C.W.P. No.4549 of 1993 -1- IN THE HIGH COURT FOR THE STATES OF PUNJAB AND HARYANA AT CHANDIGARH C.W.P. No.4549 of 1993 Date of Decision: 18.08.2009 The Punjab Agro Industries Corporation Limited .....Petitioner Versus The Presiding Officer, Labour Court, Union Territory, Chandigarh and others ....Respondents Present: Mr. D.S. Patwalia, Advocate for the petitioner. Mr. Rajive Atma Ram, Senior Advocate with Ms. Deepika, Advocate, Mr. Sarbjit Singh, Senior Advocate with Ms. Deepinder Kaur, Advocate and Mr. Vikas Singh, Advocate. Mr. K.L. Arora, Advocate for respondent Nos.2, 3, 4, 6, 8, 15, 17, to 21, 23, 24 & 31. CORAM:HON'BLE MR. JUSTICE K. KANNAN 1. Whether Reporters of local papers may be allowed to see the judgment ? Yes 2. To be referred to the Reporters or not ? Yes 3. Whether the judgment should be reported in the Digest? Yes -.- K. KANNAN J. I. Scope of lis 1. The writ petition is filed at the instance of the Punjab Agro Industries Corporation Limited, a State Government Undertaking, having been incorporated under the Companies Act. It challenges the award passed by the Labour Court, U.T., Chandigarh acceding to the reference that was a sequel to a demand notice on behalf of 35 Fertilizer Clerks-cum-Clerk Typists complaining against the order of C.W.P. No.4549 of 1993 -2- reversion without notice and fixing them on lower scales of pay, when according to them, the appropriate grade to which they were entitled to be fitted was Rs.1800-3200/- w.e.f. 01.03.1987. The main opposition to the award of the Labour Court is the alleged inherent lack of jurisdiction for a Court to accord sanction for restructuring of cadre and fixing a scale of pay, which was exclusively in the domain of the employer and the direction in the manner given by the award was contrary to law. The facts giving rise to dispute could be seen as under. II. Contentions on behalf of the Management (a) As regards seeming conflict between Standing Orders and Memorandum & Articles of Association 2. The petitioner-company, which was incorporated under the Companies Act is governed by Articles of Association that lays down in Clause 119 that the business of company shall be managed by the Directors and exercise of powers and acts as authorized to exercise by its Memorandum and Article of Associations, with specific powers given to the Board of Directors under Clause 120 which empowered the Board to appoint Officers/Clerks/Servants of the company, as they may think fit from time to time and to determine the duties and powers and also fix the salary and emoluments. The conditions of service were also governed by the Standing Orders and Clause 34 of the Standing Orders empowered the Managing Director to be the Appointing and Punishing Authority and Chairman of the Corporation as the Appellate Authority. The contention of the counsel for petitioner, Sh.D.S.Patwalia, was that they required a combined and harmonious reading of the Standing Orders with Memorandum and C.W.P. No.4549 of 1993 -3- Articles of Association and a seeming conflict that would arise by a reading is that the Standing Orders provided that the Managing Director could be the Appointing Authority but the Articles of Association provided that Board of Directors shall have the power to appoint officers and clerks and therefore, according to the petitioner it should be read in such a way that it must be understood that it is the Board of Directors, who was competent to sanction and create various posts/cadres in different pay scales and thereafter, the Managing Director shall exercise the power by making suitable appointments. (b) The organisational hierarchy 3. The hierarchy of various employees in the Corporation to the extent relevant for the case was that at the lowest level, it was Clerk/Fertilizers Clerk, the next higher post was Senior Clerk and a still higher category was Assistant and a promotion post to Assistant was Deputy Superintendent and above Deputy Superintendent was Manager. In a meeting held on 06.03.1984, the Board of Directors approved a proposal for restructuring of the cadre from the post of Assistant upwards. In pursuance of the decision and resolution passed thereon, new cadres were created being Executive Grade II and Executive Grade I from amongst the Assistants. The cadre Executive Grade II carried a pay scale of Rs.700-1200/- and Executive Grade-I carried a pay scale of Rs.800-1400/-. The office order dated 01.06.1984, issued pursuant thereto, provided that 50% of the Assistants of the Corporation were re-designated as Executive Grade I and other 50% as Executive Grade II, in the scales of pay referred to above, as per their respective seniority. Prior to the re-organization in C.W.P. No.4549 of 1993 -4- the year 1984, all the assistants were in the pay