:1: IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE JURISDICTION WRIT PETITION NO. 3764 OF 1996 The Ammunition Factory Co-operative Credit Society Ltd. Khadki, Pune - 411 033 ..Petitioner Vs. 1. Badrinarayan R. Sharma 1442, Shukrawar Peth, Bajirao Road, Pune - 411 002. 2. S.G. Kadam, Member, Industrial Court, Pune. ..Respondents Smt. Meena H. Doshi for petitioner. Mr. Kiran S. Bapat for respondent no.1. Respondent No.2 is formal party. CORAM: DR. D.Y. CHANDRACHUD,J. CORAM: DR. D.Y. CHANDRACHUD,J. CORAM: DR. D.Y. CHANDRACHUD,J. Date : December 03, 2008. Date : December 03, 2008. Date : December 03, 2008. ORAL JUDGMENT: ORAL JUDGMENT: ORAL JUDGMENT: 1. The petitioner is a Credit Co-operative Society registered under the Maharashtra Co-operative Societies Act, 1960. Its members consist of workmen employed in the Ammunition Factory and its allied establishments at Khadki. The Co-operative Society was formed with the objective of providing loan :2: facilities to its members. The finance required by the society is raised through share capital which is contributed by members of the Society. Persons who are not employed in the Ammunition Factory are not allowed to become members of the Society. 2. The 1st respondent joined the service of the Ammunition Factory as an Orderly in 1957 and was promoted through the ranks ultimately as an Upper Division Clerk. On 16/3/1989 the workman was informed that he would be attaining the age of 55 years on 28/7/1989 and that he should submit a certificate of medical fitness should he desire to continue in service. The workman submitted a certificate of medical fitness by a letter dated 3/7/1989. On 31/7/1989 the workman was superannuated from service under Clause 19 of the Staff Service Rules. Clause 19 of the Rules provides as follows:- "An employee may be called to retire from the Society’s services at the age of 55 years provided the Managing Committee may extend the period of service of any employee beyond the :3: age limit of 55 years. Managing Committee may further extend the period of service of the employees from year to year until he attains the age of 58 if, in the opinion of the Managing Committee, his services are necessary and he is found medically fit to continue." 3. The workman instituted a complaint of unfair labour practices under Item 1 of Schedule IV of the M.R.T.U. & P.U.L.P. Act, 1971. The case of the workman in the complaint before the Labour Court was that the employer had unilaterally framed Service Rules, which were approved by the Deputy Registrar of Co-operative Societies and a misrepresentation was made to the employees that they would be governed by those Rules. The workman stated that in terms of the communication received from the employer, he had submitted a certificate of medical fitness despite which he was not granted an extension in service beyond the age of 55 years under Clause 19 of the Service Rules. The workman contended that several other employees had been granted an extension and that Clause 19 had been observed in its breach. The :4: alternate case of the workman was that under Section 38-B of the Bombay Shops and Establishments Act, 1948, the provisions of the Industrial Employment (Standing Orders) Act, 1946 were applicable and under the Model Standing Orders, the age of superannuation was 60 years. The workman accordingly sought reinstatement with continuity of service and full backwages from 31/7/1989. 4. The petitioner filed its Written Statement, in which it was stated that the Service Rules were approved by the General Body of the Society on 14/10/1976 and were certified by the Deputy Registrar of Co-operative Societies on 21/1/1977. 5. Evidence was adduced by the workman and on behalf of the Management. 6. By a judgment dated 10/1/1994 the Labour Court dismissed the complaint. The workman carried the dispute in Revision before the Industrial Court. The Industrial Court allowed the Revision on 21/3/1996 and held that the petitioner was guilty of unfair labour :5: practices. The Industrial Court held firstly, that by virtue of the provisions of Section 38-B of the Bombay Shops & Establishments Act, 1948, the Standing Orders prescribed under the Industrial Employment (Standing Orders) Act, 1946 were applicable and the age of retirement under the Model Standing Orders was 60 years. Secondly, the Industrial Court was of the view that in any event under Clause 19 of the Service Rules, the petitioner was bound to extend the services of the respondent till the age of 58 years. Thirdly, the Industrial Court held that the services of certain other employees had been extended until they had attained the age of 60 years. The Industrial Court directed the petitioner to pay full backwages to the respondent from 31/7/1989 until 31/7/1994 when the workman attained the age of 60 years. 7. The order of the Industrial Court has been called into question in these proceedings. 8. On behalf of the petitioner, three submissions have been urged. Firstly, it was urged that under Section 38-B of the Bombay Shops and Establishments :6: Act, 1948 two conditions have been prescribed for the applicability of the Industrial Employment (Standing Orders) Act. The first condition is that more than 50 employees should have been engaged and the second condition is that the establishment is one to which the Bombay Shops and Establishments Act applies. It is submitted that the admitted position is that there were less than 50 employees. Secondly, it was urged that even on the assumption that the Model Standing Orders would govern the establishment, Model Standing Order 27 prescribed that the age of retirement shall either be 60 years or such other age as may be determined in a settlement, agreement or award, which has the binding force of law. It was submitted that the service regulations have the binding force of