Lloyds Bank Ltd., New Delhi vs Panna Lal Gupta And Ors.

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

Court: supreme-court

Case Number: Not extracted

Decision Date: 18 November 1960

Coram: P.B. Gajendragadkar, A.K. Sarkar, K.N. Wanchoo

In this case the Supreme Court of India considered an appeal by special leave filed by Lloyds Bank Ltd., New Delhi against an order of the Central Industrial Tribunal, Delhi. The appeal arose from an industrial dispute between the bank, as appellant, and the union representing its workmen, as respondent, concerning three employees named Panna Lal Gupta, Phusa Ram Goyal and Paras Ram Garg. The union claimed that these three men were entitled to a special allowance of fifty rupees per month pursuant to paragraph 164 of the Award of the All India Industrial Tribunal (Bank Disputes) as amended by Section 3 of the Industrial Disputes (Banking Companies) Decision Act, 1955. The central government had referred the matter to the Tribunal for adjudication. The union argued that the three employees, who worked in the audit department of the bank at New Delhi, fell within the category of workers eligible for the allowance under the Award and that the bank had committed a default by failing to implement the allowance. The bank contended that the reference to the Tribunal was invalid because no dispute could have arisen during the period when the Award was in force, and further asserted that the three workmen were not supervisors, a status that the Award limited to supervisors and persons in the same category for entitlement to the fifty‑rupee allowance. The Tribunal framed two issues for determination. The first issue was whether the reference was valid; the Tribunal held that the reference was valid and answered against the bank. The second issue was whether the three workmen were entitled to the allowance; the Tribunal again answered against the bank and made an award directing the bank to pay each of the three employees the special allowance of fifty rupees per month retroactively from the commencement of the Sastri Award on 1 April 1954, or from any later date on which any of them was entrusted with duties in the audit department, whichever was later. The award further required the bank to continue paying the allowance as long as the employees performed those duties in the audit department. The present appeal challenges that award, and the short question posed for decision is whether the Tribunal was correct in holding that the three workmen could be regarded as supervisors entitled to the special allowance of fifty rupees under the Sastri Award. It is relevant to refer briefly to the material provisions of the Award, particularly paragraph 164, which forms the basis of the present claim.

In order to set out the material provisions of the award, the Court referred to paragraph 164, which formed the basis of the present claim. Paragraph 164 appears in the Sastri Award in the chapter dealing with the special allowance. The award stated that the scales of basic pay fixed by the award were intended only as minimum pay and therefore it left “to the discretion of the banks to give more pay, and in the words of the award ‘indeed, in some cases, it is but right that they should do so’”. The same approach was adopted with respect to the special allowance to which the award fixed a rate. The Tribunal observed that “it may be open to the banks to provide for such allowances even in respect of categories which are not included in our list, wherever owing to previous practice or for other good reasons they think it right and proper to do so”. The Court held that these observations were nothing more than a recommendation made by the Tribunal to the banks. While the spirit of those observations might be respected, the Court stressed that no industrial claim could be founded upon such recommendations.

Paragraph 164 identified ten categories of employees who, in the Tribunal’s opinion, deserved special consideration for a special allowance. Paragraph 164(b) dealt with nine of those categories, and the award classified the amount of special allowance according to the class of the bank—A, B, C or D. The lowest category listed was that of computists, who were entitled to a special allowance of Rs 10 per month, whereas the highest category, category 9, comprised supervisors, superintendents, sub‑accountants, departmental in‑charges and employees in charge of treasury pay offices. Employees in this category who served in banks of class A were entitled to the maximum allowance of Rs 50 per month, as directed by the award. The respondent argued that the three workmen fell within this category and therefore should receive the Rs 50 allowance. The award, often referred to as the Sastri Award, had been challenged by the banks before the Labour Appellate Tribunal. The subsequent modification by the Government of India of the Tribunal’s decision led to the appointment of the Bank Award Commission, whose findings formed the basis of the Industrial Disputes (Banking Companies) Decision Act of 1955. The Labour Appellate Tribunal largely affirmed the award’s directions concerning the payment of the special allowance and found that the nomenclature used to describe the various employee categories differed from bank to bank.

