PETITIONER:
HERBERTSONS LIMITED
Vs.
RESPONDENT:
WORKMEN OF HERBERTSONS LIMITED AND ORS.
DATE OF JUDGMENT03/11/1976
BENCH:
GOSWAMI, P.K.
CHANDRACHUD, Y.V.
FAZALALI, SYED MURTAZA
CITATION:
1977 AIR 322 1977 SCR (2) 15
1976 SCC (4) 736
ACT
Industrial Disputes Act, 1947---S. 18--Settlement
under s. 18(1)--Scope of Union arrived at
settlement--Individual workers--If should know implications.
HEADNOTE
In respect of certain demands of the workers of the
appellant company an Industrial Tribunal made its award.
When the Special Leave Petition of the appellant was pending
before this Court the parties filed consent terms for
staying the award. In the meantime the 3rd respondent, a
Trade Union, wrote to the employer that all the workers who
were members of the 2nd respondent, also a Trade Union,
resigned from that union and joined the 3rd respondent. ’The
employer accordingly recognised the 3rd respondent as the
Trade Union representing/he workers and de-recognised the
2nd respondent.
Under s. 18(1) of the Industrial Disputes Act the em-
ployer entered into a settlement with the 3rd respondent in
substitution of the award pending before this Court. When
the 3rd respondent sought to be substituted in place of the
2nd respondent in the Special Leave Petition, the 2nd re-
spondent resisted the application claiming that it had still
the allegiance of 50 workmen of the company. But this Court
added the 3rd respondent as a respondent. Since the 2nd
respondent claimed to have some workers on its rolls as
members and had not .accepted the settlement, this Court
passed a preliminary order to the effect that "in view of
the fact that admittedly a large number of workmen employed
by the appellant have accepted the settlement is it shown by
the 2nd respondent union that the said settlement is not
valid and binding on its members and whether the settlement
is fair and just."
Before the Tribunal the 2nd respondent did not lead any
evidence to show ’the actual number of its members. The
Tribunal recorded its finding that respondent No. 2 had been
able to prove that the settlement was not valid and I bind-
ing on its members and was incomplete to that extent. It
was contended by ’the 2nd respondent that even if the set-
tlement was binding on the company and the 3rd respondent
representing a large majority of workmen, it was not
binding .on its members under s. 18(1).
Dismissing the appeal,
HELD: The settlement is fair and just. The award of the
Tribunal shall be substituted by the settlement and the
settlement shall be the substituted award.
[24D]
(1) (a) When this Court called for a finding of the Tribunal
it was satisfied that if the settlement was fair and just it
would allow the parties to be governed by the settlement
substituting the award. The Wording of the issue sent to
the Tribunal for a finding clearly shows that there was an
onus on the 2nd respondent to show how many workers of the
appellant were its members. Since a recognised and regis-
tered union had entered into. a voluntary settlement this
Court thought that if the same was found to be. just and
fair that could be allowed to be binding on all the work-
ers even if a very small number of workers were not mem-
bers of the majority union. [20E-F]
(b) In the instant case the numerical strength of the
members of the 2nd respondent, who are workers of the compa-
ny, would also have an important bearing as to whether the
settlement accepted by the majority of the workmen is to be
considered as just and fair. Not a single worker of the
company claimed before the Tribunal to be its member and
asserted that the settlement was
16
not fair and just. All the workers of the company had
accepted the settlement and received the arrears and emolu-
ments in accordance with the same [20H]
(2) (a) The assumption of the Tribunal that the quantum of
the membership of the 2nd respondent did not call for a
finding at all in view of this Court’s order is incorrect.
