Case: Bank of India Vs. T.S. Kelawala and Ors

CIVIL APPEAL No. 2581 OF 1986The appellant in this case is a nationalised bank, and respondents 1 and 2 are its employees whereas respondents 3 and 4 are the Unions representing the employees of the Bank. It appears that some demands formade by the employees of all the banks were pending at the relevant time, and in support of the said demands the All India Bank Employees Association had given a call for a countrywide strike. Theissued a circular on September 23,1977 to all its managers and. agents to deduct wages of the employees who would participate in the strike for the days they go on strike. Respondents 3 and 4 i.e., the employees Unions gave a call for a four hours strike on December 29,1977. Hence, the Bank on December 27,1977 issued an Administrative Circular warning the employees that they would be committing a breach of their contract of service if they participated in the strike and that they would not be entitled to draw the salary for the full day if they did so, and consequently, they need not report for work for the rest of the working hours on that day. Notwithstanding it, the employees went on astrike from the beginning of the working hours on 29th December, 1977. There is no dispute that thefor the public covered the said four hours. The employees, however, resumed work on that day after the strike hours, and the Bank did not prevent them from doing so. On January 16, 1978, the Bank issued a Circular directing its managers and agents to deduct the full days salary of those of the employees who had participated in the strike. The respondents filed a writ petition in the High Court for quashing the circular. The petition was allowed. The Bank preferred a Letters Patent Appeal in the High Court which also came to be dismissed. Hence, the present appeal.CIVIL APPEAL No. 855 OF 1987 The facts in this case are different from those in the earlier appeal. In this case, the allegation of the employer Company is that the workers had indulged inand as a result there was negligible production in the month of July 1984. The workers did not attend to their duty and only loitered in the premises and indulged intactics only with a view to pressurise the Company to concede demands. The Company was, therefore, compelled to suspend its operation by giving a notice of lock out. According to the Company, therefore, since the workers had not worked during all the working hours, they had not earned their wages. Hence, the Company did not pay the workers their wages for the entire month of July 1984. The workers Union, therefore, filed a complaint before the Industrial Court under the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971 (MRTU & PULP Act, for short) complaining that the Company had indulged in unfair labour practice mentioned in Item 9 of Schedule.4, from 7th August 1984 which was the date for payment of salary for the month of July 1984 and under Item 6 of Schedule.2 of that Act with effect from 14th August 1984 since the Company had declared afrom that day. It was also alleged that since no specific date of the commencement of the allegedhad been specified, it was an illegal one.32. It appears that the Company had declared theby notice dated July 30,1984 and the lock out was effected from August 14,1984. Subsequently, there was negotiations between the Union and the Company, and a settlement was reached on October 15, 1984 as a result of which the lock out was lifted with effect from October 16,1984. The terms of the settlement were formally reduced to writing on November 30,1984.33. In this appeal, we are not concerned with theand the subsequent settlement, The question that falls for consideration before us is whether the Company was justified in denying to the workers the full monthly wages for the month of July 1984. On this question, the Industrial Court accepted the oral testimony of the Companys witnesses that the workmen had not at all worked for full eight hours on any day in July 1984 and that they were working intermittently only for some time and sitting idle during the rest of the day. On an average the workers had not worked for more than one hour and 15 to 20 minutes per day, during that month. The Industrial Court did not accept the evidence of the Unions witness that the witness and the other workmen had worked on all the days during the entire month of July 1984 because he admitted that after the Company told the workers that it could not concede to the demands, the workers had started staging demonstration. Although the witness denied that from July 3,1984 the workers started indulging inhe admitted that the Company was displaying notices from time to time with effect from July 4,1984 alleging that the workers were not giving production and that they were loitering here and there. According to the Industrial Court in the circumstances, it did not see any good reason to disbelieve the Companys witnesses. The Court further held that normally in view of this evidence on record, it would have held that the pro rata deduction of wages made by the Company for the month of July 1984 would not amount to an act of unfair labour practice falling under Item 9 of Schedule IV of the MRTU and PULP Act. However, in view of the two judgments of the Bombay High Court in T.S. Kelwala & Ors. v. Bank of India & Ors. [(1981) 43 FLR 341] ie. the one impugned in the earlier appeal and Apar (Pvt) Ltd. v. S.R. Samant & Ors, [(1980) II LLJ 344], the Court had to hold that theof full wages to the workmen for the month of July 1984 was an act of unfair labour practice falling under the said provision of the Act. The Court further held that admittedly the workers were notand there was no agreement or settlement allowing the Company to deduct wages on the ground that they were indulging inor that they had not given normal production. According to the Court, the remedy of the Company against the workmen may lie elsewhere. Thus, the Court taking sustenance from the Bombay High Court Judgments referred to above held that the deduction of wages during the month of July, 1984 on account of thewas not justified, and declared that the Company had committed an unfair labour practice by not paying full monthly wages to the workmen, and directed the Company to pay the said wages for the month of July 1984. It is this order ofCourt which is challenged directly in