No. 1 (the Union of
India), in its capacity as employer, to refund the sum of Rs 4863.20 (plus Rs 100 as costs) to the
appellant, holding that the same had been illegally deducted from his wages. The authority dis-
allowed the remaining claims, including that for the running allowance. Against the order of
the authority, two appeals were carried to the appellate authority (the Additional District Judge)—
one by the appellant and the other by the respondent. The appellate authority held that the ap-
pellant’s claim was barred by time as limitation had commenced from the date of dismissal from
service and not from the date of reinstatement, or the date on which it was decided to treat the
period of dismissal as leave due. It upheld the dismissal of the appellant’s claim to the running
allowance, inter alia, for the reason that he had, despite the order of the authority, failed to
amend the petition within the period indicated in O.6, Rule 18 of the Code of Civil Procedure.
The appellate authority further found that the railway administration was competent to treat
the period of the appellant’s inactive service from 1 April 1956 to 17 February 1959 as leave due
and to deduct his wages for that period in accordance with Rule 2044 of the Railways Estab-
lishment Code and held that in view of Section 7(2)(h) of the Act, no refund of the deducted
wages could be allowed. It further held that in the case of the railway administration, the divi-
sional superintendent named as paymaster was responsible for the payment of wages to the
railway employees and, consequently, the direction of the authority requiring the Union of India
to make payment to the claimant was illegal. As a result, the appellate authority allowed the
respondent’ appeal and dismissed the appellant’s claim. The appellant’s writ petition impugning
this order of the appellate authority was, as already stated, dismissed by the High Court. Hence
this appeal.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE SARKARIA

The first question that falls to be considered is, whether the claim application filed by the ap-
pellant under Section 15(2) of the Act was time barred?
 Wages and Monetary Benefits 493

Mr Bishan Narain, learned Counsel for the appellant contends that the case falls under the
first part of the proviso (1) to Section 15(2) which relates to deduction of wages and limitation
would start from 11 March 1959 when the wages for the period of the appellant’s inactive ser-
vice were actually deducted and he was paid Rs 81/51 only for the entire period ending 7 March
1959. Even on a stricter view according to the learned Counsel, limitation would not start
earlier than the date, 13 February 1959, when constructive deduction took place and it was
decided to treat the period of his inactive service as leave due (which meant leave without pay),
Since the appellant’s claim application had been presented within six months of either of these
dates, it was well within time.
Learned Counsel for the respondents does not dispute that this is a case of deduction of
wages. His argument, however, is that irrespective of whether the case was one of deduction or
of non-payment of wages, the starting point of limitation would be the same viz, the date on
which the wages fell due or accrued. The argument is that the concept of ‘deducted wages’ and
‘delayed wages’ are so integrated with each other that the events relatable to them always synchron-
ise furnishing the same cause of action and the same start of limitation. It is pointed out that
the wages of a railway employee fall due every month; wages of one month being payable by
the 10th of the succeeding month. Since the dismissal of the appellant was declared void and
non est by the Punjab High Court—it is urged—his right to claim wages continued to accrue
every month even during the period of dismissal. In the view propounded by the learned Counsel,
limitation for making the application under Section 15(2) started from 3 January 1956, the
date of the dismissal and the application made by the appellant more than three years thereafter,
was clearly time barred. Reference has been made to this Court’s decision in Jai Chand Sawhney
vs Union of India.7
We shall presently see that while the contentions of the learned Counsel for the respondents
cannot, those canvassed by the learned Counsel for the appellant must prevail.
The material part of Section 15 of the Act reads:

Section 15(2) where contrary to the provisions of this Act any deduction has been made
from the wages of an employed person, or any payment of wages has been delayed, such per-
son himself, or any legal practioner or any official of a registered trade union authorised in
writing to act on his behalf, or any inspector under this Act, or any other person acting with
the permission of the authority appointed under sub-section (1) may apply to such authority
for a direction under sub-section (3):
Provided that every such application shall be presented within (twelve months) from the
date on which the deduction from the wages was made or from the date on which the pay-
ment of the wages was due to be made, as the case may be:
Provided further that any application may be admitted after the said period of twelve
months when the applicant satisfies the authority that he had sufficient cause for not making
the application within such period.
15(3) When any application under sub-section (2) is entertained, the authority shall hear the
applicant and the employer or other person responsible for the payment of wages under
Section 3, or give them an opportunity of being heard, and after such further inquiry (if any)
as may be necessary, may, without prejudice to any other penalty to which such employer or
other person is liable under this Act, direct the refund to the employed person of the amount
deducted, or the payment of delayed wages, together with the payment of such compensation
as the authority may think fit, not exceeding ten times the amount deducted in the former
case and not exceeding twenty five rupees in the latter, and even if the amount deducted or
the delayed wages are paid before the disposal of the application, direct the payment of such
compensation, as the authority may think fit, not exceeding twenty-five rupees…
494 Social Justice and Labour Jurisprudence

The question of limitation turns on an interpretation of the first proviso to sub-section (2) of
Section 15. This proviso ex facie indicates two alternative termini a quo for limitation, namely:
(I) the date on which deduction from wages was made, or, (II) the date on which the payment
of the wages was due to be made.
From a reading of Section 15, it is clear that the legislature has deliberately used, first, in sub-
section (2), and then in sub-section (3), the expressions ‘deduction of wages’ and ‘delay in pay-
ment of wages’ as two distinct concepts. Terminus a quo (I) in the proviso expressly relates to the
deduction of wages, while (II) is referable to the delayed wages. If both these termini were
always relatable to the same point of time, then there would be no point in mentioning terminus
a quo (I), and the Legislature could have simply said that limitation for a claim under Section
15(2) would always start from the date on which the wages ‘fall due’ or ‘accrue’ as has been done
under Article 102 of the Limitation Act which applies only to the suits for recovery of wages.
The very fact that two distinct starting points of limitation referable to two distinct concepts
have been stated in the proviso shows that the Legislature had visualised that the date of deduction
of wages and the due date of delayed wages, may not always coincide. Conjunction ‘or’, which
in the context means ‘either’ and the phrase ‘as the case may be’ at the end of the proviso are
clinching indicia of this interpretation. They are not mere surplusages and must be given their
full effect. The legislature is not supposed to indulge in tautology; and when it uses analogous
words or phrases in the alternative, each may be presumed to convey a separate and distinct
meaning, the choice of either of which may involve the rejection of the other. To hold that the
two expressions ‘wages deducted’ and ‘wages delayed’, though used in the alternative, carry the
same meaning, and in the proviso are always referable to one and the same point of time would
be contrary to this primary canon of interpretation.
‘[D]eduction from wages’ has not been defined in the Act. Some illustrations of such deductions
are, however, to be found in Sections 7 and 13. One of them in Section 7(2)(b) is ‘deductions
for absence from duty’ which indicate that such deduction can be a total deduction also. That
is to say, ‘deduction from wages’ may be the same thing as ‘deduction of wages’. The deduction
in the instant case is akin to this category covering the entire deficiency for the period of absence,
the only difference being that here, the appellant’s absence from duty was involuntary. Such
absence in official parlance is euphemistically called ‘inactive service’ if the employee is later on
reinstated.
The point to be considered further is, when did such deduction of wages take place? Ordinarily
in a case like the present where the employee was dismissed on one date and reinstated on a later
date, the deduction of wages may synchronise with the act of reinstatement. But on the peculiar
and admitted facts of this case, the deduction did not take place on the date of reinstatement
(26-12-1958) because the order of reinstatement expressly stated that ‘decision with regard to
his wages to be paid for that period will be taken later on’. In the case in hand, therefore, the
‘deduction’ will coincide with the decision impliedly or expressly deducting the wages. Such
a decision was taken and put in a course of communication to the appellant on Feb 18, 1959
whereby he was informed that the period from 3-1-1956 to 17-2-1959, would be treated as
‘leave due’ which, it is conceded, meant leave without pay. Thus, deduction from his wages for
the entire period of his ‘inactive service’ took place on Feb 16, 1959, and limitation under the
first part of the proviso commenced from that date. The application was made on 13 August
1959, within six months of that date and was thus within time.
In Jai Chand Sawhney’s8 case the interpretation of the first proviso to Section 15(2) never
came up for consideration. Therein, the court was concerned only with the construction of the
expression ‘accrue/due’ in Article 102 of the Limitation Act, 1908 which does not govern appli-
cations under Section 15(2) of the Act. That case, therefore, is of no assistance in determining
the precise issue before us.
It may be observed in passing that the rule in Sheo Prasad vs Addl. District Judge, Moradabad,9
relied on by the Additional District Judge, was not followed by the same High Court in Ram
 Wages and Monetary Benefits 495

Kishore Sharma vs Addl. District Judge, Saharanpur10 as it had ceased to be good law in view of
the decision of this court in Divisional Supt. Northern Rly. V. Pushkar Dutt Sharma.11
In Pushkar Dutt’s case,12 the application under Section 15(2) of the Act was filed within six
months of the date in which the dismissal of the employee was set aside by the court in second
appeal. The employee’s application would have been within time irrespective of whether his
case was treated as one of the ‘wages deducted’ or ‘wages delayed’. Therefore, the necessity of
examining the comparative meaning and distinction between ‘deduction from wages’ or ‘delay
in payment of wages due’ and the two alternative starting points of limitation relatable to these
expressions, did not arise in that case.
In the light of the above discussion, we reverse the finding of the Additional District Judge
and hold that the application filed by the appellant under Section 15(2) of the Act having been
made within six months of the date of deduction from his wages, was within time.
The second ground on which the Order of the Additional District Judge proceeds, is that
since the deduction of the wages for the period of his inactive service from 1 April 1956 to Feb
17, 1959, had been made under the order of a competent authority passed in accordance with
rule 2044 of the Railway Establishment Code, in view of Section 7(2)(h) of the Act no order
could be made for the refund of the deducted amount. Both the learned Counsel before us are
agreed that in view of the pronouncement of this Court in Devendra Pratap Narain Raj Sharma
vs State of U.P.,13 this ground is not sustainable. In Sharma’s14 case, this Court was construing rule
54 of the U.P. Government Fundamental Rules, the language of which is substantially the same
as that of rule 2044 of the Railway Establishment Code. It was held therein, that rule 54 enables
the State Government to fix the pay of a public servant when his dismissal is set aside in depart-
mental appeal. But that rule has no application to cases in which dismissal is declared invalid by
a decree of a civil court and he is, in consequence, reinstated.
Mr Bishan Narain next contends that the prescribed Authority had wrongly disallowed the
claim of the appellant to ‘Running Allowance’ which he had misdescribed as ‘Travelling Allow-
ance’ in his claim application. The point pressed into argument is, that once the Authority had
allowed the appellant to amend his application for converting the claim of ‘Travelling Allowance’
into ‘Running Allowance’, it had no discretion left thereafter to prevent him from carrying out
the amendment, on the technical ground that the period indicated under Order 6, Rule 18,
Code of Civil Procedure, for this purpose, has expired. The Code of Civil Procedure, it is urged,
does not govern amendment of applications under Section15(2) of the Act.
The contention is untenable. While it is true that Rules 17 and 18 of Order 6 of the Code of
Civil Procedure do not, in terms, apply to amendment of an application under Section 15(2),
the Authority is competent to device, consistently with the provisions of the Act and the rules
made thereunder, its own procedure based on general principles of justice, equity and good
conscience. One of such principles is that delay defeats equity. The Authority found that the
applicant was guilty of gross negligence. He took no steps whatever to carry out the amendment
for several months after the order permitting the amendment, and thereafter, when the case was
at final stage, he suddenly woke up, as it were, from slumber, and sought to amend his application.
In the circumstances, the Authority rightly refused to put a premium on this delay and laxity on
the part of the appellant. In the view we take on the claim to running allowance we need not
pronounce finally on whether an amendment to the relief once granted requires to be formally
carried out in the petition, as in a pleading in Court, less rigidity being permissible in quasi
Judicial proceedings.
Mr Bishan Narain further contends that Running Allowance was a part of the pay or sub-
stantive wages. In support of this argument he has invited our attention to rule 2003 of the
Railway Establishment Code, clause 2 of which defines ‘average pay’. According to the second
proviso to this clause, in the case of staff entitled to running allowance, average pay for the pur-
pose of leave salary shall include the average running allowance earned during the 12 months
immediately preceding the month in which a railway servant proceeds on leave subject to a
496 Social Justice and Labour Jurisprudence

maximum of 75 percent of the average pay for the said period, the average running allowance
once determined remaining in operation during the remaining part of the financial year in cases
of leave not exceeding one month. The crucial words, which have been underlined, show that
such running allowance is counted towards ‘average pay’ in those cases only where the leave
does not exceed one month. It cannot, therefore, be said that running allowance was due to the
appellant as part of his wages for the entire period of his inactive service. Travelling allowance or
running allowance is eligible if the officer has travelled or run, not otherwise. We therefore
negative this contention.
For the foregoing reasons, we allow this appeal, set aside the order of the Appellate Authority
and restore that of the prescribed Authority. The appellant shall have his costs throughout.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE KRISHNA IYER

The judgment just delivered has my full concurrence but I feel impelled to make a few obser-
vations not on the merits but on governmental disposition to litigation, the present case being
symptomatic of a serious deficiency. In this country the State is the largest litigant to-day and
the huge expenditure involved makes a big draft on the public exchequer. In the context of ex-
panding dimensions of State activity and responsibility, is it unfair to expect finer sense and
sensibility in its litigation policy, the absence of which, in the present case, has led the railway
callously and cantankerously to resist an action by its own employee, a small man, by urging a
mere technical plea which has been pursued right up to the summit court here and has been
negatived in the judgment just pronounced. Instances of this type are legion as is evidenced by
the fact that the Law Commission of India in a recent report15 on amendments to the Civil Pro-
cedure Code has suggested the deletion of S. 80, finding that wholesome provision hardly ever
utilised by Government, and has gone further to provide a special procedure for Government
Litigation to highlight the need for the activist policy of just settlement of claims where the
State is a party. It is not right for a welfare State like ours to be Janus-faced, and while formulating
the humanist project of legal aid to the poor, contest the claims of poor employees under it
pleading limitation and the like. That the tendency is chronic flows from certain observations
I had made in a Kerala High Court decision, P.P. Abubacker vs Union of India16 which I may use-
fully excerpt here:

The State under our Constitution undertakes economic activities in a vast and widening
public sector and inevitably gets involved in disputes with private individuals. But it must be
remembered that the State is no ordinary party trying to win a case against one of its own
citizens by hook or by crook; for, the State’s interest is to meet honest claims, vindicate a sub-
stantial defence and never to score a technical point or overreach a weaker party to avoid a
just liability or secure an unfair advantage, simply because legal devices provide such an
opportunity. The State is a virtuous litigant and looks with unconcern on immoral forensic
successes so that if on the merits the case is weak, government shows a willingness to settle
the dispute regardless of prestige and other lesser motivations which move private parties to
fight in court. The lay-out on litigation costs and executive time by the State and its agencies
is so staggering these days because of the large amount of litigation in which it is involved
that a positive and wholesome policy of cutting back on the volume of law suits by the twin
methods of not being tempted into forensic show-downs where a reasonable adjustment is
feasible and ever offering to extinguish a pending proceeding on just terms, giving the legal
mentors of government some initiative and authority in this behalf. I am not indulging
in any judicial homily but only echoing the dynamic national policy on State litigation evolved
at a Conference of Law Ministers of India way back in 1957. This second appeal strikes me
as an instance of disregard of that policy.
 Wages and Monetary Benefits 497

All these words from the Bench, hopefully addressed to a responsive Government, may, if
seasonable reactions follow, go a long way to avoidance of governmental litigiousness and affirm-
ance of the image of the State as deeply concerned only in just—Social Justice. The pyrrhic
victory of the poor appellant in this case is a sad justification for the above observations.

Grant of Additional Dearness Allowances:

Principles for Consideration

The Supreme Court, right from the time of its inception, has in a number of cases clearly
laid down the principles to be followed by the wage-fixing authorities, such as industrial
tribunals, whenever a wage-related issue comes before it. Any deviation from this normal
rule would always meet with a warning from the apex Court.

Precision Bearings India vs Baroda Mazdoor Sabha17

In this case, the Supreme Court was called upon to decide the correctness of the view
taken by the industrial tribunal in disposing of a matter related to a claim for additional
dearness allowance.

THE JUDGEMENT DELIVERED BY JUSTICE GOSWAMI

This appeal by Special leave is directed against the award of the Industrial Tribunal, Gujarat, of
8 October 1976. Although it is a composite award disposing of two references by the State
Government, we are concerned in this appeal with reference (IT) No. 11 of 1975 as per the
State Government notification of 21 January 1975 and even out of the two questions referred
to therein only with regard to one of these regarding dearness allowance.
The relevant issue which arises for consideration in this appeal may be quoted below:

All workmen should be paid dearness allowance at the rate of 100% dearness allowance paid
to the workers of the Cotton Textile Mills at Ahmedabad.

Before we advert to the submission of Mr H.R. Gokhale, appearing on behalf of the appellant,
it will be appropriate to indicate that there is no dispute about granting dearness allowance of
the pattern of what is known as the Ahmedabad Textile D.A. The question to be determined by
the tribunal was only with regard to the percentage of the textile D.A. to be paid to the employees
of the company.
The tribunal has noticed that

the recent trend in the several industries—textile, engineering and others, in Ahmedabad,
Baroda and in some other parts of the State of Gujarat, is to make a demand for dearness
allowance on the lines of the dearness allowance paid to the workers of the cotton textile
mills at Ahmedabad, with a varying percentage.

The tribunal describes this as what in ordinary parlance is called the ‘Textile D.A.’ and
reckons it ‘as before the revision of the basic wage in the mills prior to 1-1-1974’.
498 Social Justice and Labour Jurisprudence

The company is manufacturing high precision ball and roller bearings in collaboration with
a West German company. It has its plant in the district of Baroda with a manufacturing capacity
of 24 lakh pieces of bearings per annum upto 1973 and 28.82 lakh pieces per annum from
1974. The company was incorporated in April, 1962 and went into commercial production
from June 1965. Its registered office is in Bombay and has its sales office in Bombay, Calcutta,
Delhi and Madras. The plant is being operated almost to full capacity from June 1965 onwards.
The production has also increased progressively. The number of workers on 31-8-1974 was
about 630. The company is said to be the third largest unit in the ball bearing industry in the
country, the other two concerns being Antifriction Bearings and the Associated Bearings, the
next one to the company being Shriram Bearings.
Two questions are raised before us by Mr Gokhale. Counsel is conscious of his limitations in
an appeal by special leave under Article 136 of the Constitution and has, therefore, fairly enough
confined his submissions within narrow bounds and we fully appreciate this stand. The first
submission of Mr Gokhale in the forefront of his argument is that the Industrial Tribunal has
failed to consider the impact of the rise in dearness allowance granted by it on the financial cap-
acity of the appellant to bear the burden.
It is true that in considering the question of dearness allowance the capacity to pay of the
company is one of the most important considerations. Mr Gokhale has pointed out that the
additional liability as a result of the award would be Rs 8,29,312 in 1975, Rupees 7,42,563 in
1976 and Rs 12,42,395 in 1977 and the percentage increase over the annual wage bill will
respectively be 36.76%, 32.91% and 55.07% for the said three years. He has also pointed out
that the company was able to declare 8% dividend for the first time in the year 1970–71 and
has been incurring loss for the earlier years from 1962–63. He also points out that although
dividends have been progressively increasing from 8% to 12% from 1970–71 to 1974–75, only
8% dividend was declared in the year 1975–76. Besides, the company has to spend huge sums
for replacement costs which according to counsel, the Tribunal has not properly taken into ac-
count. It is true that the Tribunal has mentioned in the award that this could be done in a
phased manner. Mr Gokhale submits with some justification that this was purely a management
function and the Tribunal should have taken the figures as furnished by the management in
making reserves for replacement costs. We have, however, seen that although a substantial sum
was kept as reserve towards the replacement costs, only a fraction of it was actually utilised. The
company therefore, cannot make any grievance about the manner in which the tribunal has
dealt with this aspect. Mr Garg, on behalf of the respondents, also drew our attention to para-
graph 4 of the company’s written statement (p. 62, Volume 1) where after having referred to
certain offers made by it the company was prepared to the ‘increase of about Rs 15 lacs in the
employee cost in the very first year…’.
We find that the Tribunal has exhaustively gone into the whole matter with care and kept in
view the five principles laid down by this Court in the Bengal Chemical & Pharmaceutical Works
Ltd. vs Its Workmen,18 the 5th one being the additional financial burden which dearness allowance
would impose upon the employer and his ability to bear such burden. We are unable to find any
infirmity in the Tribunal dealing with the point of the financial capacity of the employer to bear
the burden. The tribunal finally observed as follows:—

On a careful consideration of all the relevant factors, in my opinion, the dearness allowance
paid to the PBI (Precision Bearing India) workmen at the minimum level of basic pay from
Rs 26—upto Rs 100—should be from 80 percent, of the Textile D.A. phased over a period
of three years. The dearness allowance in the higher pay scale of Rs 101–Rs 200—should be
40 percent and the still higher slab of Rs 201 and above, should be 20 percent, the per-
centage for the higher two slabs remaining the same.
 Wages and Monetary Benefits 499

The 40 percent and 20 percent of the basic wages in the higher slabs were in addition to the
Ahmedabad Textile Dearness Allowance granted in the award. This takes us to the second
objection of Mr Gokhale.
It is submitted that in the charter of demands of the union there were two specific demands
with regard to dearness allowance. These were as follows:

1:1. It is demanded that the existing minimum dearness allowance of Rs 146 should be
modified and that all the workers including workers known as staff should be paid minimum
dearness allowance at the rate of full dearness allowance that is being paid to the textile
workers at Ahmedabad, i.e. 100% of Ahmedabad Textile rate.
1:2. With the above minimum dearness allowance the workers and workers known as staff
should be further continued the higher dearness allowance as under—

Below Rs 100 pay — 100% Ahmedabad Textile Dearness Allowance.

Pay range between — 100% Ahmedabad Textile Dearness Allowance + 40% of
Rs 100 to Rs 200 — Basic.
Pay above Rs 200 — 100% Ahmedabad Textile Dearness Allowance + 20% of Basic.

Even though the demand for dearness allowance was as above, the State Government referred
the dispute only in the form set out at the outset. The Government did not entertain the claim
of dearness allowance in addition to the 100% D.A. paid to the workers of the cotton textile
mills at Ahmedabad. In other words, while the claim of the union was Ahmedabad Textile D.A.
plus, the Government did not entertain the dispute between the parties in that form. We find
great force in the above submission of Mr Gokhale. The Tribunal in view of the content of the
dispute referred to it had no jurisdiction in this reference to grant anything more than 100% of
the Ahmedabad Textile D.A. on the outside. Since the tribunal after having given appropriate
consideration to all aspects of the matter granted varying percentages from 80% to 89% phased
in a particular way, it had virtually rejected the union’s claim for 100% of Textile D.A. Having
done so, there was no scope for allowing to the higher brackets of wage earners in addition 40%
and 20% of basic wages as dearness allowance. This part of the award is, therefore, beyond the
scope of the reference and must be quashed which we hereby do. If the Government at a future
time intends to entertain a dispute of this nature with regard to higher brackets of wage earners
that will be a different dispute but such a claim could not be entertained by the tribunal in the
present reference.
We may observe that during the course of the proceedings before the tribunal the clerical and
the supervisory staff seem to have withdrawn from the reference and even an application was
filed by some of them before the tribunal to confine the dispute as pertaining to the manual and
technical workers. The Tribunal, however, did not accede to this request and proceeded on the
footing that all the members of the staff were included in the reference.
We should not be taken to suggest that the 40% and 20% plus is either wrong or excessive by
way of high cost allowance. Indeed, we even felt that the lowest bracket upto Rs 100 needed
full neutralisation of the rise in the cost of living as has been held in Killick Nixon Limited vs
Killick & Allied Companies Employees Union.19 Nor do we fail to see the force of Shri Garg’s sub-
mission that social justice perspectives being integral to industrial jurisprudence, the high cost
allowance as a component of D.A. is not impermissible in principle. It is a legitimate item. But
we disallow because there is a deliberate omission to make a reference of that item and so falls
outside the jurisdiction of the tribunal. That is why we have expressly observed that such a
dispute may well be referred by Government, if it considers fit, and this decision will not bar
such a course.
500 Social Justice and Labour Jurisprudence

In the result the appeal is partly allowed. The award of the Tribunal with regard to the 40%
and 20% for the higher two slabs is set aside. In all other aspects the award of the Tribunal
stands. The appellant will pay the costs (one set) of the respondents as ordered at the time of
granting the special leave and will also pay interest as ordered therein.
The arrears calculated in terms of the Award now upheld will be paid to the respondents in
two equal instalments the first instalment within three months from today and the final instal-
ment within three months thereafter.

Interpretation of an Industrial Truce Agreement Relating

to Wage Structure: The Approach
K. Savanth vs the Mysore State Road Transport Corporation and Another 20

This appeal by special leave, which was directed against the judgement and order dated
14 December 1970 of the High Court, Mysore, at Bangalore, allowing the writ petition
1176 of 1967 filed before it by the first respondent under Articles 226 and 227 of the
Constitution and quashing the orders dated 30 September 1966 and 1 January 1967 of
the Labour Court, Bangalore, made in the appellant’s application 171 of 1965, raises an
interesting question as to the scope and ambit of clause 4 of the industrial truce agreement
arrived at on 10 January 1958 between the management of the Mysore Government
Road Transport Department and the representatives of the State Transport Employees’
Federation.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE JASWANT SINGH

It appears that the appellant entered the service of the Bangalore Transport Company Ltd. on
1 September 1950 as a Probationary Traffic Supervisor on a salary of Rs 80 per mensem. On
completion of his probationary period, he was confirmed in the said post on a salary of Rs 100
in the pay scale of Rs 100-10-150. By virtue of the powers vested in it under the Bangalore
Road Transport Services Act No. 8 of 1956, the Government of Mysore acquired the Bangalore
Transport Company Ltd. with effect from 1 October 1956 with the result that along with
other employees of the Company, the appellant became a civil servant in the Transport Depart-
ment of the Government of Mysore which catered to the transport requirements of the public.
In course of time, the appellant was appointed as Assistant Traffic Superintendent and was
given a higher pay scale of Rs 150-10-200. On 1 April 1957 when he held that post, he was in
the pay scale of Rs 150-10-200 and was drawing a salary of Rs 150 P.M. With the re-organisation
of the States and the formation of the enlarged Mysore State as well as the expansion of the
Mysore Government Road Transport Department (hereinafter referred to as ‘Transport Depart-
ment’) comprising of the Hubli Region of the ex-Bombay State Road Transport Corporation,
the Raichur Section of the ex-Hyderabad State Road Transport Department and the Bangalore
Transport Service of the ex-Bangalore Transport Company Ltd. having their respective pay
scales, service conditions, etc., it was considered necessary by the members of the State Transport
Employees’ Federation as well as the Management of the Transport Department to have uniform
pay scales, service conditions, etc. for the entire organisation of the Transport Department.
Accordingly, on 10 January 1958, an Industrial Truce Agreement was concluded between the
 Wages and Monetary Benefits 501

Management of the Transport Department and the representatives of the State Transport Em-
ployees’ Federation which was given a retroactive effect from 1 April 1957. Clause 4 of this
Agreement which was intended to bring about uniformity of pay scales in all the divisions of
the Transport Department provided as follows:—

Weightage in the revised pay scales will be admissible only to the regular employees of the
Government Road Transport Department of ex-State of Mysore and the Bangalore Transport
Service Unit.
(a) The pay of an employee shall be fixed in the new scale at a stage next above his pay in the
existing scale on 1 April 1957, and, if, his present pay is less than the minimum of the
revised scale, his pay shall be fixed at such minimum in the revised scale.
Note: The pay in the existing scale on 1 April 1957 includes the increment, if any,
accruing on that date.
(b) After fixing the pay as above i.e. (a) he shall be granted advance increments in the revised
scale as under:
(1) For 3 completed years of service 1 increment
(2) For 4 completed years of service 2 increments
(3) For 6 or more completed years of service 3 increments
Note: Service means, the entire service of the employee irrespective of the grade held
by him.
(c) In cases where the minimum pay in the new scale has to be granted under sub-clause
(a) of Clause 4, the benefit of advance increments according to sub-clause (b) above shall
not accrue when the increase of the minimum pay in the new scale over the pay in the
existing scale exceeds Rs 25 plus one increment in the new scale. In other cases where
the initial pay has to be fixed above the minimum, the total benefit under sub-clauses
(a) and (b) above shall be uniformly limited to Rs 25 plus one increment in the revised
scale subject to a minimum of Rs 5.
(d) The above principles shall apply in fixing the initial pay both in substantive and officiating
appointments.
(e) When the weightage under sub-clause (b) above takes the total pay beyond the scale, the
difference is treated as personal pay.
(f ) The future increments will accrue from 1 April 1958.

After the conclusion of the aforesaid Industrial Truce Agreement, the then Management of
the Transport Department fixed the initial pay of the appellant in the new scale at Rs 190. Dis-
satisfied with this fixation, the appellant made a representation to the Management urging that
his initial pay in the revised scale ought to have been fixed at Rs 220 and that it had been wrongly
fixed at Rs 190.
On 1 August 1961, a Corporation styled as the ‘Mysore State Road Transport Corporation’
(hereinafter referred to as ‘the Corporation’) was constituted under Section 3 of the Road Trans-
port Corporation Act (Act 34 of 1951). By virtue of a notification issued by the Government of
Mysore under Section 34 of the Act, the Corporation took over the business of the Transport
Department together with all its liabilities as the sole successor of the Department. In view of
the fact that said notification protected the service conditions of the employees of the erstwhile
Transport Department, the appellant opted for service under the Corporation and kept on pur-
suing the earlier representation made by him for fixation of his initial pay as on 1 April 1957 at
Rs 220 in terms of the first part of sub-clause (c) of clause 4 of the Industrial Truce Agreement.
The efforts made by him in this behalf having proved ineffective, the appellant made an appli-
cation on 20 December 1965 before the Labour Court under Section 33(2) of the Industrial
502 Social Justice and Labour Jurisprudence

Disputes Act, 1947 claiming that his initial pay as on 1 April 1957 had been wrongly fixed by
the Management of the Transport Department at Rs 190, as against Rs 220 to which he was
entitled by virtue of clause 4 of the Industrial Truce Agreement. The appellant also claimed in-
crease in his dearness allowance in terms of the said Agreement. Holding that the appellant’s
pay had to be fixed at Rs 220 p.m. in the pay scale of Rs 175-15-325 with a dearness allow-
ance of Rs 50 P.M. as on 1 April 1957, the Labour Court by its order dated September 30,
1966 allowed the claim of the appellant and directed the Corporation to pay him a sum of
Rs 3345.29 p. on account of the benefits claimed by him. This order was challenged by the
Corporation before the High Court of Mysore by means of a writ petition under Articles 226
and 227 of the Constitution. By its aforesaid judgment and order dated 14 December 1970,
the High Court allowed the petition and held that the erstwhile Management of the Transport
Department was right in fixing the initial pay of the appellant at Rs 190. It is against this judg-
ment and order that the appellant has come up in appeal to this Court by special leave, as al-
ready stated.
In the absence of the appellant who has chosen not to appear despite service, the learned
Attorney General has taken us through the material on the record and has urged that the High
Court was right in reversing the order of the Labour Court and upholding the contention of the
Corporation that the initial pay of the appellant could be fixed only at Rs 190 and not at Rs 220
as claimed by the appellant.
We have given our careful consideration to the submissions made by the learned Attorney
General but are unable to agree with him.
A plain reading of clause 4 of the Industrial Truce Agreement reproduced above makes it
crystal clear that the pay of the appellant as on 1 April 1957 in the then existing scale of
Rs 150-10-200 being admittedly Rs 150 i.e. less than the minimum pay of the revised scale of
Rs 175-15-325, it had, according to clause 4(a) of the Agreement, to be fixed at Rs 175 which
is the minimum of the aforementioned revised scale. Now the appellant having put in more
than six years’ service and his case being clearly outside the pale of the prohibition envisaged
by the first part of sub-clause (c) of clause 4 of the Agreement, he had to be granted the benefit
of three advance increments in terms of the formula contained in sub-clause (b) of clause 4 of
the Agreement which would take his initial pay to Rs 220. The second part of sub-clause (c) of
clause 4 of the Agreement which is heavily relied upon on behalf of the Corporation has no
applicability to the present case as that part would operate only in those cases which fall within
the prohibition contemplated by the first part of sub-clause (c) of clause 4 i.e. where the increase
in the minimum pay in the revised scale over the pay in the scale which existed on 1 April 1957
exceeds Rs 25 plus one increment in the new scale i.e. if it exceeds Rs 25 plus Rs 15 totalling
Rs 40. As in the instant case the increase of the minimum pay in the new scale does not exceed
Rs 40, the second part of sub-clause (c) of clause 4 which is residuary cannot be invoked by the
Corporation. The High Court was, therefore, patently in error in holding that the case of the
appellant was covered not by the first part of sub-clause (c) of clause 4 but by the second part
thereof. In so holding, it obviously overlooked the significance of the words ‘in other cases’
occurring at the commencement of the second part of sub-clause (c) of clause 4. The said words
make it abundantly clear that it is only where a case does not fall within the purview of the first
part of sub-clause (c) of clause 4 that it would be governed by the second part of the sub-clause.
As the case of the appellant was not covered by the ban imposed by the first part of sub-clause
(c) of clause 4 of the Industrial Truce Agreement, he could not have been denied the benefit of
the advance increments which accrued to him under sub-clause (b) thereof. Accordingly, the
order of the High Court which suffers from a patent error cannot be sustained.
In the result, we allow the appeal, set aside the judgment and order of the High Court and
restore that of the Labour Court. In view of the fact that the appellant has failed to appear, we
make no order as to costs.
 Wages and Monetary Benefits 503

Computation of Dearness Allowance: Validity

The issue pertaining to the entitlement of dearness allowance is a very complicated aspect
of labour law which the industrial tribunal has to confront. The tribunal, as per the ratio
of the apex Court, has handled the issue from various perspectives, such as the prevailing
rate of the dearness allowance with comparable concerns and the accepted rate of dearness
allowance prevailing in the region—if necessary, going beyond the region for the purpose
of comparision.