The Tribunal was conscious that under s. 18(1) the settle-
ment was binding on the company and the 3rd respondent
Union. Yet it examined the question whether the workers
voluntarily accepted the settlement knowing all the conse-
quences, which was a wrong approach. [21B-C]
(b) When a recognised union negotiates with an employer
the workers as individuals do not come into the picture. It
is not necessary that each individual worker should know the
implications of the settlement since a recognised union.
which is expected to protect the legitimate interests of
labour enters into a settlement in the best interests of
labour. [21D]
(c) Prima facie this is a settlement in the course of
collective bargaining and, therefore, is entitled to due
weight and consideration. [21E]
(d) Having regard to the totality of the terms of the
settlement it is difficult to hold that the terms are in any
way unfair or unreasonable. An adjudication has to be dis-
tinguished from a voluntary settlement. By the settlement
labour has scored in some aspects and saved all unnecessary
expenses in uncertain litigation. The settlement cannot be
judged on the touchstone of the principles laid down by
this Court for adjudication. [22D; 23D]
(3) There may be several factors that influence parties
to come to a settlement as a phased endeavour in collective
bargaining. Once cordiality is established between the
employer and labour in arriving at a settlement there is
always a likelihood of further advance in the shape of
improved emoluments by voluntary settlement, avoiding fric-
tion and unhealthy litigation. This is the quintessence of
settlement which courts and Tribunals should endeavour to
encourage.[23E]
(4) It is not possible to scan the settlement in bits and
pieces and hold some parts good and acceptable and others
bad. Unless it can be demonstrated that the objectionable
portion is such that it completely outweighs all the other
advantages gained, the Court will be slow to hold a settle-
ment as unfair and unjust. the settlement has to be accepted
or rejected as a whole. [24B]
In the instant case the 3rd respondent representing the
large majority of the workmen has stood by this settlement
which is a strong factor difficult to ignore. When a union
backed by a large majority of workmen has accepted a settle-
ment in the course of collective bargaining, this Court
would not interfere with the settlement. [24C]
JUDGMENT
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1901 of 1970.
(From the Award dated 4/6.3.1970 of the Industrial
Tribunal Maharashtra in Ref. (I.T.) No. 158/67, published in
Maharashtra Govt. Gazette, Part I-L dated 16-4-1970).
F.V. Kaka, F.A.K. Faisulla Bhai, O.C. Mathur and D. N
Mishra for the Appellant.
F.D. Damania and B.R.Agarwala for Respondent No. 2.
Y.S. Chitale, P.H. Parekh and Miss Manjit Jelley, for
Respondent No. 3.
The Judgment of the Court was delivered by
GOSWAMI, J.--This appeal by special leave brings forth a
rather disquieting feature of union rivalry whereby the
significance of collective bargaining which is the forte of
a union, is sought to be made
17
a flop. We say this in the absence of any suggestion of
mala fides or of any other ulterior motive alleged by .the
contending union on time part of the rival union or its
principal officer who had negotiated a certain settlement on
behalf of the workmen in substitution of the award of the
Industrial Tribunal out of which this appeal arose.
The appellant before us is the employer, supported, whole-
hog, by the Bombay General Kamgar Sabha, respondent NO.
3.Respondent No. 2 is the only contending union, viz.,Mum-
baiMazdoor Sabha.
On May 18, 1967, there was a :reference by the Govern-
ment of Maharashtra of an industrial dispute under section
10(1)(d).of the Industrial Disputes Act to the Industrial
Tribunal for adjudicating eight demands such as, wage
scales, adjustment of. increments, classification of workmen
into different grades, dearness allowance, restropective
effect of the claim from 1st June, 1966, gratuity, sick
leave and wages for Sundays and holidays when called upon
to .Work The dispute was between-the D& P Products (Private)
Limited, Bombay and their workmen. A written statement was
submitted ’by the Mumbai Mazdoor Sabha (2nd respondent),
claiming to represent the majority of the workmen on: July
25, 1967. It appears that this written statement was signed
by V. S. Pandit as General Secretary. The company submitted
their written statement on August 17, 1967, in which;
inter alia, they pleaded. incapacity to have greater burden
on account of financial position. It was stated that the
company had been making losses year after year since 1963-64
During the pendency of the dispute before the Tribunal,
D & P Products (Private) Limited was amalgamated .with
Herbertsons Ltd. (the appellant) (hereinafter to be de-
scribed as-the company) with effect from 1.10.1968 under
the provisions of the" Companies Act by an order of the
Bombay High’ Court dated 6th January, 1969.
The wage scales existing at the time. of the reference
were as follows :--
Unskilled Rs. 1.25-0.10-2.25
Semi-skilled Rs. 1.50-0.15-3.00
Dearness allowance Rs. 2.16 per day.
