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CASE NO.: Appeal (civil)  2249 of 2006

PETITIONER: CEAT Ltd.

RESPONDENT: Murphy India Employees Union

DATE OF JUDGMENT: 25/04/2006

BENCH: S.B. Sinha & P.K. Balasubramanyan

JUDGMENT: J U D G M E N T [Arising out of S.L.P. (Civil) No.6897 of 2005]

S.B. SINHA,  J :  

       Leave granted.

INTRODUCTION  

       Interpretation of a settlement arrived at by and between the parties  herein is in question in this appeal which arises out of a judgment and order  dated 11.01.2005 passed by a learned Single Judge of the High Court of  Judicature at Bombay in Writ Petition No.1785 of 2001.

ADMITTED FACTS

       Murphy India Ltd. (Murphy) was a manufacturer of Radio and  Television sets.  Norwest Electronics Ltd. (for short, ’Norwest’), which was  running a servicing centre,  was a sister concern of Murphy India Ltd.  It had  been carrying out maintenance and repair works of the products of  Murphy   at its Thane factory.  It was an establishment within the meaning of the  provisions of the Industrial Employment  (Standing Orders) Act, 1946,  (1946 Act ). The concerned workmen were on the rolls of Norwest.  The  Provident Fund and E.S.I.C. Code Number of  both the companies were the  same.  Some workmen working in the said Norwest were its permanent  employees.  Murphy became a sick company.  It was referred to the Board  of Industrial and Financial Reconstruction (BIFR).  Pursuant to a scheme  made by it on or about 31.08.1990 Murphy  merged with the appellant- company.  It undertook the maintenance and repair works carried out at the  factory of Murphy situated at Parel.  Some of the workmen of Norwest, who  were represented by the Union herein, had been assured that they would be  provided with  employment on permanent basis by the appellant herein.  45  workmen had applied for employment with its Electronics Division.  They  were issued fresh appointment letters with effect from 01.02.1991.  They  were initially appointed on temporary basis at Parel Unit of the appellant,  wherein sales and service of the Radios and Televisions used to be carried  out.  Indisputably, the said establishment was registered under the Bombay  Shops and Commercial Establishment Act, 1948 (for short, ’the 1948 Act’).  

       Although initially existence of the Certified Standing Orders was  denied by the appellant, a copy thereof was produced before the High Court,  in terms whereof, the employees  appointed on probation were to get the  permanent status on the expiry of six months from the date of joining the  service; whereas in terms of the Model Standing Orders, such permanent  status was to be conferred  on the workmen on the expiry of three months of  their being placed on probation.

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       After Murphy. was referred to the BIFR and its consequent merger  with the appellant, appointments had been given to 45 workmen on and     from 01.02.1991.  Although they had been  appointed on  temporary basis,  they  were put on probation by an order dated 01.05.1991 with effect from  1.2.1991.  They had been kept on probation till 1996 and their services had  been terminated thereafter.  Termination of the services of the said workmen  had given rise to another industrial dispute and it is stated at the bar that an  award has been passed in favour of the workmen.  The said matter, however,  is pending adjudication before the Bombay High Court and the execution of  the award has been stayed.

PROCEEDINGS:

        On or about 29.04.1991, a Memorandum of Settlement was entered   into between the Electronics Division of the appellant herein and the  respondent Union, which was recognized in terms of  the Maharashtra  Recognition of Trade Unions and Prevention of Unfair Labour Practices Act,  1971 (for short, ’the  1971 Act’) for resolution of the disputes arising out a  Charter of Demands made on 27.10.1989 in respect of the workmen working  in the shop floor and office of the company situated at Thane and Parel.

       On or about 06.10.1992, a complaint was filed by the respondent- Union  about the violation of the terms of the said settlement, alleging unfair  labour practices  as contained in Item Nos. 1(a) and 4(g) of the Second  Schedule and Item Nos.6 and 9 of the Fourth Schedule appended to the said  Act.  A prayer for payment of the same wages as are  paid to the permanent  workmen of the company as also a declaration that the said workmen had  become the permanent workmen of the company from their respective dates  of joining or with effect from 01.02.1991, was also made.  The appellant  denied and disputed that it had committed any unfair labour practice.    

       In view of the rival contentions raised before the Industrial Tribunal,  the following issues were framed :

       "(i)    Does the Complainant prove that they are   permanent employees since joining Norwest Electronics  Ltd. and/or Ceat Ltd. and they are entitled to full back  wages and continuity of service w.e.f. 01.02.1991?

