Case: The Prakash Cotton Mills (Private) Ltd. And Others Vs. The State Of Bombay (Now Maharashtra)

Wanchoo, J.1. This appeal by certificate granted by the High Court of Bombay raises the constitutionality of S. 114 (2) of the Bombay Industrial Relations Act, No. XI of 1947, (hereinafter called the Act). The brief facts necessary for present purposes are these. The appellant is a cotton textile mill statuted in Bombay. It is said that the appellant had been continuously making losses from 1950 to 1955. References were however made under S. 73-A of the Act by the Rashtriya Mill Mazdoor Sangh, Bombay, in respect of disputes relating to bonus for the years 1952 and 1953, which are said to be pending before the Industrial Court, Bombay. The case of the appellant before the Industrial Court was that as it had made losses there was no question of its paying any bonus for the years in dispute. It seems that at the same time there were cases relating to bonus of other mills pending before the Industrial Court and the appellant applied that its case should be dealt with seperately, and this prayer was acceded to. It seems that while the references were pending, an agreement was arrived at between the Mill-owners Association, Bombay and the Rashtriya Mill Mazdoor Sangh, Bombay, with respect to payment of bonus for the years 1952 to 1957 and the agreement was to come into force with respect to each mill when it was signed by each member mill of the Mill-owners Association. Clause (6) of that agreement provided for payment of bonus even where the profit made by a mill was not adequate to provide for all prior charges as per the Full Bench formula evolved by the Labour Appellate Tribunal in Mill-owners Association, Bombay v. Rashtriya Mill Mazdoor Sangh, (1950) 2 Lab LJ 1247 or even where a mill made actual loss, the minimum bonus being in either of these two cases 4.8 per cent. Of the basic wages earned during the year, subject to such mill being entitled to adjust the amount thus paid by it as the minimum bonus against any available surplus in any subsequent year or years under the provisions of the agreement. This agreement was registered and was made enforceable as an award against those mills which were parties thereto. The appellant however did not sign the agreement and therefore it was not enforced as an award by the Industrial Court against the appellant. Thereafter the Rashtriya Mill Mazdoor Sangh wrote to the Government of Bombay requesting that the said award should be enforced against the appellant in exercise of the powers vested in the Government by S. 114 (2) of the Act. After necessary action under S. 114 (2), the Government of Bombay issued a notification dated July 31, 1956, directing that the award made by the Industrial Court on March 13, 1956, for payment of bonus for the years 1952 and 1953 also for the years 1954 to 1957 be enforced against the appellant.2. This was followed by a writ petition by the appellant in the High Court challenging the constitutionality of S. 114 (2) and also challenging the power of the State Government to issue such a notification under that provision. The petition was however dismissed on October 9, 1956. There was then an appeal to a Division Bench of the High Court in which also the appellant failed. The appellant then applied for a certificate to enable it to file an appeal to this Court, which was granted and that is how the matter has come up before us.3. Two main points have been urged on behalf of the appellant before us. In the first place, it is urged that S. 114 (2) is unconstitutional as it violates the fundamental rights guaranteed under Art. 19 (1) (f) and (g) of the Constitution. In the second place, it is urged that even if S. 114 (2) is constitutional, the notification has gone beyond the powers conferred on the State Government by that section and therefore the notification is bad.4. We do not think it necessary for purposes of the present appeal to consider the constitutionality of S. 114 (2), for we have come to the conclusion that the notification is bad because it goes beyond the powers conferred on the State Government by that section. This brings us immediately to the second point that has been urged before us and in that connection we have to consider the ambit of the power of the State Government under S. 114 (2). Section 114 (2) reads as follows :-"In cases in which a Representative Union is a party to a registered agreement or a settlement, submission or award, the State Government may, after giving the parties affected an opportunity of being heard, by notification in the Official Gazette, direct that such agreement, settlement, submission or award shall be binding upon such other employers and employees in such industry or occupation in that local area as may be specified in the notification :Provided that before giving direction under this section the State Government may, in such cases as it deems fit, make a reference to the Industrial Court for its opinion."5. The words of S. 114 (2) are very general and may at first blush be open to the interpretation that any agreement, settlement, submission or award may be extended thereunder provided it fulfils its terms. But further consideration shows that there are two obvious limitations on the power of the State Government in that behalf. The first limitation arises out of the subject-matter of the agreement etc., to be extended. Suppose the agreement etc., deal with (let us say) the wages of a certain type of workmen in a certain mill. Suppose that the agreement etc., are extended to another mill where that type of workmen does not exist. Obviously the agreement cannot be extended in these circumstances and the power of the State Government is thus limited by the subject-matter of the agreement etc.6. The second limitation which again is obvious arises from the provisions of law. The proviso to S. 114 (2) shows that before exercising its power under the said section the Government can refer the matter to an Industrial Court and there can be no doubt that an Industrial Court cannot and will not advise anything against the law. Section 95-A makes the determination of any question of law in any order, decision, award or declaration passed or made, by the Full Bench of the Industrial