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PETITIONER: HOCHTlEF GAMMON

       Vs.

RESPONDENT: STATE OF ORISSA & ORS.

DATE OF JUDGMENT04/09/1975

BENCH: ALAGIRISWAMI, A. BENCH: ALAGIRISWAMI, A. GOSWAMI, P.K. UNTWALIA, N.L.

CITATION:  1975 AIR 2226            1976 SCR  (1) 667  1975 SCC  (2) 649  CITATOR INFO :  R          1984 SC1030  (18)  E&R        1987 SC 537  (18,19)

ACT:      Industrial Disputes  Act-Sec. 10  - Discretion of Govt. to refuse  to make reference-Necessary and proper parties to a reference-Powers  of the  Court  to  scrutinise  executive order  s-If  the  executive  refuses  to  consider  relevant matters or  takes into  consideration relevant or extraneous matters- Whether  Court’s scrutiny can be avoided by failing to give reasons.

HEADNOTE:      In 1957,  the Hindustan Steel Limited (Company) and the appellant (contractor) entered into a contract for execution of the  foundation and civil engineering work of the hot and cold rolling  mills at  Rourkela. The  Company was to pay to the Contractor all costs of construction and in addition pay fixed overhead  charges for  the  head  office  and  general office of  the contractor  plus a fixed fee. All payments in respect of  wages and salaries and connected pay matter made to persons engaged upon the work as might be approved by the Company comprising  wages of  all operatives  as well as all other payments  connected with  wages were to be paid by the Company. Emoluments of Site Supervisory staff as well as all other payments  connected therewith  were also to be paid by the Company.  The payments  made to  statutory  schemes,  in connection with sickness, or accident, or Provident Fund, or Pension or  other like  schemes  to  the  above  categories, payments  of   overtime  and  additional  remuneration  for’ Sunday, holiday  or night  work etc., and payments for leave and traveling cost were all to be made by the Company.      In 1960,  the Labour  Union of  workmen employed by the Contractor raised a dispute for adjudication about the bonus payable to  the workmen  for doing  the aforesaid  job. ’The stand of’  the contractor  was that they would pay the bonus if it were given by the Company. The Government referred the question whether the workers of the contractor were entitled to any  bonus and  if so  what should  be the  quantum.  The question whether the Company or the Contractor was liable to pay the  bonus was  not referred. A notice was served on the

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company and  the Company contended that since the contractor did not  complete the  work according  to the  agreement, no bonus was due to the contractor and that the Company was not a necessary  party to  the reference.  The contractor in the written statement  contended that  under the  terms  of  the Contract the Company had to bear all costs with reference to labour, all payments in respect of wages, salaries and other connected payments  made to persons engaged in the works and that the contractors were paid a stated fee for professional services rendered  by them  and that  therefore, the  demand against the  contractor was  not  sustainable  in  law.  the contractor made  an application to the Tribunal that for the proper adjudication  of the  issues referred to the Tribunal it was  necessary to  bring on record the Company as a party to the proceedings. The said application was rejected by the Tribunal.      The contractor  thereupon filed  a Writ Petition in the High Court of orissa against the said order of the Tribunal. The  High  court  dismissed  the  said  writ  Petition.  The contractor filed  an appeal  by Special Leave to this Court. This Court in that appeal held:           "That  it  would  have  been  open  to  the  State      Government to  ask the  Tribunal to  consider as to who      was the  employer of  the workmen  and in that case the      terms of  reference might have been suitably framed. In      the present  case such  a course  has not been adopted.      The dispute  between the  Company  and  the  contractor      would be  a substantial  dispute and cannot be regarded      as incidental  to  the  industrial  dispute  which  was      referred The Company was therefore a necessary party." 668 The Contractor,  thereafter, filed an application before the Slate  Government   asking,  them   to  modify  the  earlier reference by  adding whether  the bonus  was  payable by the Company or  the contractor  and by  adding the  Company as a party  to   the  reference.  It  was  pointed  out  in  that application that it was the Company which would be liable to pay the  bonus if at all it was payable. The contractor also asked for  a personal  hearing. The  Government disposed  of that application by observing      "Government do  not find  any materials on the basis of      the  petition   to  include  Hindustan  Steel  Limited,      Rourkela, as a party in the above case. ’ The Government  did not  apply its mind to the other prayer, namely, adding one more issue to the reference.      The Contractor  filed a  writ Petition against the said order of  the State Government. The High Court dismissed the Writ Petition      Against the  judgment of  the High Court the appellants appealed to Court.      Allowing the appeal, ^      HELD: 1.  It is  apparent from  the Government’s  reply that the  Government did  not apply  its mind  to the  facts placed before  them. There  was at least an arguable case on the point  as to who was liable to pay the bonus and in that close  the   Company  would   have  been   a  necessary  and appropriate party.  Even if  the Government thought that the company was  not a  necessary party.  the question as to who was liable to pay the bonus was a very relevant question and that made  the Company  a necessary  or at  least  a  proper party. The  attitude of  the contractor  throughout had been that their  contract was  a cost  contract; that the Company had to  pay labour  and the  Company was  the real employer. That contention  may or.  may not be upheld by the Tribunal.

