SCA/11618/2004 1/36 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 11618 of 2004 WITH CIVIL APPLICATION No.9615 of 2004 For Approval and Signature: HON'BLE MR JUSTICE AKIL KURESHI ============================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ============================================================== GE LIGHTING INDIA LTD NOW KNOWN AS GE (INDIA) PVT - Petitioner(s) Versus GUJARAT MAZDOOR PANCHAYAT & 1 - Respondent(s) ============================================================== Appearance : SHRI KS NANAVATI, SR. ADV. FOR NANAVATI ASSOCIATES for Petitioner. MRS SANGEETA N PAHWA for Respondent No(s).: 1. RULE SERVED BY DS for Respondent No(s).: 2. ================================================================== CORAM : HON'BLE MR JUSTICE AKIL KURESHI Date : 03/08/2005 CAV JUDGMENT SCA/11618/2004 2/36 JUDGMENT In the present petition, the petitioner-employer has challenged the legality and validity of the order dated 12th July 2004 passed by the Industrial Tribunal, Nadiad. To appreciate the controversy involved in the petition, facts in nutshell may be recorded at this stage. 2. The petitioner is a company registered under the provisions of the Company Act, 1956. Earlier, respondent No.1 herein, viz. Gujart Mazdoor Panchayat (hereinafter to be referred to as “respondent No.1 Panchayat”) was representing all the workmen employed by the petitioner Company and periodical settlements were being arrived at between the petitioner company and respondent No.1 Panchayat. Respondent No.1 Panchayat raised various demands for revision of wages and other service conditions applicable to the workmen by charter of demands dated 21st April 1999. The petitioner Company however did not find it possible to accede to the said demands. It appears that sometime thereafter, a new Union called G.E. Lighting Employees Union, respondent No.2 herein (hereinafter to be referred to as “respondent No.2 Union”) was formed by break away group of workmen. It is not in dispute that presently respondent No.2 Union represents majority of the workmen employed by the petitioner Company. SCA/11618/2004 3/36 JUDGMENT 3. For adjudication of the demands with respect to the wage structure, etc. respondent No.1 Panchayat raised an industrial dispute which was referred for adjudication before the Industrial Tribunal, Ahmedabad being reference (IT) No.168 of 2000. This reference was later on transferred to the Industrial Tribunal, Nadiad and was re-numbered as Reference (IT) No.162/2001. 3.1 Respondent No.2 Union also sought and was granted two references against the petitioner Company being Reference (IT) Nos.256 and 257 of 2000 before the Industrial Tribunal, Ahmedabad. The demands raised by respondent No.2 Union in these references also pertained to the wage-structure of the workmen. These references were also transferred to the Industrial Tribunal, Nadiad and were re-numbered as Reference (IT) No.159 and 163 of 2001. 3.2 During the pendency of these references, the petitioner Company entered into three settlements dated 16.3.2001, 21.5.2001 and 7.6.2003 with respondent No.2 Union. On 2nd October 2003, the petitioner Company after producing all these three settlements before the Industrial Tribunal, requested the Tribunal to make an SCA/11618/2004 4/36 JUDGMENT award in terms of the settlements and dispose of the references including the reference made at the instance of respondent No.1 Panchayat. On 2.12.2003, the petitioner Company made another application before the Industrial Tribunal to consolidate all the three references. Respondent No.1 Panchayat opposed such an application whereas respondent No.2 Union agreed for consolidation of the references and for passing award in terms of the settlement. 3.3 It was in these applications filed by the petitioner Company that the Industrial Tribunal, Nadiad passed the impugned order dated 12th July 2004 rejecting the applications filed by the petitioner Company. 4. In its order dated 12th July 2004, the Industrial Tribunal was pleased to come to the conclusion that the settlement under section 18(1) of the Industrial Disputes Act, 1947 (hereinafter to be referred to as “ID Act”) binds only the parties to the agreement and none else. The Tribunal, therefore, found that the settlement Ex.35 produced by the petitioner Company being one under section 18(1) of the ID Act, the same would bind only the petitioner Company and respondent No.2 Union which had entered into such a settlement with the Company and the SCA/11618/2004 5/36 JUDGMENT members of respondent No.1 Panchayat cannot be bound by such a settlement. In conclusion, the Tribunal passed the following order: “32. In view of what is discussed above, this Tribunal is of the opinion that since the settlement annexed to Exh.35 is one under Sec. 2(p) it binds only the parties to it and none else and hence no award can be passed on the basis of the said settlement that the union has already settled its dispute with the company by taking recourse to Sec.2(p), (one of the modes of settling the dispute), it is now not open to the union to get another finality by seeking an award in terms of the said settlement, because it would be altogether a different mode of settling the dispute under section 2(b) of the Act; that there is no law which empowers the Tribunal to convert a settlement under Sec.2(p) into an award under Sec.2(b); that the circumstances