Tata Chemicals vs its Workmen21

In this case, the Supreme Court dealt clearly with these aspects while upholding the
award of the industrial tribunal.

THE FACTS OF THE CASE

This appeal by special leave was directed against the award dated 21 February 1977, of the
Industrial Tribunal, Gujarat, on Reference 13 of 1975 made on 21 January 1975, by the Govern-
ment of Gujarat in exercise of its powers under Section 10(1)(d) of the Industrial Disputes Act,
1947 (XIV of 1947) (hereafter called ‘the Act’) for adjudication of a dispute relating to five
demands—washing allowance, woollen jersey, unclean allowance, transport allowance and
variable dearness allowance linked with the Ahmedabad cost of living index and adequate dear-
ness allowance equal to that of the textile workers of Ahmedabad (which is 100 per cent
neutralisation)—sponsored by the Chemicals Kamdar Sangh, Mithapur (hereafter referred to
as ‘the Sangh’).
The appellant was a public limited company registered under the Indian Companies Act and
had its factory at Mithapur in the state of Gujarat. As per its practice and policy of recognising
and negotiating with the union enjoying the support of the largest number of its workers, it
carried on its dealings with the Sangh (which was the recognised union) till 25 January 1973,
when the Assistant Commissioner of Labour, Ahmedabad, declared—as a result of the verification
made by him—that the Tata Chemicals Employees’ Union (hereafter referred to as ‘the Employees
Union’) was entitled to be recognised under the Code of Discipline in view of the fact that
55 per cent of the total number of the employees of the concern were its members, and addressed
a communication to the appellant requesting it to recognise the said union. Pursuant to this
communication, the appellant accorded recognition to the Employees’ Union with effect from
25 January 1973. Thereupon, the Sangh filed a special civil application challenging the aforesaid
order of the Assistant Commissioner of Labour in the High Court of Gujarat, which was
summarily rejected (vide order dated 3 April 1973). On 18 June 1973, the Employees’ Union
submitted a charter of demands to the appellant, which included inter alia a demand for dearness
allowance at 100 percent of the Ahmedabad cotton textile rate, popularly known as the ‘textile
dearness allowance’. In respect of these demands, the conciliation officer summoned a conciliatory
meeting for 26 July 1973. Meanwhile, on 9 July 1973, the Sangh, representing about 800
workmen of the concern, submitted the aforesaid charter of demands before the management,
which also included a demand for dearness allowance as paid to the workers of the cotton textile
industry. The charter also contained an intimation to the management of the Sangh’s intention
to resort to strike for realisation of its demands. As negotiations between the parties for an amic-
able settlement did not prove fruitful, the Sangh wrote to the Conciliation Officer, Rajkot, on
17 July 1973, requesting him to intervene. After preliminary discussions with both the parties,
504 Social Justice and Labour Jurisprudence

the conciliation officer admitted the case for conciliation on 30 August 1973. As the conciliation
proceedings held by him from time to time between 7 September 1973 and 6 November 1973
(to which the Employees’ Union was also made a party at its request) did not lead to a settlement
between the parties, the conciliation officer submitted his failure report to the state government
on 14 December 1973. On the same date, the appellant arrived at an agreement with the Em-
ployees’ Union in respect of the demands submitted by the latter on behalf of its daily rated and
monthly rated members, including clerical staff. It was agreed between the parties to this settle-
ment that it would remain in force for a period of three years with effect from 1 January 1974.
A notice with regard to the settlement with the Employees’ Union was put up on the general
notice board by the appellant on 17 December 1973. On 21 January 1975, the state government
made, as already stated, a reference to the industrial tribunal for adjudication of the dispute re-
specting the aforesaid demands raised by the Sangh. In the course of the reference proceedings,
the Employees’ Union adopted a nebulous and shifting stand. In its anxiety to maintain its
status as the recognised majority union having the sole right of collective bargaining and settling
industrial disputes, it insisted in the first instance on its right to actively participate in the pro-
ceedings and inter alia questioned the right of the Sangh to raise the demand with regard to
variable dearness allowance, as also the right of the government to refer the demand for adjudica-
tion, alleging that earlier in 1968, when it raised a demand for 100 percent textile dearness
allowance, the Sangh resisted the same and entered into a settlement with the appellant company
on 31 July 1969 for a period of five years. Later on, abandoning its initial stand, it supported
the demand of the Sangh, averring that having regard to the huge profits made by the appel-
lant company over the years, the workmen were entitled to the payment of dearness allowance
not only on the lines of the textile dearness allowance but a still higher dearness allowance like
that of the employees in the Bombay head office of the appellant company.

EXCERPTS FROM THE JUDGEMENT DELIVERED BY JUSTICE JASWANT SINGH

It is a matter of common knowledge that the spiral of prices has been constantly rising and the
basket of goods and services has been costing more and more day after day since the outbreak of
the Second World War in September, 1939. It is equally well known and indeed is not disputed
that in the relevant years the prices of essential commodities and cost of living have been
comparatively higher at Mithapur than at other places in the district like Jamnagar, Dharangadhra,
Porbandar, Bhavnagar, etc. and the appellant Company had not been maintaining uniform
standard of dearness allowance and had been paying higher dearness allowance to the workmen
in its Head Office at Bombay than to its workmen at Mithapur. The statistics extracted from
various annual reports, etc. exhibited in the case (particularly Exhibit 15[6]) go to show that the
appellant Company which was established more than 40 years ago besides being a highly
integrated chemical complex based on the solar evaporation of sea water in India is the largest
solar salt producing concern in the country. The statistics also show that production of soda ash
in diverse forms by the appellant Company for the relevant years is considerably higher than
the combined production of soda ash of Dharangadhra Chemicals and Saurashtra Chemicals—
the two other concerns in the Saurashtra region. The statistics also establish that there is no
other heavy chemicals concern in the region which can be favourably compared to the appellant
Company in so far as the nature and extent of business, capital outlay, percentage of gross and
net profits, strength of labour force, reserves, dividends on equity shares, prospects of future
business are concerned. Again Chart (Ex. 13[26]) shows that the percentage of wages in the
appellant Company is the lowest amongst the even companies listed therein. Considering
all the relevant factors which are to be borne in mind in fixing the dearness allowance, it is evi-
dent that the appellant Company holds a unique position in heavy chemicals in the region. It is
in these circumstances that the Industrial Tribunal was constrained to turn to similar industries
in Gujarat and found in the light of the aforesaid guiding factors that Sarabhai Chemicals,
 Wages and Monetary Benefits 505

Baroda was the nearest similar industry which could legitimately serve as a comparable concern.
The statistics also establish that besides Sarabhai Chemicals, Baroda, Anil Starch, Ahmedabad,
Alembic Chemicals Works, Baroda, Atul Products, Bulsar and Ahmedabad Manufacturing and
Calico Printing Co. Ltd. which are included in the list of heavy chemical factories covered by
the Wages Board were paying 100% of Textile Dearness Allowance to its workmen. It is also
evident from Exhibit 23 that the total pay packet paid to Mithapur workers was much less as
compared to the total pay packet of the workers in other chemical and pharmaceutical companies
alluded to in Exhibit 23. The material on the record also makes it abundantly clear that the
appellant Company has been making huge profits over the years and its financial position is so
stable that it could not only give variable dearness allowance on the basis of what was being paid
to the workmen in the textile industry but could pay even higher allowance as was being paid to
its workmen in the Head Office at Bombay. The Tribunal was, therefore, justified in linking the
dearness allowance in question to the Textile Dearness Allowance paid to the industrial workers at
Ahmedabad which is based on the Report of Family Living Survey among Industrial Workers at
Ahmedabad, 1958–59, compiled as a result of the joint investigation carried on in a rational and
scientific manner by several institutions viz. Labour Bureau, Ministry of Labour and Employ-
ment, Government of India, Technical Advisory Committee on Cost of Living Index Numbers
consisting of representatives of the Ministry of Labour and Employment, Food and Agriculture,
Finance, Planning Commission, the National Sample Survey Directorate, the Department of
Statistics (C.S.O.), the Indian Statistical Institute and the Reserve Bank of India, etc. leading to
the construction of Consumer Price Index Number for the working class which was accepted as
reliable by this Court in Ahmedabad Mill Owners’ Association vs The Textile Labour Association.22
We are, therefore, of the opinion that notwithstanding the implementation of the recom-
mendations of the Wage Board, there was nothing wrong about the linking of the scheme of the
dearness allowance with the Ahmedabad Cost of Living Index Number known as Textile Dearness
Allowance as before the revision in 1974.
The decision of this Court in Bengal Chemical & Pharmaceutical Works Ltd. vs Its Workmen23
no doubt shows that in fixing wages and dearness allowance, the industry-cum-region formula
is inter alia to be kept in view. At the same time, it had to be borne in mind that there can be no
comparison between a small struggling concern and a large flourishing unit. It follows, therefore,
that when there is a large disparity between the two concerns engaged in the same line of busi-
ness in a region with which the Industrial Court is dealing, it is not safe to fix the same wage
structure for the large flourishing concern of long standing as obtains in a small struggling con-
cern (see French Motor Car Company Ltd. vs Their Workmen).24 It cannot also be lost sight of that
with the march of time, the narrow concept of industry-cum-region is fast changing and too
much importance cannot be attached to region. The modern trends in industrial law seem to
lay greater accent on the similarity of industry rather than on the region. It was observed by this
Court in Workmen vs New Egerton Woollen Mills 25 that where there are no comparable concerns
in the same industry in the region, the Tribunal can look to concerns in other industries in the
region for comparison but in that case such concerns should be as similar as possible and not
disproportionately large or absolutely dissimilar. On the parity of reasoning, it is reasonable to
conclude that where there are no comparable concerns engaged in similar industry in the region,
it is permissible for the Industrial Tribunal or Court to look to such similar industries or industries
as nearly similar as possible in adjoining or other region in the State having similar economic
conditions.
As in the instant case there was no comparable concern engaged in the line of business similar
to that of the appellant Company in the Saurashtra region, the Industrial Tribunal did not, in
our opinion, commit any error in taking into consideration for the purpose of comparison the
dearness allowance paid by Sarabhai Chemicals and other concerns of the like or approximately
like magnitude in other parts of the State of Gujarat.
506 Social Justice and Labour Jurisprudence

For the foregoing reasons, we do not find any force in this appeal which is dismissed with
costs quantified at Rs 2,000.

Adjusting Payment of Customary Bonus under

the Statute: The Guiding Principles

In India, the claim for payment of bonus by industrial workers out of the profits made by
an employer is a historical concept and recognised as a custom even prior to the enactment
of the Payment of Bonus Act, 1965. The Payment of Bonus Act, 1965, as such has not
created any new right for the industrial workers in claiming bonus from the employer.
However, the law regulates the payment of bonus to the extent as recognised within
the framework of the legislation. After the enactment of the statute in the year 1965, the
claim for customary bonus has created problems in view of Sections 17 and 34 of the
Act.26 Justice V.R. Krishna Iyer, through majority view almost forced a halt to this contro-
versy in the following case.

Mumbai Kamgar Sabha, Mumbai, vs Abdulbhai Faizullabhai and Others27

THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

A narration of the skeletal facts, sufficient to get a hang of the four legal issues debated at the bar
in this appeal, by special leave, will help direct the discussion along a disciplined course, although
the broader social arguments addressed have spilled over the banks of the jural stream.
Nag Devi, a locality in the city of Bombay, is studded with small hardware businesses where
pipes and fittings, nuts and bolts, tools and other small products are made and/or sold. These
establishments, well over a thousand, employ a considerable number of workmen in the neigh-
bourhood of 5,000, although each unit has (barring four), less than the statutory minimum of
20 workmen. This heavy density of undertakings and workers naturally produced an association
of employers and a union of workmen, each recognizing the other, for the necessary convenience
of collective bargaining. Apparently, these hardware merchants huddled together in the small
area, were getting on well in their business and in their relations with their workmen, and this
goodwill manifested itself in ex gratia payments to them of small amounts for a number years
prior to 1965, when trouble began.
Although rooted in goodness and grace, the annual repetition of these payments ripened, in
the consciousness of the workers, into a sort of right—nothing surprising when we see in our
towns and temples a trek of charity seekers claiming benevolence as of right from shopkeepers
and pilgrims, especially when this kindly disposition has been kept up over long years. The
compensation of yesterday crystallizes as the claim of today, and legal right begins as that which
is humanistically right. Anyway, the hardware merchants of Nag Devi, made of sterner stuff,
in the year 1965, abruptly declined to pay the goodwill sums of the spread-out past and the
frustrated workmen frowned on this stoppage by setting up a right to bonus averring considerable
profits for the industry (if one may conveniently use that expression for a collective coverage of
the conglomeration of hardware establishments). The defiant denial and the appointment of a
Board of Arbitrators under Section 10A of the Industrial Disputes Act to arbitrate upon twelve
demands put forward by the Mumbai Kamgar Sabha, Bombay (the union which represents the
bulk of workers employed in the tiny, but numerous, establishments). The charter of demands
 Wages and Monetary Benefits 507

included, inter alia, claim for 4 months’ wages as bonus for the year 1965. The arbitral board,
however, rejected the demand for bonus. The respondent establishments discontinued these
payments thereafter and the union’s insistence on bonus led to conciliation efforts. The Deputy
Commissioner of Labour mediated but since his intervention did not melt the hardened mood of
the employers, formal demands for payment of bonus were made by the Union and the Govern-
ment was persuaded to refer the dis-pute for adjudication to an Industrial Tribunal. The Tribunal
formulated two issues as arising from the statements of the parties and rendered his award dis-
missing the reference.
At this stage, it may be useful to set out the terms of reference made under Section 10(1)(d)
of the Industrial Disputes Act, 1947 (for short, the I.D. Act), for adjudication by the tribunal:

1. Whether the establishments (mentioned in the annexure) have been giving bonus to their
workmen till 1965? If so, how long before 1965 have the employers been giving bonus to
their workmen? And at what rate?
2. Whether payment of bonus by the employers to their workmen has become customs or
usage or condition of service in these establishments? If so, what should be the basis on
which employers should make payment of bonus to their workmen for the years ending
on any date in 1966, 1967, 1968 and 1969?

Following upon the statements of parties the Tribunal framed two issues which ran thus:

1. Whether the Award of the Arbitration Board made in Reference (VA) No. 1 of 1967 and
published in M.G.G. Part I-1, dated 31 October 1968, pp. 4259–86, operates as res
judicata to the demand of the workmen.
2. Whether the reference in respect of the demands is tenable and legal.

He answered the first in the affirmative and the second in the negative.
The union representing the workers in the mass has assailed the findings of the Tribunal, the
reasonings he has adopted and the mis-direction he has allegedly committed. The Tribunal did
not enter the merits of the claim but dismissed it in limine on the score that the demand for
bonus was barred by res judicata the arbitral board’s decision negativing the bonus for 1965
being the basis of this holding. The second ground for reaching the same conclusion was that
the Bonus Act was a comprehensive and exhaustive law dealing with the entire subject of bonus
and its beneficiaries. In short, in his view, the Bonus Act was a complete Code and no species of
bonus could survive outside contours of that statute. Admittedly, here the claim for bonus for
the relevant four years was founded on tradition or custom or condition of service and, in that
light, the Tribunal made short shrift of the workmen’s plea in these words:

In my opinion, the demand pertaining to the practice or custom prevailing in the establish-
ments before 1965 is not such a matter as has to be adjudicated and it also does not fall under
the provisions of Bonus Act. I, therefore, find that the reference in that respect also is not ten-
able and legal.

The submissions of Counsel may be itemized into four contentions which may be considered
seriatim. They are:

(a) Was the Industrial Tribunal competent to entertain the dispute at all?
(b) Was the claim for bonus for the years 1966–69 barred by res judicata?
(c) Was there, apart from profit-based bonus, customary bonus or bonus as a condition of
service?
(d) If answer to (c) is in favour of the workmen, does the Bonus Act interdict such a demand
since it does not provide for those categories of bonus and confine itself to profit based
508 Social Justice and Labour Jurisprudence

bonus, or does the Bonus Act speak on the topic of bonus of all species and, therefore,
stands foursquare between a claim for bonus and its grant, unless it finds statutory expres-
sion in the provisions of that Act?

The first contention which, curiously enough, has appealed to the Industrial Tribunal, need
not be investigated as it is devoid of merit and has rightly been given up by counsel for the re-
spondent. A casual perusal of the provisions bearing on the jurisdiction of the Labour Court
and the Industrial Tribunal as well as the relevant schedules will convince anyone that this industrial
dispute comes within the wider ambit of the Industrial Tribunal’s powers. It is unfortunate that
the Tribunal has made this palpable error. It is right to give plausible reasons for one’s verdict
and not mar it by bad, perfunctory supplementaries.
Fairness to respondent’s Counsel constrains us to consider in limine a flawsome plea for-
cibly urged that the union figured as the appellant before us but being no party to the dispute
(which was between the workers on the one hand and the establishments on the other) had no
locus standi. No right of the union qua union was involved and the real disputants were the
workers. Surely, there is terminological lapse in the cause title because, in fact, the aggrieved ap-
pellants are the workers collectively, not the union. But a bare reading of the petition, the de-
scription of parties, the grounds urged and grievances aired, leave us in no doubt that the battle
is between the workers and employers and the union represents, as a collective noun, as it were,
the numerous humans whose presence is indubitable in the contest, though formally invisible
on the party array. The substance of the matter is obvious and formal defects, in such circum-
stances, fade away. We are not dealing with a civil litigation governed by the civil procedure but
with an industrial dispute where the process of conflict resolution is informal, rough and-ready
and invites a liberal approach. Procedural prescriptions are handmaids, not mistresses of justice,
and failure of fair play is the spirit in which Courts must view processual deviances. Our adjectival
branch of jurisprudence, by and large, deals not with sophisticated litigants but the rural poor,
the urban lay and the weaker societal segments for whom law will be an added terror if technical
misdescriptions and deficiencies in drafting pleadings and setting out the cause title create a
secret weapon to non-suit a party. Where foul play is absent, and fairness is not faulted, lati-
tude is a grace of processual justice. Test litigations, representatives’ actions, pro bono publico and
like broadened forms of legal proceedings in keeping with the current accent on justice to the
common man and a necessary disincentive to those who wish to by pass the real issues on the
merits by suspect reliance on peripheral, procedural shortcomings. Even Article 226, viewed in
wider perspective, may be amenable to ventilation of collective or common grievances, as dis-
tinguished from assertion of individual rights although the traditional view, backed by precedents,
has opted for the narrower alternative. Public interest is promoted by a spacious construction of
locus standi in our socio-economic circumstances and conceptual latitudinarianism permits
taking liberties with individualization of the right to invoke the higher Court where the remedy
is shared by a considerable number, particularly when they are weaker. Less litigation, consistent
with fair process, is the aim of adjectival law. Therefore, the decisions cited before us founded
on the jurisdiction under Article 226 are inept and themselves somewhat out of tune with the
modern requirements of jurisprudence calculated to benefit the community. Two rulings of this
Court more or less endorse this general approach: Bar Council of Maharashtra vs M. V. Dabholkar,28
and Newabbganj Sugar Mills Co. Ltd. vs Union of India.29
All this apart, we are dealing with an industrial dispute which, in some respects, lends itself to
more informality especially in the matter of union representation. Technically, the union cannot
be the appellant, the workmen being the real parties. But the infelicity of drafting notwithstand-
ing, the union’s role as merely representing the workers is made clear in the description of the
parties. Learned Counsel took us through Section 36(1) and (4) of the Act, rules 29 and 36 of
the Central Rules under that Act, Section 15(2) of the Payment of Wages Act and some rulings
throwing dim light on the rule regarding representation in industrial litigation. We deem it
 Wages and Monetary Benefits 509

needless to go deeper into this question, for in industrial law, collective bargaining, union repre-
sentation at conciliations, arbitrations, adjudications and appellate and other proceedings is a
welcome development and an enlightened advance in industrial life.
Organized labour, inevitably involves unionization. Welfare of workers being a primary concern
of our Constitution (Part IV), we have to understand and interpret the new forms of procedure
at the prelitigative and litigative stages, conceptually recognizing the representative capacity of
labour unions. Of course, complications may arise where inter-union rivalries and kilkenny cat
competitions impair the peace and solidarity of the working class. It is admitted, in this case,
that there is only one union and so we are not called to visualize the difficult situations counsel
for the respondents invited us to do where a plurality of unions pollute workers’ unity and cre-
ate situations calling for investigation into the representative credentials of the party appearing
before the Tribunal or Court. It is enough, on the facts of this case, for us to take the union as an
abbreviation for the totality of workmen involved in the dispute, a convenient label which, for
reasons of expediency, converts a lengthy party array into a short and meaningful one, group
representation through unions being familiar in collective bargaining and later litigations.
We do not expect the rigid insistence on each workman having to be party eo nomine. The
whole body of workers, without their names being set out, is, in any case, sufficient, according
to the counsel for the respondents, although strictly speaking, even there an amount of vagueness
exists. For these reasons, we decline to frustrate this appeal by acceptance of a subversive tech-
nicality. We regard this appeal as one by the workmen compendiously projected and impleaded
through the union.
Next we come upon the plea of res judicata, as a roadblock in the way of the appellant. But
we will deal with it last, as was done by counsel, and so straight to the piece de resistance of this
lis. Points (b) and (c) bearing on bonus, therefore, claim our first attention and, in a sense are
integrated and amenable to common discussion.
Shri G.B. Pai appearing for the respondents, contended that the claim put forward by the
appellant before the tribunal was, on the face of it, unsustainable on the short ground that what
was pleaded was profit-based bonus only and, therefore, fell squarely within the Bonus Act.
That Act being a complete Code, it expressly excluded by Section 1(3) all establishments em-
ploying less than 20 workmen and all but four of the respondents were admittedly such small
undertakings, with the result that the death knell to the plea of bonus was tolled by the Act
itself. Therefore, the conclusion was irresistible, argued Counsel for the respondents, that the
plea for a profit-based bonus, being negatived by the statute, stands self-condemned.
This argument drives us into an enquiry as to whether the claim before the tribunal was for
profit-based bonus. ‘Yes’ was his holding and so he said ‘no’ to the workmen. The answer is the
same, if the claim is founded on a similar basis.
Shri Tarkunde, for the appellant, countered this seemingly fatal submission by urging that
whatever might have been the species of bonus demanded in 1965, the present dispute referred
by the State Government related to totally different type of bonus, namely, customary bonus or
one which was a term of the employment itself. Even if this be true, Shri G.B. Pai has his case
that the Bonus Act is all-comprehensive and no kind of bonus can gain legal recognition if it
falls outside the sweep and scope of the Bonus Act itself. No brand of bonus has life if it does
not find a place in the oxygen tent of the complete Code called the Bonus Act.
What thus first falls for our examination is the reference by the State Government to the tri-
bunal, the pleading of the workmen before the tribunal and the counter statement by the em-
ployers before the tribunal with a view to ascertain the character of the bonus demanded by the
workers and covered by the dispute. It must be remembered that the award has rejected the
claim not substantively but on the ground of two legal bars and care must be taken not to mix
up maintainability with merits. A short cut is a wrong cut often times and the tribunal’s easy
recourse to dismissal on preliminary grounds may well lead—and it has, as will be presently
510 Social Justice and Labour Jurisprudence

perceived—to a reopening of the case many years later if the higher Court reverses the legal
findings. Be that as it may, let us test the validity of the plea that only a profit based-bonus has
been claimed by the workers.
The demands referred by the State Government under Section 10(1)(d) specifically speak of
payment of bonus by the employers which ‘has become custom or usage or a condition of ser-
vice in the establishments’. The subsidiary or rather consequential point covered by the reference
is ‘if so what should be the basis on which employers should make payment of bonus to their
workmen for the years…’. It is plain that the subject-matter of the dispute, as referred by the
Government, deals with bonus based on custom or condition of service. The Tribunal is, there-
fore, bound to investigate this question, the terms of reference being the operational basis of its
jurisdiction.
The workmen, in their statement, have asserted that bonus had been paid for several years
and what transpired at the conciliation stages is clear from the letter of the Commissioner of
Labour who adverts of the ‘usual custom and practice of payment of bonus’. The colour of the
workers’ claim has been clarified further in paragraphs 10 to 12 of their statement before the
tribunal. While they do mention that the hardware merchants of Nag Devi have been making
large profits during the years in question and, therefore, can afford to pay bonus according to
the standards and criteria applicable to larger and prosperous industrial establishments, the real
foundation of their claim is set out in indubitable language as attributable to ‘custom, usage and
condition of service’. Surely, they have no case of bonus dependent upon the quantum of profits
of the establishments nor of uniformity region wise. On the other hand, the amount of bonus,
the time of payment, etc., vary from establishment to establishment. The constant factor, however,
is allegedly that there is ‘consistency, predictability and uniformity’, continuity and payment
‘without reference to the fluctuations in the financial performance and profits of each firm’.
The Sabha does not mince words when, in praying for relief, it states that the tribunal ‘be pleased
to restore the custom, usage and conditions of service represented by the payment of bonus in
these firms’. In short, the bedrock of the bonus claim of the workers is custom and usage and/or
implied condition of service. Nor have the establishments, who are the respondents before the
tribunal and before us, made any mistake about the nature of the demand. In their statement
before the tribunal they have urged that a scrutiny of the accounts of the firms is unnecessary
‘since the demand is not based on the profits or the financial results of the employers but is
based on custom’.
The contentions of the Sabha that the conditions of service under all these employers should
be governed by one standard and one criteria, is not tenable. Since all the shops are not owned
by one person and since every shop is a different entity there is no question of uniformity of ser-
vice conditions. Moreover, there is no law which lays down that the service conditions of the
employees under all these employers should be uniform. It is submitted that the reference to the
capital-turnover ratio in this paragraph is irrelevant. It is also submitted that the Sabha’s demand
that a sample scrutiny of the accounts of the firms should be made by the tribunal is irrelevant
in this respect since the demand is not based on the profits or the financial results of the employers
but is based on custom.
Moreover, ex gratia payments for the pre-Bonus Act period are admitted by the respondents.
They seek sanctuary on the counter-plea that few acts of grace, even if repeated, can neither
amount to a custom, usage or condition of service. In sum, a study of the pleadings, the terms of
reference and the surrounding circumstances supports the only conclusion that, peripheral refer-
ence to the profits of the establishments notwithstanding, the core of the cause of action or the
kernel of the claim for bonus is custom and/or term of service, not sounding in or conditioned
by profits.
Shri G.B. Pai did urge that the precedents of this Court have linked custom-based bonus
with some festival or other and that bonus founded on custom de hors some festival is virtually
unknown to case-law on the point. From this he argues that since the bonus has not been related
 Wages and Monetary Benefits 511

by reference to any festival by the workmen in their pleadings (reference to Diwali as the rele-
vant festival in the statement of the case in this Court is an ingenious innovation to fit into the
judge made law according to Shri Pai) the claim must fail. Legal life is breathed into customary
bonus only by nexus with Puja or other festival. We are unable to agree with this rather mere-
tricious submission. Surely, communal festivals are occasions of rejoicing and spending and em-
ployers make bonus payments to employees to help them meet the extra expenses their families
have to incur. Ours is a festival ridden society with many religions contributing to their plurality.
That is why our primitive practice of linking payment of bonus with some distinctive festival has
sprouted. As we progress on the secular road, may be the Republic Day or the Independence Day
or the Founder’s Day may well become the occasion for customary bonus. The crucial question
is not whether there is a festival which buckles the bonus and the custom. What is legally telling
is whether by an unbroken flow of annual payments a custom or usage has flowered, so that
a right to bonus based thereon can be predicated. The custom itself precipitates from and is
proved by the periodic payments induced by the sentiment of the pleasing occasion, creating a
mutual consciousness, after a ripening passage of time, of an obligation to pay and a legitimate
expectation to receive. We are therefore, satisfied that the omission to mention the name of a
festival, as a matter of pleadings, does not detract from the claim of customary bonus. The im-
pact of this omission on proof of such custom is a different matter with which we are not con-
cerned at this stage since the tribunal has not yet enquired into the merits.
Shri Pai urged that the custom, even if true, stood broken in 1965 and, therefore, during the
post-1965 period, customary bonus stood extinguished. The effect of the arbitral board’s negation
of the profit-based bonus claim in 1965 or custom-based bonus for the subsequent period is
again relevant, if at all, as evidence, which falls outside our consideration at present. In the event
of the tribunal having to adjudicate upon the question, may be this rather anaemic circumstances
will be urged by the employer and explained by the employees.
There is hardly any doubt that custom has been recognized in the past as a source of the right
to bonus as the several decisions cited before us by Shri Tarkunde make out and Section 17(a) of
the Bonus Act, in a way, recognizes such a root of title. In Management of Churakulam Tea Estate
vs Workman,30 this Court surveyed the relevant case law at some length. M/s. Ispahani Ltd. vs
Employees’ Union31 implied as a term of the contract the payment of bonus from an unbroken,
long spell. [Justice] Vaidialingam, in Churakulam32 referring to some of the precedents, observed:

In Ispahani’s33 case this Court had to consider a claim for Puja bonus, in Bengal, and the es-
sential ingredients, for sustaining such a claim when it is based on an implied agreement.
After stating that the claim, for Puja bonus, can be based either as a matter of implied agree-
ment between the employers and employees, creating a term of employment of payment of
Puja bonus, or that even where no implied agreement can be inferred, it may be payable as a
customary bonus, this Court, in the said decision, specifically dealt with a claim for payment
of bonus as an implied condition of service. This Court further accepted as correct the tests
laid down by the Appellate Tribunal in Mahalaxmi Cotton Mills Ltd., Calcutta vs Mahalaxmi
Cotton Mills Workers Union34 for inferring that there is an implied agreement for grant of
such bonus. The three circumstances, laid down by the Appellate Tribunal, were: (1) that the
payment must be unbroken; (2) that it must be for a sufficiently long period; and (3) that the
circumstances, in which payment was made should be such as to exclude that it was paid out
of bounty…

This Court, again, had to consider the essential ingredients to be established when payment
of bonus, as customary or traditional, is claimed—again related to a festival—in Graham Trading
Co. (India) Ltd. vs Its Workmen35 and dealt with the question as follows:

In dealing with Puja bonus based on an implied term of employment, it was pointed out by
us in Messrs. Ispahani Ltd. vs Ispahani Employees’ Union36 that a term may be implied, even
512 Social Justice and Labour Jurisprudence

though the payment may not have been at a uniform rate throughout and the Industrial
Tribunal would be justified in deciding what should be the quantum of payment in a particular
year taking into account the varying payments made in previous years. But when the question
of customary and traditional bonus arises for adjudication, the considerations may be somewhat
different. In such a case, the Tribunal will have to consider: (i) whether the payment has been
over an unbroken series of years; (ii) whether it has been for a sufficiently long period though
the length of the period might depend on the circumstances of each case; even so the period
may normally have to be longer to justify an inference of traditional and customary Puja
bonus than may be the case with Puja bonus based on an implied term of employment;
(iii) the circumstance that the payment depended upon the earning of profits would have to
be excluded and, therefore, it must be shown that payment was made in years of loss. In deal-
ing with the question of custom, the fact that the payment was called ex gratia by the employer
when it was made, would, however, make no difference in this regard because the proof of
custom depends upon the effect of the relevant factors enumerated by us; and it would not
be materially affected by unilateral declarations of one party when the said declarations are
inconsistent with the course of conduct adopted by it; and (iv) the payment must have been
at a uniform rate throughout to justify an inference that the payment at such and such rate
had become customary and traditional in the particular concern. It will be seen that these
tests are in substance more stringent than the tests applied for proof of Puja bonus as an
implied term of employment. It will be seen from the above extract that an additional circum-
stance has also been insisted upon, in the case of customary or traditional bonus, that the
payment must have been at a uniform rate throughout to justify an inference that the pay-
ment at such and such a rate had become customary and traditional in the particular concern.
(pp. 936–37).

