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PETITIONER: STATE OF UTTAR PRADESH AND OTHERS

       Vs.

RESPONDENT: BASTI SUGAR MILLS CO., LTD.

DATE OF JUDGMENT: 11/11/1960

BENCH: MUDHOLKAR, J.R. BENCH: MUDHOLKAR, J.R. GAJENDRAGADKAR, P.B. SARKAR, A.K. SUBBARAO, K. WANCHOO, K.N.

CITATION:  1961 AIR  420            1961 SCR  (2) 330  CITATOR INFO :  D          1975 SC1735  (2,3)  E&R        1979 SC 262  (28,30)

ACT: Industrial  Dispute--Bonus-Statute empowering Government  to direct   Payment   of   bonus   by    notification--Validity of--Whether   retrospective--United   Provinces   Industrial Disputes  Act,  1947,  (U.  P. 28  of  1947),  s.  3(b)  and (d)--Constitution of India, Art. 19(1)(f).

HEADNOTE: The  Government of U. P. appointed a Court of enquiry  under ss.  6  and 10 of the United Provinces  Industrial  Disputes Act,  1947,  and referred to it the  present  dispute.   The Court  of  enquiry submitted its report to  the  Government, whereupon  the  Government issued a  notification  in  July, 1950, directing the various sugar factories to pay bonus  to their  workmen  for  the years 1948-49 as  well  as  to  pay certain amounts as bonus for the years 1947-48. 331 Court against the Government, prohibiting it from  enforcing the  notification.  The State Government came up in  appeal, urging, that the provisions of cl. (b) of S. 3 of the United Provinces Industrial Disputes Act, 1947, were wide enough to permit it to issue such a direction to the employer  because by  doing  so  the  State Government  would  be  imposing  a condition of employment in    future. The  respondents, inter alia, contended that (1) clause  (b) of s.     3  of the Act does not operate  retrospectively  ; (2)  bonus could only be a term of employment  by  agreement and could not be imposed by statute ; (3) where there was an industrial  dispute cl. (d) and not cl. (b) of s. 3  of  the Act  would  apply and (4) if cl. (b) was applicable  it  was ultra vires being discriminatory and violative of Art. 14 of the  Constitution  and also violative of Art. 19(i)  of  the Constitution  as  it confers arbitrary powers on  the  State Government. Held,  that  (i)  though  cl. (b) of  s.  3  of  the  United Provinces Industrial Disputes Act, 1947, could not be  given

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a retrospective effect, yet there was nothing therein  which prohibited the State Government from giving a direction with regard  to  the  payment  of bonus  and  by  giving  such  a direction the State Government was not giving  retrospective effect to the provisions of that clause nor did it add a new term  or a condition for a period which was over, it  merely required  the employer to pay an additional sum of money  to their  employees  as a term and condition of  employment  in future; (ii) though  normally wage is a term of contract it  can  be made  a condition of employment by statute, and it was  open to  the State Government under cl. (b) of s. 3 to  make  the payment of bonus to workmen a condition of their  employment in future; (iii)     where the employees bargained in their  collective capacity,  the fact that the personnel of the  factory  when the  order  for  the  payment  of  bonus  was  made  by  the Government and in the year to which dispute related were not the same, did not affect the power of the Government as  the order  would  apply only to those employees who  had  worked during the period in question and not to new employees ; (iv) the  normal way of dealing with an  industrial  dispute would be to have it dealt with judicially and not by  resort to  executive  action,  but cl. (b) of  s.  3  empowers  the Government to act promptly in case of an emergency and  arms it with additional powers to deal with such an emergency  in the public interest; (v)  when the Government had made an executive or per  under cl.  (b)  of s. 3 on the ground that it was  in  the  public interest to do so it was open to the aggrieved party to move the   Government  to  refer  the  industrial   dispute   for conciliation  or adjudication under cl. (b) of S. 3  of  the Act. 332 (vi) the provisions of cl. (b) of s. 3 are not in any  sense alternative  to  those of cl. (d) and the  former  could  be availed of by the State Government only in an emergency  and as  a temporary measure.  The right of the employer  or  the employee   to  require  the  dispute  to  be  referred   for conciliation or adjudication would still be there and  could be exercised by them by taking appropriate steps; (vii)     clause (b) of s. 3 of the Act is not violative  of the  provisions of Art. 19(1)(g) of the Constitution  as  it permits action to be taken thereunder by the Government only in an emergency and in the public interest.  The restriction placed upon the employer is only a temporary one and  having been  placed in the public interest falls under cl.  (6)  of Art. 19 of the Constitution. Ram  Nath  Koeri and Anr. v. Lakshmi Devi  Sugar  Mills  and Ors., (1956) 11 L.L.J. 11, approved. L.   D.  Mills  v. U. P. Government, A.I.R. 1954  All.  705, overruled.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 790 of 1957. Appeal from the judgment and decree dated February 10, 1954, of the Allahabad High Court in Civil Misc.   Writ No. 280 of 1950. C.   B.  Aggarwala,  G.  C. Mathur and C. P.  Lal,  for  the appellants. G.   S. Pathak and D. N. Mukherjee, for the respondent No. 1. 1960.  November 11.  The Judgment of the Court was delivered