this Court by the present appeal.34. Since one of the two decisions of the Bombay High Court on which the Industrial Court relied was rendered in another context and it has already been discussed in the other appeal, we may refer here only to the other decisions, viz., Apart (Pvt.) Ltd. v. S.R. Samant & Ors. (supra) which is pressed in service before us on behalf of the workmen. The facts in that case were that by a settlement dated August 3, 1974 the workmen were allowed increase in the basic wages, dearness allowance, house rent, etc.. in addition to the production bonus in terms of a scheme. That settlement was binding on the parties upto the end of April 1977. The matters ran a smooth course till August 1975. However, from September 1975, the Company refused to pay the production bonus and with effect from 15th October, 1975 it refused to pay the wages, dearness allowances etc. as per the settlement. On August 21,1975, a notice was put up by the Company stating that because of the attitude of indiscipline on the part of the workers and deliberatetactics resulting in low production, the management was relieved of its commitments and obligation imposed upon it by, the settlement. A notice in terms of S.9A of the Industrial Disputes Act, 1947 was also put up indicating a certain scale of wages to which only the workers would be entitled. These wages were not more than the wages under the Minimum Wages Act and were even less than what was agreed to in the earlier agreement of January 23,1971. A complaint was, therefore, filed under the MRTU & PULP Act before the Industrial Court, and the Industrial Court recorded a finding that the figures of production produced by the Company before it related only to few departments. Out of total of 700 employees who were working earlier, 116 were retrenched at the relevant time. The Companys allotment of material, viz, aluminium was also reduced from 7390 metric tonnes to 2038 and there was no supply of even that allotted quantity. The Court further referred to certain inconsistent statements made by theand held that the management had failed to discharge the burden of proof of justifying the drastic reduction of the wages and other emoluments. The Court therefore recorded a finding that the Company had engaged in an unfair labour practice. Against the said decision, the Company preferred a writ petition before the High Court. The High Court on these facts held that the wages could be deducted only in terms of a statutory provision or of a settlement. A reduction of wages on the allegation that the workers in general had resorted toas wholly impermissible in law specially when the workmen were notemployees. The High Court referred to the case where reduction of wages for absence from duty for striking work was held as valid such as Manoj Kanti Bose & Ors v. Bank of India & Ors. (supra), V. Ramachandran v. Indian Bank (supra), Algemene Bank Nederland, v. Central Government Labour Court, Calcutta (supra) and held that those cases were distinguishable because they, related to absence from duty and not go

Court's reasoning:
We thought that the answer to this question was apparent enough and did not require much discussion. However, the question has assumed a different dimension in the present case because on the facts, it is contended that although the employees went on strike only for four hours and thereafter resumed their duties, the Bank has deducted wages for the whole day. It is contended that in any case this was impermissible and the Bank could at the most deduct only pro rata wages. Normally, this contention on the part of the workers would be valid. But in a case such as the present one, where the employees go on strike during the crucial working hours which generate work for the rest of the day, to accept this argument is in effect to negate the purpose and efficacy of the remedy, and to permit its circumvention effectively. It is true that in the present case when the employees came back to work after theirstrike, they were not prevented from entering the Bank premises. But admittedly, their attendance after thestrike was useless because there was no work to do during the rest of the hours. It is for this reason that the Bank had made it clear, in advance, that if they went on strike for theas threatened, they would not be entitled to the wages for the whole day and hence they need not report for work thereafter. Short of physically preventing the employees from resuming the work which it was unnecessary to do, the Bank had done all in its power to warn the employees of the consequences of their action and if the employees, in spite of it, chose to enter the Banks premises where they had no work to do, and in fact did not do any, they did so of their own choice and not according to the requirement of the service or at the direction of the Bank. In fact, the direction was to the contrary. Hence, the later resumption of work by the employees was not in fulfilment of the contract of service or any obligation under it. The Bank was therefore not liable to pay either full days salary or even the pro rata salary for the hours of work. that the employees remained in the Bank premises without doing any work. It is not a mere presence of the workmen at the place of work but the work that they do according to the terms of the contract which constitutes the fulfilment of the contract of employment and for which they are entitled to be paid.6. It is also necessary to state that though, before the High Court, reliance was placed by the Bank on the provisions of S.7(2)(b) read with S.9 of the Payment of Wages Act, 1936 for a right to deduct the wages for absence from duty, there is nothing on record to show that the provisions of the said Act have been made applicable to the Bank. However, assuming that the Act was applicable to the Bank, we are of the opinion that the relevant discussion of the High Court has missed the contentions urged by the Bank on the basis of the said provisions. What was urged by the Bank was that the said provisions enabled it to deduct wages for absence from duty. Hence, even if the Service rules/regulations were silent on the point, the Bank could legally deduct the wages under the said provisions. The High Court has reasoned that the power given by the said provisions comes into play only when the employer has power to do so, probably meaning