In Management of Bombay Co. Ltd. vs Workmen,37 this Court, after pointing out the distinction
in the ingredients of customary and contractual bonus affirmed the existence of categories like
customary bonus which are different from and unconnected with profit-based bonus. The learned
Judge discussed Jardine Henderson Ltd. vs Workmen,38 and other rulings, but the judicial chorus
of legally claimable customary or contractual bonus is not marred by any discordant note.
It may be otiose to refer to holdings of High Court when this Court has laid down the law.
Even so, two decisions, one of Patna and the other of Calcutta, deserve mention. One of us
(Untwalia J., as he then was), speaking for the Division Bench observed in Howrah-Amta Light
Railway Co. Ltd. vs Central Government Industrial Tribunal 39 thus:

Apart from the profit bonus, the sense of social justice has led to the recognition in law of the
right of the workmen to get other kinds of bonus which do not depend upon nor are necessarily
connected with the earnings of profits by the industrial concern. One such kind of bonus
is that which is paid on the occasion of special festival well celebrated in particular parts of
India, as [,] for example, Puja bonus in Bengal and Diwali bonus in Western India.

The Court, referring to Tulsidas Khimji vs Workmen,40 restated the tests for the claim of custom-
ary bonus and rightly held that these tests are but circumstances and not conditions precedent,
that it is not necessary to show that such bonus has been paid even in years of loss. The grounds
to be made out for customary, as distinguished from contractual, bonus overlap in many respects
but differ in some aspects.
Justice P.B. Mukharji, as he then was, in M. Tilak & Co. vs Third Industrial Tribunal,41 observed:

Akin to this conception of bonus is the case of a bonus annexed to the employment by cus-
tom or social practices such as customary bonus and Puja or festivity bonus. In case of such
customary and traditional bonus, the question of profit may or may not arise at all and such
 Wages and Monetary Benefits 513

customary and traditional bonus will depend on the content and terms of that custom or the
tradition on which the claim for bonus is made.
Each claim for bonus must depend on the facts of such claim. No doctrinaire view about
bonus is possible or desirable. This much, however, is judicially settled that bonus is not de-
ferred wages. It is narrow and static view that considers bonus as always an ex gratia payment
or a glorified tip or ‘Bakshish’ or a mere cash patronage payable at the pleasure of the employer.
In the industrial jurisprudence of a modern economic society, it is a legal claim and a legal
category, whose potentialities are not as yet fully conceived, but whose types and boundaries
the Courts in India are struggling to formulate. It is a vital instrument of industrial peace and
progress, dynamic in its implication and operation.

Since we are not called upon to investigate the veracity of the claim we stop with stating that
the employers’ awareness of social justice, which fertilizes the right of his employees for bonus,
blooms in many ways of which profit based bonus is but one—not the only one. All this is the
indirect bonanza of Part IV of the Constitution, which bespeaks the conscience of the nation,
including the community of employers. Law is not petrified by the past, but responds to the call
of the changing times. So too the social consciousness of employers. Of course, Labour has its
legal-moral duty to the community of a disciplined contribution to the health and wealth of the
industry. Law is not always an organizer of one-way traffic.
This general survey of the case law conclusively makes out that Labour’s claim for bonus is
not inflexibly and solely pegged to profit as the one and only right. Bonus is a word of many
generous connotations and in the Lord’s mansion there are many houses. There is profit-based
bonus which is one specific kind of claim and perhaps the most common. There is customary or
traditional bonus which has its emergence from long, continued, usage leading to a promissory
and expectancy situation materializing in a right. There is attendance bonus, production bonus
and what not. An examination of the totality of pertinent materials drives us to the inevitable
result that what has been claimed by the workmen in the present case is bonus based on custom
and service condition—not one based on profit. But the critical question pops up: Is the Bonus
Act a killer of every other kind of bonus not provided for by it?
We have thus to move on to a study of the scheme of the Bonus Act in order to ascertain
whether it extinguishes claims founded on customary bonus or contractual bonus. In one sense,
a bonus may be a mere gift or gratuity as a gesture of goodwill or it may be something which an
employee is entitled to on the happening of a condition precedent and is enforceable when the
condition is fulfilled. Any extra consideration given for what is received, or something given in
addition to what is ordinarily received by, or strictly due to the recipient is a bonus (Black’s Legal
Dictionary). But when industrial jurisprudence speaks of ‘bonus’, it enters the area of right and
claim to what is due beyond strict wages. Viewed from this angle, prima facie one is led to the
conclusion that if the Bonus Act deals wholly and solely with profit bonus, it cannot operate as
a bar to different species of claim merely because word bonus is common to both. Of course, if
the statute has spoken so comprehensively, as it can, effect must be given to it.
The cosmos of bonus is expanding as working class contentment and prosperity become
integral components of industrial peace and progress. The bone of contention between the
parties before us is as to whether the Bonus Act is the alpha and omega of all extra claims, out-
side wages and salaries, labelled bonus with separate adjectives demarcating the identity of each
species. But this issue has to be sized up not in vacuo but against the backdrop of the progressive
change around us.
Today it is accepted doctrine that Labour is the backbone of the nation, particularly in the
area of economic self reliance. This means the welfare of the working classes is not only a human
problem but a case where the success of the nation’s economic adventures depends on the co-
operation of the working classes to make a better India. Indeed, on the national agenda is the
question of labour participation in Management. Against such a perspective of developmental
514 Social Justice and Labour Jurisprudence

jurisprudence there is not much difficulty in recognizing customary bonus and contractual
bonus as permissible in Industrial Law, given proper averments and sufficient proof.
Shri G.B. Pai has raised what he regards as a lethal infirmity in the claim of the Sabha. In his
submission the Bonus Act is a complete Code and what is not covered by its provisions cannot
be awarded by the Tribunal. It is true that if the Bonus Act is a complete code and is exhaustive
of the subject, whatever the species of bonus, there may be a bar, but it is quite conceivable that
the codification may be of everything relating to profit bonus in which case other types of
bonus are left untouched. Merely calling a statute a code is not to silence, the claimant for
bonus under heads which have nothing to do with the subject-matter of the Code. On listening
to the intricate argument about implicit codification of the law of bonus by this Act, one is re-
minded of Professor Gilmore who put the case against codification thus (Aspects of Comparative
Commercial Law, 1969 Edn., Siegel and Foster, pp. 449–50—Modern Law Review, 1975 January
part, p. 30):

The law, codified, has proved to be quite as unstable, unpredictable, and uncertain—quite as
mulishly unruly—as the common law, uncodified, had ever been. The rules of law, purified,
have remained the exclusive preserve of the lawyers; the people are still very much in our coils
and clutches as they ever were if not more so.

The argument of the Bonus Act being an all inclusive code is based on the anatomy of the
Act and the ruling in Ghewar Chand.42 So the judicial task is to ascertain the history and object
of the Act, the relevant surrounding circumstances leading upto it, its scheme and the prohibitions,
exclusions, exemptions and savings which reveal the intent and ambit of the enactment. Long
ago, Plowden, with Sibylline instinct, pointed out that the best way to construe the scope of an
Act of Parliament is not to stop with the words of the sections. ‘Every law consists of two parts,
viz. of body and soul. The letter of the law is the body of the law, and the sense and reason of the
law is the soul of the law.’ The social conscience, of the judge hesitates to deprive the working
class, for whom Part IV of the Constitution has shown concern, of such rights as they currently
enjoy by mere implication from a statute unless there are compulsive provisions constraining
the Court to the conclusion. From this perspective, let us examine the exclusionary contention
based on the body and soul of the Bonus Act. If the Bonus Act is a complete Code, on a true
decoding of its scheme and spirit, the industrial Court cannot take off the ground with any
other forms of bonus—yes, that is the implication of ‘a complete Code’.
Bonus has varying conceptual contents in different branches of law and life. We are here con-
cerned with its range of meanings in industrial law but, as expatiated earlier, there is enough
legal room for plural patterns of bonus, going by lexicographic or judicial learning. It implies no
disrespect to legal dictionaries if we say that precedents notwithstanding, the critical word ‘bonus’
is so multiform that the Judges have further to refine it and contextually define it. Humpty Dumpty’s
famous words in Through the Looking Glass, ‘When I use a word…it means just what I choose
it to mean…neither more nor less’ is an exaggerated cynicism. We have to bring in some legal
philosophy into this linguistic problem as it incidentally involves doctrinal issues where the
Constitution is not altogether non-aligned. Statutory interpretation, in the creative Indian con-
text, may look for light to the lodestar of Part IV of the Constitution, e.g. Article 39(a) and (c)
and Article 43. Where two judicial choices are available, the construction in conformity with
the social philosophy of Part IV has preference.
In Jalan Trading Co. Pvt. Ltd. vs Mill Mazdoor Union,43 Shah, J., gave a synopsis of the devel-
opment of the branch of industrial law relating to bonus from the days of the First World War
to the report of the Bonus Commission culminating in the Bonus Act, 1965. The story of ‘war
bonus’, the Full Bench formula and this Court’s view that ‘bonus is not a gratuitous payment
made by the employer to his workmen, nor a deferred wage, and that where wages fall short of
the living standard and the industry makes profit part of which is due to the contribution of
 Wages and Monetary Benefits 515

labour, a claim for bonus may be legitimately made by the workmen are set out in that decision.
The Full Bench formula was based on profits and the terms of reference to the Commission put
profit in the forefront as the foundation of the scheme to define the concept of bonus, to con-
sider in relation to industrial employments the question of payment of bonus based on profits
and to recommend principles for computation of such bonus and methods of payment…’ A
glance at the various chapters of the report brings home the point that bonus based on profits is
its central theme. The conclusions and recommendations revolve round the concept of profit
bonus. Little argument is needed to hold that the bonus formula suggested by the Commission
was profit-oriented. Indeed, that was its only concern. The Act, substantially modelled on these
proposals, has adopted a blue print essentially worked out on profits. The presiding idea being
a simplified version of bonus linked to profits over a period, shedding the complex calculations
in the Full Bench formula, the statute did not cover other independent species like customary
or contractual bonus which had become an economic reality and received judicial recognition.
There were marginal references to and accommodation of other brands of bonus but they were
for better effectuating the spirit and substance of profit-based bonus.
The question then is: Was the Bonus Act only a simpler reincarnation of the Full Bench
formula, as argued by Sri Tarkunde, or was it, going by the provisions and precedents, a full
codification of multiform bonuses, thus giving a knock-down blow to any customary but
illegitimate demand for bonus falling outside the statute, as contended by Sri Pai? Indeed, we
were taken through the well-known categories of bonus vis-à-vis the statutory provisions with
impressive and knowledgeable thoroughness by Shri Pai with a view to strengthen his perspective
that the Act encompassed the whole law and left nothing outside its scope.
To begin with, the history of the Act, the Full Bench formula which was its judicial ances-
tor, the Commission Report which was its immediate progenitor and the statutory milieu as
also the majuscule pattern of bonus prevalent in the Indian industrial world, converge to the point
that the paramount purpose of the Payment of Bonus Act was to regulate profit bonus, with
incidental incursions into other allied claims like customary or attendance bonus. If such be the
design of the statute, its scheme cannot be stretched to supersede what it never meant to touch
or tackle.
The objects and reasons of the Bonus Act indicate that the subject-matter of the statute is
‘the question of payment of bonus based on profit to employees employed in establishments’.
The report of the Commission is also referred to in the objects and reasons and the tenor is the
same. The long title of the Act is noncommittal, but the concept of ‘Profit’ as the basis for bonus
oozes through the various provisions. For instance, the idea of accounting year, gross profit and
the computation thereof, the methodology of arriving at the available surplus and the items
deductible from gross profits, have intimate relevance to profit bonus—and may even be irrelevant
to customary or traditional bonus or contractual bonus. Similarly, the provision for set-on and
set-off of allocable surplus and the like are pertinent to profit-based bonus. Schematically speaking,
statutory bonus is profit bonus. Nevertheless, there is provision for avoidance of unduly heavy
burden under different heads of bonus. For this reason it is provided in Section 17 that where an
employer has paid any Puja bonus or other customary bonus, he will be entitled to deduct the
amount of bonus so paid from the amount of bonus payable by him under the Act. Of course,
if the customary bonus is thus recognised statutorily and, if in any instance it happens to be
much higher than the bonus payable under the Act, there is no provision totally cutting off the
customary bonus. The provision for deduction in Section 17, on the other hand, indicates
the independent existence of customary bonus although, to some extent, its quantum is adjustable
towards statutory bonus. Again, Section 34 provides for giving effect to the Bonus Act thus:

Notwithstanding anything inconsistent therewith contained in any other law…or in the terms
of any award, agreement, settlement or contract of service made before 29th May 1965.
516 Social Justice and Labour Jurisprudence

This does not mean that there cannot be contractual bonus or other species of bonus. This
provision only emphasizes the importance of the obligation of the employer, in every case, to
pay the statutory bonus. The other sub-sections of Section 34 also do not destroy the survival of
other types of bonus than provided by the Bonus Act. Shri G.B. Pai used the provisions of
the Coal Mines Provident Fund and Bonus Scheme Act, 1948, referred to in Section 35 of the
Bonus Act, for the purpose of making good his thesis that the Bonus Act has comprehensive
coverage except where it expressly saves any other scheme of bonus. Our understanding of
Section 35 is different. Coal mines are extremely hazardous undertakings and they are largely
located in agrarian areas where the agricultural workers absent themselves for long periods to
attend to agricultural work and do not report themselves for mining work. Coal mines have
many peculiarities and the workmen employed there have to be treated separately from the point
of view of incentive for attendance. Therefore, attendance bonus for a miner is a separate subject
attended with peculiarities deserving of special treatment and has been expressly saved from the
Bonus Act. This does not mean that whatever has not been expressly saved is, by necessary
implication, included in the Bonus Act. Of course, there are provisions for exemptions and ex-
clusions in the Bonus Act itself, particularly, vis-à-vis small establishments and public sector
undertakings. There is also marginal reference in Section 2(21) to Section 2(21)(iv) to other
kinds of bonus, including incentive production and attendance bonus. The heart of the statute,
plainly read from its object and provisions, reveals that the Act has no sweep wider than profit
bonus.
There was reference to the Payment of Bonus (Amendment) Ordinance, 1975 by counsel on
both sides. We find that the long title has been expanded and now covers bonus, ‘On the basis
of profit or on the basis of production or productivity’. This amendment itself implies that for-
merly a narrower species of bonus, namely, that based on profit had alone been dealt with. The
limits on contractual bonus also tends to feed our conclusions. The implications of the ceiling
set by the recent amendment to the law falls outside our scope and we keep away from determining
it. Sufficient unto the day is the evil thereof.
It is clear further from the long title of the Bonus Act of 1965 that it seeks to provide for
bonus to persons employed ‘in certain establishments’ not in all establishments. Moreover, cus-
tomary bonus does not require calculation of profits, available surplus, because it is a payment
founded on long usage and justified often by spending on festivals and the Act gives no guidance
to fix the quantum of festival bonus; nor does it expressly wish such a usage. The conclusion
seems to be fairly clear, unless we strain judicial sympathy contrariwise, that the Bonus Act dealt
with only profit bonus and matters connected therewith and did not govern customary, traditional
or contractual bonus.
The end-product of our study of the anatomy and other related factors is that the Bonus Act
spreads the canvas wide to exhaust profit-based bonus but beyond its frontiers is not void but
other cousin claims bearing the caste name ‘bonus’ flourish—miniatures of other colours’. The
Act is neither proscriptive nor predicative of other existences.
The trump card of Shri G.B. Pai is the ruling in Ghewar Chand.44 If the ratio there is understood
the way Shri Pai would have it, the workmen have no case to present. For establishments employ-
ing less than 20 workers are excluded from the benignant campus of the Act and the appellants
fall outside the grace of the statute for that reason alone. Does the decision exhaust the branch
of jurisprudence on every kind of bonus or merely lays down that profit-based bonus—the
most common one and complicated in working out on the mathematics of the Full Bench
Formula—has been picked out for total statutory treatment and for that pattern of bonus the
Act operates as a complete Code? The tribunal understood the former way and followed it up
with a rejection, on the ground of a legal bar, of the admittedly non-profit-based claim for bonus.
Shri Tarkunde argues the reasoning to be a misunderstanding of the meaning of the ruling. We
hold that the Bonus Act speaks, and speaks as a whole code, on the sole subject of profit-based
 Wages and Monetary Benefits 517

bonus but is silent on, and cannot, therefore, annihilate by implication, other distinct and dif-
ferent kinds of bonus such as the one oriented on custom. We confess that the gravitational pull
on judicial construction, of Part IV of the Constitution, has, to some extent, influenced our
choice.
It is trite, going by anglophonic principles, that a ruling of superior court is binding law.
It is not of scriptural sanctity but is of ratio-wise luminosity within the edifice of facts where
the judicial lamp plays the legal flame. Beyond those walls and de hors the milieu we cannot
impart eternal vernal value to the decision, exalting the doctrine of precedents into a prison-
house of bigotry, regardless of varying circumstances and myriad developments. Realism dictates
that a judgment has to be read, subject to the facts directly presented for consideration and not
affecting those matters which may lurk in the record. Whatever be the position of subordinate
Court’s, causal observations, generalizations and sub-silentio determinations must be judiciously
read by courts of coordinate jurisdiction and, so viewed, we are able to discern no impediment
in reading Ghewar Chand 45 as confined to profit-bonus, leaving room for non-statutory play of
customary bonus. The case dealt with a bonus claim by two sets of workmen, based on profit of
the business but the workmen fell outside the ambit of the legislation by express exclusion or
exemption. Nothing relating to any other type of bonus arose and cannot be impliedly held to
have decided. The governing principle we have to appreciate as a key to the understanding of
Ghewar Chand 46 is that it relates to a case of profit bonus urged under the Industrial Disputes
Act by two sets of workmen, employed by establishments which are either excluded or exempted
from the Bonus Act. The major inarticulate premise of the statute is that it deals with—and
only-profit-based bonus as has been explained at some length earlier. There is no categorical
provision in the Bonus Act nullifying all other kinds of bonus, nor does such a conclusion arise
by necessary implication. The ruling undoubtedly lays down the law thus:

Considering the history of the legislation, the background and the circumstances in which
the Act was enacted, the object of the Act and its scheme, it is not possible to accept the con-
struction suggested on behalf of the respondents that the Act is not an exhaustive Act dealing
comprehensive with the subject-matter of bonus in all its aspects or that Parliament still left
it open to those to whom the Act does not apply by reason of its provisions either as to ex-
clusion or exemption to raise a dispute with regard to bonus through industrial adjudication
under the Industrial Disputes Act or other corresponding law.

But this statement, contextually construed, means that profit-bonus not founded on the pro-
visions of the Bonus Act and by resort to an adventure in industrial dispute under the Industrial
Disputes Act is no longer permissible. When Parliament has expressly excluded or exempted
certain categories from the Bonus Act, they are bowled out so far as profit-based bonus is con-
cerned. You cannot resurrect profit-bonus by a backdoor method, viz., resort to the machinery
of the Industrial Disputes Act. The pertinence of the following observations of Shelat, J., becomes
self-evident, understood in this setting:

We are not impressed by the argument that Parliament in excluding such petty establishments
could not have intended that employees therein who were getting bonus under the Full
Bench formula should lose that benefit. As aforesaid, Parliament was evolving for the first
time a statutory formula in regard to bonus and laying down a legislative policy in regard
thereto as to the classes of person who would be entitled to bonus, thereunder. It laid down the
definition of an ‘employee’ for more wider than the definition of a ‘workman’ in the Industrial
Disputes Act and the other corresponding Acts. If, while doing so, it expressly excluded as a
matter of policy certain petty establishments in view of the recommendation of the Com-
mission in that regard, viz., that the application of the Act would lead to harassment of petty
518 Social Justice and Labour Jurisprudence

proprietors and disharmony between them and their employees, it cannot be said that Parlia-
ment did not intend or was not aware of the result of exclusion of employees of such petty
establishments.

Likewise, reference to agreements and settlements providing for bonus being exempted from
the applicability of the Act does not militate against the survival of the contractual bonus (we
are not referring to the impact of the latest amendment by Ordinance of 1975). Viewed thus
and in the light of the observations earlier extracted, the followed passage fits into the perspective
we have outlined:

Section 32(vii) exempts from the applicability of the Act (the Bonus Act) those employees
who have entered before May 29, 1965 into an agreement or settlement with their employers
for payment of bonus linked with production or productivity in lieu of bonus based on pro-
fits and who may enter after that date into such agreement or settlement for the period for
which such agreement or settlement is in operation. Can it be said that in cases where there
is such an agreement or settlement in operation, though this clause expressly excludes such
employees from claiming bonus under the Act during such period, the employees in such
cases can still resort to the Industrial Disputes Act and claim bonus on the basis of the Full
Bench formula? The answer is obviously in the negative for the object in enacting clause (vii)
is to let the parties work out such an agreement or settlement. It cannot be that despite this
position, Parliament intended that those employees had still the option of throwing aside
such an agreement or settlement, raise a dispute under the Industrial Disputes Act and claim
bonus under the Full Bench formula. The contention, therefore, that the exemption under
Section 32 excludes those employees from claiming bonus under the Act only and not from
claiming bonus under the Industrial Disputes Act or such other Act is not correct.

The core question about the policy of the Parliament that was agitated in that case turned on
the availability of the Industrial Disputes Act as an independent method of claiming profit
bonus de hors the Bonus Act and the Court took the view that it would be subversive of the
scheme of the Act to allow an invasion from the flank in that manner. The following observations
strengthen this approach:

Surely, Parliament could not have intended to exempt these establishments from the burden
of bonus payable under the Act and yet have left the door open for their employees to raise
industrial disputes and get bonus under the Full Bench formula which it has rejected by
laying down a different statutory formula in the Act. For instance, it is to be contemplated
that though the Act by Section 32 exempts institutions such as the Universities or the Indian
Red Cross Society or hospitals, or any of the establishments set out in clause (ix) of that sec-
tion, they would still be liable to pay bonus if the employees of those institutions were to raise
a dispute under the Industrial Disputes Act and claim bonus in accordance with the Full
Bench formula? The Legislature would, in that case, be giving exemption by one hand and
taking it away by the other, thus frustrating the very object of Section 32. Where, on the other
hand, Parliament intended to retain a previous provision of law under which bonus was pay-
able, or was being paid it has expressly saved such provision. Thus, under Section 35 of the
Coal Mines Provident Fund and Bonus Schemes, 1946 and any scheme made thereunder are
saved. If, therefore, Parliament wanted to retain the right to claim bonus by way of industrial
adjudication for those who are either excluded or exempted from the Act, it would have made
an express saving provision to that effect as it has done for employees in coal mines.

A discerning and concrete analysis of the scheme of the Act and the reasoning of the Court
leaves us in no doubt that it leaves untouched customary bonus.
 Wages and Monetary Benefits 519

The plea of constructive res judicata is based on the ‘might and ought’ doctrine. Shri Pai’s
argument is that before the Arbitration Board no case of customary or contract bonus was urged
for the year 1965 and so, in later years, such a ground is barred by the general principles of res
judicata. Sections 10A, 18 and 19(3) of the Industrial Disputes Act were pressed before us to
demonstrate the prior award was binding on the workers and reading it in the light of Bombay
Gas Co. Ltd. vs Jagannath Pandurang,47 the bar was spelt out. It is clear law, so long as the above
ruling stands, that industrial litigation is no exception to the general principle underlying
the doctrine of res judicata. We do entertain doubt about the extension of the sophisticated doctrine
of constructive res judicata to industrial law which is governed by special methodology of con-
ciliation, adjudication and considerations of peaceful industrial relations, where collective bargain-
ing and pragmatic justice claim precedence over formalized rules of decision based on individual
contests, specific causes of action and findings on particular issues, but we are convinced that
Pandurang48 does not apply at all to our case. There, overtime wages were claimed earlier under
the Factories Act and the case was rejected by the Tribunal. After this rebuff, a like claim was re-
peated but sustaining it on the Bombay Shops and Establishments Act. This new ground to
support the same claim was held to be barred because the workmen could and ought to have
raised the issue that the Factories Act failing, the Shops Act was available to them to back up
their demand. The fallacy in invoking this decision lies in the fact that as early as 1950 there was
a binding award of the industrial tribunal relating to the claim, which had not been put an end
to, and so this Court took the view that so long as that award stood, the same claim under a
different guise (the Shops Act) could be subversive of the rule of res judicata. The decisive cir-
cumstance which distinguishes that case is contained in the observation:

If the workers are dissatisfied with any of the items in respect of which their claim has been
rejected it is open to them to raise a fresh industrial dispute.

That is to say, if a fresh dispute had been raised, after terminating the prior award, no bar of res
judicata could have been urged. Here the Arbitration Board dealt with one dispute; the industrial
tribunal, with a fresh dispute. The Board enquired into one cause of action based on profit bonus;
the tribunal was called upon, by the terms of reference, to go into a different claim. This basic
difference was lost sight of by the tribunal and so he slipped into an error. The dangers of con-
structive res judicata in the area of suits vis-à-vis writ petitions under Article 226 and as between
proceedings under Article 226 and Article 32 are such as to warrant a closer study. To an extent
the Law Commission of India in its Report49 has touched on this topic. Industrial disputes are
as a fortiori case.
Dispute-processing is not by court litigation alone. Industrial peace best flourishes where
non-litigative mechanisms come into cheerful play before tensions develop or disputes brew.
Speaking, generally, an alternative of the longish litigative process is a joyous challenge to the
Indian activist jurist and no field is in need of the role of avoidance as a means of ending or pre-
empting disputes as industrial life. Litigation, whoever wins or loses, is often the funeral of both.
We are a developing country and need techniques of maximising mediatory methodology as
potent processes even where litigation has erupted. This socially compulsive impulse promoted
the setting in motion of a statesmanlike effort by the senior counsel on both sides, with helpful
promptings from the Bench, to advise their clients into a conciliatory mood. Should we have at
all hinted to the advocates to resolve by negotiation or stick to our traditional function of liti-
gative adjudication? In certain spheres, ‘judicious irreverence to judicialised argumentation is a
better homage to justice’. Regrettably, the exercise proved futile and we have to follow up our
conclusions with necessary directions.
The findings we have reached may now be formally set down. We hold that the Bonus Act
(as it stood in 1965) does not bar claims to customary bonus or those based on conditions of
service. Secondly, we repel the plea of res judicata. There is no merit in the view that the industrial
520 Social Justice and Labour Jurisprudence

tribunal has no jurisdiction to try the dispute referred to it. We set aside the award and direct
the tribunal to decide on the merits the subject-matter of the dispute referred to it by the State
Government. The appeal is hereby allowed but, having regard to the overall circumstances, the
parties will bear their costs.

Effects of Agreements which are Inconsistent with the

Payment of Bonus Act, 1965: The Interpretation

Basti Sugar Mills vs the State of Uttar Pradesh and Another 50

In this case, the Supreme Court had to consider the effect of an agreement with regard to
payment of bonus, which was implemented under Section 3(b) of the U.P. Industrial
Disputes Act, 1947, in view of Section 34 of the Payment of Bonus Act, 1965.51

THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

Undaunted by a direction of the State Government under the Uttar Pradesh Industrial Disputes
Act, 1947 (the U.P. Act, for short), unsuccessfully attacked before a learned Single Judge and in
appeal from his judgment, the appellant-owner of two sugar factories in Uttar Pradesh—has
secured special leave to reach this Court and press before us a few jurisdictional points which, if
valid, are deprivatory of the impugned notification under Section 3(b) of the Act. Before we
open the discussion, and, indeed, as paving the way for it, we may remind ourselves of a jural
fundamental articulated elegantly in a different context by Mr Justice Cardozo:52

More and more we lawyers are awaking to a perception of the truth that what divides and
distracts us in the solution of a legal problem is not so much uncertainty about the law as un-
certainty about the facts—the facts which generate the law. Let the facts be known as they
are, and the law will sprout from the seed and turn its branches towards the light.

Social realities mould social justice and the compulsions of social justice, in the context of
given societal conditions, constitute the basic facts from which blossom law which produces order.
The search for the social facts behind Section 3 of the U.P. Act takes us to the Objects and
Reasons set out therein:

Following the lapse of Rule 81-A of the Defence of India Rules, the Government of India
enacted the Industrial Disputes Act, 1947, but this Act was found inadequate to deal with
the spate of strikes, lock-outs and industrial disputes occurring in the province. Government
were, therefore, compelled to promulgate the United Provinces Industrial Disputes Ordinance,
1947, as an emergency measure till more comprehensive Legislation on the subject was enacted.
Although more than two years have passed since the termination of the war, normal life is
still far from sight. There is a shortage of food grains and all other essential commodities and
necessities of life. Maximum production is required to relieve the common want and misery.
Prices continue to be rising and life has become very difficult for the common man. The loss
of every working hour adds to the suffering of the community. In these circumstances, it is
 Wages and Monetary Benefits 521

essential that Government should have powers for maintaining industrial peace and production
and for the speedy and amicable settlement of industrial disputes. The bill, which is similar
to the ordinance already in force, provides for such powers.

The immediate concern of the Court in this case is with Section 3 which, in its opening part,
luminously projects the State control obligated by community well-being. Even here, we may
read the relevant part of Section 3:

Power to prevent strikes, lock-outs, etc.—If, in the opinion of the State Government it is
necessary or expedient so to do for securing the public safety or convenience or the maintenance
of public order or supplies and services essential to the life of the community, or for maintaining
employment, it may, by general or special order, make provision
(a) for prohibiting, subject to the provisions of the order, strikes or lock-outs generally,
or a strike or lock-out in connection with any industrial dispute;
(b) for requiring employers, workmen or both to observe for such period, as may be
specified in the order, such terms and conditions of employment as may be determined
in accordance with the order;
(c) for appointing committees, representative both of the employer and workmen for
securing amity and good relations between the employer and workmen and for settling
industrial disputes by conciliation; for consultation and advice on matters relating to
production, organisation, welfare and efficiency;
(d) for constitution and functioning of Conciliation Board for settlement of industrial
disputes in the manner specified in the order;
...
Provided that no order made under clause (b)
(i) shall require an employer to observe terms and conditions of employment less favourable
to the workmen than those which were applicable to them at any time within three
months preceding the date of the order.
...

