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PETITIONER: NEW STANDARD ENGINEERING CO.  LTD.

       Vs.

RESPONDENT: N. L. ABHYANKAR AND ORS.

DATE OF JUDGMENT02/02/1978

BENCH: SHINGAL, P.N. BENCH: SHINGAL, P.N. BHAGWATI, P.N. SINGH, JASWANT

CITATION:  1978 AIR  982            1978 SCR  (2) 798  1978 SCC  (2) 133  CITATOR INFO :  D          1978 SC1196  (8,19)  RF         1986 SC1830  (60)

ACT: Industrial  Disputes Act 1947--Sec. 2(p)  S.  18--Settlement arrived  at  after  the award and during  pendency  of  Writ Petition of company in the High Court--Tests for determining reasonableness and fairness of settlement.

HEADNOTE: The  Government  of Maharashtra referred to  the  Industrial Tribunal  the dispute between the New  Standard  Engineering Co.  Ltd.  and its workmen for  adjudication  under  section 10(1)(d) of the Industrial Disputes Act 1947.  The  Tribunal gave  its award in November, 1972, and it directed that  the revised  wage  scales and the scheme of  dearness  allowance shall come into force with retrospective effect from 1st  of January, 1968.  The Company challenged the award in the High Court  by a petition under Articles 226 and 227 of the  Con- stitution  which  was  fixed for hearing  on  30-7-1973.   A settlement  was  arrived  at between  the  company  and  the Bhartiya Kamgar Sena (respondent No. 3) on 31-7-1973 but the application  for adjournment was refused.  The dictation  of the judgment commenced on 31-7-1973 and was concluded on 1st August, 1973. One  of  the  points urged in the High Court  was  that  the Company had arrived at the settlement and award may be  made in  terms of that settlement or a direction may be given  to the Tribunal to consider whether the settlement was fair and reasonable.  The High Court held that the alleged settlement was  not a settlement under section 2(p) of the Act  it  was not  open  to it to take notice of it in  proceedings  under Articles  226  and  227 of the  Constitution.  it  therefore thought  it  proper  to dispose of the  petition  on  merits rather than leave it to uncertainty and inter-union  rivalry which may lead to industrial unrest. The Company riled an appeal in this Court by Special  Leave. This  Court  sent  the matter to the  Tribunal  for  finding whether  the  settlement  arrived  at  by  the  Company  and respondent No. 3 was under section 2(p) of the Act,  whether the  settlement was entered into voluntarily and whether  it

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was  just  and fair.  The Tribunal found that  out  of  1328 workmen  who were in service on 31-7-1973, 995  workmen  had signed  the  settlement  and had also  accepted  their  dues thereunder,  and  242 workmen had only accepted  their  dues under the settlement by signing receipts though they did not sign the settlement. The  Counsel  for  respondent  No.  2  contended  that   the settlement  dated  31-7-1973  was not just  and  fair.   The Counsel  further  argued  that while tinder  the  award  the increased  rates  were admissible from  January,  1968,  the settlement put that off to January. 1973 and was, therefore, unjust  and  unfair.   It was also  contended  that  by  the settlement the amount of arrears payable was reduced from Rs 40  lakhs to Rs. 11.5 lakhs.  On the other hand Counsel  for the Company pointed out with reference to the balance sheets that the Company bad paid all its tax and other  liabilities which  were  beyond recall and that during the  period  from 1968  to 1972 it had only a net surplus of Rs.  5,11  lakhs, and  that  the Company had agreed to--Pay  about  Rs.  11.56 lakhs  in addition to the difference in  dearness  allowance amounting  to Rs. 3.64 lakhs which had already been paid  to the  workmen.  It was stated that the Company  had  exceeded its borrowing limit and it was not possible to pay more than what it had agreed to pay under the settlement. Allowing the appeal, HELD   :  1.  Settlement  of  labour  disputes   by   direct negotiation  or settlement through collective bargaining  is always  to  be  referred for it is  the  best  guarantee  of industrial  peace  which is the aim of all  legislation  for settlement of 799 labour disputes.  In order to bring about such a  settlement more  easily and to make it more workable and effective,  it is  no  longer necessary under the law that  the  settlement should  be  confined to that arrived at in the course  of  a conciliation  proceeding, but now includes by virtue of  the definition  in Section 2(p) of the Act, a written  agreement between  the employer and the workman arrived  at  otherwise than  in the course of conciliation proceedings  where  such agreement  has been signed by the parties in the  prescribed manner  and a copy thereof has been sent to  the  authorised officer.   Rule 58(2) of the Industrial  Disputes  (Central) Rules,   1957,   prescribes  the  manner  of   signing   the settlement.   Section  18(1)  specifically  states  that   a settlement arrived at by agreement between the employer  and the  workman  otherwise than in the course  of  conciliation proceedings  shall be binding on the parties to  the  agree- ment. [802 D-G-] Sirsilk  Ltd. and Anr. v. Government of Andhra  Pradesh  and Anr., [1963] 11 L.L.J. 647; followed. Herbertsons Limited v. Workmen of Herbertsons Ltd. and Ors., [1977] 2 S.C.R. 15. relied on. Rajkamal  Kala  Mandir (P) Ltd. v.  Indian  Motion  Pictures Employees’ Union and Ors., [1963] I L.L.J. 318 referred to. 2.  Under the present settlement, the workmen have  received the same wagesand dearness allowance which were awarded  to them by the Tribunal. They,therefore,  lost  nothing   on that  account.  The stipulation about  increased  production had  nothing to do with the period prior to  January,  1973. nor  was there any condition in the settlement according  to which  the benefits of the settlement were to be  forefeited in case the workmen did not carry out the stipulation.  [803 A-B, D] 3.  The  question of justness and fairness of  a  settlement should  be  examined with reference to the situation  as  it