law and that consequently the age of retirement would have to be what is prescribed in Clause 19 of the Service Rules. Thirdly, it was submitted that under Clause 19 a discretion is vested in the Management to determine as to whether an extension should be granted to the employee from year to year depending upon the need of the employer and the medical fitness of the employee. Hence, it was submitted that the Industrial Court was :7: in error in granting an extension straight away upto the age of 60 years and directing the payment of backwages. In the present case, it was submitted that in the evidence it had come on the record that the Managing Committee had taken a decision not to extend the service, upon which there was no cross-examination. In so far as the plea of discrimination is concerned, it was urged that this has been satisfactorily explained both in the evidence and in the affidavits filed in these proceedings. 9. On behalf of the workman, it has been urged that Section 38-B of the Shops and Establishments Act was brought into the statute book by Maharashtra Act 64 of 1977 which came into force on 29/11/1977. Prior thereto, the Act did not postulate a requirement that there should be a minimum number of employees in the establishment. That was also the interpretation that was placed on the provisions of the Act in a judgment of a Division Bench of this court in C.N. Bhaskaran vs. S.A. Patil [1986 I L.L.J. 163] [1986 I L.L.J. 163] [1986 I L.L.J. 163]. The State Legislature amended Section 38-B by introducing the requirement of a minimum of 50 workmen in the :8: establishment by Maharashtra Act 35 of 1986. It was urged that in 1977, when the Industrial Employment (Standing Orders) Act, 1946 came to be applied to commercial establishments, there was no requirement of a stated minimum number of employees. Once the Act applied by incorporation, the Act, it was urged, would continue to apply. Secondly, it was urged that Model Standing Order 27 provides that the age of retirement should be 60 years or such age as may be determined by an agreement, settlement or award which has binding force of law. The respondent joined service in 1957, whereas the Rules were framed on 14/10/1976. Hence, it was submitted that on the date on which the workman entered the establishment, the Service Rules providing for an age of retirement of 55 were not in existence. Consequently, it has been submitted that the Rules which were framed in 1976 cannot apply with retrospective effect to an employee who had joined service prior thereto, particularly since the Rules do not have statutory force or character. They were, it was submitted, at the highest bye-laws of a Co-operative Society which do not have the binding force of law. Thirdly, it was submitted that if the :9: Service Rules were to apply, the employer had by requiring the workman to submit a certificate of his medical fitness held out an assurance to continue the employee beyond the age of 55 years, and as a result the workman was entitled to an extension of service. 10. Section 38-B was inserted into the Bombay Shops and Establishments Act, 1948 by Maharashtra Act 64 of 1977. Section 38-B, as it now stands, reads as follows:- "38-B. Application of Industrial Employment (Standing Orders) Act to establishments.- The provisions of the Industrial Employment (Standing Orders) Act, 1946, in its application to the State of Maharashtra (hereinafter in this section referred to as "the said Act"), and the rules and standing orders (including model standing orders) made thereunder from time to time, shall, mutatis mutandis, apply to all establishments wherein fifty or more employees are employed and to which this Act applies, as if they were :10: industrial establishment within the meaning of the said Act." 11. The expression "Establishment" is defined by Section 2(8), inter alia, to mean a commercial establishment. The expression "Commercial establishment" is defined by Section 2(4) to mean an establishment which carries on, any business, trade or profession or any work in connection with, or incidental or ancillary thereto. The definition, however, does not include a factory, shop, residential hotel, restaurant, eating house, theatre or other place of public amusement or entertainment. As it originally stood, Section 38-B did not contain a threshold requirement that a minimum number of employees be employed in the establishment. In C.N. Bhaskaran Vs. S.A. Patil (1986 I L.L.J. 163) a Division Bench of this Court observed that Section 38-B did not lay down that a particular number of employees should be employed in order to attract the provisions of the Industrial Employment (Standing Orders) Act, 1946. The State Legislature amended the :11: provisions of Section 38-B by Maharashtra Act 35 of 1986, consequent upon which the Industrial Employment (Standing Orders) Act now applies to all the establishments where 50 or more employees are employed and to which the Bombay Shops and Establishments Act, 1948 applies. 