The testimony from these texts, which are part of the legislative package, is the critical factor
underlying governmental order in our constitutional system. An insight into it is worthwhile as
a tool of interpretation of Section 3 of the U.P. Act and its harmonization with Section 34 of the
Payment of Bonus Act, 1965 (the Bonus Act for brief ). A synthesis of these two statutes is the
key to the problems posed by Shri Chitale before us arguing the case for the appellant.
When crisis conditions grip the community the first imperative of good government, ‘order’,
takes precedence; and the Executive transfixed between ‘govern’ or ‘get out’ and guided by value
judgments resorts to firm action. Exigent solution of problems affecting the well-being of
the have-nots, in a social justice setting, desiderates provisional directives to the haves to disgorge
payments, not as final pronouncements on rights but as immediate palliatives to preserve the
peace. This is police power at its sensitive finest when State and society are confronted by
the dilemma of ‘do or die’. And, in a broader perspective, Governments of the Third World
must hear the voice which moved the Objectives Resolution in the Constituent Assembly,
while seeking light to keep loving peace:

The service of India means the service of the millions who suffer. It means the ending of
poverty and ignorance and disease and inequality of opportunity. The ambition of the greatest
man of our generation has been to wipe every tear from every eye. That may be beyond us,
but as long as there are tears and sufferings, so long our work will not be over.53
522 Social Justice and Labour Jurisprudence

The problems of law are, at bottom, projections of life:

Law is a form of order and good law must necessarily mean good order.54

We touch these chords because the roots of jurisprudence lie in soil of society’s urges, and its
bloom in the nourishment from the humanity it serves. To petrify statutory construction by
pedantic impediments and to forget the law of all laws, viz. the welfare of the people, is to bid
farewell to the grammar of our constitutional order. Its practical application arises in the present
case. Before going further we sketch the facts of the present case and then on to the larger prin-
ciples, an understanding of which will unlock the crucial questions arising in the case.
The applicant, as stated earlier, runs two sugar factories at two different places. There are
around 71 such factories in Uttar Pradesh whose economy, in large measure, depends on the sugar
industry. Moreover, sugar is an essential commodity. Thus, these factories and the army of
workers employed therein fall within the strategic sector of the State economy. It is but natural
that Government is highly sensitive in the matter of maintenance of sugar supplies and the
smooth working of the sugar factories. Any explosive situation in the shape of an industrial dis-
pute and any disruptive factor throwing out of gear the employment in factories is sure to throw
into disarray public safety, public order, public production and distribution system and public
employment, using these expression in their social connotation. Roscoe Pound’s words are juris-
prudentially apt [here]:

Law is more than a set of abstract norms or legal order. It is a process of balancing conflicting
interest and securing the satisfaction of the maximum wants with the minimum friction.55

And, Paton has set the tone for Part IV of our Constitution to be used as background music, if
we may say so.

the law itself can not be impartial . . . for its very raison d’etre is to prefer one social interest to
another.56

As was the wont, presumably, there was apparently a clamour in 1968 for workers’ bonus
which hotted up, threatening community tranquillity, smooth supplies essential to the life of
the community and maintenance of employment and public safety.
Every industrial dispute has a potential for large scale breach of the peace when the factories
and workmen affected are numerous. But the general unrest induced by industrial demands
and resistance may, on critical occasions, blow up unless quia timet action to defuse [the situation]
are taken. This measure has necessarily to be at the administrative level, since the judicial process
is prone to suffer from slow motion. The U.P. Legislature, with comprehensive vision, provided
for long-range adjudicative resolution of industrial disputes and short-run executive remedies
to pre-empt and contain outbreaks which may get out of control once ignited, and may even
cost human lives in the ‘fire-fighting’ police actions:

A Government ought to contain in itself every power requisite to the full accomplishment of
the object committed to its care, and to the complete execution of the trusts for which it is
responsible, free from every other control but a regard to the public good and to the sense of
the people.57

From this angle, Section 3 has been designed as an emergency provision to be exercised in an
excited phase of industrial collision.
Using the power under Section 3(c) of the Act and based on the suggestion of the State Labour
Conference (Sugar) the State Government appointed a tripartite committee in October, 1968
 Wages and Monetary Benefits 523

consisting of three nominees of the Indian Sugar Mills Association and three representatives of
the workmen, the Labour Commissioner being the Chairman of the Committee. The notification
under Section 3(c) was issued with a view to—

. . .consider and make its recommendations to Government on the question of grant of bonus
for 1967–68 to workmen by the Vacuum Pan Sugar Factories of the state on the basis of the
payment of Bonus Act, 1965. Subject to such modifications as may be mutually agreed upon.58

No one, at any stage, has assailed the presence of the statutory pre-conditions of social urgency.
We proceed on the footing that a flare-up was in the offing and the State acted to pre-empt a
breakdown.
It is pertinent to note that the Association is a trade union registered under the Trade Unions
Act, 1926. Its functions are indicated in the definition of ‘trade union’ in Section 2(h) of that
Act and include regulating the relations ‘between workmen and employers’. Thus, the Association
was functionally within its competence to nominate three representatives to sit on the Committee
to regulate the relations between the member-employers and the workmen employed. The ap-
pellant is a member of the said Association.
It is significant to remember that the State Government constituted the tripartite committee
under Section 3(c) as an emergency measure before taking steps under Section 3(b) of the Act so
that it may inform itself in a responsible way through the recommendations made by the Com-
mittee which represented both the wings of the industry. Although Section 3(b) does not depend,
for coming into play, upon any report under Section 3(c) this was a measure to ensure fairness
to the concerned elements. The committee held several sittings and, at some stages, the appellant
or his representative did participate directly or indirectly in the deliberations. Equally relevant
is the circumstance that the worker’s representatives actually accepted the formula put forward
by the President of the Managements’ Association. We mention these circumstances to indicate
that the scales, if at all, were tilted in favour of the mill owners and Government, on receipt of
the recommendations and anxious to freeze the situation, issued an order under Section 3(b)
incorporating and implementing those recommendations. That notification which was impugned
before the High Court and is challenged before us reads:

WHEREAS on the recommendations of the State Labour Tripartite Conference (sugar) held
on 16, 1968,59 to consider the question of grant of bonus for the season 1967–68 to their
workmen by the Vacuum Pan Sugar Factories of the State on the basis of the Payment of
Bonus Act, 1965, subject to such modification as may be mutually agreed upon and to make
its recommendations.
AND WHEREAS, the said Committee has considered this question in various meetings, the
last meeting having been held on June 5, 1969, and has submitted its recommendations to
the State Government;
AND WHEREAS, the said Committee has succeeded in bringing about an agreement in
regard to the payment of bonus for the season 1967-68 between the representatives of em-
ployers and employees on the basis of Payment of Bonus Act, 1965, with certain modifications
and adjustments and has made recommendations on the subject accordingly which have
been accepted by the State Government;
AND WHEREAS, in the opinion of the State Government it is necessary to enforce the
recommendation of the said Committee for securing the public convenience and maintenance
of public order and supplies and services essential to the life of the community and for main-
taining employment;
NOW, THEREFORE, in exercise of the powers under clause (b) of Section 3 of the U.P. In-
dustrial Disputes Act, 1947 (U.P. Act No. XXVIII of 1947), the Government of Uttar Pradesh
524 Social Justice and Labour Jurisprudence

is pleased to make the following order and to direct with reference to Section 19 of the said
Act that the notice of this be given by publication in the official Gazette:
Order
2. (a) All the Vacuum Pan Sugar Factories in the State whose names have been mentioned in
the Annexure ‘A’ except the Kisan Co-operative Sugar Factory, Majhola (Pilibhit), shall
pay bonus for the year 1967–68 to all their employees, permanent seasonal or temporary
including contract labour who have worked for not less than 30 working days in the
accounting year 1967–68.

The High Court repelled the challenge and upheld the notification, taking the view that an
agreement as recognised in Section 34 of the Bonus Act existed in this case and so the order
which merely gave effect to that agreement was not bad in law.
The main ground of attack before us is that the State Government cannot act in the area of
bonus without breach of the embargo in Section 34 of the Bonus Act and so the impugned
notification must fail for want of power. Although this is the thrust of the submission, Shri
Chitale has trichotomised it, as it were. First, the Bonus Act being a complete Code covering
profit-sharing bonus, no other law can be pressed into service to force payment of bonus by the
managements. Secondly, Section 3(b) of the U.P. Act is independent of any agreement between
the affected parties and the notification thereunder operates on its own and not by force of
consensus or contract between the workmen and the managements. In this view, it was wrong
for the High Court to have salvaged the notification under Section 3(b) as embodying an agree-
ment to pay bonus. The third submission of counsel was that as a fact there was no agreement
between the appellant and his workmen within the scope of Section 34 of the Bonus Act since
the representatives of the Association had no power to bind its members by any agreement on
bonus, having been appointed solely to make certain recommendations. Moreover, the appellant
had specifically informed the representatives of the Association that it did not agree to any
variation from the approved balance-sheet of the company and had withdrawn its consent to
the formula which found favour with the Committee. Finally, though feebly, it was argued that
if an agreements could be spelt out under Section 34 of the Bonus Act enforcement should be
left to Section 21 of that Act and not to the punitive recovery provisions of the U.P. Act.
The single Judge of the High Court dismissed the writ petition reading on agreement into
the Committee’s recommendations and the eventual order under Section 3(b) of the Act. This
agreement was valid under Section 34 of the Bonus Act. On appeal, the two Judges on the bench
disagreed and the case went before a third Judge, who in an elaborate judgment, agreed with the
learned Single judge and upheld the order of the Government as an agreement under Section 34
of the Bonus Act. We now proceed to discuss the merit of counsel’s contentions.
We focus our attention on two principal facets of the question. They are (a) whether Section
3(b) is inconsistent with the Bonus Act; and (b) whether an agreement within the meaning of
Section 34(1) (as the law then stood) could be spelt out of the facts of the present case.
There is no challenge to the competence of the State Legislature to enact Section 3 of the Act.
Indeed, more than one item in Lists II and III will embrace legislation of the pattern of Sec-
tion 3. Even so, the short point sharply raised by Shri Chitale is that Parliament, having enacted
the Bonus Act in 1965, occupied that part of industrial law, and Section 34 in terms contains a
non obstante clause. That section reads:

34. Nothing contained in this Act shall be construed to preclude employees employed in any
establishment or class of establishment from entering into an agreement with their employer
for granting them an amount of bonus under a formula which is different from that of under
this Act:
Provided that any such agreement shall have effect unless it is entered into with the previous
approval of the appropriate Government:
 Wages and Monetary Benefits 525

Provided further that any such agreement whereby the employees relinquish their right to
receive the minimum bonus under sub-section (2A) of Section 10 shall be null and void in so
far as it purports to deprive them of such right:
Provided also that such employees shall not be entitled to be paid bonus in excess of—

(a) 8.33 percent of the salary or the wage earned by them during the accounting year if the
employer has no allocable surplus in the accounting year or the amount of such allocable
surplus is only so much that, but for the provisions of sub-section (2A) of Section 10, it
would entitle the employees only to receive an amount of bonus which is less than the
aforesaid percentage, or
(b) twenty percent of the salary or wage earned by them during the accounting year.

The effect of this provision is that anything inconsistent with the Bonus Act contained in any
other law will bow and bend before it. Secondly, agreements made after 29 May 1965 will be
valid regarding bonus even if they be inconsistent with the formulae in the Bonus Act.
Shri Chitale did not dispute the proposition that if a concluded agreement could be read into
the recommendations of the Tripartite Committee relating to bonus, it would be valid despite
Section 34; but he urged before us that it was impossible to weave out of mere recommendations
the web of a concluded contract on bonus. He canvassed before us, further, that if an agreement
on bonus was necessarily inferable from the proceedings of the tripartite committee, the enforce-
ment thereof could be only under Section 21 of the Bonus Act and not by reliance on the more
drastic processes of the U.P. Act.
A torrent of objective circumstances has emerged in this case to wash out these submissions.
This Court is rarely disposed to reverse a factual affirmation concurrently reached by the High
Court at two tiers. Even so, we may rush past the more potent circumstances which have a
compulsive force in arriving at the conclusion aforesaid.
Shri Chitale stressed the fact that the Committee itself had a functional limitation writ on
the face of the order under Section 3(c). Its authority was limited to making recommendations
on the grant of bonus 1967–68 on the basis of the Bonus Act, subject to such modifications as
mutually agreed upon. Formally, this is correct. But why could the committee which had repre-
sentatives of both the wings of the industry not mutually agree upon a bonus formula? There
was nothing in the notification prohibiting it. There was everything in the notification promoting
it. The whole process was geared to mutually agreed solutions. Of course, once the representatives
of managements and labour reached an agreement, substantially on the basis of the Bonus Act,
they would proceed to recommend to Government the acceptance of that agreement. The noti-
fication under Section 3(c) contemplated mutual agreement upon bonus as the first step and
the recommendation of the formula so reached as the second step. The good offices of the
Labour Commissioner were also available. In short, the first notification did not shut out, but
on the other hand, welcomed mutual agreement. As between the two wings, an agreement
materialized. Then it became Government’s responsibility effectively to resolve the crisis and
beyond it to put teeth into the agreement by making it a binding order under Section 3(b).
Thereafter, the arm of the law, as provided in the U.P. Act, went into action if there was violation.
The object of the Government being to keep the peace and to interdict disruption, it did not
rest content with an agreement within the meaning of Section 34 and resort to the leisurely pro-
cesses of Section 21. Exigent situations demand urgent enforcement; and therefore government
went a step further than the agreement and embodied it in an order under Section 3(b). This
incorporation in a notification under Section 3(b) did not negate the anterior agreement between
the parties. The order of Government under Section 3(b) makes the dual stage perfectly plain.
For instance, there is the following tell-tale recital: ‘Whereas the said committee has succeeded
in bringing about an agreement in regard to the payment of bonus for the season 1967–68
526 Social Justice and Labour Jurisprudence

between the representatives of the employers and employees on the basis of Payment of Bonus
Act, 1965, with certain modification and adjustments’. In unmincing language, the notifica-
tion states that an agreement on the payment of the bonus has been successfully brought about
substantially on the lines of the Bonus Act. In the same notification, Government proceeds to
state that the said agreement has been forwarded to it in the shape of recommendations, which
have been accepted and enforced in exercise of the powers conferred by clause (b) of Section 3
of the Act. The anatomy of the order under Section 3(b) being what we have explained above,
the inference is inevitable that there is a clear agreement in regard to the payment of bonus
for the relevant season between the employers and employees and ingenious argument cannot
erode that effect.
The next limb of the argument of Shri Chitale is that in fact there is no evidence of his client
having authorized the representatives of the Association to act on its behalf in agreeing to the
bonus formula. On the contrary, he had withdrawn the authority originally conferred. We can-
not agree with this specious, though plausible, submission. It admits of no doubt that the Asso-
ciation is a trade union registered under the Trade Unions Act and the functional competence
of a trade union definitionally extends to regulating the relations between workmen and em-
ployers. Section 2(h) to negotiate on agreement on payment of bonus surely falls within the
scope of regulation of the relations between the workmen and the employers. Secondly, the
notification under Section 3(c) itself authorized the Committee to consider the grant of bonus
on terms mutually agreed upon. Authority to reach agreement on behalf of the management is
thus implicit in the notification under Section 3(c). More over the Association, having the cap-
acity to represent all the members within the area of its authority, sat on the Committee through
its representatives and become effective proxies of the members. Nay more. The Assistant Manager
of the appellant was present in the Tripartite Conference at Naini Tal on June 16, 1968 and it
was at that Conference the decision to set up the Committee was made and a resolution to that
effect passed, leading to the notification of 17 October 1968. Moreover, throughout the several
meetings and investigations of the Tripartite Committee, the appellant supplied all the facts
and details sought concerning the formulation and the data for arriving at an acceptable solution.
The formula of the Committee was based largely on the Bonus Act itself with some variation
regarding the valuation of the closing stock. Importantly, what the employees’ representatives
did was merely to accept the proposal of the president of the Association of Employers. There
was a written agreement dated 5 June 1969 to which the representatives of both sides were
signatories. To dismiss the whole consensual adventure and the culminating written agreement
as nothing but an exercise in recommendatory or advisory futility is to bid farewell to raw real-
ities. Industrial jurisprudence does not brook nice nuance and torture some technicalities to
stand in the way of just solution reached in a rough and ready manner. Grim and grimy life-
situations have no time for the finer manners of elegant jurisprudence. Social justice is made of
rugged stuff. Broad consensus between the two parties does exist here, as is emphatically under-
lined by the circumstance that all the mill owners except the appellant have stood by it—and all
the workers. Where social justice is the touchstone, where industrial peace is the goal, where the
weak and the strong negotiate to reach workable formulae unruffled by the rigidities and formal-
isms of the law of contract, it is impermissible to frown down the fair bonus agreement reached
by the representatives of both camps and accepted by the employees in entirety and whole block
of employers minus the appellant, on a narrow construction of the notification under Section
3(c) or Section 34 of the Bonus Act or Section 2(e) of the Contract Act. Labour law is rough
hewn and social justice sings a different tune. We reject, without hesitation, the appellant’s sub-
mission that there was no agreement for payment of bonus within the meaning of Section 34 of
the Bonus Act and affirm the concurrent finding of the High Court on that issue.
The second seminal problem of power that falls for consideration here has deeper jurispru-
dential import and wider political constitutional portent, so much so [that] decisional elucidation
becomes necessitous. We have stated earlier that Section 34 of the Bonus Act has a monopolistic
 Wages and Monetary Benefits 527

tendency of excluding other laws vis-à-vis profit-sharing bonus. The basic condition for nullifi-
cation of Section 3(b) of the U.P. Act is that, when it enters the area of bonus, it is inconsistent
with the provisions of the Bonus Act. ‘Inconsistent’, according to Black’s Legal Dictionary,
means mutually repugnant or contradictory; contrary, the one to the other so that both cannot
stand, but the acceptance or establishment of the one implies the abrogation or abandonment
of the other’. So we have to see whether mutual co-existence between Section 34 of the Bonus
Act and Section 3(b) of the U.P. Act is impossible. If they relate to the same subject-matter, to
the same situation, and both substantially overlap and are co-extensive and at the same time so
contrary and repugnant in their terms and impact that one must perish wholly if the other were
to prevail at all—then, only then, are they inconsistent. In this sense, we have to examine the
two provisions. Our conclusion, based on the reasoning which we will presently indicate, is that
‘inconsistency’ between the two provisions is the produce of ingenuity and consistency between
the two laws flows from imaginative understanding informed by administrative realism. The
Bonus Act is a long-range remedy to produce peace; the U.P. Act provides a distress solution to
produce truce. The Bonus Act adjudicates rights of parties; the U.P. Provision meets an emergency
situation on an administrative basis. These social projection and operational limitations of the
two statutory provisions must be grasped to resolve the legal conundrum. When ‘the sequestered
vale of life’ is in imminent peril of disruption immediate tranquillisers are the desideratum. The
escalating danger to law and order, to public safety, to maintenence of supplies essential to the
life of the community, the breakdown of production and employment—these anti-social conse-
quences of ‘the madding crowds’ ‘ignoble strife’ are sought to be controlled by a quick shot in
the arm by the use of Section 3(b). It is a balm for the time, not a cure which endures. Indeed,
it is an administrative action, not a quasi-judicial determination. We may easily visualize other
explosive occasions which traumatize society and so attract Section 3(b).
The specific fact-situation which confronted the State must be seen in perspective. Labour
and capital are partners in production. When one of the partners, numerous but needy, demands
a share in the profits, beyond wages, to better its lot, industrial legislation chalks out rights and
limits, prescribes formulae, create adjudicatory machinery, awards are made, reviewed and en-
forced and parties seek social justice through the judicial process. The Bonus Act, read with the
Industrial Disputes Act, codifies this branch of right and remedies. But it is a notorious infirmity
of the noble judicative methodology that adherence to certain basic processual norms makes
procrastinating delay a besetting sin and an inevitable evil. The end product is good were it deli-
vered promptly but the operation tantalizes and sometimes self-defeats.
The working class though a weaker class, when organized is militant. Their privations are too
desperate to stand delay. Policy formulation by Government takes time, involves consultation;
adjudication involves long hearing and appeal upon appeal.
The discussion of legal prophylaxis as part of the dynamics of jurisprudence becomes relevant
at this stage. Necessity is the mother of tension: tension frays temper and maddened men turn
violent. When both sides are psyched up into frenzy, public safety, maintenance of essential
supplies, people’s employment and societal order become casualties. A wise administration anti-
cipates and acts before the flames spread. Once the industrial war is sparked off, the use of force
becomes unavoidable. And police force pitted against mob fury may mean blood and tears. And
Indian lives in free India, even though of workers, are more precious than the profits of the cor-
porate sector. Confronted by escalating disorder, the wise ruler cannot afford to wait for lethargic
legal justice to deliver its verdict but armed with crisis powers and anxious to arrest a blow-up
adopts administrative nostrums which gives quick relief but do not frustrate ultimate justice.
Prophylactic processes are not the enemy of normative law. Socially-oriented prompt action
tranquillizes where drift, vacillation and inaction may traumatize. Section 3 serves this limited
purpose of legalising administrative intervention to prevent disorder without prejudice judicial
justice which will eventually be allowed to take its course. An order under Section 3(b) is admin-
istrative; a proceeding under the Bonus Act is judicial. The former manages a crisis, the latter
528 Social Justice and Labour Jurisprudence

determines rights. Even when a direction under the exigency power involves payments towards
bonus or other claim it never can possess finality and is subject to judicial decision—except, of
course, where parties agree to settle their claims, and then the agreement gives it vitality.
The jural scheme of Section 3 is dual, each operating in its own stage and without contradicting
the power of the other. The first say, in crisis management, belongs to the administrator; the last
word, in settlement of substantive rights belongs to the tribunal. The pragmatic dichotomy of
the law is flexible enough not to put all its peace-keeping eggs in the judicial basket. Government
acts when the trouble brews and when the storm has blown over judicial technology takes over.
There are no rigid compartmentalizations. Sometimes, the judicial process itself has quick-
acting procedures. Likewise, sometimes the executive prefers to consult before going into action.
Under our constitutional order guidelines are given by the statute to ensure reasonableness in
administrative orders. And in a Government with social justice as the watchword, value judgments
are essential to exclude arbitrariness. So it is that the executive power under Section 3 has
the leading strings writ right at the top. The power shall be used only for ‘public safety or con-
venience or the maintenance of public order or supplies and services essential to the life of the
community or for maintaining employment. It prevails for the nonce, produces (hopefully)
tentative truce, and then the judicial process decides decisively. It is like an executive magistrate
passing a prohibitory order regarding disputed possession or unruly assembly to prevent breach
of the peace and making over [the dispute] to a judicial magistrate to hear and decide who is in
actual possession or whether the restriction on movement was right. Or, maybe, it is like a
magistrate quickly passing orders regarding a possessory dispute leaving it to the civil court to
adjudicate on valid tile. No one can argue that preventive magisterial power, admittedly pro-
visionally and reasonably, is inconsistent with the civil judicial machinery which speaks finally.
Dealing with the identical provision in an identical situation where an appeal reached this
Court and the parties were identical, Mudholkar, J, speaking for the court, explained the scheme
of the same Section 360 and its scope which fits into the pattern we have explained. The learned
Judge observed in State of U.P. vs Basti Sugar Mills Co. Ltd.61

The opening words of Section 3 themselves indicate that the provisions thereof are to be
availed of in an emergency. It is true that even reference to an arbitrator or conciliator could
be made only if there is an emergency. But then an emergency may be acute. Such an emergency
may necessitate the exercise of powers under clause (b) and a mere resort to those under
clause (d) may be inadequate to meet this situation. Whether to resort to one provision or
other must depend upon the subjective satisfaction of the State Government upon which powers
to act under Section 3 have been conferred by the legislature.

Dealing with the canons of statutory construction the learned Judge observed:

No doubt, this result is arrived at by placing a particular construction on the provisions of

that section but we think we are justified in doing so. As Mr Pathak himself suggested in the
course of his arguments, we must try and construe a statute in such a way where it is possible
to so construe it, as to obviate a conflict between its various provisions and also so as to ren-
der the statute or any of its provisions constitutional. By limiting the operation of the provisions
of clause (b) to an emergency we do not think that we are doing violence to the language used
by the legislature. Further, assuming that the width of the language could not be not limited
by construction it can be said that after the coming into force of the Constitution the provisions
can, by virtue of Article 13, have only a limited effect as stated above and to the extent that
they are inconsistent with the Constitution, they have been rendered void.

In the strain, the court rebuffed the unreasonable argument based on ‘reasonableness’ in
Article 19(6).
 Wages and Monetary Benefits 529

In our view, therefore, the provisions of clause (b) of Section 3 are not in any sense alternative
to those of clause (d) and that the former could be availed of by the State Government only in
an emergency and as a temporary measure. The right of the employer or the employee to re-
quire the dispute to be referred for conciliation or adjudication would still be there and could be
exercised by them [by] taking appropriate steps. Upon the construction we place on the pro-
visions of clause (b) of Section 3 it is clear that no question of discrimination at all arises. Simi-
larly the fact that action was taken by the Government in an emergency in the public interest
would be a complete answer to the argument that that action is violative of the provisions of
Article 19(1)(g). The restriction placed upon the employer by such an order is only a temporary
one and having been placed in the public interest would fall under clause (6) of Article 19 of the
Constitution.
In a practical sense, this dichotomous reconciliation has humanistic value in administration.
Let us take the case of bonus. A broad national policy on bonus, however admirable, needs
negotiation, consultation, inter-state co-ordination, diplomacy and caused delay. Like wise, an
industrial adjudication on bonus, with all the trappings of natural justice, appeal and writ pro-
ceedings, consumes considerable time. Hungry families of restive workers in militant moods
urgently ask for bonus for Onam in Kerala, Pooja in Bengal, Diwali in Gujarat or other festival
elsewhere, for a short spell of cheer in a long span of sombre life. The State Government, with
economic justice and welfare of workers brooding over its head, is hard-pressed for public order
and maintenance of essential supplies. Immediate action may take trigger-happy policing shape
or emergency direction to make ad hoc payments, worked out in administrative fairness. This
latter course may often be favored, given the correct orientation. But even here some governments
may prefer to confer, persuade parties to concur and make binding order. This requires legislative
backing. So Section 3. But such an improvised solution may leave one or the other or even both
dissatisfied with regard to ultimate rights. While enforcing the ad interim directive by the author-
ity of law, the door is left ajar for judicial take over of the industrial dispute. If workers have got
more, the excess will have to be adjusted, if less, the employers will pay over. This will be taken
care of by Section 3(e) (before amendment) and by the Bonus Act now. A crisis is best solved by
this procedure at the State level on a fair administrative basis. But lasting policy solutions are
best produced at the Central level and final rights crystallized at the tribunal level. The lengthy
judicial process may, as here, be obviated if, by a tripartite arrangement, an agreement within
the scope of Section 34 of the Bonus Act is reached.
The ruling of this Court in State of U.P. vs Basti Sugar Mills Co. Ltd.62 supports the synthesis
we have evolved. The only difference is that there is now no reference of a bonus dispute under
Section 3(e) of the U.P. Act. Instead, the same dispute will—where no agreement or settlement
stands in the way, as it does here—on application, be referred for adjudication under the Bonus
Act read with the Industrial Disputes Act, 1947.
The analysis shows the absence of basic inconsistency and presence of intelligent method in
the U.P. and the Central provisions.
We hold, after this long tour, that the goal of social justice and public peace, essential to good
Government is best reached by reading [the two statutes] together and not apart. The High
Court’s order is upheld and the appeal dismissed, of course, with costs.

Constitutional Validity of Section 10 of the Payment

of Bonus Act, 196563

A landmark in the enactment of the Payment of Bonus Act, 1965, is the provision relating
to the payment of minimum bonus by an employer to his workmen in every accounting
530 Social Justice and Labour Jurisprudence

year, whether there is an allocable surplus or not.64 This privilege to the workman has led
to the very validity of the Act. At early stages of the commencement of this legislation,
the Supreme Court, in Jalan Trading vs the Mill Mazdoor Union65 held that the plea of the
invalidity of Section 10 on the ground that it infringes Article 14 of the Constitution
must fail. The section is not open to attack on the ground that it infringes Article 31(1)
of the Constitution. However, the Constitutional validity of Section 10 figured before
the Supreme Court again.

Jalan Trading vs D.M. Aney and Another 66

THE JUDGEMENT DELIVERED BY V.R. KRISHNA IYER, P.S. KAILASAM AND A.D. KOSAL

The short and only point, draped as a constitutional issue, urged before us, after having been
repelled by the Bombay High Court against whose judgment this appeal is filed by certificate,
is as to whether Section 10 of the Bonus Act is ultra vires of Article 19(1)(g) and Article 301 of
the Constitution.
We are satisfied that the restriction imposed by the Bonus Act in compelling the employer to
pay the statutory minimum bonus even in years where there has been a loss sustained by the
management is reasonable or in public interest within the meaning of Articles 19(6) and 302.
What is reasonable depends on a variety of circumstances, but what is important is that the Dir-
ective Principles of State Policy in Part IV of the Constitution are fundamental to the governance
of the country. Therefore, what is directed as State Policy by the founding fathers of the Consti-
tution cannot be regarded as unreasonable or contrary to public interest even in the context of
Articles 19 or 302. It follows that payment of bonus, being in implementation of Articles 39
and 43 of the Constitution, is reasonable. We agree with the High Court and dismiss the appeal
with costs quantified at Rs 2,000.

Applicability of the Payment of Bonus Act, 1965:

The Scope of Section 32(5)(c)
Workmen of Tirumala Tirupathi Devasthanamas vs
the Management and Another67

The Supreme Court, in this case, considered the scope of Section 32(5)(c) of the Act in
order to test whether the workmen of Tirumala Tirupathi Devasthanamas were eligible
for the bonus from the management.68

THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

The main issue raised in this appeal turns on a construction of Section 32(5) of the Payment of
Bonus Act and its application to the facts of the present case. The Tirumala Tirupathi Devasthanam
has a very wide circle of devotees who come from all over the country. The Devasthanam caters
to their needs and provides the amenities since pilgrims flock to the shrine. One of those facilities
is stated to be offering transport services for pilgrims to come to Tirupathi from distant places.
Inevitably the Transport Department is operating under the Devasthanam and employs a large
number of transport workers. These workmen raised an industrial dispute making a demand
 Wages and Monetary Benefits 531

for bonus for the years 1965–1973. The reference was duly made to the Tribunal which considered
inter alia the question as to whether Section 32 of the Act excluded from the operation of the
bonus obligation, the respondent-institution. The plea was upheld and the reference was held
to be invalid.
The Tirumala Tirupathi Devasthanam, a vast and unique religious organisation in the country,
is certainly not founded for making profit and attracts people who want to offer worship to Shri
Venkateshwara but then the specific question with which we are concerned is whether the
transport operation by the administration falls within the category of institutions within the
meaning of Section 32(5)(c). Is the Transport Department so merged in and integrated with
the Devasthanam as to be incapable of independent identity? Is the Transport Industry run by
the Devasthanam sufficiently spread as to be treated as an institution in itself ? There is no doubt,
as the Tribunal has rightly held, that it is an industry but the further question arises whether it
is an institution in the context and within the text of the Payment of Bonus Act. This question
has not been properly appreciated by the Tribunal. Secondly, assuming that it is an institution,
it does not necessarily follow that Section 32 is excluded. On the other hand, there must be
proof that the Transport Department (a) is an institution; and (b) established not for the purpose
of profit. The Tribunal has not correctly appreciated the import of this latter requirement. It
has been found that profits made in some years are ploughed back whatever that may mean. It
is also found that the motive for running the industry of transport was to afford special facilities
for the pilgrims. These by themselves do not clinch the issue whether the institution has been
established not for purposes of profit, nor are we satisfied that merely because in the administrative
report of the Devasthanam, there is mention of the transport establishment as a remunerative
enterprise, that is decisive of the issue.
The Tribunal has to decide whether the Transport Department, having regard to the features of
its administration, the sources of its finance, the balance-sheet that is drawn up and the dis-
posal of the profits, can be considered to be an institution in itself, whether it has nexus with the
Devasthanam or not. The fact that it is run by the Devasthanarn, does not keep it out of its
being an institution. This aspect has not been considered and must be decided de novo.
Likewise, merely because it is an institution, the Transport Department does not cease to be
one established ‘not for purposes of profit’, that has got to be made out on its merits. The insti-
tution may be designed for profit although it may make or may not make profit. The institution’s
profits or earnings may be used for other charitable purposes. That also does not determine finally
the character of the institution. Was the institution ‘not one for purposes of profit’, motives
apart? If it was one, definitely not for earning profit, but merely as an ancillary facility for pil-
grims to reach and to return, Section 32(5) will exclude the institution. If we may tersely put it,
the dominant purpose of the Transport Department will be the decisive factor.
We, therefore, set aside the findings of the Industrial Tribunal and direct it to decide the issue
de novo. We sustain the other findings but permit parties to adduce further evidence on this
question so as to enable the Tribunal to make the correct decision. We allow the appeal; remand
the case to the Industrial Tribunal but parties will bear their own costs.

Veracity of the Balance Sheet: Powers of the Tribunal

K.C.P. Employees Association, Madras, vs
the Management of K.C.P., Madras, and Others69
In this case, the Supreme Court has considered the claim of the workers as to the correct-
ness of the balanced sheets and profit-and-loss accounts for the years in question, after
duly considering the provisions of the Payment of Bonus Act, 1965.
532 Social Justice and Labour Jurisprudence

THE FACTS OF THE CASE

The subject matter is a bonus dispute between the management—the respondent—and the
workmen’s union, revolving around the applicability of the proviso to Section 3 of the Payment
of Bonus Act, 1965 (hereinafter referred to as ‘the Act’) for the years 1964–65 and 1965–66. A
thumbnail sketch of the facts:
K.C.P., a public limited company, carries on three business ventures viz. manufacture of
sugar, of cement and of heavy engineering machinery. The concerned factories are in three
different places in south India and employ workmen on different terms in the three different
units. We are directly concerned with the engineering unit, known as the Central Workshops, run
at Tiruvettiyur, Madras. When the Payment of Bonus Act, 1965, came into force, the workmen
of this unit, which was financially faring ill, unlike the other two sister units, demanded bonus
on the footing that the three different undertakings must be treated as one composite establish-
ment and on the basis of the overall profits, bonus must be reckoned as provided in the Act. The
respondent demurred on the ground that the Central Workshop was a separate undertaking to
which the proviso to Section 3 applied and consequently the claim for bonus on the basis of a
single establishment was untenably overambitious. Although the concerned unit was perhaps a
losing proportion for relevant years (we do not know for certain), the tribunal upheld the claim
of the workmen for both the years, but the two awards were challenged, by writ petition, in the
High Court. The award relating to 1964–65 was upheld by a single judge of the High Court,
who took the view that since all the three units, though divergent and located in different places,
were owned by the same company and, therefore, without more were covered by the main part
of Section 3 and the proviso stood repelled. Two other questions which had engaged the attention
of the tribunal were scantily dealt with, the findings, if one may call them so, being adverse to
the workmen. The management duly carried an appeal before a Division Bench of that court,
which also called up and heard the writ petition against the award relating to the year 1965–66.
Both the awards were set aside, the holdings on the substantial points being adverse to the
workmen. However, certain follow-up inquiries had to be done by the tribunal to correct errors,
for which limited purpose there was a direction by the High Court. The matter stood at that
stage and the two appeals in this court are aimed against the decision of the Division Bench of
the High Court.

