Punjab National Bank Ltd vs Sri Ram Kanwar

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 134 of 1955

Decision Date: 20 December 1956

Coram: S.K. Das, Natwarlal H. Bhagwati, Bhuvneshwar P. Sinha

In the matter titled Punjab National Bank Ltd versus Sri Ram Kanwar, the issue concerned an industrial dispute that was before the Industrial Tribunal in Delhi. The judgment was delivered on 20 December 1956 by a bench consisting of Justice S.K. Das, Justice Natwarlal H. Bhagwati and Justice Bhuvneshwar P. Sinha. The case was reported in 1957 AIR 276 and 1957 SCR 220. The petition was filed by Punjab National Bank Ltd and the respondent was Sri Ram Kanwar. The dispute related to travelling and halting allowances claimed by representatives of workmen’s unions who travelled from various stations other than Delhi to attend the tribunal hearing. The claim was based on the contention that the bank operated branches throughout India and that several employee unions at those branches were involved in the dispute.

The Tribunal, acknowledging that no specific statutory provision supported the claim, nonetheless issued an order directing the bank to pay the requested allowances, relying on what it described as the general practice of industrial courts. The bank challenged this order by obtaining special leave to appeal, arguing that the Tribunal had acted without jurisdiction and that the order was unjust. The bank further contended that the Tribunal could not rely on general practice or on section II(7) of the Industrial Disputes Act, 1947, to impose such a cost on the employer during pending proceedings.

The headnote of the judgment reproduced subsection (7) of section II of the Industrial Disputes Act, 1947, as inserted by Act 48 of 1950, which states: “Subject to the rules made under this Act, the costs of, and incidental to, any proceeding before a Tribunal shall be in the discretion of that Tribunal, and the Tribunal shall have full power to determine by and to whom and to what extent and subject to what conditions, if any, such costs are to be paid and to give all necessary directions for the purposes aforesaid, and such costs may, on application made to it by the person entitled, be recovered as arrears of land revenue or as a public demand by the appropriate Government.” The bank’s appeal therefore raised the question of whether this provision granted the Tribunal authority to order payment of travelling and halting allowances in advance, irrespective of the final outcome of the dispute.

The Court examined the construction of section II(7) and observed that there was no uniform or consistent practice authorising such orders, and that even if a practice existed it was not supported by law or by the principles of reason and justice. The Court held that the Tribunal’s order was beyond its jurisdiction and could not be sustained either on the basis of the alleged general practice of industrial courts or on the basis of subsection (7) of the Act. The Court emphasized that the discretion conferred by section II(7) is a judicial discretion that must be exercised according to the rules of reason and justice, not by caprice, private opinion, or a fanciful notion of benevolence or sympathy. Consequently, the appeal succeeded and the Tribunal’s order directing the bank to pay the travelling and halting allowances was set aside.

The Court explained that the power granted under section II(7) of the Industrial Disputes Act was a judicial discretion that had to be exercised according to reason and justice, and could not be applied arbitrarily, whimsically, or on the basis of private opinions or fanciful ideas of benevolence or sympathy. It held that a proper construction of the sub-section showed that the Tribunal possessed no authority to order one party to pay the costs of the other party in advance, regardless of the ultimate outcome of the proceedings. The Court stressed that such discretion was not a matter of chance but must follow established principles of fairness.

In support of this view, the Court cited the decision in Jeevan Textile Mills, Hyderabad (Deccan) v. Their Workmen, (1956) I L.L.J. 423, which was approved as authority for the principle that the Tribunal’s power must be exercised within the bounds of reason and justice. The Court also referred to Certain Banking Companies v. Their Workmen, (1952) 2 L.L.J. 54, and expressly disapproved the portion of that judgment that suggested the Tribunal had the power and jurisdiction under section II(7) to direct banks to meet the workmen’s expenses in a pending proceeding.

The judgment was recorded under civil appellate jurisdiction as Civil Appeal No. 134 of 1955, filed by special leave against the order dated 17 April 1954 issued by Shri Ram Kanwar, Industrial Tribunal, Delhi, on an application filed on the same day. The appellant, Punjab National Bank Ltd., was represented by counsel, while the respondents were represented by counsel for respondent No. 13. The judgment was delivered on 20 December 1956 by Justice S. K. Das.

