State of Bombay vs K. P. Krishnan and Others

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

Court: Supreme Court of India

Case Number: Civil Appeals Nos. 37 and 38 of 1957

Decision Date: 18 April 1960

Coram: P.B. Gajendragadkar, Bhuvneshwar P. Sinha, J.L. Kapur, K.N. Wanchoo

In this case the matter was styled State of Bombay versus K P Krishnan and others, and the judgment was delivered on 18 April 1960 by the Supreme Court of India. The opinion was authored by Justice P B Gajendragadkar and the bench also comprised Justices Bhuvneshwar P Sinha, J L Kapur and K N Wanchoo. The petitioner was the State of Bombay and the respondents were K P Krishnan together with the other appellants. The decision formed a connected appeal and was pronounced on the date indicated. The case was reported in the 1960 volume of the All India Reporter at page 1223 and has been cited subsequently in a number of law reports, including the 1964 Supreme Court Reports (volume 6), the 1967 Reports (page 295), the 1969 Reports (page 707), the 1975 Reports (pages 2226 and 2238), the 1976 Reports (page 1474), the 1985 Reports (page 915) and the 1990 Reports (page 255). The dispute arose under the Industrial Disputes Act, 1947 (Act 14 of 1947), specifically concerning sections 12(5) and 10(1). The matters in contention involved the failure of conciliation, the power of the appropriate Government to refer a dispute, the order of refusal to refer, the requirement that reasons for refusal must be germane to the issue, and the questions of classification and bonus for the employees.

The Court observed that section 2(5) of the Act, when properly construed, does not by itself confer on the appropriate Government the power to make a reference; that power is contained in section 10(i). In deciding whether to refer a dispute under section 12(5), the Government is not bound to rely solely on the report of the conciliation officer but may consider all other relevant facts and circumstances under section 10(1). When the Government refuses to refer, it must record and communicate its reasons to the parties, and those reasons must be directly related to the dispute and not extraneous or irrelevant. While considerations of expediency may be taken into account, the Government must act fairly, reasonably and not in a punitive spirit. In the present case the employees claimed classification and an additional bonus, and the sole ground for the Government’s refusal was that the employees had adopted a go‑slow during the relevant year. Although the company voluntarily paid a three‑month bonus for that year and the conciliation officer’s report was in favour of the employees, the Court found that the Government acted on irrelevant considerations and that its decision was wholly punitive, thereby justifying the issuance of a writ of mandamus. The Court further held that the work done by the employees prima facie justified the claim for classification, it was in line with the practice prevailing in comparable concerns, and the alleged misconduct of the respondents could not be a ground for refusing reference because the claim related to a future benefit. The claim of bonus was also prima facie justified by the profits earned during the relevant year in accordance with well‑settled principles of industrial adjudication, and the order of refusal amounted to a punitive action inconsistent with the object of the Act.

In this case the Court observed that the order refusing the claim for bonus, which was based on the profits earned by the company in the relevant year and followed the well‑settled principles of industrial adjudication, constituted a punitive measure that was wholly inconsistent with the purpose of the Industrial Disputes Act. The judgment was delivered in the civil appellate jurisdiction concerning Civil Appeals Nos. 37 and 38 of 1957. These appeals were filed against a judgment and order dated 30 August 1955 of the former Bombay High Court in Appeals Nos. 55 and 56 of 1955, which themselves arose from a judgment and order dated 23 June 1955 of that High Court in Miscellaneous Application No. 80 of 1955.

Counsel for the appellant in Civil Appeal No. 37 of 1957 and for respondent No. 6 in Civil Appeal No. 38 of 1957 consisted of the Solicitor‑General of India together with two counsel. In Civil Appeal No. 38 of 1957 and for respondent No. 6 in Civil Appeal No. 37 of 1957, the appellant was represented by two other counsel. Respondents numbered 1 and 3 to 5 in both appeals were represented by a team of five counsel, while respondent 2 in both appeals was represented by two counsel. The judgment was pronounced on 18 August 1960 by Justice Gajendragadkar.

