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CASE NO.: Appeal (civil)  9442 of 2003

PETITIONER: CEAT Ltd.                                                                

RESPONDENT: Anand Abasaheb Hawaldar & Ors.                   

DATE OF JUDGMENT: 16/02/2006

BENCH: ARIJIT PASAYAT & R.V. RAVEENDRAN

JUDGMENT: J U D G M E N T

ARIJIT PASAYAT, J.          

Challenge in this appeal is to legality of the judgment  rendered by a Division Bench of the Bombay High Court in a  Letters Patent Appeal affirming judgment of a learned Single  Judge.  By the said judgment learned Single Judge had  confirmed the order passed by the Industrial Court, Thane  Maharashtra (in short ’Industrial Court’).  

The controversy involved in the present appeal arises in  the following background:

By Circular dated 30th June, 1992 the appellant - a  public limited company incorporated under the Companies  Act, 1956 declared a Voluntary Retirement Scheme  (hereinafter referred to as the ’VRS-I’) for its employees which  was accepted by the 337 employees. On 16th March, 1994 the  appellant entered into a Memorandum of Understanding with  the employees’ Union containing another Voluntary  Retirement Scheme (hereinafter referred to as the ’VRS-II’).   The same was accepted by 179 employees. Respondents 1 to 6  who had earlier accepted VRS-I filed a complaint before the  Industrial Court, Thane on 20th July, 1994 alleging that the  appellant-company had committed an unfair labour practice  in terms of item nos.5, 9 and 10 of Schedule IV of the  Maharashtra Recognition of Trade Unions & Prevention of  Unfair Labour Practices Act, 1971 (in short the ’Act’). It was  contended that one of the benefits which was given to the  employees who had accepted VRS-II, namely payment of a  sum of Rs.90,000/- ex-gratia, had not been extended to the  complainants who had retired pursuant to VRS-I in 1992.   This according to them was illegal, unlawful and amounted to  unfair labour practice.  The Industrial Court after considering  the materials placed before it came to hold that the grievances  of the complainants were well founded.  Accordingly, by award  dated 24.10.1996, it directed the appellant to pay Rs.90,000/-  to each of the employees who had retired under VRS-I, as  similar sum had been paid to 179 employees who had  accepted VRS-II in 1994.  The order passed by the Industrial  Court was challenged by the appellant by filing a writ petition  in the Bombay High Court.  A learned Single Judge dismissed  the writ petition by judgment dated 11.7.2001. In fact the  learned Single Judge, modified the award by granting  additionally, interest at 6% P.A. from 15.4.1994 till date of  payment.  A Letters Patent Appeal was filed before the Division

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Bench which was also dismissed by the impugned judgment  dated 12/13-6-2003.  

It is to be noted that before the High Court the following  grievances were made by the employer:-

(i)     A complaint of unfair labour practice could be filed only  by a recognized union and not by an individual workman  or some of them. Therefore, in a complaint filed by 6  employees, relief could not be granted to 337 employees.  (ii)    In order to sustain the grievance under Item (5) of  Schedule IV to the Act, something more than mere  differential treatment was necessary to be established.  It  was incumbent upon the claimants to show that there  was any favouritism or partiality shown to one set of  workers regardless of merits. (iii)   In order to sustain the grievance under Item (9) of  Schedule IV to the Act, it was to be established that there  was failure to implement any award, settlement,  agreement, and  (iv)    In order to sustain the grievance under Item (10) of  Schedule IV to the Act, it was to be established that the  employer had indulged in act of force or violence.

       The High Court found that the plea regarding  maintainability of the complaint by individual workman was  not correct. Further it held that in view of the clear statement  in the letter dated 11.7.1992 made by Sri P. Krishnamurthy,  Vice-President of the Company, there was an assurance that  all the employees who would accept the VRS-I would be  entitled to all benefits which would be given to other  employees and that those who would not accept VRS-I would  not be paid anything more. Therefore, the High Court held that  the fact that Rs.90,000/- was paid to those who accepted  VRS-II clearly indicated discrimination. Accordingly, the orders  of the Tribunal and learned Single Judge were confirmed by  the Division Bench.

