Case: Mukand Ltd Vs. Mukand Staff &amp; Officers' Association

given by the appellant-Company before us ensuring that the total wage packets of the non-workmen to whom the award further modified as above will not be applicable, are not lower than the total wage packets available to the workmen under the said award. 96. The appellant-Management has a prima facie case on merits and the balance of convenience is entirely in their favour. We also hold that the employer and the employees by their conduct is concluding settlements in the past cannot create or confer upon an adjudicating authority jurisdiction where none existed in respect of employees to whom the provisions of the Act are not applicable. In the instant case, the employer had admittedly not waived their right to issue the status of the employees under the Act in any of the said settlements. The High Court, both the learned single Judge and of the Division Bench had stepped into the shoes of the adjudicating authority and virtually modified/altered the award in vital respects like basic linked variable D.A., D.A. fixed in forms of percentages of basic pay, service increments, gratuity and effective dates for increase in emoluments. 97. The Industrial Tribunal did not have jurisdiction to adjudicate the present dispute inasmuch as it pertains to the conditions of service of non-workmen. The learned single Judge and the Division Bench of the High Court failed to appreciate that parties cannot be their conduct create or confer jurisdiction on an adjudicating authority when no such jurisdiction exists. We have already noticed that the Division Bench has erred in holding that there is community of interest between the workmen and the non-workmen and holding further that the workmen could raise a dispute regarding the service conditions of non-workmen. 98. The High Court further failed to appreciate that in order to secure revision of their own grades or other items of emoluments, it was not necessary for employees who are workmen under the Act to agitate also for the revision of the emoluments of those who are not workmen, and that as such the workmen in the present, have no direct or substantial interest in the revision of emoluments of employees who are not workmen, nor could the workmen be held to be vitally interested in the terms of employment of the non-workmen. 99. The High Court also failed to appreciate that workmen as well as non-workmen being in the same grade did not imply that the distinction between the two categories ceased to exist, or that they belonged to the same class. 100. The Division Bench has further erred in relying on the various settlements concluded between the parties in the past regarding the service conditions of the employees including the settlement of 1974 relating to welfare scheme. Both the Division Bench and the learned single Judge failed to appreciate that none of the said settlements contained any provision, or even a whisper thereof, of any waiver by the appellant-Company of its rights with regard to the status of the employees under the Act. 101. During the pendency of the proceedings in this Court, supplementary affidavit was filed by the Vice President, Finance of the appellant-Company bringing to this Courts notice certain crucial events that have occurred subsequent to the admission of the appeal, which have a vital bearing on the case. It is stated therein that the appellant-Company is in dire financial straits. The Company has already placed on record financial difficulties which it has been encountering. The present affidavit was placed on record with the updated situation as at present. The Company has suffered a loss before tax of about Rs. 210 crores in the financial year 2002-03 which was reduced to Rs. 157 crores after considering waivers and reduction in interest rate aggregating to Rs. 53 crores on the basis of concessions given by the banks and financial institutions under a restructuring package. The loss as stated above follows a loss before tax of Rs. 111 crores in the previous financial year i.e. year 2001-02 and that the losses as above are without taking into account the arrears payable to the employees amounting to Rs. 15.45 crores. The appellant being suffered a further loss before tax at Rs. 40 crores in the first quarter of the current year i.e. year 2003-04 as per the unaudited financial results and the accumulated loss is Rs. 269 crores as on 30.06.2003 leaving a net worth of Rs. 28 crores. Along with the affidavit annexures were filed for the year ended 31.03.2003. According to the learned senior counsel, the Company has now become a potentially sick industrial Company as defined by The Sick Industrial Companies (Special Provisions) Act, 1985 since there has been an erosion of more than 50% in the Companys peak net worth in the four preceding years on the basis of the audited financial results for the financial year 2002-03. The Appellant Company is required under the provisions of Section 23 of the said Act to report the fact of such erosion to the Board for Industrial and Financial Reconstruction within sixty days from the date of finalisation of the duly audited accounts of the Company for the financial year 2002-03 and also to take further actions specified in the said provisions. The appellant-Company is now in the process of submitting the necessary report to the Board for Industrial and Financial Reconstruction as required under the said Act. 102. On account of adverse market conditions and unviability of the business, the appellant-Company was complied to close down permanently its Machine Tools Division at Ballabgarh in Haryana with effect from 18.12.2002. 