thereby, the power under the Service rules/ regulations. We are unable to appreciate this reasoning, which to say the least, begs the question. It is, therefore, necessary to point out that if the Act was applicable, the Bank would certainly have had the power to deduct the wages under the said provisions in the absence of any service rule/regulation to govern the situation.7. Since the admitted position is that the service rules do not provide for such a situation, the question as stated earlier which requires to be answered in the present case, is whether there exists an implied right in theto take action as it has done. There is no dispute that although the service regulations do not provide for a situation where employees on a mass scale resort to absence from duty for whole day or a part of the day whether during crucial hours or otherwise, they do provide for treating an absence from duty of an individual employee as a misconduct and for taking appropriate action against him for such absence. Since the High Court has indicated a disciplinary action under the said provision even in the present circumstances, we will also have to deal with that aspect. But before we do so, we may examine the relevant authorities cited at theare inclined to hold that the stoppage of work for the period for about 2 to 4 hours in the circumstances of the case is not to be regarded as a strike so as to amount to a break in the continuity of service of the workman concerned". In the result, the Tribunal allowed the Unions appeal and ordered that holidays at full rates as provided for inof the Factories Act will have to be calculated on the footing that there was no break in the continuity of service. This Court set aside the finding of the Appellate Tribunal by holding that it could not be disputed that there was a cessation of work by a body of persons employed in the Mills and that they were acting in combination and their refusal to go back to work was concerted, and the necessary ingredients of the definition of "strike" in S.2(q) of the Industrial Disputes Act existed and it was not a case of an individual workers failure to turn up for work. Hence, it was an illegal strike because no notice had been given to the management, the Mills being a public utility industry.The decisions including the one impugned in this appeal which have taken the view which is either contrary to or inconsistent with the above conclusions, have done so because they have proceeded on certain wrong presumptions. The first error, as we have pointed out at the outset, is to confuse the question of the legitimacy of the strike as a weapon in the workers hands with that of the liability to lose wages for the period of strike. The working class has indisputably earned the right to strike as an industrial action after a long struggle, so much so that the relevant industrial legislation recognises it as their implied right. However, the legislation also circumscribes this right by prescribing conditions under which alone its exercise may become legal. Whereas, therefore, a legal strike may not invite disciplinary proceedings, as illegal strike may do so, it being a misconduct. However, whether the strike is legal or illegal, the workers are liable to lose wages for the period of strike. The liability to lose wages does riot either make the strike illegal as a weapon or deprive the workers of it. When workers resort to it, they do so knowing full well its consequences. During the period of strike the contract of employment continues but the workers withhold their labour. Consequently, they cannot expect to be paid.27. The second fallacy from which the said decisions suffer is to view the contract of employment as an indivisible one in terms of theWhen it is argued that the wages cannot be deducted pro rata for the hours or for the day or days for which the workers are on strike because the contract, which in this case is monthly, cannot beinto days and hours, what is forgotten is that, in that case if the contract comes to an end amidst a month by death, resignation or retirement of the employee, he would not be entitled to the proportionate payment for the part of the month he served. This was the iniquitous and harsh consequence of the rule of indivisibility of contract laid down in an English case, Cutter v. Powell [(1795) 6 TR 3201 which was rightly vehemently criticised and later, fortunately not followed. If theis held indivisible, it will be so for both the parties. We are also unable to see any difficulty, inequity or impracticability in construing the contract as divisible into different periods such as days and hours for proportionate reimbursement or deduction of wages, which is normally done in practice.28. The third fallacy was to equate disputedwith admitted mass conduct. A disciplinary proceeding is neither necessary for feasible in the latter case. The contract of employment, Standing Orders or the service rules provide for disciplinary proceedings for the lapse on the part of a particular individual or individuals when the misconduct is disputed. As things stand today, they do not provide a remedy forwhich is admitted or cannot be disputed. Hence, to drive the management to hold disciplinary proceedings even in such cases is neither necessary nor proper. The service conditions are not expected to visualise and provide for all situations. Hence, when they are silent on unexpected eventualities, the management should be deemed to have the requisite power to deal with them consistent with law and the other service conditions and to the extent it is reasonably necessary to do so. The prorate deduction of wages is not an unreasonable exercise of power on such occasions. Whether on such occasions the wages are deductible at all and to what extent will, however, depend on the facts of each case. Although the employees may strike only for some hours but there is no work for the rest of the day as in the present case, the employer may be justified in deducting salary for the whole day. On the other hand, the employees may put in work after the strike hours and the employer may accept it or acquiesce in it. In that case the employer may not be entitled to deduct wages at all or be entitled to deduct them only for the hours of strike. If further statutes such as the Payment of Wages Act or the State enactments like the Shops and Establishments