scales of Rs.600- 1120/-. At the pre-revised scale, the Assistants' scales still carried a higher pay other than that of Clerks/Fertilizer Clerks or Senior Clerks/Fertilizer Clerks, who were in the pay scale of Rs.400-600/- and Rs.510-800/- respectively. It was, therefore, the contention of the petitioner that the re-organization took effect only from Assistants upwards and no decision had been taken for providing for any promotion for Clerks/Fertilizer Clerks/Senior Clerks. (c) The Managing Director's initiative for clerks/Senior Clerks – the starting point of dispute 4. It is an admitted case that the Clerks/Senior Clerks/Fertilizer Clerks nurtured a grievance that the restructuring and provision for higher scales of pay had been granted only from Assistants upwards and they started making representations seeking higher scales of pay. This evoked a positive response from the Managing Director of the Corporation and according to the petitioner, the proposal had been approved that the senior-most 43 Clerks-cum Typists/Senior Clerks- cum-Typists and senior-most 28 Fertilizer Clerks, who were at that time drawing a pay in the scale of pay of Rs.510-800, be promoted as Executive Grade III and Sales Representatives respectively and orders had been made appointing the various private respondents as such in the pay scale of Rs.570-1080/- w.e.f. 01.03.1987. This was the starting point for the dispute, for in the perception of the Board of Directors, the Managing Director had exercised his powers in excess of authority by literally creating a new cadre like Executive Grade III for Clerks and Senior Clerks which had never been in contemplation by the Board. In this process about 74 persons were purported to have C.W.P. No.4549 of 1993 -5- been promoted but subsequently 15 had been reverted during the period of the probation and consequently 59 Clerks/Senior Clerks- cum-Fertilizer Clerks had been promoted to the posts of Sales Representatives/ Executives Gr III. (d) The Board's reversal of MD's action – the subject of challenge 5. The Board of Directors sought to set right the decision arising out of the act of Managing Director, for what it perceived to be unauthorised action, by constituting a Sub-Committee to consider the implications of promotions, advance increments and other facilities and the financial burden that the increased scales cast on the management. In its meeting held on 23.05.1989, the staff structure of the Corporation had been reappraised and it found that the promotion to the post of Executive Grade-III and Sales Representatives had been made without creating any posts in the higher grade and even the new grades had been created without approval from the Board of Directors. The Sub-Committee was of the view that these promotions were unjustified, for there was no change in their job content and the Senior Clerks/Clerks were continuing the same work, which they were doing before their promotions. The recommendations of the Sub-Committee had been placed before the Board of Directors in its 109th meeting held on 29.06.1989. The Board decided not to approve the continuation of the posts of Executive Grade III and Sales Representatives and decided to abolish the posts so created. However, the Board decided that in order to avoid hardship to employees, the personal pay of the employees in the revised grades from the date of C.W.P. No.4549 of 1993 -6- the promotions, would be protected. It was decided then that the revised pay would be granted to those employees on the basis of their original pay-scales as it stood before 01.03.1987. It was this order of reversion and the loss of future monetary benefit that gave rise to the demand and a reference to the Labour Court. IV. The workmen's point of view 6. The contention of the workmen had been, one, that the power exercised by the Managing Director was in pursuance of the delegated powers to the Chairman/Managing Director which had been given by the Board of Directors in the meeting held on 23.09.1983 where the Managing Director had been given the power of “creating and upgradation of posts upto the pay scale of Rs.825-1580/- on non- technical side and scale of Rs.825-1700/- on technical side.” The posts of Clerks/Senior Clerks were admittedly in a scale lower than Rs.825-1580 and therefore, not merely the power of appointment and cancellation but even the creation and upgrdation of posts upto the pay scale of Rs.825-1580/- had been fully granted to the Managing Director and therefore, the complaint regarding the alleged want of power of the Managing Director as contended by the management was not tenable. Secondly, the contention on behalf of the workmen was that what was done by the Managing Director was not creation of new cadre but it was merely