The two appeals arose out of an industrial dispute between Firestone Tyre and Rubber Co. of India Ltd. (referred to as “the company”) and its workmen (referred to as “the respondents”). The dispute centred on the construction of section 12(5) of the Industrial Disputes Act, 1947. The respondents had lodged four separate demands with the company: gratuity, holidays, classification of certain employees, and the payment of an unconditional bonus for the financial year ending 31 October 1953.

The union representing the respondents forwarded a copy of these demands to the Assistant Commissioner of Labour, Bombay, and informed the Commissioner that because the company had not recognised the union, direct negotiations were unlikely to succeed. The Assistant Commissioner, who also acted as the conciliation officer, was therefore requested to commence conciliation proceedings without delay.

Shortly thereafter the company announced a bonus equal to one‑quarter of the basic earnings for the year 1952‑53. The respondents replied that, considering the company’s profits for that year, they were entitled to a substantially larger bonus. Nevertheless, they indicated that they would accept the company’s offered bonus without prejudice to their earlier demand for a higher amount.

During a preliminary discussion, the conciliation officer examined all four demands. He elected to admit only two matters into conciliation: the classification of certain employees and the bonus for the year 1952‑53. The remaining two demands—gratuity and holidays—were not taken up for conciliation. The conciliation proceedings that followed, however, proved infructuous with

On 5 July 1954 the conciliator prepared a failure report pursuant to section 12(4) of the Industrial Disputes Act. In that report the conciliator recorded the arguments presented by both the respondents and the company concerning the two matters that had been placed before conciliation. Regarding the respondents’ claim for a bonus, the conciliator made several proposals to the company, but the company rejected each proposal and the conciliator concluded that a settlement on the bonus issue was impossible. The conciliator nevertheless noted that the respondents appeared to have a substantial case for the payment of an additional bonus. Turning to the respondents’ demand for re‑classification of certain workmen, the conciliator expressed the view that, given the type and nature of the work performed, the work was principally clerical and that placing those employees on the monthly‑paid roll would be consistent with the practice followed by other comparable enterprises. The management, however, contended that those employees had already received generous salary increments, had reached the ceiling of their pay scales, and therefore saw no justification for acceding to the classification demand. After receiving the conciliator’s report, the Government of Bombay (now the Government of Maharashtra) examined the matter and decided that the dispute should not be referred to an industrial tribunal for adjudication. Accordingly, in compliance with section 12(5), on 11 December 1954 the Government mailed a notice to the respondents stating that it would not refer the dispute to the tribunal under section 12(5), explaining that the refusal was based on the fact that the workmen had resorted to a go‑slow during the year 1952‑53. That refusal to refer the dispute to industrial adjudication gave rise to the present suit. On 18 February 1955 the respondents filed a petition in the Bombay High Court under article 226 of the Constitution, seeking a writ of mandamus—or a writ in the nature of mandamus, or any other appropriate order—directing the State of Maharashtra (hereinafter called the appellant) to refer the dispute to an industrial tribunal in accordance with sections 10(1) and 12(5) of the Act. The company was impleaded as an opponent. The petition was heard by Justice Tendolkar, who held that section 12(5) in substance imposes a duty on the appellant to refer a dispute when a case for reference has been made out. He found that the appellant’s reason for refusing to make a reference was extraneous and therefore the respondents were entitled to a writ of mandamus. Justice Tendolkar consequently ordered that a mandamus be issued against the appellant.