Act apply, the employer may be justified in deducting wages under their provisions. Even if they do not apply, no thing prevents the employer from taking guidance from the legislative wisdom contained in it to adopt measures on the lines outlined therein, when the contract of employment is silent on the subject.29. It is, however, necessary to reiterate that even incases such as the present one where action is resorted to on a mass scale, some employees may not be a party to the action and may have genuinely desired to discharge their duties but could not do so for failure of the management to give the necessary assistance or protection or on account of other circumstances. The management will not be justified in deducting wages of such employees without holding an inquiry. That, however, was not the grievance of any of the employees in the present case, as pointed out earlier.There cannot be two opinions thatis a serious misconduct being a coven and a more damaging breach of the contract of employment. It is an insidious method of undermining discipline and at the same time a crude device to defy the norms of work. It has been roundly condemned as an industrial action and has not been recognised as a legitimate weapon of the workmen to redress their grievances. Infact the model standing orders as well as the certified standing orders of most of the industrial establishments define it as a misconduct and provide for a disciplinary action for it. Hence, once it is proved, those guilty of it have to face the consequences which may include deduction of wages and even dismissal from service.37. But by its very nature, the proof ofparticularly when it is disputed, involves investigation into various aspects such as the nature of the process of production, the stages of production and their relative importance, the role of the workers engaged at each stage of production, theactivities and the facilities for production and the activities of the workmen connected therewith and their effect on production, the factors bearing on the average production etc. Thefurther may be indulged in by an individual workman or only some workmen either in one section or different sections or in one shift or both shifts affecting the output in varying degrees and to different extent depending upon the nature of product and the productive process. Even where it is admitted,may in some case present difficulties in determining the actual or approximate loss, for it may have repercussions on production after theceases which may be difficult to estimate. The deduction of wages formay, therefore, present difficulties which may not be easily resoluble. When, therefore, wages are sought to be deducted for breach of contract on account ofthe quantum of deduction may become a bone of contention in most of the cases inevitably leading to an industrial dispute to be adjudicated by an independent machinery statutory or otherwise as the parties may resort to. It is necessary to emphasize this because unlike in the case of a strike where a simple measure of a pro rata deduction from wages may provide a just and fair remedy, the extent of deduction of wages on account of aaction may in some case raise a complex question. The simplistic method of deducting uniform percentage of wages from the wages of all workmen calculated on the basis of the percentage fall in production compared to the normal or average production may not always be equitable. It is, therefore, necessary that in all cases where the factum ofand/or the extent of the loss of production on account of it, is disputed, there should be a proper inquiry on charges which furnish particulars of theand the loss of production on that account. The rules of natural justice require it, and whether they have been followed or not will depend on the facts of each case.38. In the present case, the Industrial Court, as pointed out earlier, has accepted the evidence of the witness of the Company that the workmen had not worked for full eight hours on any day in the month concerned, namely July 1984, and that they were working intermittently only for sometime and were sitting idle during the rest of the time. According to him, the workers had worked hardly for an hour and 15 to 20 minutes on an average during the said month. The witness had also produced notices put up by the Company from time to time showing the daily fall in the production and calling upon the workmen to resume normalcy. There is further no dispute that the copies of these notices were sent to the Union of the workmen as well as to the Government Labour Officer. The Industrial Court did not accept the evidence of the workmen that there was noas alleged by the Company. Accordingly, the Industrial Court has recorded a finding that the pro rata deduction of wages made by the Company for the month of July 1984 did not amount to an act of unfair labour practice within the meaning of the said Act. It does not further appear from the record of the proceedings before the Industrial Court that any attempt was made on behalf of the workmen to challenge the figures of production produced by the Company. These figures show that during the entire month of July 1984, the production varied from 7.06 per cent to 13.9 per cent of the normal production. The Company has deducted wages on the basis,of each days production. In view of the fact that there is a finding recorded by the Industrial Court that there wasresorted toby the workmen and the production was as alleged by the Company during the said period, which finding is not challenged before us, it is not possible for us to interfere with it in this appeal. As stated above, all that was challenged was the right of the employer to deduct wages even when admittedly there is awhich question we have answered in favour of the employer earlier. The question with regard to the quantum of deduction from the wages, therefore, does not arise before us for consideration. It is, however, likely that the workmen did not question the figures of production before the Industrial Court because they were armed with the two decisions of the High Court (supra) which accordinghad negatived the right of the employer to deduct wages even in such circumstances. While, therefore, allowing the appeal, we direct that the appellant will not deduct more than 5 per cent of the wages of the workmen for the month of July 1984.