The Associated Cement Companies Ltd vs Their Workmen

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

Court: supreme-court

Case Number: Civil Appeal No. 404 of 1958

Decision Date: 3 March 1960

Coram: P.B. Gajendragadkar, A.K. Sarkar, K.C. Das Gupta

In this case the Supreme Court of India delivered its judgment on 3 March 1960. The matter was titled The Associated Cement Companies Ltd versus Their Workmen and was decided by a bench consisting of Justice P. B. Gajendragadkar, Justice A. K. Sarkar and Justice K. C. Das Gupta. The official citations for the decision are 1960 AIR 777 and 1960 SCR (3) 157, and it is also referenced in later reports. The dispute concerned the application of sections 18 and 19(6) of the Industrial Disputes Act, 1947. The workmen of the appellant were originally represented by a union called Kamdar Mandal Cement Works, Porbandar. After the registration of that union was cancelled, two new unions emerged: the Cement Kamdar Mandal and the Cement Employees Union. The Cement Kamdar Mandal issued two successive notices to the appellant, claiming to terminate two earlier awards that had been made when the now‑defunct union was the workers’ representative. Following those notices the union presented fresh demands, and the matter was referred to the Industrial Tribunal. The Cement Employees’ Union, which represented the majority of the workmen at Porbandar, was also made a party to the Tribunal proceedings. The appellant raised preliminary objections before the Tribunal, arguing that the reference was incompetent because the award it sought to terminate had not been properly ended under section 19(6) of the Act, since the union that attempted the termination represented only a minority of the workers bound by the award. The Tribunal, in its interlocutory judgment, rejected the appellant’s objection. The core issue before the Supreme Court was to determine who was authorized to give notice of termination of an award on behalf of workmen bound by that award. The Court examined the effect of section 18, holding that a properly made award binds the employer, all persons who represent the employer under clause 18(c), the employees who are parties to the dispute, and all persons included in clauses 18(b) and 18(d). The Court then read section 19(6) in a fair and reasonable manner and concluded that although the phrase “any party bound by the award” includes all workmen subject to the award, the notice of termination may be given not by an individual workman but by a collective group of workmen acting together, either through their trade union or by some other collective means. Importantly, the Court found that it is not necessary for that collective group to represent a majority of the workmen bound by the award; a minority union or minority of workmen may validly issue the termination notice under the Act.

The Court observed that even a minority of workmen or a union representing a minority may terminate the award that binds them together with other employees, just as they may raise an industrial dispute under the Act. The decisions in Central Provinces Transport Services Limited v. Raghunath Gopal Patwardhan, [1956] S.C.R. 956 and The Newspapers Limited v. The State Industrial Tribunal, U.P., [1957] S.C.R. 754 were cited in support of this principle.

The matter before the Court was the civil appeal numbered 404 of 1958, filed by special leave against the interlocutory judgment and order dated 10 March 1958 of the Industrial Tribunal at Rajkot in adjudication case number 67 of 1955. Counsel for the appellant included the Attorney‑General for India and other senior counsel, while counsel for respondent No. 2 was also appointed. The judgment was delivered on 3 March 1960 by Justice Gajendragadkar.

The central issue for determination was whether a registered trade union that represents only a minority of the workmen bound by an award may give notice of its intention to terminate that award under section 19(6) of the Industrial Disputes Act, 1947. To resolve this question the Court considered the overall scheme of the Act and sought a fair and reasonable construction of the meaning and effect of section 19(6). Although the controversy was narrowly confined, the Court first set out the material facts that gave rise to the present proceedings.

The appeal was filed by Associated Cement Companies Limited, hereinafter called the appellant, against its workmen, hereinafter called the respondents. The dispute between them had been referred by the Saurashtra Government to the Industrial Tribunal for the State of Saurashtra under section 10(1) of the Act. The respondents had presented several demands that formed the subject‑matter of the reference. When the tribunal commenced its proceedings, the appellant raised four preliminary objections challenging the competence of the reference itself. After hearing the parties on these objections, the tribunal, by its interlocutory judgment dated 10 March 1958, rejected all of the appellant’s points and ordered that the reference proceed to hearing on its merits. The appellant challenged that interlocutory judgment and order by obtaining special leave to appeal.

Among the four preliminary objections, the appeal is concerned only with the second objection, which questions the competence of the reference on the ground that the award binding the parties had not been properly terminated under section 19(6) of the Act because the union that purported to terminate the award represented only a minority of the workmen covered by it.

