IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 07.09.2010 CORAM THE HON'BLE MRS. JUSTICE CHITRA VENKATARAMAN W.P. No.2178 of 2006 1. Magnesite National Labour Union Rep. By its Deputy General Secretary. 2. Magnesite Thozhilalar Munnetra Sangam, Rep. By its General Secretary. 3. Salem District Magnesite Labour Union, Rep. By its General Secretary. ..Petitioners Vs. 1. Dalmia Magnesite Corporation, Rep. By its General Manager, Salem. 2. The Presiding Officer, Central Government Industrial Tribunal, Shastri Bhavan, Haddows Road, Chennai. ..Respondents Prayer: Petition under Article 226 of the Constitution of India praying for issue of Writ of Certiorarified Mandamus to call for the records from the 2nd respondent relating to the award dated 05.09.2005 in ID No.135 of 2003, quash the same and consequently direct the frist respondent to pay the balance of ex-gratia at 2.33 % due to the workers for the accounting year 2001-02 together with interest at 10% per annum. For Petitioners :: Mr.S.Vaidyanathan For Respondents :: Mr.T.Poornam for R-1 O R D E R Magnesite National Labour Union, Magnesite Thozhilalar Munnetra Sangam and Salem District Magnesite Labour Union are the writ petitioners herein challenging the order passed by the second respondent herein in I.D.No.135 of 2003 dated 05.09.2005. 2. The petitioners herein filed a petition before the Central Government Industrial Tribunal cum Labour Court, Chennai, questioning the action of the Management in paying ex-gratia for the Accounting Year 2001-02 at the rate of 6% as amounting to effecting change in https://hcservices.ecourts.gov.in/hcservices/ the service condition of workmen without giving notice under Section 9-A of the Industrial Disputes Act, thereby violated the provisions of the Industrial Disputes Act. The petitioners contended that even though for the last eight years the employees were paid ex gratia payment pursuant to bilateral negotiation, the payment for the accounting year 2001-02 at 6% fixed by the Management was an unilateral one and not under any bilateral negotiation. It is further pointed out that even though the loss during the Accounting Year 2001-02 was much less than what prevailed in the earlier years, yet, the unilateral decision to pay at 6%, amounts to effecting change in the service condition without giving notice. Consequently, the petitioner contended that they were entitled to be paid ex-gratia payment at 8.33% and the management be directed to pay the balance of ex gratia payment at 2.33% on the earned wages with costs. 3. The claim of the petitioner was however countered by the Management, the first respondent herein, that the payment as regards the earlier years was, no doubt, made on the basis of the settlement entered into under Section 18(1) of the Act, but it was specifically agreed by the Union that the ex gratia payment for that year would not be cited as a precedent in future negotiations. The payment was made on the basis of various factors like profit and loss of the company, financial position, production and cash flow, etc. The payment of ex gratia was neither a part of the service conditions nor a statutory condition to insist on payment at 8.33%. Referring to the deteriorating market condition and the fall in production of dead burnt magnesite and magnesia carbon bricks from 1998-99 to 2000- 2001, the Management decided to give ex gratia payment at 6% only. The Management pointed out that due to the accumulated loss over the period of ten years, the Management could not offer anything more than 6% by way of ex gratia payment. Apart from that, by its very nature, payment of ex gratia would not form part of service conditions to give notice under Section 9-A of the Industrial Disputes Act. Consequently, there is no withdrawal of any customary concession or privilege to fall under Item 8 of Schedule IV. Considering the rival contentions, the Tribunal formulated the following questions: (i) Whether the action of the respondent/Management in paying ex gratia for the accounting year 2001-02 only at 6% is justified? (ii) To what relief the members of the petitioner Unions are entitled? 4. The Tribunal rejected the plea of the petitioners and confirmed the payment of ex gratia at 6%. The Tribunal pointed out that there are no material to show that the receipt of ex gratia at 6% was under protest; there was no material to show that the minimum ex gratia at 8.33% paid in the earlier years was made as custom, usage or practice or a condition of service that it could not be altered unilaterally. 5. The Tribunal further pointed out that the respondent Management had established through documents, the accumulated loss https://hcservices.ecourts.gov.in/hcservices/ for the past ten years and the payment of ex-gratia was not a part of the service conditions or a customary practice to become a condition of service. Although the respondent had suffered huge loss, yet, as a goodwill, ex gratia at 6% was offered by the Management, which was accepted by the employees. Thus the Tribunal came to the conclusion that though the payment of ex gratia in addition to the bonus payable under the Payment of Bonus Act was in practice for over a decade as a customary concession, yet, it was not established that there was a minimum percentage payable as part of the service conditions. Thus the Tribunal rejected the plea of the petitioner. Hence, the present writ petition at the instance of the Management. 6. Learned counsel for the writ petitioners placed reliance on Section 9A of the Industrial Disputes Act as well as the Clause 8 of Schedule IV, only to contend that ex gratia payment being a service condition, the reduction to 6% is in violation of the service conditions; that in the absence of any notice, as contemplated under Section 9A of the Act, the petitioners are entitled to the relief. Learned counsel further pointed out that even going by the documents showing the loss of the company, there was no reason for the Management to pay 6% ex gratia with a reduced loss at Rs.1198.50 lakhs in the year 2001-2002. 7. Learned counsel appearing for the petitioners pointed out that the loss in the year 1998-99 was Rs.1273.32. When the loss stood at Rs.1273.32 lakhs in the year 1998-99, the Management paid ex gratia payment at 17%. Considering the reduced ex gratia payment at 6% with a reduced loss, the Management has no reason to reject the claim of the employees. Referring to the receipt of ex gratia payment at 6% by the petitioner without protest, learned counsel appearing for the petitioner submitted that even going by the documents as stated above, the contention of the Management has to be rejected. In the background of the said facts, learned counsel for the writ petitioners placed reliance on the decision reported in (1972) 2 SCC 383 (Tata Iron & Steel Co. Ltd. Vs. Workmen) only to point out that when there had been a change in the policy relating to service conditions, notice under Section 9A of the Industrial Disputes Act is mandatory for compliance; consequently, the award has to be set aside. 