WP/1372/2000 : 1 : vss IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO.1372 OF 2000 General Kamgar Sangh ... Petitioner Vs. Ichalkaranji Nagarpalika ... Respondent Mr.S.M. Dharap for Petitioner Mr.S.C. Naidu a/w T.S. Ingle and Saurabh Kulkarni for Respondent CORAM: SMT.NISHITA MHATRE, J. DATE: MARCH 9, 2011 ORAL JUDGMENT: 1. The issue involved in the present petition is whether a Municipal Council which has entered into a settlement u/s 2(p) read with 12(3) of the Industrial Disputes Act can renege from that settlement on the ground that circulars have been issued by the Director of Municipal Administration, Government of Maharashtra to refrain from granting wages for work done on public holidays and on the second and fourth Saturday of each month. 2. A settlement was signed between the petitioner and the Municipal Council on 5.7.1987 under section 2(p) read with section 18(1) of the Industrial Disputes Act, 1947. Under this settlement it was agreed that those employees who worked on public holidays or on the second or fourth Saturday of a month would be entitled to extra wages for 21 days. This settlement came into effect from 5.7.1983 and was WP/1372/2000 : 2 : implemented in accordance with law. The employees started drawing the benefits of the settlement. On 17.6.1990 the petitioner union raised 48 demands on behalf of the workmen employed in the respondent Municipal Council. One of the demands raised was for the enhancement of the number of days for payment of extra wages for working on public holidays or on the second or fourth Saturday. These demands were admitted in conciliation on 18.6.1996. A settlement was signed in Conciliation u/s 2(p) r/w 12(3) and Rule 58 of the Industrial Disputes Act, 1947. Under clause 1of the settlement, those employees working in essential services rendered by the Municipal Council who were required to work on public holidays and on the second and fourth Saturday of the month were entitled to 45 days' wages per year instead of 21 days' wages. This settlement was arrived at between the parties only after the Director of Municipal Administration had sanctioned the signing of such a settlement by an order dated 24.4.1996. By a letter dated 18.8.1997, the Municipal Council intimated the petitioner that clause 1of the settlement of 18.6.1996 was being withdrawn and the notice would come into effect within two months from the date of the notice. 3. Being aggrieved by action taken by the Municipal Council, the petitioner filed complaint (ULP) No.351 of 1997 before the Industrial Court, Kolhapur under Item 9 and 10 of Schedule IV of the MRTU & PULP Act. The Industrial Court had initially at the ad-interim stage directed the respondent Municipal Council to deposit the arrears of wages payable under clause 1 of the Settlement of 18.6.1996 in the Court. Thereafter it appears that the application for interim relief was rejected by the Industrial Court on 20.10.1997. Aggrieved by the order passed by the Industrial Court, the petitioner filed Writ Petition No.5511 of 1998 challenging the order passed WP/1372/2000 : 3 : by the Industrial Court. The petition was allowed to be withdrawn. However, the Court directed that in case the petitioner succeeds before the Industrial Court interest @ 18% p.a. from the date on which such benefits were found payable to the employees should be granted by the Industrial Court. The complaint was expedited. 4. It appears that the Municipal Council issued a letter on 20.8.1999 directing its various departments including the accounts department that telephone operators, employees working in the Octroi department and Tax Collectors should be given the benefit of clause 1 of the settlement for the year 1998-1999. 5. The Industrial Court after considering the evidence on record dismissed the complaint filed by the petitioner. The Industrial Court was of the view that though the settlement had been signed under section 2(p) r/w 12(3) of the Industrial Disputes Act, clause 1 of the same was contrary to a circular issued by the Director of Municipal Administration in 1984. It was also held that clause 1 was contrary to the provisions of the Maharashtra Civil Services Rules and the provisions of section 76 of the Maharashtra (Municipal Councils), (Nagar Panchayats) and Industrial Townships Act, 1965 (for short the Maharashtra Municipalities Act). 