In that decision the Court directed the appellant to revisit the issue of whether to make or refuse a reference under section 12(5), instructing that the presence of a slowdown should be ignored and that only reasons directly relevant to the determination of a reference should be considered. Both the appellant and the company challenged this order by filing appeals. The Court of Appeal, consisting of Chief Justice Chagla and Justice Desai, permitted the two appeals to be combined, heard them together, and affirmed that the view expressed by Justice Tendolkar was correct and that the writ of mandamus issued against the appellant was proper. Subsequently the appellant and the company obtained a certificate from the High Court and, relying on that certificate, brought two appeals—numbered 37 and 38 of 1957—before this Court. These appeals were ordered to be consolidated and were heard jointly, and each raised the question of how section 12(5) of the Act should be interpreted. Before analysing that question, the Court noted an additional factual circumstance that was agreed by the parties. It was undisputed that during a portion of the relevant year the respondents had engaged in go‑slow tactics. The company asserted that the go‑slow lasted seven months, while the respondents contended that it lasted about five months. Under clause 23(c) of the company’s standing orders, deliberate slowing down of work, abatement, or encouragement thereof constituted misconduct, and it was not denied that disciplinary action had been taken against fifty‑eight workmen as a consequence of the go‑slow. The respondents argued that, despite the go‑slow, the total output for the period compared favourably with previous years and that the profit earned by the company justified their claim for an additional bonus. The appellant, however, maintained that the respondents’ adoption of a go‑slow during the year meant that the industrial dispute concerning bonus and classification should not be referred for adjudication under section 12(5). In view of these facts, the Court had to decide whether the order of the appellant refusing to refer the dispute for adjudication under section 12(5) could be sustained. The Court then proceeded to examine the scheme of the relevant provisions of the Act. Chapter III, comprising sections 10 and 10A, deals with the reference of disputes to Boards, Courts or Tribunals. Section 10(1) states that when the appropriate Government is of the opinion that an industrial dispute exists or is likely to arise, it may at any time by a written order refer the dispute to any of the authorities listed in clauses (a) to (d). This section is of

It was observed that the provision under discussion holds a basic importance within the overall scheme of the Industrial Disputes Act. The provision reflects the principal purpose of the Act, which is to establish a cheap and speedy mechanism for resolving all industrial disputes by referring them to adjudication, thereby preventing industrial conflict that may arise from frequent lock‑outs and strikes. Accordingly, the power to refer a dispute is contemplated not only for disputes that already exist but also for those that may be anticipated in the future. Section 10(1) therefore confers a wide, and in some respects absolute, discretion on the appropriate Government to either refer an industrial dispute to an adjudicating authority or to decline to do so. Such broad discretion, however, must be exercised in good faith and must be based on a consideration of the relevant and material facts that are before the Government. The second proviso to section 10(1) deals specifically with disputes concerning a public‑utility service. It provides that when a notice under section 22 has been served in relation to such a dispute, the Government shall, unless it is convinced that the notice has been frivolously or vexatiously filed or that it would be inexpedient to act, refer the dispute under the same subsection even if other proceedings under the Act have already been commenced. This makes it clear that, for disputes falling within the scope of the proviso, the Government has a duty to refer the dispute unless it is satisfied that the notice lacks merit or that expediency requires otherwise. The proviso further clarifies that a reference may be made notwithstanding the existence of parallel proceedings under the Act concerning the same dispute, thereby limiting the Government’s discretion in these particular cases.

Section 10(2) addresses situations in which the Government is obliged to refer an industrial dispute and possesses no discretion to refuse. When the parties to a dispute apply, either jointly or separately, in the prescribed manner for a reference, the Government must refer the dispute provided it is satisfied that the applicants represent the majority of each party involved. In such cases, the sole requirement for the Government is confirmation of majority representation; once this condition is met, the Government has no option but to comply with the parties’ request for reference. Similarly, section 10A deals with circumstances where the employer and the workmen mutually agree to refer a dispute to arbitration before any reference under section 10 has been made. The provision permits them to refer the dispute to the arbitrator or arbitrators named in their arbitration agreement. Section 10A(3) further requires that upon receipt of such an arbitration agreement, the Government must publish it in the official Gazette within fourteen days, thereby confirming that voluntary arbitration falls outside the range of Government discretion to refer disputes.

