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PETITIONER: GENERAL MANAGER, SECURITY PAPER MILL, HOSHANGABAD

       Vs.

RESPONDENT: R.S. SHARMA & ORS.

DATE OF JUDGMENT14/02/1986

BENCH: VENKATARAMIAH, E.S. (J) BENCH: VENKATARAMIAH, E.S. (J) THAKKAR, M.P. (J)

CITATION:  1986 AIR  954            1986 SCR  (1) 281  1986 SCC  (2) 151        1986 SCALE  (1)231

ACT:      Industrial  Disputes   Act,   1947   section   2(p)   - "Settlement",  meaning   of  -   Settlement  arrived  at  by agreement between the employer and workman otherwise than in the course  of  conciliation  proceedings,  whom  it  binds, explained -  Burden of  Proof that a "Settlement" arrived at by agreement  between the  employer and  the  workman  binds every workman  being parties  to the settlement and that the agreement was fair and just, is upon the employer.

HEADNOTE:      In the  course of  conciliation proceedings  under  the provisions  of   the  Industrial   Disputes  Act,   1947,  a settlement was  arrived at  on June  29,  1973  between  the management of  the Security  Paper  Mill,  Hoshangabad,  the appellant and  the SPM  Employees Union, Hoshangabad. One of the terms of the settlement related to the incentive benefit entered into  on  behalf  of  the  workmen  and  other  non- operative officers  and staff  of the Security Paper Mill at Hoshangabad. When  the above  Settlement was  in  force  the Government of  India by  its letter  dated December 29, 1975 reduced the  rate of  group  incentive  benefit  payable  by restricting the  entitlements of  the non-operative officers and staff  with effect  from  1.1.76  to  25%  of  the  rate applicable to  industrial workmen  for gazetted officers and to 50% in respect of non-gazetted industrial staff. When the said order was challenged, the Central Government Industrial Tribunal-cum-Labour Court  held that the modification of the incentive benefit  made  by  the  Government  of  India  was illegal. After that the management entered into an agreement with one  of the  trade unions  named SPM Employees Union on April 11, 1979 reducing the rate of incentive benefit to 50% to the non-operative employees that is administrative staff, accounts staff,  and paid  the benefit accordingly. The said agreement was not entered into during the course of any 282 conciliation  proceedings   and  in   fact  there   were  no conciliation  proceedings  pending  at  the  time  when  the agreement was  entered into. The respondents who belonged to the non-operative  staff and who were not the members of the Union and  parties to  the agreement challenged the validity of the  agreement before  the Authority under the Payment of

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Wages Act  on the  basis of the Settlement of the year 1973. While allowing the claim for Rs. 1,93,357.85 and cost at the rate of  Rs. 10  per worker,  it did not, however, allow any compensation. In  appeal, the  Industrial Court affirmed the decision of the authority under the Payment of Wages Act but disallowed the costs at the rate of Rs. 10 per worker. Hence the appeal by special leave by the management alone.      Dismissing the appeal, the Court, ^      HELD: 1. The expression "settlement" defined in section 2(p) of the Industrial Disputes Act, 1947 means a settlement arrived at in the course of conciliation proceeding and also includes a  written agreement  between employer  and workmen arrived at  otherwise than  in conciliation proceeding where such agreement  has been  signed by  the parties  thereto in such manner as may be prescribed and a copy thereof has been sent  to  an  officer  authorised  in  this  behalf  by  the appropriate Government and the Conciliation Officer. [286 G- H; 287 A]      A distinction  is made  in the Industrial Disputes Act, 1947 between  a settlement  arrived  at  in  the  course  of conciliation proceeding  and  a  settlement  arrived  at  by agreement between the employer and workman otherwise than in conciliation proceeding  both as regards the procedure to be followed in  the cases  and as  regards the  persons on whom they are  binding. If  a settlement of the dispute or of any of the matters in dispute is arrived at in the course of the conciliation proceeding  the Conciliation Officer shall send a report thereof to the appropriate Government or an officer authorised in  that behalf  by  the  appropriate  Government together with  a Memorandum  of  Settlement  signed  by  the parties. Even though a Conciliation Officer is not competent to adjudicate  upon the  disputes between the management and its workmen  he is  expected to  assist them  to arrive at a fair and  just settlement.  He has  to play  the role  of an adviser and  friend of  both the parties and should see that neither party takes undue 283 advantage of the situation. Any settlement arrived at should be a  just and  fair one.  It is  on account of this special feature of the settlement sub-section 3 of section 18 of the Industrial Disputes  Act, 1947  provides that  a  settlement arrived at  in the  course of conciliation proceedings under that Act  shall  be  binding  on  (i)  all  parties  to  the industrial dispute, (ii) where a party referred to in clause (i) is  an employer,  his heirs,  successors, or  assigns in respect of  the establishment  to which  the dispute relates and (iii)  where a  party  referred  to  in  clause  (i)  is comprised of  workmen, all  persons who were employed in the establishment of  part. Law  thus  attaches  importance  and sanctity to  a settlement  arrived at  in the  course  of  a conciliation proceeding  since it carries a presumption that it is  just and fair and makes it binding on all the parties as well  as the  other workmen  in the  establishment or the part of  it to  which it  relates. But  in  the  case  of  a settlement not  arrived at in the course of the conciliation proceedings it  has to  be in  writing  and  signed  by  the parties in  the prescribed  manner and a copy thereof should be  sent  to  the  officer  authorised  by  the  appropriate government in  this behalf  and to the Conciliation Officer. Such a  settlement  arrived  at  by  agreement  between  the employer  and  workmen  otherwise  than  in  the  course  of conciliation proceedings  is binding  only on the parties to the agreement as provided in section 18(1) of the Industrial Disputes Act,  1947. Such a settlement is not binding on the

