Rohtas Industries Ltd vs Brijnandan Pandey

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

Court: Supreme Court of India

Case Number: Civil Appeal No. 144 of 1955

Decision Date: 11 October 1956

Coram: S.K. Das, Natwarlal H. Bhagwati, P. Govinda Menon

In this case the Supreme Court recorded that the dispute was titled Rohtas Industries Ltd versus Brijnandan Pandey and that the judgment was delivered on 11 October 1956. The judgment was authored by Justice S. K. Das, who sat on a bench together with Justices Natwarlal H. Bhagwati and P. Govinda Menon. The petitioner was Rohtas Industries Ltd and the respondent was Brij Nandan Pandey. The citation for the decision was reported as 1957 AIR 1 and also as 1956 SCR 800. The matter concerned the provisions of the Industrial Disputes (Appellate Tribunal) Act, 1950, specifically section 22, which deals with applications for the discharge of temporary employees before the Labour Appellate Tribunal.

The headnote of the judgment explained that the purpose of an enquiry under section 22 is to determine whether a prima facie case exists for the proposed discharge of a workman and whether the employer has avoided any unfair practice or victimisation. The Court observed that an Industrial Tribunal, while empowered to create new obligations or to modify existing contracts in order to promote industrial peace or to prevent unfair treatment, must exercise its discretion in line with well-recognised principles. The Tribunal cannot simply disregard an existing agreement or the obligations that arise from it. The Court referred to the decisions in Automobile Products of India Ltd. v. Rukmaji Bala ([1955] 1 S.C.R. 1241) and Atherton West & Co. Ltd. v. Suti Mill Mazdoor Union ([1953] S.C.R. 780) as authority for this position.

The Court then turned to the facts of the present appeal. The appeal was filed by special leave against a judgment and order dated 25 September 1953 issued by the Labour Appellate Tribunal of India, Calcutta, in Miscellaneous Case No. C-112 of 1953. The appellant, Rohtas Industries Ltd, had on 4 May 1953 made an application to the Tribunal under section 22 of the 1950 Act seeking permission to discharge ninety-six temporary employees. The appellant owned a group of factories at Dalmianagar, including a cement plant, a power house, a pulp mill, a paper factory, a chemical plant and a factory for the manufacture of certain acids. The temporary employees were engaged for erection work connected with the extension and enlargement of these factories. Their terms of employment were set out in a temporary appointment form signed by both the employee and the management. That form stipulated, among other things, that the company could discharge the employee at any time without notice, compensation or reason, whether the work for which the employee had been engaged was completed or not. It also stated that the employee would remain a temporary worker until a written letter from the Works Manager expressly appointed him as a permanent employee, regardless of whether the employee moved to a different job or department.

The Court noted that, as the erection projects were completed, the temporary workers were first placed on a list of spare men and thereafter discharged. The Labour Appellate Tribunal, however, had failed to address the essential question of whether the workers in question were indeed temporary employees within the meaning of the Act. Instead, the Tribunal dismissed the application on the basis of a finding that did not resolve the true issue before it. Because the Tribunal did not direct its mind to the real question of the workers’ status and because its decision was not based on a determinative finding, the Court held that the Tribunal’s order must be set aside and that the proper order should be made in accordance with the requirements of section 22 of the Industrial Disputes (Appellate Tribunal) Act, 1950.

In this matter, the appellant, Rohtas Industries Limited, owned a group of factories at Dalmianagar that included, among others, a cement plant, a power house, a pulp mill, a paper factory, a chemical factory, a plant for manufacturing certain acids, and an asbestos cement factory. The company employed a number of workers on a temporary basis to carry out erection work required for the extension and enlargement of those factories. The conditions of their employment were set out in a temporary appointment form that each worker and the management signed. Those conditions expressly provided that the company could terminate the worker at any time without giving notice, compensation, or any reason, whether the work for which the worker was engaged had been completed or not. The form also clarified that a worker would remain temporary, regardless of whether he was assigned to the same job, a different job, the same department, another department, temporary work, or permanent work, until the Works Manager issued a written letter specifically converting him to a permanent employee.

When the various erection projects were finished, the temporary workers were first placed on a list of “spare men” and thereafter were discharged. Prior to 3 July 1952, sixty-nine of these temporary workers were exempted from discharge; their names were recorded in two separate lists identified as Appendix A and Appendix B. It was alleged that on 3 July 1952 a number of those workers, led by one Brij Nandan Pandey, entered the office of Shri L. C. Jain, the manager of the cement factory, and that Brij Nandan Pandey assaulted the manager. The incident created a serious situation, prompting the company to prevent the sixty-nine temporary workers from reporting to the factories or to the labour office, and to issue a notice stating that the company was applying to the Industrial Tribunal for permission to terminate their services.

