16 September 1996
Supreme Court


Bench: SEN,S.C. (J)
Case number: C.A. No.-004390-004390 / 1988
Diary number: 69088 / 1988
Advocates: LAXMI ARVIND Vs






DATE OF JUDGMENT:       16/09/1996




JUDGMENT:     [With Civil Appeal No.4074 of 1988 and Civil Appeal                    Nos.4075-4076 of 1988]                      J U D G E M E N T      SEN, J.      The  Patiala   Central  Cooperative   Bank  Ltd.,   the appellant herein, is a cooperative Bank registered under the provisions of  Punjab Cooperative  Societies Act,  1961. The Patiala  Central   Cooperative  Bank  Employees  Union,  the respondent No.1  herein, is  a Union of the employees of the appellant-Bank  working   at  various  places  in  different branches of  the Bank.  On 13.11.1972, the Union submitted a charter of  demands culminating  in an agreement between the Bank and the Union on 28.5.1973. This agreement was to be in force upto 31st March, 1977.      The agreement  reached  on  28.5.1973  provided  for  a number  of   things  like   fixation  of   pay-scales  after classifying  the   various  categories  of  staff.  It  also provided for  Fixation Formula providing for pay rise in the revised pay  scales. There  was also a provision for payment of  dearness   allowance,   house   rent   allowance,   city compensatory allowance and various other allowances, if any. Provisions have  been made  for  uniforms,  provident  fund, gratuity, over  time allowance and also fixation of strength and rules  providing quota for promotion to various posts in the future.  The agreement  also provided  for loans  to  be given for  purchase  of  scooter/motor  cycle/cycle  upto  a ceiling of  Rs.15,000/- for  Central Cooperative  Banks  and Rs.30,000/- Apex  Cooperative Bank  per annum. The agreement concluded with general Conditions which were as under:-      "GENERAL CONDITIONS      i) The existing facilities given to      employees  on   the  Punjab   State      Cooperative Bank may continue.      ii) This  settlement will remain in      force for  a period  of four years,      i.e., upto 31.3.1977.



    iii) A  copy of this settlement may      be sent to the Labour Commissioner,      Punjab for necessary confirmation.      iv) Anomalies,  if  any,  shall  be      discussed in  the joint  meeting of      the signatories."      In order  to appreciate  the argument  advanced in this case, it  is necessary  to set  out the  pay scales  and the provisions relating  to dearness allowance as agreed upon in the settlement:- ------------------------------------------------------------ Category of         Present grades   Revised  Revised grades Staff               after merger      Grades  after merger                     of grades DP                     w.e.f. 1.2.1968  ----------------------------------------------------------- a. Subordinate Staff Peons and Chowkidar 75-140            75-165   122-5-162-6 in all the C.Bs.                               216-7-258 Daftri              95-160           100-170   147-6-195-7                                                230-8-270 Drivers            120-170           120-170   190-7-267-8 b.Clerical Staff Jr.Clerks A Class Banks      140-315           150-350   240-10-300-                                                425-15-470 B Class Banks      130-270           140-315   210-10-300-                                                400-15-430 C Class Banks      115-265           140-315 Senior Clerks A Class Banks     170-360            190-385   280-12 1/2-                                                380-16-485-                                                20-505 B Class Banks     155-335}           170-360   260-10-280- C Class Banks     140-315}                     12 1/2-380-                                                15-485 c. Supervisory staff Junior Accountant 245-480            245-510  365-15-490-20-                                                590-25-640 Junior Accountant 220-420}           245-480   365-12 1/2- B Class Banks     190-380}                      380-15-500                                                  -20-620      Regarding the  staff in  the  Common  Cadre  also,  new grades    will  be  framed  after  merging  D.P.,  in  their present pays. The new grades will be as under:-      Senior Accountants        275-530         385-15-480-20-590-25-665 Assistant Managers           375-690         485-20-525-25-725-30-815 Managers           475-930         595-30-745-35-955-40-1075      Fixation Formula      All employees  may be  given a  pay rise of 5% of their pay in  the revised  scales mentioned above and may be fixed at the  next higher  stages after adding 5% to their present basic pay including Dearness Pay. In the case of subordinate staff, however,  one additional  increment may also be given over and above the above mentioned benefits.      Dearness Allowance.      As mentioned  above, the  D.P. is  to be  merged in the revised grades.  The  D.A.  and  interim  relief  which  the employees are getting at present will together form the D.A. This D.A.  may be  linked with the All India Consumers Price Index number  (Base Year  1960 : 100) in such a way that any further rise in the Index number may be reflected to D.A. to the extent  of 100% in the case of subordinate staff and 75%