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This was  however, an appropriate question to be referred to the Tribunal [674 C-F]      2. The  power of  the courts  in relation to the orders or’ the  appropriate Government  in the  matter of referring industrial disputes  for adjudication is no longer in doubt. [674 G]      State of  Bombay v.  K P  Krishan  &  Ors.  [1961]  (1) [S.C.R. 227] and Bombay Union of Journalists v. The State of Bombay [1964(6) S.C.R. 22@ 24]. followed.      The powers  of the  Court mentioned  in the  above  two cases in  relation to the orders of the Government under any statute are  not the  only powers of the courts. In England, in earlier  days, the  courts usually  refused to  interfere where the  Government or  the concerned  officer passed what was called  a nonspeaking  order. Where a speaking order was passed the Courts proceeded to consider the reasons given to see whether  the reasons  given  were  relevant  reasons  or considerations. Where  there was  a non-speaking  order they used to  saw it was like the face of the sphnix in the sense that it was inscrutable and. therefore, held that they could not consider the question of the validity of the order. Even in England,  the courts  have traveled very fast since those say. They  no longer  find the face of the sphinx incurable. Needless to  say that  the courts  in India  which  function under  a  written  constitution  which  confers  fundamental rights on  citizens exercise,  far greater powers than those exercised by the courts in England where there is no written constitution  and  there  are  no  fundamental  rights.  The decision of’  House of  Lords in  Padfield  v.  Minister  of Agriculture. Fisheries-  and Food (1968 A.C. 997), followed. [675-F-H, 676-A]      3. The  Executive have  to  reach  their  decisions  by taking into account relevant considerations. They should not refuse to  consider relevant  matter. nor  should they  take into account  wholly irrelevant or extraneous considerations ’they should  not misdirect  themselves on  a point  of law. only such  a decision  will be lawful. The Courts have power to see  that the Executive acts lawfully. It is no answer to the exercise of that power to say that the Executive acted 669 bone  fide   nor  that   they  have   bestowed   painstaking consideration .  They cannot  avoid scrutiny  by  courts  by failing to  give reason.   If they give reasons and they are not good  reasons, the  court can  direct them to reconsider the matter  in the  light of  relevant  matters  though  the propriety,  adequacy  or  satisfactory  character  of  these reasons may  not be  open to judicial scrutiny. Even if. the Executive considers  it inexpedient to exercise their powers they should  state their  reasons and there must be material to show  that they  have considered  all the relevant facts. [679 D-F]      4.  Judged   by  this  test  the  order  of  the  State Government is unsustainable. The Government does not seem to have Noticed that the contract in question us not one of the and wherein a contractor undertakes to do a certain work for a certain  sum. In thus contract, the Company had to pay for the material as well as for labour. the Contractor to a paid only for his professional services. There was in any case no provision in  the contract  that the contractor was to incur any item  of expenditure  or make any payment in relation to the workmen. The Government did not realise that the dispute concerned of  merely two  parties but  three. The Government order in  the present  case really  amounts to  an  outright refusal to consider relevant matters and the Government also misdirected itself  in point  of law  in wholly  omitting to

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take into  account the relevant considerations which as held by the  House of Lords us unlawful behaviour. The Government does not  appear to  have applied  their mind  to any of the considerations set out in the contractor’s application.[679- F-H, 680 D&F]      Allowing the  appeal the  Court directed the Government of Orissa  to reconsider  the matter  and take a decision in the matter  of reference in the light of the relevant facts. [680-G]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 1827 of 1969.      Appeal by  Special Leave  from the  Judgment and  order dated the  28th November,  1968 of  the Orissa High Court in O.J.C. No. 152 of 1964.      F.S. Nariman,  A. G.  Meneses, Sharad Manohar and J. B. Dada chanji, for the Appellant.      S.T. Desai  and M.  N. Shroff’  and R.  N. Sachthey for Respondents 1 and 5.      Santosh Chatterjee  and G. S. Chatterjee for Respondent No. 4.      The Judgment of the Court was delivered by      ALAGIRISWAMI,  J.-The  question  of  bonus  for  16,000 workmen for  the years  1958-59 and  1959-60 is  still being fought out on preliminary points and this is the second time the matter  has come  to this Court. The earlier decision is reported  in   1964  (7)  S.C.R.  596  (Hochtief  Gammon  v. Industrial Tribunal, Bhubaneshwar, Orissa & Ors.(1).      In August  1957  the  Hindustan  Steel  Ltd.,  the  4th respondent in  the appeal,  hereinafter called  the company, and the  appellant, a  partnership of  a West German company and an  Indian company,  hereinafter called  the contractor, entered into  a contract for execution of the foundation and civil engineering  work of the Hot and Cold Rolling Mills at Rourkela  including   the  purification   and  other   civil engineering work  of the  Hot and   with the water supply to the Rolling  Mills. The  contract was a cost contract with a target sum  plus fixed  overheads  and  fee,  that  is,  the company  was   to  pay   to  the  contractor  all  costs  of construction and  in addition pay fixed overhead or the head office general expenses of the (1) [1964] 7 S.C.R. 596. 670 contractor plus a fixed fee. The target sum for the work was Rs 66,294,000.  The overheads  were D.M. 2,800,000/- plus Rs 2,120,000/- and  the fee of Rs. 6,200,000/-. The work was to be carried  out  as  detailed  in  the  drawings,  bills  of quantities, specifications  and other  written orders issued or to  be issued  by the company. All payments in respect of wages and  salaries and  connected payments made two persons engaged upon  the work  as may  be approved  by the company, comprising wages  of all  operatives as  well as  all  other payments connected  with  wages  were  to  be  paid  by  the company. Any  increase beyond the initial rates specified in Enclosure III  to the  contract was  to be  subject  to  the approval of the company and such approval was to be taken in respect of  categories and  not individuals.  Emoluments  of site  supervisory  staff  as  well  as  all  other  payments connected therewith  were also  to be  paid by  the company. Payments  made  to  statutory  schemes  in  connection  with sickness or  accident or  provident fund or pension or other like schemes  to the  above categories, payments of overtime