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stood on the date on which it was arrived at i.e.. on  31-7- 1973.   One of the ground of challenge to the  award  before the High Court was the contention that the Tribunal had  not made a proper comparison of wages and the dearness allowance on industry-cum-region basis.  The possibility of an adverse decision by the court could therefore operate as a  positive force in favour of deliberate and careful effort by both the parties to settle their dispute through direct  negotiation. It  is that force which has brought about  settlement  under consideration.   In the event of the success of the  Company in  the  High Court the workmen were liable  to  refund  the amounts which had already been paid to them. 995 workmen had signed  the settlement and 242 workmen have  accepted  their dues  under settlement.  Bonafide of respondent No. 2  Union had not been challenged. [803 F, H, 804 A, B-E] 4.  The  Court directed that the award of  the  Tribunal  be substituted by the settlement. [804 F]

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1177/73. Appeal  by Special Leave from the Judgment and  Order  dated 31st  July,  1st August 1973 of the  High  Court,  Bombay.in Civil Application No. 335 of 1973. F. N. Kaka, D. C. Shroff, I. N. Shroff and H. S. Parihar for the Appellant. Y.  S. Chitaley, P. H. Parekh, K. Vasudev, C. B.  Singh  and (Mrs.) Manju   Sharma, for Respondents 2, 4 and 5. S.  J. Desmukh, K. L. Hathi and P. C. Kapur  for  Respondent No. 3. 800 The Judgment of the Court was delivered by SHlNGHAL,  J.-The Government of Maharashtra referred to  the Industrial  Tribunal,  Bombay, the dispute between  the  New Standard  Engineering Company Ltd.  Bombay (referred  to  as the Company) and its workmen, for adjudication under section 10(1) (d) of the Industrial Disputes Act, 1947,  hereinafter referred to as the Act.  The order of reference was made, on August  9,  1966,  and  it stated all  the  demands  of  the workmen.  The Tribunal give its award on November 29,  1972. It  held, inter alia, that the revised wage scales  and  the scheme  of dearness allowence shall come into force and  the workmen shall be entitled to wages at the revised rates from January 1, 1968. The  Company  challenged the award in the High  Court  by  a petition  under  articles 226 and 227  of  the  Constitution which   was  fixed  for  hearing  on  July  30,  1973.    An application  was made for an adjournment, but to  no  avail. The dictation of the judgment commenced on July 31, 1973 and was  concluded on August 1, 1973.  One of the  points  which was urged in the High Court was that the Company had arrived at a settlement with the Union known as the Bhartiya Kamagar Sena (respondent_No. 3) and an award may be made in terms of that settlement, or a direction may be given to the Tribunal to consider whether the settlement was fair and  reasonable. It  was brought to the notice of the High.  Court that  some workers  had already accepted the settlement and  some  more may accept it.  The request for adjournment on that account, as  well  as the settlement, were opposed on behalf  of  the General  Engineering Employees Union (respondent No. 2)  and some  others.  The High Court took notice of the  fact  that respondent No. 3 which claimed to represent " a  substantial number  of  workmen" supported the settlement, but  it  held that  the  alleged settlement was "not  a  settlement  under

