IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.451 OF 2007 National Organic Chemical ) Industries Limited, a Company ) incorporated under the Companies ) Act, 1956, having its registered ) office at Mafatlal House ) H.T. Parekh Marg, Backbay ) Reclamation, Churchgate ) Mumbai 4000020 ) .. Petitioner. Vs 1. State of Maharashtra ) 2. Mr Bhaskar Mendon, ) 3. Mr. Sure Rane, ) 4. Mr. Subhash Prabhu ) 5.Mr. Jagdish Shetty ) 6.Mr. Shekhar Kundar ) 7. Mr. Shantaram Bhinge ) 8.Mr. Balkrishna Bhinde ) c/o Mahesh B Pabane ) 501, Sir Vithaldas Chambers ) 16, Bombay Samachar Marg ) Fort, Mumbai 400023 ) 9.M/s Sadanand Caterers ) Catering Contractors having ) its address at B-10-17, 1st floor ) Room No.4, C.B.D.Belapur ) Konkan Bhavan, ) New Bombay 400708 ) 10.Shri K. R. Itolikar ) Presiding Officer ) First Labour Court ) PWD Building Bandra(E) ) Mumbai 400051 )……. Respondents 1 Mr K.R. Pai with Mr.J.P.Cama i/b M/s Sanjay Udeshi & Co for the petitioner. Mr. P.M. Mokashi, AGP for respondent No.1. M. M.B.Pahane for respondent Nos.2 to 8. CORAM: SWATANTER KUMAR, C.J., & S.R.SATHE, J. Judgment reserved on 3rd April 2007 Judgment delivered on 19th April 2007. JUDGMENT(PER SWATANTER KUMAR, C.J.): Heard the learned counsel for the parties. 1. The Government of Maharashtra in exercise of its powers vested by virtue of section 39 of the Industrial Disputes Act, 1947 (hereinafter referred to as “the Act”) notified that powers exercisable by it under sub-section (1) of section 10 and sub-section (5) of section 12 of the Act shall, in relation to the Industrial Disputes Act, relating to disputes specified in the schedule, be exercised also by the Deputy Commissioner of Labour (Conciliation), Mumbai District Office, Mumbai. In exercise of his powers the said officer, vide his order of reference dated 20th July 2006 referred the alleged dispute between the petitioner and its workmen for determination to the Labour Court, Mumbai. The relevant part of the order of reference reads as under: “Now, therefore, in exercise of the powers conferred by clauses (d) of sub-section (1) of section 10 and with section 12(5) of the 2 Industrial Disputes Act, 1947 as delegated in the manner aforesaid, the Deputy Commissioner of Labour ( Conciliation), Mumbai District Office, Mumbai is pleased to make a reference of the said dispute for adjudication of the Labour 1st Court, at Mumbai consisting of Shri K.R. Itolikar, Presiding Officer, constituted under Government Notification Industries, Energy and Labour Department No IDA-2004/5/3871/LAB-3 dated 28.5.2004. S C H E D U L E Shri Bhaskar Mendon and 6 others as per Schedule should be reinstated with full back wages and other consequential benefits as are applicable to permanent staff of the company and continuity of service w.e.f. 1.11.2001. sd/- (A.P.Joshi) Deputy Commissioner of Labour (Conc) Mumbai District, Mumbai.” The legality and correctness of the above order is questioned by the petitioner by means of the present petition under Article 226 of the Constitution of India, primarily on the following grounds, and it prays for quashing of reference at the very threshold: (a) The respondent authority exceeded its jurisdiction in referring the dispute raised by respondent Nos.2 to 8 for adjudication under section 10(1) of the Act without primarily determining whether there existed relationship of employer-employee. The respondents were, if at all employees of the canteen contractor, consequences of their 3 employment in relation to conditions of their services would not be fastened upon the petitioner. (b) It was a clear case of absence of an industrial dispute as contemplated under section 2(k) of the Act. The employees of the Petrochemical and Polymer Division including the employees with the head office were ceased to be the employees by their acceptance of voluntary retirement on account of closure notice dated 3rd June 2002. Thus the appropriate Government had no jurisdiction to make any reference; (c) There was no prima facie material to establish the privity of contract between the parties, the workmen had no locus standi to raise the industrial dispute and the reference, in any case, is contrary to the settled principles of law and is liable to be quashed at the very threshold. 