At that time an industrial dispute concerning, among other matters, the payment of bonus to employees was pending before the Industrial Tribunal of Bihar. On 5 July 1952 the appellant filed an application with that tribunal seeking permission, under section 33 of the Industrial Disputes Act, 1947, to discharge the sixty-nine workers. On 12 July 1952, forty-nine of those workers filed their own application, invoking section 33-A of the same Act, before the Chairman of the Industrial Tribunal, Bihar, alleging that the company had discharged them on 5 July 1952 in violation of section 33. Later, on 20 August 1952, an additional thirty-six temporary workers were placed on the spare list, and a further application was made to the Industrial Tribunal of Bihar requesting that these thirty-six persons also be included in the original discharge application. Consequently, the application covered a total of one hundred and five temporary men.

In this case the Court explained that the construction work for which the temporary men had originally been engaged proceeded gradually, and that, with respect to the erection of the cement factory, the principal work was finished by the end of March 1952 apart from a few minor additions and alterations. Consequently the appellant company asserted that it no longer needed the services of those temporary workers, and therefore each of them was placed on the spare list at the time his or her services ceased to be required. The Court noted that two separate applications had been filed before the Industrial Tribunal of Bihar – one under section 33 of the Industrial Disputes Act and another under section 33-A of the same Act – and that both applications remained pending before the Tribunal until 17 December 1952, when the application under section 33-A filed by forty-nine of the sixty-nine temporary employees was dismissed. On 3 January 1953 the Chairman of the Industrial Tribunal communicated to the appellant company that the Tribunal no longer possessed jurisdiction to pass any order on the application under section 33 because the adjudication proceedings on the principal reference had already been concluded. The Court further recorded that two appeals were subsequently lodged with the Labour Appellate Tribunal: one challenging the award made in the main adjudication and the other challenging the order issued under section 33-A. On 20 May 1953 the appeal concerning the order under section 33-A was dismissed, and the Court indicated that, since that appeal is not the subject of the present judgment, no further discussion of it is required. The appeal concerning the main award remained pending as of 4 May 1953, which was the date on which the appellant company filed an application under section 22 of the Act with the Labour Appellate Tribunal seeking permission to discharge ninety-six of the temporary employees. Although originally one hundred and five temporary workers had been the subject of the application before the Industrial Tribunal, nine of those workers had voluntarily left the company’s service; consequently the number of temporary employees for whom the section 22 application was made was ninety-six. The Court observed that the application was contested by forty-two of the temporary employees. In their affidavit those employees denied that any of the sixty-nine workmen had originally been recruited as temporary laborers and also rejected any involvement in the incident concerning the assault on Shri L.C. Jain on 3 July 1952. They asserted that, in substance, they were permanent employees and that they enjoyed all the rights and benefits accorded to permanent staff. Moreover, they submitted a statement to the effect that the erection work of the petitioners’ cement plants had been completed by the end of 1950, and that therefore it was plainly false to allege that they had become redundant as a result of the completion of the erection work. They further pointed out that a large number of workers who had participated in the erection of the cement plants had been discharged shortly after the completion of that work, suggesting that the reason for the proposed retrenchment was not redundancy but rather the petitioner’s desire to increase the workload and exploitation of its workforce.

Shortly after the completion of the erection work, the workers were told that they were surplus. The cement plants began operating at full capacity in the first quarter of 1951, and the appellants state that they were engaged in the production of cement from the very beginning of the plant’s operation. They continued to work until the fifth day of July in the year 1952, at which point they received notice that they were surplus. According to the workers’ version, the true motive behind the proposed retrenchment was not the completion of the erection work but the petitioner’s intention to increase the exploitation of its labour force by assigning a heavier workload to the remaining employees.

The workers also raised a grievance concerning the terms set out in the appointment form. They alleged that on or about the third day of December 1948 the employees of the appellant company were compelled to go on strike because of an industrial dispute. As the strike drew to a close, the workmen became exhausted and gradually returned to work. When the strike was finally called off, the appellant company, taking advantage of its victorious position, forced a segment of the workmen—those who had not resumed work until after the strike was terminated—to sign the appointment form. The workers claimed that the purpose of this forced signature was to humiliate and terrorise them.

The Labour Appellate Tribunal rendered its decision on the twenty-fifth day of September 1953, and that decision is the one under appeal. The Tribunal dismissed the application filed by the appellant company. In doing so, it made a factual finding expressed in the following words: “It is thus clear that these ninety-six workmen had been working in the production departments from as far back as the beginning of the year 1951 and so the completion of the erection work cannot be put forward as the ground for their retrenchment.” The Tribunal also referred to the Directors’ Report dated the tenth of July 1951 and concluded that the workmen’s assertion that the erection works had been completed by the end of 1950 was corroborated by that report. In effect, the Tribunal based its decision primarily on the finding that the erection works were finished by the end of 1950, and therefore it held that there was no valid ground for discharging the ninety-six temporary men.