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other workmen who are not parties to the settlement. [287 A- H; 288 A-D]      In the  instant case,  the agreement  entered  into  on April 11,  1979 between  the Management  and  SPM  Employees Union is  not binding  on  the  respondents  and  therefore, cannot have  the effect  of depriving  them of  their  right under the settlement dated June 29, 1983 as long as it is in operation since,  (a) it is not shown that the SPM Employees Union which  had entered  into an  agreement could represent the respondents and that the respondents were parties to it; (b) no  plea of  termination or  bringing to  an end in some manner known  to law  of the earlier agreement under section 19(2) was  taken by  the management;  and (c) apart from the bare assertion  that the  agreement  dated  April  11,  1979 reducing  the  incentive  benefit  was  fair  and  just  and therefore it should not be interferred with, no material was placed by  the management  before the  Authority  under  the Payment of  Wages Act  or the  Industrial Court to show that the said agreement was fair and just. [288 E; 289 A-B] 284

JUDGMENT:      CIVIL APPELIATE  JURISDICTION :  Civil Appeal  No. 2696 (NL) of 1984.      From the  Judgment and  Order dated  10.11.1983 of  the Madhya Pradesh High Court in Appeal No. 25/PWA of 1981.      C.V. Subba Rao for the Appellant.      M.N. Shroff for the Respondents.      The Judgment of the Court was delivered by      VENKATARAMIAH, J. This appeal by special leave is filed against the  judgment and  order  dated  November  10,  1983 passed by  the Industrial Court, Madhya Pradesh at Indore in Appeal No.  25/PWA/81 modifying  the order  dated April  29, 1981 passed  by the Authority under the Payment of Wages Act (Labour Court  No.2), Bhopal in case No. 1/PWA/81. The facts of the  case are briefly these in the course of conciliation proceedings under  the provision  of the Industrial Disputes Act, 1947  a settlement  was arrived  at on  June  29,  1973 between  the   management  of   the  Security   Paper  Mill, Hoshangabad, the  appellant herein, and the S.P.M. Employees Union, Hoshangabad.  In the Memorandum of Settlement arrived at as per section 12(3) of that Act one of the terms related to the  incentive  benefit.  Clause  2(c)  and  (d)  of  the Memorandum of  Settlement which relates to incentive benefit reads as follows :           "2.(c) The  settlement on  revised group incentive           base of  6 M.T.  a day  will be  treated as ad hoc           regardless of  merits of  the case and will remain           close and  localised to  S.P.M. and will not serve           as precedent  for norms  of  production  in  other           departmental industrial undertakings.           (d) The  revised base  of 6  M.T. a  day  and  the           existing norms  of the processing sections will be           temporary and  remain valid  till Government  take           final decision  on the  basis of  the revision and           recommendations of the Expert Review Committee set           up under  letter No.F8(6)/73  Cy dated  5th April,           1973." 285      The above  settlement was entered into on behalf of all the workmen  and other  non-operative officers  and staff of the Security  Paper Mill  at  Hoshangabad.  When  the  above Settlement was  in force  the Government  of  India  by  its