The Court summarized the factual backdrop by noting that the Government of India, Ministry of Labour, had appointed Shri Ram Kanwar as Industrial Tribunal on 2 September 1953 (Order No. LR-100(98)) to adjudicate a dispute between the appellant and its workmen concerning the absorption of Bharat Bank employees into Punjab National Bank Ltd. and the conditions of their service. On 17 April 1954, during preliminary proceedings before the Tribunal, an application was made on behalf of the All India Punjab National Bank Employees’ Federation. The application asserted that several other unions were involved in the dispute because the bank operated nationwide and had multiple employee unions at its various branches. It further claimed that some of those unions had previously submitted statements when the dispute was referred to the Industrial Tribunal, Bombay, which was then presided over by Shri Panchapagesa Shastri, who later became a member of the Labour Appeal Tribunal of India.

The application of 17 April 1954 contained two principal prayers. The first prayed that the adjudication proceedings be widely publicized by issuing notices to all unions so they could participate. The second prayed that the Tribunal issue an order directing the appellant to pay travelling and halting allowances to the representatives of the various unions, thereby enabling those representatives to travel to Delhi, the venue of the pending adjudication. The Court indicated that the present appeal concerned only the second prayer and the order issued by the Tribunal in response to that prayer, which was the order under challenge.

In the present case the appellant sought to have representatives of several trade unions travel to Delhi, the place where the adjudication proceedings were pending. The application that was filed identified a list of fourteen unions and organisations and specified the number of representatives that each union or organisation wished to send to the proceedings. The appeal before this Court concerns only the second prayer contained in that application – namely, the request that the appellant be ordered to pay travelling and halting allowances to the union representatives so that they could attend the tribunal. The order that is now under challenge was issued by respondent No 1 and it read in substance as follows: “The management objects to the grant of any travelling allowance or halting allowance to the representatives of the unions. It is admittedly correct that there is no statutory provision that specifically authorises such allowances for the representatives, but the general practice of various tribunals has consistently been to allow reasonable travelling and halting allowances to union representatives, particularly in cases involving banks. Consequently, it is ordered that the representatives of the unions who appear before the tribunal from stations outside Delhi shall be paid two and a half second-class railway fares for the journey to and from Delhi, together with a halting allowance of ten rupees per day, to be paid by the management of the bank. The bank is further requested to direct its branches to pay travelling and halting allowances in advance to any employees who intend to appear as representatives before the tribunal.” It is relevant to note that of the fourteen unions and organisations that intended to send representatives, two already had their offices in Delhi and therefore required no travelling allowance. Respondent No 1 therefore directed that travelling and halting allowances be paid only to the representatives of the remaining twelve unions and organisations and also fixed the number of representatives each union or organisation could send. The appellant contended that respondent No 1 had acted without jurisdiction and that the order was unjust because it would oblige the bank to incur an expenditure of at least two thousand five hundred rupees for each day of hearing in the proceedings before respondent No 1. On that ground the appellant moved the Punjab High Court seeking a writ of certiorari, or any other appropriate writ, to set aside the order. The Punjab High Court dismissed the petition on a preliminary basis on 14 May 1954. Subsequently the appellant obtained special leave to appeal from this Court on 18 October 1954. The matter that now comes before us is confined to a single question of law. The respondents, who appear before us, rely on subsection (7) of section 11 of the Industrial Disputes Act 1947 (XIV of 1947) – a provision inserted by Act 48 of 1950 – to support the impugned order. That subsection, which we will read presently, provides, inter alia, that the costs of and expenses incidental to any proceeding before a tribunal are to be determined at the discretion of that tribunal, and that the tribunal has the authority to decide the manner, extent and conditions, if any, under which such costs are to be paid and to give any necessary directions for that purpose.