       (ii)    Whether the Respondent has committed  Unfair Labour Practice under Items 1(a), 4(a) of  Schedule II and Item 3, 6 and 9 of Schedule IV of the  MRTU & PULP Act?"

       Before  the Industrial Court, reliance was placed by the respondent on  the said settlement dated 29.04.1991.

       By reason of  an  award dated 29.03.2001, the Industrial Court held  that the benefits under the said settlement must be held to have been    rendered to the concerned workmen,  in terms whereof they became entitled  to the status of permanent workmen  on the expiry of the period of probation  of three months, and were, thus, also entitled to the other benefits envisaged  thereunder .  Monetary benefits were directed to be paid to the workmen  with compound interest @ 12% p.a.

       The legality or otherwise of the said award came to be questioned by  the appellant by filing a writ petition before the Bombay High Court.  The  said writ petition has been dismissed by reason of the impugned judgment.

SUBMISSIONS :

       Mr. T.R. Andhyarujina, the learned Senior Counsel appearing on  behalf of the appellant, would submit that the Industrial Court as also the

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High Court overlooked the fact that in terms of Section 18(3)(c) of the  Industrial Disputes Act, 1947 (for short, ’the 1947 Act’),  the benefits of the  said settlement dated 29.04.1991 having been given only to the permanent  workmen who were appointed with effect from 01.02.1991, benefits thereof  could not have been directed to be given to the concerned workmen who  joined the establishment on a temporary basis and/or on probation only with  effect from 01.02.1991.

       It was submitted that the High Court fell into an error in holding  that  despite the fact that the number of workmen had fallen to less than 50, the  provisions of Model Standing Orders framed under the 1946 Act would not   apply in the case of the concerned  workmen.   

       Ms. Jane Cox, the learned counsel appearing on behalf of the  respondent-Union, on the other hand, submitted that the said settlement  dated 29.04.1991 must be read in its entirety and so read it would be evident  that the same would  also apply to such workmen who joined the services of  the appellant’s establishment on and from 01.02.1991.  It was further  submitted that applicability of the provisions of the Model Standing Orders  or the Certified Standing Orders framed under the 1946 Act having been  made a part of the settlement, it matters little as to whether the status of the  permanent workmen was to be given to the concerned workmen on the  expiry of three moths or six months from the date of their joining service.   

SETTLEMENT :

       It is also not in dispute that a Memorandum of Settlement within the  meaning of Section 2(p), read with Section 18(1) of the 1947 Act and Rule  62 of the Industrial Disputes (Bombay) Rules, had been arrived at between  the parties on or about 29.04.1991, the relevant clauses whereof are as  under:

       "Whereas the President, MAHARASHTRA  SHRAMIC SENA, a recognized Union under the  Provisions of the MRTU & PULP Act, 1971 (hereinafter  referred to as the Union) representing the workmen of  M/s CEAT LIMITED, ELETRONICS DIVISION  (hereinafter referred to as the Company) served the  Charter of Demands on 27th February, 1989 on the  Company in respect of the workmen working on the  Shop floor and the office of the company situated at  Thane and Parel under cover of their letter dated 27th  February, 1989 relating to wage Scale, Classifications,  Dearness Allowance, Leave Facilities, Leave Travel  Allowance, Transports etc. and have also forwarded  supplementary demands in relation to Lunch Allowance,  Five days week working, etc. as contained in their  supplementary Charter dated 9th March, 1989.

       And whereas the negotiations were held between  the representatives of the Company and the  representatives of the Union from time to time on the  said set of Charter of Demands parties have reached a  package settlement covering the service conditions and  terms of employment applicable to the workmen at  Thane and Head Office establishment.  Parties therefore  have agreed to sign the settlement in full and final  satisfaction of all the demands in accordance with  Section 2(p) read with Section 18(1) of the Industrial  Disputes Act, 1947 and under the Rules 62 of the  Industrial Disputes (Bombay) Rules, 1957.

NOW THIS SETTLEMENT WITNESS AS FOLLOWS  

       This settlement shall cover all terms and

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conditions of service of various categories of permanent  workmen and shall apply to all permanent workmen  (hereinafter referred to as "workmen") who are on the  rolls of the Company as on 31st December, 1990 at the  Company’s Head Office and other Factories,  establishments situated at Bombay and Thane.

       "Year" means from 1st of January to 31st December  of any year."          

Under the heading ’Code of Conduct’,  it provided that the Code of  Conduct shall operate concurrently with the Company’s Standing Orders and  not in derogation thereof.  The said Code of Conduct was evolved to repress  the hardship arising out of the implementation of the Standing Orders.   