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by MUDHOLKAR J.-This is an appeal by the State of Uttar Pradesh against the decision of the Full Bench of the Allahabad High Court  in  a  writ  petition.   In  the  writ  petition  the respondents challenged certain orders made by the Government of Uttar Pradesh under s. 3, cl. (b) of the United Provinces Industrial  Disputes Act, 1947, (XXVIII of  1947)  requiring the respondents to pay bonus at certain rates for the  years 1947-48  and  1948-49 to their workers and also  payment  of retaining  allowances  to the skilled seasonal  workmen  and clerical  staff.  The circumstances under which  the  orders were made are briefly these: 333 The   Indian  National  Sugar  Mills  Workers’   Federation, Lucknow, served notices on various sugar factories in  Uttar Pradesh  on  December  15,  1949, in  which  they  made  six demands.  We need, however, mention only one of them as that alone is in controversy in this appeal.  That demand related to the bonus for the year 1948-49 and to the restoration  of the  reduction  which had been made in the  previous  year’s bonus.  By that notice the Federation threatened a strike in the  industry  with  effect from January 16,  1960,  if  the demands  were  not met by the sugar factories.   Since  this situation brought into existence an industrial dispute,  the Government  of  Uttar  Pradesh, in  exercise  of  the  power conferred  by ss. 6 and 10 of the Industrial  Disputes  Act, 1947,  (XIV  of  1947)  appointed a  Court  of  Inquiry  and referred  the dispute to it.  The notification  also  stated the  points  which were referred to the  Court  of  Inquiry. That  notification  was twice amended but nothing  turns  on those  amendments.  A full enquiry was held by the Court  of Inquiry  at which the representatives of both the  employers as  well as the employees were represented and material  was placed  before the Court of Inquiry by both the sides.   The Court  of Inquiry submitted its report to the Government  on April 15, 1950.  On receipt of this report the Government of Uttar  Pradesh  published the report in  the  Uttar  Pradesh gazette  on  May 8, 1950, as provided for in s.  17  of  the Industrial  Disputes  Act,  1947.   On  July  5,  1950,  the Government  of  Uttar  Pradesh, in exercise  of  the  powers conferred  by  s.  3(b)  of  the  Uttar  Pradesh  Industrial Disputes  Act,  1947, issued a  notification  directing  the various  sugar factories to pay bonus to their  workmen  for the year 1948-49 as well as to pay certain amounts as  bonus for  the year 1947-48.  A further direction was made in  the notification  for  payment  of retaining  allowance  to  the skilled seasonal workmen and clerical staff with effect from the off season in the year 1950.  Thereupon the Indian Sugar Millers  Association,  which  is  an  Association  of  sugar factories  in India and is registered under the Trade  Union Act made a petition before the High Court at Allahabad under 334 Art. 226 of the Constitution for the issue of a writ against the  Government of Uttar Pradesh prohibiting the  Government from  enforcing  the notification.  The  writ  petition  was dismissed  by the High Court on September 14, 1950,  on  the ground  that  the Association had no legal interest  in  the matter.   Thereupon various sugar mills  preferred  separate writ petitions before the High Court, the respondents before us  being  one of them.  As many as  fourteen  grounds  were taken  on  their  behalf in their writ  petition.   We  are, however,  concerned with only three of them to which Mr.  G. S.  Pathak,  who appears for the  respondents  confined  his arguments.   Before  we  refer to  those  grounds  we  would complete  the  narration  of  facts.   The  High  Court   of

