M/S. North Brook Jute Co. Ltd. vs Their Workmen

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

Court: supreme-court

Case Number: Civil Appeal No. 141 of 1959

Decision Date: 23 March 1960

Coram: Das Gupta

The case involved M/S North Brook Jute Co. Ltd. and another company as petitioners and their workmen as respondents. The judgment was delivered on 23 March 1960 by the Supreme Court of India. The dispute concerned an industrial matter arising under the Industrial Disputes Act, 1947 (the Act), specifically sections 3(2), 9A, 33 and 33A. The petitioners had introduced a rationalisation scheme in the mills, which had been examined and approved by the Works Committee of the companies. A notice required under section 9A of the Act was subsequently issued to the union representing the 365 workmen. The workmen objected to the introduction of the scheme, and the Government of West Bengal referred the dispute to the Industrial Tribunal on 13 December 1957. Despite the pending reference, the management placed the rationalisation scheme into operation on 16 December 1957, which required the workmen to perform additional duties. The workmen refused to comply, and later that same day the mills were declared to be under lock‑out. After a few days, work resumed following a settlement, and a further question arose as to whether the workmen were entitled to wages for the period during which the mills were closed.

The Court held that the representatives of the workmen on the Works Committee acted only in the capacity of the Committee and that the Committee’s approval of the rationalisation scheme did not bind the workmen or their union. The Court cited Kemp and Company Ltd. v. Their Workmen, [1955] 1 L.L.J. 48, in support of this principle. It further held that the implementation of the rationalisation scheme constituted an alteration of conditions of service that was prejudicial to the workmen. The alteration occurred not at the time the notice under section 9A was given, but when the scheme was actually put into operation on 16 December 1957, which was while the reference was still pending before the Tribunal. Accordingly, the Court found that this action contravened section 33 of the Act. Moreover, the Court concluded that the employer’s closure of the mills in the circumstances amounted to an illegal lock‑out, and therefore the workmen were entitled to receive wages for the period of absence caused by the lock‑out. The judgment arose from Civil Appeal No. 141 of 1959, filed by special leave against an award dated 19 July 1958 rendered by the Fourth Industrial Tribunal, West Bengal, in Case No. VIII‑240 (166)/57. Counsel for the petitioners included the Solicitor‑General of India and two additional advocates, while counsel for the respondents comprised two advocates. The judgment was delivered by Justice Das Gupta.

The Court recorded that under section 10 of the Industrial Disputes Act a dispute had been referred concerning M/S Northbrook Jute Co., Ltd. and Dalhousie Jute Mills, both of which appeared as appellants, together with their respective workmen. The specific question framed for the Tribunal was whether the proposals of rationalisation in the two mills would result in any increase in the workload of the workmen, and if such an increase existed, what relief the workmen would be entitled to. Approximately one month before the reference, the management of the two mills had presented a rationalisation scheme to the Works Committee at an extraordinary meeting. The Committee had examined the proposal and subsequently agreed to it. Following this approval, the companies issued a notice under section 9A of the Industrial Disputes Act to the unions representing their workmen. The workmen, however, objected to the introduction of the rationalisation scheme, and this objection gave rise to the dispute that was referred by the Government to the Tribunal. While the reference remained pending, on 16 December the management of both mills proceeded to implement the rationalisation scheme. The workmen responded by refusing to perform the additional work imposed by the scheme, and later on the same day the mills declared a lock‑out. Work was resumed in all departments except the weaving and finishing departments on 20 December, and in those two departments on 21 December, after a settlement had been reached between the unions and the mills regarding the introduction of the rationalisation scheme. Nevertheless, a further dispute arose concerning the payment of wages for the period during which the mills were closed: namely, from 16 to 20 December for employees in the weaving and finishing departments, and from 16 to 19 December for employees in all other departments. This wage dispute was also referred to the Tribunal by a Government order dated 1 February 1958. In view of the events that had transpired, the original question concerning the proposed rationalisation scheme was amended to inquire whether the rationalisation that had been effected since 16 December 1957 had increased the workload, and what relief the workers were entitled to. The Court noted that it no longer needed to consider the first issue because the Tribunal’s decision on that matter, which was unfavorable to the workmen, was no longer contested. Regarding the two remaining disputes, the Tribunal had awarded wages to the workmen for the periods of absence mentioned above. The workmen’s case before the Tribunal asserted that the reason they could not work on the specified days was the illegal lock‑out by the employers. The employers, in turn, contended that the workmen had engaged in an illegal strike, and therefore the closure of the mills on 16 December following that strike was neither illegal nor unjustified. The Tribunal concluded that the employer’s attempt to implement the rationalisation scheme on 16 December contravened the statutory provisions, rendering the workmen’s refusal to work under that scheme non‑illegal and the subsequent closure of the mills illegal.