2. In order to examine the merit or otherwise of these contentions, now we may refer to the facts giving rise to the present writ petition. The petitioner is a limited company registered under the Companies Act, 1956 4 and as per its case, was involved in manufacturing of petrochemicals and polymer. On 3rd June 2002, a notice was issued by the company seeking permission under section 25(O) of the Act for closure of its petrochemicals and polymer undertaking permanently and also sought permission to terminate the services of all its workmen employed in that division totaling about 580. The Commissioner of Labour, Mumbai, vide his order dated 20th March 2003 granted permission to close down the undertaking. However, later on, the order was referred for review to the Industrial Tribunal, Thane. This division of the company came to be demerged and hived off from the petitioner under a scheme of arrangement as per the order of this court passed in Company Petition No. 104 of 2005 along with Company Application No.446 of 2005 on 8th June 2005. The contract for catering service, which was awarded to M/s Sadanand Caterers was terminated by them on 2nd March 1998. Respondent Nos. 2 to 8 workmen were the employees of M/s Sadanand Caterers. The workmen filed a complaint before the Industrial Court, Mumbai against the petitioner company for their absorption, while another complaint was filed being Complaint (ULP) No. 622 of 1998 before the Industrial Court, Mumbai, inter alia challenging their termination of services by the contractor. Vide order dated 6th September 1999, the complaint was decided in favour of the workmen. This order was 5 challenged by the petitioner company by filing writ petition being Writ Petition No.2648 of 1999 before this court, which was allowed vide order dated 10th September 2001. Aggrieved by that order the workmen had filed an appeal bearing Letters Patent Appeal No.1202 of 2001, which was dismissed, whereafter on 30th December 2004, the workmen raised a demand against the petitioner company demanding their absorption. This demand was opposed by the company vide their letter dated 19th April 2005. The matter was taken upto the Deputy Commissioner of Labour, Mumbai, where the workmen filed justification statement. The company filed reply. The workmen also issued notice to the contractor M/s Sadanand Caterers for reinstatement of the workmen. The Commissioner of Labour and Conciliation Officer vide his order dated 14th December 2005 submitted a failure report resulting in passing of an order of reference dated 20th July 2006 by the appropriate Government. The proceedings were taken by the Presiding Officer, 1st Labour Court and the reference was numbered as IDA No.382 of 2006 where the respondent-workmen have filed their statement of claim. The petitioner company filed its written statement and the matter is stated to be listed for recording evidence. At this stage the company filed the present writ petition on 27th February 2007. 6 3. In terms of the reply affidavit filed on behalf of the respondent- workmen, it is stated that the present writ petition is not maintainable. The order of reference was passed on 20th July 2006 and the pleadings have been completed. Now the matter is fixed for recording of evidence and the present petition is an abuse of process of the court. The averments with regard to the filing of the complaints and the orders of the courts are not in dispute. In the order allowing the complaints partly the authority had directed the petitioner company not to pass transfer orders/termination orders and respondents were directed to return the retrenchment compensation. They were also directed to designate post and pay scale in consultation with the recognised union in regard to the National Organic Chemicals Limited within the stipulated time. 4. While relying upon the judgment of the Supreme Court in the case of Cipla Limited vs Maharashtra Kamgar General Union and ors, reported in 2001 (1) CLR 754, it is argued that they are the employees of the petitioner company and any contract between the petitioner company and the contractor is a sham and camouflage transaction and also offends the provisions of the Contract Labour (Regulation and Abolition) Act. According to the workmen, they were working with the petitioner company right from 7 the year 1992. The contractor came on the scene only in the year 1997, the contractor used to supply snacks, which are prepared outside whereas all the work within the premises of the canteen of the petitioner company was being done by the respondent-workmen. They claim to be the workmen of the petitioner company and have direct relationship in fact and in law. After merger into the NOCIL, the factory outside Mumbai and the administrative office at Nariman Point were being maintained where the respondent- workmen were employed. On February 18, 1996 as a result of fraudulent and illegal act, the contractor was brought into the picture and respondent- workmen were directed to leave the premises. According to the workmen the reference is valid. There is apparent findings recorded, prima facie establishing relationship of employer-employee and existence of industrial dispute. In these circumstances they prayed for dismissal of the petition. 