6. The main contention of Mr. Dharap, appearing for the petitioner, is that a valid settlement signed in conciliation cannot be terminated by the Municipal Council without following the procedure envisaged under the I.D.Act. He points out that the settlement was arrived at between the petitioner and the Respondent only after the latter obtained a sanction from the Director of Municipal Administration. Clause 1 of the settlement deals with payment to be made for working on public holidays and 2nd WP/1372/2000 : 4 : and 4th Saturdays was stipulated in the settlement. He submits that the respondent could not unilaterally withdraw clause 1 of the settlement without any intimation whatsoever to the petitioner. He submits that the notice issued on 18.8.1997 by the respondent indicating that clause 1of the settlement stood withdrawn was invalid as it was contrary to the provisions of section 19 of the Industrial Disputes Act. He submits that the Municipal Council unilaterally stopped paying the benefits of clause 1 of the settlement and the workmen were forced to avail of compensatory or optional holidays if they were directed to work on a 2nd or 4th Saturday or on a public holiday. He points out that the union by its letter dated 29.8.1997 had responded to the notice of termination indicating that they opposed such termination or withdrawal of the benefits available to the workmen under clause 1 of the settlement. He submits that there in these circumstances is ample evidence on record to indicate that in view of the breach of section 19 of the Industrial Disputes Act, the respondent Municipal Council had committed unfair labour practice under Items 9 and 10 of Schedule IV of the MRTU & PULP Act. In these circumstances, submits Mr. Dharap, the circular dated 24.4.1996 and, the impugned order of the Industrial Court ought to be set aside. 7. Per contra, Mr. Naidu submits that for a settlement to be binding it must be legal and not proscribed by law. The main thrust of the argument of Mr. Naidu is that the circular dated 24.12.1996 has been issued in exercise of the powers vested in the Municipal Council u/s 76 and s. 308 of the Maharashtra Municipalities Act. Therefore according to Mr. Naidu, the power of the Municipal Council which is vested in it under the Maharashtra Municipalities Act coupled with the duty to act honestly and faithfully cannot be overlooked. He submits that the vires of the circular which WP/1372/2000 : 5 : regulates payment of any amount to the employees has not been challenged by them. He further points out that there is an anomalous position in this case inasmuch as the circular cannot operate if clause 1 of the settlement remains in force. He further contends that the settlement of 18.6.1996 is contrary to Rule 45 Note 1 of the Maharashtra Civil Service (Leave) Rules as well as Maharashtra Civil Service (General Conditions of Service) Rules. According to the learned advocate a settlement which is contrary to the various circulars issued by the Director of Municipal Administration is void or in any event voidable. In these circumstances the Municipal Council had no alternative but to terminate the settlement and withdraw the offensive clause of the settlement as the Municipal Council has to obey the directions of the Director of Municipal Administration. He submits therefore that the Industrial Court has not committed any error by dismissing the complaint. 8. The issues which arise before me are (i) whether the Council can decide unilaterally on the basis of circulars issued by the State Government that it will not implement a settlement signed in conciliation? (ii) whether the Council could have stopped paying the benefits under the settlement of 18.6.1996 to the workmen after it had terminated the settlement on 24.12.1996? and (iii) whether the provisions of section 76 of the Maharashtra Municipalities Actor the circulars issued in exercise of the powers available under that Act will bind the workmen? The answer to all these questions has to be in the negative and therefore the impugned order will have to be set aside. 9. The settlement undisputedly has been signed under the provisions of section 2(p) r/w 12(3) of the Industrial Disputes Act. It is a settlement signed in conciliation WP/1372/2000 : 6 : and is binding on both the petitioner and the respondent. When a settlement signed in conciliation is to be terminated, a certain procedure as envisaged under the Industrial Disputes Act is required to be followed. 10. The relevant provisions of Section 19 are as follows: 19. Period of operation of settlements and awards. - (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. 2(A) …. 3 …. 4 …. 5 …. 6 …. 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, and where there is a recognized union for any undertaking under any law for the time being in force by such recognized union. The object of Section 19 therefore, is to ensure that once a settlement is arrived at peace prevails between the parties during the period agreed upon. The purpose is to provide for the continuance of the settlement until its termination is manifested in the manner prescribed to avoid industrial unrest. An option is available to either party to terminate the settlement by a written intimation to the other. Till the settlement is either replaced or substituted by a new settlement or an award, the benefits under the earlier settlement must continue to flow. In any event, a bilateral settlement can- not be terminated unilaterally before the period prescribed in the settlement. In the WP/1372/2000 : 7 : present case, the settlement was arrived after a strike called by the workmen which is evident from the recitals in the settlement. No period was prescribed for the opera- tion of the settlement dated 18.6.1996. Therefore, it was binding on the parties at least for a period of six months from the date on which the memorandum of settle- ment was signed. Thus a specific procedure has to be followed while terminating a settlement which has been signed in conciliation. 