Civil Appeals Nos
600 601 and 1699 1714 and 877 878 of 1975
Appeals by Special Leave from the Judgment and Order dated 30th January 1975 of the Gujarat High Court in Spl
Civil Applns
Nos 15 1194 88 89 90 107 113 121 122 124 125 166 182 202 112 123 177 1757 149 150 of 1974 respectively
622 F section Nariman K section Nanavati P C Bhartari and J B Dadachanji for Appellant In CA 60075
K section Nanvavati P C Bhartari and J B Dadachanji for the Appellants In CA 60175 and CA 1700 171475
V M Tarkunde K section Nanavati P C Bharatari and J B Dadachanji for the Appellant in CA 169975
V N Ganpule for Appellants In CA 877 87875
M C Bhandare and M N Shroff for the Respondents In CA 600 601 of 1975 and CA Nos
1699 171475 and 877 to 87875
The Judgment of the Court was delivered by KHANNA J
This judgment would dispose of civil appeals Nos 600 601 877 878 and 1699 to 1714 of 1975 which have been filed by special leave against the judgment of Gujarat High Court dismissing petitions under article 226 of the Constitution of India filed by the appellants
The appellants in these petitions assailed the validity of sections 53A and 53B of the Bombay Industrial Relations Act 1946 Bombay Act No 1 of 1947 hereinafter referred to as the principal Act
These sections along with some other provisions were inserted in the principal Act by the Bombay Industrial Relations and Industrial Disputes Gujarat Amendment Act 1972 Gujarat Act No 21 of 1972
The appellants also challenged the validity of the rules which were added to the Bombay
Industrial Relations Gujarat Rules 1961 as per notification dated June 4 1973
In addition to that the appellants challenged the validity of notification dated December 17 1973
The principal Act was enacted to regulate the relations of employers and employees to make provisions for settlement of industrial disputes and certain other purposes
In 1956 the industrial policy resolution of the Government of India stated inter alia that in a socialist democracy labour is a partner in the common task of development and must participate in it with enthusiasm
Emphasis was laid upon joint consultation of workers and technicians and for associating progressively labour in the management of the industry
Stress was again laid on joint management councils at the tripartite conference held in July 1957
Representatives of labour management and Government were present at that conference
There was however no statutory provision for joint management councils and whatever was done was on a voluntary basis
Sections 53A and 53B were inserted in the principal Act by Gujarat Act 21 of 1972
The two sections read as under 53A1 If in respect of any industry the State Government is of opinion that it is desirable in public interest to take action under this section it may in the case of all undertakings or any class of undertakings in such industry in which five hundred or more employees are employed or have been employed on any day in the preceding twelve months by general or special order require the employer to constitute 623 in the prescribed manner and within the prescribed time limit a Joint Management Council consisting of such number of members as may be prescribed comprised of representatives of employers and employees engaged in the undertaking so however that the number of representatives of employees on the Council shall not be less than the number of representatives of the employers
Notwithstanding anything contained in this Act the representatives of the employees on the Council shall be elected in the prescribed manner by the employees engaged in the undertaking from amongst themselves Provided that a list of industries in respect of which no order is issued under this sub section shall be laid by the State Government before the State Legislature within thirty days from the commencement of its first Session of each year
2 One of the members of the Council shall be appointed as Chairman in accordance with rules made in this behalf
53B 1 The Council shall be charged with the general duty to promote and assist in the management of the undertaking in a more efficient orderly and economical manner and for that purpose and without prejudice to the generality of the foregoing provision it shall be the duty of the council a to promote cordial relations between the employer and employers b to build up understanding and trust between them c to promote measures which lead to substantial increase in productivity d to secure better administration of welfare measures and adequate safety measures e to train the employees in understanding the responsibilities of management of the undertaking and in sharing such responsibilities to the extent considered feasible and f to do such other things as may be prescribed
2 The Council shall be consulted by the employer on all matters relating to the management of the undertaking specified in sub section 1 and it shall be the duty of the Council to advise the employer on any matter so referred to it
3 The Council shall be entrusted by the employer with such administrative functions appearing to be connected with or relevant to the discharge by the Council of its duties under this section as may be prescribed
624 4 It shall be the duty of the employer to furnish to the Council necessary information relating to such matters as may be prescribed for the purpose of enabling it to discharge its duties under this Act
5 The Council shall follow such procedure in the discharge of its duties as may be prescribed
 Consequent upon the insertion of sections 53A and 53B in the principal Act the Bombay Industrial Relations Gujarat Rules were also amended and certain new rules were added
Rule 47A relates to the manner of election of two persons from amongst employees in disputes