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letter dated December 29, 1975 reduced the rate of incentive benefit payable  by ordering  that the  entitlements of  the non-operative officers  and staff  to  the  group  incentive benefit shall be as under :           (i)  All   Gazetted  Officers   incharge  of  non-           operative Section  (like Administrative  and Chief           Accounts  Officers,   Accounts  Officers,  Medical           Officer  and   Junior  Medical  Officer)  will  be           entitled to  Group Incentive at 25 per cent of the           rate applicable to industrial workmen.           (ii) All  non-gazetted  non-industrial  staff  and           supervisor officers  in non-operative section such           as office (Accounts, Establishment, Administration           and General  Sections),  Dispensary,  Estate  etc.           will be entitled to group Incentive at 50 per cent           of the rate applicable to industrial workmen.      It was directed that the above order dated December 29, 1975 would  be effective  on the incentives to be drawn from January 1, 1976. The above order dated December 29, 1975 was challenged  before   the   Central   Government   Industrial Tribunal-cum-Labour Court  and that  authority held that the modification of the incentive benefit made by the Government of India was illegal. After that the management entered into an agreement  with one  of the  trade  unions  named  S.P.M. Employees Union  on April  11, 1979  reducing  the  rate  of incentive benefit  to  50  per  cent  to  the  non-operative employees i.e.  administrative staff, accounts staff, estate employees and  dispensary staff.  After that  the  appellant paid the  benefit at the reduced rates as per that agreement to the  non-operative employees.  The said agreement was not entered  into   during  the   course  of   any  conciliation proceedings  and   in  fact   there  were   no  conciliation proceedings pending  at the  time  when  the  agreement  was entered into.  The respondents  who were  the  non-operative staff and  were not  the members of the Union and parties to the agreement  challenged  the  validity  of  the  agreement before the  Authority under  the payment of Wages Act on the basis of the Settlement of the year 1973. The claim 286 before that  Authority was  in respect of the period between May 1,  1979 to  April 30, 1980 and the total amount claimed was Rs.1,93,357.85.  The management  filed  a  statement  of objections before  the Authority  under the payment of Wages Act  stating   that  the  S.P.M.  Employees  Union  was  the representative Union  and the agreement entered into by that Union  was   binding  on   all  the  workers  including  the respondents. The  Authority under  the Payment  of Wages Act recorded the  evidence and  thereafter allowed  the claim of the respondents  regarding deducted wages of Rs.1,93,357.85. It did  not, however, allow any compensation but allowed the costs at  the rate  of Rs.10  per worker.  Aggrieved by  the order of  the Authority  under the Payment of Wages Act, the management preferred  an appeal  to  the  Industrial  Court, Indore. Before  the Industrial  Court the  management raised several  contentions.  The  Industrial  Court  affirmed  the decision of the Authority under the Payment of Wages Act but disallowed the  costs at  the rate of Rs.10 per worker which had been awarded by the Authority under the Payment of Wages Act after  rejecting all  other contentions.  This appeal by special  leave   is  filed   against  the  decision  of  the Industrial Tribunal.      The only  point urged  before us  by the  management in this appeal  is that  the S.P.M.  Employees Union  which had entered into the agreement dated April 11, 1979 was entitled to represent  all  the  workers  including  the  respondents

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herein and  it was  binding on  the  respondents  (who  were neither members  of  the  said  Union  nor  parties  to  the agreement) also.  On behalf of the respondents it is pleaded that they  were  not  members  of  the  said  Union  and  an agreement not entered into in the course of the conciliation proceedings had  not the  effect of taking away their rights under the Settlement arrived at in the year 1973. It is also contended that the said Union had no authority to enter into an agreement  binding  the  respondents  who  were  not  its members.      The expression  ’settlement’ is defined in section 2(p) of the  Industrial Disputes Act, 1947. It means a settlement arrived at in the course of conciliation proceeding and also includes a  written agreement  between employer  and workmen arrived at  otherwise than  in conciliation proceeding where such agreement  has been  signed by  the parties  thereto in such manner as may be prescribed and a copy thereof has been sent 287 to an  officer authorised  in this behalf by the appropriate Govt. and the Conciliation Officer. A distinction is made in the Industrial  Disputes  Act,  1947  between  a  settlement arrived at  in the  course of  conciliation proceeding and a settlement arrived  at by agreement between the employer and workmen otherwise  than in  conciliation proceeding  both as regards the procedure to be followed in the two cases and as regards the  persons on whom they are binding. Section 12 of the Industrial  Disputes Act,  1947 lays  down the duties of Conciliation Officer.  Under sub-section  (1) of  section 12 where any  industrial dispute  exists or is apprehended, the Conciliation  Officer   is  required  to  hold  conciliation proceedings in  the prescribed  manner. By  sub-section  (2) thereof  he   is  charged   with  the   duty   of   promptly investigating the  dispute and  all  matters  affecting  the merits and  the right  settlement thereof for the purpose of bringing about  the settlement  of the  dispute  and  he  is required to do all necessary things as he thinks fit for the purpose of  inducing the  parties to  come  to  a  fair  and amicable settlement  of the  dispute. If a settlement of the dispute or of any of the matters in dispute is arrived at in the course  of the conciliation proceedings the conciliation Officer shall  send a  report  thereof  to  the  appropriate Government or  an officerauthorised  in that  behalf by  the appropriate  Government   together  with   a  Memorandum  of Settlement signed by the parties. Even though a Conciliation Officer is  not competent  to adjudicate  upon the  disputes between the  management and  its workmen  he is  expected to assist them  to arrive at a fair and just settlement. He has to play  the role  of an  adviser and  friend  of  both  the parties and  should  see  that  neither  party  takes  undue advantage of the situation. Any settlement arrived at should be a  just and  fair one.  It is  on account of this special feature of  the settlement  sub-section (3) of section 18 of the Industrial Disputes Act, 1947 provides that a settlement arrived at  in the  course of  conciliation proceeding under that Act  shall  be  binding  on  (i)  all  parties  to  the industrial dispute, (ii) where a party referred to in clause (i) is  an employer,  his heirs,  successors, or  assigns in respect of  the establishment  to which  the dispute relates and (iii)  where a  party  referred  to  in  clause  (i)  is comprised 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. Law  thus  attaches  importance  and