that the settlement was arrived at within four days after denying its capacity even to pay by way of interim relief/award by the company speaks volume of facts about the justness and fairness of the settlement. So far as the application for consolidation of the three reference cases is concerned, the members of the union have given up any claims whatsoever in the said three reference cases by signing the declaration form annexure-3 and therefore, the union should walk out of the adjudication proceedings and allow the company and the panchayat to resolve the disputes through adjudication or an agreement which may or may not be SCA/11618/2004 6/36 JUDGMENT a settlement under sec.2(p). Thus, there being no merits in application Ex.35 or application Ex.117 according to this Tribunal, the same are required to be dismissed. I accordingly pass the following order: Order The application Ex.35 and Ex.177 are dismissed with no order as to costs.” 5. Appearing for the petitioner-Company learned Senior Advocate Shri K.S.Nanavati submitted that respondent No.2 Union represents majority of the workmen employed by the petitioner company and when settlements were arrived at between the petitioner Company and respondent No.2 Union, it should have been appreciated that large number of workmen had agreed to abide by the terms of settlements and that therefore, award in terms of such settlements should have been made by the Industrial Tribunal, since the settlement was legal, just and fair. It was further submitted that the Industrial Tribunal could not have ignored the settlements arrived at between the petitioner Company and respondent No.2 Union without there being any basis to do so. It was contended that respondent No.1 Panchayat represents less than 25 per cent of the workmen employed by the petitioner Company and when a Union representing more than 75 per cent of SCA/11618/2004 7/36 JUDGMENT the work-force had agreed to certain terms and conditions, such agreement would bind the minority Union also. It was contended that the concept of collective bargaining is accepted in the industrial law and when overwhelming majority of workmen had accepted certain set of terms and conditions, it is not possible for a Union espousing the cause of minority work-force to oppose such a settlement and insist on adjudication of their demands. It was contended that the Tribunal gravely erred in rejecting the request of the petitioner for consolidation of the references. It was submitted that the request for consolidation of the proceedings was an innocuous prayer and the same ought to have been granted all the more so since by an order dated 21st July 2001, the Tribunal had earlier, according to the learned counsel, already ordered consolidation of the proceedings. Learned counsel for the petitioner relied on number of decisions including those of the Hon'ble Supreme Court, reference to which will be made at a later stage. 6. Appearing for respondent No.1, Mrs.Pahwa opposed the petition. She sought to support the decision rendered by the Industrial Tribunal. She contended that the Tribunal did not commit any error in rejecting the applications SCA/11618/2004 8/36 JUDGMENT filed by the petitioner Company. She submitted that the settlement arrived at between the Company and respondent No.2 Union was not in course of conciliation proceedings. The settlement being one covered under section 18(1) of the ID Act would bind only the parties to the settlement and to none else. She, therefore, contended that despite the settlement between the petitioner Company and respondent No.2, respondent No.1 Panchayat would have an independent right to proceed further with their demands and have the reference adjudicated upon by the Industrial Tribunal. She pointed out that even as per the settlement between the parties, the revised wage structure is to be made applicable only to those workmen who signed the formal agreement. She submitted that the members of respondent No.1 Panchayat have neither signed the agreement nor have been given the revised wages. She strongly relied on the decision of the Hon'ble Supreme Court in the case of Tata Chemicals v. Workmen, Tata Chemicals, AIR 1978 SC 828 to canvass that even the minority union has a right to raise an industrial dispute and to have the same adjudicated upon. She additionally submitted that when the dispute was raised by respondent No.1 Panchayat and the reference was made, the settlements were not entered into between the parties. SCA/11618/2004 9/36 JUDGMENT 7. Before considering the rival submissions, relevant provisions of the ID Act can be noted. Section 2(p) of the ID Act defines the term “settlement”. It, inter alia, provides that a “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. Section 2(p) of the ID Act reads as follows:- “(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 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.” Section 12 of the ID Act provides for duties of conciliation officers. Sub-section (1) of section 12 requires a conciliation officer to hold conciliation proceeding where any industrial dispute exists or is apprehended. Sub-section (2) of section 12 of the ID Act requires the conciliation officer to investigate the SCA/11618/2004 10/36 JUDGMENT dispute and all matters affecting the merits for the purpose of bringing about a settlement of the dispute and authorises him to do all such