in case of the other Staff. No additional D.A. No additional D.A. will  be made   unless  the Index number increase by at least four points (quarterly average).      The  rate  of  D.A.  being  paid  at  present  will  be converted into  percentage rates mentioned below for various categories of staff.  This percentage has been worked out on the basis  of the  current D,A.  Plus relief, rates, rounded off in  such a  way that  the rate can be divided by four in the case of others:      Categoryof Staff    Percentage rate      Peons and Chowkidars     56.      Drivers                  40      Daftry                   44      Clerk                    33      Senior Clerk-I           27      Senior Clerk-II          30      Junior Accountants and      Senior Accountants 24    24      Assistant Managers and      Managers                 18      It is certified that any increase/decrease in the Index number  after   31.3.1973  shall  be  added/reduced  in  the percentage rate  mentioned above  at the rate of 100/ in the case of subordinate staff and 75% in the cast of others.      T.A. and D.A.      T.A and  D.A. rules  as applicable at present to common cadre employees be applied to all the employees.      This was  a comprehensive agreement reached between the Employees’ Union and the management.  It is not an agreement relating  to  payment  of  Dearness  Allowance  only.    The agreement was  valid for  a period of four years and case to an end  on 31st March, 1977.  After the agreement case to an end,  disputes   and  differences  cropped  up  between  the employees and the management inter alia about the payment of Dearness Allowance in tears of the aforesaid agreement.  The case of  the employees  is  that  the  agreement  cannot  be repudiated unilaterally even though the period of four years mentioned in  the agreement expired on 31st March, 1977.  It has been  contended that  the agreement  will continue to be binding even after the expiry of the period mentioned in the agreement expired  on 31st  March, 1977,  by virtue  of  the provisions  of   sub-section  (2)   of  Section  19  of  the Industrial Disputes  Act, 1947.  Section 19 lays down that a settlement shall  come in  to operation  on such  date as is agreed upon by the parties to the dispute, and if no date is agreed upon,  on  the  date  which  the  memorandum  of  the settlement is  signed by  the parties  to the dispute.  Sub- section  has  been  reached  between  the  workers  and  the management, that  shall be  binding not  only for the agreed period, but also shall continue to be binding on the parties after the  expiry of  the period  mentioned in the agreement "until the  expiry of  two months  form 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.".      The case  of the  employees is  that no such notice was given and, therefore, the agreement continues to be in force and binding  upon the  management.  The duty to pay Dearness Allowance at  the rate  specified in the agreement cannot be avoided by the management by any device.      It has  been further contended that Section 84-B, which was introduced in the Punjab Cooperative Societies Act, 1961 by which it was laid down that "no employee of a cooperative society shall  be paid  dearness allowance  at a rate higher than that  admissible to  the employees  of  the  Government