The Tribunal observed that the way particular categories of employees are described varies from one bank to another. To prevent disputes, the Appellate Tribunal asked the banks to provide it with statements showing the different names given to employee categories for which the Tribunal had previously granted special allowances. After the banks supplied the relevant information, the Tribunal compiled a summary of that information and issued its decision. In its decision, the Tribunal noted that the equivalents it listed did not cover every possible case. It added that, “in the absence of data on the record we must leave it to the banks to pay the appropriate allowances having regard to the duties and responsibilities of a post.” When the appellant responded to the Tribunal’s request, it asserted that none of its staff matched the description of category 9 and therefore the provision concerning that category was not applicable to any employee of the bank. Nevertheless, it was undisputed that even if the three workmen were not identified by name or designation as belonging to category 9, they could still claim the special allowance if their duties and functions were similar to, or the same as, those assigned to persons classified in that category. Consequently, the principal issue for the Tribunal to resolve was whether, considering the duties and functions assigned to the three workmen, they could be regarded as clerks falling within category 9.

Mr Ramamurthy, appearing for the respondent, argued that the question raised was a question of fact and that the Court should not interfere with the Tribunal’s factual finding. The Court noted that, while it generally exercises its discretion under Article 136 with restraint and is reluctant to disturb factual findings of a lower tribunal, it would accept the Tribunal’s factual determinations as correct in this case. The status of the three workmen, however, must be derived as a matter of law from those facts. The Court explained that drawing a legal inference about a party’s status from established facts is not a pure question of fact. Where the Tribunal’s inference concerning the three workmen’s status required the application of legal tests, the issue becomes a mixed question of fact and law. Therefore, the respondent could not successfully raise a preliminary objection that the appellant should be barred from challenging the Tribunal’s conclusion on this mixed question.

The Court observed that even where a question involves a mixture of fact and law, it would not normally intervene in the Tribunal’s finding unless it was satisfied that the conclusion was manifestly or obviously erroneous. The Court then proceeded to summarise the factual findings recorded by the Tribunal. According to the Tribunal’s record, the duties assigned to the three clerks in the audit department were detailed in three separate documents filed in the case file. For the purpose of illustration, the Court referred to the document labelled “W‑1”, which set out the duties of one clerk, Mr Garg, in eight successive paragraphs. The duties listed for Mr Garg included checking entries against vouchers in four classes of books as described in the first paragraph; verifying the balances of three ledgers as mentioned in the second paragraph; examining entries in fourteen subsidiary books with the vouchers enumerated in the third paragraph; performing weekly checks of impersonal and cash balances; reviewing the contents of ordinary outgoing branch mail; reconciling the New Delhi Branch accounts with those of other branches and preparing monthly branch reconciliation statements; checking the monthly reconciliation statements received from the branches; receiving the previous day’s current‑account, branch and agency, casual and impersonal vouchers and scrutinising them; and checking half‑yearly interest entries in one Savings Bank Ledger and one Current Account Ledger. The Court noted that, on its face, these responsibilities, while responsible and important, did not disclose any supervisory character. However, oral evidence revealed that a clerk in the audit department was required to verify the authority of the person issuing a voucher, to ascertain whether the prescribed limit had been exceeded, and to confirm that the amount fell within the security limit. When mistakes were identified, the clerk was expected to bring them to the attention of the concerned clerk and assistant for correction. The Tribunal also heard evidence concerning Mr Lahorilal Khanna, who was described as the assistant in charge of the audit department. The Tribunal found that Mr Khanna was accountable to management for any errors or delays in his department, that he superintended the audit section, and that he allocated duties to any absent audit clerk. When audit clerks discovered mistakes, those errors were reported to him, and he either arranged for the clerks or assistants to rectify the mistakes or directed the audit clerks to do so. Based on this evidence, the Tribunal concluded that the three clerks functioned as internal auditors who oversaw and inspected accounts, and that they supervised the work of almost all persons in the establishment to ensure the correctness and authenticity of the accounts. The Tribunal further observed that the test of exercising directional and controlling authority was of doubtful validity, and accordingly, having regard to the nature of the duties and functions of the three clerks, it held that they should be regarded as supervisors within the meaning of Clause 9 of the Award.