Learned counsel for the appellant argued before this Court that (1) the Appellate Tribunal failed to correctly appreciate the true scope and effect of section 22 of the Act; (2) the Tribunal considered only the single factor of the completion of the erection works and ignored the other circumstances presented by the appellant in support of its application; (3) instead of addressing the real issue that should have been determined under an application made pursuant to section 22 of the Act, the Tribunal confined its attention to a point that was not decisive of the question before it; and (4) because of this failure to consider the proper point for determination, the Tribunal’s order resulted in manifest injustice. In the opinion of this Court, those contentions are correct and must be upheld. The Court also noted the observation made in The Automobile Products of India Ltd. v. Rukmaji.

Bala (1) observed that section 22 of the 1950 Act gives the Appellate Tribunal a special jurisdiction which is essentially original in nature. Because the Tribunal is a body with limited jurisdiction, it must limit its exercise to the functions and powers that are expressly granted to it by the statute.

Regarding the scope of section 22, the Court noted that the purpose of section 22 of the 1950 Act, similar to the purpose of section 33 of the 1947 Act as amended, is to protect workmen who are involved in industrial disputes that are already the subject of pending proceedings. The protection is intended to prevent any victimisation by the employer that might arise because the workmen have raised a dispute or are continuing with pending proceedings. The two sections also aim to ensure that disputes which are already before the authorities are resolved in a peaceful manner, and that during the pendency of those proceedings the employer does not take any action that could create fresh disputes or worsen the already strained relationship between employer and workmen.

To achieve this protective purpose, the statutes impose a ban on the ordinary right of the employer that would otherwise arise under the general law governing contracts of employment. Both section 22 of the 1950 Act and section 33 of the 1947 Act provide that this ban may be lifted, but only through the grant of explicit written permission by the authority specified in the respective provisions. The essential function of the authority exercising jurisdiction under these sections is therefore to either grant or withhold such permission, after considering whether the ban should be removed in the particular case.

The Court also referred to its earlier decision in Atherton West and Co. Ltd. v. Suti Mill Mazdoor Union (1). That case dealt with clause 23 of the Uttar Pradesh Government Notification dated 10 March 1948, which was issued under sections 3 and 8 of the Uttar Pradesh Industrial Disputes Act, 1947. In that decision, the Court observed that the enquiry under the relevant provision must determine whether a prima facie case exists for the discharge or dismissal of a workman and whether the employer, his agent, or manager acted with any improper motive, resorted to unfair practice, or engaged in victimisation in connection with the proposed discharge or dismissal.

Applying the principle laid down in Atherton West, the Labour Appellate Tribunal in the present matter was required to examine two specific points: first, whether the appellant company had established a prima facie case for the proposed discharge of the temporary men; and second, whether the company was resorting to any unfair practice or victimisation in effecting that discharge. The Tribunal was thus tasked with assessing both the substantive justification for the discharge and the presence of any improper motive or unlawful conduct on the part of the employer.

The appellant company had relied solely on the assertion that the workmen’s version stating that the erection works were finished by the end of 1950 was corroborated by the Directors’ Report dated 10 July 1951. Counsel for the appellant correctly observed that, even with regard to the issue of when the erection works were completed, the conclusion reached by the Labour Appellate Tribunal was a clear non-sequitur. Firstly, the Directors’ Report, although dated 10 July 1951, pertained to a balance-sheet covering the financial period that ended on 31 October 1950. Consequently, the report naturally referred only to works that had been completed on or before 10 July 1951. It was evident that the completion of the erection works could not have occurred in a single instant; rather, it was a gradual process. While certain portions of the erection works may indeed have been finished by the close of 1950 or by July 1951, other portions remained in progress at later dates. Under the terms of employment applicable to the workers, temporary employees were permitted to be transferred from one assignment to another, and the mere fact that they had been employed in a production department for a period, even if true, did not transform them into permanent employees; similarly, the fact that they enjoyed some benefits normally accorded to permanent staff did not by itself render them permanent. The Tribunal had entirely overlooked these circumstances. It was noteworthy that, in an application filed on 12 July 1952, the forty-nine workmen acknowledged that “though most of us were originally recruited for erection work in the Cement Factory, many of us were later on transferred as permanent workers to sugar and paper factories and some of us were absorbed as permanent workers in the maintenance section of the Cement Factory” (see paragraph 3 of the application). In a joint affidavit submitted on 12 August 1953 in response to the appellant’s section 22 application, those same workmen denied, in paragraphs 3 and 6, that they had ever been engaged on a temporary basis. Their statements made clear that they had moved away from the positions they initially held. No evidence was produced to show that any of the temporarily employed men were subsequently made permanent. The workmen attached a schedule, marked “A”, to their affidavit, detailing their periods of service and the factory or plant where their duties ceased. Examination of this schedule (Annexure A) revealed that several of them were placed on a spare list when the erection work was completed sometime in 1952. Annexure A therefore supported the appellant’s contention that the completion of the erection works was indeed incremental—some parts concluded in 1950, others in 1951, and the remainder in 1952. The first group of sixty-nine employees under consideration had been placed on the spare list between March and July 1952, and the second group had been placed on the spare list in August 1952 when the relevant erection works were finally completed.