12. The argument of the learned counsel appearing on behalf of the workman is that upon the enforcement of Section 38-B (by Maharashtra Act 64 of 1977) the Model Standing Orders framed under the Industrial Employment (Standing Orders) Act, 1946 came to be applicable. Model Standing Order 27 provides as follows:- "27. The age for retirement or superannuation of the workmen may be sixty years or such other age as may be agreed upon between the employer and the workmen by any agreement, settlement or award which may be binding on the employer and the workmen under any law for the time being in force." :12: 13. The provisions of Model Standing Order 27 came up for consideration before a Division Bench of this court in Tulsiram K. Gothad vs. The Superintendent, Mahatma Gandhi Memorial Hospital and anr. [2007 III [2007 III [2007 III CLR 718] CLR 718] CLR 718]. The Division Bench held thus, "Perusal of the above Model Standing Order itself shows that it prescribes 60 years as age of retirement if some other age of retirement is not agreed upon between the employer and the workmen by any agreement or settlement or award which may be binding on both the parties. Thus the age of retirement is prescribed by the Model Standing Order no.27 as 60 years only if there is no contrary provision to be found in an agreement between the parties. It is thus clear that the moment it is shown that there is an agreement between the parties which is binding on both the parties prescribing different age of retirement then the Model Standing Order no.27 will not operate because of the language in which the Model Standing Order has been :13: couched." . A Single Judge of this court had in Engineering Workers’ Association v. J.D. Jamdar, Member Industrial Court and ors. [2004 III CLR 315] [2004 III CLR 315] [2004 III CLR 315] had taken the view that in Model Standing Order 27 what was intended was that the minimum age of retirement should be 60 years and consequently an agreement, settlement or award under which the age of retirement was above 60 years would be permissible in law but not otherwise. This view of the learned Single Judge was overruled in the judgment of the Division Bench in Gothad’s case. The position in law as it obtains, therefore, is that the age of retirement under Model Standing Order 27 is 60 years or such other age as may be agreed upon between the employer and the workmen by any agreement, settlement or award which may be binding on the employer and the workmen under any law for the time being in force. The age of 60 years would operate provided there is no contrary provision to be found in an agreement between the parties. Once an agreement is arrived at between the employer and the workmen, it is the age of :14: retirement that is stipulated in the agreement that would govern. 14. The judgment in Gothad’s case was, however, sought to be distinguished on the ground that in that case the letter of appointment stipulated that the conditions of service would be governed by the Rules framed and to be framed thereafter by the employer. The submission which was urged on behalf of the workman is that on the date on which he entered service, no regulation was in force governing the age of retirement. The service regulations, as was averred in the Written Statement of the Management, were approved by the General Body on 14/10/1976 and it was submitted that these regulations would not govern those employees who had joined service prior thereto. In Workmen of Kettlewell Bullen and Co. Ltd. vs. Kettlewell Bullen and Co. Ltd. [1964 II LLJ 146] [1964 II LLJ 146] [1964 II LLJ 146] the Supreme Court held that rules of retirement framed by the employer would have no application to those who were in service prior to the enforcement of the Rules unless it is shown that the employees had accepted the :15: new Rules as part of the conditions of their service. The Supreme Court held thus, ".... where rules of retirement are framed by the company it would have no application to its prior employees unless it is shown that such employees accepted the new rules as part of their conditions of service. The tribunal found such acceptance proved by the mere fact that no dispute had been raised earlier. That is in our opinion not justified. In the first place, there is nothing to show that after the new rules for retirement at 55 came into force they were actually applied by the company to its older employees. The union in its written statement mentioned the case of a large number of employees who had continued in the service of the company till they were well above 55. As regards these the company stated in the written statement that these persons were retired in 1948 and 1951. The company made no specific averment, however, that at any time after the new rules ere framed in 1947 and in :16: 1951 the prior employees were invariably or even generally retired when they were 55 years of age. In the absence of any satisfactory evidence that the rule of retirement at 55 was actually enforced as against prior employees, the fact that no dispute was earlier raised cannot possibly show that the prior employees accepted this new rule as applicable to themselves or acquiesced in it." 15. The bye-laws of a Co-operative Society are, it is well settled, akin to the Articles of Association of a company incorporated under the Companies Act, 1956. They do not have a statutory character. The service rules which have been framed by the petitioner do not have the force of statute nor do they have a statutory character. In The Co-operative Central Bank Ltd. and ors. vs. The Additional Industrial Tribunal, Andhra Pradesh and ors. [1969 (2) SCC 43] [1969 (2) SCC 43] [1969 (2) SCC 43], the Supreme Court held thus, "...In respect of bye-laws laying down :17: conditions of service of the employees of a society, the bye-laws would be binding between the society and the employees just in the same manner as conditions of service laid down by contract between the parties. In fact, after such bye-laws laying down the conditions of service are made and any person enters the employment of a society, those conditions of service will have to be treated as conditions accepted by the employee when entering the service and will thus bind him like conditions of service specifically forming part of the contract of service. The bye-laws that can be framed by a society under the Act are similar in nature to the Articles of Associate of a Company incorporated under the Companies Act and such articles of Association have never been held to have the force of law..." 16. The primary question of fact upon which the outcome of the complaint of unfair labour practices