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and additional  remuneration for  Sunday, holiday  or  night work etc.,  and payments  for leave  and traveling cost were all to be made by the company. It was also provided that the count of  any other  expenditure was  to be admitted only on satisfactory proof  being given  by the contractor that such expenditure was necessary in connection with the preparation and execution  of the  work. The  company  was  to  open  an imprest account of Rs. 30,00,000/- and the contractor was to draw on the account to cover his day-to-day requirements for the work.  The imprest was to be increased or decreased from time to  time  depending  on  the  amount  required  by  the contractor to  do the  work. The  contractor was  to  submit fortnightly cash  account covering  the expenditure incurred from the  imprest account  and the company was to recoup the amounts covered  by such  account within seven working days. Once in three months the contractor was to be paid a part of the fixed amount of overheads pro rata to the target cost of work done  during the  preceding three  months. Once  in six months  he   was  to   be  paid  three-fourths  of  the  fee proportionate to  the target  cost of  the work  done in the preceding. half year. Enclosure Ill also set out the rate of wages for  unskilled labourers,  khalasi, mason,  fitter  or carpenter. If the contractor completed the work prior to the 30th September,  1960 he  was to  be paid, exclusive of such sums as  may be  due to,  or from, him a bonus equivalent to Rs. 2,00,000/-  for every complete month by which the actual completion of  the work  precedes the  30th September, 1960. The terms  of the  contract have been set out at some length as they have a relevance to the question of bonus payable to the workers  because the  question now  agitated before this Court is  that the  Industrial Tribunal  should be  asked to decide who  is to  Pay the bonus, if bonus is payable to the workmen, the contractor or the company.      It would be noticed from the provisions of the contract set out above that all payments to labour were to be made by the company.  The contract contemplates payment of traveling allowance,  payment   in  respect   of  sickness,  accident, provident fund,  pension, overtime,  additional remuneration for Sunday, holiday or right work etc. It has even mentioned the rate  of wages  and is  thus fairly comprehensive. There is, of course, no mention about bonus. Now if the contractor 671 has to  pay a  higher rate  of  wages  than  that  found  in Enclosure III because of the conditions in the labour market naturally the  contractor cannot  be expected to pay it from out of  his funds  or the  payments he  was  to  receive  in pursuance of  the contract.  This being  a contract in which the company  is to  pay for  labour as well as for materials any increase  in the  cost of those items cannot be borne by the contractor,  who was to be paid only a fixed sum towards its remuneration.  As the question of bonus is not mentioned in the  contract the question arises as to who is to pay the bonus in  case bonus  is found  payable to  the workmen.  We express no  opinion on that point. But it appears to us that the company  is adopting an ostrich like policy in trying to avoid being  made  a  party  to  the  reference  before  the Industrial Tribunal.  if it  should ultimately  be held that bonus is  payable and  the company  is liable  to pay it, it should do  its best  even  from  this  stage  to  fight  the question of liability to pay bonus as well as the quantum.      What is  called a  tripartite agreement  seems to  have been entered  into between  the workmen and the appellant in the presence  of the Labour Commissioner on 12th June, 1960. That was  natural as  the appellant  it  was  that  employed labour. But  that by itself does not decide the question who