drawing pay at the same rate", cannot in any way abrogate an agreement protected  by the  provisions  of  the  Industrial Disputes Act.      On behalf  of the  employees, a writ petition was filed in the High Court under Article 226 challenging the validity of Section  84-B.   The case  of the  employees is  that  by virtue of  Section 19  of the  Industrial Disputes  Act, the agreement between  management and  the employees  cannot  be altered except  in the  manner laid  down in  the Act.  Such agreement have ban  given statutory force and they cannot be altered by  the management  on its own without following the procedure of  law.   Similarly, the  State Government cannot give any  direction as  to the  manner of working out of the agreement or abridge or modify the contents of the agreement to any  manner whatever.   Industrial  Disputes Act  being a special  Act    relating  to  industrial  disputes  and,  in particular, about  the relationship  between the  management and the  employees, the  agreement reached  under  that  Act cannot  be   varied   or   abrogated   by   the   management unilaterally.   It was  further contended  that  the  Punjab Cooperative Societies Act, 1961 is a general Act relating to Cooperative Societies  and it  cannot curtail or control the specific provisions  of Industrial  Disputes Act  which is a special Act, in any manner whatever.      It was held the Division Bench of the Punjab High Court that Section  84-B of  the Punjab Cooperative Societies Act, 1961, which  was introduced  by the  Amending Act  of  1981, could not  take away the effect of the settlement dated 28th May, 1973  which was  subsisting and binding on the date the Amending Act  came in  to force.  Section 84-B of the Punjab Cooperative Societies Act was violative of the provisions of Section 19  of the  Industrial Disputes  Act, 1947.  It  was further held  by the  High Court that change in condition of service of the employees could not be made in respect of any of the  matters mentioned  in the  Fourth Schedule,  without giving a  prior notice  in the  manner prescribed by Section 19(2) of the Act.  It was held that unilateral withdrawal of the city  compensatory allowance  by  the  employer  of  the workmen affected  their conditions of services and attracted mandatory provisions  of Section  9-A. ON  the same analogy, unilateral withdrawal  of  dearness  pay  from  the  workmen affected the conditions of service of Class III and Class IV employees of  the CO-operative  Banks.  Since the provisions of Section  9-A of the Industrial Disputes Act, 1947 had not been compiled with, the changes brought about in the service conditions of the employees were of no consequence.  It was, therefore held  that the  respondent would  continue  to  be benefited by  the tears  of the  settlement dated  28th May, 1973 as  before.   Section 84-B  of the  Punjab  Cooperative Societies Act,  1961 was held to be ultra vires of the State Legislature of Punjab and quashed.  It was further held that the settlement  dated 28th  May, 1973  would continue  to be valid and  binding between  the parties  and Class  III  and Class IV  employees  of  the  Cooperative  Banks  were  held entitled to  claim dearness  pay in  terms of  the aforesaid settlement.      On behalf of the appellant,  it has been contended that an important  factual aspect has been totally ignored by the High Court  in this case.  It was contended on behalf of the appellant before  the High Court that a notice under Section 19(2) of  the Industrial  Disputes  Act  (P.4  of  the  writ Petition) was  duly issued  by the appellant and served upon the employees.   The High Court has failed to deal with this aspect of  the case  altogether.   It  has  been  stated  in paragraph 2  of the  Special  Leave  Petition  that  it  was