5. Having stated the factual metrixs of the case we will prefer to examine the law in relation to the ambit and scope of section 10(1) of the Act and the limitations of judicial review in relation to an order of reference referring an industrial dispute to the Labour Court. In the case of Shri Subhash Chand vs Government of NCT and Anr, reported in 117(2005) DLT 527, a Division Bench of the Delhi High Court had an occasion to discuss, in some 8 elaboration, the law on the subject. The court has held as under: “Reference to the development of law in this regard is necessitated for the reason that somewhat divergent views have been expressed by the Courts while explaining the scope and limitations of jurisdiction vested in the appropriate Government while exercising its administrative power of making a reference under Section 10(1)(c) of the Act. 6. Reference to the decision of the Constitutional Bench of the Supreme Court in the case of State of Madras v. C.P. Sarathy, 1953 SCR 334 can be usefully made at the very outset. It was observed: "But, it must be remembered that in making a reference under section 10(1) the Government is doing an administrative act and the fact that it has to form an opinion as to the factual existence of an industrial dispute as a preliminary step to the discharge of its function does not make it anytheless administrative in character. The Court cannot, therefore, canvass the order of reference closely to see if there was any material before the Government to support its conclusion, as if it was a judicial or quasi-judicial determination. 7. Explaining the ratio of the decision in Sarathy's case (supra), in Western India Match Co. Ltd. v. Western India Match Co. Workers Union, MANU/SC/0375/1970 it was observed as under : "In the State of Madras v. C.P. Sarathy, this Court held on construction of Section 10(1) of the Central Act that the function of the appropriate Government thereunder is an administrative functions. It was so held presumably because the Government cannot go into the merits of the 9 dispute its function being only to refer such a dispute for adjudication so that the industrial relations between the employer and his employees may not continue to remain disturbed and the dispute may be resolved through a judicial process as speedily as possible." 8. After referring to the earlier decisions on the subject in "Shambhu Nath Goyal v. Bank of Baroda, Jullundur, MANU/SC/0283/1978 it was held that "in making a reference under section 10(1), the appropriate Government is doing an administrative act and the fact that it has to form an opinion as to the factual existence of an industrial dispute as a preliminary step to the discharge of its function does not make it any the less administrative in character." Thus, there is a considerable body of judicial opinion that while exercising power of making a reference under Section 10(1), the appropriate Government performs an administrative act and not a judicial or quasi- judicial act." 9. The scope and scheme of Sections 10 and 12 of the Act were also examined by the Supreme Court in State of Bombay v. K.P. Krishnan and Ors., MANU/SC/0199/1960. It was held therein as under : "Even if the appropriate Government may be acting under section 12(5) by itself and independently of Section 10(1) does not confer power on the appropriate Government to 10 make a reference. While deciding whether a reference should be made under section 12(5) it would be open to the appropriat Government to consider, besides the report of the Conciliation Officers other relevant facts which may come to its knowledge or which may be brought to its notice. Just as discretion conferred on the Government under section 10(1) can be exercised by it in dealing with industrial disputes in regard to non-public utility services even when Government is acting under Section 12(5), so too the provisions of the second proviso to Section 10(1) can be pressed into service by the Government when it deals with an industrial dispute in regard to a public utility service under Section 12(5)." 10. It was further held by the Supreme Court that "whether Section 12(5) is construed as making it obligatory on the Government to make a reference when it is satisfied that there is a case for reference or as only conferring a discretion, if in refusing to make a reference Government is influenced by reasons which are wholly extraneous or irrelevant or which are not germane, then its decision may be open to challenge in a court of law. Though considerations of expediency cannot be excluded when Government considers whether or not it should exercise its power to make a reference it would not be open to the Government to introduce and rely upon wholly irrelevant or extraneous considerations under the guise of expediency." 