The Court observed that the employer’s attempt to implement the rationalisation scheme on 16 December contravened section 33 of the Industrial Disputes Act, and therefore the workmen’s refusal to work under that scheme did not constitute an illegal strike, making the closure of the mills by the employer unlawful. Counsel for the employer‑mills argued that the scheme had been introduced lawfully because the Works Committee, duly constituted under the Act, had considered and approved it. He further contended that since the workmen’s representatives on the Works Committee had agreed to the scheme, the workmen themselves should be deemed to have consented. The counsel supported this claim by producing a copy of the Works Committee resolution that recorded the representatives’ agreement to introduce the scheme whenever the companies desired. The Court, however, noted that the representatives on the Works Committee did not speak for the workmen in all matters but only for the purposes defined for the Committee. Section 3(2) of the Act set out the Committee’s functions, stating that it was “the duty of the Works Committee to promote measures for securing and preserving amity and good relations between the employer and workmen and, to that end to comment upon matters of their common interest or concern and endeavor to compose any material difference of opinion in respect of such matters.” The language of the legislation made it clear that the Works Committee was not intended to replace the unions in collective bargaining, nor was it authorised to consider substantial changes in conditions of service. Its role was limited to smoothing frictions that might arise in day‑to‑day work. Accordingly, the Court held that the Committee’s duties did not encompass deciding on a matter as significant as altering conditions of service through rationalisation. While the Committee could comment on the rationalisation scheme as a matter of common interest and try to reconcile differing views, it possessed no authority to make the final decision. Hence, the Court rejected the employer’s contention that the Committee’s approval bound the workmen or their union, emphasizing that the Committee’s function was confined to recommendation and dispute composition, not to binding determinations on substantial service‑condition changes.

In this case, the Court observed that the works committees are principally occupied with problems that arise in the ordinary daily operations of the enterprise. Their designated role is to identify the grievances of the employees and, when circumstances permit, to reach an agreement that resolves those grievances. However, the Court emphasized that the very name “works committee” limits its function to the level of recommendation. Consequently, the committees act essentially as bodies that first attempt to reconcile differences, but the ultimate authority to decide rests with the trade union as a whole. The Court further held that even though the representatives of the workmen serving on the works committee had consented to the introduction of the rationalisation scheme, that consent could not be deemed binding on either the individual workmen or their union. The opinion of the committee therefore could not compel the workmen to accept the scheme, and any suggestion that their agreement created an enforceable obligation was rejected.

The Court then turned to the argument that the alteration in conditions of service became effective on the date when notice under section 9A was issued, and because that date fell before 13 December, the employer could not be said to have violated section 33. The Court found this contention without merit. Section 9A, as applied, requires that no employer who proposes to effect any change in the conditions of service covered by the Fourth Schedule may implement such change unless, first, a notice describing the nature of the proposed change is given to the affected workmen in the prescribed manner, and, second, the change is effected not earlier than twenty‑one days after that notice. The Court noted that the legislature, in drafting this provision, clearly envisaged three distinct stages: the employer’s proposal of a change, the issuance of the statutory notice, and finally the implementation of the change after the twenty‑one‑day period has elapsed. The conditions of service are not considered altered at the proposal stage nor at the notice stage; they are altered only when the new conditions are actually introduced. Accordingly, for the purpose of determining when section 33 is triggered, the Court must ascertain the exact moment the change contemplated in the section 9A notice is put into effect. If, at that moment, a proceeding is pending before a tribunal, section 33 becomes applicable; otherwise it does not. The Court therefore held that the timing of the employer’s proposal and the timing of the notice are irrelevant to the application of section 33. The Court also dismissed the further submission that the alteration was not prejudicial to the workmen, noting that this point would be addressed separately.

The Court observed that it was difficult to understand how the contention could be seriously made that the scheme did not prejudice the workmen. The entire purpose of the scheme, as explained, was to assign machines to workmen in such a way that fewer workmen could operate the same number of machines, thereby creating surplus labour who could be dismissed. The object, as stated by the employer, was to reduce the cost of production. The method adopted to achieve that objective was to obtain a greater amount of work from each workman while paying wages that were approximately the same as before. Even if the objective was commendable, the Court noted that there was no doubt that the scheme seriously prejudiced the workmen. The company’s witness, Mr Fraser, testified that earlier each machine in the batching department was operated by two hands, but after the scheme two hands were required for two machines. He further explained that the company had surplus labour in both mills and was suffering heavy losses. He said that up to that point the company had relied on natural wastage and had not considered rationalisation, but in November of the preceding year a decision was taken to act on rationalisation. The Court recognised that the rationalisation introduced two consequences: first, some workers would become surplus and face dismissal; second, the remaining workmen would have to shoulder a larger workload. Accordingly, the introduction of the rationalisation scheme constituted an alteration of the conditions of service that was prejudicial to the workmen.

The Court further held that the alteration was effected on 16 December, at a time when reference to the scheme had already been made and a matter concerning it was pending before the Industrial Tribunal. Consequently, the Tribunal was correct in finding that the introduction of the scheme contravened section 33 of the Act. It was also contended that, even if the introduction violated section 33, the workmen’s remedy lay only under section 33A and that they were not entitled to strike. The Court explained that section 33A indeed allows workmen aggrieved by a contravention of section 33 to apply to the Tribunal for relief, but that provision does not obligate the workmen to accept altered conditions that are unlawful. When the workmen refused to perform the additional work required by the rationalisation scheme, they were refusing to do work that the employer had no legal right to demand. Although it might be difficult to label this refusal as a “strike,” the Court said that even if it were characterized as a strike, it was neither illegal nor unjustified. Accordingly, the Court concluded that the Tribunal was right in holding that the employer’s closure of the mills amounted to an illegal lock‑out, and that the workmen, being unable to work because of that lock‑out, were entitled to wages for the period of their absence. The appeal was therefore dismissed with costs.