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CASE NO.: Appeal (civil)  7378 of 2003

PETITIONER: Transmission Corpn., A.P. Ltd. & Ors.

RESPONDENT: P. Ramachandra Rao & Anr

DATE OF JUDGMENT: 17/04/2006

BENCH: ARIJIT PASAYAT & TARUN CHATTERJEE

JUDGMENT: J U D G M E N T

ARIJIT PASAYAT, J.

Challenge in this appeal is to the judgment rendered by a  Division Bench of the Andhra Pradesh High Court dismissing  the writ appeal         filed under Clause 15 of the Letters Patent.   Order of learned Single Judge allowing writ petition filed by  the respondents was affirmed.   

Background facts in a nutshell are as follows:

Respondents retired from the services of the Andhra  Pradesh State Electricity Board (in short the ’Board") on  30.4.1990 after attaining the age of superannuation.  The  Transmission Corporation of Andhra Pradesh Ltd. (in short the  ’Corporation’), is the successor company of the Board which  came into existence with effect from 1.2.1990 by virtue of the  Andhra Pradesh State Electricity Reforms Act, 1998 (in short  the ’Reforms Act’). The pay scales of the employees were  revised with effect from 1.7.1990 by which time the  respondents herein were drawing maximum pay in the  concerned scale. The rational of fixing the date with effect from  1.7.1990 was that employees who retired prior to 1.7.1990 are  entitled to D.A. at the rate of 38% on the pension whereas the  D.A. payable to pensioners retired on or after 1.7.1990 is  12.4%, but not before the date of issue of the order. The  revised pay scales permitted grant of three annual increments  beyond the time scale in regard to those who had reached or  crossed the maximum pay as on 1.7.1986. However, in respect  of the respondents herein the additional amount was shown  as personal pay and the stagnation increments were adjusted  towards the said additional amount.   

Questioning correctness of the action of the Corporation  and its functionaries the respondents herein filed writ a  petition.  Prayer was to direct the appellants herein to fix their  pension and other terminal benefits at par with other UDCs.  retired on or after 1.7.1990 and to pay all the arrears of  pensions and other terminal benefits.  Learned Single judge  having regard to the intended purpose of the scheme held that  the respondents have been discriminated while calculating the  pension on the ground that they had retired prior to the  introduction of the scheme. Stand of the employer in essence  was that the Board’s proceedings Ms No 481 dated 4.2.1991  had application only to those who were on its rolls as on  1.7.1990.  In view of the fact that the respondents retired on

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30.4.1990 the said scheme has no application to them.  In any  event the scheme was introduced keeping in view the  settlement dated 29.1.1991 entered into between the Wage  Negotiation Committee and the Board before the Joint  Commissioner of Labour and State Conciliation Officer in  terms of Section 12(3) of the Industrial Disputes Act, 1947 (in  short the ’Act’) and the same cannot be the subject matter of  interpretation in the writ petition.  In the Appeal its stand  before learned Single Judge was reiterated before the Division  Bench. Stand of the writ petitioners was that the learned  Single Judge was justified in its conclusion.   

The Division Bench upheld the view taken by the learned  Single Judge.  Placing reliance on the decision of this Court in  D.S. Nakara & Others  V. Union of India (1983 (1) SCC 305) it  was held that the cut off date fixed was discriminatory.

In support of the appeal learned counsel for the appellant  highlighted that the learned Single Judge and the Division  Bench had not considered the issues in their proper  perspective.  D.S. Nakara’s case (supra) has no application to  the facts of the present case.  There was no challenge to the  settlement and the only challenge relating to rational of fixing  the cut off date with effect from 1.7.1990.  The conclusion that  the respondents were entitled to the stagnation increment  deducting the same from the personal pay is clearly tenable.

Learned counsel for the respondents on the other hand  supported the judgment of learned Single Judge as affirmed by  the Division Bench.

A brief reference to the factual position would be  necessary.  Relevant portion of the Board’s proceedings dated  4.2.1991 are as follows:

"The scales of pay of Office Staff, O& M  Staff, Construction Staff, Medical Staff, Fire  Fighting Staff, Security Staff and Teaching Staff  etc. were revised with effect from 1.7.86 in the  B.P. first read above as subsequently amended,  as per the negotiated settlements with the  employees Unions.  The said settlements expired  on 30.6.90."