The circumstances that gave rise to the contention now under discussion must be set out in detail. The appellant is a limited company that owns and operates a number of cement factories located in various states of India and also in Pakistan. Among these plants is a factory situated at Porbandar in the Saurashtra region, which is identified as the Porbandar Cement Works. In 1949 an industrial dispute emerged between the appellant and the workmen who were respondents to the dispute. The matter was referred to the industrial tribunal for adjudication on 22 March 1949, and the tribunal issued its award on 13 September 1949. After that award was pronounced, the appellant itself terminated the award. Subsequent disputes between the appellant and the workmen led to a second reference of the same matters to the same tribunal. The tribunal then rendered a second award on 24 July 1951, which affirmed the earlier award with only minor modifications and directed that it remain in force.

During the proceedings relating to both references, the workmen of the appellant were represented by a union known as Kamdar Mandal, Cement Works, Porbandar. The registration of this union was cancelled on 2 July 1954. The cancellation prompted the formation of two new unions representing the appellant’s workmen: the Cement Kamdar Mandal, which was registered on 7 July 1954, and the Cement Employees’ Union, which received registration on 18 September 1954. The newly formed Cement Kamdar Mandal sent a notice to the manager of the appellant on 23 September 1954, claiming to terminate the first award of 13 September 1949, effective after a two‑month notice period counted from the date of the communication. In a further letter dated 20 December 1954, the same union attempted to terminate the second award of 24 July 1951 in an identical manner.

On 22 November 1954 the Cement Kamdar Mandal lodged fresh demands, many of which were already covered by the two earlier awards. These demands were forwarded to the Conciliation Officer for settlement, but the conciliation efforts failed. After receiving a failure report from the officer, the Government of Saurashtra made the present reference, asserting its jurisdiction under section 10(1)(c) of the Industrial Disputes Act.

The appellant contends that the Cement Kamdar Mandal lacked authority under section 19(6) of the Act to terminate either of the two awards, and therefore the second award remained operative, rendering the present reference invalid. Meanwhile, the Cement Employees’ Union, which represented the majority of the workmen at Porbandar, did not issue a termination notice under section 19(6). Instead, it raised disputes with the appellant, which were also referred to the Conciliation Officer. After conciliation failed, the officer submitted a failure report to the Saurashtra Government, but the government did not refer that particular dispute for adjudication. In the current proceedings the Cement Employees’ Union has been impleaded and has supported the demands advanced by the Cement Kamdar Mandal. Thus, despite the rivalry between the two unions, the demands of the minority union have received the backing of the majority union.

It was observed that the demands of the Cement Kamdar Mandal, although originally put forward by the minority of the work‑men, received the support of the majority union. In the present appeal, it was the majority union that actually appeared before the Court to contest the order. The tribunal, when hearing the case, had examined the legal question presented by the appellant under section 19(6) on the premise that the Cement Kamdar Mandal, which claimed the authority to terminate the awards under that provision, represented only a minority of the work‑men employed at Porbandar. The Court indicated that it would consider the issue raised in the appeal while retaining that same assumption for purposes of analysis. The principal statutory provisions that required consideration in resolving the dispute were sections 18 and 19 of the Industrial Disputes Act as they existed in the year 1954. Section 18, inter alia, stipulated that once an award became enforceable, it would be binding upon (a) every party to the industrial dispute, (b) any other persons summoned to appear in the proceedings as parties to the dispute, unless the Board or tribunal recorded an opinion that such summons had been made without proper cause, (c) where the party identified in clause (a) or (b) was an employer, that employer’s heirs, successors or assigns with respect to the establishment to which the dispute related, and (d) where the party identified in clause (a) or (b) was a group of work‑men, all persons who were employed in the establishment or any part of it at the date of the dispute, as well as all persons who subsequently became employed in that establishment or part. From this language it was evident that although an industrial dispute might be initiated by a group of work‑men who did not represent the entire workforce, once the dispute was referred to an industrial tribunal for adjudication and an award was rendered, the award bound not only the immediate parties and those summoned but also every individual who had been employed in the establishment and anyone who would be employed there in the future. In other words, the operation of section 18 meant that a properly made award by an industrial tribunal governed the employer and all persons who represented the employer under clause 18(c), as well as the employees who were parties to the dispute and all persons covered by clauses 18(b) and 18(d). Section 19 dealt with the period for which settlements and awards remained operative. Section 19(3) provided that, subject to the other provisions of the section, an award would remain in force for a period of one year, subject to the various provisos contained in subsection (3) and to subsection (4), although those additional provisions were not the focus of the present discussion. Finally, section 19(6) stipulated that notwithstanding the expiry of the period of operation prescribed in subsection (3), the award would continue to bind the parties until a period of two months had elapsed from the date on which any party bound by the award gave notice to the other party of its intention to terminate the award.