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section 2(p)" of the Act and it was not open to it to  "take notice of the said settlement in proceedings under  Articles 226  and 227 of the Constitution." It therefore  thought  it proper to dispose of the petition on the merits, rather than leave it to uncertainty and inter-union rivalry, which might lead to industrial unrest.  In that view of the matter,  the High Court dismissed the petition on merits by its  judgment dated  31-7-73/1-8-73.  In the meantime, the  memorandum  of settlement  was signed by and on behalf of the  Company  and respondent No. 3 (Bhartiya Kamgar Sena). The Company felt aggrieved against the judgment of the  High Court and applied for special leave to appeal to this Court. Leave was granted on August 10, 1973 along with an order for stay  of  enforcement  of the award on  condition  that  the appellant  paid the workers in accordance with the terms  of the settlement of which copies were to be filed by  counsel. Thereafter  the "consent terms", duly signed, were filed  by counsel  for the parties and an order was made on  September 28,  1973,  after notice to all concerned, that  the  matter would  go back to the Industrial Tribunal "for findings  and transmission thereof to this Court" along with a copy of the following consent terms,-  801               "The  appellants and respondents 2 to 5  agree               that  the  matter be sent down  to  Industrial               Tribunal,  Maharashtra, Bombay, for  recording               findings on the following issues               (a)  Whether  the settlement dated  31st  July               1973   between  the  appellant   company   and               respondent No. 3 is a settlement under Section               2(p) of the Industrial Disputes Act, 1947.               (b)  Whether the settlement was  entered  into               voluntarily.               (c) How many workmen covered by the  reference               have signed and/or accepted the settlement.               (d)  Whether the individual workmen  who  have               signed  and/or  accepted the  settlement  have               done so voluntarily.               (e) Whether the settlement is just and fair." The Tribunal found issues Nos. (a), (b), (d) and (e) in  the affirmative.  As regards issue No. (c) it found that out  of 1328  workmen  who were in ’service on July  31,  1973,  995 workmen  had  signed the settlement and  had  also  accepted their  dues  thereunder, and 242 workmen had  only  accepted their  dues under the settlement by signing receipts  though they had not signed the settlement.  As regards the  workmen who  had left the Company between January 1, 1968  and  July 31,  1973, the Tribunal found that 910 workmen had  accepted their dues under the settlement by passing receipts for  the same. On receipt of the Tribunal’s findings, an order was made  by this  Court  on October 4, 1977 allowing the  respondent  to file,  a  counteraffidavit and permitting the  appellant  to file its affidavit in reply.  This is how the case has  come up for disposal of the Company’s appeal. Counsel for respondent No. 2 has not challenged the findings of the Tribunal on issues Nos. (a), (b), (c) and (d).  There is in fact no room for any controversy about these findings, which appear to be fully justified, and it is therefore  not necessary  to  examine  them  here.   The  question  remains whether  the  settlement dated July 31, 1973  was  just  and fair, for that was the subject matter of the remaining issue (e) on which, as has been stated, the Tribunal has  returned a finding in the affirmative.  In reaching that  conclusion, the Tribunal has taken note of the facts that even under the