103. Several other details in regard to the sickness of the company has also been furnished. Since we are remitting the matter to the Industrial Tribunal, it is for the appellant-Company to place the additional materials before the said Tribunal for its adjudication. During the pendency of the proceedings before the High Court and of this Court, certain directions were given in regard to the disbursement of certain amounts.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]The Reference is limited to the dispute between the Appellant-Company and the workmen employed by them. 23. We have already referred to the order of Reference dated 17.2.1993 in paragraph supra. The dispute referred to by the order of Reference is only in respect of workmen employed by the appellant-Company. It is, therefore, clear that the Tribunal being a creature of the Reference, cannot adjudicate matters not within the purview of the dispute actually referred to it by the order of Reference. In the facts and circumstances of the present case, the Tribunal could not have adjudicated the issues of the salaries of the employees who are not workmen under the Act nor could it have covered such employees by its award. Even assuming, without admitting, that the Reference covered the non-workmen, the Tribunal, acting within its jurisdiction under the Act, could not have adjudicated the dispute insofar as it related to the non-workmen. 24. It was submitted by the learned counsel appearing for the respondent that under the Act, the dispute can be raised only by the workmen with the employer and that the workmen, however, can, in appropriate case, espouse the cause of non-workmen because under the definition of industrial disputes under clause (k) of Section 2 of the said Act, the dispute may not only be related to workmen but to any person including non-workmen, provided, however, that there is community of interest between the workmen and the non-workmen.findings of the Court below that there is community of interest between the workmen and the non-workmen is based on misconstruing of evidence and disregarding of vital facts. 58. In this regard, learned senior counsel for the appellant brought to our notice the evidence of Mr. Krishnan Nair that the employees are interested in promotions because of financial benefits, a universal fact, has been misconstrued by the Courts below as proof of community of interest between the workmen and the non-workmen. The evidence of Mr. Krishnan Nair reads as follows:- "57. It is true that the employees are promoted from the lower grade to upper grade as the case may be, on merits. It is true that once a workman is not always a workman. On promotion he comes out of that category. I agree that wages scales of different grades of M.R.W. are in hierarchy. But I deny there being any cooperation. I cannot say whether the employees in the lower grade have an interest in the promotional grade because of financial benefits. I say that it is not true to say that they are interested. Now the witness says that the employees will be naturally interested in promotional post because of the financial benefits and for the reasons known to them." 59. The learned single Judge vide para 22 of his judgment arrived at the conclusion as under: "The Companys witness Mr. Nayar has also admitted in his evidence existence of community of interest between them. Under the circumstances the tribunal has rightly come to the conclusion that the respondents have a substantial interest in the subject matter of the dispute and there is a community of interest between the respondents and those whose case they have espoused." 60. After quoting verbatim the relevant part of the evidence of Mr. Krishnan Nair as above, the counsel for the appellant-Company made the following submissions before the Division Bench (pages 96-97 Volume-II of the Companys appeal before this Court). "It is submitted that the Tribunal has nowhere cited the above statement of the Appellant Companys witness in support of its conclusions. It is respectfully submitted that the Learned Single Judge grievously erred in reappraising the evidence of the Companys witness on this vital issue. It is further submitted that the witness had, by his statement quoted above, stated only that the employees are interested in promotions because of the financial benefits and that the said statement by the witness, while stating the obvious which is indeed a universal fact, in no way amounted to admission of any community of interest between employees in workmen and non-workmen categories. It is respectfully submitted, to illustrate the point, that a Typist may become interest in, and may rightfully aspire form promotion at some indeterminate point in his future career to the post of Managing Director but such interest does not establish a community of interest between Typists and the Managing Director. It is submitted that no material whatsoever was placed by the Respondent Association and that no evidence was on record either before the Tribunal or before the Learned Single Judge to show community of interest between the two categories of employees. The Learned Single Judge erred in picking up an isolated statement made by the Companys witness, in total disregard of the central thrust of the whole body of his evidence and in holding that the Companys witness admitted, in his evidence, existence of such community of interest between the workmen and the non-workmen, wholly misconstruing the meaning of the evidence on a vital issue which goes to the root of the dispute and on such misinterpretation, the Learned Single Judge has built up the ratio of this Judgment on the issue of the status of the employees under the Act and the jurisdiction of the Tribunal." 