Court under the regulations made under S. 92 binding in all proceedings under the Act. What is done under S. 114 (2) is also a proceeding under the Act after notice to the parties affected. The State Government is thus bound by any decision on a question of law while proceeding under S. 114 (2). The policy of the Act underlying S. 95-A therefore leads to the conclusion that the exercise of power conferred by S. 114 (2) has to be in conformity with the industrial law laid down by the Full Bench of the Industrial Court and also by any decision of this Court. The State Government therefore when it passes an order under S. 114 (2) must have full regard to the law as laid down by the legislature and by the decisions of this Court and cannot pass an order under S. 114 (2) which is against such law. Besides, S. 114 (2) places a registered agreement, a settlement, a submission and an award on the same footing and so if an award has to conform to S. 95-A as it must so must the other three mentioned therein. Therefore, when the State Government acts under S. 114 (2) it can only do as between the parties before it what a labour court, an Industrial Court or a wage board can in law do under the Act. We do not think that S. 114 (2) authorities the State Government to act against the law as laid down by the legislature or by this Court. Section 114 (2) therefore appears to be speedy remedy (dispensing with all appeals provided under the Act) by which the State Government may direct that the terms and conditions of employment in the matter of wages, hours of work and so on may be the same in a particular industry or occupation in a particular area as may have been settled between a representative union and other employers in that area and as could if necessary be enforced through an award in a case to which the representative union was a party. There can be no doubt, however that the State Government cannot do under S. 114 (2) what an adjudicator has no power to award under the provisions of the Act. Therefore, as we read S. 114 (2) we cannot escape the conclusion that the State Governments power to make a direction under that section is co-terminous with the power of an adjudicator (be it a labor court, an Industrial Court or a wage board under the Act) to make an award thereunder, and the State Government cannot under S. 114 (2) do what an adjudicator cannot do under the Act. This being the ambit of the State Governments power in respect of giving a direction under S. 114 (2), let us now proceed to see whether the impugned notification is within the ambit of these powers.7. By this notification the State Government has directed that the award dated March 13, 1956, made by the Industrial Court shall be binding on the appellant and its employees in the matter of payment of bonus for the years 1952 to 1957 (both inclusive). It is not in dispute that the said award was based on an agreement between the Mill-owners Association, Bombay and the Rashtriya Mill Mazdoor Sangh, Bombay. The said agreement provided that it would have to be signed by each member mill of the Mill-owners Association before it would be binding on it and again it is not in dispute that the appellant mill though it is a member of the Mill-owners Association never signed it. Further cl. (6) of the agreement provided for payment of minimum bonus even in cases where there was no adequate profit to provide for all prior charges as per the Full-Bench formula and also in cases where a mill had made actual loss on the years working, subject to a proviso as to adjustment. Thus by the direction given in the impugned notification the appellant is subjected to payment of bonus even where it has not made adequate profit to provide for all prior charges or has in fact made a loss. The contention on behalf of the appellant is that it would not be open to an Industrial Court to grant bonus when profit was not adequate to meet all prior charges or where there was an actual loss and therefore when the impugned notification made it possible for grant of bonus even in these cases (for prima facie the appellant had made losses upto 1955), it directed something which even an Industrial Court could not do. In consequence, it is urged that the notification inasmuch as it makes this possible is beyond the powers conferred on the State Government under S. 114 (2) because it allows something to be done which even an Industrial Court could not allow. Reliance in this connection is placed on the decision of this Court in New Manekchowk Spng. Co. Ltd. v. Textile Labour Association. C. As. Nos. 351-356 and 358-359 of 1960, D/- 7-12-1960 : (AIR 1961 SC 867). In that case this Court was considering a similar agreement relating to Ahmedabad. The Industrial Court had imposed that agreement after its expiry for one year on the mills in spite of their contention that they were not bound to pay any bonus for the years in dispute in view of the law laid down by this Court in Associated Cement Companies Ltd. v. The Workmen, 1959 S C R 925 : (AIR 1959 SC 67). After examining the terms of the agreement then in dispute this Court came to the conclusion that in view of the law laid down in Associated Cement Companies case, 1959 SCR 925 : (AIR 1959 SC 967 ) the Industrial Court had no jurisdiction to impose that agreement on the mills. It further held that an agreement of that kind could only continue by consent of parties and could not be enforced by industrial adjudication against the will of any of the parties. The agreement in the present case directed to be enforced by the impugned notification is similar in terms and as held in New Menekchowk case, AIR 1961 SC 867 it could not be enforced by industrial adjudication against the will of any of the parties. The power of the State Government under S. 114 (2) being co-terminous with the power the an adjudicator under the Act, such an agreement cannot therefore be directed to be enforced against the will of the appellant even under S. 114 (2) inasmuch as by doing so the State Government would be going beyond the powers conferred on it by that section. The impugned notification therefore must be held to be bad inasmuch as it goes beyond the powers conferred on the State Government under S. 114 (2) and must therefore be struck down.