Rule 61A reads as under 61 A Constitution of Joint Management Council
Any employer who is required by an order made under sub section 1 of section 53 A to constitute a Joint Management Council shall constitute within a period of ninety days from the date of the said order a Joint Management Council consisting of ten members out of which the number of representatives of the employer to be nominated by the employer and the number of representatives of employees engaged in the undertaking to be elected from amongst themselves shall be such as may be determined by the employer so however that the number of representatives of the employees on the Council shall not be less than the number of representatives of the employer
 Rule 61B to rule 61T relate to election of employees representatives on the Management Council
Rule 61U prescribes for appointment of Chairman of the Council
Rule 61V deals with the constitution of the Council from time to time and the manner of filling in the vacancies
Rule 61W relates to the number of meetings of the Council and provides that the Chairman shall also have a second or casting vote in the event of equality of votes
Rule 61X makes other provisions for the meeting while Rule 61Y deals with annual returns
Rules 61Z 61ZA and 61ZB to which reference has been made during the course of arguments read as under 61 Z Duties of the Council
It shall be the endeavour of the Council i to improve the working conditions of the employees ii to encourage suggestions from the employees iiito assist in the administration of laws and agreements iv to serve generally as an authentic channel of communication between the management and the employees v to create in the employees a sense of participation vi to render advice in the general administration of Standing Orders and their amendment when needed 625 viito render advice on matters pertaining to retrenchment or rationalisation closure reduction in or cessation of operations 61 Z A Administrative functions with which the Council shall be entrusted by Employer
The Council shall be entrusted by the employer with administrative functions in respect of i operation of vocational training and apprenticeship schemes ii preparation of schedules of working hours and breaks and of holidays and iiipayment of rewards for valuable suggestions received from the employees
61 Z B Matters in respect of which the Council shall be entitled to receive information
The Council shall be furnished by the employer with information in respect of i general economic situation of the concern ii the state of the market production and sales programmes iiiorganisation and general running of the undertaking iv circumstances affecting the economic position of the undertaking v methods of manufacture and work vi the annual balance sheet and profit and loss of statement and connected documents and explanation and viilong term plan for expansion re employment etc Imugned notification dated December 17 1973 reads as under No KH SH 1988BIR 1073 JH Whereas in respect of the industry specified in the Schedule annexed hereto the State Government is of opinion that it is desirable in public interest to take action under section 53A of the Bombay Industrial Relations Act 1964 Bom
of 1947 in the case of all undertakings in the said industry in which five hundred or more employees are employed or have been employed any day in the preceding twelve months
Now therefore in exercise of the powers conferred by sub section 1 of the said section 53 A the Government of Gujarat hereby requires the employer of each such undertaking in the said industry to constitute a Joint Management Council in the manner and within the time limit specified in rule 61 A G of the Bombay Industrial Relations Gujarat Rules 1961
626 SCHEDULE Cotton Textile Industry as specified in the Government of Bombay Political and Services Department Notification No 284734 A dated 30th May 1939 and the Government of Gujarat Education and Labour Department Notification No BIR 1361 dated the 17th July 1961
 Although a number of contentions were advanced before the High Court to assail the validity of sections 53A and 53B as well as the rules mentioned above before us learned counsel for the appellants have restricted their challenge to the impugned provisions only on the ground of lack of legislative competence of the State Legislature
So far as notification dated December 17 1973 is concerned we may state that the said notification is no longer in force and instead of that notification a fresh notification date March 1 1976 has been issued
In the circumstances no opinion need be expressed on the validity of notification dated December 17 1973
We also express no opinion on the reasons given by the High Court in upholding the aforesaid notification
It is also in our opinion not necessary to express any opinion about the validity of notification dated March 1 1976 as this notification was issued subsequent to the decision of the High Court and was not the subject matter of writ petitions before the High Court
We may now advert to the question of the legislative competence of Gujarat legislature to enact sections 53A and 53B reproduced above
In upholding the contention of the respondent State that the impugned provisions were within the sphere of the legislative competence of the State legislature under entries 22 and 24 of List III in Seventh Schedule to the Constitution the High Court has held that the subject matter of the above legislation was labour welfare even though it might have some incidental effect on corporate undertakings or controlled industries
Dealing with rule 61ZB the High Court held that the information to be furnished should be of such a nature that its disclosure would not be harmful to the undertaking