The demand of the workmen on the other hand was as follows.
Unskilled Rs. 1.50-0.15-3.00 per day
Semi skilled Rs 1.75 0.20 3.75 " "
Skilled Rs. 2.50-0.30-5.50 " "
Highly skilled Rs. 3.50-0.45.8.00 " "
Dearness allowance "as paid to. the Bombay Textile Oper-
atives". 3--1458SCI/76
18
The Tribunal (Shri R.D. Tulpule) made its award on March
4, 1970. As regards the demand for wages and dearness
allowance, the award of Tribunal was as follows :-
Grade I Rs Plus Revised
(Unskilled) 1.30-0. 12-2.50 Textile dearness
allowance.
Grade II
B (Semi-skilled) 1.40--0.15-3.20 do
A (Semi-skilled) 1-60-0.30-3.60 do
Grade III 1.80-0.20-2.80-0.25-4.80 do
(Skilled)
The company preferred an application for special leave
to this Court on May 12, 1970, against the award. On May
25, 1970, certain consent terms for staying the award were
filed by the parties without prejudice to the rights in the
appeal whereby the company agreed to pay Rs. 2.50 as addi-
tional dearness allowance per day from October 1, 1968.
This Court admitted the special leave petition and posted
the stay application for hearing on September 24, 1970, on
which date in modification of the earlier stay order the
parties further agreed that from 1st September, 1970, till
the disposal of the appeal, the total dearness allowance
would be calculated at Rs. 5/- per day irrespective of the
index figures. On February 22, 1973, the company agreed to
increase the dearness allowance further by 80 paise with
effect from January 1, 1973.
From June 1973 certain new developments took place. On
June 7, 1973, a letter was received by the company from the
3rd respondent, Bombay General Kamgar Sabha, stating that
all the workers of the company had resigned from the 2nd
respondent union (Mumbai Mazdoor Sabha) and joined the 3rd
respondent union. On June 7, 1973, the 3rd respondent sent a
communication to the respondent No. 2 with a copy to the
company enclosing a letter signed by the workers stating
that they had resigned from the 2nd respondent union.
On June 25, 1973, the 3rd respondent sent a reminder to the
company to recognise the Bombay General Kamgar Sabha. By a
letter dated 2nd/5th July, 1973, to the President, Bombay
General Kamgar Sabha, who was incidentally the same V.S.
Pandit who had earlier submitted the written statement in
behalf of the Mumbai Mazdoor Sabha, the company granted
recognition to the Bombay General Kamgar Sabha and informed
the 2nd respondent of its derecognition.
On October 18, 1973, the company entered into a memorandum
of settlement with the Bombay General Kamgar Sabha which was
in substitution of the award which was pending appeal before
this Court. Copies of this settlement were forwarded to the
Secretary to the Government of Maharashtra, Industries and
Labour Department, the Commissioner of Labour, the Deputy
Commissioner of Labour and the Conciliation Officer. It is
common ground that this is a settlement under section 18 (1)
of the Industrial Disputes Act.
The 3rd respondent applied to this Court to be substi-
tuted if place of the 2nd respondent and the Other union.
The 2nd respondent
19
alone resisted the application claiming that it had still
the allegiance of 50 workmen of the company. This Court
allowed the Bombay General Kamgar Sabha to be added as the
3rd respondent.
The company also submitted a petition to this Court to
decide the appeal in terms of the memorandum of settlement
dated October 18, 1973. This Court on December 19, 1974,
passed the following order :--
"The number of workmen concerned in this
industrial dispute is 210. The appellant
employer and the 3rd respondent union which
claims to have 193 members on its rolls have
entered into a settlement. The 2nd respondent
union which claims to have about 55 members on
its rolls has not yet accepted the settlement.
We think it just, therefore, to pass the
same kind of preliminary order that was passed
in Amalgamated Coffee Estate vs. Their workmen
in the following terms :--
"In view of the fact that admittedly a
large number of workmen employed by the
appellant have accepted the settlement, is it
shown by the 2nd respondent union that the
said settlement is not valid and binding on
its members and whether the settlement is fair
and just?"
"The Industrial Tribunal, Maharashtra,
would consider the issue and submit its
finding within two months from this date.