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is to  pay the  bonus. Under  that agreement  the  appellant agreed to  the payment  of bonus in principle subject to the condition that  they get  the bonus  from the  company.  The quantum of  bonus and  exact date  from which  the bonus was payable was not, however, indicated. It was also stated that when bonus  was received  by the  management it shall notify the fact to the workers and that the union may raise this as a point of dispute when it would deem it appropriate      On 15th  June, 1960  the labour  union appears  to have written a  letter  to  the  Labour  Commissioner  of  orissa raising a dispute for adjudication regarding bonus The union mentioned that  they had also written a number of letters to the appellant  as well as the company but either of them had decied the  issue.  They,  therefore,  served  a  notice  of strike. The  Labour Commissioner  wrote to the Government on 17-10-60 about  the dispute and mentioned that the appellant had agreed  to pay  bonus if  the company  paid it.  He also mentioned the  fact that  the  appellant  in  reply  to  the letters from  the workmen  had stated that they had not come to any  final decision  in the  matter. On  the ground  that unless something  was done  there will  be a  strike causing complete dislocation  of work  of the  company he  suggested that the  following issue may be considered for reference to the Industrial Tribunal:           "Whether  the   workers  of  Hochtief  Gammon  are      entitled to  any bonus  ? If  so, what  should  be  the      quantum ?" He proceeded  to say  that  if  this  question  was  finally decided it would also serve as a guiding principle for other contractors as  similar demands  for payment  of bonus  from workers were being received. It would be noticed that though the appellant’s  stand was  that they would pay the bonus if it were given by the company the Labour Commissioner did not suggest that  the question as to the party liable to pay the bonus, whether  it was  the appellant  or  the  company,  be referred for 672 adjudication. His  anxiety was  that the work of the company should not A be dislocated. He did not apply his mind to the question of the party liable to pay the bonus. Naturally the Government also  did not.  The Government therefore referred the following issue for adjudication:           "Whether the  workers  of  M/s.  Hochtief  Gammon.      Civil Engineers  and Contractors, Rourkela are entitled      to any bonus and if so, what should be the quantum?" On this  a notice  seems to  have been served on the company and curiously enough the company said that the appellant did not complete  the work  as set  out  in  the  Memorandum  of Agreement and  hence no bonus was due to the contractors and that therefore  they were not a necessary party. This bonus, as the terms of the contract set out earlier would show. has nothing to  do with  the bonus  payable to  the workmen. The appellant in  their written statement pointed out that under the terms  of the  contract the  company  had  to  bear  all expenditure  with  reference  to  labour,  all  payments  in respect of wages, salaries and other connected payments made to  persons   engaged  in   the  works,  that  it  was  also responsible to make payments to statutory schemes in respect of all  workmen and  that they  themselves were  only paid a stated fee  for professional  services rendered  to them and therefore no  demand can  be raised  by the  workmen who are engaged by  the contractor against the contractor and such a demand is  unsustainable in  law. They then gave reasons why the workmen  were not entitled to any bonus from them. It is not necessary  to set  out those  reasons at length. We have

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already referred  to the  stand of  the company. As would be apparent from  the decision  of this  Court on  the  earlier occasion, which  we shall  set out later, the Tribunal could not have  decided this  question in  view of  the  terms  of reference made to it.      Thereafter the appellant filed. an application under s. 18(3) (b)  of the Industrial Disputes Act praying that for a proper adjudication of the issue referred to the Tribunal it was necessary  to bring  on record the company as a party to the proceedings. They pointed out that any amount payable to the labourers  engaged by  the contractors  for what- soever reason was  a contract expenditure within the meaning of the term contract  and payable by the company as it was entirely responsible for  payment of  all remuneration to the workmen and all  expenditure incurred  by reason  of any  demand put forward by  the workmen  in connection  with the  works, was debitable to  the contract  and payable by the company. This application was rejected. Thus the stand of the appellant as to the party liable to pay the bonus was never in doubt.      The appellant  thereupon filed  a petition  before  the High Court  of orissa praying that the order of the Tribunal should  be   set  aside.  that  petition  also  having  been dismissed an  appeal was  filed before this Court by special leave. The relevant portion of the judgment of this Court is found at page 605, 1964(7) S.C.R.: -           "The next  contention raised  by Mr. Chatterjee is      that M/s.  Hindustan Steel  Ltd. is  a necessary  party      because it is the said concern which is the employer of      the respondents  and not the appellant. In other words,      this contention is that 673      though in  form the  appellant engaged the workmen whom      the respondent  union  represents,  the  appellant  was      acting  as   the  agent   of  its   principal  and  for      adjudicating upon  the industrial  dispute referred  to      the Tribunal  by the  State of  orissa, it is necessary      that the  principal, viz.,  M/s. Hindustan  Steel  Ltd.      Ought to  be added  as a  party. In  dealing with  this      argument, it is necessary to bear in mind the fact that      the appellant  does not  dispute the respondent Union’s      case that  the workmen  were employed by the appellant.      It would  have been open to the State Government to ask      the Tribunal  to consider who was the employer of these      workmen and  in that case, the terms of reference might      have  been   suitably  framed.  Where  the  appropriate      Government desires  that the  question as  to  who  the      employer is  should be determined, it generally makes a      reference in  wide enough terms and includes as parties      to the  reference different  persons who are alleged to      be the employers. Such a course has not been adopted in      the present  proceedings, and so, it would not possible      to hold  that the question as to who is the employer as      between the  appellant and M/s. Hindustan Steel Ltd. is      a question  incidental to  the industrial dispute which      has been  referred under s. 10(1)(d). This dispute is a      substantial  dispute  between  the  appellant  and  M/s      Hindustan  Steel   Ltd.  and   cannot  be  regarded  as      incidental in  any sense,  and so,  we think  that even      this ground is not sufficient to justify the contention      that M/s.  Hindustan Steel  Ltd. is  a necessary  party      which can  be added  and  summoned  under  the  implied      powers  of the Tribunal under s. 18(3)(b)." lt would be noticed that before this Court what was admitted was that  the appellant  had employed  the workmen  but  the question as  to who  was the  employer in  relation to those