61. We have perused the Division Bench judgment on this aspect. The Division Bench has not even adverted to, much less dealt with, the above submissions while confirming the learned single Judges ruling on this issue. The Division Bench has also ignored the cumulative effect of the Settlements of 1989 and 1995 which were concluded between the parties without prejudice to their respective rights and contentions on the status of the employees under the Act. 62. It is pertinent to refer to the Settlement of 1995 in this context. Clause 1 of the Settlement of 1995 concluded during the proceedings in the reference when the issue was already before the Tribunal, stated: "Clause 1 of this Settlement reads : "It is the Companys contention that a majority of the staff, on the one hand and the officers on the other are not workmen under Section 2(s) of The Industrial Disputes Act, 1947 and are also not covered by the provisions of The Payment of Bonus Act, 1965. These contentions of the Company are not, however, accepted by the Association. In the circumstances, it is agreed that this Settlement shall not be cited by either party as evidence of waiver of the contentions of the other and that both the parties shall continue to be at liberty to raise their respective contentions on these issues on all fora." 63. It is thus seen that the High Court has not only disregarded of vital facts but also misconstrued the evidence of the witness of the Company. This issue is answered accordingly in favour of the Management. The non-workmen cannot be given the status and protection available to the workmen under the Act. 64. The above submission of learned counsel for the appellant is well founded under the Act. Disputes can be raised only by the workmen with the employer. The workmen, however, can in appropriate cases espouse the cause of non-workmen if there is community of interest between the workmen and the non-workmen. In the instant case, it is an admitted fact that the community of interest or estoppel has never been pleaded and the findings rendered by the High Court on this issue is in the absence of pleadings. If the non-workmen are given the status and protection available to the workmen, it would men that the entire machinery and procedure of the Act would apply to the non-workmen with regard to their employment/non-employment, the terms of employment, the conditions of labour etc. This would cast on the appellant-Company the onerous burden of compliance with the provisions of the Act in respect of the non-workmen. In our view, the situation is not envisaged by the Act which is solely designed to protect the interests of the workmen as defined in Section 2(s) of the Act. Estimation/Computation of the total wage packet, which is a vital task in wage adjudication, has not been done by any of the Courts below. 65. It is argued that individual items in the wage packets can, and often do, vary very considerably among comparable concerns. Hence, estimation/computation of the total wage packets for different categories of employees and comparison of the total wage packets among comparable concerns is essential. As rightly pointed out by learned counsel for the appellant that none of the Courts below have admitted to estimate/compute the total wage packets resulting from their awards/judgments for any of the categories of employees. This is a fatal omission in the award/judgment. There has been no acceptable reply from counsel for the respondent-Association on this issue. 66. The basic pay and increment structure, found to be higher than in comparable concerns by the Learned Single Judge, remain unchanged by the Learned Single Judge himself or by the Division Bench. Along with the high rate of Dearness Allowance granted by the Order of the Division Bench, these have cascading effect on other items or emoluments like House Rent Allowance which is already high at 12.5% of Basic pay plus DA and Leave Travel Allowance which is fixed at one months basic pay the amounts specified in the Award. 67. The Tribunal had granted in toto the demands relating to scales of basic pay and increment structure except the demand for the merger of grades 12 and 11 into grade 09. The result has been a disproportionate increase in the basic pay and annual increments. Neither the Learned Single Judge nor the Division Bench attempted to remedy thetribunal has obviously committed an error in holding that the yearly burden on account of the award would be within the range of 3.3 crores to 3.7 crores and works out to more 6 to 7 percent of the total profits of the company. As a matter of fact the burden on account of the present award itself works out to about 25% of the gross profit and this fact will have to be borne in mind while fixing the wage structure and the concerned employees. 75. The Learned Single Judge has not however adverted to the above position anywhere else in his Judgment later. Further, he has not estimated the burden that would result from his own judgment. 76. In paragraph 22 of its Judgment, which is at pages 51-52 of Vol. I of the present appeal, the Division Bench observed inter alia: "We would be revisiting the question of financial burden at a later stage of the judgment once gain in considering the appropriate relief, if any, that should be granted in these proceedings." 77. Later in the Judgment however, vide paragraph 28 thereof which is on pages 76 to 78 of Vol. I of the present Appeal, the Division Bench, after reproducing some of the submissions made by both the parties, observed: "We have duly taken into account the rival submissions and have carefully considered the figures which have been submitted before us by both the sides. The Court will have also necessarily to have regard to the impact of the financial performance of the Company over a period of time. This includes the financial difficulties faced by the Company in 1998-99. Having regard to the financial burden under the award of the Tribunal as modified by us we are of the considered view that the award of the Tribunal as modified should be made operative not from 17th February, 1993 as directed by Industrial Tribunal but, with effect from 1st January, 1996." 