an upgradation of the existing cadre by providing for a higher scale, which was well within the powers of the Managing Director. Such a power had been exercised even earlier and that had never been objected by the management. The instances were when a Manager Harjit Singh was promoted as Senior Manager by the C.W.P. No.4549 of 1993 -7- Managing Director without any approval from the Board; Sh. T.P.S. Kochhar, Sh. Sandeep Khanna, Sh. J.P. Jain, Sh. Dina Nath had all been promoted by the Managing Director without any sanction from the Board. It was placed in evidence as a matter of fact through the management witness before the Labour Court that the Managing Director was able to create and sanction posts upto the scale of Rs.825-1050/-. Thirdly, Sh. Rajive Atma Ram, learned Senior Counsel appearing for the respondents would contend that what was pleaded before this court in the writ petition by the petitioner, was altogether a new case. The whole thrust of arguments before the Labour Court was the power of the Board to abolish posts and revert the workmen to lower scales of pay. To the contention of the workmen that what had been done by the Managing Director was merely a case of re-designation and not a creation of new cadre itself, even the reply on behalf of the management before the Labour Court was that there had been a change of designation and that there had really no promotions. Even the Board of Directors knew at all times that the action of the Managing Director did not involve any promotion but merely involved a re-designation with higher scales of pay and that was why in the meeting of the Board of Director held on 29.06.1989, what was taken up for consideration was to avoid any hardship to employees as well as continuing the financial burden to the Corporation, the Board itself felt that it would be just and equitable if the effect of revision of pay-scales in terms of Punjab Third Commission's Report was given on the basis of pay-scales of different grades existing in the Corporation as on 01.01.1986 and C.W.P. No.4549 of 1993 -8- promotions, creation of new scales and upgradation of posts were not taken in the account while revising the pay scales. In other words, revision in the pay scales of various grades of employees were to be made corresponding to the grades they were enjoying on 01.01.986 without taking into account the promotion, creation of new scales and upgradation of posts ordered by the Managing Director on the basis of length of service. Fourthly, 43 workmen had been working as Sales Representatives and Executives Gr III, on the basis of the respective orders that provided for probation of six months and on completion of the period of six months with no orders reverting them, they were entitled to be confirmed in the respective posts at the scales of pay which they were drawing. Any decision by the management reverting them to a lower post or a lower scale could not have been done without any notice to the workmen. V. Labour Court's dispensation 7. If a unilateral reduction in the pay scale was not possible despite their assurance that their personal scales would be protected, what was accorded by the Labour Court's order was merely a re- fixation of the scales as per the recommendations of the Pay Commission. The Labour Court had itself not fixed any particular scale but it took notice of the fact that pay scales corresponding to Rs.570-1080 w.e.f. 01.01.986 had been first revised by the 3rd Pay Commission to Rs.1500-2640/- and after the removal of anomaly it was Rs.1800-3200/- w.e.f. 01.03.1987. The direction by the Labour Court was in accordance with the recommendations of the Pay Commission. C.W.P. No.4549 of 1993 -9- VI. Consideration – Power of Managing Director 8. The first issue that falls for consideration is the power of the Managing Director to create or upgrade posts and to increase in the pay scales in the manner it was done. Apart from the delegation of powers of the Board to the Managing Director as revealed in the extract of the agenda Item No.109.10 of the Board's Meeting held on 23.09.1983, even the Standing Orders admittedly empowered the Managing Director to create new posts or increase new scales of pay. That the Standing Orders have a statutory character, is too well- established now through express provisions in the Standing Orders Act as well as by the decisions of the Hon'ble Supreme Court in Western India Match Co. Ltd. Vs. Workmen AIR 1973 S.C. 2650; U.P. State Electricity Board and another Vs. Hari Shanker Jain & another AIR 1979 S.C. 65 and Workmen of Dewan Tea Estate and others Vs. Their Management AIR 1964 S.C. 1458. The pre-eminent position of the effect of standing orders on the terms of service was laid down by a Constitution Bench of Hon'ble