specifically stipulated  in that the agreement was valid for a period  of four years and would cease to be effected after the expiry  of 31st  March, 1977.   As there was no Board of Directors  and     administration   was  being  run  by  the Administrator, as per provisions of Section 27 of the Punjab Cooperative Societies Act, the Administrator issued a notice under Section  19(2) if  the  Industrial  Disputes  Act  for terminating the  agreement dated 28.5.1973 which had expired on 31.3.1977.   The  notice was issued on 25.2.1978.  It has been alleged  after this, the Board of Directors of the Bank had rectified  the notice  by Resolution No.7 at its meeting held on 9.4.1978.      In  the  counter  affidavit  filed  on  behalf  of  the Employees; Union,  affirmed by  Malinderjit  Singh,  General Secretary of  the Employees’  Union, it has been stated that since the  facts of the case as pleaded in the Special Leave Petition are  not disputed  and the  whole matter relates to pure question  of law  for decision, it is not necessary for the deponent  to answer  parawise the  petition.  In view of the submissions  made above  and the  two decisions  of this Hon’ble Court  referred to in the affidavit, the appeals may be dismissed with costs.      In other  word, the  fact  that  notice  was  given  on 25.2.1978 terminating  the agreement  dated 28.5.1973 is not in dispute.      However,  the   case  need   not  be   decided  on  the technically of  the pleadings  only, After expiration of the term of  the agreement  dated 28.5.1973  on  31.3.1977,  the agreement has  not ben  continued unaltered.   If  the legal contention on  behalf of the petition is upheld and if it be held that  the agreement dated 28.5.1973 is still continuing by virtue  of the  provisions of  sub-section (2) of Section 19, then  the entire agreement including the clause relating to the  Dearness Allowance  will have to be treated as still in force.   The  pay scales  and other  terms and conditions relating to employment have been drastically revised upwards after the expiration of the agreement dated 28.5.1973.  From the chart  of salaries,  furnished  by  the  appellants,  it appears that the pay scales upward in the following manner- ------------------------------------------------------------ Category        Position          Position      Position of post         as on             as on         as on                 4.6.81            1.10.81       1.1.86 ------------------------------------------------------------                 Rs.               Rs.           Rs. PEON            525.32            605.84      1144.60 JR.CLERK        820.95            917.30      1838.34 SR.CLERK        943.68            1109.32     2117.69 ------------------------------------------------------------      Note:   No minimum  benefit and Interim Relief has been included while fixing pay as on 1.10.1981 and 1.1.1986.      There is  some dispute  as to  the exact quantum of the enhancement but  there  is  no  dispute  that  the  salaries payable  under  the  agreement  dated  28.5.1973  have  been drastically revised upwards at all levels thereafter.      Another point  that has been on behalf of the appellant which is  of substance  is that  in fixing  pay of  the Bank employees consequent  upon the  revision of  pay scales, the same formula which was applied for fixation of pay scales of Punjab Government  employees has  been adopted.    The  bank employees have  been given the benefits of proficiency step- up, master  scales, stepping  of pay of senior equivalent to the junior  as allowed  by  the  Punjab  Government  to  its employees.  All these changes have brought about substantial benefits to the employees of the Bank.  In the background of



these facts,  the employees  cannot claim dearness allowance in terms  of the  agreement dated 28.5.1973.  That agreement has been  given up  for much better terms and conditions and also subsequent  revision of  pay.   The employees cannot be heard to  say  that  they  will  enjoy  all  the  subsequent benefits given  by the  revision of pay scales. but dearness allowance must  be given  in  accordance  with  the  formula contained in  the agreement  dated 28.5.1973.  It is not the case of  the employees  that the  agreement dated  28.5.1973 will have to be enforced in full.      There is  some dispute  as to  the exact  amount of the benefit considered  by the  various revisions  in pay scales but there  is no  dispute that  the  pay  scales  and  other benefits now  given are much better and higher than what was given by  the agreement  dated 28.5.1973. No one wants to go back to  that  agreement  so  far  as  the  pay  scales  are concerned. I  fail to see how in the context of these facts, the employees  can urge  that Dearness  Allowance formula of that agreement  must remain  in tact  at the  same time  the drastic changes  in every  other part of the agreement dated 28.5.1973 will  continue in  force for  the benefit  of  the employees.      In view  of the aforesaid, it is unnecessary to go into other questions  raised in  the case. But since the question of  validity  and  scope  of  Section  84-B  of  the  Punjab Cooperative  Societies   Act,  1961  has  been  raised  that question will have to be examined. Section 84-B was inserted by Amendment Act 26 of 1981. The section is as under:      "84-B.     Dearness     Allowance.-      Notwithstanding  anything  in  this      Act or  any other  law for the time      being in  force, or  any agreement,      settlement or award, no employee of      a Cooperative Society shall be paid      dearness allowance at a rate higher      than   that   admissible   to   the      employees of the Government drawing      pay at the same rate."      This section  places  a  bar  on  payment  of  Dearness Allowance at  a rate  higher than the rate admissible to the employees of  the Government  drawing  the  same  pay.  This provision will  apply  to  all  the  employees  of  all  the Cooperative Societies in the State of Punjab. This provision has been specifically made applicable notwithstanding, inter alia any  other law  for the  time being  in  force  or  any agreement, settlement or award.      Prima facie,  there is  no reason  to  hold  that  this provision will  not apply  to the  agreement dated 28.5.1973 assuming that  agreement was  still in  force  on  the  date Section 4-B  was introduced  in the  statute.  It  has  been contended that  Industrial Disputes  Act is  a complete Code relating to  industrial  disputes  and,  therefore,  by  the general provisions  of the Punjab Cooperative Societies Act, 1961, the  applicability and  scope  of  the  provisions  of Industrial Disputes Act cannot be whittled down.      I am  unable to  uphold this  contention  because  sub- section (2)  of Section  19 of  the Industrial  Disputes Act merely provides that even if the period of the agreement has expired, the  terms of  the agreement will continue to be in force unless  determined in  the manner  laid down  in  sub- section (2)  of Section  19. It  does not have the effect of invalidating any  legislation  altering  the  terms  of  the agreement after the period of agreement comes to an end. The agreement provided  for payment of Dearness Allowance higher than what  was provided  by the Government to its employees.