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workman was  the main  question at  issue. That was why this Court pointed  out that it would have been open to the State Government to  ask the  Tribunal to  consider  who  was  the employer of  these workmen  and in  that case  the terms  of reference might  have been  suitably framed. As that had not been done  this Court  pointed out  that  it  would  not  be possible to  hold that  the  question  as  to  who  was  the employer as  between the  appellant and  the company  was  a question incidental to the industrial dispute which had been referred under  s. 10(1)(d), as it was a substantial dispute between the appellant and the company.      Apparently taking the cue from the observations of this Court the  appellant filed a writ petition out of which this appeal arises.  But before  doing so the appellant had filed an application  before the  State Government  asking them to modify the  earlier reference  to the Industrial Tribunal by adding the  company as  a party  to  the  reference  and  an additional clause as under:           "If bonus  is payable, who is the employer and who      is  responsible   for  payment  of  the  bonus  to  the      workmen?" They pointed  out in  that application  that the company was entirely responsiblele  for payment  of wages  and connected payments and all 674 other remuneration  of any  kind to  the workmen,  that  for enabling the  appellant to  make payments  to the  labourers engaged for such work on behalf of the company an imprest of Rs. 3,000,000/-  was given to them out of which the payments were made,  that the  appellant got  only a fee, that if any bonus becomes  payable it was the person who pays wages that has to  pay the  bonus. Thereafter  they also  asked  for  a personal hearing. To this the reply of the Government was as follows:           "With reference to their petition dated 20-5-64 on      the above  subject, the  undersigned is directed to say      that  after   due.  Consideration  of  the  matter  the      Government do  not find  any materials  on the basis of      the petition  to include Hindustan Steel Ltd., Rourkela      as a party in the above case." It would  be noticed  that in  the  petition  the  appellant wanted not  only that the company should be made a party but also that another issue must be referred to the Tribunal for adjudication. They  had given  reasons as to why the company should be  included as  a party.  They had in their petition included the  paragraph which  we have  extracted above from this Court’s  judgment. It is apparent from their reply that the Government  had not  applied their  mind  to  the  facts placed before  them. There  was at least an arguable case on the point  as to who was liable to pay the bonus and in that case the company would have been a necessary and appropriate party. Even  if the  Government thought that the company was not a  necessary party  the question as to who was liable to pay the bonus was a very relevant question and that made the company a necessary or at least a proper party. The attitude of the appellant had throughout been that their contract was a cost  contract, that  the company  had to  pay labour  and while they have employed the workmen the employer was really the company. That contention may or may not be upheld by the Tribunal. Ultimately  if the  Tribunal should  hold that the appellant is  the party responsible for payment of bonus the question  as  between  the  company  on  the  one  hand  and appellant on the other may have to be decided by arbitration as provided  in the  contract between  them or otherwise. It appears  to  us,  therefore,  that  not  only  was  this  an

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appropriate  question  to  be  referred  to  the  Industrial Tribunal for  adjudication but  even the  company should  be interested in  getting itself  impleaded as a party so as to put forward  any contention  which  it  may  decide  to  put forward as  regards the  question whether  bonus was payable and if  so the  quantum thereof,  as also the question as to who would be liable to pay the bonus instead of adopting, as we have said earlier, an ostrich like policy.      The power  of the  Courts in  relation to the orders of the  appropriate  Government  in  the  matter  of  referring industrial disputes  for adjudication is no longer in doubt. In State of Bombay v. K.P. Krishnan & Ors. (1) it was held:           "It is common ground that a writ of mandamus would      lie against  the Government  if the  order passed by it      under  s.10   (1)  is  for  instance  contrary  to  the      provisions of  s.10(1) (a)  to (d)  in  the  matter  of      selecting the appropriate authority; (1) [1961] 1 S.C.R. 227 675      it is  also common  ground that  in refusing  to make a      reference under  s. 12(S) if Government does not record      and communicate  to the  parties concerned  its reasons      therefore a writ of mandamus would lie. Similarly it is      not disputed  that if a party can show that the refusal      to refer  a dispute  has not bona fide or is based on a      consideration of wholly irrelevant facts and circuit of      mandamus would  lie. The order passed by the Government      under s.  12(5) may  be an administrative order and the      reasons recorded  by it  may not  be justiciable in the      sense that  their propriety,  adequacy or  satisfactory      character may not be open to judicial scrutiny; in that      sense it would be correct to say that the court hearing      a petition  for mandamus  is not sitting in appeal over      the decision  of the  Government; nevertheless  if  the      court is  satisfied  that  the  reasons  given  by  the      Government  for   refusing  to  make  a  reference  are      extraneous and  not germane  then the  court can Issue,      and would  be justified  in issuing, a writ of mandamus      even in respect of such an administrative order." In Bombay  Union of Journalists v. The State of Bombay(1) it was observed:           "The breach  of section  25F is no doubt a serious      matter and  normally the  appropriate Government  would      refer  a   dispute  of   this   kind   for   industrial      adjudication; but  the provision  contained in s. 10(1)      read with  s. 12(5)  clearly shows  that even  where  a      breach of s. 25F is alleged, the appropriate Government      may  have  to  consider  the  expediency  of  making  a      reference and  if after  considering all  the  relevant      facts  the   appropriate  Government   comes   to   the      conclusion that  it would  he inexpedient  to make  the      reference, it  would be  competent to  it to  refuse to      make such  a reference..  If the appropriate Government      refuses   to    make   a   reference   for   irrelevant      considerations,  or  on  extraneous  grounds,  or  acts      malafide, that,  of course, would be another matter: in      such a  case a party would be entitled to move the High      Court for a writ of mandamus."      The above  are not  the only  powers of  the Courts  in relation to  the orders  of the  Government or an officer of the Government  who has  been conferred  any power under any statute,  which   apparently   confer   on   them   absolute discretionary powers, in this country as well as in England. In England  in earlier  days the  Courts usually  refused to