       Clause 4 of the said settlement provides for period of apprenticeship,  inter alia, stating :

"\005Upon successful completion of three years  apprenticeship subject to the availability of vacancies  having due regard to suitability to the post the  apprentices will be offered employment and will be  absorbed with due regard to seniority in regular  employment under such terms and conditions prevailing  for regular employees and shall be issued regular  appointment letters."

Provision has been made to pay stipend to the apprentices and other  benefits and facilities arising therefor.  Probation of the employees was to be  governed by  the Standing Orders.  The matter relating to confirmation of   employees has been provided for in clause 8 of the settlement stating that the  same would be as per the Standing Orders.  Clause 11 provides for  fitment  in the regular grades after successful completion of three years period.   

STATUTORY PROVISIONS

Section 18(1) of the 1947 Act provides as under :

"18.  Persons on whom settlement and awards  are binding.- (1) A settlement arrived at by agreement  between the employer and workman otherwise than in  the course of conciliation proceeding shall be binding on  the parties to the agreement."

       The State of Maharashtra indisputably has made an amendment in  sub-section (1) of Section 18 of the 1947 Act, in terms whereof, the  following proviso  was  added :

       "Provided that, where there is a recognized union  for any undertaking under any law for the time being in  force, then such agreement (not being an agreement in  respect of dismissal, discharge, removal, retrenchment,  termination of service, or suspension of an employee)  shall be arrived at between the employer, and the  recognized union only; and such agreement shall be  binding on all persons referred to in clause (c) and clause  (d) of sub-section (3) of this section."    

       Section 18(3) of  the 1947 Act reads as under :

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"18(3).  A settlement arrived at in the course of  conciliation proceedings under this Act or an arbitration  award in a case where a notification has been issued  under sub-section (3A) of Section 10A or an award of a  Labour Court, Tribunal or National Tribunal which has  become enforceable shall be binding on \026

(a)     all parties to the industrial dispute;

(b)     all other parties summoned to appear in the  proceedings as parties to the dispute, unless  the Board, arbitrator, Laour Court, Tribunal  or National Tribunal, as the case may be,  records the opinion that they were so  summoned without proper cause;

(c)     where a party referred to in clause (a) or  clause (b) is an employer, his heirs,  successors or assigns in respect of the  establishment to which the dispute relates;

(d)     where a party referred to in clause (a) or  clause (b) is composed of workmen, all  persons who were employed in the  establishment or part of the establishment,  as the case may be, to which the dispute  relates on the date of the dispute and all  persons who subsequently become  employed in that establishment or part."  

The 1971 Act was enacted, inter alia, to provide for recognition of  trade unions inter alia for facilitating  collective bargaining for certain  undertakings.  Section 4 thereof provides for constitution of the Industrial  Court.  Chapter III provides for recognition of Unions.  Chapter IV provides  for obligations and rights of recognized Unions, other Unions and  certain   employees.  Sub-section (2) of Section 20 of the 1971 Act reads as under : "(2)    Where there is a recognized union for any  undertaking, -

(a)     that union alone shall have the right to appoint its  nominees to represent workmen on the Works  Committee constituted under section 3 of the  Central Act;

(b)     no employee shall be allowed to appear or act or  be allowed to be represented in any proceedings  under the Central Act (not being a proceeding in  which the legality or propriety of an order or  dismissal, discharge, removal, retrenchment,  termination of service, or suspension of an  employee is under consideration), except through  recognized union and the decision arrived at, or  order made, in such proceeding shall be binding on  all the employees in such undertaking;

and accordingly, the provisions of the Central Act, that is  to say, the Industrial Disputes Act, 1947, XIV of 1947,  shall stand amended in the manner and to the extent  specified in Schedule I."

       Section 21 of the 1971 Act provides that no employee in an  undertaking to which the provisions of the Central Act for the time being

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apply, shall be allowed to appear or act or allowed to be represented in any  proceeding relating to unfair labour practices specified in items 2 and 6 of  Schedule IV of this Act except through the recognized union.   

UNFAIR LABOUR PRACTICE :

Chapter VI of the 1971 Act deals with Unfair Labour Practices, which  term has been defined in Section 26 thereof to mean any of the practices  listed in Schedules II, III and IV of  the Act, unless the context otherwise  requires.

Item Nos.1(a), 4(a) of Schedule II, and Item Nos.3, 6 and 9 of  Schedule IV, which are relevant for the purpose of the case,  read as under :  

"1.     To interfere with, restrain or coerce employees in  the exercise of their right to organize, form, join or assist  a trade union and to engage in concerted activities for the  purposes of collective bargaining or other mutual aid or  protection, that is to say \026

(a)     threatening employees with discharge or dismissal,  if they join a union;"  

"4.     To encourage or discourage membership in any  union by discriminating against any employee, that is to  say \026

(a)     discharging or punishing an employee because he  urged other employees to join or organize a  union;"

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

"9.     Failure to implement award, settlement or  agreement."  