The information it was held should not be confidential or relating to trade secrets
Sections 53A and 53B as already mentioned were inserted in the principal Act by Gujarat Act No 21 of 1972
This Act was published on October 19 1972 after it had received the assent of the President
According to the respondents the above provisions have been enacted under entries 22 and 24 of List III of the Seventh Schedule to the Constitution
Entry 22 relates to trade unions industrial and labour disputes while entry 24 deals with welfare of labour including conditions of work provident funds employers  liability workmen s compensation invalidity and old age pensions and maternity benefits
As against that the contentions advanced on behalf of the appellants is that the impugned legislation falls under entries 43 44 and 52 of List I in the Seventh Schedule which relate respectively to incorporation regulation and winding up of trading corporations including banking insurance and financial corporations but not including 627 co operative societies incorporation regulation and winding up of corporations whether trading or not with objects not confined to one State but not including universities and industries the control of which by the Union is declared by Parliament by law to be expedient in the public interest
We have given the matter our earnest consideration and we find no sufficient ground to interfere with the finding of the High Court that the impugned statutory provisions fall under entries 22 and 24 of List III in Seventh Schedule of the Constitution and that the State legislature was competent to enact the same
The impugned provisions in our opinion are intended in pith and substance to forestall and prevent industrial and labour disputes
They constitute also in essence a measure for the welfare of the labour
From a conceptual viewpoint workers  management of undertakings or self management represents the most far reaching degree of association of workers in decisions concerning them
Probably the best known example of this type of workers  participation is the Yugoslav system of self management
Under that system the workforce of the undertaking exercises the principal functions of management through the self management organs the organisation and powers of which have been established since the sixties by the statute or internal regulations of the undertaking namely the workers  assembly and the workers council
For varying lengths of time in a large number of countries and by virtue of a legal obligation workers  representatives have been included in management organs in the public sector as a whole or in certain nationalised undertakings
In the private sector the system which has pushed workers  representation to the furtherest degree is that of co determination applied in the Federal Republic of Germanv since the beginning of the fifties
By an Act of 1951 equal representation of workers was established on the supervisory boards of large iron and steel and mining undertakings
These boards generally include five workers  representatives five representatives of the shareholders and an eleventh member nominated by mutual agreement
In addition one of the members of the directorate or management board namely the labour director who is generally responsible for personnel questions and social affairs may only be nominated or dismissed in agreement with the maiority of the workers  members of that board
Under an Act of 1952 the workers  representation on the supervisory boards of the companies which do not belong to the above industries is one third of the total membership
Pressure is however being brought by the trade unions for equal representation of workers on the supervisory boards in sectors other than iron and steel and mining see International Labour Organization Background Paper on Symposium on Workers  Participation in Decisions within Undertaking in Oslo in August 1974
The object of workers  participation in joint management councils is to enlist co operation of workers with a view to bring about improvement in the performance of industrial organisations
It is assumed that the above scheme would give a robust feeling of participation to the workers in the management and thus result in improved functioning of the industrial undertaking
Another object appears to 628 be to democratise the industrial milieu and ensure egalitarianism in the process
It has not been disputed on behalf of the appellants that the various objectives mentioned in clauses a to f of sub section 1 of section 53B pertain to welfare of labour
What is however contended is that joint management councils may claim to exercise such functions under the opening words of sub section 1 of section 53B as can be discharged only by the Board of Directors
This contention in our opinion is not well founded
The impugned statutory provisions in our opinion should be so construed and implemented as would sustain their constitutional validity
The functions which can be performed by the joint management councils have to be of such a character as would pertain to welfare of labour or prevent industrial disputes
Such functions would be analogous to those specified in clauses a to f
If the impugned legislation in pith and substance relates to subjects which are within the competence of the State legislature as it in fact does the fact that there is an incidental encroachment on matters which are the subject matter of entries in List I would not affect the legislative competence of the State legislature to pass the impugned legislation
The impugned rules in our opinion likewise relate to subjects which are within the competence of the State legislature