The Tribunal possessed unfettered authority to decide the identity of the person liable to pay costs, the quantum of such costs, any conditions attached to the payment, and to issue any directions necessary to give effect to that discretion. The question presented for determination was whether Respondent No 1, while exercising the discretion conferred by sub-section (7) of section 11, could order that one of the disputing parties advance the payment of costs to the other party during the pendency of the proceeding, without regard to the ultimate outcome of the matter. In the Court’s view, the answer to that query could be only one. Sub-section (3) of section 11 lists certain powers that a Civil Court enjoys under the Code of Civil Procedure and declares that every Board, Court and Tribunal created by the Act shall possess those powers; the last power in that enumeration is couched in general terms, referring to “such other matters as may be prescribed.” No rules made under the Act concerning the question of costs have been brought to the Court’s notice. Consequently, apart from the powers expressly enumerated, the other powers vested in a Civil Court by the Code of Civil Procedure have not been transferred to the Board, Court or Tribunal under the Act. Nevertheless, the Act contains a distinct provision dealing with costs, namely sub-section (7) of section 11. That sub-section, as it stood before the amendment of 1956, reads: “Subject to the rules made under this Act, the costs of, and incidental to, any proceeding before a Tribunal shall be in the discretion of that Tribunal, and the Tribunal shall have full power to determine by and to whom and to what extent and subject to what conditions, if any, such costs are to be paid, and to give all necessary directions for the purposes aforesaid, and such costs may, on application made to it by the person entitled, be recovered as arrears of land revenue or as a public demand by the appropriate Government.” A comparison of this sub-section with section 35 of the Code of Civil Procedure shows that the language is substantially similar to that of section 35, except for the concluding portion of the sub-section which provides for recovery of costs as arrears of land revenue. Another distinction is that sub-sections (2) and (3) of section 35 of the Code do not appear in the Act. On a plain reading of the sub-section, it is evident that (1) the expression “costs of any proceeding” refers to the costs of the entire proceeding as determined at its conclusion, and not to costs incurred while the proceeding is still pending or to future costs that may be incurred by a party; and (2) the expression “ costs”

In this case the Court explained that the phrase “incidental to any proceeding” referred only to the costs of interlocutory applications or similar matters, and that such costs were to be fixed at the conclusion of the hearing. The expression did not include any costs payable in advance, nor any expenses that might be incurred by a party in the future, and it certainly did not cover travelling or halting allowances that a party might claim while attending the Court on his own behalf. Respondent No 1 correctly understood this legal position and observed that no statutory provision supported the claim advanced by the respondents. Although he cited the general practice of Industrial Courts, especially in banking cases, the Court expressed doubt that any such uniform practice existed, and it was not persuaded that even if such a practice were present it would have any legal justification. The Court indicated that it would address this point when reviewing the decisions of Industrial Tribunals that had been placed before it. Counsel for the respondents, however, did not rely on the alleged practice but on the wording of the relevant subsection. He argued that the concluding portion of the subsection, which stated that “such costs may, on application made to it by the person entitled, be recovered as arrears of land revenue or as a public demand by the appropriate Government,” demonstrated that costs could be granted in advance during a pending proceeding. His submission proceeded on two points: first, that an Industrial Tribunal became functus officio upon the submission of its award; and second, that because the subsection allowed an application for recovery of costs to be made to “it,” the application had to be filed before the Tribunal became functus officio, that is, while the proceedings were still ongoing. The Court found this argument wholly untenable and based on a misreading of the subsection. It held that the pronoun “it” in the concluding clause referred to the appropriate Government, not to the Tribunal, and therefore the foundation of the respondent’s contention collapsed. Consequently, the Court deemed it unnecessary to consider whether the Tribunal became functus officio upon the award. The Court noted that subsection (7) of section 11 of the Act expressly conferred discretion on the Tribunal to determine to whom, by what means, and to what extent costs should be awarded, subject to any conditions it might impose. This discretion was characterized as a judicial discretion that must be exercised in accordance with the principles of reason and justice, and not according to arbitrary whim, caprice, personal opinion, or an imagined notion of benevolence or sympathy. It would be a denial of justice and reason to order the appellant to pay the respondents’ costs in advance irrespective of the ultimate outcome of the proceeding. The general rule, as reiterated by the Court, was that costs follow the event unless the Court, for good reasons, decides otherwise.