EXCERPTS OF THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

Affirming judgments need not speak elaborately, and so, in these two appeals where we do not
disagree with the High Court, only a brief statement of reasons is called for.
The first point that appealed to the learned Single Judge, but failed before the Division
Bench, has admittedly no merit in the light of this court’s direct ruling on the point.
The second point urged by Sri M.K. Ramamurthy that the Central Workshop has had no
separate viable balance sheet and profit and loss accounts in respect of that undertaking, and
that such is the finding of fact by the Tribunal, does not appeal to us. Nor is there life in the
third limb of his argument that the respondent has failed to show that the workshop has not
been treated as part of the common establishment for the purpose of computation of bonus.
We agree with the appellate judgment that the proviso is attracted. Separate balance-sheet profit
and loss accounts have been prepared and maintained in the past and during the relevant years
of accounting also, although there is much force in the contention that they have not been
properly maintained. Some items which may help enhance the bonus have, perhaps been omitted
and the High Court is right in directing the Tribunal to re-enquire, rectify the balance-sheets
and profit and loss accounts for the years in the question taken due note of the requirements of
 Wages and Monetary Benefits 533

the Act as mentioned in the judgment of the Division Bench vis-à-vis Central Workshop. We
are in respectful agreement with the decision in Alloy Steel Project v. The Workmen,70 but do not
regard the ratio of that case as applicable to the present case on the facts.
In industrial law, interpreted and applied in the perspective of Part IV of the Constitution,
the benefit of reasonable doubt on law and facts, if there be such doubt, must go to the weaker
section, labour. The tribunal will dispose of the case making this compassionate approach but
without over-stepping the proved facts, correct the balance sheets and profit and loss accounts
of the Central Workshop to the extent justified by the Act and the evidence and finish the list
within three months of receipt of this order. The appeals are dismissed.

NOTES

1. The Payment of Wages Act, 1936, seeks to regulate the payment of wages both in the organised and un-
organised sectors of employment.
2. See Section 3 of the Minimum Wages Act.
3. Section 4 of the Minimum Wages Act provides:

(1) Any minimum rate of wages fixed or revised by the appropriate Government in respect of scheduled
employments under Section 3 may consist of
(i) a basic rate of wages and a special allowance at a rate to be adjusted, at such intervals and in such
manner as the appropriate government may direct, to accord as nearly as practicable with the variation
in the cost of living index number applicable to such workers (hereinafter referred to as the ‘cost of
living allowance’); or
(ii) a basic rate of wages with or without the cost of living allowance, and the cash value of the concessions
in respect of supplies of essential commodities at concession rates, where so authorized; or
(iii) an all inclusive rate allowing for the basic rate, the cost of living allowance and the cash value of the
concessions, if any.
(2) The cost of living allowance and the cash value of the concessions in respect of supplies of essential
commodities at concession rates shall be computed by the competent authority at such intervals and in
accordance with such directions as may be specified or given by the appropriate government.

4. AIR 1976 SC 2303. The case was heard by V.R. Krishna Iyer, A.C. Gupta and N.L. Untwalia.
5. AIR 1964 SC 864.
6. AIR 1974 SC 130. The case was heard by H.R. Khanna, R.S. Sarkaria and V.R. Krishna Iyer. The majority
decision was delivered both by Justice Sarkaria and Justice Krishna Iyer separately.
7. (1969) 3 SCC 642.
8. (1969) 3 SCC 642.
9. AIR 1962 All 144.
10. 1969 All LJ 225:(1970 Lab IC 582).
11. (1967) 14 Fac LR 204.
12. (1967) 14 Fac LR 204.
13. 1962 Supp (1) SCR 315:AIR 1962 SC 1334.
14. 1962 Supp (1) SCR 315:AIR 1962 SC 1334.
15. Law Commission of India, 54th Report Civil Procedure Code.
16. AIR 1972 Ker 103, 107:para 5.
17. AIR 1978 SC 419. This case was heard by V.R. Krishna Iyer and P.K. Goswami.
18. (1969) 2 SCR 113:AIR 1969 SC 360.
19. (1975) Supp SCR 453:AIR 1975 SC 1778.
20. AIR 1978 SC 1133. The case was heard by V.R. Krishna Iyer and Jaswant Singh and the majority judgement
was delivered by [Justice] Jaswant Singh.
21. AIR 1978 SC 828. The case was heard by V.R. Krishna Iyer and Jaswant Singh and the majority judgement
was delivered by Justice Jaswant Singh.
22. 1965 (11) FLR 337:1950–67 1 SCLJ 253:(1966) 1 SCR 382.
534 Social Justice and Labour Jurisprudence

23. 1969 (18) FLR 271:(1969) 1 LLJ 751 758.

24. 1963 (6) FLR 80:(1050–67) SCLJ 4136:(1962) 2 LLJ 744.
25. 1969 (18) FLR 228:(1969) 2 LLJ 782:(1967–68) 32 FJR 182.
26. Section 17 of the Act provides that

Where in any accounting year—(a) an employer had paid any puja bonus or other customary bonus to
an employee; (b) an employer has paid part of the bonus payable under this Act to an employee before
the date on which such bonus becomes payable, then the employer shall be entitled to deduct the
amount of bonus so paid from the amount of bonus payable by him to the employee under this Act in
respect of that accounting year and the employee shall be entitled to receive only the balance.
Section 34 of the Act provides that subject to the provisions of Section 31-A, the provisions of this Act
shall have effect notwithstanding anything inconsistent herewith contained in any other law for the time
being in force or in terms of any award, agreement, settlement or contract of service.

27. AIR 1976 SC 1455. This case was heard by V.R. Krishna Iyer and N.L. Untwalia.
28. (1976) I SCR 306.
29. (1976) I SCR 120.
30. (1969) I SCR 931:AIR 1969 SC 998.
31. (1960) I SCR 24:AIR 1959 SC 1147.
32. (1969) I SCR 931:AIR 1969 SC 998.
33. (1960) I SCR 24:AIR 1959 SC 1147.
34. 1952 LAC 370.
35. (1960) I SCR 107 (111):AIR 1959 SC 1151 at 1153.
36. (1960) I SCR 24:AIR 1959 SC 1147.
37. (1964) 7 SCR 277:AIR 1964 SC 1770.
38. 1962 Supp (3) SCR 382:AIR 1963 SC 474.
39. (1966) 2 LLJ 294, 302 (Pat HC).
40. (1962) II LLJ 435:AIR 1963 SC 1007.
41. AIR 1959 Cal. 797.
42. (1969) I SCR 366:AIR 1969 SC 530.
43. (1967) I SCR 15:AIR 1967 SC 691.
44. AIR 1960 SC 530.
45. AIR 1969 SC 530.
46. AIR 1969 SC 530.
47. (1975) II LLJ 345 (SC).
48. (1975) II LLJ 345 (SC).
49. Law Commission on India, 54th Report.
50. AIR 1979 SC 262. This case was heard by V.R. Krishna Iyer and D.A. Desai.
51. Section 34 of the Act provides that subject to the provisions of Section 31-A, the provisions of this Act
shall have effect notwithstanding anything consistent therewith contained in any other law for the time
being in force or in the terms of any award, agreement, settlement or contract of service.
52. Benjamin Nathan Cardozo 1947. ‘What Medicine can do for Law,’ (Address before the New York Academy
of Medicine, 1 Nov. 1928), in Margaret E. Hall (ed.) Selected Writings of Benjamin Nathan Cardozo. New York:
Mathew Bender and Co.
53. Austin, Granville. 1972. The Indian Constitution—Cornerstone of a Nation. Oxford: Clarendon Press, p. 26.
54. Politica, Book VII, Chapter 4, Section 5.
55. Interpretation of Legal History, p. 156, quoted in ‘Criminal Law—Principles of Liability’ by T.S. Batra,
p. 612.
56. A Text Book of Jurisprudence, p. 31, quoted in ‘Criminal Law—Principles of Liability by T.S. Batra,
p. 612.
57. Skies, Melvin P. ‘The Administration of Justice’, Pawns of Politics and of Power, p. 120.
58. Notification dated 17-10-1968 of the U.P. Govt. Labour (C) Dept.
59. A committee was constituted under Labour (C) Department, notification No. 7548(HI) XXXVI-C-109
(HI)/68, dated 17 October 1968.
60. An amendment to Section 3(e) has since been made.
61. (1961) 2 SCR 330 at pp. 242–343:AIR 1961 SC 420 at p. 426.
 Wages and Monetary Benefits 535

62. AIR 1961 SC 420.

63. Section 10 of the Act provides that:

subject to the other provisions of this Act, every employer shall be bound to pay to every employee in
respect of the accounting year commencing on any day in the year 1979 and in respect of every subsequent
accounting year, a minimum bonus which shall be 8.33 percent of the salary or wage earned by the
employee during the accounting year or one hundred rupees, whichever is higher, whether or not the
employer has any allocable surplus in the accounting year:
Provided that where an employee has not completed fifteen years of age at the beginning of the accounting
year, the provisions of this section shall have effect in relation to such employee as if for the words ‘one
hundred rupees’ the words ‘sixty rupees’ were substituted.

64. Section 36 provides that:

if the appropriate government, having regard to the financial position and other relevant circumstances
of any establishment or class of establishments, is of opinion that it will not be in public interest to
apply all or any of the provisions of this Act thereto, it may, by notification in the Official Gazette,
exempt for such period as may be specified therein and subject to such conditions as it may think fit to
exempt, such establishment or class of establishments from all or any of the provisions of this Act.

65. AIR 1967 SC 691:1966 (2) LLJ 546:1966 (13) FLR 298.
66. AIR 1979 SC 233:1979 (1) LLJ 162:1979 (38) FLR 58.
67. AIR 1980 SC 604. This case was heard by V.R. Krishna Iyer, R.S. Pathak and O. Chinnappa Reddy.
68. Section 32 of the Act provides that nothing in this Act shall apply to:

(i) employees employed by any insurer carrying on general insurance business and the employees of
the Life Insurance Corporation of India;…
(v) employees employed by
(a) the Indian Red Cross Society or any other institution of a like nature (including its branches)
(b) universities and other educational institutions;
(c) institutions (including hospitals, chambers of commerce and social welfare institutions)
established not for purposes of profit;…

69. 1978 I LLJ 322:AIR 1978 SC 474. This case was heard by V.R. Krishna Iyer and Jaswant Singh.
70. 1971 (22) FLR 181:1971 (3) SCR 529.
 Chapter 15

Social Security and Welfare

In India, the law relating to social security owes its origin to the concept of social security
envisaged by the International Labour Organization. The social security legislation in
India, as far as its applicability and coverage is concerned, differs from other labour legis-
lations that govern various aspects of industrial relations. The very premise of social security
legislation in India is to maintain the purchasing capacity of a worker when he becomes
unemployed, either temporarily or permanently.

Employees’ State Insurance Act, 1948: Applicability

Royal Talkies, Hyderabad, and Others vs the Employees’
State Insurance Corporation1

In this case, the Supreme Court had to consider the scope of the definition of ‘employee’
in Section 2(9)2 and the employer’s liability to pay the contribution under Section 45A3
of the Employees’ State Insurance Act, 1948, respectively.

THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

Law is essentially the formal expression of the regulation of economic relations in society. That
is the key note thought in this case, where the core question is: who is an employee? Secondly,
to decide the meaning of a welfare measure a feeling for the soul of the measure is a surer guide
than meticulous dissection with lexical tools alone.
The definitional amplitude of ‘employee’ in Section 2(9) of the Employees’ State Insurance
Act, 1948, (hereinafter referred to as the Act), is the sole contentious issue canvassed by counsel
at the bar. We have heard Shri Chitale for the appellant and the learned Attorney General for
the respondent-Corporation at some length, because a decision by this court as to the width of
the definition and consequential fall-out of statutory obligations may cover a considerable number
of establishments. We have granted leave to appeal on that basis and now proceed to study the
anatomy of ‘employee’ as defined in Section 2(9) of the Act.
A brief factual narration may help get a hang of the case. The High Court, before which the
present appellants had filed these appeals, has summarised the facts succinctly thus:

The appellants are owners of theatres in the twin cities of Hyderabad and Secunderabad,
where films are exhibited. Within the same premises as the theatre, in every case, there is a
canteen and a cycle stand. The canteen and the cycle stand are leased out to contractors
 Social Security and Welfare 537

under instruments of lease. The contractors employ their own servants to run the canteen
and the cycle stand. In regard to persons so employed by the contractors, the owners of the
theatres were treated as ‘Principal Employers’ and notices of demand were issued to them
calling upon them to pay contribution under the Employees’ State Insurance Act. Thereupon
the owners of theatres filed application under Section 75 of the Employees’ State Insurance
Act before the Employees Insurance Court for a declaration that the provisions of the Act
were not applicable to their theatres and that they were not liable to any contribution in re-
spect of the persons employed in the canteens and cycle-stands attached to the theatres.

The Insurance Court, on a consideration of the relevant lease deeds and other evidence, noticed
the following features in regard to the running of the canteens:

(1) All these canteens are within the premises of the cinema theatres. (2) A few of these can-
teens have access directly from the abutting roads whereas the other canteens can be reached
only through the open space inside the cinema theatres. (3) The persons running the canteens
are themselves responsible for equipping the canteens with the necessary furniture and for
providing the required utensils. (4) The Managements of all these cinema theatres pay the
electricity charges due in respect of these canteens. (5) The persons working in these can-
teens are employed only by the contractors or tenants who run the canteens and they alone
are responsible for the salaries payable to the persons. (6) The managements of the cinema
theatres have absolutely no supervisory control over the persons employed in these canteens.
(7) These canteens have to be run only during the show hours. This is made abundantly clear
by Exhibits P-7 to P-10 and in the face of the recitals contained in these agreements, I am not
prepared to accept P.W. 1’s evidence that the tenants of these canteens are at liberty to run
them at other times also. In particular Exhibit P-10 provides that the lessee shall run the
business only during the show hours and that it shall be closed as soon as the cinema shows
are closed. (8) A few of the persons working in the canteens are allowed inside the auditorium
during the interval for vending eatables and beverages. They can enter the auditorium a few
minutes before the interval and can remain inside the auditorium for a few minutes after the
interval. (9) It is seen from Exhibit P-10 that the management of the cinema theatre had re-
served to itself the right to specify what types of things should be sold in the canteen. The
canteens are expected to maintain a high degree of cleanliness and sanitation. (10) In some
cases the managements of the theatres reserve the right to enter the canteen premises at all
reasonable time for purposes of check and inspection. Exhibit P-9 contains a specific clause
in that regard.

These features led the Insurance Court to arrive at the following findings of fact:

From the several circumstances mentioned above it is clear that these canteens are meant
primarily for the convenience and comfort of those visiting the cinema theatres though in a
few cases the persons in charge of canteens seem to be allowing the general public also to have
access to the canteens taking advantage of the fact that the canteens can be reached directly
from the abutting road. But this circumstance does not by itself indicate that these canteens
are thrown open to the general public as other hotels, restaurants or eating houses.

In regard to cycle stands, the Insurance Court held:

Hence it may safely be concluded that these cycle stands are meant exclusively for the
convenience of persons visiting the theatres.

The Insurance Court found that the owners of theatres were principal employers with reference
to the persons employed by contractors in the canteens and the cycle stands attached to the
theatres and rejected the applications filed by the owners of theatres under Section 75 of the Act.
538 Social Justice and Labour Jurisprudence

The disappointed theatre owners appealed under Section 82, without avail, but undaunted,
moved this Court for Special Leave to Appeal which we have granted, as stated earlier, so that
we may discuss the facets of the definitional dispute in some detail and lay down the law on the
main question.
A conspectus of the statute, to the extent relevant, is necessary to appreciate the controversy
at the Bar. The statutory personality and the social mission of the Act once projected, the re-
solution of the conflict of interpretation raised in this case is simple. Although, technically, the
Act is a pre-Constitution one, it is a post-Independence measure and shares the passion of the
Constitution for social justice. Articles 38, 39, 41, 42, 43 and 43-A of the Constitution show
concern for workers and their welfare. Since Independence, this legislative motivation has found
expression in many enactments. We are concerned with one such law designed to confer benefits
on this weaker segment in situations of distress as is apparent from the Preamble. The machinery
for state insurance is set up in the shape of a Corporation and subsidiary agencies. All employees
in factories or establishments are sought to be insured against sickness and allied disabilities, but
the funding, to implement the policy of insurance, is by contributions from the employer and
the employee. In view of the complexities of modern business organisation the principal employer
is made primarily liable for payment of contribution ‘in respect of every employee, whether dir-
ectly employed by him or by or through an immediate employer’. Of course, where the employee
is not directly employed by him but through another ‘immediate employer’, the principal em-
ployer is empowered to recoup the contribution paid by him on behalf of the immediate employer
(Section 41). There is an Inspectorate to supervise the determination and levy of the contributions.
There is a chapter prescribing penalties; there is adjudicating machinery and there are other
policing processes for the smooth working of the benign project envisaged by the Act. The
benefits belong to the employees and are intended to embrace as extensive a circle as is feasible.
In short, the social orientation, protective purpose and human coverage of the Act are important
considerations in the statutory construction, more weighty than mere logomachy or grammatical
nicety.
With this prefatory statement we may go straight to the crucial definition. The essential
question is whether a cinema theatre manager, who has no statutory obligation to run a canteen
or provide a cycle stand but, for the better amenities of his customers and improvement of his
business, enters into an arrangement with another to maintain a canteen and a cycle stand and
that other employs, on his own, workers in connection with the canteen and the cycle stand,
can be held liable for contribution as the principal employer of the workmen although they are
engaged independently by the owner of the canteen or the cycle stand. It is common ground
that there is no statutory obligation on the part of the appellants to run canteens or keep cycle
stand. It is common ground, again, that the workers with whom we are concerned are not dir-
ectly employed by the appellants and, if we go by the master and servant relationship under the
law of contracts, there is no employer-employee nexus. Even so, it has been held concurrently
by the Insurance Court and High Court that ‘canteens are meant primarily for the convenience
and comfort of persons visiting the theatres and the cycle stands are meant exclusively for the
convenience of the persons visiting theatres’ and ‘that the persons employed in the canteens and
cycle stands are persons employed on work which is ordinarily part of the work of the theatre or
incidental to the purpose of the theatre. In relation to the person so employed, therefore, the
owners of the theatres are principal employers’. The High Court proceeded further to affirm:

By undertaking to run the canteen or the cycle stand the contractor has undertaken the
execution of the whole or part of the work which is ordinarily part of the work of the theatre
of the principal employer or is incidental to the purpose of the theatre. We have already held
that the running of canteen or cycle stand is work carried on in connection with the work
of the theatre, work which may be considered to be either ordinarily part of the work of the
 Social Security and Welfare 539

theatre or incidental to the purpose of the theatre. If so, there is no reason why, the contractor
should not come within the definition of ‘immediate employer’.

Before us counsel have mainly focussed on the definition of ‘employee’ since the short pro-
position which creates or absolves liability of the appellants depends on the canteen workers
and the cycle stand attendants being ‘employees’ vis-à-vis the theatre owners. There is no doubt
that a cinema theatre is an ‘establishment’ and that the appellants, as theatre owners, are principal
employers, being persons responsible for the supervision and control of the establishment.
Admittedly, the canteens and cycle stands are within the theatre premises. Within this factual
matrix let us see if the definition in Section 2(9) will fit.
We may read the definition of ‘employee’ once again before analysing the components thereof:

2 (9) ‘employee’ means any person employed for wages in or in connection with the work of
a factory or establishment to which this Act applies, and
(i) Who is directly employed by the principal employer on any work of, or incidental or
preliminary to or connected with the work, of the factory or establishment, whether
such work is done by the employee in the factory or establishment or elsewhere; or
(ii) Who is employed by or through an immediate employer on the premises of the factory
or establishment or under the supervision of the principal employer or his agent on
work which is ordinarily part of the work of the factory or establishment or which is
preliminary to the work carried on in or incidental to the purpose of the factory or
establishment; or
(iii) Whose services are temporarily lent or let on hire to the principal employer by the
person with whom the person whose services are so lent or let on hire has entered into
a contract of service; and includes any person employed for wages on any work con-
nected with the administration of the factory or establishment or any part, department
or branch thereof or with the purchase of raw materials for, or the distribution or sale
of the products of, the factory or establishment; but does not include:
(a) any member of the Indian naval, military or air forces; or
(b) any person so employed whose wages (excluding remuneration for overtime
work) exceed five hundred rupees a month:
Provided that an employee whose wages (excluding remuneration for overtime
work) exceed five-hundred rupees a month at any time after and not before,
the beginning of the contribution period, shall continue to be an employee
until the end of that period.

The reach and range of the definition is apparently wide and deliberately transcends pure
contractual relationships. We are in the field of labour jurisprudence, welfare legislation and
statutory construction which must have due regard to Part IV of the Constitution. A teleological
approach and social perspective must play upon the interpretative process.
Now here is a break-up of Section 2(9). The clause contains two substantive parts. Unless the
person employed qualifies under both he is not an ‘employee’. Firstly, he must be employed ‘in
or in connection with’ the work of an establishment. The expression ‘in connection with the
work of an establishment’ ropes in a wide variety of workmen who may not be employed in the
establishment but may be engaged only in connection with the work of the establishment.
Some nexus must exist between the establishment and the work of the employee but it may be
a loose connection. ‘[I]n connection with the work of an establishment’ only postulates some
connection between what the employee does and the work of the establishment. He may not do
anything directly for the establishment; he may not do anything statutorily obligatory in the
establishment; he may not even do anything which is primary or necessary for the survival or
540 Social Justice and Labour Jurisprudence

smooth running of the establishment or integral to the adventure. It is enough if the employee
does some work which is ancillary, incidental or has relevance to or link with the object of the
establishment. Surely, an amenity or facility for the customers who frequent the establishment
has connection with the work of the establishment. The question is not whether without that
amenity or facility the establishment cannot be carried on but whether such amenity or facility,
even peripheral may be, has not a link with the establishment. Illustrations may not be ex-
haustive but may be informative. Taking the present case, an establishment like a cinema theatre
is not bound to run a canteen or keep a cycle stand (in Andhra Pradesh) but no one will deny
that a canteen service, a toilet service, a car park or cycle stand, a booth for sale of catchy film lit-
erature on actors, song hits and the like, surely have connection with the cinema theatre and
even further the venture. On the other hand, a book-stall where scientific works or tools are
sold or a stall where religious propaganda is done, may not have anything to do with the cinema
establishment and may, therefore, be excluded on the score that the employees do not do any
work in connection with the establishment, that is, the theatre. In the case of a five-star hotel,
for instance, a barber shop or an arcade, massage parlour, foreign exchange counter or tourist
assistance counter may be run by some one other than the owner of the establishment but the
employees so engaged do work in connection with the establishment or the hotel even though
there is no obligation for a hotel to maintain such an ancillary attraction. By contrast, not a
lawyer’s chamber or architect’s consultancy. Nor, indeed, is it a legal ingredient that such adjunct
should be exclusively for the establishment if it is mainly its ancillary.

The primary test in the substantive clause being thus wide, the employees of the canteen and
the cycle stand may be correctly described as employed in connection with the work of the
establishment. A narrower construction may be possible but a larger ambit is clearly imported
by a purpose-oriented interpretation. The whole goal of the statute is to make the principal
employer primarily liable for the insurance of kindred kinds of employees on the premises,
whether they are there in the work or are merely in connection with the work of the establishment.
Merely being employed in connection with the work of an establishment, in itself, does not
entitle a person to be an ‘employee’. He must not only be employed in connection with the
work of the establishment but also be shown to be employed in one or other of the three cat-
egories mentioned in Section 2(9).
Section 2(9)(i) covers only employees who are directly employed by the principal employer.
Even here, there are expressions which take in a wider group of employees than traditionally so
regarded, but it is imperative that any employee who is not directly employed by the principal
employer cannot be eligible under Section 2(9)(i). In the present case, the employees concerned
are admittedly not directly employed by the cinema proprietors.
Therefore, we move down to Section 2(9)(ii). Here again, the language used is extensive and
diffusive imaginatively embracing all possible alternatives of employment by or through an
independent employer. In such cases, the ‘principal employer’ has no direct employment relation-
ship since the ‘immediate employer’ of the employee concerned is some one else. Even so, such
an employee, if he works (a) on the premises of the establishment, or (b) under the supervision
of the principal employer or his agent ‘on work which is ordinarily part of the work of the estab-
lishment or which is preliminary to the work carried on in or incidental to the purpose of the
establishment’, qualifies under Section 2(9)(ii). The plurality of persons engaged in various
activities who are brought into the definitional net is wide and considerable; and all that is
necessary is that the employee be on the premises or be under the supervision of the principal
employer or his agent. Assuming that the last part of Section 2(9)(ii) qualifies both these cat-
egories, all that is needed to satisfy that requirement is that the work done by the employee must
be (a) such as is ordinarily (not necessarily nor statutorily) part of the work of the establishment,
or (b) which is merely preliminary to the work carried on in the establishment, or (c) is just in-
cidental to the purpose of the establishment. No one can seriously say that a canteen or cycle
 Social Security and Welfare 541

stand or cinema magazine booth is not even incidental to the purpose of the theatre. The cinema
goers ordinarily find such work an advantage, a facility, an amenity and some times a necessity.
All that the statute requires is that the work should not be irrelevant to the purpose of the estab-
lishment. It is sufficient if it is incidental to it. A thing is incidental to another if it merely ap-
pertains to something else as primary. Surely, such work should not be extraneous or contrary to
the purpose of the establishment but need not be integral to it either. Much depends on time
and place, habits and appetites, ordinary expectations and social circumstances. In our view,
clearly the two operations in the present case, namely, keeping a cycle stand and running a can-
teen are incidental or adjuncts to the primary purpose of the theatre.
We are not concerned with Section 2(9)(iii) nor with the rest of the definitional provision.
Shri Chitale tried to convince us that on a minute dissection of the various clauses of the pro-
vision it was possible to exclude canteen employees and cycle stand attendants. May be, punctili-
ous sense of grammar and minute precision of language may sometimes lend unwitting support
to narrow interpretation. But language is handmaid, not mistress. Maxwell and Fowler move
along different streets, sometimes. When, as in Section 2(9), the definition has been cast delib-
erately in the widest terms and the draftsman has endeavoured to cover every possibility so as
not to exclude even distant categories of men employed either in the primary work or cognate
activities, it will defeat the object of the statute to truncate its semantic sweep and throw out of
its ambit those who obviously are within the benign contemplation of the Act. Salvationary ef-
fort, when the welfare of the weaker sections of society is the statutory object and is faced with
stultifying effect, is permissible judicial exercise.
In this view we have no doubt that findings assailed before us are correct and that the conclusion
reached deserves to be affirmed. We do so.
Learned Counsel for the appellants finally submitted that, in this event of our negativing his
legal contention, he should be given the benefit of natural justice. We agree. The assessment of
the quantum of the employers’ contribution has now been made on an ad hoc basis because they
merely pleaded non-liability and made no returns. On the strength of Section 45A the con-
tribution was determined without hearing. In the circumstances of the case—and the learned
Attorney General has no objection—we think it right to direct the relevant Corporation author-
ities to give a fresh hearing to the principal employers concerned, if sought within 2 months
from to-day, to prove any errors or infirmities in the physical determination of the contribution.
Such a hearing, in tune with the ruling, of this Court in the Central Press4 case is fair and so we
order that the assessment shall be reconsidered in the light of a de novo hearing to the appellants
and the quantum of contribution affirmed or modified by fresh orders.
Before we formally wind up we think it apt to make a critical remark of the cumbersome
definition in Section 2(9) of the Act which has promoted considerable argument. This reminds
us of the well-known dictum of Sir James Fitzjames Stephen ‘that in drafting it is not enough to
gain a degree of precision which a person reading in good faith can understand, but it is neces-
sary to attain if possible to a degree of precision which a person reading in bad faith cannot
misunderstand’.5

Computation of Maternity Benefit under

the Maternity Benefit Act, 1961

The maternity benefit for women employees employed in industrial establishments is

provided through two legislations namely—the Employees’ State Insurance Act, 1948, and
the Maternity Benefit Act, 1961. In cases of industrial establishments where the Employees’
542 Social Justice and Labour Jurisprudence

State Insurance Act, 1948, is not extended, the Maternity Benefit Act, 1961, is made
applicable. On the whole, the Maternity Benefit Act, 1961, is more comprehensive in
providing the benefits to a woman employee.

B. Shah vs the Presiding Officer, Labour Court, Coimbatore and Others6

In this case, the Supreme Court addressed the computation of maternity benefit, stressing
that the Act is intended to achieve the object of ensuring social justice to women workers.
This appeal by special leave, which is directed against the judgement and order dated
24 April 1974 of the letters patent bench of the High Court of Judicature at Madras,
reversing the judgement and order dated 19 April 1971 of the single judge of that court
passed in writ petition 3822 of 1969 presented under Article 226 of the Constitution,
raises a complex but interesting question relating to the construction of the phrase ‘ma-
ternity benefit for the period of her actual absence immediately preceding and including
the day of her delivery and for the six weeks immediately following that day,’ occurring in
Section 5(1) of the Maternity Benefits Act, 1961 (Act LIII of 1961) (hereinafter referred
to as ‘the Act’), which in view of Section 2(1) of the Act, is the law applicable even to
women workers employed in plantations.

THE JUDGEMENT DELIVERED BY JUSTICE JASWANT SINGH

It appears that in October, 1967, Subbammal, respondent 2 herein, who is a woman worker em-
ployed in Mount Stuart Estate (hereinafter referred to as ‘the establishment’), which is carrying
on plantation industry, was allowed leave of absence by the establishment on the basis of a
notice given by her of her expected delivery which actually took place on 16 December 1967.
After her delivery, the respondent was paid by her employers on account of maternity benefit an
amount equivalent to what she would have earned on the basis of her average daily wage in 72
working days falling within twelve weeks of the maternity period. While calculating the aforesaid
amount of maternity benefit, the establishment admittedly excluded twelve Sundays being wage-
less holidays, which fell during the period of the respondent’s actual absence immediately pre-
ceding and including the day of her delivery and the six weeks immediately following that day.
Dissatisfied with this computation, the respondent made a representation to her employers
claiming maternity benefit for the entire period of twelve weeks under the Act, i.e. for 84 days
on the plea that a week consisted of seven days. As her demand did not evoke a favourable re-
sponse, the respondent applied to the Labour Court, Coimbatore, under Section 33C (2) of the
Industrial Disputes Act for redress of her grievance. The claim preferred by the respondent was
resisted by the appellant herein who contended that the respondent was admittedly working
and was being paid only for six days in a week and that a pregnant woman worker is entitled to
maternity benefit for 72 days which are the normal working days in twelve weeks and not for 84
days, as no wage is payable for the seventh days of the week, i.e. Sunday, which is a non-working
wageless holiday. By its order dated 26 February 1969, the Labour Court allowed the claim of
the respondent. Thereupon the establishment moved the High Court at Madras under Article
226 of the Constitution challenging the decision of the Labour Court contending that the claim
made by the respondent was untenable as normally a worker works only for six days in a week
and the maternity benefit had to be computed only for 72 days. As against this, the respondent
pleaded that the computation had to be made not with reference to the actual number of work-
ing days but with reference to total number of days covered by twelve weeks, i.e. 84 days. The
single Judge of the High Court to whom the case was assigned allowed the petition holding that
 Social Security and Welfare 543

twelve weeks for which maternity benefit is provided for in sub-section (3) of Section 5 of the
Act must be taken to mean twelve weeks of work and the computation of the benefit had to be
made with reference to the actual days on which the woman would have worked but for her in-
ability. Aggrieved by this decision, the respondent filed an appeal under clause 15 of the Letters
Patent which, as already stated, was allowed by the Letters Patent Bench of the High Court
observing that the maternity benefit which the respondent was entitled to receive was for the
period of her absence before delivery including the day of delivery and also six weeks thereafter,
each week consisting of seven days including Sundays. Dissatisfied with this decision, the estab-
lishment has, as already stated, come up in appeal to this Court by special leave.
We have heard Mr Pai, learned Counsel, for the appellant as also Mr Bhat, who in view of
the default in appearance of respondent 2 and the importance of the point involved in the case
was appointed as amicus curiae. We place on record our deep appreciation of the valuable assist-
ance rendered to us by both of them.
Assailing the judgment and order under appeal, Mr Pai has urged that since legislative intent,
as revealed from the scheme of Section 5(1) of the Act is to compensate the woman worker who
expects delivery for the loss that her forced absence from work on account of pregnancy and
confinement may entail, the liability which has to be imposed on her employer cannot exceed
the amount that she would have earned if she had not been compelled to avail of the maternity
leave and since Sunday is a non-working wageless day, the employer cannot be made to pay for
that day. He has further urged that since under Section 5(1) of the Act, the maternity benefit
has to be computed with reference to the period of the worker’s actual absence thereby meaning
absence to days on which there was work excluding Sundays and the term ‘week’ in the context
of sub-sections (1) and (3) of Section 5 of the Act is to be understood as a week of work consisting
of six days and in the instant case, respondent 2 was working and earning wages for six days in
a week, the seventh days being a wageless holiday, her claim cannot be sustained. In support of
his contention, Mr Pai has referred us to the Full Bench decision of the Kerala High Court in
Malayalam Plantations Ltd., Cochin vs Inspector of Plantations, Mundakayam and to Convention
103 concerning Maternity Protection Convention (Revised), 1952 adopted by the General
Conference of the International Labour Organisation.
Mr Bhat has, on the other hand, urged that the scheme of Section 5 of the Act clearly indi-
cates that a woman worker who expects delivery has to be paid maternity benefit for all the
seven days of the week including Sundays falling within the ante-natal and post-natal periods
specified in the section.
For a proper determination of the question involved in the appeal, it would, we think, be
useful to refer to certain provisions of the Act which have a bearing on the subject-matter of the
controversy before us.
Section 2(1) of the Act makes the Act applicable to every establishment being a factory, mine
or plantation (including any such establishment belonging to Government and to every estab-
lishment wherein persons are employed for the exhibition of equestrian, acrobatic and other
performance). Sub-section (2) of Section 2 of the Act specifically excludes the applicability of
the provisions of the Act to any factory or other establishment to which the provisions of the
Employees’ State Insurance Act, 1948 apply for the time being. Section 3(n) of the Act defines
‘wages’ as under:

3. (n) Wages means all remuneration paid or payable in cash to a woman, if the terms of the
contract of employment, express or implied, were fulfilled and includes—
(1) such cash allowances (including dearness allowance and house rent allowance) as a
woman is for the time being entitled to;
(2) incentive bonus; and
(3) the money value of the concessional supply of food grains and other articles,
544 Social Justice and Labour Jurisprudence

but does not include

(i) any bonus other than incentive bonus;
(ii) over-time earnings and any deduction or payment made on account of fines;
(iii) any contribution paid or payable by the employer to any pension fund or provident
fund or for the benefit of the woman under any law for the time being in force; and
(iv) any gratuity payable on the termination of service.

