* THE HON'BLE MR JUSTICE RAMESH RANGANATHAN + WRIT PETITION NO. 9645 OF 1998 % 22.4.2008 # The Management of APSRTC rep. By its Vice Chairman & Managing Director, Hyderabad ….. Petitioner and $ The Workmen of the APSRTC rep. By its Secretary General APSRTC Employees Union, Hyderabad and another …..Respondents ! Counsel for the petitioner: Sri K. Madhava Reddy, Standing Counsel for the respondent – Corporation ^ Counsel for the second respondent: Sri G. Vidyasagar < Gist: >Head Note ? [1] 1962(1) LLJ 634 2 AIR 2000 SC 469 3 1965 II LLJ 433 4 (2002)2 ALD 462 (DB) 5 2006(5) ALT 606 6 AIR 2005 SC 998 7 AIR 1998 SC 1737 8 1981(1) LLJ 431( Karnataka High Court) 9 Judgment of O. Chinnappa Reddy.J in W.P. No. 3174 of 1967 dated 10 07.08.1968 10Order in W.P.M.P. No. 11838 of 1982 and W.P.M.P. No. 14971 of 1984 in W.P. No. 8082 of 1982 dated 25.07.1984 11 AIR 1966 SC 182 12[1963] II LLJ 65 (SC) 13[1974] II LLJ 404 (SC) 142000 (8) Supreme 519 15[1967] I LLJ 423 16[1972] I LLJ 437 17[1981] II LLJ 218; 18[1960] II LLJ (SC) 191951(1) LLJ 621 20[1970] II LLJ 429 (SC) 21AIR 2005 SC 1252 221979 LAB. I. C. 827 (SC) 23[1960] 1 LLJ (Mad) 24[1959] II LLJ 595 (Cal.) 25[1962] 1 LLJ 338 26[1958] I LLJ 571 (Cal.) 27AIR 1959 SC 1191 281962 (2) LLJ 227 (SC) 29(1996) 1 SCC 95 30JT 1997 (9) SC 316 311989(1) MLJ 419 321981 (1) SCC 315 33(1977) 4 SCC 31 34AIR 1986 SC 95 351986 Supp SCC 79 36AIR 1960 SC 879 371998(3) SCC 506 38(1973) 4 SCC 141 39(2005) 6 SCC 725 40(1976) 1 SCC 63 41(1972) 2 SCC 383 42(1999) 6 SCC 275 43 1985(2) SCC 136 THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION No. 9645 OF 1998 ORDER: The Management of A.P.S.R.T.C has invoked the jurisdiction of this Court under Article 226 of the Constitution of India aggrieved by the award of the Industrial Tribunal, Hyderabad, in I.D. No. 19 of 1997 dated 06.02.1998, wherein it was held that employees of the A.P.S.R.T.C. were entitled to be paid the difference between the ex-gratia payable to them in accordance with the amended Payment of Bonus Act and the actual ex-gratia paid to them under the pre-amended Payment of Bonus Act. On a dispute being raised by the 1st respondent – union, the Government of A.P, vide G.O.Rt. No. 662 dated 17.4.1997, referred the following dispute for adjudication by the Industrial Tribunal:- “Whether the APSRTC Employees Union is justified in demanding the Managing of APSRTC for payment of Ex-gratia for the year 1993-94 and to formulate exempted employees pension scheme? If so to what relief the workman are entitled to?” The petitioner-corporation started paying ex-gratia to its employees pursuant to a memorandum of settlement dated 15.6.1966. It kept increasing the wage limit for payment of, the quantum of, and the percentage of minimum ex-gratia as and when the Payment of Bonus Act was amended, and the wage limit as well as the percentage of minimum bonus payable under the said Act was increased. When the statutory minimum bonus, under the Payment of Bonus Act, was raised from 4% to 8.33%, the petitioner increased the ex-gratia by a similar extent from the year 1971-72 onwards. Similarly, when the salary/wages, on the basis of which bonus was paid, was increased from Rs.1600/- to Rs.2500/- per month from the years 1985-86 onwards, the petitioner paid ex-gratia to all its employees drawing monthly wages of upto Rs.2500/-. The Payment of Bonus Act was again amended in the year 1995 with retrospective effect from 1.4.1993. As a result, the wage limit was raised from Rs.2500/- to Rs.3500/- and the wage limit for calculation of bonus was also raised from Rs.1600/- to Rs.2500/-. While ex-gratia was paid to the employees for the years 1993-94 and 1994-95, before amendment of the Payment of Bonus Act, at the request of the Union a settlement was entered into on 12.1.1996 whereby the petitioner agreed to pay ex-gratia for the years 1994-95 and 1995-96 as per the amended Payment of Bonus Act. The petitioner also agreed to pay Rs.2000/- as Transport Minister’s Goodwill Amount, for the years 1994-95 and 1995-96, to each employee whose pay plus dearness allowance exceeded Rs.3500/- per month. Since the petitioner – Corporation did not pay additional ex-gratia for the year 1993-94, the 1st respondent union served a strike notice on 15.3.1997 resulting in the reference being made to the Industrial Tribunal by the Government. The Tribunal framed the following points for consideration: 1 ) Whether 1st respondent union can raise the dispute; 2) Whether there exists industrial dispute. 