Case: Hill Son & Dinshaw Limited Vs. P.G. Pednekar & Others

ORAL ORDERA.P. Shah, J.These two appeals are directed against the order of the learned Single Judge passed in a writ petition under Article 226 by which the respondent workman was directed to be reinstated with backwages. Appeal No. 1200 is filed by the employer whereas Appeal Lodging No. 519 of 2001 is filed by the Union, as the union has been directed to pay the backwages. 2.Briefly stated, the facts are as follows: The Government of India had referred to the Industrial Tribunal the following industrial dispute for adjudication: "Whether the action of the management of M/s. Hillson and Dinshaw Ltd. Mumbai in not reinstating Shri P.G. Pednekar who is senior among the retrenched employees in the same category is just, proper and legal If not, to what relief the workman is entitled to" The respondent workman who was in the employment of the appellant company, was retrenched from employment alongwith other 4 employees vide notice dated 27.4.1995. The respondent workman was given retrenchment compensation of Rs.1,14,115 by cheque and there is no dispute that the workman has accepted and encashed the said cheque. The workman thereafter approached the Transport and Dock Workers Union, which is the appellant in Appeal Lodging No. 519 of 2001 and the Union served notice dated 9.5.1995 to the employer. The union also wrote to the Assistant Labour Commissioner. The appellant company and the union thereafter signed a settlement dated 28.12.1995 under Section 18(1) read with Section 2(p) of the Industrial Disputes Act, 1947; hereinafter referred to as the Act. According to this settlement the appellant company had offered to reinstate 4 out of 5 workmen, as one had expired, including respondent workman with immediate effect with continuity of service. However, the union had given up the claim of the respondent workman and two others on the ground that they were in gainful employment and no more interested in the employment with the employer. It was agreed by the union that the aforesaid 3 workmen would be treated as having lost their lien over the employment with the company and the 4th workman Shri Fernandes who was unemployed would be employed with immediate effect. On 7.6.1996 the respondent workman approached the Asst. Labour Commissioner making a grievance that he had never given up his claim for reinstatement and that he had not given up his lien on employment and the dispute should be referred for adjudication. Accordingly a reference was made to the Central Government Industrial Tribunal. The Tribunal held inter alia that the settlement dated 28.12.1995 is binding on the respondent workman and the reference was answered against the workman.3.Being aggrieved the respondent workman filed a writ petition which was allowed by the learned Judge by the impugned order. The learned single Judge held that under S.18(1) of the Act settlement is intended to be binding only on the signatories or parties to the settlement and as the respondent workman was not signatory to the settlement it was not binding on him. The union which has signed the settlement was not a recognised union and even assuming that the union was recognised union it could not have signed such a settlement giving up the right of the employment of the workman without his consent and without his authority and signature on the settlement. The learned Judge therefore directed the appellant-company to reinstate the workman and so far as backwages are concerned directed the union to pay the amount of backwages on the ground that the union alone was responsible for the loss of backwages of the workman. The propriety and legality of the said order is impugned in these appeals. 4.Mr. N.M. Makandar the learned counsel appearing for the appellant company submitted that as the respondent workman was a member of the union, the union had every right to sign the settlement on behalf of the workman and such settlement is binding on him. On the other hand, Ms. Gopal appearing for the respondent workman sought to support the finding of the learned single Judge that the settlement is not binding on the workman. She contended that there was non-compliance with rule 58 of the Industrial Disputes (Central) Rules, 1957. She also sought to challenge the settlement on the ground that it is violative of section 25-J of the Act. It should be noted that these contentions based on rule 58 and section 25-J were not raised before the Tribunal or before the single Judge. Mr. Singhvi learned counsel for the union contended that the learned Judge was not right in directing the union to pay the backwages of respondent workman who had not made any claim against the union nor the dispute referred to the Tribunal pertain to any claim against the union and therefore the impugned order is patently in excess of jurisdiction. 5.Before adverting to the rival submissions, we consider it necessary and proper to refer to relevant provisions of the Act. Clause (p) of Section 2 of the Act defines "settlement" as under: "2(p) "settlement" means a settlement arrived at in the course of conciliation proceeding and includes a written agreement between the employer and workmen arrived at otherwise than in the course of conciliation proceeding where such agreement has been signed by the parties hereto in such manner as may be prescribed and a copy thereof has been sent to an officer authorised in this behalf by the appropriate Government and the Conciliation Officer". An analysis of the above mentioned clause would show that it envisages two categories of settlement (i) a settlement which is arrived at in the course of conciliation proceeding, i.e. which is arrived at with the assistance and concurrence of the Conciliation Officer who is duty bound to promote a right settlement and to do everything he can to induce the parties to come to a fair and amicable settlement of the dispute and (ii) a written agreement between employer and workmen arrived at otherwise than in the course of conciliation proceeding. 