After the finding is received, the appeal
would be set down for hearing. Parties
should be allowed to lead evidence."
When the matter went back, it appears that respondent
No. 2 did not lead any evidence before the Tribunal (Shri
D.L. Bhojwani). The company and the 3rd respondent, on the
other hand, examined 7 witnesses including V.S. Pandit, the
President of the 3rd respondent union. Certain documents
were also filed before the Tribunal by the parties. The
Tribunal after hearing the parties in due course recorded
its findings on September 9. 1975 and forwarded the same to
this Court. The findings of the Tribunal recorded are as
follows :--
(1) Respondent 2 the Mumbai Mazdoor
Sabha has been able to prove that the Disputed
Settlement is not valid and binding on its
members.
(2) The Disputed Settlement is
incomplete to the extent mentioned above.
(3) The scheme of D.A. provided for in
the Disputed Settlement in so far as it
affects workmen at or just above the
subsistence level is not fair, just and
reasonable.
(4) The rest of the Disputed Settlement
is fair, just and reasonable."
20
That is how this appeal has come up for bearing before us.
The first question that arises for consideration is
whether the findings. of the Tribunal are sustainable. The
appellant and respondent No. 3. with one voice, have as-
sailed the findings 1 to 3 whereas the 2nd respondent has
supported all the findings. It is strenuously submitted by
the 2nd respondent that there is no reason why we should
interfere with the findings of fact returned by the Tribunal
and relying upon these it is further contended that we
should hear the appeal on the merits ignoring the settlement
altogether.
Before we proceed further it is necessary to appreciate
the implication of the order of this Court passed on Decem-
ber 19, 1974, set out earlier. This order was passed after
hearing the parties for some time when the appeal was first
called for hearing on December 19, 1974. From the recitals
in the order it is apparent that the parties were prepared
to abide by the settlement if the same was fair and just.
We are not prepared to accept the position, as urged by the
2nd respondent, that even if the settlement is binding on
the parties executing the document, namely, the company and
the 3rd respondent representing a large majority of the
workmen, since the same is not binding on the members of the
Mumbai Majdoor Sabha Union, howsoever small the number,
under section 18 (1) of the Industrial Disputes Act, the
appeal should be heard on merits. On the other hand, we take
the view that after hearing the parties this Court was
satisfied when it had called for a finding of the Tribunal
that if the settlement was fair and just it would allow the
parties to be governed by the settlement substituting the
award. The wording of the issue sent to the Tribunal for a
finding clearly shows that there was an onus on the 2nd
respondent to show how many workers of the appellant were
their members upon whom they could clearly assert that the
settlement was not binding under section 18(1) of the Indus-
trial Disputes Act. It cannot be assumed that the parties
were not aware of the implications of section 18(1) of the
Industrial Disputes Act when the Court passed the order of
December 19, 1974. This Court would not have sent the case
back only to decide the legal effect of section 18(1) of the
Industrial Disputes Act. Since a recognised and registered
union had entered into a voluntary settlement this Court
thought that if the same, were found to be just and fair
that could be allowed to be binding on all the workers even
if a very small number of workers were not members of the
majority union. It is only in that context that after hear-
ing the parties the case was remanded to the Tribunal for a
finding on the particular issues set out above.
The numerical strength of the members of the 2nd re-
spondent, who are workers of the company, would also have an
important bearing as to whether the settlement accepted by
the majority of the workmen is to be considered as just and
fair. In that view of the matter we are unable to appreci-
ate that the 2nd respondent did not choose it fit to produce
evidence to show the actual number of the workers of the
company having membership of the 2nd respondent. It is
rather odd that not a single worker of the company claimed
before the Tribunal
21
to be a member of the 2nd respondent and to assert that
the settlement was not fair and just. This is particularly
so when all the workers of the company have accepted the
settlement and also received the arrears and emoluments in
accordance with the same.
The Tribunal thought that the question of the quantum of
membership of the 2nd respondent did not call for a finding
at all in view of 1his Court’s order. As observed above
that was not a correct assumption. On the other hand, we
feel that this view of the Tribunal has led it to approach
the matter in an entirely erroneous manner. The Tribunal
is, rightly enough, conscious that under section 18 (1) of
the Industrial Disputes Act the settlement was binding on
the company and the members of the 3rd respondent union.