8. Per contra, learned counsel appearing for the respondent- management pointed out that due to the financial constraints of the company on account of the huge loss suffered and the poor performance on account of the market conditions, the Management, with great difficulty, decided to grant the relief at 6% towards ex gratia payment. Given the admitted fact that ex gratia payment is solely based on the discretion of the Management and given the poor financial condition of the company, a fact which is well within the knowledge of the petitioners, it is not open to the petitioners to contend that there had been a change in the service conditions to warrant compliance of Section 9A of the Industrial Disputes Act. In any event, going by the decision of the Apex Court reported in https://hcservices.ecourts.gov.in/hcservices/ (2007) 2 LLJ 239 (Ghaziabad Zila Sahkari BankLtd. Vs. Additional Labour Commissioner), payment of ex-gratia is not a part of the service conditions to insist compliance of Section 9A of the Industrial Disputes Act. In the circumstances, rightly the Tribunal rejected the plea of the writ petitioners. 9. Heard Mr.S.Vaidyanathan, learned counsel appearing for the writ petitioners and Mr.T.Poornam, learned counsel for the first respondent-Management. 10. A reading of the decision of the Apex Court reported in (2007) 2 LLJ 239 (Ghaziabad Zila Sahkari BankLtd. Vs. Additional Labour Commissioner), particularly paragraph 69, shows that payment of ex-gratia could not be regarded as the one in fulfilment of the terms of the contract of employment within the meaning of the definition under Section 2(22) of the Industrial Disputes Act, 1947. The Apex Court further pointed out that the payment made as ex-gratia payment would not constitute any precedent for future years. Referring to a similar objection as has been taken by the petitioners in this case, the Supreme Court pointed out that ex-gratia payment could not be treated as a service condition on the basis of the contract of employment. Since the payment is more of a policy that the company takes and not as part of the service conditions, the question of demanding ex-gratia payment on par with the previous years, hence, does not arise. Going by the above-said decision, I do not find any merit in the contention now placed by the learned counsel as regards the applicability of Section 9A of the Industrial Disputes Act that payment of ex-gratia is in the nature of service condition which cannot be interfered with without following the procedure under Section 9A of the Industrial Disputes Act. On the admitted fact that it is a matter of discretion by the employer and that the payment does not have the character of a customary privilege, I do not find any justification to accept the plea of the petitioners that payment of ex gratia is part of service conditions. No materials are placed in support of the said contention to accept the plea of the petitioner that Section 9A of the Act was violated. 11. A perusal of the statement regarding payment from 1996-97 to 2001-02 shows that with a loss of Rs.1273.32 lakhs for the year 1998- 99, the Management released 17% ex gratia; for the loss of Rs.1205.98 lakhs during the year 1999-2000, it released 15% ex gratia and for the year 2000-2001, with a loss at Rs.1368.42 lakhs, ex gratia at 8.33% was released. However, with a reduced loss to the extent of Rs.1198.50 lakhs relatable to the year 2001-02, the management had declared only 6% ex gratia. It has to be pointed out herein that solely on the basis of the details of loss as shown herein in the statement, one cannot immediately jump to the conclusion that the reduced loss statement is an indication of good business performance, that the first respondent had to pay either at the same extent of what was paid earlier or near about the same. Given the fact that the calculation of loss in a concern is a matter of accounting principles and there being no material to justify or prove that the reduction in the loss is on account of the good commercial activity, https://hcservices.ecourts.gov.in/hcservices/ I do not find any justification to accept the plea of the petitioners herein that the reduced loss should result in better ex gratia payment or at least to the extent of what was paid in the earlier year. As already noted, the decision of the Apex Court in this case squarely covers the issue. Hence, I have no hesitation in upholding the order of the Tribunal . 12. Leaving aside the details as to the loss, when the Management had thought it fit to make ex gratia payment at 6% on the strength of its financial position and not related to the service conditions, I do not find the petitioners could not draw any support from the decision of the Apex Court reported in (1972) 2 SCC 383 (Tata Iron & Steel Co. Ltd. Vs. Workmen). The issue before the Apex Court was as regards the change of the weekly rest day from Sunday to Wednesday and the change in the hours of working. In paragraphs 14 and 16 of the said decision, the Apex Court pointed out that a change in the weekly days of rest without complying with Section 9A of the Act read with Schedule IV, is a violation of service conditions, for which notice was necessary. The withdrawal of customary concession or privilege or change in usage covers the change of weekly holidays, for which a notice was necessary. As far as the present case is concerned,there is no material to show that payment of ex gratia was a customary usage or privilege or service condition to fall under Entry 8 of Schedule IV, that a notice is required under Section 9A of the Industrial Disputes Act. In the circumstances, I have no hesitation in confirming the award of the Tribunal and thereby dismissing the writ petition. No costs. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar sra To The Presiding Officer Central Government Industrial Tribunal Shastri Bhavan, Haddows Road, Chennai. 1 cc To Mr.T.Poornam, Advocate, SR.66541 1 cc To Mr.S.Vaidyanathan, Advocate, SR.66464 W.P.No.2178 of 2006 SR (CO) RH (19.10.10) https://hcservices.ecourts.gov.in/hcservices/