11. Again in Bombay Union of Journalists and Ors. v. The State of Bombay and Anr., MANU/SC/0135/1963, which has been relied upon by 11 both the parties, the relevant scheme of the Act as disclosed by Section 12 viz.-a-viz. the powers of the appropriate Government under Section 10 was discussed. It was held therein as under : "When the appropriate Government considers the question as to whether a reference should be made under section 12(5), it has to act under section 10(1) of the Act, and Section 10(1) confers discretion on the appropriate Government either to refer the dispute, or not to refer it, for industrial adjudication according as it is of the opinion that it is expedient to do so or not. In other words, in dealing with an industrial dispute in respect of which a failure report has been submitted under Section 12(4), the appropriate Government ultimately exercises its power under section 10(1), subjects to this that Section 12(5) imposes an obligation on it to record reasons for not making the reference, when the dispute has gone through conciliation and a failure report has been made under Section 12(4)." 12 However, it was further held by the Supreme Court which also needs re-production and it is re-produced hereunder : "But it would not be possible to accept the plea that the appropriate Government is precluded from considering even prima facie the merits of the dispute when it decides the question as to whether its power to make a reference should be exercised under section 10(1) read with Section 12(5), or not. If the claim made is patently frivolous, or is clearly belated, the appropriate Government my refuse to make a reference. Likewise, if the impact of the claim on the general relations between the employer and the employees in the region is likely to be adverse, the appropriate Government may take that into account in deciding whether a reference should be 12 made or not. It must, therefore, be held that a prima facie examination of the merits cannot be said to be foreign to the enquiry which the appropriate Government is entitled to make in dealing with a dispute under section 10(1)." 13 A reference to a Supreme Court ruling in The M.P. Irrigation Karamchari Sangh v. State of M.P. and Anr., MANU/SC/0221/1985 is also very much relevant. In an appeal before the Supreme Court it was contended that the High Court had failed to properly delineate the jurisdiction of the Government under Section 10 read with Section 12(5) of the Act. It was contended before the Supreme Court that question raised by the appellant had to be decided by the Tribunal on evidence to be adduced before it and it could not be decided by the Government on a prima facie examination of the facts of the case. This submission was met with the plea that the Government had in appropriate cases at least a limited jurisdiction to consider on a prima facie examination of the merits of the demands, whether they merited a reference or not. 14. After considering the rival contentions of the parties the Hon'ble Supreme Court observed as under : "..................But it would not be possible to accept the plea that the appropriate Government is precluded from considering even prima facie the merits of the dispute when it decides the question as to whether its power to make a reference should be exercised under Section 10 (1) read with Section 12(5) or not. If the claim made is 13 patently frivolous, or is clearly belated, the appropriate Government may refuse to make a reference. Likewise, if the impact of the claim on the general relations between the employer and the employees in the region is likely to be adverse, the appropriate Government may take that into account in deciding whether a reference should be made or not." 15. It was then held by the Supreme Court as under : "We find that the approach made by the High Court has wrong and the reliance on the above passage on the facts of this case, is misplaced and unsupportable. This Court had made it clear in the same Judgment in the sentence preceding the passage quoted above that it was the province of the Industrial Tribunal to decide the disputed questions of fact." ".........Similarly, on disputed questions of fact, the appropriate Government cannot purport to reach final conclusions, for that again would be the province of the Industrial Tribunal..................." 