South Indian Bank Ltd vs A.R. Chacko

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

Court: Supreme Court of India

Case Number: Civil Appeal No.178 of 1963

Decision Date: 02/12/1963

Coram: K.C. Das Gupta, P.B. Gajendragadkar, K.N. Wanchoo

In this matter, the Supreme Court considered an appeal filed on 2 December 1963 by South Indian Bank Ltd against A.R. Chacko. The judgment was authored by Justice K.C. Das Gupta, who was joined by Justices P.B. Gajendragadkar and K.N. Wanchoo. The case is reported in the 1964 volume of the All India Reporter at page 1522 and in the 1964 volume of the Supreme Court Reports (5) at page 625, with further citations in later reports. The central issue concerned the applicability of section 33C(2) of the Industrial Disputes Act, 1947, and the jurisdiction of the Labour Court versus an industrial tribunal.

The respondent, who had been employed as a clerk in the appellant bank, was later promoted to the position of accountant and his remuneration was fixed according to the new post. After assuming the accountant role, the respondent submitted an application under section 33C(2) of the Industrial Disputes Act, claiming entitlement to three separate benefits: firstly, the basic pay of his former grade together with the annual increments that were normally due on 1 December each year; secondly, a special allowance of forty rupees per month for the additional supervisory duties as prescribed in paragraph 164 of the Sastry Award; and thirdly, the dearness allowance provided for under the same award. The respondent therefore prayed that the Labour Court order the recovery of the amounts he alleged were due.

The appellant bank contested the application on four grounds. First, it argued that the petition was incompetent because it was filed under section 33C(2). Second, the bank maintained that, even if the application were competent, the dispute fell within the jurisdiction of an industrial tribunal rather than the Labour Court. Third, the bank asserted that the Sastry Award had ceased to be operative long before the respondent’s appointment as accountant, and therefore no benefits could accrue to him under that award. Fourth, the bank contended that by becoming an accountant, the respondent ceased to be a workman within the meaning of the Industrial Disputes Act and consequently was not eligible for the benefits of the Sastry Award.

The Labour Court rejected each of the bank’s objections and allowed the respondent’s application. Upon appeal by special leave, the Supreme Court affirmed the Labour Court’s findings. The Court held that an application filed by a workman under section 33C(2) of the Industrial Disputes Act is permissible, following the precedent set in Central Bank of India v. P.S. Rajagopalan, reported in the 1964 volume of the Supreme Court Reports at page 140. The Court further observed that, in view of sections 7 and 33C(2) of the Industrial Disputes Act, the Labour Court designated by the Government, and not an industrial tribunal, possessed the appropriate jurisdiction to adjudicate the matter. The Court also rejected the contention that no benefit could accrue after the Sastry Award had ceased to operate, explaining that the provision in section 19(6) regarding the period for which an award remains binding is not altered by section 4 of the Industrial Disputes (Banking Companies) Decision Act, 1955. Consequently, the Court affirmed that the respondent, although designated as an accountant, performed duties of a senior clerk with supervisory responsibilities and therefore qualified as a workman under the Act, entitling him to the benefits claimed under the Sastry Award.

Section 19(3) and Section 19(6) of the Industrial Disputes Act were explained as showing the difference between an award that is in operation and an award that is binding on the parties. Section 19(6) was read to mean that even after the period during which an award is in operation has ended, the award does not lose its effectiveness. Accordingly, although Section 4 of the Industrial Disputes (Banking Companies) Decision Act caused the award to remain in force only up to 31 March 1959, the award nevertheless continued to operate as a contractual obligation that had been created by industrial adjudication in place of the parties’ former contract. In reviewing the evidence that was placed before it in the present matter, the Court observed that the respondent, although designated as an accountant, was in fact a senior clerk who performed mainly clerical work and was, under the definition of “workman” in the Industrial Disputes Act, a workman who also performed a supervisory function. The Labour Court was noted to have properly distinguished between accountants who are truly officers and those accountants who are essentially senior clerks carrying supervisory duties, a distinction that was contemplated by the Sastry Award.