In this case, the Court considered whether the three clerks should be treated as supervisors under Clause 9 of the Award. The factual question for determination was, given that the duties and functions of the three clerks were not contested, whether the Tribunal’s conclusion that they were supervisors was justified. The learned Attorney‑General, appearing for the appellant, argued that the Tribunal’s conclusion was manifestly and obviously erroneous. While examining this contention, the Court noted that Mr Ramamurthy, whose submissions were relied upon, maintained that the determination of supervisory status should not be based on general ideas of administrative or supervisory control that are normally attached to a supervisor or supervising officer. He emphasized that the Award dealt exclusively with a claim by clerks for a special allowance and that Category 9 of the Award applied only to clerks and to no other class of employees. Consequently, officers who possessed administrative control and could be regarded as supervisors fell outside the scope of the Award, and the Court should not rigidly import the general considerations of administrative or directional control into the present dispute. The Court acknowledged that Mr Ramamurthy’s argument possessed a degree of merit.

Nevertheless, the Court observed that before a clerk could be entitled to a special allowance, his work had to display some element of supervisory character. The duties performed by the clerks in the audit department consisted principally of checking the books of accounts and the entries recorded in them. The Court held that such checking was essentially an accounting process and that the term “checking” could not, by itself, be interpreted as indicating supervisory responsibility. Similarly, the task of verifying the authority of the person issuing a voucher or of ascertaining whether the prescribed limit of authority had been exceeded was also a form of checking, but it was purely mechanical and did not involve any supervisory function. The six classes of clerks enumerated in Clause 9 suggested that, for each class, there would normally be subordinate persons working under them; in other words, a person claiming the status of a supervisor under Clause 9 should ordinarily supervise staff who ranked below him. Mr Ramamurthy’s argument would therefore render every clerk in the audit department a supervisor and entitle each of them to the monthly special allowance of Rs 50, even though, in the bank’s overall hierarchy, they might rank below head clerks or head cashiers who received only Rs 20 as allowance. The Tribunal had described the work of these clerks as that of internal auditors, but the Court considered this description to be an over‑statement. It clarified that the concept of “internal audit” as commonly understood differed fundamentally from the mechanical checking tasks assigned to the clerks.

In the present case, the Court observed that the Tribunal’s statement that the clerks in the audit department supervised the work of almost every person in the bank was an over‑statement. While it was correct to recognise that the audit department performed work that was important for the proper and efficient functioning of the bank, it was not correct to describe that work as being performed by officers who supervised the entire establishment. Accordingly, the Court held that the Tribunal’s conclusion that the three clerks fell within the ninth category defined in paragraph 164(b) of the Award was manifestly erroneous and could not be sustained.

The Court also noted that the Tribunal had completely ignored a further aspect of the controversy. The Tribunal’s own direction allowed for the possibility that the three clerks could be transferred from the audit department to another department, and it provided that, if such a transfer occurred, the clerks would lose the entitlement to the special allowance. The Court found that this created a serious infirmity in the Tribunal’s conclusion. If the nature of the clerks’ work truly placed them in category 9, thereby fixing their status as supervisors, then that supervisory status could not be removed simply by transferring them to a different department. Counsel for the respondents argued that the bank could not lawfully transfer the three clerks to another department without causing them to forfeit their claim to the special allowance. The Tribunal, however, appeared to base its decision solely on the importance and responsibility of the work performed in the audit department, and therefore applied paragraph 164(b) of the Award without giving due consideration to the effect of a transfer on the clerks’ supervisory status.