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interfere where  the Government  or  the  concerned  officer passed what  was called  a non-speaking  order, that  is, an order which  on the  face of  it did not specify the reasons for the  order. Where a speaking order was passed the Courts proceeded to  consider whether  the reasons  given  for  the order or  decision were  relevant reasons or considerations. Where there  was a  non-speaking order they used to say that it was  like the face of the Sphinx in the sense that it was inscrutable and  therefore hold that they could not consider the question  of the  validity of the order. Even in England the Courts have travelled very far since those days.      (1) [1964] 6 S.C.R. 22, 34. 676 They on  longer find  the face  of The  Sphinx  inscrutable. Needless to   say that Courts in India, which function under a written  Constitution which  confers fundamental rights on citizens, have  exercised far  greater;  powers  than  those exercised by  Courts in  England, where  there is no written Constitution and  there are  no fundamental rights. Therefor the decisions  of Courts in England as regards powers of the Courts ’surveillance’,  as Lord  Pearce  calls  it,  or  the control which the Judiciary have over the Executive, as Lord Upjohn put  it, indicate at least the minimum limit to which Courts  in   this  country   would  be  prepared  to  go  in considering the validity of orders of the; Government or its officers. In  that sense  the decision of the House of Lords in  Padfield  v.  Minister  of  Agriculture,  Fisheries  and Food(1) is  a landmark  in the  history of  the exercise  by Courts of their power of surveillance.      That decision  is well  worth a close study but we will resist the  temptation to  quote  more  than  is  absolutely necessary. That was a case where under the provisions of the Agricultural Marketing  Act, 1958 the Minister had the power to appoint  a committee  to go into certain questions under. s. 19  of that Act but when requested to appoint a committee he refused.  In refusing  to appoint  the committee  he  had given elaborate  reasons for  his refusal.  It was  admitted that the question of referring the complaints to a committee was a  matter within the, Minister’s discretion. It was also argued that  he was  not  bound  to  give  any  reasons  for refusing to  refer a complaint to a committee and that if he gives no  reason his  refusal cannot  be questioned  and his giving reasons could not put him in a worse position. It was held by  the House  of Lords  that an  order  directing  the Minister to  consider the  complaint according to law should be made.  It was  also  held  that  Parliament  conferred  a discretion on  the Minister  so that  it could  be  used  to promote the  policy and  objects of the Act which were to be determined by  the construction  of the  Act and  that was a matter of law for the court. It was further held that though there might  be reasons  which would justify the Minister in refusing to  refer   a complaint,  his  discretion  was  not unlimited and, if it appeared that the effect of his refusal to appoint a committee of investigation was to frustrate the policy of  the Act, the court was entitled to interfere. The extracts given  below of certain portions of the speeches of the learned Lords can be appreciated in that background. Lord Reid:           "The respondent  contends that his only duty is to      consider a  complaint fairly  and that  he is  given an      unfettered discretion  with regard  to every  complaint      either to  refer it or not to refer it to the committee      as he  may think fit. The appellant contents that it is      his  duty   to  refer  every  genuine  and  substantial      complaint, or  alternatively that his discretion is not