       Section 28 of the 1971 Act provides for procedure for dealing with  complaints relating to unfair labour practices, in the following terms :

"28. Procedure for dealing with complaints relating to  unfair labour practices : (1) Where any person has  engaged in or is engaging in any unfair labour practice,  then any union or any employee or any employer or any  Investigating Officer may, within ninety days of the  occurrence of such unfair labour practice, file a  complaint before the Court competent to deal with such  complaint either under section 5, or as the case may be,  under section 7,  of this Court.       

       Provided that, the Court may entertain a complaint  after the period of ninety days from the date of the  alleged occurrence, if good and sufficient reasons are  shown by the complainant for the late filing of the  complaint.

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       (2)     The Court shall take a decision on every  such complaint as far as possible within a period of six  months from the date of receipt of the complaint.                  (3)     On receipt of a complaint under sub-section  (1), the Court may, if it so considers necessary, first  cause an investigation into the said complaint to be made  by the Investigating Officer, and direct that a report in the  matter may be submitted by him to the Court, within the  period specified in this direction.

       (4)     While investigating into any such complaint,  the Investigating Officer may visit the undertaking,  where the practice alleged is said to have occurred, and  make such enquiries as he considers necessary.  He may  also make efforts to promote settlement of the complaint.

       (5)     The Investigating Officer shall, after  investigating into the complaint under sub-section (4)  submit his report to the Court, within the time specified  by it, setting out the full facts and circumstances of the  case, and the efforts made by him in settling the  complaint.  The Court shall, on demand and on payment  of such fee as may be prescribed by rules, supply a copy  of the report to the complaint and the person complained  against.

       (6)     If, on receipt of the report of the  Investigating Officer, the Court finds that the complaint  has not been settled satisfactorily, and that facts and  circumstances of the case require, that the matter be  further considered by it, the Court, shall proceed to  consider it, and give its decision.

       (7)     The decision of the Court, which shall be in  writing, shall be in the form of an order.  The order of the  Court shall be final and shall not be called in question in  any civil or criminal court.

       (8)     The Court shall cause its order to be  published in such manner as may be prescribed.  The  order of the Court shall become enforceable from the  date specified in the order.

       (9)     The Court shall forward a copy of its order  to the State Government and such officers of the State  Government as may be prescribed."

       We have noticed hereinbefore that the establishment in question is  governed by the provisions of the 1948 Act,  Section 38-B whereof reads as  under :

"38-B. Application of Industrial Employment  (Standing Orders) Act to establishments.  The  provisions of the Industrial Employment (Standing  Orders) Act, 1946, in its application to the State of  Maharashtra (hereinafter in this section referred to as  "the said Act"), and the rules and standing orders  (including model standing orders) made thereunder from  time to time, shall mutatis mutandis, apply to all  establishment wherein fifty or more employees are  employed and to which this Act applies, as if they were  industrial establishment within the meaning of the said  Act."      

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It is, however, not in dispute that the establishment had its own  certified standing orders.

INTERPRETATION OF TERMS OF SETTLEMENT :   

       The preamble of the settlement refers to the Charter of Demands  served upon the appellant on 27.02.1989 in respect of the shop floor and  office of the company situated at Thane and Parel relating to  wage scale,  classification, dearness allowance, leave facilities, leave travel allowance,  transports etc.  Supplementary demands were also raised.  The parties  reached a package settlement covering the service conditions and terms of  employment applicable to the workmen at Thane and Head Office.  The said  settlement was to cover all terms and conditions of  service of various  categories of permanent workmen; and was to apply to all permanent  workmen who were on the rolls of the  company as on 31.12.1990.  The said  Memorandum of Settlement, indisputably, was entered into on 29.04.1991.  

       Does it apply only to those workmen who were on the rolls of the  company as on 31.12.1990 is the question.

       If the said settlement was only to apply to the permanent workmen,  who were on the rolls of the company as on 31.12.1990, evidently it would  not have contained any provision for appointment of apprentices, payment of  stipend and probation or confirmation or their fitment.    

       A Memorandum of Settlement must be read in the context in which  the same was made.