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Allahabad  allowed  the  writ petitions, in so  far  as  the question  of payment of bonus was concerned,  though  Sapru, J., one of the judges constituting the Full Bench, expressed a doubt as to the correctness of the view that the order  of the  State  Government as regards the payment of  bonus  was invalid.  After the decision of the High Court, the State of Uttar Pradesh applied for a certificate under Art. 133(1)(b) and  Art.  133(1)(c) of the Constitution.   The  High  Court having granted the certificate, the present appeal has  been brought to this Court. In  order  to  appreciate the points raised  by  Mr.  G.  S. Pathak, it is necessary to set out the provisions of s. 3 of the  Uttar Pradesh Industrial Disputes Act, 1947.  They  are as follows: "  If,  in  the  opinion of  the  State  Government,  it  is necessary  or  expedient so to do for  securing  the  public safety or convenience, or the maintenance of public order or supplies   and  services  essential  to  the  life  of   the community, or for maintaining employment, it may, by general or special order, make provision- (a)  for  prohibiting,  subject  to the  provisions  of  the order, strikes or look-outs generally, or a strike or  lock- out in connection with any industrial dispute; (b)  for requiring employers, workmen or both to observe for such  period, as may be specified in the order,  such  terms and  conditions  of  employment  as  may  be  determined  in accordance with the order; 335 (c) for appointing industrial courts; (cc)  for appointing committees representative both  of  the employer  and workmen for securing amity and good  relations between the employer and workmen and for settling industrial disputes  by  conciliation; for consultation and  advice  on matters  relating to production, organization,  welfare  and efficiency; (d)  for  referring any industrial dispute for  conciliation or adjudication in the manner provided in the order ; (e)  for  requiring  any  public  utility  service,  or  any subsidiary undertaking not to close or remain closed and  to work  or  continue  to work on such  conditions  as  may  be specified in the order; (f)  for exercising control over any public utility service, or  any  subsidiary undertaking, by authorising  any  person (hereinafter  referred  to as an authorised  controller)  to exercise, with respect to such service, undertaking or  part thereof such functions of control as may be specified in the order;  and,  on  the making of  such  order   the  service, undertaking or part thereof such functions of control as may be specified in the order; and, on the making of such  order the service, undertaking or part, as the case may be,  shall so  long  as  the  order  continues  to  be  carried  on  in accordance  with  any  directions given  by  the  authorised controller  in accordance with the provisions of  the  order and every person having any functions of management of  such service, undertaking or part thereof shall comply with  such directions; (g)  for  any  incidental  or  supplementary  matters  which appear  to the State Government necessary or  expedient  for the purposes of the order: Provided that no order made under clause (b) (i)  shall   require  an  employer  to  observe  terms   and conditions of employment less favourable to the workmen than those which were applicable to them at any time within three months preceding the date of the order; (ii) shall,  if  an  industrial  dispute  is  referred   for