As result the earlier settlement expired on 30.6.1990 the  paras 5 & 6 are also relevant and they read as follows :

"The A.P.S.E. Board also directs that the  amount of stagnation increments not released  earlier in 1986 pay scales but adjusted against  P.P. shall now be released on 30.6.1990 but  effect shall be given from 1.7.1990 or from the  date of going over to the revised scales, as the  case may be, this amount will be taken into  account for the purpose of fixation of pay in  the revised pay scales.

The date of option for the revised pay scales  shall be 1.7.1990 or the date on which an  employee earns his next increment in the  existing scale of pay."

The notification issued on 4.2.1991 is in exercise of  powers conferred under Section 79(C) of the Electricity Supply

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Act, 1948, which notified Boards’ regulations. It is stated at  Para 1(ii) that the regulations shall be deemed to have come  into force with effect from 1.7.1990.  In Clause 2(iv) it is stated  that ’Pensioner" means an employee who retired on or after  1.7.1990 but before the date of issue of the order.  Grievance  of the writ petitioners basically was that the persons who  retired from service after 1.7.1990 were drawing more pension  than the writ petitioners.  Learned Single judge referred to the  Memorandum of Settlement but did not attach much  importance to it.  The Memorandum of Settlement clearly  shows that the period of settlement was from 1.7.1990 to  30.6.1994.  Claim of the writ petitioners was that the employer  and its functionaries were liable to fix the pension and other  terminal benefits of the writ petitioners at par with the other  UDCs retired on or after 1.7.1990. As noted above, the  grievance was that the said category of persons was drawing  more pensions.  It was pointed out that the revision of pay  scale in BPMs. No. 878 dated 5.10.1981 effective from  1.4.1981 was only for a period of 4 years and the same was  required to be revised after expiry of the period i.e. with effect  from 1.4.1985.  The Board instead of revising the pay scales  with effect from 1.4.1985 revised the same with effect from  1.7.1986.  It was, therefore, submitted that the classification  as done was violative of Article 14 of the Constitution of India,  1950 (in short the ’Constitution’).

Learned Single Judge and the Division Bench clearly  overlooked the fact that there was no challenge to the  settlement.  Undisputedly, the three stagnation increments  deducted from personal pay have been added to the basic pay.

There was no challenge to the settlement made under  Section 12(3) of the Act.  No finding has been recorded by  either learned Single Judge or the Division Bench that the  modality adopted is wrong.  It has to be noted that in terms of  the Fifth Schedule to the Act under Section 2(ra) as per Sr. No.  13 consequences flow for failure to implement the award,  settlement or agreement.  There is no dispute that the Board’s  decision is prospective. There is also no challenge to the  legality of the Board’s decision on the ground that there is no  rational for fixing the date, except saying that it should have  been done from an earlier date i.e. 1985 and not from  1.7.1986 as done earlier.  There was no challenge at the stage  it was done.  The line of enquiry whether settlement was  unfair and unjust has been examined by this Court in several  decisions. In Herbertsons Ltd. v. Workmen (1976) 4 SCC 736) this  Court called for a finding on the point whether the settlement  was fair and just and it is in the light of the findings of the  Tribunal that the appeal was disposed of. Goswami, J.  speaking for the three-Judge Bench made it clear that the  settlement cannot be judged on the touchstone of the  principles which are relevant for adjudication of an industrial  dispute. It was observed that the Tribunal fell into an error in  invoking the principles that should govern the adjudication of  a dispute regarding dearness allowance in judging whether the  settlement was just and fair. The rationale of this principle  was explained thus :  "25. There may be several factors that may  influence parties to come to a settlement as a  phased endeavour in the course of collective  bargaining. Once cordiality is established  between the employer and labour in arriving at  a settlement which operates well for the period  that is in force, there is always a likelihood of

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further advances in the shape of improved  emoluments by voluntary settlement avoiding  friction and unhealthy litigation. This is the  quintessence of settlement which courts and  tribunals should endeavour to encourage. It is  in that spirit the settlement has to be judged  and not by the yardstick adopted in  scrutinizing an award in adjudication."  

The line of enquiry whether settlement was unfair and  unjust in K.C.P. Ltd. v. Presiding Officer (1996) 10 SCC 446)  was adopted by a three-Judge Bench of this Court speaking  through Majumdar, J. It was observed at SCC p. 451,  paragraph 21 that:  "Under these circumstances, Respondents 3 to  14 also would be ordinarily bound by this  settlement entered into by their representative  Union with the Company unless it is shown  that the said settlement was ex facie, unfair,  unjust or mala fide."  