3) Whether the employees of APSRTC are entitled to enhanced ex-gratia for the year 1993-94 Before the Industrial Tribunal, Exs.W.1 to W.21 were marked as exhibits on behalf of the 1st respondent – union. On behalf of the petitioner, M.Ws.1 and 2 were examined and Exs.M.1 to M.16 were marked as exhibits. On issue No.1, the Tribunal observed that, the 1st respondent union represented between 7000 to 8000 workers throughout the State and as such could raise a dispute though it was a minority union. On issue No.2, while noting that Ex.W.21 settlement dated 21.10.1997 was arrived at between the majority union and the petitioner management, under Section 12(3) of the I.D. Act, the Tribunal observed that there was no settlement on the issue of payment of ex-gratia and that both the management, and the majority union, had merely agreed to abide by the award of the Tribunal. The Tribunal, accordingly, held that there was a dispute in existence from the date of the reference. On issue No.3, the Tribunal noted that the Payment of Bonus Act, 1965 was not applicable to the Corporation and, therefore, the Corporation had been paying bonus in the form of ex-gratia, from the year 1965-66 onwards, pursuant to a settlement entered into with the Unions. The Tribunal noted that the Corporation was sustaining accumulated losses but was making annual profits and had, therefore, paid ex-gratia for the years 1993-94 and 1994-95 as per the provisions of the Payment of Bonus Act. The Tribunal noted that the employees were paid ex-gratia as per the amended provisions of the Payment of Bonus Act for the years 1994-95 and 1995-96 and, therefore, I.D.No.3 of 1996, wherein this question was in issue, was closed on 18.11.1996. The Tribunal traced the history of the claim for additional ex-gratia for the year 1993-94 and noted the evidence of M.W.2 that the net profit and loss could not be decided by taking into account a few items of income and expenditure and that all heads of accounts should be taken into consideration. The Tribunal held that it was an unending procedure for the reason that the demands for taxes etc., of one year would be reviewed in the subsequent year, that the Corporation had been paying ex-gratia to its employees at the same rate as given in the Payment of Bonus Act, that it had been enhancing the bonus, and the upper wage limit, as and when the Payment of Bonus Act was amended, that it had been paying ex-gratia to employees who were not eligible, that they had paid the enhanced rate of bonus to all eligible employees in 1995-96 as per the amendment made to the Payment of Bonus Act in the year 1995 and that this payment had become a service condition by long practice and convention. The Tribunal held that there was no meaning in not paying ex-gratia for the year 1993-94 though the Bonus Act was amended by Parliament with retrospective effect. The Tribunal, accordingly, passed an award directing payment, of the difference in ex-gratia, within three months. Oral arguments were advanced and written submissions were filed before this Court both on behalf of the petitioner-corporation and the respondent Union. It is contended on behalf of the petitioner corporation, by Sri K. Madhava Reddy the Learned Standing Counsel, that the respondent Union, which was the majority Union upto 15.10.1996, had lost its majority in the verification held on 21.09.1996 wherein the APSRTC National Mazdoor Union had secured the majority, that consequently, vide circular dated 15.10.1996, the National Mazdoor Union was acknowledged to be the recognized Union for a period of two years from 15.10.1996, that the Code of Discipline, which regulates conduct of trade unions and the management in respect of industrial relations, is applicable to the A.P.S.R.T.C and that its object is to regulate activities of the Unions including their conduct in raising industrial disputes. According to the petitioner, since the question of entitlement to enhanced ex-gratia affects all employees of the corporation, it is only the recognized Union, which has the support of a majority of the employees, that is entitled to raise an industrial dispute regarding entitlement of a section of the workmen of the corporation to be paid enhanced ex-gratia. Reliance is placed on Workmen Vs. Rohtak General Co[1] to contend that it is only if the dispute is supported and sponsored by a majority of the workmen in the establishment, and such support is in existence prior to the reference, would it become an “industrial dispute”. It is contended that the Tribunal had erroneously held that the respondent Corporation represented 7,000 to 8,000 workmen throughout the State and could raise a dispute though it was a minority Union. It is further contended that neither was a plea raised, nor was evidence adduced, to show either that the Secretary General of the respondent Union, who signed the strike notice dated 15.03.1997, or the State Committee of the Union, elected at the meeting of all the workmen, were authorised to represent the workmen with regards the dispute in question. Reliance is placed by Sri K. Madhava Reddy, Learned Standing