The Court further explained that the question of whether an employee held a supervisory post had frequently arisen before industrial courts under the original definition of “workman” in the Industrial Disputes Act. Section 2(s), as originally framed, defined a workman as any person employed, including an apprentice, in any industry to do any skilled or unskilled, manual or clerical work for hire or reward. Under this definition, employers often contended that the persons in dispute were officers or members of the supervisory staff and therefore fell outside the definition, while the workers maintained that they performed merely clerical or mechanical duties and thus were workmen. Industrial courts, when deciding such disputes, ordinarily examined the substance of the employee’s duties rather than attaching undue importance to titles or designations. They required that a supervisor or officer occupy a position of command or decision‑making authority and be authorised to act within the limits of that authority without needing the sanction of a manager or other supervisors. The courts therefore focused on the actual nature of the duties performed to determine whether the employee was a workman or a supervisor.

In determining the status of an employee, the initial inquiry concerned the employee’s primary duties. The question asked whether the employee performed clerical or manual work; if the answer was affirmative, the employee was classified as a workman. Conversely, the inquiry examined whether the employee’s duties were of a supervisory nature; if that answer was affirmative, the employee was not regarded as a workman. When addressing the supervisory aspect, industrial adjudication generally required that a supervisor or officer occupy a position of command or decision‑making and be authorized to act in certain matters within the limits of his authority without needing the sanction of a manager or other supervisors. The Court illustrated this principle with the decision of the Industrial Tribunal in A.R. Nataraja Ayyar v. Trichy‑Srirangam Transport Co. Ltd., reported in 1955‑1 Lab LJ 608 (Ind. Tri. Madurai). In that case the checking inspector was tasked with inspecting conductors and drivers and verifying whether they performed their duties properly, and he was required to submit a daily check report to the office. Although it was argued on the inspector’s behalf that he did not possess absolute control over any group of workers and that his report had to be forwarded to superiors for final orders, the Tribunal held that the general nature of the inspector’s duties placed him within the supervisory cadre. A similar approach was adopted in United Commercial Bank Ltd. v. L.S. Seth, 1954‑2 Lab LJ 457 (L.A.T.I. Luck.), where the chief cashier of a banking company was found not to be a workman because he was responsible for all acts of commission and omission of the cash‑department employees and exercised control and supervision over the work performed by those employees, thereby belonging to the supervisory staff. The Labour Appellate Tribunal reached the same conclusion in Burma‑Shell Oil Storage and Distributing Co. Ltd. Madras v. Their Employees, 1954‑1 Lab LJ 21 (LATI), holding that to be an officer an employee must occupy a position of command and direction and must be authorized to act without the sanction of a manager or other supervisors, and that the employee’s name or designation was not the decisive test. The Court cited these industrial decisions solely to emphasize that, in determining an employee’s status, the employee’s designation is not decisive; rather, the decisive factor is a consideration of the nature and duties of the function assigned to the employee. Consequently, the question before the Court in the present appeal was narrowly framed: given the nature of the duties and functions assigned to the three employees by the appellant, could it be reasonably held that they were supervisors within the meaning of clause nine of paragraph 164(b) of the Award? In the Court’s opinion, the

In this case the Court concluded that the proper response to the issue presented was that the answer had to be negative, meaning that the employees could not be treated as supervisors under the relevant provision of the Award. Accordingly, the Court held that the appeal filed by the petitioner succeeded, and therefore the decision rendered by the Tribunal was overturned. The order that had been issued by the Tribunal was consequently set aside, and the relief sought by the petitioner in the appeal was granted. The judgment further specified that no costs would be awarded to either party, indicating that the parties would each bear their own expenses arising from the proceedings. By allowing the appeal and nullifying the Tribunal’s order while denying any costs order, the Court completed its determination of the matter.