The rules in the very nature of things can operate only in that field in which the parent Act can operate
For about a hundred years the term industrial democracy has been often mentioned in the writings of socialists trade unionists and social reformers
Of late the industrialists have taken it over
The reason for that is that industrialists have become conscious that any approach which has the effect of treating workers as if they were commodities is unsound and wasteful economically
The industrialists it has been said tried paternalism or benevolent autocracy and they have found that this did not work just as Frederick the Great and his followers found that benevolent political despotism did not work
Democracy in political terms means the consent of the governed in the governance of the country
In industry it means that wage earners shall have an effective voice
It has been observed by Edward Filence
labour  having experienced the advantages of democracy in government now seeks democracy in industry
Is it any stranger that a man should have a voice as to the conditions under which he works than that he should participate in the management of the city and the state and the nation  If a voter on governmental problems why not a voter on industrial problems  See page 339 Personnel and Labour Relations by NashMiner
The above approach postulates trade unions as a potential positive force
For management and union to share the pluralist ideology requires more than agreement about joint decision making as such
It requires also that neither side enforces claims or imposes policies which are found excessively burdensome by its counterpart
As observed 629 by Alan Fox on page 303 of Beyond Contract Work and Trust Relations It follows from this analysis that management will be readier to accept pluralistic forms of decision making the greater its confidence that it will always be able in the last resort to bend employee claims towards acceptable compromises
It may even be convinced of its ability to charm them away altogether or at least much reduce them by rational  argument and persuasion designed to bring out the true  common interests
In this sense a formal acceptance of pluralistic patterns may mask unitary convictions on managements past about the nature of the enterprise
It may regard joint decision making and a fully institutionalised handling of claims and grievances not as mechanisms for compromising genuine conflicts of interest but as devices which facilitate the working through  of mistaken conceptions psychological blockages and organizational confusions by a process of rational  clarification
 It would appear from the above that the concept of joint management has a much wider connotation
That wider aspect of joint management would plainly be impermissible under the impugned legislation as it has been enacted by the State legislature
Such legislation can operate only within a limited field because that is the only way in which its constitutional validity can be sustained against the challenge on the ground of want of legislative competence by the State legislature
With the above observations we dismiss the appeals but in the circumstances leave the parties to bear their own costs throughout
VPS Appeal dismissed


Summary:
Sections 53A and 53B of the Bombay Industrial Relations Act 1946 were inserted in that Act by the Bombay Industrial Relations and Industrial Disputes Gujarat Amendment Act 1972
They relate to the constitution of joint management councils which include representatives of the employees also for the purpose of forestalling and preventing industrial disputes
Consequent amendments were made in the Bombay Industrial Relations Gujarat Rules
The appellants challenged the two sections on the ground that the State Legislature was incompetent to enact them
According to the appellants the impugned legislation falls under Entries 43 44 and 52 of List I VII Schedule to the Constitution which relate to matters of incorporation etc
The High Court held that they fall under Entries 22 and 24 of List III which relate to labour welfare and industrial disputes and that the State Legislature was competent to enact them
Dismissing the appeal to this Court  HELD It has been recognised during the last hundred years that the wage earners should have an effective voice in the management of the industry in which they are working
The concept of joint management of industry by the employer and the employee may have a wide connotation because the joint management councils may not only perform such functions as pertain to welfare of labour that is those relating to the various objectives mentioned in cls
a to f of section 53B1 but may also claim to exercise such functions as can be discharged by the board of directors
This wider aspect of the joint management would however be impermissible under the impugned provisions because the provisions should be so construed and implemented as would sustain their constitutional validity
They have been enacted by the State Legislature and so the functions which can be performed by the joint management councils have to be of such a character as would pertain to welfare of labour or prevent industrial disputes
If the impugned legislation in pith and substance relates to subjects which are within the competence of the State Legislature the fact that there is an incidental encroachment on matters which are the subject matter of Entries in List I would not affect the legislative competence of the State Legislature to pass the impugned legislation
628A 629E Rules in the very nature of things can operate only in that field in which the parent Act can operate and hence the impugned rules likewise relate to subjects which are within the competence of the State Legislature
628D