When an arbitration agreement is executed, the Government is required to publish that agreement in the official Gazette within fourteen days. Section 10A(4) further mandates that the arbitrator or arbitrators investigate the industrial dispute and forward the arbitration award to the appropriate Government authority. Section 10A(5) clarifies that such arbitrations are conducted outside the provisions of the Arbitration Act. Consequently, cases in which the parties voluntarily refer their dispute to arbitration fall outside any discretionary power that the Government might otherwise possess. In brief, the Government’s discretionary power to refer industrial disputes is limited to directing them to the appropriate authorities prescribed under the Act. The authorities identified by the Act include the conciliator, the Board, the Court of Enquiry, the Labour Court, the Tribunal and the National Tribunal. Section 11(3) confers upon the Board, the Court of Enquiry, the Labour Court, the Tribunal and the National Tribunal all the powers vested in a civil court when trying a suit concerning the matters enumerated in clauses (a) to (d). The position of the conciliation officer, however, is distinct. Under Section 11(4) the conciliation officer is empowered to call for and inspect any relevant document and is granted the same authority as a civil court to compel production of documents. Section 12 outlines the duties of conciliation officers. Section 12(1) provides that a conciliation officer may, in the prescribed manner, conduct conciliation proceedings whenever an industrial dispute exists or is apprehended. In the case of a dispute relating to a public‑utility service, once notice under Section 22 has been given, the officer shall conduct conciliation proceedings. The effect of this provision is that, for disputes not involving a public‑utility service, the officer retains discretion to hold or not hold proceedings, whereas for public‑utility disputes with the required notice, the officer has no discretion and must proceed with conciliation. Section 12(2) obliges the officer to investigate the dispute without delay with a view to securing a settlement; during the investigation the officer may examine all matters affecting the merits and the appropriate settlement and may take any action he deems necessary to induce the parties to reach a fair and amicable settlement. The officer’s duty, as his title suggests, is to mediate between the parties and to persuade them to settle their differences amicably. If the officer succeeds, Section 12(3) requires him to prepare a report of the settlement together with a memorandum of settlement signed by the parties. Section 18(3) declares that any settlement reached through conciliation proceedings is binding on the parties specified therein, showing that the officer’s efforts to induce a settlement result in a binding agreement.

When the conciliation officer is able to persuade the parties to reach an agreement and they sign a settlement, that settlement acquires, in substance, the same binding effect as an award made under section 18(3). On the other hand, the conciliation process sometimes fails because one of the parties refuses to cooperate or because the parties cannot agree on the terms of settlement. In such circumstances the officer is required by section 12(4) to forward a report to the appropriate Government. The report must describe in detail the steps the officer took to ascertain the facts and circumstances of the dispute and to bring about a settlement, and it must contain a full statement of those facts and circumstances together with the officer’s reasons for concluding that a settlement could not be achieved. The purpose of requiring such a comprehensive report is to ensure that the Government is fully informed of all relevant facts, including the reasons for the conciliation officer’s failure, so that it possesses the material necessary to decide what action to take under section 12(5). In construing section 12(5) it is essential to consider the background of the officer’s actions under sections 12(1) to 12(4), namely that the officer has conducted conciliation proceedings, investigated the matter, attempted mediation, failed to secure a settlement, and then prepared a detailed report outlining his enquiry and conclusions about why settlement was not possible. Section 12(5), which is the provision at issue in the present appeals, provides that if, after considering the report referred to in subsection (4), the appropriate Government is satisfied that there is a case for reference to a Board, Labour Court, Tribunal or National Tribunal, it may make such a reference. If the Government decides not to make a reference, it must record and communicate to the parties its reasons for that decision. Thus the statute obliges the Government to examine the report and determine whether a case for reference exists; if it is satisfied that such a case exists, it may refer, and if it is not satisfied, it must still provide the parties with the reasons for refusing to refer, which in effect are the reasons for not being satisfied that a case for reference exists. The High Court has held that the word “may” in the first part of section 12(5) must be interpreted to mean “shall,” because the power conferred on the Government by the first part is coupled with a duty imposed on it by the second part.

The appellant and the company asserted that the Court’s view was mistaken. They argued that the requirement to record and communicate reasons for not making a reference does not change the word “may” into “shall.” According to their submission, the discretion vested in the Government to either make a reference or refuse to do so remains as wide as it is under section 10(1) of the Act. They further contended that even after the Government receives the report, any decision to make a reference must be taken under section 10(1), because that section alone confers the power on the appropriate Government to make a reference. While it is correct that section 12(5) states that the appropriate Government may make such reference, they accepted that this language can be understood to indicate that a power to make reference is conferred by section 12(5). The High Court, however, appeared to be inclined to hold that in matters falling within section 12(5), a reference could be made only under that provision, independently of section 10(1). In the Court’s opinion, that interpretation does not reflect the true effect of the provisions of section 12(5). If references under section 12(5) were required to be made solely under that provision, it would produce anomalous results.