Supreme Court in The United Provinces Electric Supply Co. Ltd. Vs. T.N. Chatterjee and others AIR 1972 SC 1201 when the Hon'ble Supreme Court observed that the scheme and object of the Industrial Employment (Standing Orders) Act showed that it was not intended by the legislature that different sets of conditions should apply to employees depending on whether a workman was employed before the standing orders were certified or after. In Rajasthan State Road Transport Corporation and another Vs. Krishna Kant etc. AIR 1995 SC 1715, the Hon'ble Supreme Court ruled that Standing Orders are undoubtedly binding C.W.P. No.4549 of 1993 -10- upon the employer and employees and constitute the conditions of service of employees but it is difficult to say on principle that they have statutory force. If the intention was otherwise it would lead to industrial unrest and not industrial peace, the latter being the principal object of the legislation.It is not possible to see any conflict between the Articles of Association and the Standing Orders, for the Articles that granted the power to the Board to create new cadres or upgrade the scales of pay had subsequently been delegated to the Managing Director and therefore, the resolution was made to conform it with the Standing Orders and the power exercised by the Managing Director issuing orders in May, 1987 (samples of orders being available through Annexures P-4 and P-5) cannot be questioned. VII. Tenability of the Board's action reverting workmen 9. If the power had been exercised properly by the Managing Director, the question would only be whether the Board had a power to abolish the posts and revert the workmen holding the respective posts and put them on lower scales, even while proclaiming that their personal pay would be protected. Learned counsel appearing for the workmen had two submissions to make. One, that the power of the Board to abolish the posts and revert the workmen themselves were not in dispute. It is the manner of exercise of such power that was called in question before the Court. Second, there had been not even a case of creation of a higher post and promoting the Clerks/Senior Clerks to higher posts. It was merely a case of upgradation of posts with higher scale of pay, keeping in view the general increase of the scales that had been done consequent on restructuring of cadre from C.W.P. No.4549 of 1993 -11- the posts of Assistants upwards. In this case, according to learned counsel appearing for the workmen, the Board had decided to revert all the workmen without affording any notice to them and put them on lower scales, even while stating that their pays were protected. According to learned counsel that when the scales of pay of Rs.400- 600/- for Clerks and Rs.510-800/- for the Senior Clerks were revised, the basis was that Clerks-cum-Typists, who had rendered service for more than 10 years and who were in the pay scale of Rs.510-800/- numbering 35 and Junior Clerks-cum-Typists (CCTs), who were in the pay scale of Rs.400-600/- numbering about 40 had been ignored totally and it was their experience that only 8 numbers in CCTs had been promoted as Assistants (Executives) since the inception of the Corporation and the last promotion had been made on 09.04.1981 and thereafter no CCT had been promoted on seniority basis. It was, therefore, felt necessary that 43 Nos. of persons in the order of seniority from Senior CCTs and Junior CCTs were to be promoted as Executive Grade III in the scale of Rs.570-1080/-. They were to perform their existing duties without disrupting any work and that the benefit would be admissible to the employees w.e.f. 01.03.1987. When orders were issued, they were put on probation for a period of 6 months. All these workmen had completed 18 months of service in the respective posts after the initial upgradation of the posts as ordered by the Managing Director and they had also been confirmed in the posts. Abolition of these posts and reversion without notice, according to the learned counsel appearing for the workmen, was impermissible.Learned counsel appearing for the workmen refers to a C.W.P. No.4549 of 1993 -12- decision in Virendra Chawla Vs. The Chandigarh Administration and another 1984(1) SLR 452 when a Division Bench of this Hon'ble Court held that a reversion to rectify the mistake committed in promoting the official cannot be undertaken without following the principles of natural justice, even in case where Article 311 of the Consitution was not applicable. A later Bench of this Hon'ble Court held in Balwant Singh Kataria Vs. State of Haryana and others 1997 (3) AIJ 301 that compliance of principles of natural justice cannot be dispensed with under any circumstances. Benefits once conferred upon a civil servant even though under an erroneous assumption cannot be withdrawn without affording opportunity of hearing. The Division Bench was setting aside the order of reversion made in the Department of Social Welfare without notice. 