Even so, the Tribunal devoted nearly half of its order in
scanning the evidence given by the company and respondent
No. 3 to find out whether the terms of the settlement had
been explained by the President of the union to the workmen
or not and whether the workers voluntarily accepted the
settlement knowing all the "consequences". This to our mind
is again an entirely wrong approach.
When a recognised union negotiates with an employer the
workers as individuals do not come into the picture. It is
not necessary that each individual worker should know the
implications of the settlement since a recognised union,
which is expected to protect the legitimate interests of
labour, enters into a settlement in the best interests of
labour. This would be the normal rule. We cannot altogeth-
er rule out exceptional cases where there may be allegations
of mala fides, fraud or even corruption or other induce-
ments. Nothing of that kind has been suggested against the
President of the 3rd respondent in this case. That being
the position, prima facie, this is a settlement in the
course of collective bargaining and, therefore, is entitled
to due weight and consideration.
It is true that in the course of evidence given by the
’President as also by two workmen and other officers of the
company the Tribunal has found certain discrepancies. For
example, the President in the course of cross-examination
stated that since the workers had already agreed he only
tried to improve upon the settlement by negotiating .with
the company for 85% and 871/2% dearness allowances instead
of 80% earlier agreed to by the workers on their own. We do
not think that this admission by the President would reduce
the efficacy of the settlement or affect its validity. It
may be that negotiations had been going on for some time and
even some important workers had been individually approached
by the management, but it is clear that the President of the
union had taken upon himself the responsibility for the
settlement upon which he. on his own turn, succeeded in
making some effective improvements beneficial to the Work-
men. The Tribunal further made some observations that Shri
Pandit was actually unaware of the consequences that would
ensure to the workmen as a result of the settlement Reading
the evidence of Shri Pandit as a whole. we, however. find
"hat it cannot be said that he was unaware of the conse-
quences. We are also unable to hold that he had knowingly
and deliberately suppressed the fact about the importance of
the consequences
22
to the workers if the settlement were accepted. As a matter
of fact it has been stated by the workmen. who were exam-
ined, that Shri Pandit did mention that they would lose Rs.
12/- to Rs. 15/- in dearness allowance if the settlement
superseded the award. Mathematically this may not be correct
as perhaps, on account of the rise of consumer price index,
the loss in dearness allowance could have been even double
the figure given by the President. That, however, per se,
does not make the settlement unfair or unreasonable.
It is found by the Tribunal that in the matter of wages
the settlement has given better terms and that the same
cannot be said to be unfair. The Tribunal has stated in
more than one place that the only objection to this settle-
ment levelled by the 2nd respondent is with regard to the
quantum of dearness allowance. While the award has given
the Revised Textile dearness allowance, the settlement has
substituted 86% and 871/2% of the Revised Textile allowance
for the first and the second period respectively. While the
award is for one year, subject to the provisions of the
Industrial Disputes Act, the settlement is for a period of
three years. Having regard to the totality of the terms of
the settlement we are unable to agree with the Tribunal that
the terms are in any way unfair or unreasonable.
Besides, the settlement has to be considered in the
light of the conditions that were in force at the time of
the reference. It will not be correct to judge the settle-
ment merely in the light of the award which was pending
appeal before this Court. So far as the parties are con-
cerned there will always be uncertainty with regard to the
result of the litigation in a court proceedings. When,
therefore, negotiations take place which have to be encour-
aged, particularly between labour and employer in the inter-
est of general peace and well being, there is always give
and take. Having regard to the nature of the dispute, which
was raised as far back as 1968, the very fact the existence
of a litigation with regard to the same matter which was
bound to take some time must have influenced both the par-
ties to come to some settlement. The settlement has to be
taken as a package deal and when labour has gained in the
matter of wages and if there is some reduction in the matter
of dearness allowance so far as the award is concerned, it
cannot be said that the settlement as a whole is unfair and
unjust.
There are three categories of workers, permanent work-
ers, listed casual workmen and certain other casual workmen.