       In support of the appeal Mr. T.R. Andhyarujina, learned  senior counsel submitted that the approach of the High Court  is clearly erroneous. Firstly, it was submitted that the  complaint itself was not maintainable before the Industrial  Court as the complainants, at the relevant point of time, were  not workmen. Additionally, Items 5, 9 and 10 of the Schedule  IV had no application to the facts of the case.  There was no  discrimination, favouritism or partiality whatsoever in any  manner.  Those who are covered by VRS-II stood at a different  footing from those who accepted VRS-I and, therefore, the  complaint should not have been entertained.  It was further  submitted that mere fact that subsequently some more  amount had been paid does not per se establish favouritism or  partiality. The Industrial Court and the High Court did not  consider the distinguishing features.  Unnecessary emphasis  was laid on the letter written by the Vice-President referred to  above.  There was no award or agreement, or settlement which  as alleged was not implemented.  No evidence was led to show  that there was any award or agreement or settlement which  was to be enforced.  Similarly, there was no evidence led to  show that the appellant had indulged in any act of force or  violence.   

       Learned counsel for the respondents on the other hand  submitted that factual findings have been recorded by the  Tribunal which have been endorsed by learned Single Judge  and the Division Bench that the act of paying an amount

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higher than what was paid to those who had accepted VRS-I  itself showed favouritism and partisan approach.  VRS-I which  was accepted by 337 employees was not voluntary and was on  account of the threat perceptions.

       In order to appreciate rival submission the entries in  Schedule IV of the Act need to be noted.  They read as follows:-

SCHEDULE \026 IV General Unfair Labour Practices on the part of  Employers  

1.      To discharge or dismiss employees -         (a) by way of victimization;

(b) not in good faith, but in colourable  exercise of employer’s rights;

(c)     by falsely implicating an employee in  a criminal case on false evidence or  on concocted evidence;

(d) for patently false reasons;

(e)     on untrue or trumped up allegation of  absence without leave;

(f) in utter disregard of the principles of  natural justice in the conduct of  domestic enquiry or with undue  haste;

(g) for misconduct of a minor or technical  character, without having any regard  to the nature of the particular  misconduct or the past record of  service of the employee, so as to  amount to a shockingly  disproportionate punishment.

2.      To abolish the work of a regular nature  being done by employees, and to give  such work to contractors as a measure of  breaking a strike.

3.      To transfer an employee mala fide from  one place to another, under the guise of  following management policy.

4.      To insist upon individual employees, who  were on legal strike, to sign a good  conduct-bond, as a pre-condition to  allowing them to resume work.

5.      To show favouritism or partiality to one  set of workers, regardless of merits.

6.      To employ employees as "badlis", casuals  or temporaries and to continue them as  such for years, with the object of  depriving them of the status and  privileges of permanent employees.

7.      To discharge or discriminate against any  employee for filing charges or testifying

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against an employer in any enquiry or  proceeding relating to any industrial  dispute.

8.      To recruit employees during a strike  which is not an illegal strike.

9.      Failure to implement award, settlement  or agreement.

10.     To indulge in act of force or violence."

              It will be appropriate to first deal with Item (5) which  relates to the act of favouritism or partiality by the employer to  one set of workers regardless of merit.

       The factual background which is virtually undisputed is  that the appellant-company took over Murphy India Ltd.  (hereinafter referred to as the ’Murphy’). Murphy had merged  with the appellant-company pursuant to the order of Board of  Industrial & Financial Reconstruction (in short ’BIFR’). Due to  recession in the consumer electronic industry, the  undertaking became unviable.  Before the VRS I and II the  appellant-company had introduced VRS Schemes in October,  1983 and February, 1988.  All the employees who were  covered by the VRS I and II were ex-Murphy employees.

       According to learned counsel for the appellant, a  complaint of unfair labour practice can be made only by the  existing employees.  Under clause (5) of Section 3 of the Act  the expression "employee" only covers those who are workmen  under clause (s) of Section 2 of the Industrial Disputes Act,  1947 (in short the ’ID Act’).  The expression "workman" as  defined in clause (s) of Section 2 of the ID Act relates to those  who are existing employees.  The only addition to existing  employees, statutorily provided under Section 2(s) refers to  dismissed, discharged and retrenched employees and their  grievances can be looked into by the forums created under the  Act. In the instant case, the complainants had resigned from  service by voluntary retirement and, therefore, their cases are  not covered by the expression ’workman’.  On the factual  scenario, it is submitted that after the 337 employees had  accepted VRS-I, others had raised disputes and had gone to  Court. Order was passed for paying them the existing salary  and other emoluments. This went on nearly two years and,  therefore, with a view to curtail litigation a Memorandum of  Understanding was arrived at in 1994. This basic difference in  the factual background was not noticed by either the  Industrial Court or the High Court.   