The judgment was delivered in the civil appellate jurisdiction in Civil Appeal No 178 of 1963, which was taken on special leave from the order of 27 November 1961 issued by the Central Government Labour Court, Delhi Camp at Madras, in L.C.A. No 564 of 1961. Counsel for the appellant and for the respondent were listed, and the judgment was pronounced on 2 December 1963 by Justice Das Gupta. The appeal concerned an application made under Section 33C(2) of the Industrial Disputes Act. The respondent, A R Chacko, had been employed as a clerk in the Coimbatore branch of the appellant bank when, by an order dated 19 June 1959, he was promoted to the post of accountant and transferred to the Alleppey branch. His remuneration in the new position was fixed by an order dated 16 July 1960, which authorized a basic salary of Rs 120 in the grade of 120‑10‑160 effective from 1 January 1960. From 1 August 1960 onward, he was also permitted to receive a CAIIB allowance of Rs 10 per month. In the application under Section 33C(2), the petitioner contended that, as a result of his promotion to accountant with added supervisory responsibilities, he was entitled to the special allowance of Rs 40 per month prescribed in Paragraph 164 of the Sastry Award. He further asserted that, from the date he joined as accountant on 13 July 1959, he should have received a basic pay of Rs 95 in his former grade with annual increments payable each 1 December, namely Rs 95 for the months of August, September, October and November 1959, increasing to Rs 100 from December 1959 through November 1960, and then to Rs 106 from December 1960 onward; additionally, he claimed entitlement to the Rs 40 special allowance for supervisory duties and to dearness allowance as specified in the award.

In this case, the petitioner calculated that the total sum to which he was entitled under the award would be Rs. 4,495.22. The amount actually paid to him for the period from 13 July 1959 to the end of March 1961, which was the period covered by his application, was Rs. 3,637.73. Consequently, he asserted that he was owed an additional Rs. 855.49 and requested that the Labour Court issue a certificate for that amount to the Collector, thereby authorising the Collector to recover the sum in accordance with the law. The Bank opposed the application on four grounds. First, it argued that an application filed under section 33C(2) of the Industrial Disputes Act, 1947 was legally incompetent. Second, it contended that the matter fell within the jurisdiction of an industrial tribunal and not within that of the Labour Court. Third, it maintained that the Sastry Award had ceased to operate on 31 March 1959, which was before the respondent’s appointment as an accountant, and therefore no benefits could accrue to him under that award. Fourth, it claimed that by being appointed as an accountant the respondent had ceased to be a workman and consequently could not claim the benefits of the Sastry Award. The Labour Court rejected each of these objections, allowed the petition, and computed the amount due from the Bank to be Rs. 855.49. The Bank appealed this order by obtaining special leave. The Court noted that the first objection was settled by the decision in Central Bank of India v. P. S. Rajagopalan, where it was held that an application by workmen does fall under section 33C(2) of the Act. Regarding the second objection, counsel for the Bank referred to the second schedule of the Industrial Disputes Act, but the Court observed that the schedule lists matters for which Labour Courts may be constituted under section 7 of the Act, and it does not contain any provision covering an application under section 33C(2). Consequently, the contention was misplaced. Section 33C(2) expressly provides that the determination of the monetary benefit to which a workman is entitled shall be made by the Labour Court designated by the appropriate Government, and not by an industrial tribunal. Thus, the Labour Court had jurisdiction to hear the petition. On the third objection, counsel for the Bank drew attention to section 4 of the Industrial Disputes (Banking Companies) Decision Act, 1955, and argued that in view of that provision