In this case the respondents had been placed on the spare list in August 1952 when the erection works that were the subject of the dispute were finally completed. The Court observed that the decision of the Labour Appellate Tribunal concerning the completion of those erection works was defective because the Tribunal had failed to consider the circumstances that had been set out earlier in the record. Regarding the terms of employment recorded in the temporary appointment form, the respondents argued that those forms had been signed during the strike of 1948; no allegation was ever made that the forms had not been signed at all, and therefore the contention raised by counsel for the respondents that the appellant company had not produced the appointment forms carried little weight. The respondents did not provide any evidence to support a claim that the appointment forms had been taken from them for the purpose of humiliating or terrorising them, and the Appellate Tribunal had made no finding to that effect. Moreover, none of the affidavits filed on behalf of the respondents, even in the most remote sense, suggested that the appellant company was engaging in any unfair practice or victimisation in connection with the proposed discharge. Counsel for the respondents advanced the argument before this Court that the Labour Appellate Tribunal’s determination was a factual finding on the question of whether the respondents were temporary or permanent employees, and that this Court should not interfere even though the reasons given by the Tribunal appeared unconvincing. The Court, however, pointed out that the Tribunal had never actually ruled on the status of the respondents as temporary employees; the only finding it had made related to a different issue, namely the completion of the erection works. In a further submission, counsel for the respondents maintained that, under section twenty-two of the Act, the Appellate Tribunal possessed a discretion either to lift the ban or to leave it in place, and that a matter of discretion should not be disturbed by this Court. The Court acknowledged that it does not normally sit in appeal over decisions of Industrial Tribunals as an ordinary appellate court does, and that special circumstances must exist to justify the exercise of the extraordinary power granted under article one hundred thirty-six of the Constitution. The Court concluded that such special circumstances were indeed present, because the Labour Appellate Tribunal had failed to address the substantive question raised under section twenty-two of the Act and had instead based its order on an irrelevant finding, thereby causing manifest injustice. The Court emphasized that the discretion of an Industrial Tribunal must be exercised in accordance with well-recognised principles, and noted the clear distinction between commercial arbitration and industrial arbitration, citing Ludwig Teller’s observation that industrial arbitration may involve extending an existing agreement, creating a new one, or generally establishing new obligations or modifying old ones, whereas commercial arbitration generally concerns the interpretation of existing obligations and disputes relating to existing agreements.

The Court explained that interpretation of existing obligations and disputes relating to existing agreements is the usual function of a court of law. A court of law proceeds on the premise that it lacks authority to create contracts for parties, and therefore the parties themselves must enter into their own agreements. The judicial power of a court is limited to enforcing contracts that have been voluntarily made by the parties involved. In contrast, an Industrial Tribunal is not so strictly bound and may fashion new obligations or modify existing contracts in order to promote industrial peace. Such power may be exercised to protect legitimate trade-union activities and to prevent unfair practice or victimisation of workers. Nevertheless, the Court rejected the extreme submission that an Industrial Tribunal could disregard an existing agreement or obligations without any reason. The present case required the Court to examine the facts and circumstances in greater depth than is normally required, because the Labour Appellate Tribunal had failed to do so. The statute under which the Appellate Tribunal purported to pass its order has since been repealed by the Industrial Disputes (Amendment and Miscellaneous Provisions) Act, 1956. A subtle question concerning the correct interpretation of section thirty-three of that Act might have arisen if the Court had chosen to remit the matter. The Court, however, found no need to remit the case and therefore declined to express any opinion on the legal position laid down in subsection two of section thirty-three. No new facts required investigation, as the affidavits on record already disclosed the material facts necessary for an enquiry under section twenty-two of the Act. Counsel for both sides guided the Court through all the affidavits, and from those documents the factual matrix relevant to the section twenty-two enquiry clearly emerged. The Court was satisfied, on a prima facie basis, that the respondents were temporary employees who had been placed on a spare list as each phase of the erection work was completed. The appellant company had also made out a prima facie case for the permission it sought, and there was no indication of any unfair practice or victimisation. Accordingly, the Court decided to allow the appeal, set aside the decision of the Labour Appellate Tribunal dated 25 September 1953, and issue the order that the Tribunal should have made. The order directed that permission be granted to the appellant to discharge ninety-six temporary workmen. The Court also ruled that each party should bear its own costs throughout the proceedings, and therefore the appeal was allowed.