The above definition, it would be noted, does not restrict the meaning of the term ‘wages’ to
contractual wages but gives the term a composite meaning covering all remunerations in the
nature of cash allowances, incentive bonus and the money value of the concessional supply of
food grains and other articles.
Section 4 of the Act, which prohibits the employment of, or work by, women during certain
period lays down:

4. Employment of, or work by, women prohibited during certain period—

(1) No employer shall knowingly employ a woman in any establishment during the six
weeks immediately following the day of her delivery or her miscarriage.
(2) No woman shall work in any establishment during the six weeks immediately following
the day of her delivery or miscarriage.
(3) Without prejudice to the provisions of Section 6, no pregnant woman shall, on a
request being made by her in this behalf, be required by her employer to do during
the period specified in sub-section (4) any work which is of an arduous nature or
which involves long hours of standing, or which in any way is likely to interfere with
her pregnancy or the normal development of the foetus, or is likely to cause her mis-
carriage or otherwise to adversely affect her health.
(4) The period referred to in sub-section (3) shall be
(a) the period of one month immediately preceding the period of six weeks, before
the date of her expected delivery;
(b) any period during the said period of six weeks for which the pregnant woman
does not avail of leave of absence under Section 6.

Section 5 of the Act which confers right to payment of maternity benefit on a woman worker
provides:

5. Right to payment of maternity benefit—(1) Subject to the provisions of this Act,

every woman shall be entitled to, and her employer shall be liable for, the payment of maternity
benefit at the rate of the average daily wage for the period of her actual absence immediately
preceding and including the day of her delivery and for the six weeks immediately following
that day.
Explanation:—For the purpose of this sub-section, the average daily wage means the average
of the woman’s wages payable to her for the days on which she has worked during the period
of three calendar months immediately preceding the date from which she absents herself on
account of maternity, or one rupee a day, whichever is higher.
(2) No woman shall be entitled to maternity benefit unless she has actually worked in an
establishment of the employer from whom she claims maternity benefit, for a period of
not less than one hundred and sixty days in the twelve months, immediately preceding
the date of her expected delivery:
Provided that the qualifying period of one hundred and sixty days aforesaid shall not apply to
a woman who has immigrated into the State of Assam and was pregnant at the time of the
immigration.
 Social Security and Welfare 545

Explanation: For the purpose of calculating under this sub-section, the days on which a
woman has actually worked in the establishment, the days for which she has been laid off
during the period of twelve months immediately preceding the date of her expected delivery
shall be taken into account.
(3) The maximum period for which any woman shall be entitled to maternity benefit shall
be twelve weeks, that is to say, six weeks up to and including the day of her delivery and six
weeks immediately following that day:
Provided that where a woman dies during this period, the maternity benefit shall be payable
only for the days up to and including the day of her death:
Provided further that where a woman, having delivered of a child, dies during her delivery or
during the period of six weeks immediately following the date of her delivery, leaving behind
in either case the child, the employer shall be liable for the maternity benefit for the entire
period of six weeks immediately following the day of her delivery but if the child also dies
during the said period, then, for the days upto and including the day of the death of the child.

Section 6 of the Act which deals with notice of claim for maternity benefit and payment
thereof is to the following effect:

6. Notice of claim for maternity benefit and payment thereof—(1) Any woman employed
in an establishment and entitled to maternity benefit under the provisions of this Act may
give notice in writing in such form as may be prescribed, to her employer, stating that her
maternity benefit and any other amount to which she may be entitled under this Act may be
paid to her or to such person as she may nominate in the notice and that she will not work in
any establishment during the period for which she receives maternity benefit.
(2) In the case of a woman who is pregnant, such notice shall state the date from which she
will be absent from work, not being a date earlier than six weeks from the date of her ex-
pected delivery.
(3) Any woman who has not given the notice when she was pregnant may give such notice as
soon as possible after the delivery.
(4) On receipt of the notice, the employer shall permit such woman to absent herself from
the establishment until the expiry of six weeks after the days of her delivery.
(5) The amount of maternity benefit for the period preceding the date of her expected delivery
shall be paid in advance by the employer to the woman on production of such proof as
may be prescribed that the woman is pregnant, and the amount due for the subsequent
period shall be paid by the employer to the woman within forty-eight hours of production
of such proof as may be prescribed that the woman has been delivered of a child.
(6) The failure to give notice under this section shall not disentitle a woman to maternity
benefit or any other amount under this Act if she is otherwise entitled to such benefit or
amount and in any such case, an Inspector may either of his own motion or on an appli-
cation made to him by the woman, order the payment of such benefit or amount within
such period as may be specified in the order.

The provisions of Section 5 of the Act quoted above make it clear that a woman worker who
expected a child is entitled to maternity benefit for a maximum period of twelve weeks which is
split up into two periods viz. pre-natal and post-natal. The first one i.e. pre-natal or ante-natal
period is limited to the period of woman’s actual absence extending upto six weeks immediately
preceding and including the day on which her delivery occurs and the second one which
is post-natal compulsory period consists of six weeks immediately following the day of delivery.
The benefit has to be calculated for the aforesaid two periods on the basis of the average daily
wage. According to the Explanation appended to Section 5(1) of the Act, the average daily wage
546 Social Justice and Labour Jurisprudence

has to be computed taking into consideration the average of the woman’s wages payable to her
for the days on which she has worked during the period of three calendar months immediately
preceding the date from which she absents herself on account of maternity, or one rupee a day,
whichever is higher. For fixing the average daily wage, it has therefore first to be ascertained
whether the wages which were paid or were payable to the woman was for ‘time work’ or for
‘piece work’. It has next to be ascertained as to what were the cash wages paid or payable to her
in terms of the definition contained in Section 3(n) of the Act for the days on which she worked
during the period of three calendar months immediately preceding the date of delivery, reckoned
according to the British calendar month. The total wages thus worked out are to be divided by
the number of days in the aforesaid three calendar months in order to arrive at the average daily
wage. After thus finding out the average daily wage, the liability of the employer in respect of
the maternity benefit has to be calculated in terms of Section 5 of the Act for both pre-natal and
post-natal period indicated above.
The real though difficult question that calls for determination by us is as to what is the con-
notation of the term ‘week’ occurring in sub-sections (1) and (3) of Section 5 of the Act and
whether the computation of the maternity benefit prescribed by the Act for the aforesaid two
periods has to be made taking a ‘week’ as signifying a cycle of seven days including a Sunday or
a cycle of seven days minus a Sunday which is said to be a wageless day. As the Act does not con-
tain any definition of the word ‘week’, it has to be understood in its ordinary dictionary sense.
In the Shorter Oxford English Dictionary (Third Edition), the word ‘week’ has been described
as meaning ‘the cycle of seven days, recognized in the calendar of the Jews and thence adopted
in the calendar of Christian, Mohammedan and various other peoples. A space of seven days,
irrespective of the time from which it is reckoned. Seven days as a term for periodical payments
(of wages, rent, or the like) or as a unit of reckoning for time of work or service’.
In Webster’s New World Dictionary (1962 Edition), the meaning of the word ‘week’ is given
as ‘a period of seven days, especially one beginning with Sunday and ending with Saturday; the
hours or days of work in a seven-day period’.
In Stroud’s Judicial Dictionary (Third Edition), it is stated that ‘(1) though a week usually
means any consecutive seven days, it will sometimes be interpreted to mean the ordinary notion
of a week reckoning from Sunday to Sunday and (2) probably, a week usually means seven clear
days’.
A ‘week’ according to Halsbury’s Laws of England (Third Edition) Volume 37 at p. 84 is strictly
the time between midnight on Saturday and the same hour on the next succeeding Saturday,
but the term is also applied to any period of seven successive days.
Bearing in mind the above mentioned dictionary or popular meaning of the term ‘week’, we
think that in the context of sub-sections (1) and (3) of Section 5 of the Act, the term has to be
taken to signify a cycle of seven days including Sundays. The language in which the aforesaid
sub-sections are couched also shows, that the Legislature intended that computation of maternity
benefit is to be made for the entire period of the woman worker’s actual absence, i.e. for all the
days including Sundays which may be wageless holidays falling within that period and not only
for intermittent periods of six days thereby excluding Sundays falling within that period for if
it were not so, the Legislature instead of using the words ‘for the period of her actual absence
immediately preceding and including the day of her delivery and for the six weeks immediately
following that day’ would have used the words ‘for the working days falling within the period of
her actual absence immediately preceding and including the day of her delivery and the six
weeks immediately following that day but excluding the wageless days’. Again the word ‘period’
occurring in Section 5(1) of the Act is a strong word. It seems to emphasize, in our judgment,
the continuous running of time and recurrence of the cycle of seven days. It has also to be borne
in mind in this connection that in interpreting provisions of beneficial pieces of legislation like
 Social Security and Welfare 547

the one in hand which is intended to achieve the object of doing social justice to woman work-
ers employed in the plantations and which squarely fall within the purview of Article 42 of the
Constitution, the beneficent rule of construction which would enable the woman worker not
only to subsist but also to make up her dissipated energy, nurse her child, preserve her efficiency
as a worker and maintain the level of her previous efficiency and output has to be adopted by
the Court.
The interpretation placed by us on the phraseology of sub-sections (1) and (3) of Section 5 of
the Act appears to us to be in conformity not only with the legislative intendment but also with
Paragraphs 1 and 2 of Article 4 of Convention 103 concerning Maternity Protection Convention
(Revised), 1952 adopted by the General Conference of the International Labour Organisation
which are extracted below for facility of reference:

Article 4:
1. While absent for work on maternity leave in accordance with the provisions of Article 3,
the woman shall be entitled to receive cash and medical benefits.
2. The rates of cash benefit shall be fixed by national laws or regulations so as to ensure
benefit sufficient for the full and healthy maintenance of herself and her child in accordance
with a suitable standard of living.

Thus we are of opinion that computation of maternity benefit has to be made for all the days
including Sundays and rest days which may be wageless holidays comprised in the actual period
of absence of the woman extending upto six weeks preceding and including the day of delivery
as also for all the days falling within the six weeks immediately following the day of delivery
thereby ensuring that the woman worker gets for the said period not only the amount equalling
100 per cent of the wages which she was previously earning in terms of Section 3(n) of the Act
but also the benefit of the wages for all the Sundays and rest days falling within the aforesaid
two periods which would ultimately be conducive to the interests of both the woman worker
and her employer.
In view of what we have stated above, we cannot uphold the view of the law expressed by the
Full Bench of Kerala High Court in Malayalam Plantations Ltd., Cochin vs Inspector of Plantations
Mundakayam.7
In the result, the appeal fails and is hereby dismissed. Although costs have to be paid by
appellate to respondent 2 in terms of the Court’s order dated 30 October 1975, yet in view of
the fact that the said respondent has not chosen to appear at the hearing of the case and
Mr K.N. Bhat has assisted the Court as amicus curiae, we direct the appellant to pay Rs 1000 to
Mr Bhat as his fee.

The Employees Provident Fund and Miscellaneous

Provisions Act, 1952: Interpretation of Section 14B
Organo Chemical Industries and Another vs the Union of India and Others 8

In this case, the Supreme Court had to counter the contention that Section 14B of the
Act was unguided in respect of the imposition of damages against a defaulting employer.9
In this case, both the judges delivered a concurring opinion, but on the request of the
brotheren Justice A.P. Sen, a separate judgement was delivered by Justice V.R. Krishna Iyer.
548 Social Justice and Labour Jurisprudence

THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

Having had the advantage of reading my learned brother’s judgment I should have stopped
mine with a single sentence, following the example of Diplock, L.J. who in Hughes vs Hughes
merely said: ‘For the reasons given by my brother Harman I would dismiss the appeal’. But
I respect brother Sen’s request that my concurrence notwithstanding I should, in a separate opinion,
highlight the quintessential aspects and reinforce the legal conclusions which are interpretatively
decisive and constitutionally validatory of Section 14-B of the Employees Provident Fund and
Miscellaneous Provisions Act, 1952 (briefly, the E.P.F. and M.P. Act). That is the apology for
this separate judgment of mine. Why an apology? Because exordiums are opprobriums and socio-
economic apercus are anathemas for some judicial psyches; and I should have, for that reason,
abandoned my habitual deviance from the orthodox norm idealized by some that a judicial
judgment ‘shall be a dry statement of facts, drier presentation of law and logomachy and driest
in least communicating to the law-abiding community, which is the court’s constituency, the
glow of life-giving principles rooted in social sciences and translated into juristic rules which
legitimate our institution functionally’. The last consideration, in my humble view, is the elan
vital of the justicing process and jettisoning it is judicial self-alienation from the nation. Of course,
minds differ as rivers differ and habits die hard!
The central issues in this civil appeal are whether Section 14-B of the E.P.F. and M.P. Act is
unconstitutional and, if not, what is the semantic-juristic sweep of the expression ‘damages’
used therein. Other vital but peripheral matters may be side-stepped for the nonce, especially
because my learned brother has neatly and rightly dealt with them. The factual setting of the
case, without which the legal contentions argued lose their luscent relevance, have been stated
by my brother [Justice] Sen, but I may project them in a single sentence to help focus on the
vires of Section 14-B and the conceptual width of ‘damages’ in the given context. Is the imposition
by the ‘speaking order’ of the Regional Provident Fund Commissioner, Chandigarh, of a heavy
penalty of Rs 94,996.80 by way of damages under Section 14-B of the E.P.F. and M.P. Act,
1952 upon the writ petitioners-employers, for chronic and unjustified defaults in remittances
of the provident fund contributions of themselves and their employees legally sustainable, if
obviously in excess of the pecuniary loss of interest attributable to the non-payment? Briefly
and broadly and lopping off aspects unnecessary for this case the scheme of the Act is that each
employer and employee in every ‘establishment’ falling within the Act do contribute into a
statutory fund a title, viz. 6¼ per cent of the wages to swell into a large Fund wherewith the
workers who toil to produce the nation’s wealth during their physically fit span of life may be
provided some retiral benefit which will ‘keep the pot boiling’ and some source wherefrom
loans to face unforeseen needs may be obtained. This social security measure is a humane homage
the State pays to Articles 39 and 41 of the Constitution. The viability of the project depends on
the employer duly deducting the workers’ contribution from their wages, adding his own little
and promptly depositing the mickle into the chest constituted by the Act. The mechanics of the
system will suffer paralysis if the employer fails to perform his function. The dynamics of this
beneficial statute derives its locomotive power from the funds regularly flowing into the statu-
tory till.
The pragmatics of the situation is that if the stream of contributions were frozen by employers’
defaults after due deduction from the wages and diversion for their own purposes, the scheme
would be damnified by traumatic starvation of the fund, public frustration from the failure of
the project and psychic demoralization of the miserable beneficiaries when they find their wages
deducted and the employer get away with it even after default in his own contribution and mal-
versation of the workers’ share. ‘Damages’ have a wider socially semantic connotation than
pecuniary loss of interest on non-payment when a social welfare scheme suffers mayhem on ac-
count of the injury. Law expands concepts to embrace social needs so as to become functionally
effectual.
 Social Security and Welfare 549

We may read Section 14-B and Para 38 of the Scheme to vivify the discussion:

14-B. Power to recover damages.—Where an employer makes defaults in the payment of any
contribution to the Fund (the Family Fund or the Insurance Fund) or in the transfer of
accumulations required to be transferred by him under sub-section (2) of Section 15 (for sub-
section [5] of Section 15) or in the payment of any charges payable under any other provision
of this Act or of (any scheme or Insurance Scheme) or under any of the conditions specified
under Section 17 (the Central Provident Fund Commissioner, or such other officer as may
be authorized by the Central Government by notification in the Official Gazette in this be-
half ), may recover from the employer such damages, not exceeding the amount of arrear, as
it may think fit to impose:
Provided that before levying and recovering such damages, the employer shall be given a
reasonable opportunity of being heard.
Mode of payment of contribution—(1) The employer shall, before paying the member his
wages in respect of any period or part of period for which contributions are payable, deduct
the employee’s contribution from his wages which together with his own contribution as well
as an administrative charge of such percentage of the total employer’s and employee’s con-
tribution as may be fixed by the Central Government, he shall within fifteen days of the close
of every month pay to the Fund by separate Bank drafts or cheques on account of contributions
and administrative charge…
(2) The employer shall forward to the Commissioner, within fifteen days of the close of the
month, a monthly consolidated statement in such form as the Commissioner may specify,
showing recoveries made from the wages of each employee and the amount contributed
by the employer in respect of each such employee.

Counsel for the petitioners has turned the constitutional fusillade on Section 14-B by charging
it with many-sided, in-built arbitrariness and therefore liable to be fatally shot down by Article 14.
The provision is simple and the contention is familiar. The offending words of Section 14-B are
that ‘the Provident Fund Commissioner may recover from the employer such damages, not
exceeding the amount of arrear, as it thinks fit to impose’. Within the limit of 100 per cent, the
enforcing agency is vested with naked and unguided power to inflict any quantum of damages
as he fancies and this blanket authority is instinct with discriminatory possibility, a vice to
which Article 14 is very allergic. No reasons need be given, no appellate or revisional review is
prescribed and no judicial qualification is required for the Commissioner. This tiny statutory
tyrant must be slain if equal justice under the law were to be part of our fundamental rights
package. So runs the argument—traditional, attractive and near-lethal. Indeed, if executive fiats
released from legal restraints, were free to run amok, our freedoms would be frothy boasts!
Sedulous scrutiny of this submission of counsel is our solemn duty since I share with him the
pensive thought that arrogance of power dressed in little, brief authority is the undoing of our
constitutional order. And yet, here the mini-Nero portrait is too naive to meet with approval.
A shower of precedents has rained on Article 14 but the cardinal principles have sunk so deep
into the constitutional consciousness of the juristic community that recapitulation of citations
is an act of supererogation. I desist from it.
The power to affect citizen’s rights, especially by way of punitive impost or damages for wrong-
doing, is quasi-judicial in character even if exercised by executive echelons. This Court has
underscored the importance of injecting the norms of natural justice when statutory function-
aries affect the rights of a person. The most recent of the cases which lay bare the elementals of
this branch of jurisprudence are: (1) Siemens Engineering and Manufacturing Co. of India Ltd. vs
Union of India,10 Maneka Gandhi (Mrs.) vs Union of India,11 Mohinder Singh Gill vs Chief Election
Commissioner, New Delhi.12
550 Social Justice and Labour Jurisprudence

In Siemens13 case this Court observed:

It is now settled law that where an authority makes an order in exercise of a quasi-judicial
function, it must record its reasons in support of the order it makes. Every quasi-judicial order
must be supported by reasons. That has been laid down by a long line of decisions of this
Court ending with N.M. Desai vs Testeels Ltd. C.A. No. 245 of 1970, D/-17-12-1975 (SC).

Fair play in administration is a finer juristic facet, at once fundamental and inviolable and
natural justice is an inalienable functional component of quasi-judicial acts. Here, it is indubitable
that the imposition of damages on a party, after a statutory hearing, is a quasi-judicial direction.
This Court has impressed the requirements of natural justice on such jurisdictions and one
such desideratum is spelling out reasons for the order made, in other words, a speaking order.
The inscrutable face of a sphinx is ordinarily incongruous with a judicial or quasi-judicial per-
formance. It is, in my view, an imperative of Section 14-B that the Commissioner shall give
reasons for his order imposing damages on an employer. The constitutionality of the power,
tested on the anvil of Articles 14 and 19, necessitates this prescription. Such a guarantee ensures
rational action by the officer, because reasons imply relevant reasons, not capricious ink and the
need for cogency rivets the officer’s mind to the pertinent material on record. Moreover, once
reasons are set down, the order readily exposes itself to the writ jurisdiction of the court under
Article 226 so that perversity, illiteracy, extraneous influence, mala fides and other blatant in-
firmities straight get caught and corrected. Thus, viewing the situation from the conspectus of
requirements and remedies, statutory agencies may be inhibited and the scare of arbitrary behav-
iour allayed once reasons are required to be given.
Nor is the plea of absence of guidelines or appellate review sound enough to subvert the validity
of Section 14-B. It is attractive to hear the argument that an order passed by an authority, which
becomes infallibly final in the absence of an appeal or revision, is apt to be arbitrary and bad. An
appeal is a desirable corrective but not an indispensable imperative and while its presence is an
extra check on wayward orders its absence is not a sure index of arbitrary potential. It depends
on the nature of the subject-matter, other available correctives, possible harm flowing from
wrong orders and a wealth of other factors.
If a death sentence is allowed to become conclusive without so much as a single appeal, Art-
icles 14 and 21 may imperil such a provision but if a fine of Rs 5 imposed for a minor offence
in a summary trial by a First Class Magistrate is imparted a finality, subject, of course, to a con-
stitutional remedy in the event of perverse or patent illegality we may still uphold that provision
with an easy constitutional conscience. In the present case, a hearing is given to the affected
party. Reasons have to be recorded in the order awarding damages. The writ jurisdiction is ready
to review glaring errors. The maximum harm is pecuniary liability limited by the statute. A high
official hears and decides. Under such circumstances the needs of the factual situation and the
legal milieu are such that the absence of appellate review in no way militates against the justice
and reasonableness of the provision. The argument of arbitrariness on this score is untenable.
The section is not bad. Maybe, action under the section may be challenged in writ jurisdiction
provided infirmities which attract such jurisdiction vitiate the order.
The bogie of absence of guidelines in the provision and consequential possibility of the
authority running berserk or acting hubristically does not frighten. Of course, the more bereft
of explicit guidelines a statutory power is, the more searching must be the judicial invigilation
to discover hidden injustice and masked mala fides. Even so, let us examine the ground that,
absent detailed guidelines, the law is void. What is not explicit may still be implicit. What is not
articulated at length may be spun out from a single phrase. What is not transparent in par-
ticularized provisions may be immanent in the preamble, scheme, purpose or subject-matter of
the Act. What is real is not only the gross but also the subtle, if I may strike a deeper note. Such
a perspective dispels the submission that Section 14-B is bad as uncircumscribed and over-broad.
 Social Security and Welfare 551

The power under the section permits award of ‘damages’ and that word has a wealth of impli-
cations and limitations, sufficient to serve as guideline in fixing the impost. In Avinder Singh vs
State of Punjab,14 this Court upheld an otherwise unbridled power to levy tax by importing a
variety of factors gathered from the statute and relied on many precedents. Likewise, in C.S.T.
v. Radhakrishan,15 this Court rejected the plea that a power in the Commissioner to choose one
of the two remedies was invalid in the absence of guidelines and observed, on a review of the
case-law:

When power is conferred on high and responsible officers they are expected to act with cau-
tion and impartiality while discharging their duties and the circumstances under which they
will choose either of the remedies available should be left to them. The vesting of discretionary
power in the State or public authorities or an officer of high standing is treated as a guarantee
that the power will be used fairly and with a sense of responsibility.

It has been held by the Privy Council in Province of Bombay vs Bombay Municipal Corporation16
that every statute must be supposed to be for public good at least in intention and therefore of
few laws can it be said that the law confers unfettered discretionary power since the policy of
law offers guidance for the exercise of discretionary power.
Although our democratic ethos is incongruous with the assumption that highly paid officials
are more responsible than low-paid minions, the jurisprudence of power must be applied workably
and not untouched by reality. More to the point is the decision in P.N. Kaushal vs Union of
India.17 There this Court accepted the submission that the seemingly naked power under Section
59 of the Punjab Excise Act was guided by the requirement that it was to be exercised for con-
trol of consumption of intoxicants. (The whole scheme of the statute proclaims its purpose of
control in time and space and otherwise observed the Court.) Here the conceptual limitations
of ‘damages’ serve as guideline and barricade the exercise. The Commissioner cannot award
anything more than or unrelated to ‘damages’. Nor can he go beyond 100% of the amount de-
faulted. Such limitations without further guidelines are not uncommon in taxing laws to penalise
defaults and suppressions.
What do we mean by ‘damages’? The expression ‘damages’ is neither vague nor over-wide. It
has more than one signification but the precise import in a given context is not difficult to
discern. A plurality of variants stemming out of a core concept is seen in such words as actual
damages, civil damages, compensatory damages, consequential damages, contingent damages,
continuing damages, double damages, excessive damages, exemplary damages, general damages,
irreparable damages, pecuniary damages, prospective damages, special damages, speculative dam-
ages, substantial damages, unliquidated damages. But the essentials are (a) detriment to one by
the wrongdoing of another, (b) reparation awarded to the injured through legal remedies and
(c) its quantum being determined by the dual components of pecuniary compensation for the
loss suffered and often, not always, a punitive addition as a deterrent-cum-denunciation by the
law. For instance, ‘exemplary damages’ are damages on an increased scale, awarded to the plaintiff
over and above what will barely compensate him for his property loss, where the wrong done to
him was aggravated by circumstances of violence, oppression, malice, fraud, or wanton and
wicked conduct on the part of the defendant, and are intended to solace the plaintiff for mental
anguish, laceration of his feelings, shame, degradation, or other aggravations of the original
wrong, or else to punish the defendant for his evil behaviour or to make an example of him, for
which reason they are also called ‘punitive’ or ‘punitory’ damages or ‘vindictive’ damages, and
(vulgarly) ‘smart-money’. It is sufficient for our present purpose to state that the power conferred
to award damages is delimited by the content and contour of the concept itself and if the Court
finds the Commissioner travelling beyond [this], the blow will fall. Section 14-B is good for
these reasons.
552 Social Justice and Labour Jurisprudence

The further submission is that damages being compensatory in character could not exceed
the interest the amount defaulted would have carried during the period of delay. The respondent
has gone beyond the mere quantum of interest and has rounded it off to a sum equal to the de-
faulted contribution. Is this excess an illegal extravagance or a legal levy? This turns on what is
‘damages’ in the setting of the Act.
The measure was enacted for the support of a weaker sector viz. the working class during the
superannuated winter of their life. The financial reservoir for the distribution of benefits is
filled by the employer collecting, by deducting from the workers’ wages, completing it with his
own equal share and duly making over the gross sums to the Fund. If the employer neglects to
remit or diverts the moneys for alien purposes the Fund gets dry and the retirees are denied the
meagre support when they most need it. This prospect of destitution demoralises the working
class and frustrates the hopes of the community itself. The whole project gets stultified if employers
thwart contributory responsibility and this wider fall-out must colour the concept of ‘damages’
when the court seeks to define its content in the special setting of the Act. For, judicial inter-
pretation must further the purpose of a statute. In a different context and considering a funda-
mental treaty, the European Court of Human Rights, in the Sunday Times Case, observed:

The Court must interpret them in a way that reconciles them as far as possible and is most
appropriate in order to realise the aim and achieve the object of the treaty.

A policy-oriented interpretation, when a welfare legislation falls for determination, especially

in the context of a developing country, is sanctioned by principle and precedent and is implicit
in Article 37 of the Constitution since the judicial branch is, in a sense, part of the State. So it is
reasonable to assign to ‘damages’ a larger, fulfilling meaning.
What are the strands which make the fabric of ‘damages’ under the Article? I have stated
earlier that the composite idea of ‘damages’ includes more than pecuniary compensation. More-
over, the injured party is the Board of Trustees who administer the Fund. That Fund not merely
loses the interest consequent on the non-payment but receives a shock in that its scarce resources
are further famished by employers’ default. There is great social injury to the scheme when em-
ployers default in numbers. So the lash of the law is delivered when its object is frustrated. What
is more denunciatory is the fact that the employer makes deductions from the poor wages of the
workers (and makes them suffer to that extent) and diverts even those sums for his private pur-
poses by failing to make prompt remittances. Thus, default in contributions is compounded by
embezzlement, as it were. Naturally, damages will take an exemplary character and inflict a heavy
blow on the shady defaulter.
I am clearly of the view that ‘damages’, as imposed by Section 14-B, includes a punitive sum
quantified according to the circumstances of the case. In ‘exemplary damages’ this aggravating
element is prominent. Constitutionally speaking, such a penal levy included in damages is per-
fectly within the area of implied powers and the legislature may, while enforcing collections,
legitimately and reasonably provide for recovery of additional sums in the shape of penalty so as
to see that avoidance is obviated. Such a penal levy can take the form of damages because the
reparation for the injury suffered by the default is more than the narrow computation of interest
on the contribution.
This Court has in R.S. Joshi, S.T.O., vs Ajit Mills Ltd,18 considered the constitutionality of a
penal forfeiture and a bench of seven judges in that case has upheld it.
A Patna decision R.B.H.N. Jute Mills vs Provident Fund Commissioner,19 where the levy of
damages was attacked as violative of Article 20(2) has taken the view that the amount of damages
imposed under Section 14-B is penal in character. Of course, the learned judges repelled the
application of Article 20(2) of the Constitution to this situation but made some observations
 Social Security and Welfare 553

which are misleading. The Court there took the view that the damages imposed under Section
14-B are transferred to the general revenues of the appropriate government and went on to
observe:

In other words, the infliction of the damages under Section 14-B is not meant to provide
compensation or redress to the employees whose interest may be injured. It is not meant to
provide reparation to such employees and the quantum of damages imposed has no relation
to the amount of loss suffered by the employees. I consider that the infliction of the damages
under Section 14-B is penal in its nature. It is a warning to employers in general not to com-
mit a breach of the statutory rule.

The above observations, in my view, are unsound and I am happy to record that my learned
brother takes the same view, although in his separate judgment this aspect has not been expressly
considered. I speak for both of us. The damages are levied under the Act. The authority levying
penal damages is created by the Act and is responsible for the collection of contributions and
damages for the Fund. It is not possible to dichotomize and hold that the contributions go into
the Provident Fund but the rest of the damages go into the general revenues. This is not a fine
under the criminal law. Nor is it recovery, on behalf of the Government of amounts under a
general statute for purposes of revenue. A special statute creating a special fund, empowers
special officers to recover specially designated contributions and special damages for default.
The entire sum belongs to the Fund except perhaps the administrative charges which are usually
(as in this case) separately indicated. In our view, therefore, it is wrong to credit the damages
into the general revenues. To that extent it is a breach of the statutory scheme and a deprivation
of what belongs to the workers’ Provident Fund. Indeed, employees are a needy community
and if the Fund is replenished by damages the scheme can be improved and the benefits
augmented. We, therefore, express the view that if any State is diverting damages under the Act
into its own coffers, it is improper. Lazarus can ill-afford to lose even a little. State and citizen
alone is subject to the rule of law.

I am in full agreement with the concluding statement regarding the disposition of the damages
made in my learned brother’s judgment.
The learned Additional Solicitor General was fair enough to concede that the entire amount
of damages awarded under Section 14-B, except for the amount relatable to administration
charges must necessarily be transferred to the Fund constituted under the Act. We hope that
those charged with administering the Act will keep this in view while allocating the damages
under Section 14-B of the Act to different heads. The employees would, of course, get damages
commensurate with their loss, that is, the amount of interest on delayed payment but the re-
maining amount should go to augment the Fund constituted under Section 5 for implementing
the schemes under the Act.
In this view I direct the appropriate Government to credit the sums allocable to the Fund so
that the damages may reach where it belongs.
I wholly agree with my learned brother, for the reasons I have given. The writ petition de-
serves to be and is hereby dismissed with costs.