The Court explained that the sub‑section dealing with termination of an award required that, unless the award was lawfully ended in accordance with that provision, the award would remain binding even after the period specified in subsection (3) had expired. The Court noted that this principle was not contested. The central issue in the present dispute was the determination of which party was authorized to issue the notice that would terminate the award on behalf of the workmen who were bound by the award pursuant to section 18 of the Act. According to the sub‑section, a notice had to be served by any party bound by the award upon the other party or parties. The Court observed that identifying the recipient of such a notice was relatively straightforward: when the termination was sought on behalf of the employees, the notice must be addressed to the employer, who is the party entitled to receive it. The Court then considered to whom the phrase “the parties” referred when it required that notices also be given. It suggested that the reference might be to parties joined under section 10, subsection (5), or under section 18, subsection (2), or generally to parties to the dispute. However, the Court stated that this particular aspect was not relevant for the present appeal because notice had already been served upon the appellant, and all the workmen involved in the dispute had appeared before the tribunal through their two respective unions. The Court identified the more difficult question as the proper interpretation of the words “any party bound by the award.” Having already examined the effect of section 18 and recognised the broad class of persons bound by the award under that provision, the Court considered a literal construction of the phrase. Under a literal reading, even a single employee who was bound by the award could be regarded as “any party bound by the award,” and consequently a lone dissatisfied employee might be entitled to serve a notice terminating the award. By contrast, the Court noted that an alternative interpretation could hold that “any party” should be understood to mean a party representing the majority of those bound by the award, since terminating an award is a serious step that should be taken only by a party capable of demonstrating that it represents the majority view. The appellant argued for this latter construction. In interpreting the provision, the Court found it relevant to recall the definition of an industrial dispute contained in section 2(k) of the Act, which describes an industrial dispute as any dispute or difference between employers and employers, between employers and workmen, or between workmen and workmen, that is connected with employment, non‑employment, terms of employment, or conditions of labour of any person. The Court emphasized that this definition highlights the essential nature of the disputes that the Act is intended to address.

The Court explained that an industrial dispute, as defined by section 2(k) of the Act, must concern the terms of employment or the conditions of labour and must arise, among other situations, between workmen and their employer. Normally, a dispute that is not backed by a union or by a group of workmen is not treated as an industrial dispute for the purposes of the Act. Section 33A creates an exception to this general rule. The foundation of industrial adjudication recognised by the statute is that disputes between employers and employees fall within the Act only when those disputes acquire the character of an industrial dispute. Modern trade‑union activity involves collective bargaining, which is essential to industrial adjudication. Consequently, industrial courts consider individual cases only when the dispute has become an industrial dispute because it is sponsored by a union or has been taken up by a collective body of employees. In the decision of The Central Provinces Transport Services Limited v. Raghunath Gopal Patwardhan, the Court observed that the majority of judicial opinion holds that an individual dispute cannot by itself be an industrial dispute, but it may become one if a trade union or a number of persons adopts it. The same observation received approval in The Newspapers Limited v. The State Industrial Tribunal, U.P. Keeping these principles in mind, the Court found it difficult to accept that the phrase “any party bound by the award” could include an individual workman, even though, taken literally, he is a party bound by the award. Accordingly, the expression was held not to encompass an individual workman, a point that the respondent’s counsel had largely conceded.

The Court then turned to the question of whether “any party bound by the award” should be interpreted as meaning a union representing the majority of workmen bound by the award or a group of workmen forming such a majority acting outside the union. The expression clearly refers to, and embraces, all persons bound by the award under section 18. The Attorney‑General urged the Court to read section 19(6) so that a minority of workmen bound by the award could not disrupt the award’s smooth operation and thereby create an industrial dispute. When an award is made, it binds the parties for the statutory period prescribed by section 19(3); even after that period expires, the award continues to bind the parties under section 19(6) unless it is properly terminated. The policy of the Act, therefore, appears to be that the award should operate smoothly even after the statutory period, and that disturbance should not be permitted unless the majority of the workmen bound by it wish to terminate it and present fresh demands. The Court recognized the Attorney‑General’s concern but concluded that imposing a majority‑vote limitation on the termination of an award would be unreasonable and would unduly prejudice the employees’ interests.