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adjudication  under  clause  (d),  be  enforced  after   the decision  of the adjudicating authority is announced  be  or with the consent of, the State Government." 336 The view taken by the High Court was that clause (b)   of s. 3 of the Uttar Pradesh Industrial Disputes Act, 1947, is prospective in operation in that thereunder it is  open  to the State Government to ask an employer  or  an employee  to observe a term or a condition of employment  in future and that consequently it is not competent  thereunder to require an employer to pay bonus to workmen in respect of a  period of employment which is already past.  The view  of the  High  Court was challenged before us on behalf  of  the State.   According  to  the  State  the  provisions  of  the aforesaid  clause  are wide enough to permit the  making  of such  a  direction to the employer because by doing  so  the State  Government  would  only be imposing  a  condition  of employment  in  future.  In answer to  this  contention  Mr. Pathak has, as already stated, raised three points and  they are as follows: (1)  Clause (b) of s. 3 does not operate retrospectively and must be construed as having a prospective operation only. (2)  This  clause does not apply at all where an  industrial dispute has arisen and that the appropriate provision  under which  the  State  Government  can  take  action  where   an industrial dispute has arisen is cl. (d). (3)  If cl. (b) is susceptible of the interpretation that it is  applicable  even when an industrial dispute  has  arisen then  it  is ultra vires in as much as it would  enable  the State Government to discriminate between an industry and  an industry  or an industrial unit and another industrial  unit or  between a workman and a workman by referring some  cases for  adjudication to an industrial court under cl.  (d)  and passing  executive order itself in respect of  others.   The provisions  of cl. (b), according to him, are  violative  of Art.  14  of the Constitution.  Further, according  to  him, they  are also violative of the provisions of Art.  19(1)(g) of  the Constitution in as much as they confer an  arbitrary power on the State Government to require an employer to  pay whatever  it  thinks fit to an employee and  thus  place  an unreasonable  restriction on the rights of the  employer  to carry on his business. 337 We  entirely agree with the learned judges of the  Allahabad High  Court  that  cl.  (b)  of  s.  3  cannot  be  given  a retrospective effect.  But we are unable to agree with  them that  the  State  Government in making a  direction  to  the employers  to pay bonus for the years in question  purported to give a retrospective operation to the provisions of  that clause.  The order made by the State Government in regard to bonus  is to the effect that it shall be paid for  the  year 1947-48 to those persons who worked during that year and for the  year 1948-49 to those persons who worked in that  year. This payment was directed to be made within six weeks of the making  of  the order.  By giving this direction  the  State Government  did  no  more than attach  a  condition  to  the employment of workmen in the year 1950-51 in sugar factories affected  by the order.  That is all that it has done.   Mr. Pathak contended that bonus has certain attributes of a wage and  wage being a matter of contract can only be a  term  of employment  agreed to between the employer and the  employee but  could not be a condition of employment which  could  be imposed  by  a  statute  or which  could  be  imposed  by  a Government  acting under a statute.  We agree that  normally wage  is  a term of contract but it would be futile  to  say

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that  it  cannot  be made a condition  of  employment.   The Minimum  Wages Act provides for the fixation of a  statutory minimum wage payable to a worker in respect of certain types of  employments  and  is an instance of wage  being  made  a condition of employment.  That apart, whether wage or  bonus is  a term of a contract or a condition of employment it  is clear that s. 3 empowers the State Government to require the employers  and  workmen  or  both to  observe  any  term  or condition  of employment for a specified period.  Since  the law  enables  the State Government to impose a  term  it  is apparent that the legislature which enacted that law did not import  into  that word a con. sensual  sense.   We  cannot, therefore, accept the argument that under cl. (b) it was not open to the State Government to make the payment of bonus to 338 workmen  a condition of their employment in future and  thus augment their past wages. Mr.  Pathak then referred to the following  observations  in the  judgment of Bhargava, J. s " Obviously there can be  no question of requiring any one to observe for a future period terms  and  conditions  of  employment  which  have  already remained  effective  and have already been  carried  out  by those persons ". According  to  Mr.  Pathak the effect of the  order  of  the Government  is to add a new term or a condition with  regard to employment for a period which is already over.  We  would again point out that this is not the effect of the order  of the  Government.   The  effect of that order  is  merely  to require  the employer to pay an additional sum of  money  to his  employees  as a term and condition of work  in  future. Mr. Pathak, however, said that this would involve payment of bonus  even  to new employees, that is, those  who  had  not participated  in  earning the profits in the past  and  that this would be contrary to the very conception of bonus.  The answer  to  that is that under the order of  the  Government such  bonus is payable only to those workers who had  worked during  the years in question and not to new employees.   It is  further  to  be borne in mind that  in  the  dispute  in question  the employees were bargaining in their  collective capacity and, therefore, the question whether the  personnel forming  the employees of the factories in July, 1950,  when the order was made by the Government, and in the years 1947- 48 and 1948-49 to which the dispute relates was the same  is quite immaterial.  As has been rightly pointed out by Sapru, J., " The employees might well have taken in the  industrial dispute the line that the payment of bonus in respect of the years  1947-48 and 1948-49 to the workmen employed in  those years was regarded by those who were employed in future as a preliminary  and  essential  condition  for  not  only   the settlement  of the industrial dispute in progress  but  also for  carrying on their future work in sugar factories ".  We also concur with the observations of the learned judge  that by coming                             339 conceded the State Government was not passing an order which will  have  retrospective effect but was  passing  an  order which was to ensure that the work. men to be employed in the year 1950 would work in a contented manner.  It must not  be forgotten  that the dispute was in the present, that is,  it existed when the impugned order was made, though its  origin was  in  the past.  What the order did was to  resolve  that dispute and this it could only do by removing its cause. Mr.  Pathak then relied upon the following  observations  of Bhargava, J., in L. D. Sugar Mills v. U. P. Government (1): "  The  expression 1 to observe for such period  as  may  be