Counsel for the Corporation, on the memorandum of settlement dated 27.03.1997 entered into between the management of the APSRTC and the recognised Union pursuant to the strike notice dated 06.03.1997. The strike notice was issued for the petitioner’s failure to implement their charter of 22 demands including the demand for payment of the difference of ex-gratia for the year 1993-94 consequent to the Payment of Bonus Act being amended. Learned Counsel would contend that, after bilateral discussions on numerous occasions, the matter was admitted to conciliation and, eventually, a memorandum of settlement was entered into on 27.03.1997 and all employees of the corporation, including members of the respondent Union, had accepted the benefits conferred under the said settlement. Reference is made to clause 2, of the terms of the said settlement whereunder it was mutually agreed to discuss and settle the demand of payment of difference of ex-gratia for the year 1993-94, consequent to the amendment made to the Payment of Bonus Act, in due course of time. Reliance is placed on National Engineering Industries Limited Vs. State of Rajasthan[2] to contend that a settlement, entered into under Section 12(3) of the Industrial Disputes Act, was binding on all workmen of the establishment and, therefore, the respondent Union was not justified in seeking a reference with regards their entitlement for payment of the difference between the ex-gratia, as per the pre-amended and the amended Payment of Bonus Act. It is also contended that the strike notice issued by the respondent Union on 15.03.1997 was without justification as the recognized Union had already issued a strike notice for the said cause which ultimately culminated in the memorandum of settlement dated 27.03.1997 and, since there was no pending dispute, the State Government had no jurisdiction to make the reference on 18.03.1997. Learned Counsel would contend that, less than a month after the settlement was entered into on 27.03.1997, the present dispute was referred, that since the employees Union did not raise any fresh dispute thereafter, the State Government had no jurisdiction to make the reference on 18.04.1997 and that the reference itself was illegal and invalid. Learned Counsel would contend that clause 13.2 of the settlement dated 21.10.1997 did not mean that the impugned reference was valid or that there was a dispute necessitating adjudication by the date of the reference or that the Tribunal had jurisdiction to entertain the reference. According to the Learned Counsel the dispute, in the order of reference, was not an “industrial dispute” as even if the reference was answered in the affirmative, the employees would not get anything thereby, for the reference was not whether ex-gratia was payable to them for the year 1993-94 as per the amended Payment of Bonus Act. Learned Counsel would contend that the respondent Union was not entitled to raise the dispute with regards payment of differential ex-gratia, that there was no industrial dispute in existence at the time of making the reference on 17.04.1997, that the reference made was not genuine and that the State Government had no authority to make the reference. It is also contended that the Tribunal had gone beyond the scope of the reference in holding that employees of the petitioner corporation were entitled to be paid the difference between the ex-gratia payable to them as per the amended Payment of Bonus Act, and the actual ex-gratia paid as per the pre-amended Act, when there was no reference made in that regard. According to the Learned Counsel, the question whether employees of the APSRTC were entitled to ex-gratia for the year 1993-94, and whether they were entitled to the difference between the ex-gratia payable to them as per the amended Act and the ex-gratia paid to them under the pre-amended Act, were two distinct and different subjects, each independent of the other, that the latter was not incidental to the former and, even if the reference was answered affirmatively, it did not follow that employees of the APSRTC would be entitled to the difference. It is contended that grant of enhanced ex-gratia for the year 1993-94, based on the amended Payment of Bonus Act, depended on several factors, that the Payment of Bonus Act had no application to the APSRTC, that the employees of the Corporation had no statutory right to claim ex-gratia as per the rate fixed under the Payment of Bonus Act, that the right of employees of the corporation to claim ex-gratia for any particular period could only be in accordance with the agreement/settlement entered into between the petitioner and the recognized Union under Section 12(3) of the I.D. Act, that otherwise employees of the Corporation had no legal right to claim ex-gratia at a particular rate