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    unfettered and  that in this case he failed to exercise      his discretion according to law because his refusal was      caused or  influenced by his having misdirected himself      in law  or by  his having taken into account extraneous      or irrelevant considerations. (1) [1968] A.C. 997. 677           In my  view, the appellants’ first contention goes      too far.  There are  a number  of reasons  which  would      justify the  Minister in refusing to refer a complaint.      For example,  he might  consider it  more suitable  for      arbitration, or  he might  consider that  in an earlier      case  the   committee  of   investigation  had  already      rejected a substantially similar complaint, or he might      think the complaint to be frivolous or vexatious. So he      must have  at least  some measure of discretion. But is      it unfettered?           lt is  implicit in  the argument  for the Minister      that there  are only  two possible  interpretations  of      this provision-.  either he  must refer every complaint      or he  has an  unfettered discretion to refuse to refer      in any case. I do not think that   is right.           It was  argued that  the Minister  is not bound to      give any  reasons for  refusing to refer a complaint to      the committee, that if he gives no reasons his decision      cannot  be  questioned,  and  that  it  would  be  very      unfortunate if  giving reasons  were to  put him  in  a      worse position.  But I  do not  agree that  a. decision      cannot be questioned if no reasons are given." Lord Hadson:           The reasons  disclosed are  not in my opinion good      reasons for  refusing to  refer the  complaint  to  the      committee, that  if he  gives no  reason  his  decision      cannot  be  questioned,  and  that  it  would  be  very      unfortunate if  giving reasons  were to  put him  in  a      worse position.  But I  do not  agree that  a  decision      cannot be questioned if no reason are given. Lord Hodson:           "The reason disclosed are not, in my opinion, good      reason for  refusing to refer the complaint seeing that      they leave  out of account altogether the merits of the      complaint itself.  The complaint  is, as the Lord Chief      Justice pointed  out, made  by person  affected by  the      scheme and  is not  one for  the consumer  committee as      opposed to  the committee  of investigation  and it was      eligible for reference to the latter. It has never been      suggested that  the complaint was not a genuine one. It      is no  objection to  the exercise  of the discretion to      refer that wide issues will be raised and the interests      of other  regions and the regional price structure as a      whole would  be affected. It is likely that the removal      of a  grievance will,  in any event, have a wide effect      and the Minister cannot lawfully say in advance that he      will not refer the matter to the committee to ascertain      the facts  because, as  he says in effect, although not      in so  many words,  "l would  not regard it as right to      give effect to the report if it were favour able to the      appellants." Lord Pearce:           "I do  not regard a Minister’s failure- or refusal      to give  any reasons  as a  sufficient exclusion of the      court’s survellance.      It was  for the  Minister  to  use  his  discretion  to      promote Parliament’s  intention. If the court had doubt      as to  whether the  appellants’ complaint was frivolous

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    or repetitive,  or not  genuine, or not substantial, or      unsuitable  for   investigation   or   more   apt   for      arbitration, it  would not interfere. But nothing which      has been said in this case leads one 678      to doubt that it is a complaint of some substance which      shoukl A  properly be  investigated by  the independent      committee with  a view  to pronouncing on the weight of      the complaint and the public interest involved.           The fact that the complaint raises wide issues and      affects other regions was not a good ground for denying      it an  investigation by  the committee.  lt is a matter      which makes  it very  suitable  for  the  committee  of      investigation, with  its duty  to report  on the public      interest, and  its capacity  to hear representatives of      all the regions." Lord Upjohn:           "The Minister in exercising his powers and duties,      conferred upon  him by  statute? can only be controlled      by a  prerogative writ which will only issue if he acts      unlawfully. Unlawful  behaviour by  the Minister may be      stated with sufficient accuracy for the purposes of the      present appeal  (and here  I adopt the clarification of      Lord Parker  C.J., ill the Divisional Court): (a) by an      outright refusal  to consider.  the relevant matter, or      (b) by  misdirecting himself in point of law, or (c) by      taking  into   account  some   wholly   irrelevant   or      extraneous consideration,  or (d) by wholly omitting to      take into account a relevant consideration.           There is  ample authority  for these  propositions      which were not challenged in argument. In practice they      merge into  one another  and ultimately  it  becomes  a      question whether for one reason or another the Minister      has acted  unlawfully  in  the  sense  of  misdirecting      himself in  law, that is, not merely in respect of some      point of  law but  by  failing  to  observe  the  other      headings I have mentioned.      The  Minister’s  main  duty  is  not  to  consider  its      suitability for  investigation; he  is putting the cart      before the  horse. He might reach that conclusion after      weighing all the facts but not until he has done so.      This  introduces  the  idea,  much  pressed  upon  your      Lordships in  argument, that  he  had  an  "unfettered"      discretion in  this matter;  it was argued, means that,      provided the  Minister considered  the  complaint  bona      fide, that  was an  end of  the matter.  Here let it be      said at  once, he and his advisers have obviously given      a bona  fide and  painstaking consideration  to the com      plaints addressed  to him;  the question is whether the      consideration given was sufficient in law.           My Lords,  I believe  that the introduction of the      adjective "unfettered"  and its  reliance thereon as an      answer  to   the  appellants’   claim  is  one  of  the      fundamental   matters    confounding   the   Minister’s      attitude, bona fide though it be....even if the section      did contain that adjective I doubt if it would make any      difference in  law to  his powers.. But the use of that      adjective, even in an Act of Parliament, can do nothing      to unfetter  the control  which the judiciary have over      the executive, 679      namely that  in exercising their powers the latter must      act law  fully and that is a matter to be determined by      looking  at  the  Act  and  its  scope  and  object  in      conferring a  discretion upon  the Minister rather than