Section 10(3) empowers the appropriate Government, by an order, to prohibit the continuance of any strike or lock‑out connected with an industrial dispute that exists on the date of the reference, but this power applies only to disputes referred under section 10(1). Consequently, if a reference were made only under section 12(5) without reliance on section 10(1), the Government would lack authority to prohibit the continuation of a strike concerning a dispute that it had referred to the tribunal for adjudication, a result that could not have been intended by the Legislature. Sections 23 and 24 forbid the commencement of strikes and lock‑outs while proceedings are pending, so even where a reference is made under section 12(5), an employer could not lawfully declare a lock‑out nor could workmen lawfully strike after such a reference. However, if a strike or lock‑out began before the reference, the appropriate Government would have no power to stop its continuation. Section 24(2) clarifies that the continuance of a lock‑out or strike is deemed illegal only when an order prohibiting it is issued under section 10(3). Thus, the power to preserve industrial peace during adjudication, which is essential and forms the basis of such proceedings, is exercisable only if

The Court observed that the power to make a reference is vested in the appropriate Government by section 10(1) of the Act. It further held that the same principle applies to the powers conferred by sections 10(4), 10(5), 10(6) and 10(7). In other words, the essential provisions contained in sub‑sections (3) to (7) of section 10(1), which form an integral part of the reference scheme prescribed in Chapter III, demonstrate that even when the Government is acting under section 12(5), the reference must ultimately be made under section 10(1). The petition filed by the respondents sought a writ of mandamus directing the appellant to make a reference under sections 10(1) and 12(5), underscoring the significance of this construction. Moreover, the Court explained that the language of section 12(5) does not itself create a separate power to refer; that power already exists in section 10(1). Section 12(5) appears in a chapter dealing with the procedure, powers and duties of the authorities under the Act, and it is appropriate to interpret it as authorising the Government to make a reference, but only in the manner provided by section 10(1). Consequently, it would be unreasonable to read section 12(5) as independently conferring the power to refer without reference to section 10(1).

The Court then turned to the question of whether, while acting under section 12(5), the Government must base its decision solely on the report prepared by the conciliation officer under section 12(4). The High Court’s judgment appeared to suggest that the report was the exclusive material on which the Government’s conclusion should rest. The Court acknowledged that, in view of the background established by the earlier provisions of section 12, the Government would naturally give careful consideration to the conciliation officer’s report, treating it as the relevant material that helps determine whether a case for reference exists. However, the wording of section 12(5) does not limit the Government to that report alone. The Government remains free to examine any other relevant facts that may come to its knowledge or be brought to its attention. It must assess all such pertinent facts in order to arrive at its decision on whether a reference should be made.

The Government, when acting under section twelve five a, must decide whether a reference should be made. To reach that decision, the Government first has to determine whether a prima facie case for reference exists on the merits of the dispute. If the Government is satisfied that such a prima facie case does exist, it may then examine any other relevant or material facts that could justify refusing to make a reference. The question of whether a case for reference has been established is to be answered by considering all relevant circumstances that bear upon the merits of the dispute as well as the ancillary issue of whether a reference should nevertheless be made. The discretion conferred on the Government by section ten one may be exercised even in cases under section twelve five, provided that the discretion is exercised in good faith, that the final decision is based on a consideration of relevant facts and circumstances, and that the second part of section twelve five is complied with. Section twelve governs conciliation proceedings for all industrial disputes, whether or not they involve a public utility service. Section twelve one obliges the conciliation officer to conduct conciliation proceedings in respect of an industrial dispute concerning a public utility service once a notice under section twenty‑two has been given. If conciliation fails and a failure report is filed under section twelve four, the Government must act under section twelve five and decide whether there is a case for reference. In disputes involving a public utility service, the considerations prescribed by the second proviso to section ten one may become relevant, and the Government may be justified in refusing a reference if it finds the notice frivolous, vexatious, or the reference inexpedient. Just as the discretion under section ten one can be applied to non‑public‑utility disputes when the Government is acting under section twelve five, the provisions of the second proviso may also be invoked for public‑utility disputes under the same section. Consequently, upon receiving the failure report from the conciliation officer, the Government will evaluate the report together with any other pertinent material and decide whether a case for reference exists. If it is satisfied that such a case exists, it may make the reference; if it decides not to make the reference, it must record and communicate the reasons for that decision.