The Court observed that the respondent did not have any entitlement to the Sastry Award in July 1959 when he was required to undertake additional supervisory duties. Section 4 of the Industrial Disputes (Banking Companies) Decision Act, 1955, was quoted in full: “Notwithstanding anything contained in the Industrial Disputes Act, 1947, or the Industrial Disputes (Appellate Tribunal) Act, 1950 the award as now modified by the decision of the Labour Appellate Tribunal in the manner referred to in s. 3 shall remain in force until March 31, 1959.” The argument was advanced that the non‑obstante clause “Notwithstanding anything contained in the Industrial Disputes Act, 1947” rendered the provisions of section 19(6) inapplicable to the Sastry Award, and consequently the provision that the award should remain binding on the parties until two months after a notice of termination would not take effect. To address this objection, the Court identified two possible responses. The first response highlighted a distinction between an award being “in operation” and an award being “binding on the parties,” a distinction that is reflected in the different legislative provisions of sections 19(3) and 19(6).

Under section 19(3) the award continues in operation for a period of one year; the amendment made by the 1956 Act added the words “from the date on which the award becomes enforceable under s. 17A” after the phrase “period of one year.” Section 19(6) reads: “Notwithstanding the expiry of the period of operation under sub‑section (3), the award shall continue to be binding on the parties until a period of two months has elapsed from the date on which notice is given by any party bound by the award to the other party or parties intimating its intention to terminate the award.” This language makes clear that, even after the period of operation expires, the award does not cease to be effective; it remains binding on the parties until one party gives notice of termination and two months have passed. The Court noted that the effect of section 4 was merely to cause the award to cease to be in force after March 31, 1959, and that this fact did not affect the period for which the award would continue to bind the parties thereafter. The provision in section 19(6) regarding the continuing binding effect of the award is therefore not altered by section 4 of the 1955 Act. Moreover, the Court indicated that even if an award had ceased to be in operation or in force and had ceased to be binding on the parties under the provisions of s…

In this case the Court explained that under section 19(6) an award continues to have the effect of a contract between the parties, having been created by industrial adjudication to replace the old contract. The Court noted that while the award remains in operation under section 19(3), the prohibition contained in section 23(c) prevents any strike by the workmen and any lock‑out by the employer with respect to any matter covered by the award. The Court further observed that so long as the award is binding on a party, a breach of any of its terms makes that party liable to the penalty prescribed in section 29 of the Act, which may consist of imprisonment for up to six months, a fine, or both. After the period of the award’s operation and the period for which it remains binding have elapsed, the provisions of sections 23 and 29 can have no operation. The Court held that nothing in the scheme of the Industrial Disputes Act justifies concluding that, because these special provisions relating to the prohibition of strikes, lock‑outs and penalties for breach of an award cease to be effective, the new contract embodied in the award must also cease to be effective. On the contrary, the Court reasoned that the very purpose for which industrial adjudication has been given the peculiar authority to make new contracts between employers and workmen makes it reasonable to think that even though the period of operation of the award and the period for which it remains binding may expire—periods for which specific provisions have been made in sections 23 and 29 respectively—the contract created by the award continues to govern the relationship between the parties until it is displaced by another contract. The Court therefore rejected the objection that no such benefit could accrue to the respondent after 31 March 1959. Turning to the last objection, the Court considered whether the respondent, Chacko, ceased to be a workman when he was appointed as an accountant. The Court agreed that the mere fact of being designated as accountant does not automatically remove a person from the category of workman. It referred to paragraph 332 of the Sastry Award, which observed that categories of workmen such as Head Clerks, Accountants and Head Cashiers should be taken as workmen unless the bank can show that, in a particular branch or office, a person so designated is truly entrusted with directional, controlling or higher‑type supervisory duties over ordinary supervisory agencies. The Court also cited paragraph 167, where the award dealt specifically with accountants, stating that in many cases accountants are indisputably officers and that it is difficult to lay down a hard and fast rule. The award further observed that an accountant is often the second officer‑in‑charge of a branch, particularly where the branch is relatively small. Accordingly, the Court concluded that the respondent, although designated as accountant, performed duties that were essentially clerical and supervisory in nature and therefore qualified as a workman within the meaning of the Industrial Disputes Act.