The Court observed that Respondent No. I did not give any reasons for his order except to invoke an alleged “practice”. The Court held that even if such a practice existed, it was neither lawful nor just. It was noted that the jurisdiction of an Industrial Tribunal is not meant to enforce simple contractual rights and liabilities of the parties that have been referred to the Tribunal for adjudication. Rather, the Tribunal’s jurisdiction in industrial dispute adjudication is broader and more flexible, but it is not arbitrary. The Court affirmed that an employee is entitled to a fair deal no less than an employer and must be shielded from victimisation and unfair labour practice. However, the Court cautioned that the notion of “social justice” does not require that reason and fairness always bend to the convenience of one party, such as the employee, at the expense of the employer in an adjudication proceeding. The Court described such a one-sided view as bordering on caprice or humour. quoting Lord Halsbury L.C., the Court reproduced the forceful language that “discretion” means that an authority must act according to the rules of reason and justice, not according to private opinion, as stated in Rooke’s Case (1). The Court added that discretion must be exercised according to law and not according to whim, and that it must be legal, regular and not arbitrary, vague or fanciful, citing Susannah Sharp v. Wakefield (2).

The Court then turned to special situations where costs may be required to be borne by a party during a pending proceeding. It cited sub-rule (4) of rule 4 of Order XXXII of the Code of Civil Procedure, which permits a Court, where no suitable person is available to act as guardian of a minor in a suit, to appoint one of its officers as guardian and to direct that the costs incurred by that officer in performing the guardianship duties be borne either by the parties or by any one or more of the parties to the suit. The decision referred to the authority reported as 5 Rep. 100, a. (2) [1891] A.C. 173 179. The Court further noted that Section 35 of the Code is subject not only to prescribed conditions and limitations but also to any other law then in force. In addition, the Court mentioned the practice under the Matrimonial Causes Rules, 1950, whereby, after a registrar’s certificate for trial is granted or with leave at an earlier stage, a wife who is a petitioner and who seeks costs, or who has filed an answer, may apply for security for her costs up to and incidental to the hearing, as discussed in Halsbury’s Laws of England, 3rd Ed., Vol. 12, para. 765 at p. 358. The Court noted that when such security is ordered, unless the husband elects to pay the amount, the security remains in effect.

When a bond was required from the husband after the registry entry and notice to the wife’s solicitor, the Court observed that such situations are governed by special statutory provisions that apply only to cases occupying a distinct legal category, and therefore they could not be invoked to justify the order that was being challenged before this Court. The discussion then shifted to the practice prevailing in Labour Courts. The earliest authority brought to the Court’s attention was the decision in Kirloskar Brothers Ltd. v. Their Workmen, where one of the claims presented for adjudication concerned the travelling and other expenses incurred by the workers’ representatives when those representatives were directed, by a duly constituted authority or Court, to attend an industrial matter. The Court in that case observed that the claim, as presented by the company, effectively amounted to financing the Union’s administration and was therefore objectionable even on psychological grounds. Consequently, the Tribunal ordered that the travelling and other expenses arising from Union work should be met from Union funds and that the employer could not be required to contribute to those sums. The Court then turned to the well-known case of Certain Banking Companies v. Their Workmen, in which the issue of providing facilities for effective representation of employees before the Tribunal was examined in detail. The Tribunal held that, under sub-section (7) of section 11 of the relevant Act, it possessed the power and jurisdiction to direct the banks to meet the reasonable expenses of the workmen in a pending proceeding so as to secure a fair and effective hearing. The reasoning relied upon several grounds: first, the banks were well organised and their management possessed sufficient resources; second, adjudication by a Labour Court or Industrial Tribunal was compulsory in the public interest, and because disputes involving banking establishments operating in more than one State were referred to the Tribunal by the Central Government, the fact that workmen from different States were compelled to appear before a Central Tribunal justified an order for payment of their travelling and halting allowances; third, nothing in the Act prohibited the Tribunal from exercising such power, which was necessary to achieve the fundamental objective of ensuring a proper hearing for the parties, especially the comparatively weaker, numerous and scattered workmen employed at various branches; fourth, prior to the insertion of sub-section (7) of section 11 in 1950, various Industrial Tribunals had already issued similar orders, and the statutory provision was introduced in recognition of the necessity of such orders; and fifth, the principles of natural justice required that the workmen be given a real opportunity to present their case.