The Court observed that the legislation obliges the Government, when it decides not to refer a dispute, to record its reasons and to communicate those reasons to the parties concerned. The issue that arose at this point was the true import of the word “may” as used in the statutory provision. Specifically, the Court examined whether “may” should be interpreted as “shall”, thereby imposing a mandatory duty, or whether it should be understood in its ordinary permissive sense, indicating that the Government retains discretion to either refer the dispute or refrain from doing so.

The respondent contended that whenever a power is granted to an authority and that power is linked with the performance of a duty, the language conferring the power, even if termed directory, must be read as mandatory. In support of this contention, the Court referred to the observation of Mr. Justice Coleridge in Beg. v. Tithe Commissioners (1), wherein the learned judge stated that although the words are “undoubtedly…only empowering”, long‑standing judicial practice has rendered it an axiom that in public statutes, words that are merely directory, permissory or enabling may acquire compulsory force when the act to be done is for the public benefit or in the advancement of public justice. The respondent argued that section 12(5) imposes an obligation on the Government to record and communicate its reasons for not making a reference, and that this obligation demonstrates that the power to refer is intended to be exercised for the benefit of the party that has raised the industrial dispute and seeks a decision from the appropriate authority.

The Court noted that it is possible the legislature introduced the requirement that reasons be recorded and communicated in order to prevent casual or capricious decisions. By obliging the Government to make its reasons open to public examination and scrutiny, the provision would ensure that the decision was carefully and properly considered. However, the Court also recognized a second purpose: to signal that an explicit duty was placed upon the Government. Because the power to refer, expressed in the first part of the provision, is coupled with the duty described in the second part, the Court concluded that the word “may” in this context must be read as “shall”. The Court found considerable support for this view in the cited authority (1849) 14 Q.B. 459, 474 : 117 E.R. 179, 185, and observed that the High Court had accepted the argument, holding that if the Government is satisfied that there is a case for reference, it is bound to make that reference.

Conversely, the appellant argued that if the power to refer ultimately stems from section 10(1), it would be difficult to construe the relevant portion of section 12(5) as imposing an affirmative obligation on the Government to make a reference. Reading section 12(5) together with section 10(1), the appellant submitted, would allow the Government, even after a careful consideration of the matter, to refuse to refer the dispute in a proper case, provided that it records and communicates the reasons for its final decision. In support of this position, the appellant relied heavily on the provisions of section 13, which deals with the duties of Boards and is analogous to section 12.

The provision being discussed relates to the office of conciliation officers. A dispute may be initially sent to a Board either under section 10(1) or directly under section 12(5). The Board, like a conciliation officer, strives to achieve a settlement of the dispute. Although the Board possesses broader powers than a conciliator, its essential function remains substantially the same. Consequently, if the Board’s attempts at settlement are unsuccessful, it is required to prepare a report in accordance with section 13(3).

Section 13(4) stipulates that when the Board submits its report concerning a dispute that involves a public utility service, and the appropriate Government does not subsequently refer the matter to a Labour Court, Tribunal or National Tribunal under section 10, the Government must record and communicate the reasons for its decision to the parties concerned.

When section 13 is read as a whole, it becomes clear that the authority to make a reference in respect of disputes that have been sent to the Board lies unequivocally in section 10(1). In the context of disputes that do not concern public utility services, there is no specific provision that empowers the Government to make a reference. Moreover, section 13(4) addresses a situation where no reference is made in a public utility dispute, implying that any intended reference must be founded on the second proviso of section 10(1). This observation reinforces the conclusion that whenever a reference is to be made, the power to do so is found in section 10(1).

Accordingly, for cases that fall within section 13(4), because the reference must be made under section 10, the considerations set out in the second proviso of section 10(1) are inevitably applicable. The Government may therefore justify its refusal to refer a dispute by invoking any of the grounds specified in that proviso. Similarly, for disputes that are not covered by section 13(4), any reference that is required would also be made under section 10(1). This interpretation is implicit in the overall scheme of section 13.