6.The consequence of the aforesaid two categories of settlement which are quite distinct are set out in section 18 of the Act which reads as under: "18(1) A settlement arrived at by agreement between the employer and workman otherwise than in the course of conciliation proceeding shall be binding on the parties to the agreement (2) subject to the provisions of subsection (3) an arbitration award which has become enforceable shall be binding on the parties to the agreement who referred the dispute to arbitration. (3) A settlement arrived at in the course of conciliation proceeding under this Act or an arbitration award in a case where a notification has been issued under sub-section (3A) of S.10A or an award of a Labour Court, Tribunal or National Tribunal which has become enforceable shall be binding on (a) all parties to the industrial dispute (b) all other parties summoned to appear to the proceeding as parties to the dispute, unless the Board, Arbitrator, Labour Court, Tribunal or National Tribunal as the case may be records the opinion that they were so summoned without proper cause; (c) where a party referred to in cl. (a) or clause (b) is an employer, his heirs, successors or assigns in respect of the establishment to which the dispute relates; (d) where a party referred to in clause (a) or (b) is composed of workmen, all persons who are employed in the establishment or part of the establishment as the case may be to which the dispute relates on the date of the dispute and all persons who subsequently become employed in that establishment or part." 7.A bare perusal of the above quoted section would show that whereas a settlement arrived at by agreement between the employer and the workmen otherwise than in the course of conciliation proceeding is binding only on the parties to the agreement, a settlement arrived in the course of conciliation proceeding under the Act is binding not only on the parties to the settlement but also on other persons specified in clauses (b), (c) and (d) of sub-section (3) of section 18 of the Act. Therefore, if the settlement arrived at between the employer and the workmen, otherwise than in the course of conciliation proceedings, with which we are concerned in this case, it shall be binding on the parties to the settlement. The phrase "parties to the settlement" includes both employer and an individual employee or the union representing the employees. If the settlement is between the employer and workman it would be binding on that particular employee and the employer; if it is between a recognised union of the employees and the employer, it will bind all the members of the union and the employer. That it would be binding on all the members of the union is a necessary corollary of collective bargaining in the absence of allegation of malafides or fraud. Merely because an individual employee or some of the employees do not agree to the terms of the settlement entered into between a recognised union and the employer, he/they cannot be permitted to contend that it is not binding on him/them. In the present case the union is recognised union under the Code of Discipline in respect of the Dock Workers working in the appellant company. Therefore, the settlement entered into by the Union with the employer would be binding on its members. 8.The aims and objects of the provisions of the Industrial Disputes Act include industrial peace which is essential to the industrial development and economy of the nation. Great emphasis is, therefore, laid on the settlements as they set at rest all the disputes and controversies between the employer and the employees. In the case of Herbertsons Limited vs. The Workmen of Herbertsons Ltd. and Ors. (1976) 4 SCC 736 , the Supreme Court considered the effect of the settlement arrived at by the recognised union of majority workers. It was observed by Goswani J. speaking for the Court that when a recognised union negotiates with an employer, the workers as individuals do not come into the picture, it is not necessary that each individual worker should know the implications of the settlement since a recognised union, which is expected to protect the legitimate interests of labour enters into a settlement in the best interests of labour. This would be the normal rule. There may be exceptional cases where there may be allegations of malafides, fraud or even corruption or other inducements. But in the absence of such allegations a settlement in the course of collective bargaining is entitled to due weight and consideration. In connection with justness and fairness of the settlement it was observed that this has to be considered in the light of the conditions that were in force at the time of the reference. When, therefore, negotiations take place which have to be encouraged, particularly between labour and employer in the interest of industrial peace and well-being, there is always give and take. The settlement has to be taken as a package deal and when labour has gained in the matter of wages and if there is some reduction in the matter of dearness allowance so far as the award is concerned, it cannot be said that the settlement as a whole is unfair and unjust. It was further observed that it is not possible to scan the settlement in bits and pieces and held some parts good and acceptable and others bad. Unless it can be demonstrated that the objectionable portion is such that it completely outweights all the other advantages gained the Court will be slow to hold a settlement as unfair and unjust. The settlement has to be accepted or rejected as a whole. 9.In the case of K.C.P. Ltd. vs. Presiding Officer and Ors. 1996 (2) LLN 970 (1996 74 FLR 2540 ) the Supreme Court considered the concept of settlement entered into between the employer and the union representing the employees. In that case the settlement arrived at by the union with the company was not in the course of conciliation proceedings. The facts were that the issue of dismissal of 29 workmen, by way of punishment was pending for adjudication and during such pendency, the recognised union entered into a settlement with the management regarding these 29 dismissed workmen as well and it was agreed that an option would be given to them either to accept reinstatement without backwages or a lump sum amount of Rs.75,000 with other monetary benefits may be accepted by the concerned workmen in lieu of reinstatement; 17 workmen accepted the settlement and remaining 12 challenged the said settlement and pressed for adjudication being continued by the Labour Court. The contesting workmen contended before the Supreme Court that the settlement regarding their interest as entered between the management and recognised union during the pendency of adjudication of the dispute was illegal and was not binding on them. It was also submitted that they were not parties to the settlement and hence it did not bind them. The Supreme Court held that the settlement arrived at by direct negotiations between the management and union was valid and legal and the recognised union had represented 29 dismissed workmen. Speaking for the Bench Majmudar, J. observed: "It has to be kept in view that under the scheme of labour legislation like the Act in the present case, collective bargaining and the principle of industrial democracy permeate, the relations between the management on the one hand and the union which resorts to collective bargaining on behalf of its members-workmen with the management on the other. Such a collective bargaining which may result in just and fair settlement