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sanctity 288 to a  settlement arrived  at in the course of a conciliation proceeding since  it carries  a presumption  that it is just and fair  and makes it binding on all the parties as well as the other  workmen in the establishment or the part of it to which it  relates as  stated above.  But in  the case  of  a settlement not  arrived at in the course of the conciliation proceeding it has to be in writing and signed by the parties in the  prescribed manner  and a copy thereof should be sent to the  officer authorised  by the appropriate Government in this  behalf   and  to  the  conciliation  Officer.  Such  a settlement arrived  at by agreement between the employer and workmen  otherwise   than  in  the  course  of  conciliation proceedings in  binding only on the parties to the agreement as provided in section 18(1) of the Industrial Disputes Act, 1947. Such  a settlement is not binding on the other workmen who are not parties to the settlement.      It is  seen from  the material  placed before  us  that there were  three Unions  and there  was no evidence to show that  the   respondents  were  the  members  of  the  S.P.M. Employees Union  which had  entered into the agreement dated April 11,  1979. Since it is not shown that S.P.M. Employees Union which  had entered  into the agreement could represent the respondents herein and that the respondents were parties to it, the agreement was not binding on them.      The settlement arrived at in the course of conciliation proceeding on  June  29,  1973  which  was  binding  on  the appellant  and   the  respondents  herein  would  remain  in operation until  it is  terminated or  brought to  an end in some manner  known to  law. Section  19(2) of the Industrial Disputes Act, 1947       provides that a settlement shall be binding on the persons on whom it is binding for such period as is  agreed upon  by the  parties and if no such period is agreed upon  for a  period of  six months  from the  date on which the  memorandum of settlement is signed by the parties to the  dispute and  shall continue  to be  binding  on  the parties after  the expiry  of the period aforesaid until the expiry of  two months  from the  date on  which a  notice in writing of an intention to terminate the settlement is given by one  of the  parties to the other party or parties to the settlement. No  notice given  under section 19(2) shall have effect unless  it is  given  by  a  party  representing  the majority of  papers bound  by the  settlement in view of the provisions contained in sub-section (7) of section 289 19 of  the Industrial  Disputes Act,  1947. No  such plea of termination under section 19(2) is taken in this case by the management. The  agreement entered  into on  April 11,  1979 between the  management and the S.P.M. Employees Union which is not  binding on the respondents cannot have the effect of depriving them  of their  right under  the settlement  dated June 29,  1973 as  long as  it is  in operation.  The  first contention, therefore, fails.      It was,  however, alternatively argued on behalf of the management that  the agreement dated April 11, 1979 reducing the incentive  benefit was  fair and  just and  therefore it should  not  be  interferred  with.  Apart  from  this  bare assertion no  material was  placed by  the management before the  Authority  under  the  Payment  of  Wages  Act  or  the Industrial Court  to show  that the  said agreement was fair and  just.   A  reduction   of  incentive   benefit  in  the circumstances of  the case  cannot be  considered as  either fair or just.      The Authority  under the  Payment of  Wages Act and the

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industrial Court  were, therefore,  right in  rejecting  the defence of  the management. The appeal, therefore, fails and it is dismissed with costs. S.R.                                  Appeal dismissed. 290