10. Learned counsel for the workmen further argued with vehemence that the justification of the decision of the management to revert them must be found expressed in the impugned proceedings themselves and management will be barred from supplementing the reasons and ambiguity for deficiencies in the impugned order by providing such reasons in the writ petition. He refers to a decision of the Hon'ble Supreme Court in Mohinder Singh Gill and another Vs. The Chief Election Commissioner, New Delhi and others AIR 1978 SC 851 where a Constitution Bench of the Hon'ble Supreme Court held "when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise an order bad in the beginning may, by the time C.W.P. No.4549 of 1993 -13- it comes to court on account of a challenge, get validated by additional grounds later brought out." The attempt of learned counsel for the workmen was, therefore, to show that the orders passed by the management reverting them were not even communicated to the workmen and it was not possible to find justifications by the reasons provided through the affidavit. 11. Learned counsel appearing for the management, however, points out that every case of reduction in rank shall not require principles of natural justice to be followed. Referring to a decision of Ranjit Singh, I.P.S. Vs. The President of India and others 1971 SLR 561, learned counsel appearing for the management points out that it was nowhere laid down that no matter where there was infringement of an enforceable legal right or not, whenever there was reduction in rank or loss of seniority, emoluments or the like resulting even from the exercise of the lawful authority, the affected Government servant always got under the rules of natural justice, a right to be afforded an opportunity to be heard before an order relating to any such matters was passed. In Bhupinder Singh Sandhu Vs. State of Punjab and others 1991 (2) SCT 246 , a learned Single Judge of this Hon'ble High Court had held that if at the time of promotion correct facts having not been brought to the notice of the authority, the authority was within its powers to correct the mistake and reconsider the case of promotion. While reverting a person wrongly promoted no notice or opportunity of hearing was required. A reversion which arises on account of rectification of mistake does not attract Article 311 (2) and principles of natural justice are not required to be followed. It must be however, C.W.P. No.4549 of 1993 -14- seen that these decisions have no applicability because, it is difficult to hold that there was any mistake underwhich the Managing Director acted while passing the orders designating certain classes of workmen in the posts of sales representatives or Executive Gr III. He was acting within the frontiers of delegated powers of the Board. 12. Learned counsel appearing for the management would have an alternative argument to submit that even if the powers of the Managing Director were to be conceded and that reversion to a lower post was impermissible by virtue of the fact that the workmen had been confirmed in the re-designated posts or that the orders had been issued without notice, learned counsel would still submit that the scales of pay for these Clerks, who had been re-designated as Sales Representatives could not be on par with the Assistants, which was a promotion post for them. If the contention on behalf of the workmen was that there was really no creation of a new cadre or that they had not obtained any promotions and what according to workmen were merely re-designation and provision for higher scales of pay, even then their claims to salary on parity with the scales admissible for Assistants was impermissible. According to learned counsel for the management, the appropriate pay to them would be only in the scale of Rs.1500-2640/- and cannot be Rs.1800-3200/-. Learned counsel appearing for the management. Sh. Patwalia would further submit that if it was merely a case of re-designation and higher scales of pay, there was no need for using the expression promotion in orders issued by the Managing Director and there was again no need for any probation for the same post. It is admitted on all fours that there had C.W.P. No.4549 of 1993 -15- been no promotion and what the Clerks and Senior Clerks were bargaining for was that there was really no avenue for promotion and they had not obtained any benefit monetarily while the Assistants had obtained through restructuring in their cadre to the Executives Grade-I and Grade-II higher scales of pay.