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

Civil Appeal No. 5601 of 2001 was filed by the appellant-Company against the common final judgment and order of the Division Bench of the High Court of Judicature at Bombay in Appeal No. 194 of 2000. The said appeal was filed by the Company against the judgment dated 01.12.1999 of the learned single Judge in Writ Petition No. 1705 of 1998 which was filed by the Company against the award of the Industrial Tribunal in Reference being Reference (IT) No. 3 of 1993 which arose out of the demands of the respondent-Union. 3. Civil Appeal Nos. 7340 and 7341 of 2001 were filed by the Union against the judgment and order in Appeal No. 441 of 2000 which was filed by the Union impugning the judgment dated 01.12.1999 of the learned single Judge in Writ Petition No. 1705 of 1998 by which the single Judge had reduced the extent of dearness allowance granted under the award of the Industrial Tribunal. 4. We shall take Civil Appeal No. 5601 of 2001 filed by the Company against the judgment and order of the Division Bench for consideration and the decision taken on this appeal will also govern the other two appeals filed by the Staff and Officers Association in Civil Appeal Nos. 7340 and 7341 of 2001. 5. The appellant-Company concluded a Settlement with the respondent-Association on 14.08.1974 whereby welfare scheme for the staff and officers, jointly funded and managed by the Company and the Association did not create any condition of service. The Company concluded a settlement on 09.06.1982 covering service conditions of all staff and officers including those in Grades 01 and 00. According to the Management, this was a unique settlement in that at the instance the Chairman and Managing Director of the Company, the Association determined for itself and recommended the quantum of increase in emoluments for the staff and officers which the Company accepted and implemented through the said settlement. On 24.02.1989, the appellant-Company concluded a Settlement with the respondent-Association which stated, inter alia, that "It is the Companys contention that a substantial number of the staff, not being workmen under Section 2(s) of the Industrial Disputes Act, 1947 (hereinafter referred to as the Act) are not covered by the provisions of the Act. Without prejudice to the rights and contentions of both the parties with regard to the applicability of the provision of the Act, the parties have reached a comprehensive Settlement covering in addition to the demands made in the said Charter of Demands, the issue of annual bonus as well, under Section 12(3) and 18(3) of the Act read with Rule 62 of the Industrial Disputes (Bombay) Rules, 1957 in conciliation proceedings on the following terms". "This Settlement did not cover employees in Grade 01 and 00 who are General Foremen or Senior Officers and Asstt. General Foremen or Officers". 6. On 04.11.1991, the respondent-Association served a Charter of Demands on the Company. Failure report was submitted by Conciliation Officer on 31.10.1992. The Government of Maharashtra, by its Order dated 17.02.1993, referred the dispute for adjudication to the Industrial Tribunal. The text of the Order issued by the Government of Maharashtra is reproduced below: "ORDER Industrial Disputes Act, 1947:- No. ADM 3092/21867/CR 2001/Lab-3.- Whereas the Government of Maharashtra has considered the report submitted by the conciliation Officer under sub-section (4) of section 12 of the Industrial Disputes Act, 1947 (XIV of 1947), in respect of the dispute between M/s. Mukand Ltd., L.B.S. Marg, Kurla, Bombay 400 070 and the workmen employed under them, over the demands mentioned in the schedule appended hereto. And whereas the Government of Maharashtra after considering the aforesaid report is satisfied that there is a case for reference to the dispute to an Industrial Tribunal. Now, therefore, in exercise of the powers conferred by clause (d) of sub-section (1) of section 10 read with sub-section (5) of section 12 of the Industrial Disputes Act, 1947, the Government of Maharashtra hereby refers the said dispute for adjudication to an Industrial Tribunal, Bombay consisting of Shri G.S. Baj, Member constituted under Government Notification, Industries, Energy and Labour Department, No. IDA 0392/CR 69/Lab-3, dated the 31st March, 1992." 7. The respondent-Association filed its Statement of Claims. The appellant-Company filed its written statement setting out in detail how the demands raised by the respondent-Association, which according to them, were unreasonable and pointing out that the financial position of the Company was notwas also pointed out that barring a few categories of employees, the bulk of employees were not workmen as defined under the Act and that the Industrial Tribunal had no jurisdiction to grant any relief to the employees who are not workmen under the Act. 8. The Tribunal, by its Part-I Award, directed an ad hoc payment of Rs. 500/- per month to all employees in grades 12-00. The appellant-Company on its own effected an additional ad hoc payment in varying amounts grade-wise to employees in grades 00-09. The Tribunal, by its interim Award Part-II, directed payment of employees on the basis of basic pay slab ad hoc amount ranging from Rs. 375/- to Rs. 1050/- per month to employees who had not been granted additional ad hoc payment by the appellant-Company. The High Court, by its judgment and order dated 27.01.1996 in Writ Petition No. 342 of 1996 filed by the company against the said Awards, directed the Company to deposit the amounts payable under the interim Award Part-II in the Provident Fund Accounts of the concerned employees instead of disbursing the same to them, and directed the Tribunal to dispose of the Reference on or before 30.04.1996. 