Thus, in a dispute such as the one presently before the Court, the Government is free to refer the matter to a Board under section 12(5). If the Board fails to achieve a settlement between the parties, the Government may either proceed to refer the dispute for industrial adjudication under section 10(1) or decline to make such a reference, provided it records and communicates its reasons. There is no legal compulsion or obligation imposed on the Government to make a reference once a dispute has been sent to a Board. If this interpretation of the relevant provisions of section 13 is correct, it becomes difficult to accept the argument that the Government is required to make a reference at the stage of section 12(5).

In this case the Court noted that the respondent’s contention that the Government is bound to make a reference under section twelve five whenever it acts under that provision was only of academic importance. Even assuming, for the sake of argument, that the Government has a duty to refer a dispute when it is satisfied that a case for reference exists, the Court observed that the Government remains entitled to examine all the relevant facts before reaching that satisfaction. If, after such an exhaustive consideration, the Government concludes that the facts do not support a case for reference, it may lawfully refuse to refer the dispute, provided that it records the reasons for its refusal and communicates those reasons to the parties concerned. The appellant and the company, while emphasizing that the discretion rests with the Government, agreed that a refusal is justified only when the reasons disclosed are not wholly extraneous or irrelevant. Both sides therefore accepted that a refusal based on reasons that are irrelevant or unrelated to the matter may be subject to judicial challenge. Though the parties differed in the emphasis they placed on the method of interpreting section twelve five, they ultimately converged on the same essential enquiry: whether the reasons recorded by the Government are germane and relevant to the decision to refuse a reference.

The Court further observed that it was undisputed that a writ of mandamus could lie against the Government where an order made under section ten one contravenes the specific provisions governing the selection of the appropriate authority, namely clauses a to d of that section. It was also common ground that if the Government declines to make a reference under section twelve five without recording and communicating its reasons, a writ of mandamus would be available. Similarly, if a party could demonstrate that the refusal was not made in good faith or rested upon facts that are wholly irrelevant, the Court could issue a mandamus. While acknowledging that an order issued under section twelve five may be characterised as an administrative order and that the propriety, adequacy or satisfactory character of the reasons may not be directly justiciable, the Court held that the judiciary is not sitting in appeal over the Government’s decision. Nevertheless, when the Court is satisfied that the reasons for refusing a reference are extraneous and not germane, it is empowered to grant a writ of mandamus even against such an administrative order.

In this case, the Court observed that while the adequacy or satisfactory character of reasons recorded by the Government in an administrative order may not be subject to judicial scrutiny, a court hearing a petition for mandamus is not functioning as an appellate body reviewing the Government’s decision. Nevertheless, if the Court is convinced that the reasons supplied by the Government for refusing to make a reference are extraneous and not germane, the Court is empowered to and justified in granting a writ of mandamus even against such an administrative order. After an extensive discussion on how to interpret section 12(5), it became clear that there was no substantive dispute between the parties on that point, rendering the controversy over the construction of the provision merely academic. The real dispute, therefore, centered on whether the reason given by the appellant for refusing to make a reference was germane. The High Court had concluded that the reason was wholly extraneous and had issued a writ of mandamus against the appellant. The Court noted that the only reason advanced by the appellant was that the workmen had resorted to a go‑slow during the year 1952‑53, and that this appeared to be the sole factor influencing the Government’s decision not to refer the dispute under section 12(5). The appellant and the company urged that the Government was entitled to consider whether it would be expedient to refer a dispute of this nature for adjudication, arguing that the purpose of the Act was not only to provide for investigation and settlement of industrial disputes but also to secure industrial peace, thereby promoting production and the national economy. They contended that cooperation between capital and labour, along with mutual understanding and discipline, was essential to achieving the Act’s main objective, and therefore the Act should not be interpreted to require that every dispute be referred to industrial adjudication.

The Court also considered the argument that the Government might take into account the respondents’ lack of discipline manifested through the go‑slow tactics, which had violated the standing orders for a substantial part of the relevant year, and that this fact could be relevant when deciding whether to refer the present dispute to industrial adjudication. In contrast, the High Court had held that the Government’s reason was entirely extraneous, characterising the refusal to refer the dispute as punitive and based on considerations unrelated to section 12(5). The Court therefore needed to determine whether the bare reason set out in the appellant’s order could be sustained as germane or relevant to the matter between the parties, while acknowledging that considerations of expediency may be taken into account but must not permit the Government to rely on wholly irrelevant or extraneous factors under the pretext of expediency.