11. It is contended on behalf of the respondent that in view of the letter issued on 18.8.1997 terminating the effect of clause 1 of the settlement, the Industrial Court was right in dismissing the complaint. It is contended by Mr. Naidu that in view of the fact that the Council had found that the settlement had been signed in contravention of the order issued by the Director of Municipal Administration on 14.5.1984 it was necessary to withdraw the benefits available under clause 1 of the settlement. In my view, there can be no unilateral withdrawal of a term of a settlement, even assuming the settlement was contrary to the provisions of certain circulars or orders issued by the Director of Municipal Administration. The Settlement was signed between an employer and its workers. The Director of Municipal Administration had sanctioned the signing of such a settlement. Therefore, it could not be said that the settlement was signed contrary to the powers conferred on the Municipal Council to enter into such a settlement. The settlement was not illegal per se. In any event a unilateral withdrawal of a benefit granted to workmen cannot be made unless a notice terminating the settlement is issued and the settlement is replaced by another settlement or an award. The benefits of the settlement must continue even after the settlement is repudiated till it is replaced or substituted either by an award or a settlement. In the case of Life Insurance Corporation of India vs. D.J. Bahadur & WP/1372/2000 : 8 : ors., AIR 1980 SC 2181, the Supreme Court has held that unless an earlier settlement is altered by a fresh settlement or an award or a valid legislation it would continue to be in force. The powers of regulation of conditions of service including payment and/or non-payment being enjoyed by the employees of the LIC under the Life Insurance Corporation Act cannot supplant, subvert or substitute a special legislation i.e. the Industrial Disputes Act which specifically deals with the Industrial Disputes between the workmen and employers. Justice Krishna Iyer in his judgment has observed thus: 43. 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 case 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. 44. 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 conditions of service would not have been WP/1372/2000 : 9 : 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 reversion to an obsolete and long ago “dead” contract of service. 45. 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. 1000 could it be the Management might, by unilateral yet disastrous action give notice under s. 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 imagination. 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 a state of lawless hiatus. No canon of interpretation of statutes can compel the court to construe a statutory provision in this manner. We have, no doubt, that the precedents 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 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. 46. 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 s. 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. (Emphasis supplied) 12. In his concurring judgment, Justice R.S. Pathak has held thus: 77. 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 WP/1372/2000 : 10 : 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 had 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 reagitation 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. Certainty in 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. 78. The position seems comparable with what happens in the case of an award. Section 19(3) and Section 19(6) contain similar provisions. In the case of an award this Court has laid down in South Indian Bank Limited v. A.R. Chacko19 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”. WP/1372/2000 : 11 : Later in Md. Qasim Larry, Factory Manager, Sasamusa Sugar Works v. Muhammad Samsuddin21 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.” 79. 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. 12. Therefore, as observed by the Supreme Court, the Industrial Disputes Act substantially equates an award with a settlement. There is no distinction with regard to the nature and period of their effect. Thus, there can be no doubt that the employer cannot withdraw the benefits of a settlement unilaterally. 13. The Reference made by Mr.Naidu to section 76 of the Maharashtra Municipalities Act is in