will turn is, whether the service rules that have been :18: framed by the employer were in existence on the date on which the workman joined service or, if they have been framed thereafter, whether they were accepted explicitly or by conduct. In the Written Statement which was filed by the employer it was stated that the Rules were approved by the General Body on 14/10/1976 and were certified by the Deputy Registrar of Co-operative Societies on 21/1/1977. However, the learned counsel appearing on behalf of the petitioner submitted that this would appear to be an obvious error. A copy of the Rules was produced for the perusal of the court. The compilation that has been produced during the course of the hearing, shows that several service rules were certified by the Divisional Joint Registrar of Co-operative Societies on 28/3/1970. If the rules were certified by the Registrar in 1970, then obviously they were framed prior thereto. Moreover, the rules provide that they shall be subject to the approval of the General Body and the Registrar and shall be deemed to have come into force from 1/1/1953. The deeming fiction that was created by the rules to the effect that they have been brought into force from 1/1/1953 would be subject :19: to the caveat that they would apply to those employees who were either in service on the date on which the rules were framed or to those employees in service prior thereto who had accepted the rules. As already noted earlier, the service rules in this case do not have a statutory character and, as observed in the judgment of the Supreme Court in the Co-operative Central Bank case the rules are akin to a contract of service. In view of the law laid down by the Supreme Court, the rules would apply to those who were in service on the date they were framed and to those who were in service prior thereto who had accepted the rules. Acceptance of the rules need not be by an overt act of acceptance, but can also be implied as a matter of conduct by the acceptance of benefits under the rules. This is a matter on which a factual determination ought to have been made on the basis of the evidence adduced before the Labour Court. 17. Unfortunately, the evidence which is on the record is silent on the question of the date on which the rules were actually framed and on whether the employees, such as the respondent, assuming that they :20: were in service prior to the enforcement of the rules, had accepted the benefit thereof. On this state of the record, it is only appropriate and proper that the proceeding should be remanded back to the Labour Court for a fresh determination. The issue which arises in this petition is of recurring importance since it is not only confined to the employee before the court in this proceeding but relates to a large number of other cases as well. The Industrial Court, while allowing the revision, proceeded on the basis that Model Standing Order 27 would apply and that the age of retirement of 60 years would govern. The Industrial Court obviously lost sight of the language of Model Standing Order 27 under which the age of retirement of 60 years would apply provided no other age of retirement contrary thereto is determined under an agreement, settlement or award having binding force of law. The Industrial Court has also not borne in mind that if Clause 19 of the service rules were to apply, there is no vested right to an automatic extension of service until the age of 58. After the employee completes the age of 55, extension is on a year to year basis. Moreover, medical fitness is only one of :21: the preconditions. Equally important is the opinion of the managing committee that the services of the employee are necessary. Necessity is an issue which has to be considered from the standpoint of the employer and rests in the discretion of the employer. In the present case, the employer has set up Clause 19 of the Service Rules as constituting an agreement having the binding force of law. Whether such a clause would bind a particular workman shall depend upon, (i) whether the workman was in service on the day on which the rules were framed; or (ii) whether the workman, even though in service prior to the enforcement of the rules, has accepted the rules expressly or by conduct such as the acceptance of benefits of the Staff Rules. On both these aspects the record before the court is completely silent, which would warrant a remand. 18. In the circumstances, the petition shall stand disposed of by setting aside the judgment of the Industrial Court dated 21/3/1996. Complaint (ULP) No. 197 of 1989 shall stand remitted back to the Labour Court. The Labour Court shall decide the said :22: complaint afresh after hearing the parties. Parties shall be at liberty to apply to the Labour Court for leading such additional evidence as they may be advised to lead. Parties shall appear before the Labour Court on 15/12/2008 for receiving directions. The Labour Court shall endeavour to dispose of the said complaint afresh as expeditiously as possible and preferably by 30th April, 2009. In the event that parties desire to amend their pleadings, it would be open to them to make an application in that regard before the Labour Court. . While admitting the petition, interim relief was granted in terms of prayer clause (b) on the condition that the petitioner deposits backwages as awarded by the Industrial Court on the basis of the last drawn salary. Permission was granted to the workman to withdraw Rs.25,000/- without security and the balance amount was directed to be invested in Fixed Deposit. The respondent-workman has already withdrawn Rs.25,000/- without security. The investment of the said balance amount deposited in this court shall be renewed periodically till the :23: final disposal of the complaint by the Labour Court and shall be subject to