Decision reasoning: 1[ds]4. We do not think it necessary for purposes of the present appeal to consider the constitutionality of S. 114 (2), for we have come to the conclusion that the notification is bad because it goes beyond the powers conferred on the State Government by thatfirst limitation arises out of the subject-matter of the agreement etc., to be extended. Suppose the agreement etc., deal with (let us say) the wages of a certain type of workmen in a certain mill. Suppose that the agreement etc., are extended to another mill where that type of workmen does not exist. Obviously the agreement cannot be extended in these circumstances and the power of the State Government is thus limited by the subject-matter of the agreement etc.6. The second limitation which again is obvious arises from the provisions of law. The proviso to S. 114 (2) shows that before exercising its power under the said section the Government can refer the matter to an Industrial Court and there can be no doubt that an Industrial Court cannot and will not advise anything against the law. Section 95-A makes the determination of any question of law in any order, decision, award or declaration passed or made, by the Full Bench of the Industrial Court under the regulations made under S. 92 binding in all proceedings under the Act. What is done under S. 114 (2) is also a proceeding under the Act after notice to the parties affected. The State Government is thus bound by any decision on a question of law while proceeding under S. 114 (2). The policy of the Act underlying S. 95-A therefore leads to the conclusion that the exercise of power conferred by S. 114 (2) has to be in conformity with the industrial law laid down by the Full Bench of the Industrial Court and also by any decision of this Court. The State Government therefore when it passes an order under S. 114 (2) must have full regard to the law as laid down by the legislature and by the decisions of this Court and cannot pass an order under S. 114 (2) which is against such law. Besides, S. 114 (2) places a registered agreement, a settlement, a submission and an award on the same footing and so if an award has to conform to S. 95-A as it must so must the other three mentioned therein. Therefore, when the State Government acts under S. 114 (2) it can only do as between the parties before it what a labour court, an Industrial Court or a wage board can in law do under the Act. We do not think that S. 114 (2) authorities the State Government to act against the law as laid down by the legislature or by this Court. Section 114 (2) therefore appears to be speedy remedy (dispensing with all appeals provided under the Act) by which the State Government may direct that the terms and conditions of employment in the matter of wages, hours of work and so on may be the same in a particular industry or occupation in a particular area as may have been settled between a representative union and other employers in that area and as could if necessary be enforced through an award in a case to which the representative union was a party. There can be no doubt, however that the State Government cannot do under S. 114 (2) what an adjudicator has no power to award under the provisions of the Act. Therefore, as we read S. 114 (2) we cannot escape the conclusion that the State Governments power to make a direction under that section is co-terminous with the power of an adjudicator (be it a labor court, an Industrial Court or a wage board under the Act) to make an award thereunder, and the State Government cannot under S. 114 (2) do what an adjudicator cannot do under the Act.By this notification the State Government has directed that the award dated March 13, 1956, made by the Industrial Court shall be binding on the appellant and its employees in the matter of payment of bonus for the years 1952 to 1957 (both inclusive). It is not in dispute that the said award was based on an agreement between the Mill-owners Association, Bombay and the Rashtriya Mill Mazdoor Sangh, Bombay. The said agreement provided that it would have to be signed by each member mill of the Mill-owners Association before it would be binding on it and again it is not in dispute that the appellant mill though it is a member of the Mill-owners Association never signed it. Further cl. (6) of the agreement provided for payment of minimum bonus even in cases where there was no adequate profit to provide for all prior charges as per the Full-Bench formula and also in cases where a mill had made actual loss on the years working, subject to a proviso as to adjustment. Thus by the direction given in the impugned notification the appellant is subjected to payment of bonus even where it has not made adequate profit to provide for all prior charges or has in fact made aagreement in the present case directed to be enforced by the impugned notification is similar in terms and as held in New Menekchowk case, AIR 1961 SC 867   it could not be enforced by industrial adjudication against the will of any of the parties. The power of the State Government under S. 114 (2) being co-terminous with the power the an adjudicator under the Act, such an agreement cannot therefore be directed to be enforced against the will of the appellant even under S. 114 (2) inasmuch as by doing so the State Government would be going beyond the powers conferred on it by that section. The impugned notification therefore must be held to be bad inasmuch as it goes beyond the powers conferred on the State Government under S. 114 (2) and must therefore be struck down.