In Item (5) of Schedule IV to the Act, the Legislature has  consciously used the words ’favouritism or partiality to one set  of workers’ and not differential treatment. Thus, the mental  element of bias was necessary to be established by cogent  evidence.  No evidence in that regard was led. On the contrary  the approach of the Industrial Court and the High Court was  different. One proceeded on the basis of breach of assurance  and the other on the ground of discrimination.  There was no  evidence brought on as regards the pre-requisite i.e.  favouritism or partiality.  Favouritism means showing favour  in the matter of selection on circumstances other than merit.   (per Advanced Law Lexicon by P.Ramanatha Aiyar, 3rd Edition,  2005).  The expression ’favouritism’ means partiality, bias.   Partiality means inclination to favour a particular person or

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thing. Similarly, it has been sometimes equated with  capricious, not guided by steady judgment, intent or purpose.  Favouritism as per the Websters’ Encyclopedic Unabridged    Dictionary means the favouring of one person or group over  others having equal claims. Partiality is the state or character  being a partial, favourable, bias or prejudice. According to Oxford English Dictionary "favouritism"  means - a deposition to show, or the practice of showing  favour or partiality to an individual or class, to the neglect of  others having equal or superior claims; under preference.  Similarly, "partiality" means the quality or character of being  partial, unequal state of judgment and favour of one above the  other, without just reason.  Prejudicial or undue favouring of  one person or party: or one side of a question; prejudice,  unfairness, bias. Bias may be generally defined as partiality or preference.  It is true that any person or authority required to act in a  judicial or quasi-judicial matter must act impartially.  "If however, ’bias’ and ’partiality’ be defined to  mean the total absence of preconceptions in  the mind of the Judge, then no one has ever  had a fair trial and no one ever will. The  human mind, even at infancy, is no blank  piece of paper. We are born with  predispositions and the processes of  education, formal and informal, create  attitudes which precede reasoning in  particular instances and which, therefore, by  definition, are prejudices." (per Frank, J. in  Linahan, Re, (1943) 138 F 2d 650, 652).  

It is not every kind of differential treatment which in law  is taken to vitiate an act. It must be a prejudice which is not  founded on reason, and actuated by self-interest - whether  pecuniary or personal.  Because of this element of personal interest, bias is also  seen as an extension of the principles of natural justice that  no man should be a judge in his own cause. Being a state of  mind, a bias is sometimes impossible to determine. Therefore,  the courts have evolved the principle that it is sufficient for a  litigant to successfully impugn an action by establishing a  reasonable possibility of bias or proving circumstances from  which the operation of influences affecting a fair assessment of  the merits of the case can be inferred. As we have noted, every preference does not vitiate an  action. If it is rational and unaccompanied by considerations  of personal interest, pecuniary or otherwise, it would not  vitiate a decision. The above position was highlighted in G.N.  Nayak v. Goa University and Ors. (2002 (2) SCC 712).  The factual scenario does not establish any favouritism  or partiality. When VRS-I Scheme was introduced same was  offered to every employee.  It is nobody’s case that there was  any hidden intent and/or that the employer had any previous  knowledge at the time of introducing the scheme that some of  the employees would not accept it. It is not the case of the  complainants that the employer had at that point of time  intended to pay something more to those who did not accept  VRS-I. The Memorandum of Understanding which was the  foundation for the VRS-II, of course gives a different package,  but on the clear understanding that litigations of all types  were to be withdrawn.  

In order to bring in application of Item 9, it was  submitted by the respondents that there was an  agreement/assurance which was not implemented. It has been

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urged that a letter can also be construed as an agreement. But  that logic is not applicable in all cases.  It will depend upon  the nature of the letter/communication. As a matter of fact,  there is no dispute that there was no Memorandum of  Understanding or agreement in writing.  The letter of Vice- President on which the Industrial Court and the High Court  have placed reliance does not anywhere indicate that even if  the fact situation was different the same amount would be  paid at all future times. Mere breach of assurance is not  favouritism or partisan approach. It has to be definitely  pleaded and proved to show that Item 9 of Schedule IV was  attracted. As noted above, the Memorandum of Understanding  in 1994 came to arrive at because some of the employees went  to Court after not accepting VRS-I.  The background facts do  not establish that the appellant-company was guilty of  favouritism or partiality. There is also no plea or proof that the  employer indulged in any violence or force to coerce 337  employees to accept VRS-I. Therefore, the complaint of unfair  labour practice is not established under Items 5, or 9 or 10 of  Schedule IV to the Act.  

That being the factual position the relief granted by the  Industrial Court to the complainants cannot be maintained.  The judgment of the High Court upholding the view of the  learned Single Judge and the Industrial Court stands set  aside. In view of this finding of fact it is not necessary to go  into the question of maintainability of the proceedings before  the Industrial Court, by employees who retired voluntarily  from service.  

The appeal is allowed but in the circumstances without  any order as to costs.