THE CONCURRING BUT SEPARATE JUDGEMENT DELIVERED BY JUSTICE A.P. SEN

This is a petition under Article 32 of the Constitution by M/s. Organo Chemical Industries,
Sonepat directed against an order of the Regional Provident Fund Commissioner, Chandigarh,
dated 12 October 1977, by which he imposed a penalty of Rs 94,996.80 on the petitioners as
554 Social Justice and Labour Jurisprudence

damages under Section 14-B of the Employees’ Provident Funds and Miscellaneous Provisions
Act, 1952, for delayed remittances of the Employees Provident Fund Family Pension Scheme
contributions of their employees, including their own contributions, and the administrative
charges thereon.
Organo Chemical Industries, an ‘establishment’ within the meaning of Section 1(3) of the
Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 committed defaults in
payments of Provident Fund and Family Pension Scheme dues for the period from March to
October 1975 and again for the period from December 1975 to November 1976 to the extent
of Rs 92,687.00 and of administrative charges amounting to Rs 2399.80 i.e. Rs 94,996.80 in
all. The Regional Provident Fund Commissioner, Chandigarh, accordingly, issued a show cause
notice dated 7 June 1977 requiring the petitioners to show cause why damages should not be
levied under Section 14-B of the Act. The notice was accompanied by a statement showing a
break-up of the various amounts in arrears and the extent of delay in respect of each payment
and the details of damages proposed to be imposed on the belated payments. The period of de-
lay in payment of the amounts remitted varied from a few months to a year. It was proposed to
levy damages at a uniform rate of hundred per cent on each of the amounts in arrears. In re-
sponse to the notice, the petitioners tried to explain away the delay by alleging that it was due to
difficulties beyond their control and, therefore, the payments could not be made in time viz.,
the facts that there were disputes between the partners of the firm as a result of which, there was
a loss of Rs 1,40,165.15, there was a power-cut of 60% by the Haryana Electricity Board w.e.f.
6 May 1974, which compelled the petitioners to purchase a generating set to tide over the diffi-
culties and that the establishment had borrowed huge sums from the Haryana Financial Cor-
poration and in payment of which it had defaulted for want of financial resources, etc. It was,
accordingly, contended that the default, if any, was not wilful as they had no intention to com-
mit a default. The Regional Provident Fund Commissioner after giving to the petitioners the
opportunity of a hearing by his reasoned order dated 16 August 1977 considered in detail each
of the grounds taken in mitigation of the defaults and came to the conclusion that none of the
grounds alleged furnished a legal justification for the delay in making contributions in time. As
regards the alleged dispute among the partners leading to a loss of Rs 1,40,165.15, he observed:

Even if it is assumed that there was a loss as claimed it does not justify the delay in deposit of
Provident Fund money which is an unqualified statutory obligation and cannot be allowed
to be linked with the financial position of the establishment, over different points of time.
Besides 50% of the contributions deposited late represented the employees’ share which had
been deducted from the employees’ wages and was a trust money with employer for deposit
in the statutory fund. The delay in the deposit of this part of the contribution amounted to
breach of trust and does not entitle the employer to any consideration for relief.

With respect to the plea that the petitioners had been subject to a power-cut of 60% w.e.f.
6 May 1974 by the Haryana Electricity Board, he negatived the plea by observing that this
restriction was not exclusive to them and further that no cause had been shown as to how this
prevented them from depositing the provident fund dues in time. Even if the power-cut had
resulted in any substantial loss, it would have, reduced the liability on the amount of provident
fund dues also. He went on to observe that where an employer can pay wages, it is not conceivable
why it cannot pay the provident fund dues. As regards the stand taken that the establishment
had borrowed huge sums from the Haryana Financial Corporation and in repayment of which
it had defaulted, he held that even if it were so, the fact did not absolve the establishment of its
statutory obligation for deposit of provident fund dues in time. Similarly, the other reasons fur-
nished like the purchase of a new generating plant or internal dispute among the partners
and the dissolution of the partnership firm, etc. did not constitute sufficient cause beyond the
control of the petitioners to justify the late deposit of Provident Fund dues. He accordingly,
 Social Security and Welfare 555

concluded that the petitioners had failed to carry out their obligation to contribute to the Em-
ployees’ Provident Fund and Family Pension Scheme within the time-limit provided therefor,
and that no convincing case had been made out to justify the delay in making the deposits. He
also on the material on record found, as a fact, that the petitioners, having regard to their past
record, were ‘habitual defaulters’ and had, therefore, to be severely dealt with, and should be
visited with the maximum penalty.
The petitioners are guilty of suppressio veri and this, by itself, was sufficient to dismiss the writ
petition, but, since it involves a point of importance which was argued at length, we will have to
deal with the same.
There can be no doubt that the petitioners have been habitual defaulters in the matter of
making contributions to the Employees’ Provident Fund, Family Pension Scheme and payment
of administrative charges from the very inception. They have deliberately concealed the facts
pertaining to the earlier defaults and the attendant levy of damages under Section 14-B of the
Act. For the period between November 1970 and January 1971, again for the periods between
October 1971, February 1972, March and April 1973, August to October 1973, January and
February 1974, then again for the period March 1974, May to August 1974, October and
December 1974, and January 1975, they made delayed payments of the Employees’ Provident
Fund and Family Pension Scheme Contributions and consequently the Regional Provident
Fund Commissioner after notice to them under Section 14-B and after considering the objections
raised and hearing the petitioners, imposed damages amounting to Rs 223.35, Rs 2,452.40
and Rs 15,214.05 for the periods in question respectively, which they deposited on 17 February
1972, 25 September 1975 and 13 December 1976.
It would thus be manifest that the petitioners instead of making their contributions, deliberately
made wilful defaults on one pretext or another and have been utilising the amounts deducted
from the wages of their employees, including their own contributions as well as administrative
charges, in running their business. The Regional Provident Fund Commissioner, therefore, rightly
observed that the petitioners having regard to their past record must be visited with the maximum
penalty.
Taking an overall view, the Regional Provident Fund Commissioner, by his reasoned order
dated 12 October 1977, adverted to the fact that the petitioners were habitual defaulters and,
therefore, deserve to be dealt with sternly so as to bring home the deterrent effect of damages,
under Section 14-B of the Act and, accordingly, directed recovery of Rs 94,996.80 at the rate
of hundred per cent i.e. equivalent to the amount in arrears, for the delayed payment of con-
tributions to the Employees’ Provident Fund, the Family Pension Fund and administrative
charges, as detailed below:

Damages on delayed payment of provident fund and family pension fund contributions
required to be deposited under Section 6.
Rs 92,687.00
(2) Damages on delayed payment of administrative charges.
Rs 2,309.80
Rs 94,996.80

This was pre-eminently a fit case for imposition of punitive damages to ensure due com-
pliance [with] the provisions of the Act.
Before stating the contentions raised by learned counsel for the petitioners, we think it
convenient to set out the scheme of the Act and the relevant provisions thereof having a bear-
ing on the question to be determined. It would be relevant to take into account some of the
provisions of the Provident Funds Act which have since its inception in 1952, been subjected
to various amendments. The Provident Funds Act, 1952 as originally enacted, provides for
556 Social Justice and Labour Jurisprudence

the institution of compulsory provident funds for employees in factories and other establish-
ments. It applies to every establishment which is a factory engaged in any industry specified
in Schedule I and in which twenty or more persons are employed and to any other establish-
ment employing twenty or more persons or class of such establishments which the Central
Government may specify in that behalf by notification in the Official Gazette. Under Sec-
tion 4, the Central Government framed the Employees’ Provident Funds Scheme, 1952 by
S.R.O. 1509, dated 2 September 1952. Section 6 of the Act enjoins on every employer to
make contribution to the Employees’ Provident Fund at the rate of 6 1 4 % of the basic wages,
dearness allowance, retaining allowance, if any, for the time being payable to each of the em-
ployees and the employee’s contribution shall be equal to the contribution by the employer
in respect of him. The employee at his option may, however, increase the contribution to the
extent of 8 1 3 per cent.
The initial responsibility for making payment of the contribution of the employer as well
as of the employee lies on the employer. Para 30 of the Scheme makes it incumbent on the
employer that he shall, in the first instance, pay both the contribution payable by himself
and also on behalf of the member employed by him. Under para 38, the employer is authorised
before paying the member employee his wages in respect of any period or part of period for
which contributions are payable, to deduct the employee’s contribution from his wages. It
further provides that the deposit of such contribution shall be made by the employer within
fifteen days of the close of every month, i.e., a contribution for a particular month has got to
be deposited by the 15th day of the month following. A breach of any of these requirements
is made a penal offence. Section 14 of the Act provides for penalties. Failure to comply with
the requirements of Section 6 is punishable with various terms of imprisonment, which, may
extend to a period of six months, or with fine which may extend to one thousand to two
thousand rupees, under the provisions of Section 14, depending upon the nature of the
breach, viz., failure to pay the contributions, or failure to submit the necessary returns, or
failure to pay administrative charges. Section 14-A provides for offences by companies and
other corporate bodies. Para 76 of the scheme provides for punishment for failure to pay con-
tributions, etc., and in particular by clause (d), every employer guilty of contravention or of
non-compliance with the requirements of the scheme, shall be punishable with imprisonment
which may extend to six months or with fine of Rs 1,000.
Parliament amended the Act by Act No. 16 of 1971, and it was re-entitled as the ‘Employees’
Provident Funds and Miscellaneous Provisions Act, 1952’. It inserted Section 6-A in the Act
for the establishment of the Family Pension Fund. In exercise of the powers conferred by
Section 6-A, the Central Government framed the Employees’ Family Pension Scheme, 1971
by GSR 315, dated 4 March 1971. Under para 4 of the Scheme, every employee who is a
member of the Employees’ Provident Fund, is given the option to join the Family Pension
Scheme. Para 9 created the Family Pension Fund and provides that from and out of the con-
tributions payable by the employer and employees in each month under Section 6 of the Act,
a part of the contribution, representing 1 1 6 % of the employees’ pay along with an equivalent
amount of 1 1 6 % from out of the employer’s contribution, shall be remitted by the employer
to the Family Pension Fund.
In its working, the authorities were faced with certain administrative difficulties. An em-
ployer could delay payment of Provident Fund dues without any additional financial liability.
Parliament accordingly, inserted Section 14-B for recovery of damages on the amount of arrears.
The reason for enacting Section 14-B is that employers may be deterred and thwarted from
making defaults in carrying out statutory obligations to make payments to the Provident Fund.
The object and purpose of the section is to authorise the Regional Provident Fund Com-
missioner to impose exemplary or punitive damages and thereby to prevent employers from
making defaults. Section 14-B, as originally enacted, provided for imposition of such damages,
 Social Security and Welfare 557

not exceeding 25% of the amount of arrears. This, however, did not prove to be sufficiently
deterrent. The employers were still making defaults in making contributions to the Provident
Fund, and in the meanwhile utilising both their own contribution as well as the employees’
contribution, in their business. The provision contained in Section 14-B for recovery of dam-
ages, therefore, proved to be illusory. Accordingly, by Act No. 40 of 1973, the words ‘twenty-
five per cent of ’ were omitted from Section 14-B and the words ‘not exceeding the amount of
arrear’ were substituted. The intention is to invest the Regional Provident Fund Commissioner
with power to impose such damages that the employer would not find it profitable to make
defaults in making payments.
In support of the petition, learned counsel for the petitioners assails the impugned order
on two grounds, namely, (i) Section 14-B of the Act is violative of Article 14 of the Constitution
as it confers unguided, uncontrolled and arbitrary power on the Regional Provident Fund
Commissioner to impose damages which may be to the extent of 100% i.e., equal to the
amount of arrears. The conferral of such unguided, uncanalised and arbitrary power on the
Regional Provident Fund Commissioner to arrive at a decision, without any guidelines what-
soever, makes Section 14-B constitutionally invalid as offending against Article 14, and (ii)
Section 14-B deals with the power to recover damages. It is not the power to impose penalties.
The word ‘damages’ in Section 14-B must, therefore, be understood in the legal sense. Damages
must have some co-relation with the loss suffered as a result of delayed payments. The authority
imposing the penalty or damages must, therefore, apply its mind to this aspect of the matter.
The defaulting employer under Section 14-B is, accordingly, liable to pay damages which
represents the loss to the beneficiaries of the scheme, such as recovery of interest; but not
anything more, as such recovery would amount to penalty, and that is not permitted under
the section. There is no substance in any of the contentions.
Section 14-B of the Act reads as follows:

Power to recover damages.—Where an employer makes defaults in the payment of any

contribution to the Fund (the Family Fund or the Insurance Fund) or in the transfer of
accumulations required to be transferred by him under sub-section (2) of Section 15 (for sub-
section [5] of Section 17) or in the payment of any charges payable under any other provision
of this Act or of (any scheme or Insurance Scheme) or under any of the conditions specified
under Section 17 (the Central Provident Fund Commissioner, or such other officer as may
be authorised by the Central Government, by notification in the Official Gazette in this be-
half ), may recover from the employer such damages, not exceeding the amount of arrear, as
it may think fit to impose:
Provided that before levying and recovering such damages, the employer shall be given a
reasonable opportunity of being heard.

The contention that Section 14-B confers unguided and uncontrolled discretion upon the
Regional Provident Fund Commissioner to impose such damages ‘as he may think fit’ is, therefore,
violative of Article 14 of the Constitution, cannot be accepted. Nor can it be accepted that
there are no guidelines provided for fixing the quantum of damages. The power of the Regional
Provident Fund Commissioner to impose damages under Section 14-B is a quasi-judicial function.
It must be exercised after notice to the defaulter and after giving him a reasonable opportunity
of being heard. The discretion to award damages could be exercised within the limits fixed by
the statute. Having regard to the punitive nature of the power exercisable under Section 14-B
and the consequences that ensue therefrom, an order under Section 14-B must be a ‘speaking
order’ containing the reasons in support of it. The guidelines are provided in the Act and its var-
ious provisions, particularly in the word ‘damages’, the liability for which in Section 14-B arises
on the ‘making of default’. While fixing the amount of damages, the Regional Provident Fund
558 Social Justice and Labour Jurisprudence

Commissioner usually takes into consideration, as he has done here, various factors viz. the
number of defaults, the period of delay, the frequency of defaults and the amounts involved.
The word ‘damages’ in Section 14-B lays down sufficient guidelines for him to levy damages.
Learned counsel for the petitioners, however, contends that in the instant case, the period of
arrears varies from less than one month to more than 12 months and, therefore, the imposition
of damages at the flat rate of hundred per cent for all the defaults irrespective of their duration,
is not only capricious but arbitrary. The submission is that if the intention of the legislature was
to make good the loss caused by default of an employer, there could be no rational basis to
quantify the damages at hundred per cent in case of default for a period less than one month
and those for a period more than 12 months. It is urged that the fixation of upper limit at
hundred per cent is no guideline. If the object of the legislation is to be achieved, the guidelines
must specify a uniform method to quantify damages after considering all essentials like loss or
injury sustained, the circumstances under which the default occurred, negligence, if any, etc. It
is said that the damages under Section 14-B, which is the pecuniary reparation due, must be co-
related to all these factors. In support of his contention, he drew our attention to Section 10-F
of the Coal Mines Provident Fund and Bonus Schemes Act, 1958, which uses the words ‘damages
not exceeding twenty-five per cent’ like Section 14-B of the Act, and also to a tabular chart
provided under that Act itself showing that the amount of damages was co-related to the period
of arrears. We regret, we cannot appreciate this line of reasoning. Section 10-F of the Act of
1958 came up for consideration before this Court in Commissioner of Coal Mines Provident Fund,
Dhanbad vs J.P. Lalla.20 This Court observed, firstly, that the determination of damages is not
‘an inflexible application of a rigid formula’ and secondly, the words ‘as it may think fit to im-
pose’ show that the authority is required to apply its mind to the facts and circumstances of the
case. The contention that in the absence of any guidelines for the quantification of damages,
Section 14-B is violative of Article 14 of the Constitution, must, therefore, fail.
In this connection, it was also urged that the absence of any provision for appeal, leaves the
defaulting employer with no remedy. The conferral of arbitrary and uncontrolled powers on the
Regional Provident Fund Commissioner to quantify damages, it is said, without a corresponding
right of appeal or revision, makes the provision contained in Section 14-B per se void and illegal
and it is liable to be struck down on that ground. We are afraid the contention is wholly devoid
of substance. Mere absence of provision for an appeal does not imply that the Regional Provident
Fund Commissioner is invested with arbitrary or uncontrolled power, without any guidelines.
The conferral of power to award damages under Section 14-B is to ensure the success of the
measure. It is dependent on existence of certain facts; there has to be an objective determination,
not subjective. The Regional Provident Fund Commissioner has not only to apply his mind to
the requirements of Section 14-B but is cast with the duty of making a ‘speaking order’, after
conforming to the rules of natural justice.
This Court has repeatedly laid it down that where the discretion to apply the provisions of a
particular statute is left with the Government or one of the highest officers, it will be presumed
that the discretion vested in such high authority will not be abused. The Government or such
authority is in a position to have all the relevant and necessary information in relation to each
kind of establishment, the nature of defaults made by the employer, and the necessity to decide
whether the damages to be imposed should be exemplary or not: Mohmedalli vs Union of India,21
it was stated in K.L. Gupta vs Bombay Municipal Corporation,22 that when power has to be ex-
ercised by one of the highest officers, the fact that no appeal has been provided for ‘is a matter of
no moment’. The same view was reiterated in Chinta Lingam vs Government of India.23 There is
always a presumption that public officials would discharge their duties honestly and in accordance
with the rules of law. This was emphasised in Pannalal Binjraj vs Union of India,24 stress being
laid on the power being vested not in any minor official but in top-ranking authority. In the cir-
cumstances, the absence of a provision for appeal or revision can be of no consequence.
 Social Security and Welfare 559

Turning now to the main question, the contention is that Section 14-B of the Act does not
authorise levy of any penal damages, i.e., a penalty or fine but deals with the power to recover
damages. It is not the power to impose a penalty on the defaulting employer, though the maximum
amount of damages that can be recovered has been indicated in the section, it is submitted that
the damages must have some co-relation with the loss suffered as a result of delayed payments
and the authority imposing damages must apply its mind to this aspect of the matter. The de-
faulter under Section 14-B is, therefore, liable to pay damages which represents the actual loss,
but not anything more, as such recovery would amount to penalty and that is not permitted
under the section. In support of his submissions, [counsel] has referred to certain authorities.
It is argued that the damages referred to in Section 14-B is different from penalty or fine and
is intended to compensate the loss to the beneficiaries of the scheme. It has only the ordinary
legal meaning of the term ‘damages’ viz. actual loss as in law of Contract or Tort. Thus the award
of damages under Section 14-B must be, in essence, the pecuniary reparation for loss or injury
sustained by one person through the fault or negligence of another.
There is a conflict of opinion between different High Courts as to the meaning of the word
‘damages’ in Section 14-B of the Act. According to some of the High Courts, the word ‘damages’
in Section 14-B means actual loss to the beneficiaries. The view is that Section 14-B clearly
indicates that an employer is liable to pay damages, if he has made default in payment of the
contribution. Any delay in paying the amount under Section 6 causes loss to the beneficiaries of
the Scheme, such as loss of the interest and the like. This is the loss that is sought to be recovered
from the defaulting employer for the purpose of indemnifying the beneficiaries of the Scheme,
namely, the employees, to the extent of the loss suffered by them. The defaulter under Section
14-B is, therefore, liable to pay damages which represent the loss, but not anything more, as
such recovery would amount to penalty, and that is not permitted under the section. It is, there-
fore, held by these High Courts that the damages to be imposed under Section 14-B should
have co-relation with the loss suffered and that damages under Section 14-B are intended to
compensate the loss to the beneficiaries of the Scheme. With respect, these High Courts have
obviously fallen into an error in reading the word ‘damages’ in Section 14-B in isolation, by
trying to construe the word in a purely legalistic sense. These High Courts have overlooked that
we are not concerned in interpreting what damages means in the realm of Contract or Tort but
the word had to be given its true meaning, in consonance with the objects and purpose of the
legislation.
The learned Additional Solicitor General brought to our notice the conflict of opinion between
the different High Courts on the construction of the word ‘damages’ used in Section 14-B and
submitted that this has given rise to confusion in the mind of those charged with the duty of
administering the Act. He wants that the conflict should be resolved by placing a proper con-
struction on the word ‘damages’ in Section 14-B, in the larger public interest, as the question is
one of frequent occurrence. He rightly contends that the word ‘damages’ in Section 14-B must,
in the context in which it appears, mean penal damages i.e., a penalty and not merely actual loss
to the beneficiaries. He submits that if the word ‘damages’ appearing therein, were to mean
actual loss to the beneficiaries and not anything more, as some of the High Courts have held, it
would make the Act unworkable. He also points out that some of the High Courts have taken
a view to the contrary. According to these High Courts, the expression ‘damages’ is, in substance,
a penalty imposed on the employer for the breach of the statutory obligation. The object of the
legislature in enacting Section 14-B is clearly to punish the recalcitrant employers.
The traditional view of damages as meaning actual loss does not take into account the social
content of a provision like Section 14-B contained in a socio-economic measure like the Act in
question. The word ‘damages’ has different shades of meaning. It must take its colour and con-
tent from its context and it cannot be read in isolation, nor can Section 14-B be read out of con-
text. The very object of the legislation would be frustrated if the word ‘damages’ appearing in
Section 14-B of the Act was not construed to mean penal damages. The imposition of damages
560 Social Justice and Labour Jurisprudence

under Section 14-B serves a two-fold purpose. It results in damnification and also serves as a
deterrent. The predominant object is to penalise, so that an employer may be thwarted or de-
terred from making any further defaults.
The expression ‘damages’ occurring in Section 14-B is, in substance, a penalty imposed on
the employer for the breach of the statutory obligation. The object of imposition of penalty
under Section 14-B is not merely ‘to provide compensation for the employees’. We are clearly of
the opinion that the imposition of damages under Section 14-B serves both the purposes. It is
meant to penalise defaulting employer as also to provide reparation for the amount of loss suf-
fered by the employees. It is not only a warning to employers in general not to commit a breach
of the statutory requirements of Section 6, but at the same time it is meant to provide com-
pensation or redress to the beneficiaries i.e., to recompense the employees for the loss sustained
by them. There is nothing in the section to show that the damages must bear relationship to the
loss which is caused to the beneficiaries under the Scheme. The word ‘damages’ in Section 14-B is
related to the word ‘default’. The words used in Section 14-B are ‘default in the payment of
contribution’ and, therefore, the word ‘default’ must be construed in the light of Para 38 of the
Scheme which provides that the payment of contribution has got to be made by the 15th of the
following month and, therefore, the word ‘default’ in Section 14-B must mean ‘failure in per-
formance’ or ‘failure to act’. At the same time, the imposition of damages under Section 14-B is
to provide reparation for the amount of loss suffered by the employees.
The construction that we have placed on the word ‘damages’ appearing in Section 14-B of
the Act, is in accord with the intent and purpose of the legislation. It was brought on the statute
book by Act 37 of 1953. The objects and reasons so far material, read:

There are also certain administrative difficulties to be set right. There is no provision for in-
spection of exempted factories nor is there any provision for the recovery of dues from such
factories. An employer… can delay payment of Provident Fund dues without any additional
financial liability. No punishment has been laid down for contravention of some of the pro-
visions of the Act.

The object and purpose of the section is to authorise the Regional Provident Fund Commis-
sioner to impose exemplary or punitive damages and thereby prevent employers from making
defaults. The provision for imposition of damages at 25 per cent of the amount of arrear,
however, did not prove to be effective. Accordingly, by Act 40 of 1973, the words ‘not exceeding
the amount of arrear’ were substituted for the words ‘25 per cent’. The necessity for making
this change is brought out in the objects and reasons, a material portion of which reads:

STATEMENT OF OBJECTS AND REASONS (ACT 40 OF 1973)

1. The working of the Employees’ Provident Fund and Family Pension Fund Act, 1952 and
the Employees’ Provident Fund Scheme has revealed that the present provisions of the
Act and the Scheme are not effective in preventing defaults in payment of contributions
to the Employees’ Provident Fund or in recovery of the dues on that account. The result
is that the amount of Provident Fund arrears recoverable from the employers has been
steadily increasing. In 1959-60, the arrears which amounted to Rs 3.65 crores, rose to
Rs 5.96 crores as on 31st March 1967. The arrears stood at Rs 14.6 crores on 31st March
1970 and they have risen to Rs 20.65 crores as on 31st March 1972.
2. The National Commission on Labour has recommended that in order to check the growth
of arrears, penalties for defaults in payment of Provident Fund dues should be made more
stringent and that the default should be made cognisable. In its 116th Report presented
to Parliament in April 1970, the Estimates Committee has endorsed the recommendations
made by the National Commission on Labour and has further suggested that Government
 Social Security and Welfare 561

should consider the feasibility of providing compulsory imprisonment for certain offences
under the Act. Accordingly, it is proposed to amend the Act so as to render the penal pro-
visions more stringent and to make defaults cognizable offences. Provision is also being
made for compulsory imprisonment in cases of non-payment of contributions and admin-
istration or inspection charges. As recommended by the Estimates Committee, a further
provision is being made to enable levy of damages equal to the amount of arrears from a
defaulting employer.

Each word, phrase or sentence is to be considered in the light of general purpose of the Act
itself. A bare mechanical interpretation of the words ‘devoid of concept or purpose’ will reduce
most of legislation to futility. It is a salutary rule, well established, that the intention of the legis-
lature must be found by reading the statute as a whole.
There appears to be a misconception that the object of imposition of penalty under Section
14-B is not ‘to provide compensation for the employees’ whose interest may be injured, by loss
of interest and the like. There is also a misconception that the damages imposed under Section
14-B are not transferred to the Employees’ Provident Fund and the Family Pension Fund of the
employees who may be adversely affected, but the amount is transferred to the General Revenues
of the appropriate Government. We find that this assumption is wholly unwarranted. In assessing
the damages, the Regional Provident Fund Commissioner is not only bound to take into account
the loss to the beneficiaries but also the default by the employer in making his contributions,
which occasions the infliction of damages. The learned Additional Solicitor-General was fair
enough to concede that the entire amount of damages awarded under Section 14-B, except for
the amount relatable to administrative charges, must necessarily be transferred to the Employees’
Provident Fund and the Family Pension Fund. We hope that those charged with administering
the Act will keep this in view while allocating the damages under Section 14-B of the Act to dif-
ferent heads. The employees would, of course, get damages commensurate with their loss, i.e.,
the amount of interest on delayed payments; but the remaining amount should go to augment
the ‘Fund’ constituted under Section 5, for implementing the Schemes under the Act.
The result, therefore, is that this writ petition fails and is dismissed with costs.

The Payment of Gratuity Act, 1972: Applicability

State of Punjab vs the Labour Court, Jullundur, and Others25
In this case, the Supreme Court considered the following issues under the Payment of
Gratuity Act, 1972:

1. Whether the Hyder Upper Bari Doab Construction Project was covered by the
provisions of the Act.
2. The scope of the definition of ‘retirement’ under Section 4(1) of the Act.
3. Whether Section 33C(2) of the Industrial Disputes Act, 1947, applied to the pro-
ceedings for the payment of gratuity due.

In this appeal by special leave, the state of Punjab appealed against the judgement and
order of the High Court of Punjab and Haryana refusing to quash an order under Section
33-C(2) of the Industrial Disputes Act, 1947, for payment of gratuity to the respondents
under the Payment of Gratuity Act, 1972.
562 Social Justice and Labour Jurisprudence

THE FACTS OF THE CASE:

The Hydel Department of the Government of Punjab had undertaken a Project described as
the “Hydel Upper Bari Doab Construction Project”. Respondents Nos. 2 to 8 were employed
as work-charged employees. On completion of the work assigned to them they were retrenched,
and retrenchment compensation was paid to them. The employee respondents claimed that
they were also entitled to gratuity, bonus and certain other allowance and benefits. The gratuity
was claimed under the Payment of Gratuity Act, 1972. The claim being disputed, the respond-
ents applied under Section 33-C(2) of the Industrial Disputes Act, 1947 to the Labour Court,
Jullundur. The Labour Court made an order dated 30 April 1975 that the employee-respondents
were entitled to the gratuity claimed by them but not to bonus and the other allowances and
benefits. A writ petition filed by the appellant has been dismissed in limine by the High Court
of Punjab and Haryana.

EXCERPTS FROM THE JUDGMENT DELIVERED BY JUSTICE R.S. PATHAK

In this appeal, the learned Additional Solicitor-General contends on behalf of the appellant
that the Payment of Gratuity Act, 1972 cannot be invoked by the respondents because the Pro-
ject does not fall within the scope of Section 1(3) of that Act. Section 1(3) provides that the Act
will apply to:

(a) every factory, mine, oilfield, plantation, port and railway company;
(b) every shop or establishment within the meaning of any law for the time being in force
in relation to shops and establishments in a State, in which ten or more persons are em-
ployed, or were employed, on any day of the preceding twelve months;
(c) such other establishments or class of establishments, in which ten or more employees
are employed, or were employed, on any day of the preceding twelve months, as the
Central Government may, by notification, specify in this behalf.”

According to the parties, it is clause (b) alone which needs to be considered for deciding whether
the Act applies to the Project. The Labour Court has held that the Project is an establishment
within the meaning of the Payment of Wages Act, Section 2(ii)(g) of which defines an ‘industrial
establishment’ to mean any ‘establishment in which any work relating to the construction,
development or maintenance of buildings, roads, bridges or canals, relating to operations con-
nected with navigation, irrigation or the supply of water, or relating to the generation, trans-
mission and distribution of electricity or any other form of power is being carried on’. It is
urged for the appellant that the Payment of Wages Act is not an enactment contemplated by
Section 1(3)(b), of the Payment of Gratuity Act. The Payment of Wages Act, it is pointed out, is
a Central enactment and Section 1(3)(b), it is said, refers to a law enacted by the State legislature.
We are unable to accept the contention. Section 1(3)(b) speaks of ‘any law for the time being in
force in relation to shops and establishments in a State’. There can be no dispute that the Pay-
ment of Wages Act is in force in the State of Punjab. Then, it is submitted, the Payment of
Wages Act is not a law in relation to ‘shops and establishments’. As to that, the Payment of
Wages Act is a statute which, while it may not relate to shops, relates to a class of establishments,
that is to say, industrial establishments. But, it is contended, the law referred to under Section
1(3)(b) must be a law which relates to both shops and establishments such as the Punjab Shops
and Commercial Establishments Act, 1958. It is difficult to accept that contention because
there is no warrant for so limiting the meaning of the expression ‘law’ in Section 1(3)(b). The
expression is comprehensive in its scope, and can mean a law in relation to shops as well as sep-
arately, a law in relation to establishments, or a law in relation to shops and commercial establish-
ments and a law in relation to non-commercial establishments. Had Section 1(3)(b) intended
to refer to a single enactment, surely the appellant would have been able to point to such a
 Social Security and Welfare 563

statute, that is to say, a statute relating to shops and establishments, both commercial and non-
commercial. The Punjab Shops and Commercial Establishments Act does not relate to all kinds
of establishments. Besides shops, it relates to commercial establishments alone. Had the intention
of Parliament been, when enacting Section 1(3)(b), to refer to a law relating to commercial
establishments, it would not have left the expression ‘establishments’ unqualified. We have
carefully, examined the various provisions of the Payment of Gratuity Act, and we are unable to
discern any reason for giving the limited meaning to Section 1(3)(b) urged before us on behalf
of the appellant. Section 1(3)(b) applies to every establishment within the meaning of any law
for the time being in force in relation to establishments in a State. Such an establishment would
include an industrial establishment within the meaning of Section 2(ii)(g) of the Payment of
Wages Act. Accordingly, we are of opinion that the Payment of Gratuity Act applies to an estab-
lishment in which any work relating to the construction, development or maintenance of build-
ings, 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 Hydel Upper Bari Doab Construction Pro-
ject is such an establishment, and the Payment of Gratuity Act applies to it.
The second contention on behalf of the appellant is that retrenchment does not fall within
Section 4(1) of the Payment of Gratuity Act, under which gratuity is payable to an employee on
the termination of his employment. The termination envisaged occurs either.

(a) on his superannuation, or

(b) on his retirement or resignation, or
(c) on his death or disablement due to accident or disease.