In this case the Court observed that where a bank maintains a hierarchy of officers there may be a chief accountant, accountants and sub‑accountants, and that in many of those situations the persons styled as “accountants” would usually be officers. However, the Court also recognized that there were instances in which individuals bearing the dignified title of accountant were in reality senior clerks who performed higher‑level clerical work and who exercised a modest degree of supervision over other clerks as part of their duties. In such circumstances, the Court held that those individuals could properly be regarded as workmen, and that the minimum allowances fixed for sub‑accountants would consequently apply to them as well.

The Labour Court carefully noted the distinction between accountants who genuinely functioned as officers and those who were merely senior clerks with supervisory responsibilities. After examining the evidence concerning the duties actually performed by the respondent, Mr Chacko, the Labour Court concluded that he was essentially a senior clerk who mainly carried out clerical tasks, bore the designation of accountant, and therefore qualified as a workman under the Industrial Disputes Act, while also performing a limited supervisory function. The Court found no error in the Labour Court’s approach to this question and saw no justification for interfering with its conclusion based on the evidence on record.

All the relevant documents produced by the parties had been duly considered by the Labour Court alongside the oral testimony. The Court noted that, although certain rights and powers were assigned to Mr Chacko on paper and that, on occasional occasions, he acted in the stead of the Agent when the Agent was absent, those responsibilities did not constitute his principal or main duties. Counsel for the Bank drew the Court’s attention to a resolution passed by the Board of Directors, dated 18 July 1959, which authorised the respondent, in his capacity as Accountant, to make, draw, sign, endorse, purchase, sell, discount and negotiate bills of exchange, hundies, drafts, cheques, promissory notes and other negotiable instruments on behalf of the bank, and to operate upon all banking accounts maintained by the bank with other banks, bankers and parties in India. On the same date a circular‑letter was circulated to all branches containing a binder of specimen signatures of all bank officers, and the respondent’s name appeared in that list.

Nevertheless, as the Labour Court pointed out, the evidence did not show that Mr Chacko regularly exercised the many powers mentioned in that resolution. A clearer picture of his actual functions emerged from a document dated 28 August 1961, signed by the Agent and entered into evidence as Exhibit 1, whose authenticity was not challenged by the Bank. The list of duties set out in that document was almost entirely clerical, the sole exception being Item 14, which read “and other work entrusted to him by the Agent from time to time.” The Labour Court also noted that no power of attorney had ever been granted to Mr Chacko. Having considered all the material evidence, the Labour Court affirmed that the duties performed by the respondent consisted of clerical work with supervisory elements and were not managerial or administrative as alleged by the Bank. The Court found no reason to disturb that conclusion.

The Court observed that the list of duties set out in the document was almost entirely clerical in nature, the sole exception being Item 14, which stated “and other work entrusted to him by the Agent from time to time.” The Court also noted that the Labour Court had pointed out that no power of attorney had ever been given to Mr Chacko. After reviewing all the material evidence, the Labour Court concluded that the respondent’s functions consisted of clerical tasks coupled with supervisory responsibilities, and that these functions were certainly not managerial or administrative as the Bank had alleged. The Court found no justification for disturbing that conclusion.

The Court further remarked that, according to the Bank’s own position, a workman in the situation of Mr Chacko would, upon promotion to the rank of an officer, suffer a financial loss because he would forfeit the special allowance that he would have received as a workman with supervisory duties, without receiving an adequate replacement for the alleged managerial and administrative duties. The Court considered it reasonable to infer that the so‑called promotion to the officer grade was intended to reverse the effect of the Sastry Award, which provided the supervisory allowance. It was difficult to understand how a person with higher responsibilities and managerial duties could receive a lower monetary remuneration than a workman. Consequently, the Court held that the Labour Court’s finding that the respondent was a workman entitled to the benefits of the Sastry Award could not be successfully challenged. All the grounds raised in the appeal were therefore rejected, the appeal was dismissed, and costs were awarded against the appellant.