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specified, such terms and conditions of employment as may be determined’  gives an indication that clause (b) of s. 3  of the  U. P. Industrial Disputes Act, 1947, is meant  for  the purpose  of  passing orders by which  the  Government  gives directions about what the terms and conditions of employment should  be  and not how a particular term and  condition  of employment already in existence should be acted upon." Bhargava,  J.’s decision was, however, reversed in Ram  Nath Koeri  and Another v. Lakshmi Devi Sugar Mills and Ors.  (2) by  a division bench of the Allahabad High Court in  Letters Patent  Appeal brought against Bhargava, J.’s decision.   We agree with the view taken by the Appellate Bench. In our opinion, therefore, there is nothing in cl. (b) of s. 3  of  the Act which prohibited the  State  Government  from making a direction to the sugar factories with regard to the payment of bonus for the years 1947-48 and 1948-49 in  their order  of July 7, 1950 and that by making such  a  direction the  State Government was not giving a retrospective  effect to the provisions of that clause.  In this connection it  is relevant  to  remember that any direction as to  payment  of bonus must inevitably be based on the available surplus, and such  surplus can be determined only at the end of  a  given year.  Therefore, what the impugned (1) A.I.R. 1954 All. 705, 714. (2) (1956) II L. L. J. 11. 340 order  purports  to do is to require the  employers  to  pay specified  amounts in future, though the said  ,amounts  are fixed by reference to the profits made in the two  preceding years.  If a direction as to payment ;of bonus can be issued under   s.  3(b)  it  cannot,  therefore,  be  said  to   be retrospective. The next argument of Mr. Pathak appears, at first sight,  to be  more  formidable.   He points out  that  undoubtedly  an industrial  dispute had arisen, and indeed it is  upon  that basis that the State Government proceeded to appoint a Court of Inquiry.  Therefore, according to Mr. Pathak resort could be  taken  by  the  State Government  only  to  the  special provisions of cl. (d) and not to the more general provisions of  cl.  (b)  of s. 3. In other words,  where  there  is  an industrial dispute, the appropriate thing for the Government to do is to refer it for conciliation or adjudication  under the provisions of cl. (d) and not to deal with the matter by an executive order as it has done in this case.  Mr.  Pathak then  refers  to  a further passage  from  the  judgment  of Bhargava, J., just cited which is as follows: "  It appears from the language that this provision was  not meant  for the purpose of dealing with  individual  disputes arising  out  of the application of a term or  condition  of employment and no power was granted to the State  Government under  this  provision of law, to sit as an  adjudicator  to decide  a  dispute that might have arisen  relating  to  the working  and actual application of terms and  conditions  of employment  already  in force.  The provision  was  for  the purpose  of  enabling  the  State  Government  to  vary  the agreed  terms  and  conditions of  employment  for  purposes specified  in a. 3 of U. P. Industrial Disputes  Act,  1947, under the pressing necessities or expediency justifying such course of action." We  entirely  agree with Mr. Pathak that the normal  way  of dealing with an industrial dispute under the Act would be to have  it dealt with judicially either by conciliation or  by adjudication   and   that   judicial   process   cannot   be circumvented by resort to executive action.  The  proceeding before a conciliator or an