       If the said settlement is given a narrow meaning, as has been  contended by Mr. Andhyarujina, the same would defeat the purpose thereof.   It may be true that by reason of a settlement, a cut-off date may be provided  or the benefits be given only to a class of employees but  with a view to give  a proper meaning to the terms of the settlement, the court would be entitled  to notice the source of the dispute.  The workmen of Norwest were not on  the rolls of the company; they became its employees only with effect from  01.02.1991.  Their terms and conditions were already governed by the  Certified Standing Orders.  A Code of Conduct was required  to be evolved  only as regard the workmen who came on the rolls of the company after  31.12.1990.

       The said Code of Conduct was evolved to repress the hardships which  had already been confronted by the use of the Standing Orders of the  company.  It was to operate concurrently with the Certified Standing Orders.   Some of the provisions in the Code of Conduct expected of the employees  evidently were not governed by the Certified Standing Orders.  The  settlement not only provides for appointment of apprentices, who would be  governed by the provisions of the Apprentices Act, 1961 but also for the  eligibility criteria therefor in terms whereof the first preference was to be  given to the sons and daughters of the employees and the ex-employees of  the company, had  either retired from service or accepted Voluntary  Retirement Scheme, or expired during service.  The eligibility criteria also  provides that the applicant should complete 18 years of age as on the date of  application.  Indisputably, in terms of the provisions of the Apprentices Act,  no apprentice would have a right of a job or promotion.  The Memorandum  of Settlement, however, provides for their absorption on successful  completion of three years’ apprenticeship.  It provides for seniority and  furthermore lays down criteria for determination thereof.   

       The provisions relating to probation and confirmation of the workmen  would not fit in with the concept of applicability of the settlement only to  those who were on the permanent rolls of the company as on 31.12.1990.   Evidently, thus, the said settlement not only covers those who were  permanent workmen as on the said date and had ceased to be workmen but

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also those who were to be appointed at a later date.

CERTIFIED STANDING ORDERS :          

       Applicability of the provisions of the 1948 Act is not in question.  The  only contention raised is the applicability of the Model Standing Orders.   The fact that the company had its Certified Standing Orders is not in dispute.   The same finds reference in the Memorandum of Settlement itself.                    The period of probation as also confirmation in the services were to be  in terms of the Standing Orders.  It has not been disputed before us that  whereas the Model Standing Orders provided for a successful period of  probation of three months; under the Certified Standing Orders, the period  thereof was to be six months.   

We have noticed hereinbefore that the appellant at one stage denied  and  disputed the applicability of the Model Standing Orders and only at a  latter stage, in a proceeding before the High Court, they produced a xeroxed  copy of the Certified Standing Orders, evidently with a view to show that the  successful period of probation was not three months as per the Model  Standing Orders but in fact was six months.   

In this case, whether the period of probation was three months or six  months is not of much significance; as the workmen had been kept on  probation by an order dated 01.05.1991 with retrospective effect from  01.02.1991.  Evidently they were, thus, entitled to the status of permanent  workmen on completion of six months’ period if not three months.  They  were kept on probation till 1996 and, thus, they had admittedly completed  the period of six months.  Once they had successfully completed the period  of probation, they were entitled to the status of permanent workmen, the  consequences whereof would be that they became entitled to all the benefits  and privileges in terms of the settlement as  permanent employees.

APPLICABILITY  OF  1948 ACT

       Mr. Andhyarujina’s submission that having regard to the fact that the  number of workmen in the said establishment was less than 50 as is provided  for in Section 38-B of  1948 Act, is again of not much significance.    

It may be true that provisions of the Payment of Gratuity Act, 1972  and the Employees’ Provident Funds and Miscellaneous Provisions Act,  1952 specifically provide that in the event  an establishment becomes liable  thereunder, it would continue to be so despite the fact that the number of  workmen goes below the prescribed limit, but  in this case, we are not beset  with such a question.

We need not enter into the controversy as to whether such a  contingency would ensue even in respect of the employees governed by the  1948 Act; inasmuch as in the instant case, the Certified Standing Orders  forms part of the settlement itself. The Certified Standing Orders, therefore,  govern the terms and conditions of the service of the workmen apart from  those which were specifically mentioned in the Settlement.   

We, thus, do not find any force in the said submission.

INTEREST: Mr. Andhyarujina would submit that the rate of interest awarded by  the High Court being 12% p.a. is on a high side.   We, in the peculiar facts  and circumstances of the case and having regard to the current rate of  interest prevailing in the market, direct that the rate of interest would be 9%  p.a.   

Subject to the modification aforementioned, this appeal is dismissed.   The appellant shall pay and bear the costs of the respondent in this appeal.   Counsel fee  assessed at Rs. 5,000/-.