9. On 11.12.1995, the appellant-Company and the respondent-Association concluded a Settlement on annual bonus for four years, without prejudice to their respective rights and contentions as stated in Clause 1 of the said settlement which stated as under: "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." 10. An affidavit by the Vice-President of the Company - Mr. Krishnan Nair was also filed before the Tribunal affirming the designations and categories of employees of the appellant-Company who are not "workmen" under the Act. The Tribunal passed an award on 26.03.1998 and held that the appellant was purportedly estopped from contending that the employees were not workmen under the Act and granted all the major demands, including revision in basic salaries, clearness allowance, etc. in toto and rejected certain demands like computer allowance, shift allowance also insingle Judge passed another Order on the same date in the Companys Writ Petition No. 1704 of 1998 against another Award passed by another Tribunal in Reference (IT) No. 70 of 1998 relating to the Companys daily-rated workmen at its factory at Kurla while admitting the said writ petition, directing the Company to pay to the said daily-rated workmen 50% of the increase in the allowances granted by the said Award except certain allowances specified therein. The appellant filed an appeal before the Division Bench against the said interim order dated 05.10.1998. The appeal was disposed of stating that the said order was a discretionary order and did not warrant any interference at the interim stage.The Association filed contempt petition in the High Court on the ground that the Company was deducting from retrial benefits of the employees the amount that were paid to them under the interim order dated 05.10.1998. By its order dated 19.02.2000 in the said petition, the Company was directed to deposit in the High Court a sum of Rs. 9,52,205/- recovered thus from the employees. 13. The Vice President of the Company filed an affidavit before the learned single Judge on 24.06.1999 whereby he placed on record the facts on the financial position of the Company. The affidavit affirmed, inter alia, the fact that CRISIL progressively down-graded the Companys financial standing and that by its letter dated 01.04.1999, the said credit rating agency further down-graded followed the down-grading done earlier as under:-14. The said letter from CRISIL showed that the rating "AA" indicated "high safety", while "BB" indicated "Inadequate Safety". The rating as above showed that the Company had been down-graded by as many as 9 notches between 1995 and 1999. 15. On 01.12.1999, the learned single Judge passed judgment and order modifying the impugned Award and held that there was community of interest between the workmen and non-workmen as they worked and functioned in the same grades and that the Company had concluded Settlements covering both categories of employees in the past, and further that in the facts of the case, the workmen could espouse the cause of the non-workman. The learned single Judge disallowed the granting of one component of D.A. viz., basic linked variable D.A. He conformed all other increases in emoluments granted by the Tribunal. The Review Petition filed by the Association against the judgment of the learned single Judge was also rejected by Order dated 15.02.2000. Both the appellant and the respondent preferred separate appeals challenging the judgment of the learned single Judge. In the appeal, the Company filed its Annual Report for the year 1999-2000 which reported a profit of Rs. 5.85 crores but showed that when capital profits i.e. profits from sale of land and of shares owned by the Company in the companies are excluded, there was, in fact, a loss amounting to Rs. 9.45 crores. The Company also submitted statements relating to basic pay etc. to the Division Bench during the course of hearing. According to the appellant-Company, they suffered a loss of Rs. 40 crores during the financial year 2000-01 as per the audited financial results and a chart showing the financial position of the Company from 1991-92 to 2000-01 was also filed. 16. The Division Bench passed its judgment partially modifying the learned single Judges Order by reducing (i) one of the 3 components of Dearness Allowance granted by the Tribunal viz. the D.A. fixed in terms of percentages of basic pay, grade-wise (ii) the number of service increments; (iii) the gratuity from 21 days to 15 days; and (iv) by changing the effective date for increase in emoluments from 17.02.1993 to 01.01.1996. The Division Bench affirmed the decision of the learned single Judge on all other points. The Order casts as retrospective burden of approximately Rs. 35 crores upto March, 2001 and prospective gross burden of Rs. 7 crores per annum. 17. As already stated, the special appeals were filed against the common judgment by the respective parties

Court's reasoning:
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.