Having regard to the definition of ‘superannuation’ in Section 2(r) of the Act, it is clear that
the case is not under clause (a). Nor, admittedly, is it a case which falls under clause (c). As regards
clause (b), it is not a case of resignation. The only question is whether it can be regarded under
clause (b) as a case of retirement. The expression ‘retirement’ has been defined by Section 2(q)
to mean ‘termination of the service of an employee otherwise than on superannuation.’ The
definition is framed in the widest terms. Except for superannuation, any termination of service
would amount to ‘retirement’ for the purposes of the Act. Retrenchment is a termination of
service. It is immaterial that the termination is occasioned by the need to discharge surplus labour.
That retrenchment implies the discharge of surplus labour was explained in Barsi Light Railway
Co. Ltd. vs K.N. Joglekar.26 Nonetheless, it amounts to termination of service. We are of opin-
ion that the retrenchment of the employee respondents fall within the scope of Section 4(1) of
the Payment of Gratuity Act, and the employee respondents are, therefore, entitled to gratuity
under that provision.
The third contention raised by the appellant is that the employee respondents were not en-
titled to apply under Section 33C(2) of the Industrial Disputes Act, 1947 for payment of the
gratuity, and should have, if at all, applied under the provisions of the Payment of Gratuity Act.
It is urged that the Payment of Gratuity Act is a self-contained code incorporating all the es-
sential provisions relating to payment of gratuity which can be claimed under that Act, and its
provisions impliedly exclude recourse to any other statute for that purpose. The contention has
force and must be accepted. A careful perusal of the relevant provisions of the Payment of Gra-
tuity Act shows that Parliament has enacted a closely knit scheme providing for payment of
gratuity. The controlling authority is appointed by the appropriate government under Section 3,
and Parliament has made him responsible for the administration of the entire Act. In what
event gratuity will become payable and how it will be quantified are detailed in Section 4. Sec-
tion 7(1) entitles a person eligible for payment of gratuity to apply in that behalf to the employer.
Under Section 7(2), the employer is obliged, as soon as gratuity becomes payable and whether
an application has or has not been made for payment of gratuity, to determine the amount of
564 Social Justice and Labour Jurisprudence

gratuity and inform the person to whom the gratuity is payable specifying the amount of gratuity
so determined. He is obliged, by virtue of the same provision, to inform the controlling authority
also, thus ensuring that the controlling authority is seized at all times of information in regard
to gratuity as, it becomes payable. If a dispute is raised in regard to the amount of gratuity pay-
able or as to the admissibility of any claim to gratuity, or as to the person entitled to receive the
gratuity. Section 7(4)(a) requires the employer to deposit with the controlling authority such
amount as he admits to be payable by him as gratuity. The controlling authority is empowered,
under Section 7(4)(b), to enter upon an adjudication of the dispute, and after due inquiry, and
after giving the parties to the dispute a reasonable opportunity of being heard, he is required to
determine the amount of gratuity payable. In this regard, the controlling authority has all the
powers as are vested in a court while trying a suit under the Code of Civil Procedure, 1908 in
respect of obtaining evidentiary material and the recording of evidence. The amount deposited
by the employer with the controlling authority as the admitted amount of gratuity will be paid
over by the controlling authority to the employee or his nominee or heir. Section 7(7) provides
an appeal against the order of the controlling authority under Section 7(4) to the appropriate
Government or such other authority as may be specified by the appropriate Government in
that behalf. The appropriate government or the appellate authority is empowered under Sec-
tion 7(8), after giving the parties to the appeal a reasonable opportunity of being heard, to con-
firm, modify or reverse the decision of the controlling authority. Where the amount of gratuity
payable is not paid by the employer within the prescribed time, the controlling authority is re-
quired by Section 8, on application made to it by the aggrieved person, to issue a certificate for
that amount to the Collector. The Collector thereupon is empowered to recover the amount of
gratuity, together with compound interest thereon at the rate of nine percent per annum from
the date of expiry of the prescribed time, as arrears of land revenue, and pay the same to the
person entitled thereto.
It is apparent that the Payment of Gratuity Act enacts complete Code containing detailed
provisions covering all the essential features of a scheme for payment of gratuity. It creates the
right to payment of gratuity, indicates when the right will accrue, and lays down the principles
for quantification of the gratuity. It provides further for recovery of the amount, and contains
an especial provision that compound interest at nine percent per annum will be payable on
delayed payment. For the enforcement of its provisions, the Act provides for the appointment
of a controlling authority, which is entrusted with the task of administering the Act. The fulfill-
ment of the rights and obligations of the parties are made his responsibility, and he has been
invested with amplitude of power of the full discharge of that responsibility. Any error committed
by him can be corrected in appeal by the appropriate Government or an appellate authority
particularly constituted under the Act.
Upon all these considerations, the conclusion is inescapable that Parliament intended that
proceedings for payment of gratuity due under the Payment of Gratuity Act must be taken
under that Act and not under any other law. That being so, it must be held that the applications
filed by the employee-respondents under Section 33-C(2) of the Industrial Disputes Act did not
lie, and the Labour Court had no jurisdiction to entertain and dispose of them. On that ground,
this appeal must succeed.
In the circumstances, it is not necessary to notice the further submission on behalf of the
appellant that where a serious dispute exists in regard to the basis of a claim for payment of
gratuity, no proceedings will lie under Section 33-C(2) of the Industrial Disputes Act.
The appeal is allowed, and the order dated 30 April 1975 of the Labour Court, Jullundur is
quashed. Having regard to the terms on which special leave was granted by this court to the
appellant, the appellant shall pay to the employee-respondents their costs of this appeal.
At this stage we put to the learned Solicitor-General, who appeared for the State whether in
the special circumstances it was not fair that the entire amount be paid by the appellant to the
employees without driving them to a separate proceeding. He has fairly stated that the appellant
 Social Security and Welfare 565

is willing to do so and the sole object of this litigation was to have the law clarified. We, therefore,
direct the appellant to pay to the employee respondents within one month from today the
amounts that may be due to them, if they have not already been paid.

Principles to be Followed in Framing a Scheme of

Gratuity by the Industrial Tribunal under Schedule 3,
Item 5 of the Industrial Disputes Act, 1947

With due respect and regard to the judges who have coordinated on the Bench with Justice
V.R. Krishna Iyer, the following statement is summed up thus:

The speciality of Justice V.R. Krishna Iyer in delivering the majority view in labour matters,
especially the philosophical aspects of labour jurisprudence and the Constitutional implications,
are clearly brought down in the judgement of such cases. The Straw Board Manufacturing Company
vs Its Workmen27 is one such example, which was dealt by his lordship from this perspective.

The Straw Board Manufacturing Company vs Its Workmen

THE JUDGEMENT DELIVERED BY JUSTICE V.R. KRISHNA IYER

A dispute between the appellant mill (the Straw Board Manufacturing Company Ltd.) and its
workmen, regarding a scheme of gratuity, was referred to the Industrial Tribunal, way back in
February 1958; and, long 19 years later, this Court is pronouncing on the validity of the award
made by the Tribunal in favour of the workmen! Small wonder the respondent workmen, after
this tiring and traumatic tantalization, have not turned up to argue their cause, although Shri
Parekh, as amicus curiae, has filled the gap. Such an unhappy and not infrequent phenomenon
as considerable delay in adjudication and implementation is destructive of industrial peace and
productive of disenchantment with labour jurisprudence. Naturally, even constitutional pro-
visions and governmental decisions about labour and concern for its welfare cease to achieve the
desired goals when the legal process limps and lingers and rights turn illusory when remedies
prove elusive. The life of rights is remedies and a jurisprudence of ready reliefs alone can inhibit
the weaker numbers of our land asking the disturbing question: ‘Is Law Dead?’ Dicey wrote
long ago:

The law ubi jus ibi remedium, becomes from this point of view something much more im-
portant than a mere tautological proposition. In its bearing upon constitutional law, it means
that the Englishmen whose labours gradually formed the complicated set of laws and insti-
tutions which we call the Constitution, fixed their minds far more intently on providing
remedies for the enforcement of particular rights or for averting definite wrongs, than upon
any declarations of the Rights of Man or Englishmen.28

It is more than rhetoric to say that courts belong to the people. ‘Judges occupy the public’s
bench of justice. They implement the public’s sense of justice.’ If the courts are the fulcrum of
the justice-system, there is a strong case for the reform of Court methodology and bestowal of
attention on efficient management of judicial administration. Otherwise, the courts may be so
overloaded or so mismanaged that they grind to a halt and citizens’ exercise of their rights dis-
couraged or frustrated. The vital aspects of the jurisprudence of remedies include speeding the
pace of litigation ‘from the cradle to the grave’. We are reluctant to make these self-critical ob-
servations about putting our house in order, but when the consumers of justice like workmen
566 Social Justice and Labour Jurisprudence

lose interest in the judicial process and are absent, legislative unawareness of research and devel-
opment as to the needs of courts and simplification and acceleration of the judicative apparatus
become matters of national concern. Law’s delays are in some measure, caused by legislative in-
action in making competent, radical change in the procedural laws and sufficient financing and
modernising of the justice system as a high priority programme.
The chequered career of this lis and its zigzag, climb up the precipice of justice contextually
deserves brief narration. The order of reference was made early in 1958, the usual processual
exercise before the Tribunal resulted in an award on 1 May 1958 where the tribunal refused the
relief bearing on gratuity. The disappointed workers challenged the award before the High
Court which set it aside in November 1963—too long hibernation in the High Court for a
labour dispute where prompt adjudication is the essence of industrial peace. Anyway, when the
case came back to the tribunal, its decision took another six inscrutable years and, on 31 October
1969, a fresh award was made whereunder the tribunal framed a gratuity scheme and gave the
guidelines thereof. This time the appellant mill straight came to the Supreme Court with the
present appeal for which special leave was granted in a limited way, in the sense that it was
confined to the question ‘whether the correct principles on which gratuity should be payable
have been followed in this case or not’. It is a fact, though unfortunate, that this labour litigation
arrived in this Court in 1970 but its final chapter is being written by this judgment only in
1977. And it is noteworthy that the facts are brief, the legal issues small, the arguments brief
and this judgment, but for general observations and traditional reference to rulings cited at the
bar, could have been judiciously abbreviated.
The main battle at the bar has been over the correct principles in a scheme of gratuity for
factory workers and further whether those principles have been departed from under the award
assailed by the appellant. We may mention, at this stage, that the Parliament has enacted the
Payment of Gratuity Act, 1972, which has come into force with effect from 16 September
1972. Section 4(5) of the said Act gives an option to the workers to choose between the gratuity
scheme under the award and the one under the statute. Had the workers been represented be-
fore this Court it might have been possible for us finally to close this controversy or even
produce a reasonable solution by discussion and negotiation and persuade them to opt for one
or the other scheme. Early finality, credible certainty and mutually assented solutions, are the
finer processes of conflict resolution—a pursuit which baffles us here because of labour’s absence.
All that we can do, therefore, is to adjudicate upon the correctness or otherwise of the principles
which have gone into the gratuity scheme prepared by the tribunal in the light of the rulings of
this Court and the canons of industrial law.
We now proceed to itemise the grounds of attack levelled by Shri I.N. Shroff for the appellant
and assay their worth in the light of the submissions in defence of the award made by Shri
P.N. Parekh appearing as amicus curiae. Even here we may place on record our appreciation of
Shri Parekh’s services to the Court and the fairness of Shri Shroff in making his points on behalf
of the appellant.
The only dispute, which has ramified into a few issues, relates to the gratuity scheme the tri-
bunal has framed. Shri Parekh is right in drawing our attention in limine to the financial insig-
nificance, for the appellant, of the subject matter of this lis and the consequential disinclination
we must display to disturb the award. He has urged that the total annual impact on the industry
by the implementation of the award is of the order of Rs 3,000 to a substantial part of which
the management has no objection. What is more, the appellant is prosperous enough to distri-
bute dividends around 20% over the years. Further, since 1972 an obligatory statutory gratuity
scheme has come into force with the result that the economic consequences of this litigation,
even if the appellant loses, are marginal or nil. This makes us ponder whether, in matters of less
than grave moment, this Court should, as part of high judicial policy to arrest the tidal flow of
unsubstantial litigation, turn away at the portals those who invoke our jurisdiction to examine
every case where some legal principle has been wrongly decided, regardless of a sense of ‘summit
 Social Security and Welfare 567

court’ perspective and the rare use of its reserve power so as to pre-empt a docket explosion and
the injustice of delayed justice and invest the High Courts and high tribunals with final legal
wisdom. The amplitude of Article 136 is meant more for exceptional situations than to serve as
hospitable basket to receive all challenges to seemingly erroneous judgments in the country.
As stated earlier, we are confronted by an industrial dispute and are called upon to apply the
principles of industrial jurisprudence with its primary concern for peace among the parties,
contentment of the workers, the end product being increased production informed by distributive
justice. Law, especially Labour Law, is the art of economic order sustained by social justice. It
aims at pragmatic success, but is guided by value-realities. It believes in relativity and rejects
absolutes. The recent constitutional amendment (Article 43A) which emphasizes the workers’
role in production as partners in the process, read in the light of the earlier accent on workers’
rights and social justice, gives a new status and sensitivity to industrial jurisprudence in our
‘socialist republic’. This social philosophy must inform interpretation and adjudication, a caveat
needed because precedents become time-barred when societal ethos progresses. We are not
called upon to interpret an Act since, in this area of law the Payment of Gratuity Act came in on
a later date. Judge made law rues the roost. Even so, are we fettered by inflexible norms hallowed
by dated decisions? Not in this jurisdiction. The golden rule in a rapidly changing system ‘is
that there are no golden rules’. We should be guided by realistic judicial responses to societal
problems, against the back drop of the new, radical values implied in ‘social justice’ to labour,
the production backbone of the nation, adjusted to the environs of the particular industry and
its economics and kindred circumstances. The dynamics of labour law, rather than the bonded
labour of old-time case-law answers questions of current justice. Cardozo had cautioned in his
The Nature of the Judicial Process:

That court best serves the law which recognizes that the rules of law which grew up on a
remote generation may, in the fullness of experience, be found to serve another generation
badly, and which discards the old rule when it finds that another rule of law represents what
should be according to the established and settled judgment of society, and no considerable
property rights have become vested in reliance upon the old rule. It is thus great writers upon
the common law have discovered the source and method of its growth, and in its growth
found its health and life. It is not and it should not be stationary. Change of this character
should not be left to the legislature. If judges have woefully misinterpreted the mores of their
day, or if the mores of their day are no longer those of ours, they ought not to tie, in helpless
submission, the hands of their successors.29

Indeed, we are stating no new proposition since the profusion of decisions assiduously presented
before us states, in sum, that each case has to be decided on the updated justice of the fact-
situations therein and the only law that we can reasonably discern from the rulings we have read
is that there is no law but only justice, dependent on a variety of socio-economic variables, that
the tribunal’s award, if his performance is not perverse in the process or the end product, must
be left well alone by this Court even if some juristic failing or factual peccadillos can be discovered.
A quest for error and an inclination for correction, frequently exercised by higher Courts, will
do double injury. It will take away the necessary initiative of the tribunal to produce satisfactory
results. It will delay the finality of industrial adjudication and thereby defeat the paramount
purpose of early re-adjustment. Judicial decentralization claims its price and it must be paid by
ignoring errors less than grave. Once this perspective is clear, our non-interference with this
award is just. Moreover, an industrial tribunal must act on a legal horse sense, rather than on
juristic abstractions, on rugged fairness rather than on refined legalisms. It is shop-floor justice,
not five star loveliness. The weaker qualify for protective order, in the over-all view of the matter.
568 Social Justice and Labour Jurisprudence

Gratuity for workers is no longer a gift but a right. It is a vague, humanitarian expression of
distributive justice to partners in production for long, meritorious service. We have, therefore,
to adopt a broad and generous approach to the problems posed before us by Shri Shroff without
being mechanistically precedent-bound or finically looking into evidence.
Speaking generally, Shri Shroff focussed his fire-power firstly on the qualifying period of five
years for earning gratuity as against ten years sanctified in some earlier rulings and, secondly, on
the basic wage, as contrasted with the ‘consolidated’ wage being treated as the base for the com-
putation of gratuity. He did cite half-a-dozen or more cases of this Court in support which, on
closer scrutiny and studied in the light of other citations Shri Parekh emphasized, stand neutralized.
The Tribunal has itself referred to many rulings of this court, noted the features of the industry
in question, the high dividends and the low wages and reached a via media which we may re-
gard as a prudent judicial resolution of the simple conflict. The flavour of the social milieu, the
raw realities of industrial conditions and the locale and life-style out there, are sensed by the
tribunal better than a distant court of last resort primarily specialising in declaration of law. So
we are loathe to upset the scheme unless the tribunal is grievously or egregiously in error.
Shri Shroff staked his case on case-law alone and culled passages which upheld basic wages as
basis and ten-year service for eligibility. Even here, we must mention that the basic wage at the
relevant time (revised subsequently) was in the miserable range of Rs 20 per mensem and to
calculate gratuity on this pitiful rate, when after ‘long and meritorious service’ the worker bids
farewell to his labour life in the industry is to be callous to basic justice.
The Human today cannot be held captive by the less-than-human yesterday in a crucial area
of social justice. So viewed, we are constrained to negative the two preliminary contentions
urged by Shri Shroff while agreeing with him on the smaller points of clarification sought.
We reproduce at this stage, the decretal part of the award:

The award, therefore, is that the employers should be required to frame a scheme of gratuity
for their workmen. The details of the gratuity scheme are as under:—

(a) On death of a workman while in continuous 15 days wages for each completed year
service or on attainment of the age of super- of service subject to a maximum of 15
annauation or on retirement or resignation months.
due to continued ill health or on being
incapacitated.
(b) On voluntary abandonment of service 15 days wages for each completed year
by a workmen in case not falling under of continuous service subject to the
(a) or termination of service by employers. condition that no gratuity will be
payable on a total service of less than
5 years. But this condition will not
apply in case of resignation or discharge
on the grounds of physical disablement
or incapacity.

(i) For the purposes of gratuity a period of six months or over shall be reckoned as ‘one
year’ while a period less than 6 months will be ignored.
(ii) Gratuity shall be payable to the nominee of the workman in case of his death or to his
legal heirs, if no one has been nominated by the workman in this behalf.
(iii) ‘Wages’ shall mean and include basic wages and dear food allowance but shall not include
bonus.
(iv) Gratuity will not be allowed to a workman in case of a serious misconduct committed
by him such as insubordination, acts involving moral turpitude, etc. In case of damage
 Social Security and Welfare 569

to the property of employers or financial loss, the amount to the extent of loss shall be
liable to be deducted from the amount of the gratuity.
v) The basis of payment of gratuity shall be average earnings of a workman during the last
three years.

One of the leading cases both sides referred to is the Delhi Cloth & General Mills Co. vs Workmen.30
In this decision the Court did make the point:

That gratuity is not in its present day concept merely a gift made by the employer in his own
discretion. The workmen have in course of time acquired a right to gratuity on determination
of employment provided the employer can afford, having regard to his financial conditions
to pay it.

[Justice] Shah, speaking for the Court, also emphasized what we have already adverted to:

We consider it right to observe that in adjudication of industrial disputes settled legal principles
have little play: the awards made by industrial tribunals are often the result of ad hoc deter-
mination of disputed questions, and each determination forms a precedent for determination
of other disputes. An attempt to search for principle from the law built up on those precedents
is a futile exercise. To the courts accustomed to apply settled principles to facts determinated
by the application of the judicial process, an essay into the unsurveyed expenses of the law of
industrial relations with neither a compass nor a guide, but only the pillars of precedents is a
disheartening experience. The Constitution has however invested this Court with the power
to sit in appeal over the awards of Industrial Tribunals which are, it is said, founded on the
somewhat hazy background of maintenance of industrial peace, which secures the prosperity
of the industry and the improvement of the conditions of workmen employed in the industry,
and in the absence of principles, precedents may have to be adopted as guides—somewhat
reluctantly to secure some reasonable degree of uniformity of harmony in the process.

Several decisions, which were referred to at the bar have been touched upon in the above
case. At the end of the consideration of these cases, the Court made two pregnant observations
which we extract:

We may repeat that in matters relating to the grant of gratuity and even generally in the set-
tlement of disputes arising out of industrial relations, there are no fixed principles, on the
application of which the problems arising before the Tribunal or the Courts may be determined
and often precedents of cases determined ad hoc are utilised to build up claims or to resist
them. It would in the circumstances be futile to attempt to reduce the grounds of the decisions
given by the Industrial Tribunals, the Labour Appellate Tribunals and the High Courts to the
dimensions of any recognized principle.
…
It is not easy to extract any principle from these cases; as precedents they are conflicting.

These cautionary signals guide us too in the instant case.

It is true that on account of the peculiar circumstances affecting the textile industry in the
whole country the Court felt that the Tribunal was in error in relating gratuity to the consolidated
wage instead of the basic wage. The emphasis in the ruling is on the facts and circumstances
affecting the particular industry and the promotion of industrial peace in that field. Rightly, if
we may say so with respect, did the Court highlight the view that determination of gratuity is
not based on any definite rules and each case must depend upon the prosperity of the concern,
needs of the workmen and the prevailing economic conditions, examined in the light of the
570 Social Justice and Labour Jurisprudence

auxiliary benefits which the workmen may get on determination of employment. In short, the
core of the matter is the totality of the circumstances and the stage of evolution of industrial
relations at a given time. What held good a decade ago may be given the go by years later.
Another leading case on the question of gratuity is the British Paints,31 where, after referring
to the special features of the particular industry and the other benefit schemes enjoyed by the
employees, the Court referred to May & Baker32 where basic wages were treated as the basis and
British India Corporation33 where ‘gross salary, i.e., basic wages plus dearness allowance’ was held
to be the basis. It may be noted that in this case the minimum qualifying service for gratuity was
held to be five years except in case where termination resulted from resignation by the employee.
In Hydro-Engineers,34 this Court apparently upheld the contentions now urged before us by
Shri Shroff but stressed that no hard and fast rule could be laid down and each case must be
decided on its own circumstances.
In Hindustan Antibiotics35 again, this Court highlighted the relevant circumstances upon which
the discretion of the Tribunal could play, viz., the stability of the concern, the profits made in
the past, the future prospects and capacity, etc. This Court declined to disturb the gratuity
scheme in that case even though the wages which formed the basis of the gratuity included
dearness allowance.
In Bengal Chemical & Pharmaceutical Works Ltd., Calcutta,36 a Bench of this Court entered
the caveat which we have underscored in the earlier part of this judgment that

…a free and liberal exercise of the power under Article 136 may materially affect the funda-
mental basis of such decisions, namely, quick solution to such disputes to achieve industrial
peace. Though Article 136 is couched in [the] widest terms, it is necessary for this Court to
exercise its discretionary jurisdiction only in cases where awards are made in violation of the
principles of natural justice, causing substantial and grave injustice to parties or raises an
important principle of industrial law requiring elucidation and final decision by this Court
and discloses such other exceptional or special circumstances which merit the consideration
of this Court.

It was also mentioned, what is not oft remembered when interfering with awards, that the
Industrial Disputes Act is

…intended to be a self-contained one and it seeks to achieve social justice on the basis of
collective bargaining, conciliation and arbitration. Awards are given on circumstances peculiar
to each dispute and the tribunals are, to a large extent, free from the restrictions of technical
considerations imposed on courts.

This approach is what we earlier described as the Tribunal’s legal hunch or horse sense. Even
Gaziabad Engineering Co,37 on which Shri Shroff heavily relied, accepts the position that while
gratuity is usually related to the basic wage, a departure by relating it to the consolidated wage
may be made if there be some strong evidence or exceptional circumstances justifying that
course.
Calcutta Insurance Co. Ltd.38 also placed accent on the practical approach in industrial ad-
judication and did not interfere with the qualifying service of 5 years except in the case of resig-
nation by the employee where the qualifying period was raised to 10 years.
This survey of the cosmos of case-law can expand, but no service will be rendered by that
exercise. All that we need say is that there is nothing fundamentally flawsome in the 5 year
period being fixed as qualifying service. The real reason why some cases like British Paints39 re-
quired a qualifying period of 10 years was that a longer minimum period for earning gratuity in
the case of voluntary retirement or resignation would ensure that workmen do not leave one
concern for another after putting in the short minimum service qualifying for gratuity.
 Social Security and Welfare 571

We think that current conditions must control the tribunal’s conscience in finalising the
terms of the gratuity scheme. Taking things as they are, in our country presently there is unem-
ployment at the level of workers—that being the category we are concerned with. Colossal
unemployment means that the worker will not leave his employment merely because he has
qualified himself for gratuity. In an economic situation where there is a glut of labour in the
market and unemployment stares the working class in the face it is theoretical to contend that
employees will hop from industry to industry unless the qualifying period for earning gratuity
is raised to 10 years. The tribunal was realistic in fixing 5 years as the period of eligibility.
Our industrial realities do not provide for easy mobility of labour. What is more, the sense of
national consciousness in this field is reflected in the Payment of Gratuity Act which fixes a
period of 5 years as the qualifying period for earning gratuity.
Decisions have been brought to our notice some of which refer to basic wages and others to
consolidated wages as the foundation for computation of gratuity. These are matters of discretion
and the ‘feel’ of the circumstances prevalent in the industry by the Tribunal and, unless it has
gone haywire in the exercise of its discretion the award should stand. We see that in the Payment
of Gratuity Act also, not basic wages but ‘gross wages inclusive of dearness allowance’ have been
taken as the basis. This, incidentally, reflects the industrial sense in the country which has been
crystallised into legislation.
All things considered, we are disinclined to alter the award on the two critical issues on which
it was challenged. However, there are certain minor clarifications which will eliminate ambiguity
and, on that, both sides are agreed.
We clarify that wages will mean and include basic wages and dearness allowance and nothing
else. This corresponds to Section 2(s) of the Act. Likewise, we declare that qualifying service is
continuous service (counted with reference to completed years) as defined in Section 2(c). We
hold that the award will operate as directed therein, i.e. from the date of reference of the dispute.
Both sides agree, in their statement of the case, that in clause (a) of the award the expression
‘due to continued ill-health or on being incapacitated’ governs only resignation although we
feel on compassionate grounds it should govern both situations. The ambiguity must be resolved
in favour of the workers. In regard to the other conflicts of construction possible, as set out in
grounds 7 and 8 of the appellant’s statement of [the] case, we resolve them in favour of the
workmen, abandonment of service being too recondite and the amount involved too trivial for
variation by this Court.
Shri I.N. Shroff fairly stated that the Court may make an order regarding costs. We direct
that the appellant do pay the respondents costs which we quantify at Rs 2000. Out of this sum
Rs 1000 will be paid direct to Shri Parekh who has assisted the Court on behalf of the workers
and the balance of Rs 1000 shall be drawn by the present President of the Respondent Union.
Our parting thought is that negotiating settlements should be vigorously and systematically
pursued even by tribunals since litigation, escalating from deck to deck upto this Court, defeats
both, whoever wins or loses. This must be a sobering influence on Labour and Management
and agencies of conflict-resolutions. That is a legal beacon that can brighten the dark tunnel of
industrial conflict and promote national production cheered by shared wealth.

NOTES

1. AIR 1978 SC 1478. This case was heard by V.R. Krishna Iyer and D.A. Desai.
2. Section 2(9) of the Employees’ State Insurance Act of 1948 defines ‘employee’ means any person employed
for wages in or in connection with the work of a factory or establishment of which this Act applies and—

(i) who is directly employed by the principal employer on any work of, or incidental or preliminary to
or connected with the work of, the factory or establishment, whether such work is done by the
employee, in the factory or establishment or elsewhere; or
572 Social Justice and Labour Jurisprudence

(ii) who is employed by or through an immediate employer on the premises of the factory or
establishment or under the supervision of the principal employer or his agent on work which is
ordinarily part of the work of the factory or establishment or which is preliminary to the work
carried on in or incidental to the purpose of the factory or establishment; or
(iii) whose services are temporarily lent or let on hire to the principal employer by the person with
whom the person whose services are so lent or let on hire has entered into a contract of services;
[and includes any person employed for wages on any work connected with the administration of
the factory or establishment or any part, department or branch thereof or with the purchase of
raw materials for, or the distribution or sale of the products of, the factory or establishment or any
person engaged as an apprentice, not being an apprentice engaged under the Apprentice Act,
1961 (52 of 1961), or under the standing orders of the establishments; but does not include
(a) any member of [the Indian] Naval, Military or Air Force; or
(b) any person so employed whose wages (excluding remuneration for overtime work) exceed
such wages as may be prescribed by the Central Government:
Provided that an employee whose wages (excluding remuneration for overtime work) exceed
such wages as may be prescribed by the Central Government at any time after (and not before)
the beginning of the contribution period, shall continue to be an employee until the end of that
period.

3. Section 45A of the Act provides:

(1) Where in respect of a factory or a establishment no returns, particulars, registers or records are
submitted, furnished or maintained in accordance with the provisions of Section 44 or any Inspector
or other official of the Corporation referred to in sub-section (2) of Section 45 is prevented in any
manner by the principal or immediate employer or any other person, in exercising his functions or
discharging his duties under Section 45, the Corporation may, on the basis of information available
to it, by order determine the amount of contributions payable in respect of the employees of that
factory or establishment.
Provided that no such order shall be passed by the Corporation unless the principal or immediate
employer or the person in charge of the factory or establishment has been given reasonable
opportunity of being heard;
(2) An order made by the Corporation under sub-section (1) shall be sufficient proof of the claim of
the Corporation under Section 75 or for recovery of the amount determined by such order as an
arrear of land revenue under Section 45B (or for recovery under Section 45C to Section 45-I).

4. (1977) 3 SCR 35:(1977) LIC 884:AIR 1977 SC 1351.

5. Lux Gentium Lex-Then and Now 1799–1974, p. 7.
6. AIR 1978 SC 12. The case was heard by V.R. Krishna Iyer and Jaswant Singh. The majority judgement
was delivered by Justice Jaswant Singh.
7. 1975 LIC 848: AIR 1975 (Ker) 86.
8. AIR 1979 SC 1803. The case was heard by V.R. Krishna Iyer and A.P. Sen. Two separate but concurring
judgements were delivered by Justice V.R. Krishna Iyer and Sen.
9. Section 14B of the Act states:

Where an employer makes default in the payment of any contribution to the Fund the Pension Fund or
the Insurance Fund or in the transfer of accumulations required to be transferred by him under sub-
section (2) of Section 17, the Central Provident Fund Commissioner or such other officer as may be
authorized by the Central Government, by notification in the Official Gazette, in this behalf may
recover from the employer by way of penalty such damages, not exceeding the amount of arrears, as
may be specified in the Scheme;
Provided that before levying and recovering such damages, the employer shall be given a reasonable
opportunity of being heard;
Provided further that the Central Board may reduce or waive the damages levied under section in
relation of which a scheme for rehabilitation has been sanctioned by the Sick Industrial Companies
(Special Provisions) Act, 1985 (1 of 1986), subject to such terms and conditions as may be specified in
the Scheme.
 Social Security and Welfare 573

10. 1976 Supp SCR 489.

11. (1978) 2 SCR 621.
12. (1978) 2 SCR 272.
13. 1976 Supp SCR 489.
14. (1979) 1 SCC 137.
15. (1979) 2 SCC 249.
16. AIR 1947 PC 34.
17. (1978) 3 SCC 558.
18. (1977) 4 SCC 98.
19. 1958 1 LLJ 598 (Pat).
20. (1976) 3 SCR 365.
21. (1963) Supp I SCR 993.
22. (1968) I SCR 674.
23. (1971) 2 SCR 871.
24. 1957 SCR 223.
25. AIR 1979 SC 1981. This case was heard by V.R. Krishna Iyer and R.S. Pathak.
26. AIR 1957 SC 121.
27. AIR 1977 SC 941. This case was heard by V.R. Krishna Iyer and Jaswant Singh.
28. (Jurisprudence of Remedies): University of Pennsylvania Law Review Vol. 117, November 1968. pp. 1, 16.
29. Cardozo, The Nature of the Judicial Process, Yale University Press, pp. 151–52.
30. AIR 1970 SC 919.
31. AIR 1966 SC 732.
32. (1961) 2 Lab LJ 94.
33. (1965) 10 Fac LR 244 (SC).
34. AIR 1969 SC 182.
35. AIR 1967 SC 948.
36. AIR 1959 SC 633.
37. AIR 1970 SC 390.
38. AIR 1967 SC 1286.
39. AIR 1966 SC 732.
 About the Authors

I. Sharath Babu is Reader at the Post-Graduate Department of Studies in Law, Karnataka

University, Dharwad. He was Fellow, Centre for Labour Studies, National Law School of
India University, Bangalore from 2004 to 2006. He has a Ph.D in the area of norms re-
lated to fixation and quantification of the minimum wages for sweated labour under the
Minimum Wages Act of 1948. He was appointed Chief Investigator by the Ministry
of Labour, Government of Karnataka in 2004 to study the contract labour system in
Karnataka, for which he submitted a comprehensive report in 2005. He prepared and
presented a model for the Unorganized Sector Workers (Regulation of Employment,
Welfare and Social Security) Bill, 2005 (for the Ministry of Labour, Government of
India) in collaboration with the National Centre for Labour. He has published a number
of research papers in various journals on the subject of minimum wages, contract labour
claims and on issues pertaining to workers in the unorganised sector.

Rashmi Shetty is Associate Country Director Secretariat at ActionAid India, New Delhi.
She obtained a master’s degree in Law (Public Law and Policy) from the National Law
School of India University, Bangalore. She worked as Visiting Faculty in the National
Law School of India University, Bangalore, and taught labour laws from 2002 to 2004.
She also worked as Research Officer in the Centre for Labour Studies, National Law
School of India University, Bangalore from 2004 to 2005. She was a part of the study
group on the Contract Labour System in Karnataka, constituted by the Ministry of Labour,
Government of Karnataka.