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settlement the workmen would receive 22 per cent  additional emoluments, the award of the Tribunal would cast a burden of Rs.  40.06  lakhs on account of arrears which was  not  only unreasonable  but also unbearable, the Company had  all  the same  agreed to incur a recurring liability of Rs. 12  lakhs in the first year, Rs. 14 lakhs in the ’second year and  Rs. 16  lakhs  in the third year. and. had already paid  Rs.  15 lakhs.  in  arriving at its finding the Tribunal  has  drawn heavily on this Court’s judgement in Herbertsons Limited  v. Workmen  of Herbertsons Limited and others(1).  It  has,  in this connection, taken into consideration the (1) [1977]2 S.C.R. 15. 802 factors  which  were likely to prevail with the  workmen  in accepting  the terms of the settlement dated July 31,  1973, including the prospects of a protracted litigation, the risk of an adverse decision in the Company’s pending appeal,  the possibility  of  having to refund a part of  what  they  had obtained during the intervening period, the distribution  of Rs.  8,00,000/- instead of Rs. 5,00,000/- by way of  ad  hoc payment etc. Mr.  Chitaley has argued that the Tribunal erred  in  taking the  view  that the award was likely to cast  an  unbearable burden  of  Rs. 40 lakhs on account of  arrears,  which  the company had no capacity .to pay.  Our attention has, in this connection,  been invited to some of the Annual  Reports  of the Company and the statements of the Chairman of the  Board of  Directors.   It has therefore been pointed  but  that  a settlement under which the sum which was payable as ’arrears was  reduced  from Rs. 40 lakhs and odd to about  Rs.  11.50 lakhs  cannot  be  ’said to be fair and  reasonable  as  the workmen  lost  heavily because while the award  revised  the wage scales and the dearness allowance from January 1, 1968, the settlement put that off to January 1, 1973, and  thereby unduly  interfered  with  a  matter  which  was  within  the Tribunal’s  discretion.   Reference in this  connection  has been  made to Rajkamal Kalamandir (Private) Ltd.  v.  Indian Motion  Pictures v. Employees’ Union and others.(1)  It  has also been pointed out that the workmen were required,  under the settlement, to work harder and give increased production to the extent of ten per cent. Settlement  of  labour  disputes by  direct  negotiation  or settlement  through  collective bargaining is always  to  be preferred  for, as is obvious, it is the best  guarantee  of industrial peace which is the aim of all legislation for the ’settlement  of  labour disputes.  In order to  bring  about such a settlement more easily, and to make it more  workable and  effective,  it is no longer necessary, under  the  law, that the settlement should be confined to that arrived at in the  course of a conciliation proceeding, but now  includes, by  virtue of the definition in section 2(p) of the  Act,  a written  agreement  between  the employer  and  the  workmen arrived  at otherwise than in the course of  a  conciliation proceeding  where  such  agreement has been  signed  by  the parties in the prescribed manner and a copy thereof has been ’sent  ’to  the  authorised officers.   Rule  58(2)  of  the Industrial  Disputes (Central) Rules, 1957,  prescribes  the manner of signing the settlement and it is not in dispute  = us that this requirement has been complied with.  The  other relevant provision is that contained in section 18(1) of the Act  which specifically states that a settlement arrived  at by agreement between the employer and the workmen  otherwise than  in  the  course of concilation  proceedings  shall  be binding  on  the parties to the agreement.  In fact  it  has clearly  been  held  by this Court  in  Sirsilk,  Ltd.,  and