78. The Division Bench failed to recognise that the relief granted as above is only a one-time relief and that it does not reduce the prospective burden of the modified Award. But for the observation that the rival submissions have been duly taken into account and carefully considered, there is no discussion or analysis of the submissions by the parties on the hotly contested issue of the financial burden of the Award vis-Ã -vis the Companys financial capacity. 79. It is further submitted that the reference to gross burden and net burden after taking into account the tax payable by the Company in the Award/Judgment of the Courts below are not relevant in view of the subsequent developments as the Appellant Company has not been paying any tax since the year 2000-2001. 80. The Division Bench, like the Learned Single Judge, has in fact nowhere estimated the financial burden that would result from its own judgment. This is an omission that is fatal to the legality of the Order impugned in the present Appeal. 81. The Industry-cum-region principle has not been followed nor have the comparisons been made in accordance with the well-settled law. 82. The Companies adopted for comparison are not comparable in terms of the nature of the business, sales turnover, employee strength, profits and other relevant parameters. The comparisons are also incorrect, as these have been made as between categories of employees, which are not comparable. 83. The Learned Single Judge, vide paragraph 31 of his Judgment which is at page 159 of Vol.II of the Companys Appeal, has observed: "The data furnished by the association in respect of the comparable concerns is also not complete in many respects. It seems that the data furnished is mainly in respect of the posts of peons, clerks, telephone operators, watchmen, supervisors etc. and it seems that the data concerning the staff and officers working in grade 00 to grade 5 is rather incomplete and sketchy. The claim of the workers will have to be examined keeping in mind these aspects of the matter." 84. The Learned Single Judge, however, has not adverted to these aspects of the matter anywhere else in his Judgment later. The Division Bench, toto, has not remedied the flaw in this aspect in its own Judgment. Assessment of the appellant-Companys financial capacity by the courts below is riddled with serious errors: 85. The Tribunal on this issue relied entirely on the data submitted by the Association in respect of the Companys financial capacity. The award dealt with this topic in two short paragraphs, namely, paras 63 and 64 thereof. "63. I have perused the Balance Sheets and the charts submitted by the Union and I am of the opinion that the information tabulated by the Union is satisfactory and correct and the computation of the gross profits is on well laid down principles of various adjudicating authorities. 64. It is the contention of the Union that the financial position of the Company is very sound. It is the Companys contention that the financial position is not very sound. It means that the financial condition of the Company is quite good." 86. In arriving at its conclusion as above, the Tribunal ignored the serious errors pointed out by the Company which may be seen on page 159 of Volume-III of the present appeal in the data submitted by the Association. The Tribunal considered average gross profit at Rs. 56.25 crores for the years 1991-92 to 1996-97, as against Rs. 34.22 crores as computed corrected by the Company. Learned single Judge vide para 28 of his judgment stated, inter alia, as under: "...It is true that the company has been registering losses in the last year but that may be particularly due to the factor of recession which has affected the industries in general. If we examine the material on record it is seen that the companys business is consistently growing." Again the learned single Judge vide para 29 of his judgment went on to observe: "In the light of the material placed before me it is not possible to agree with Mr. Rele that the companys financial position is not sound and the company is doing badly." 87. The Division Bench adopted, vide para 22 of its judgment, the gross profit for six years from 1991-92 to 1996-97 at Rs. 250.418 crores and average profit per year at Rs. 41.736 crores based on Krishnan Nairs affidavit dated 04.06.1999. In doing so, the Division Bench ignored the fact that the said data on profits included capital profits i.e., profits from sale of the shares in other companies owned by the Appellant Company and from sale of land etc. which had not accrued from the Companys normal business operations. The Division Bench in fact had before it the data on profits excluding capital profits, which the Tribunal also had before it, but failed to take these data into account. The relevant data are available vide Annexure P-4 on page 121 of Vol.I of the present Appeal. As may be seen from the said data, the total gross profit for the years from 1991-92 to 1996-97 was only Rs. 205.32 crores as computed corrected by the Company after excluding capital profits. The Division Bench also had before it relevant data for the period upto and including the year 1999-2000. Despite the declining trends in the financial performance of the Company as evident from the data, the Division Bench concluded, inter alia, vide paragraphs 19.8 and 19.9 of its Judgment, which are on pages 37-39 of Vol.I of the present Appeal, as under: "In the present case, these economic and financial indicators reflective of the performance and financial health of the employer establish beyond doubt that this is a company which is financially sound.