things as he thinks fit for the purpose of inducing the parties to come to a fair and amicable settlement of the dispute. Sub-section (3) of section 12 provides that if a settlement of the dispute or 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 authorized officer together with memorandum of the settlement. Sub-section (3) of section 12 reads as follows:- “(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 authorised in this behalf by the appropriate Government together with a memorandum of the settlement signed by the parties to the dispute.” Sub-section (4) of section 12 provides that if no such settlement is arrived at, the conciliation officer shall send to the appropriate Government a full report setting forth the steps taken by him for ascertaining the facts and circumstances relating to the dispute and for SCA/11618/2004 11/36 JUDGMENT bringing about a settlement thereof and statement and reasons on account of which settlement could not be arrived at. Sub-section (5) of section 12 of the ID Act provides that if on consideration of report referred to in sub-section (4) the appropriate Government is satisfied that there is a case for reference to the Board, Labour Court, Tribunal or National Tribunal, it may make such a reference. If the Government decides not to make a reference, it has to record and communicate to the parties concerned the reasons therefor. 7.1 From the provisions contained in section 12 of the ID Act, it can be seen that one of the prime duties of the conciliation officer where an industrial dispute exists or is apprehended is to endeavour to bring about a fair and amicable settlement of the dispute. If such a settlement is arrived at between the parties, the Conciliation Officer has to send a report thereof to the appropriate Government and if no such settlement is arrived at, under sub-section (4) of section 12 of the ID Act, the conciliation officer is required to send a failure report stating the reasons on account of which, in his opinion, a settlement could not be arrived at. Upon consideration of the failure report sent by the conciliation officer, the appropriate Government if it is SCA/11618/2004 12/36 JUDGMENT satisfied that there is a case for reference to the appropriate Court or the Tribunal, may make such a reference. It can thus be seen that the machinery provided under the ID Act for conciliation of disputes is an important step in the process of resolving disputes between the employer and the workmen. If conciliation efforts succeed and an amicable settlement is arrived at between the parties, the conciliation officer has to make a report thereof to the Government. In case of failure of the efforts, the conciliation officer has to send his failure report. The conciliation officer has to ensure that the settlement is fair and amicable. Thus the settlement arrived at between the parties during conciliation proceedings with the active participation of the Conciliation Officer is put on a higher pedestal than the settlement arrived at between the parties outside of the conciliation proceedings. Section 2(p) of the ID Act also recognizes two different kind of settlements, one arrived at during the course of conciliation proceedings and another arrived at otherwise than in course of conciliation proceedings, but which has been signed by the parties in such a manner as may be prescribed. 7.2 Section 18 of the ID Act also draws distinction between above two kinds of settlements. Sub-section (1) SCA/11618/2004 13/36 JUDGMENT of section 18 of the ID Act provides that a settlement arrived at by agreement between the employer and the workman otherwise than in the course of conciliation proceeding shall be binding on the parties to the agreement. Sub-section (3) of section 18 on the other hand provides, inter alia, that a settlement arrived at in the course of conciliation proceedings shall be binding on all parties to the industrial dispute; all other parties summoned to appear in the proceedings as parties to the dispute; heirs, successors or assigns of the employer and all persons who were employed in the establishment or part thereof to which the dispute relates on the date of dispute and all persons who subsequently become employed in the establishment or part thereof. Section 18 of the ID Act reads as follows: “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 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. SCA/11618/2004 14/36 JUDGMENT (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 (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 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.” 8. The combined reading of section 2(p), section 12 and section 18 of the ID Act makes it abundantly clear that there is a vital difference between a settlement arrived at in course of conciliation proceedings between the SCA/11618/2004 15/36 JUDGMENT employer and workmen and one arrived at by agreement between the parties outside the conciliation proceedings. While the settlement arrived at between the employer and the workmen during the course of conciliation proceedings binds not only all the parties to the dispute, the same binds also the heirs, successors and assigns of the employer on one hand and all persons who were employed in the establishment on the date of the dispute and all the persons who subsequently become employed in such an establishment on the other. This distinction has been recognized and reiterated by the Hon'ble Supreme Court in number of decisions. 