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another v. Government of Andhra Pradesh and another(2)  that as  soon as an agreement is signed in the prescribed  manner and a copy of it is sent to the officers concerned, it (1)  [1963] 1 L.L.J. 318. (2)  [1963] II L.L.J. 647. 803 becomes  binding on the parties and comes into operation  on the  date at is signed, or on the date mentioned in  it  for its coming into operation.    We  have therefore to  examine the arguments of counsel for the parties with due regard  to these provisions of the law. It is not in dispute before us that under the settlement the workmen have received the same wages and dearness  allowance which were awarded to them by the Tribunal.  They  therefore lost  nothing  on  that account. Mr.  Chitaley  has  however argued  that while under the award the increased rates  were admissible from January 1, 1968, the settlement put that off to  January 1, 1973 and was therefore unjust and unfair.  It is in this connection that the Tribunal’s finding about  the incapacity  of the Company to shoulder the financial  burden of paying all the arrears has been challenged before us. Mr.  Kaka  has,  on the other hand,  taken  us  through  the balance  sheets  of the Company for the purpose  of  showing that the ’Company had, as a fact, paid all its tax and other liabilities,  which were beyond recall, and that during  the period  from 1968 to 1972 it had only a net surplus  of  Rs. 5.11  lakhs.   It has been pointed out that,  even  so,  the Company has agreed to pay about Rs. 11.56 lakhs, in addition to the difference in the dearness allowance amounting to Rs. 3.64  lakhs which has already been paid to the workmen.   It has  also  been  brought  to notice  that  the  Company  has exceeded its borrowing limit and is not in a position to pay more  than what it has agreed ,to pay under the  settlement. As  regards the stipulation that the ,workmen  will  improve their   efficiency  and  productivity  so  as  to   increase production  at the rate of at least 10 per cent  per  annum, nothing  worthwhile  has been urged before  us  against  the Tribunal’s view that ground alone it is equally well settled that when once a prosecu-1, 1973 for which the arrears  were claimed  and  were  agreed to be  paid  in  part.   Moreover counsel  for respondent No. 2 has not found it  possible  to refer to any condition in the settlement according to  which its  benefits were to be forfeited in case the  workmen  did not carry out the ’stipulation. The  question  of  justness and  fairness  of  a  settlement should,  in a case like this, be examined with reference  to the  situation  as  it stood on the date  on  which  it  was arrived  at i.e. on July 31, 1973.  As has been stated,  the award  was  made  on  November 29, 1972  but  it  was  under challenge in the High Court on the Company"s petition  under ’articles  226  and 227 of the Constitution.   It  has  been pointed  out by Mr. Kaka, and has not been disputed  by  Mr. Chitaley,  that  one  of the grounds of  challenge  was  the contention   that  the  Tribunal  had  not  made  a   proper comparison  of  the  wages and  the  dearness  allowance  on "industry-cum-region basis" even though it was enunciated by this Court in Greaves Cotton & Company., Ltd, and others  v. Their  Workmen.  (1) It cannot therefore be  said  that  the award  was  not  at  all in jeopardy  at  the  time  of  the settlement. It is well known that the possibility of an adverse decision by  the  ,Court operates as a positive force  in  favour  of deliberate and careful (1) [1964] 5 S.C.R. 362. 804

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effort  by  both  parties to settle  their  dispute  through direct  negotiations.  And we have no doubt that it is  that force   which  has  brought  about  the   settlement   under consideration.  Then there is the further fact that, as  has been stated by the Tribunal, the workmen were liable, in the event  of  the success of the Company, to a  refund  of  the amounts  which  had  already  been  paid  to  them  on  that understanding. Moreover,  as  has been found by the Tribunal, out  of  1328 workmen who were in the Company’s service on July 31,  1973, 995  workmen  have  signed  the  settlement  and  have  also accepted  their  dues  thereunder,  and  242  workmen   have accepted their dues under the settlement by actually signing the receipts though they have not signed the settlement.  It will also be recalled that 910 workmen who left the  Company between January 1, 1968 and July 31, 1973 have also accepted their  dues under the settlement.  As has been  stated,  the settlement   was   made  with  the  Bhartiya   Kamgar   Sena (respondent  No. 3) which represented a very large  majority of  the  workmen of the Company.  It is a  significant  fact that  the bona fides of that Union have not been  challenged before us.  There is therefore no reason why the  Tribunal’s finding that the ’settlement is just and fair should not  be accepted. it has to be remembered that the settlement was entered into on  the  morning  of July 31, 1973,  while  the  High  Court delivered  its judgment on August 1, 1973.  It is  therefore difficult to ignore the argument of Mr. Deshmukh that it was only  when the workmen came to know that the award had  been confirmed  by  the  High Court, that they  thought  hey  had nothing to lose by challenging the settlement as unfair  and unjust.   It  is  that feeling which appears  to  have  been exploited.  by  respondent  No. 2,  because  of  inter-union rivalry.   As  it is, we are satisfied that  the  Tribunal’s finding  on issue No. (e) is also correct and does not  call for interference. The  appeal  is allowed, the impugned judgment of  the  High Court  dated  31-7-1973/1-8-1973  is set  aside  and  it  is ordered that the award of the Tribunal shall be  substituted by  the settlement dated July 31, 1973, so’ that  settlement shall be the substituted award.  In the circumstances of the case, however, we leave the parties to bear their own costs. P.H.P.                           Appeal allowed. 805