for a particular year unless that right was conferred on them by settlements/agreements entered into between the recognized Union and the Management and that, in the instant case, there was no agreement/settlement between the parties as to the grant of ex-gratia at 8.33%. It is contended that, from the various G.Os issued by the State Government, it was evident that the corporation was not entitled to pay ex-gratia to its employees unless profits accrued, and, even if there were profits, only with the prior approval of the State Government. Reference is made to the memo dated 26.05.1994 whereunder the State Government had clarified that ex-gratia could be paid to eligible employees of public enterprises only when there were accumulated profits, that too on receipt of prior approval of the State Government. Reliance is placed on Workman of British India Corporation Limited Vs. British India Corporation Limited[3], Senior Regional Manager, Hindustan Petroleum Corporation Limited Vs. Presiding Officer, Industrial Tribunal-I, Hyderabad[4] and Management of Divisional Engineer, Telecommunications Vs. Venkataiah[5]. On merits, Learned Counsel would submit that the Corporation had earned profits of Rs. 6.00 crores for the year 1993-94 and had paid ex-gratia at the then existing rate of 8.33% to the employees drawing Rs.2,500/- per month, subject to a maximum of Rs.1,600/-, that if the demand of the first respondent Union is to be met, it has to pay Rs.14 crores, that the Corporation would incur loss of Rs.8 crores thereby, that the Tribunal, having observed that the accumulated losses had come to Rs.19.22 crores for the year 1993-94, should not have passed an Award directing payment of ex-gratia for the year 1993-94 as per the amended Payment of Bonus Act. Sri G. Vidyasagar, Learned Counsel for the first respondent Union, would rely on J.H. Jadhav Vs. M/s. Forbes Gokak Ltd[6] to contend that, for espousal of a dispute, the Union need not be a majority Union and the mere fact that the respondent Union was not the recognized Union had no bearing on its raising an industrial dispute or seeking adjudication thereof. Learned Counsel would submit that employees, drawing salary of Rs.2,500/- and above, were also entitled for payment of bonus restricting their claim upto Rs.2,500/-, and, hence, the demand raised by the Union was justified. It is contended that employees working in the Corporation are not exempt and that they do not come within the purview of Section 32 of the Payment of Bonus Act. Reliance is placed on Tamilnadu Water Supply and Drainage Board Vs. Tamilnadu Water Supply and Drainage Board Engineers’ Association[7] to contend that, since the petitioner corporation has been paying bonus in the form of ex-gratia, it was governed by the provisions of the Payment of Bonus Act. It is contended that the dispute raised by the respondent Union, for payment of ex-gratia for the year 1993-94, was a demand which was raised in the strike notice dated 15.03.2007. Learned Counsel would contend that, in the strike notice, it was clearly mentioned that the issue of payment of additional ex-gratia to all the employees had not been resolved, that it was also stated therein that, while payment of additional ex-gratia for all employees for the year 1994-95 and 1995-96 had been settled, the dispute in respect of additional ex-gratia for the year 1993-94 had not been settled. According to the Learned Counsel, the issue raised before the Tribunal was, therefore, with regards payment of ex-gratia for the year 1993-94 in terms of the amended provisions of the Payment of Bonus Act and that the statutory right which accrued to employees could not be denied by the management on technical pleas. Learned Counsel would contend that there is no settlement between the APSRTC and the employees union with regards payment of additional ex-gratia for the year 1993-94 as per the amended Payment of Bonus Act and, in the absence of any settlement, the dispute raised by the Union was justified. Learned Counsel would also contend that the management had submitted its views before the Joint Commissioner of Labour in the meeting held on 30.04.1997 wherein, against the issue regarding payment of additional ex-gratia to all employees for the year 1993-94, it was stated that the issue was referred to Industrial Tribunal –I Hyderabad. It is contended that the APSRTC was also aware of the industrial dispute and it was, therefore, not open for them to contend that the dispute was not maintainable. Reference is made to the finding of the Tribunal that the petitioner has been paying ex-gratia inspite of having accumulated losses whereas, for the year 1993-94, it had earned profits. It is contended that, even otherwise, profit or loss cannot be taken into consideration in view of Section 10 of the