would always be beneficial to the management as well as to the body of workmen and society at large as there would be industrial peace and tranquillity pursuant to such settlement and which would avoid unnecessary social strife and tribulation on the one hand and promote industrial and commercial development on the other hand. Keeping in view the aforesaid salient features of the Act the settlement which is sought to be impugned has to be scanned and scrutinized. Settlement of labour disputes by direct negotiations and collective bargaining is always to be preferred for it is the best guarantee of industrial peace which is the aim of all legislations for settlement of labour disputes. In order to bring about such a settlement more easily and to make it more workable and effective it may not be always possible or necessary that such a settlement is arrived at in the course of conciliation proceedings which may be the first step towards resolving the industrial dispute which may be lingering between the employers and their workmen represented by their unions but even if at that stage such settlement does not take place and the industrial dispute gets referred for adjudication, even pending such disputes, the parties can arrive at amicable settlement which may be binding the parties to the settlement unlike settlement arrived at during conciliation proceedings which may be binding not only on the parties to the settlement but even to the entire labour force working in the concerned organisation even though they may not be members of the union which might have entered into settlement during conciliation proceedings". 10.In the case of Balmer Lawrie Workers Union and Anr. vs. Balmer Lawrie & Co.Ltd. and Ors. 1985 I CLR 103, clause 17 of the settlement entered into between the management and the recognised union came to be challenged and as per the said clause the company was to collect, from each workman, an amount equivalent to 15 per cent of the gross arrears payable to each employee under the settlement as contribution to the union fund and it was, in turn, to be paid to the union within three days of the payment of arrears. It was inter alia contended by the petitioner union that the said clause was in breach of the provisions of the Payment of Wages Act and while rejecting the challenge the Supreme Court observed: "It is well known that no deduction could be from the wages and salary payable to a workman governed by the Payment of Wages Act unless authorised by the Act. A settlement arrived at on consent of parties can however permit a deduction as it is the outcome of understanding between the parties even though such deduction may be not authorised or legally permissible under the Payment of Wages Act."11.In the instant case it is not disputed that the settlement arrived by the union with the appellant company was not in the course of conciliation proceedings. Therefore, it would be binding on the parties to the agreement namely the appellant company on the one hand and the union representing the respondent workman who was its member. In the circumstances, the respondent workman also would be ordinarily bound by the settlement entered into by his representative union with the company unless it is shown that the said settlement was ex facie unfair, unjust or malafide. No such case was even alleged much less made out by the respondent workman either before the Tribunal or before the learned single Judge. It is interesting to note that before the learned single Judge the only argument put forward on behalf of the respondent workman was that, he was not a party to the settlement and his consent was not taken by the union and, therefore, it was not binding to him. Once it is kept in view that the industrial dispute was raised by the union on behalf of the retrenched workmen including respondent workman, and it was an industrial dispute covered by section 2(k) it cannot be held that the settlement which was entered into under section 2(p) read with section 18(1) of the Act is not binding on the individual workman. 12.In the light of the aforesaid discussion it is not possible to sustain the finding of the learned single Judge that the settlement was not binding on the respondent workman on the ground that the workman was not a signatory to the settlement. 13.Ms. Shobha Gopal, however, drew our attention to the proviso to section 18(1) (Bombay Amendment) which reads as follows: "Provided that where there is a recognised union for any undertaking under any law for the time being in force, then such agreement not being an agreement in respect of dismissal, discharge, removal, retrenchment, termination of service, or suspension of an employee shall be arrived at between the employer and the recognised union only and such agreement shall be binding on all persons referred to in Clause (c) and Clause (d) of sub-section (3) of this section."Ms. Gopal relying upon the words "not being an agreement in respect of dismissal, discharge, removal, retrenchment, termination of service, or suspension of an employee" contended that union has no right to enter into settlement in respect of these categories. The argument is required to be stated only to be rejected. In the first place the settlement is not in respect of any of these categories but it pertains to the right to re-employment in terms of Section 25-G of the Act. Moreover there is nothing in the language of the proviso that the settlement in respect of the above matters will not bind the members of the union. 14.Ms. Gopal then contended that there was non-compliance with rule 58 of the Industrial Disputes (Central) Rules, 1957 as the office bearers of the union were not duly authorised by the union to enter into such settlement. She referred to the judgments of the Supreme Court in Workmen of M/s. Delhi Cloth General Mills Ltd. vs. The Management of M/s. Delhi Cloth and General Mills Ltd. 1970 LIC 1407 and Brooke Bond India Ltd. vs. Workmen 1981 II LLJ 184. The above contention was not raised before the trial court or before the learned single Judge. It is impermissible to raise such a contention at this belated stage. In fact the Tribunal has recorded a finding that there was compliance with the rules and the copies of the settlement were sent to the Commissioner of Labour, Conciliation Officer, Secretary of Industries, Energy and Labour Department of the Central Government. 15.Lastly Ms. Gopal challenged the settlement by taking recourse to section 25-J of the Act. This contention is equally without any substance and not tenable. In the present case the reference is in respect of the action of the management in not reemploying the workman and it does not relate to the retrenchment or layoff and, therefore, Chapter VB which contains this provision has no application.