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341 adjudicator  is, in a sense, a judicial  proceeding  because therein  both  the  parties to the dispute  would  have  the opportunity  of  being  heard and of  placing  the  relevant material  before the conciliator or adjudicator.  But  there may  be  an  emergency and the Government may  have  to  act promptly " for securing the public safety or convenience  or the.  maintenance of public order or supplies  and  services essential  to  the  life of  the  community  or  maintaining employment."  It  was, therefore, necessary to arm  it  with additional  powers  for  dealing  with  such  an  emergency. Clause (b) of s. 3 was apparently enacted for this  purpose. An order made thereunder would be in the nature of a tempor- ary or interim order as would be clear from the words "  for such period as may be specified " appearing therein and from the  second  proviso to s. 3. Under this  proviso  where  an industrial  dispute is referred for adjudication  under  cl. (d) an order made under cl. (b) cannot be enforced after the decision  of the adjudicating authority is announced  by  or with  the  consent  of  the  State  Government.   It  would, therefore,  follow from this that where the  Government  has made  an executive order, as it did in this case, under  cl. (b)  of s. 3, it is open to the aggrieved party to move  the Government to refer the industrial dispute for  conciliation or adjudication under cl. (d) of s. 3. Mr. Pathak,  however, stated  that  under  this  section,  the  Government  has  a discretion   whether   or  not  to  refer  a   dispute   for conciliation  or  adjudication under cl. (d).   But  in  our opinion where once the Government has acted under cl. (b) on the  ground that it was in the public interest to do so,  it would  not be open to the Government to refuse to refer  the dispute under cl. (d) for conciliation or adjudication.  Mr. C.  B. Agarwal, who appeared for the State of Uttar  Pradesh conceded,  and we think rightly, that this would be  so  and added that in case the State Government was recalcitrant  it could  be  forced to do its duty by the issue of a  writ  of mandamus   by  the  High  Court  under  Art.  226   of   the Constitution. There  is  a further argument of Mr. Pathak  which  must  be noticed and that argument is that there is 342 nothing  in  cl.  (b)  which  limits  its  operation  to  an emergency  and  that  it is, therefore, not open  to  us  to place  a  construction thereon of the kind we  are  placing. The  opening  words of s. 3 themselves  indicate   that  the provisions thereof are to be availed of in an emergency.  It is  true  that  even  a reference  to  an  arbitrator  or  a conciliator  could  be made only if there is  an  emergency. But  then an emergency may be acute.  Such an emergency  may necessitate the exercise of powers under cl. (b) and a  mere resort to those under cl. (d) may be inadequate to meet this situation.  Whether to resort to one provision or other must depend  upon  the  subjective  satisfaction  of  the   State Government  upon  which powers to act under s. 3  have  been conferred  by  the legislature.  No doubt,  this  result  is arrived  at  by  placing a particular  construction  on  the provisions of that section but we think we are justified  in doing so.  As Mr. Pathak himself suggested in the course  of his arguments, we must try and construe a statute in such  a way, where it is possible to so construe it, as to obviate a conflict  between its various provisions and also so  as  to render the statute or any of its provisions  constitutional. By limiting the operation of the provisions of cl. (b) to an emergency we do not think that we are doing violence to  the language  used by the legislature.  Further,  assuming  that

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the   width  of  the  language  could  not  be  limited   by construction it can be said that after the coming into force of  the Constitution the provisions can, by virtue  of  Art. 13,  have only a limited effect as stated above and  to  the extent  that  they are inconsistent with  the  Constitution, they have been rendered void. In  our view, therefore, the provisions of cl. (b) of  s.  3 are  not  in any sense alternative to those of cl.  (d)  and that the former could be availed of by the State  Government only in an emergency and as a temporary measure.  The  right of the employer or the employee to require the dispute to be referred  for  conciliation or adjudication would  still  be there  and could be exercised by them by taking  appropriate steps.  Upon the construction we place on the 343 provisions  of cl. (b) of s. 3 it is clear that no  question of  discrimination at all arises.  Similarly the  fact  that action  was taken by the Government in an emergency  in  the public  interest would be a complete answer to the  argument that  that action is violative of the pro- visions  of  Art. 19(1)(g).  The restriction placed upon the employer by  such an  order is only a temporary one and having been placed  in the public interest would fall under cl. (6) of Art. 19  of, the Constitution. Upon  this view we hold that the High Court was in error  in issuing  a writ against the State Government quashing  their order  in  so far as it related to payment  of  bonus.   The appeal is allowed and order of the High Court is set  aside. Costs of this appeal will be paid by the respondents. Appeal allowed.