16. It was then finally held by the Supreme Court as under : "While conceding a very limited jurisdiction to the State Government to examine patent frivolousness of the demands, it is to be understood as a rule, that adjudication of demands made by workmen should be left to the Tribunal to decide. Section 10 permits appropriate Government to determine whether dispute "exists or is apprehended" and then refer it for adjudication on merits. The "demarcated functions are (1) reference; (2) adjudication. When a reference is rejected on the specious plea that the Government cannot bear the additional burden, it constitutes adjudication and thereby usurption of the power of quasi- judicial Tribunal by an Administrative authority, namely, the Appropriate Government. There may be exceptional cases in which the State Government may, on a proper examination of the demand come to a conclusion that the 14 demands are either perverse or frivolous and do not merit a reference. Government should be very slow to attempt an examination of the demand with a view to decline reference and Courts will always be vigilant whenever the government attempts to usurp the powers of the Tribunal for adjudication of valid disputes. To allow the Government to do so would be to render Sections 10 and 12(5) of the Industrial Disputes Act nugatory." 17 The observations of the Supreme Court in Ram Avtar Sharma and Ors. v. State of Haryana and Anr., MANU/SC/0228/1985 that making or refusing to make a reference under section 10(1), the Government cannot dwelve into the merits of the dispute also needs attention. The relevant portion of the judgment reads as under : "Now if the Government performs an administrative act while either making or refusing to make a reference under Section 10(1), it cannot delve into the merits of the dispute and take upon itself the determination of lis. "That would certainly be in excess of the power conferred by Section 10. Section 10 requires the appropriate Government to be satisfied that an industrial dispute exits or is apprehended. This may permit the appropriate Government to determine prima facie whether an industrial dispute exits or the claim is frivolous or bogus or put forth for extraneous and irrelevant reasons not for justice or industrial peace and harmony. Every Administrative determination must be based on grounds relevant and germane to the exercise of power. If the administrative determination is based on grounds irrelevant, extraneous or not germane to the exercise of power it is liable to be questioned in exercise of the power of judicial review." 15 18 The judgment of the Supreme Court in Workmen of Syndicate Bank, Madras v. Government of India and Anr., MANU/SC/0214/1984, is also very much relevant for throwing light on the powers of the Government under section 10 of the Act. The relevant portion is re-produced hereunder : "We are of the view that the ground on which the Government of India has refused to refer the dispute relating to the imposition of punishment of stoppage of three increments of Shri Murugavelu to the Industrial Tribunal is not a valid ground. It would not be right for the Government of India to refuse to make the reference on the ground that the charges of misconduct against the worker were proved during a duly constituted departmental enquiry and penalty was imposed on the worker after following the required procedure. If such a ground were permissible it would be the easiest thing for the management to avoid a reference to adjudication and to deprive the worker of the opportunity of having the dispute referred for adjudication even if the order holding the charges of misconduct proved was unreasonable or perverse or was actuated by mala fides or even if the penalty imposed on the worker was totally disproportionate to the offence said to have been proved. The management has simply to show that it has held a proper inquiry after complying with the requisite procedure and that would be enough to defeat the worker' s claim for adjudication. Such a situation cannot be countenanced by law. We must, therefore, set aside the order dated 2.4.1981 passed by the Government of India declining to make a reference of the industrial dispute for adjudication to the industrial Tribunal." 19 Again the observations of the Supreme Court in Telco Convoy Drivers Mazdoor Sangh and Anr. v. State of Bihar and Ors., MANU/SC/0605/1989, which are relevant for the proposition under consideration are re-produced 16 as under : "While exercising power under Section 10(1) the function of the appropriate Government is an administrative function and not a judicial or quasi judicial function, and that in performing this administrative function the Government cannot delve into the merits of the dispute and take upon itself the determination of the lis, which would certainly be in excess of the power conferred on it by Section 10. It is true that in considering the question of making a reference under section 10(1), the Government is entitled to form an opinion as to whether an industrial dispute "exists or is apprehended" is not the same thing as to adjudicate the dispute itself on its merits." 20. Reading the above judgments of the highest Court of the land shows that provisions of Section 10