Decision reasoning: 1[ds]In the present case the union is recognised union under the Code of Discipline in respect of the Dock Workers working in the appellant company. Therefore, the settlement entered into by the Union with the employer would be binding on itstherefore, negotiations take place which have to be encouraged, particularly between labour and employer in the interest of industrial peace andthere is always give and take. The settlement has to be taken as a package deal and when labour has gained in the matter of wages and if there is some reduction in the matter of dearness allowance so far as the award is concerned, it cannot be said that the settlement as a whole is unfair and unjust. It was further observed that it is not possible to scan the settlement in bits and pieces and held some parts good and acceptable and others bad. Unless it can be demonstrated that the objectionable portion is such that it completely outweights all the other advantages gained the Court will be slow to hold a settlement as unfair and unjust. The settlement has to be accepted or rejected as athe instant case it is not disputed that the settlement arrived by the union with the appellant company was not in the course of conciliation proceedings. Therefore, it would be binding on the parties to the agreement namely the appellant company on the one hand and the union representing the respondent workman who was its member. In the circumstances, the respondent workman also would be ordinarily bound by the settlement entered into by his representative union with the company unless it is shown that the said settlement was ex facie unfair, unjust or malafide. No such case was even alleged much less made out by the respondent workman either before the Tribunal or before the learned single Judge. It is interesting to note that before the learned single Judge the only argument put forward on behalf of the respondent workman was that, he was not a party to the settlement and his consent was not taken by the union and, therefore, it was not binding to him. Once it is kept in view that the industrial dispute was raised by the union on behalf of the retrenched workmen including respondent workman, and it was an industrial dispute covered by section 2(k) it cannot be held that the settlement which was entered into under section 2(p) read with section 18(1) of the Act is not binding on the individualShobha Gopal, however, drew our attention to the proviso to section 18(1) (Bombay Amendment) which reads asthat where there is a recognised union for any undertaking under any law for the time being in force, then such agreement not being an agreement in respect of dismissal, discharge, removal, retrenchment, termination of service, or suspension of an employee shall be arrived at between the employer and the recognised union only and such agreement shall be binding on all persons referred to in Clause (c) and Clause (d) of(3) of this section."Ms. Gopal relying upon the words "not being an agreement in respect of dismissal, discharge, removal, retrenchment, termination of service, or suspension of an employee" contended that union has no right to enter into settlement in respect of these categories. The argument is required to be stated only to be rejected. In the first place the settlement is not in respect of any of these categories but it pertains to the right toin terms of SectionGopal then contended that there waswith rule 58 of the Industrial Disputes (Central) Rules, 1957 as the office bearers of the union were not duly authorised by the union to enter into such settlement. She referred to the judgments of the Supreme Court in Workmen of M/s. Delhi Cloth General Mills Ltd. vs. The Management of M/s. Delhi Cloth and General Mills Ltd. 1970 LIC 1407   and Brooke Bond India Ltd. vs. Workmen 1981 II LLJ 184. The above contention was not raised before the trial court or before the learned single Judge. It is impermissible to raise such a contention at this belated stage. In fact the Tribunal has recorded a finding that there was compliance with the rules and the copies of the settlement were sent to the Commissioner of Labour, Conciliation Officer, Secretary of Industries, Energy and Labour Department of the CentralMs. Gopal challenged the settlement by taking recourse to sectionof the Act. This contention is equally without any substance and not tenable. In the present case the reference is in respect of the action of the management in not reemploying the workman and it does not relate to the retrenchment or layoff and, therefore, Chapter VB which contains this provision has no application.