The judgment observed that the State has consistently expressed disapproval of any violation of law, whether committed by an employer or by employees, and has emphasised that employees, although entitled to press for legitimate claims, must not resort to actions prohibited by standing orders or statutes, nor to conduct that demonstrates a wilful lack of discipline or a collective refusal to cooperate with the employer. The Court noted that, notwithstanding this principle, the issue remained whether the simple and unqualified reason set out in the order issued by the appellant could be sustained as being germane or relevant to the dispute between the parties. It was held that, while considerations of expediency may inevitably arise when the Government decides whether to exercise its power to refer a dispute, the Government must not invoke wholly irrelevant or extraneous considerations under the pretext of expediency. For example, the Court explained, the Government may legitimately examine whether a claim is excessively stale, contrary to the provisions of the Act, or inconsistent with any agreement between the parties; if the Government concludes that the dispute suffers from such infirmities, it may lawfully refuse to make a reference. However, even in assessing expediency, the Government must refrain from acting in a punitive spirit, must evaluate the matter fairly and reasonably, and must base its decision only on facts and circumstances that are truly relevant.

The judgment further held that, in exercising the power conferred by section 10(1), it would be illegitimate for the Government to refuse a reference on the ground that it disapproves of the appearance, behaviour, or manner of the union secretary, or that it objects to the political affiliation of the union that has sponsored the dispute, as such considerations are wholly extraneous and must be excluded from the exercise of the wide discretion vested in the Government. In the case before it, the Court found it significant that the company had voluntarily paid a three‑month bonus for the relevant year despite the workmen’s adoption of go‑slow tactics, and that the conciliator’s report prima facie indicated that the respondents’ claim was not frivolous. The reasons communicated by the Government did not reveal any influence of extraneous considerations in its refusal to refer the dispute. Moreover, the Court expressed difficulty in seeing how the respondents’ alleged misconduct, upon which the Government based its decision, could have any relevance to the claim for classification of the specified employees, which was one of the disputed items. If the work performed by those employees prima facie justified the claim, and if, as the conciliator’s report showed, the claim was consistent with practices in comparable concerns, then the respondents’ misconduct was irrelevant to the classification issue.

In this matter the Court observed that the fact that the employees had engaged in misconduct could not be taken as a material circumstance for refusing to refer the dispute concerning their classification to an industrial adjudicating authority. The claim for classification was one that, if allowed, would have provided a benefit to the workmen in the future, and the order issued by the appellant barred them from obtaining that prospective advantage. The Court further held that considerations of disciplinary action could not, in its view, be legitimately employed as a means of imposing a penalty that would deny the employees a rightful claim. The same line of reasoning was applied to the claim for bonus. The Court stated that, where the respondents could demonstrate that the company's profits for the relevant year, when compared with the profits of preceding years, justified an additional bonus, a refusal to refer that dispute on the sole ground of the employees’ misconduct would amount to a punitive measure. The Court also pointed out that, notwithstanding the misconduct, the company had taken the disciplinary steps it deemed necessary, yet it still paid the respondents the bonus it considered they were entitled to. Thus, the presence of disciplinary action did not, by itself, justify denying a reference of the bonus dispute to an adjudicating forum.

The Court then turned to the well‑established principles that govern bonus claims in industrial adjudication. It explained that a claim for bonus is premised on the idea that, by contributing to the employer’s profits, employees acquire a right to share in those profits; consequently, any punitive act by the Government that refuses to refer a bonus dispute for adjudication would be wholly inconsistent with the purpose of the legislation. The Court added that, had the Government provided specific reasons that were directly derived from the misconduct in question, the situation might have been different. However, under the present circumstances the Court could not support the view that the High Court was wrong in describing the Government’s decision as entirely punitive and based on considerations that were irrelevant and extraneous. The Court emphasized that the Act was enacted to provide for the investigation and settlement of industrial disputes, and that where, under section 12(5), the appropriate Government prevents such investigation and settlement by refusing a reference on grounds that are wholly irrelevant, a petition for a writ of mandamus is clearly justified. Accordingly, the Court affirmed the order of the High Court, though not for exactly the same reasons, and dismissed the appeals with costs, including one set of hearing fees.