Payment of Bonus Act, that all employees have to be paid ex-gratia irrespective of whether or not the Corporation made profits and, therefore, the conclusions arrived at by the Industrial Tribunal was legal and valid. It is useful to note, to the extent necessary, the amendment made to the Payment of Bonus Act, 1965, by amendment Act 34 of 1995, with retrospective effect from 01.04.1993. Section 2(13) of the Payment of Bonus Act which defines “employee” was amended by Act 34 of 1995 and, for the words “Rs.2,500/-“ therein, the words “Rs.3,500/-“ was inserted and, as a result, persons whose salary or wage did not exceed Rs.3,500/- per month also came within the definition of “employee” under the Act. Similarly, Section 12 of the Payment of Bonus Act, which relates to calculation of bonus with respect to certain employees, was amended and, instead of the words “Rs.1600/-”, the words “Rs.2,500/” was inserted therein. As a result, even in cases where the salary or wage of an employee exceeded Rs.2,500/- per month, the bonus payable to such an employee, under Section 10 or 11, was required to be calculated as if his salary or wage was Rs.2,500/- per month. Section 10 of the Payment of Bonus Act, 1965 relates to payment of minimum bonus and, thereunder, minimum bonus of 8.33%, of the salary or wage earned by an employee during the year, is required to be paid in an accounting year whether or not the employer had any available surplus or allocable surplus. Thus, even in cases where an industrial establishment is running in losses, and has no available/allocable surplus for payment of bonus, section 10 of the Payment of Bonus Act, 1965 mandates payment of statutory minimum bonus of 8.33% each year. CODE OF DISCIPLINE IS NOT REFERABLE TO ANY STATUTORY PROVISION: The contention of Sri K. Madhava Reddy, learned Standing Counsel for the petitioner corporation, that, since the respondent union was neither the majority union nor the Union recognized under the Code of discipline, it could not raise a dispute on matters which affect all the employees of the Corporation, is only to be noted to be rejected. The Code of Discipline, which was ratified by the Central Employees and ‘Workers’ Organization at the 16th Session of the Indian Labour Conference held at Nainital in May, 1958, came into force from 01.06.1958. Part V of the Code of Discipline relates to Implementation and Evaluation Machinery and its functions and procedures, wherein the rights arising out of recognition of unions are found. Under Para 13 thereof, it was agreed that the Unions, granted recognition under the Code of discipline, would enjoy the right to raise issues and enter into collective agreements with the employers on general questions concerning the terms of employment and conditions of service of workers in an establishment. Appendix-I to the Code of discipline requires the management to recognise the Union in accordance with the criteria provided in Annexure-I to that Appendix, which was evolved at the 16th session of the Indian Labour Conference held in May, 1958. Under clause 4 of Annexure-1 when a union has been recognised, there should be no change in its position for a period of two years. Under clause 5 of the said Annexure, when there are several unions in an industry or establishment, the one with the largest membership should be recognised. Under clause 8, only unions which observe the Code of Discipline would be entitled to recognition. (I.T.C. Employees Association Vs. State of Karnataka[8]. The Code of discipline which provides for recognition of the Union, which represents a majority of the workmen in the establishment, as the recognized union with whom the management would negotiate, does not have statutory force. The Code of discipline is neither referable to any specific statute nor does the Industrial Disputes Act, which prescribes the procedure for resolution of Industrial Disputes either amicably by means of conciliation, settlements etc or by adjudication by the Labour Courts/Industrial Tribunals, place any restriction requiring an industrial dispute to be raised only by a Union recognized by the employer under the Code of discipline. INDUSTRIAL DISPUTE: FOR A DISPUTE TO BE REFERRED FOR ADJUDICATION TO THE INDUSTRIAL TRIBUNAL IT IS NOT NECESSARY THAT IT SHOULD HAVE BEEN RAISED ONLY BY A RECOGNIZED OR MAJORITY UNION: It is not mandatory for an employer to negotiate only with a particular Union nor would it disentitle a registered Trade Union from raising a dispute concerning the workmen of the establishment. The code of discipline is non-statutory, is a voluntary agreement between the management and the workers and cannot be enforced by a writ of mandamus. (HMT Employees Union Vs. HMT[9]; All India Reserve Bank Employees Federation v. Governor, Reserve Bank of India[10]).