The Court came to the conclusion that the settlement  cannot be characterised to be unfair or unjust. It was further  observed that "once this conclusion is reached it is obvious  that the entire industrial dispute should have been disposed of  in the light of this settlement". It was reiterated in the case of  Tata Engg. and Locomotive Co. Ltd. v. Workmen ((1981) 4 SCC  627) that :  "A settlement cannot be weighed in any golden  scales and the question whether it is just and  fair has to be answered on the basis of  principles different from those which come into  play when an industrial dispute is under  adjudication."  Earlier, it was observed :  "If the settlement had been arrived at by a vast  majority of the concerned workers with their  eyes open and was also accepted by them in its  totality, it must be presumed to be just and  fair and not liable to be ignored while deciding  the reference merely because a small number  of workers (in this case 71 i.e. 11.18 per cent)  were not parties to it or refused to accept it, or  because the Tribunal was of the opinion that  the workers deserved marginally higher  emoluments than they themselves thought  they did."  

These aspects were highlighted in ITC Ltd. Workers’  Welfare Association and Anr   v. Management  of ITC Ltd.  and  Another  (2002(3) SCC 411.)

Exclusion of workmen retiring before the date fixed is no  good ground to characterize settlement as unjust or unfair.  In  fact in the instant case there is no challenge to the legality of  the settlement. As the settlement entered into in the course of  conciliation proceedings assumes crucial importance in the  present case, it is necessary for us to recapitulate the fairly  well-settled legal position and principles concerning the  binding effect of the settlement and the grounds on which the  settlement is vulnerable to attack in an industrial  adjudication. Analysing the relative scope of various clauses of  Section 18, this Court in the case of Barauni Refinery  Pragatisheel Shramik Parishad v. Indian Oil Corpn. Ltd. (1991)

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1 SCC 4) succinctly summarized the position thus:  "Settlements are divided into two categories,  namely, (i) those arrived at outside the  conciliation proceedings [Section 18(i)] and (ii)  those arrived at in the course of conciliation  proceedings [Section 18(3)]. A settlement which  belongs to the first category has limited  application in that it merely binds the parties  to the agreement. But a settlement arrived at  in the course of conciliation proceedings with a  recognised majority union has extended  application as it will be binding on all  workmen of the establishment, even those who  belong to the minority union which had  objected to the same. To that extent it departs  from the ordinary law of contract. The object  obviously is to uphold the sanctity of  settlements reached with the active assistance  of the Conciliation Officer and to discourage an  individual employee or a minority union from  scuttling the settlement. There is an  underlying assumption that a settlement  reached with the help of the Conciliation  Officer must be fair and reasonable and can,  therefore, safely be made binding not only on  the workmen belonging to the union signing  the settlement but also on the others. That is  why a settlement arrived at in the course of  conciliation proceedings is put on par with an  award made by an adjudicatory authority."

As observed by this Court in Tata Engineering’s case  (supra) a settlement cannot weigh in any golden scales and the  question whether it is just and fair has to be answered on the  basis of principles different from those which comes into play  when an industrial dispute is under adjudication.  If the  settlement had been arrived at by a vast majority of concerned  workers with their eyes open and was also accepted by them  in its totality, it must be presumed to be just and fair and not  liable to be ignored while deciding the reference made under  the Act merely because a small number of workers were not  parties to it or refused to accept it or because the Tribunal was  on the opinion that the workers deserved marginally higher  emoluments than they themselves thought they did.  The  decision in Herbertsons Ltd.’s case (supra) was followed.  

As noted above there was no challenge to the settlement  which was the foundation for the Board’s decision.  A copy of  the Memorandum of Settlement under Section 12(3) of the Act  before the Joint Commissioner and Labour and State  Conciliation officer, Government of Andhra Pradesh,  Hyderabad was placed on record.  On the basis of the  settlement, the Board’s decision was taken.  Paragraph 2 of  the proceedings is very significance and read as follows:

"A Wage Negotiation Committee was  therefore constituted by the Board in the B.P.  sixth read above.  The committee held detailed  discussions with the representatives of the  unions and finally reached a negotiated  settlement with the recognized union under  the code of discipline on 29.1.1991 before the  Joint Commissioner of Labour and State  Conciliation Officer under Section 12(3) of I.D.  Act."

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Above being the position the judgment of the learned  Single judge and that of the Division bench affirming the same  cannot be maintained and are, therefore, set aside.  The  appeal is allowed but in the circumstances no order as to  costs.