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    by the use of adjectives."           ’ ....  a decision of the Minister stands on quite      a different  basis; he  is a  public officer charged by      Parliament with  the discharge  of a  public discretion      affecting Her  Majesty’s subjects;  if he does not give      any reason for his decision it may be, if circumstances      warrant it,  that a  court may be at liberty to come to      the conclusion  that he had no good reason for reaching      that conclusion  and order  a prerogative writ to issue      accordingly." That was  a case  where the  Minister  had  given  elaborate reasons and  it was, therefore, possible for their Lordships of the  House of  Lords to consider the reasons given by the Minister in elaborate detail and show how he had misdirected himself. They also pointed out that by merely keeping silent the Minister  cannot avoid  the Court  considering the whole question.      The principles  deducible from  the decisions  of  this Court and  the above  decision of  the House of Lords which, though not  binding on us, appeals to us on principle may be set out as follows:      The Executive  have to  reach their decisions by taking into account relevant considerations. They should not refuse to consider  relevant  matter  nor  should  They  take  into account wholly  irrelevant or extraneous consideration. They should not misdirect themselves on a point of law. Only such a decision will be lawful. The courts have power to see that the Executive acts lawfully. It is no answer to the exercise of that  power to say that the Executive acted bona fide nor that they  have  bestowed  painstaking  consideration.  They cannot avoid  scrutiny by courts by failing to give reasons. It they  give reasons  and they  are not  good reasons,  the court can  direct them to reconsider the matter in the light of relevant  matters,  though  the  propriety,  adequacy  or satisfactory character  of those  reasons may not be open to judicial  scrutiny.  Even  if  the  Executive  considers  it inexpedient to exercise their powers they should state their reasons and  there must  be material  to show that they have considered all the relevant facts.      Judged by these tests the order of the State Government is unsustainable.  Here the  Government did  not say that it considered  it   inexpedient  to   refer  the  question  for adjudication or  that the  considerations put forward by the appellant before  it were  irrelevant.  Neither  the  Labour Commissioner nor  the Government  seem to  have noticed that this contract  is not  one  of  the  usual  kind  wherein  a contractor undertakes  to do  a certain  work for  a certain sum. In  that case  the question  of profit  and loss  or as between  the  contractor  and  the  party  for  whom  he  is executing the  work any question as to who was to pay labour would not arise whether it is with regard to wages or bonus. The contractor  will have  to bear the full cost o material as well  as the full liability for paying the workmen on any head whatsoever. In this contract the company had to pay for the material as well as labour. The appellant 680 got paid  only for  its professional  services. There was in any case  in A  the contract no provision that the appellant was to  incur any item of expenditure or make any payment in relation to  the workman.  In such  a contract  it would  be unusual if  it was  to be considered that the appellant were expected to pay the bonus for the workman. This however need not be  taken as  our final  view on this point. But it is a relevant Matter  for  consideration  by  the  Government  in deciding whether to refer the matter to the Tribunal or not.

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Furthermore, when  the question  of bonus in this case arose what is  known as  the Full  Bench formula  was holding  the field in  the matter  of payment of bonus. If the bonus were to be  paid by  the appellant  it could  hardly  be  brought within that  formula. As the company had certainly not begun production at  that stage it would be difficult to calculate the bonus  with reference  to the  business of  the  company either. The  mistake that  the Labour Commissioner committed was in  not realising  that the  dispute  concerned  not  Cr merely two  parties but three because from the beginning the appellant had made it clear that they would pay the bonus if the necessary amount  was paid to them by the company. We have  set out  the facts  of this  case  at  considerable length and  considered the whole question. We think that the Government’s  order  in  this  case  really  amounts  to  an outright  refusal  to  consider  relevant  matters  and  the Government also misdirected itself in point of law in wholly omitting to  take into  account the  relevant considerations which as held by the House of Lords is unlawful behavior. It has failed to realise that in effect the contractor employed labour for  the company wh() was the real paymaster. lt held failed to  take into  account the  fact that  the    workmen wanted the  bonus from  either the company or the appellant. Naturally the  workmen were  not interested who paid them as long as  they were  paid. lt  would bear  repetition to  say again that the. Original mistake arose out of the assumption by the  Labour Commissioner  that this  was  a  case  of  an ordinary contract  which would  apply to  other  contractors also. He  had apparently  not seen  the contract between the company and  the appellant  and that  mistake was adopted by the State  Government and  they stuck  to it  inspite of the application made to them by the appellant after the disposal of the  earlier appeal  by this  Court, giving  all relevant facts. It  does not  appear from  the communication  of  the Government to the appellant that they had applied their mind to any  of the  considerations set  out in  the  appellant’s application.      In the  circumstances this  appeal must  be allowed and the Government of orissa must be directed to reconsider this matter and take a decision in the matter of reference in the light of  the relevant  facts. There  will be no order as to costs. P.H.P.                                       Appeal allowed. 681