It is said that the third category of workmen are employed
seasonally for a period of 20 days or so. Their number is
also said to be not more than 20 or 30. The terms and
conditions relating to this category of casual workmen were
left, under the settlement, to be mutually decided by the
parties. It is because of this feature in the settlement
that the Tribunal held that the settlement was incomplete.
We are, however, informed that as a matter of fact by mutual
agreement some terms have been settled even for this third
category of casual workmen. At any rate, because no deci-
sion was arrived at with regard to this small number of
seasonal workmen, it cannot be said that the settlement is
bad on that account.
23
The Tribunal next dealt with the principles applicable
in granting dearness allowance to workers. It is while
dealing with this part of the Tribunal’s award that Shri
Damania for the 2nd respondent sought to make a strong plea
in favour of sustaining the award by disregarding the set-
tlement. According to counsel the wage level of the workers
is more or less at subsistence level and, therefore, cent
per cent neutralisation of the cost of living or, at any
rate, 95% neutralisation should have been allowed while
setting dearness allowance. Since the Tribunal has rightly
taken that settled principle into consideration and the
settlement has departed from it, the same should be held as
unjust and unfair to the workmen.
We should point out that there is some misconception
about this aspect of the case. The question of adjudication
has to be distinguished from a voluntary settlement. It is
true that this Court has laid down certain principles with
regard to the fixation of dearness allowance and it may be
even shown that if the appeal is heard the said principles
have been correctly followed in the award. That, however,
will be no answer to the parties agreeing to a lesser amount
under certain given circumstances. By the settlement,
labour has scored in some other aspects and will save all
unnecessary expenses in uncertain litigation. The settle-
ment, therefore, cannot be judged on the touchstone of the
principles which are laid down by this Court for adjudica-
tion.
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 further advances in the shape of
improved emoluments by voluntary settlement avoiding fric-
tion 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 scrutinising an
award in adjudication. The Tribunal fell into an error in
invoking the principles that should govern in adjudicating a
dispute regarding dearness allowance in judging whether the
settlement was just and fair.
Mr. Damania has drawn our attention to several authori-
ties of this Court with regard to the principles of fixation
of dearness allowance including the recent decision of this
Court in Killick Nixon Limited v. Killick & Allied Companies
Employees Union and earnestly submitted that there is a
"peremptive necessity" to grant cent per cent or at any rate
95% neutralisation of the cost of living as dearness
allowance (5th principle of Killick Nixon Limited supra).
Even the Tribunal has relied upon the above decision. But,
as we have pointed out, that is not the correct way to
decide whether a settlement voluntarily arrived at by the
parties is just and fair. The matter would have been abso-
lutely different if on the face of it the settlement was
highly unconscionable or grossly unjust. Even according to
the Tribunal, the reduction of the dearness allowance to 85%
and 871/2% from cent per cent is the only objectionable
feature to enable it to hold that that part of the
(1)[1975] Supp. S.C.R. 453.
24
settlement is unjust and unfair. The Tribunal found that
all other terms of the settlement were "fair, just and
reasonable".
It is not possible to scan the settlement in bits and
pieces and hold some parts good and acceptable and others
bad. Unless it can be demonstrated that the objectionable
portion is such that it completely outweighs all the other
advantages gained the Court will be slow to hold a settle-
ment as unfair and unjust. The settlement has to be accepted
or rejected as a whole and we are unable to reject it as a
whole as unfair or unjust. Even before this Court the 3rd
respondent representing admittedly the large majority of the
workmen has stood by this settlement and that is a strong
factor which it is difficult to ignore. As stated elsewhere
in the judgment, we cannot also be oblivious of the fact
that all workmen of the company have accepted the settle-
ment. Besides, the period of settlement has since expired
and we are informed that the employer and the 3rd respondent
are negotiating another settlement with further improve-
ments. These factors, apart from what has been stated
above, and the need for industrial peace and harmony when a
union backed by a large majority of workmen has accepted a
settlement in the course of collective bargaining have
impelled us not to interfere with this settlement.
That being the position, we unhold the settlement as
fair and just and order that the award of the Tribunal shall
be substituted by the settlement dated October 18, 1973.
The said settlement shall be the substituted award. The
appeal is disposed of accordingly. There will be no order
as to costs.
B.P.R. Appeal
dismissed.
25