Section 84-B  specifically  stated  that  in  spite  of  any statutory provision  to  the  contrary,  or  any  agreement, Dearness Allowance  can only  be paid upto the rate fixed by the Government  for  corresponding  pay  of  the  Government Servants.      There is  nothing in  the wording  of Section 19 of the Industrial Disputes  Act which  supports this  contention of the employees. Section 19 reads as under:-      "19.   Period   of   operating   of      settlements and awards:-      (1) A  settlement shall  come  into      operation on such date as is agreed      upon by the parties to the dispute,      and if  no date  is agreed upon, on      the date on which the memorandum of      the settlement  is  signed  by  the      parties to the dispute.      (2)  Such   settlement   shall   be      binding  for   such  period  as  is      agreed upon  by the parties, and if      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 thee 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."      ’Settlement’  has  been  defined  in  Section  2(p)  as under:-      "2(p).   ’settlement’    means    a      settlement arrived at in the course      of  conciliation   proceeding   and      includes   a    written   agreement      between the  employer  and  workmen      arrived at  otherwise than  in  the      course of  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."      A written  agreement between  the employer  and workmen may constitute  a settlement  in the circumstances mentioned in  Section  2(p).  But  Section  19  lays  down  that  such agreement shall  come into  operation  on  the  agreed  date between the  parties to the settlement or if the date is not agreed upon,  on the  date on which the settlement is signed by the  parties. That is the starting point. Sub-section (2) provides for  the period during which the settlement will be in force.  It shall be binding during the period agreed upon the parties.  If no  such period  is agreed  upon, then  the settlement will be valid for a period of six months from the date on  which the  settlement was signed by the parties and shall continue  to  be  binding  after  the  expiry  of  the



aforesaid period. The settlement can be brought to an end by serving a  notice in  writing by  one of  the parties to the other party of its intention to terminate the settlement. If such a  notice is given, the settlement will remain in force for two  months  from  the  date  on  which  the  notice  of termination is given.      The provisions  of  Section  19(2)  make  an  agreement between the  employers and  the employees  binding. It  also lays down  the period  during which  it shall be binding. It also provides  the manner  in which  the  agreement  can  be terminated inter  partes.  It  does  not  follow  from  this provision that  a competent  legislature cannot legislate on any matter  which forms  part of  the  agreement.  Not  does Section 19  have the  effect of  validating any infirmity in the agreement. If the agreement is contrary to any law or if the agreement  cannot be  implemented without  violating any provision of  law, then  the agreement cannot be enforced at all. There  is nothing  in sub-section  (2) of Section 19 to suggest that  even such  an agreement  will continue  to  be binding upon the employers and the employees and enforceable against express provision of law. If after the agreement has been entered  into, any  law is  passed  and  the  agreement cannot be  enforced without violating that law, then clearly the agreement cannot be enforced. The law will prevail.      Sub-section (2) of Section 19 merely extends the period during which the agreement will be enforced, but it does not provide  that  the  agreement  will  be  valid  and  binding notwithstanding any law to the contrary.      For all  these reasons,  this appeal  is  allowed.  The order under  appeal is  set aside. There will be no order as to costs.                CIVIL APPEAL NO. 4074 OF 1988                             AND                CIVIL APPEAL NOS. 4076 OF 1988      In view  of the  judgment in  Civil Appeal  No.4390  of 1988, the  above appeals  are also allowed. There will be no order as to costs.