The Court noted that an award remained binding even after the prescribed statutory period unless the majority of the workmen bound by it decided that the award should be terminated and new demands should be made. The Court explained that allowing a minority of workmen or a minority union to terminate the award would produce an anomalous result in which, despite the majority of workmen wishing to continue with the award, a small group could create disturbance and raise an industrial dispute. The Court observed that such a result could not have been intended by the Legislature when it enacted section 19(6) of the Act. The Court recognized that this line of argument had been urged before it and that, on its face, the argument appeared attractive, as noted in the citation (1) [1957] S.C.R 754. However, the Court held that it would be unreasonable to adopt that construction and to impose a majority‑vote limitation on the termination of an award. The Court added that imposing such a limitation would, in its opinion, seriously prejudice the interests of the employees.

The Court pointed out that the trade‑union movement in the country had not yet succeeded in covering all employees engaged in the various branches of industry. Although membership of the major trade unions had increased appreciably, the stage at which unions could claim to represent all employees or even a majority of them had not been reached. Consequently, the Court feared that if the majority rule advocated by the appellant were accepted and section 19(6) were interpreted accordingly, termination of awards would become very difficult, if not impossible, in a large number of cases. The Court then turned to section 18, reminding that the class of employees bound by an award under that provision was far wider than the parties to the industrial dispute in which the award was made. Section 18 covered not only all persons employed in the establishment at the date of the award but also any employees who were appointed to the establishment after the award was pronounced. The Court concluded that adopting the majority rule would mean that only a very few awards, if any, could be terminated because few unions could demonstrate a majority of members on their rolls, and at the present stage of organization, few workmen could meet, decide, and act together apart from their unions. Accordingly, the Court held that the majority rule would seriously prejudice the right of employees to terminate awards when they felt the awards needed to be modified or changed. The Court stated that this consideration could not be ignored in construing the material words of section 19(6). The Court also observed another relevant aspect, namely that an industrial dispute could be raised by a group of workmen or by a union even when neither represented the majority of the workmen concerned.

The Court observed that an industrial dispute could be raised by a union or by a group of workmen even when neither represented a majority of the workers concerned, and therefore the majority rule on which the appellant based its interpretation of section 19(6) was inapplicable to the reference of an industrial dispute under section 10 of the Act. The Court explained that a minority group of workmen could make a demand that would create an industrial dispute, which, if appropriate, would be referred for adjudication under section 10. Although an award made on such a reference would bind all employees under section 18, the Court reasoned that if a minority of workmen or a minority union could raise an industrial dispute, there was no logical reason why the same minority could not terminate the award that resulted from a reference made at their instance. The Court dismissed the alleged anomaly highlighted by the learned Attorney‑General as having no practical significance. It stated that if the majority of workmen bound by the award wished the award to continue without modification, they could reach an agreement with their employer and adopt a course permitted by the Act to give effect to that agreement. Nevertheless, the Court concluded that both logic and fairness justified the position that a minority of workmen or a minority union could terminate the award that bound them, just as they could raise an industrial dispute under the Act. The Court affirmed the view taken by the industrial tribunal in the present case and found no reason to differ. It noted that the appellant had heavily relied on rule 83, framed by the Government of Bombay under section 38 of the Act, and argued that the rule supported the appellant’s construction of section 19(6). The Court acknowledged that the rule was not in force at the relevant time and therefore was not applicable to the present proceedings. Consequently, the Court declined to consider the argument based on that rule or to examine its validity. The matter, the Court held, required a fair and reasonable construction of section 19(6) itself, and even if the rule were applicable, it would not be material to that construction. Accordingly, the Court held that a fair and reasonable interpretation of section 19(6) meant that, although the words “any party bound by the award” refer to all workmen bound by the award, the notice to terminate the award could be given not by an individual workman but by a collective group of workmen acting together either through their union or otherwise.

The Court observed that the statutory scheme did not require the collective body of employees or the trade union through which it acted to command the support of a majority of the workmen who were bound by the award. It explained that the provision permitted a group of workmen, acting together, to give notice of termination of the award even if that group, or the union representing it, did not represent most of the employees covered by the award. Accordingly, the Court rejected the submission that a majority representation was a necessary condition for a valid termination notice. On the basis of this interpretation, the Court found that the appeal advanced no viable ground for relief and therefore could not succeed. As a result, the Court concluded that the appeal must fail. The judgment accordingly ordered that the appeal be dismissed in its entirety and that the costs of the proceedings be assessed against the appellant. The order explicitly stated that the appeal was dismissed, thereby terminating the litigation and imposing the cost liability on the unsuccessful party.