In this case the Court examined the argument that the employer should be required to pay the expenses of the workmen. The Court concluded that none of the reasons offered for such an order were sustainable either under the law or according to the principles of justice, equity and good conscience. The Court observed that the fact that banks are well-organised and that their management possesses ample resources cannot, by itself, justify ordering them to bear the other party’s expenses. If that principle were applied, the richer party would invariably be made to pay the weaker party regardless of the final outcome of the dispute. Consequently, even where a dispute is raised by workmen and is later found to be wholly without merit, the employer would still be required to finance the workmen’s costs. The Court warned that such a rule would encourage frivolous and unsubstantial disputes and would defeat the object and purpose of the governing Act, namely the promotion of industrial peace in the public interest. The Court also rejected the contention that because adjudication is compulsory it should impose a penalty on one side only. It noted that compulsory adjudication applies equally to employees and to employers; therefore there is no justification for imposing a cost burden on only one party. The Court further held that a proper construction of the relevant sub-section does not confer any power on the Tribunal to direct the repayment of one party’s costs in advance by the other party, irrespective of the final result of the proceeding. Accordingly, the view expressed by the Bank Disputes Tribunal concerning the construction of that sub-section was manifestly erroneous. Moreover, the Court found no evidence of a consistent or uniform practice prior to the addition of the sub-section that would indicate statutory recognition of such an approach.

The Court expressed difficulty in reconciling the principles of natural justice with an order that penalises one party by making it pay the other party’s costs in advance, regardless of the proceeding’s result. It stated that such an order is neither natural nor just. The Court then referred to later authorities to support its view. In Associated Cement Companies Ltd. v. Workmen, Dwarka Cement Works, the Court quoted the observation that “the Union’s representatives thought it proper to attend on the various dates before the Tribunal, it is the Union who should bear the costs” (1) [1953] I.C.R. 292 at 307. In a subsequent decision, Jeevan Textile Mills, Hyderabad (Deccan) v. Workmen, the Court again considered the scope of sub-section (7) of section 11, observing that although the provision is worded very broadly, the power to order…

In this case the Court observed that the authority allowing industrial tribunals to order the payment of costs was intended to be broad and was not limited by a provision such as section 35(2) of the Code of Civil Procedure, which obliges a tribunal to state reasons when it declines to order costs. Consequently, even industrial tribunals may award costs only on the basis of well-recognised legal principles and may not rely on vague or abstract notions of what might be deemed desirable in a particular circumstance, as illustrated in United Commercial Bank Case(2). The Court agreed with this view and noted that, from the material before it, there was no uniform or consistent practice concerning the award of costs. Moreover, the Court held that any alleged practice was neither sanctioned by law nor supported by the principles of reason and justice. The Court then referred to Ex parte Snow In re Sherwell(3), where an application was filed to review a taxation of costs. In that matter the appellant, a barrister-at-law residing in Liverpool, sought reimbursement for his travel expenses between Liverpool and London on the basis that he had represented himself and thereby avoided the expense of hiring counsel, an expense to which he claimed entitlement. The Court dismissed that claim as “preposterous and unheard of.” The Court concluded that respondent No. I possessed no authority, under the discretion granted by sub-section (7) of section II of the Act, to direct the appellant to pay the travelling and halting allowances of union representatives in a pending proceeding, irrespective of the ultimate result of that proceeding. Accordingly, the appeal was allowed with costs, and those costs were to be borne by the contesting respondents. The order issued by respondent No. 1 concerning the payment, in a pending proceeding, of travelling and halting allowances to the various union representatives was set aside. The appeal was therefore allowed.