9. In the case of Barauni Refinery Pragatisheel Shramik Parishad v. Indian Oil Corporation Ltd., (1991) 1 SCC 4, in para 8 of the judgment, the Hon'ble Supreme Court observed that “it may be seen on a plain reading of sub- sections (1) and (3) of Section 18 that settlements are divided into two categories, namely, (i) those arrived at outside the conciliation proceedings and (ii) those arrived at in the course of conciliation proceedings. A settlement which belongs to the first category has limited application in that it merely binds the parties to the agreement but the settlement belonging to the second category has extended application since it is SCA/11618/2004 16/36 JUDGMENT binding on all parties to the industrial dispute, to all others who where summoned to appear in the conciliation proceedings and to all persons employed in the establishment or part of the establishment, as the case may be, to which the dispute related on the date of the dispute and to all others who joined the establishment thereafter. Therefore, a settlement arrived at in the course of conciliation proceedings with a recognized majority union will be binding on all workmen of the establishment, even those who belong to the minority union which had objected to the same. To that extent it departs from the ordinary law of contract. The object, obviously is to uphold the sanctity of settlements reached with the active assistance of the Concilation Officer and to discourage an individual employee or a minority union from scuttling the settlement. There is an underlying assumption that a settlement reached with the help of the Conciliation Officer must be fair and reasonable and can, therefore, safely be made binding not only on the workmen belonging to the union signing the settlement but also on others. That is why a settlement arrived at in the course of conciliation proceedings is put on par with an award made by an adjudicatory authority”. It would not be necessary to list the long line of decisions of the Hon'ble Supreme Court SCA/11618/2004 17/36 JUDGMENT reiterating this settled principle. 10. In the present case, it is not in dispute that the settlements arrived at between the petitioner Company and respondent No.2 Union were not during the course of conciliation proceedings. These settlements were clearly outside the conciliation proceedings. Therefore the settlements would though obviously bind the parties to the settlements, namely, the petitioner Company and respondent No.2 Union, the question is whether such a settlement can be thrust upon respondent No.1 Panchayat. In other words, the question is, can the settlements in question arrived at between the petitioner Company and respondent No.2 Union which are admittedly settlements outside the conciliation proceedings bind respondent No.1 Panchayat and preclude adjudication of the dispute raised by respondent No.1 Panchayat long before such settlements were arrived at between the such parties. 11. In this regard, I find that the learned counsel for respondent No.1 is justified in placing reliance on the decision of the Hon'ble Supreme Court in the case of Tata Chemicals Limited (supra). In the said case, it was the case of the employer-Company that a settlement dated 14th December 1973 between the appellant Company and the SCA/11618/2004 18/36 JUDGMENT Employees Union covered the pending demand regarding variable dearness allowance sponsored by the Sangh and the benefit accruing from the settlement was taken by the entire batch of workmen and that therefore, the reference made by the State Government with respect to variable dearness allowance was invalid and the Tribunal had no jurisdiction to adjudicate upon the same. On the other hand, it was the contention of the Sangh that the settlement in question was binding only on the parties thereto and Sangh not being a signatory to the settlement, it was open to it, even though it was a minority Union, to sponsor the demand in question and to the Government to make a reference. In this regard, the Hon'ble Supreme Court formulated a question, viz. 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. The Hon'ble Supreme Court observed that there are two categories of settlements, (i) a settlement which is arrived at in course of conciliation proceedings 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 SCA/11618/2004 19/36 JUDGMENT parties to come to a fair and amicable settlement of the dispute and (ii) a written agreement between employer and workmen arrived at otherwise than in the course of conciliation proceeding. It was observed that 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 Hon'ble Supreme also noted that different consequences of the aforesaid two categories of settlements as set out in section 18 of the ID Act. It was observed that a bare perusal of section 18 of the ID Act would show that whereas a settlement arrived at by agreement between the employer and the workmen otherwise than in the course of conciliation proceedings is binding only on the parties to the agreement, a settlement arrived at in the course of conciliation proceeding 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. Having thus noted the distinction between the two kinds of settlement, the Hon'ble Supreme Court in para 16 of the decision observed that