The Sirsilk Ltd. And Others vs Government Of Andhra Pradesh and Another

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

Court: Supreme Court of India

Case Number: Civil Appeals Nos. 220, 423 and 424 of 1962

Decision Date: 20 March 1963

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

In the case titled The Sirsilk Ltd. and Others versus Government of Andhra Pradesh and Another, decided on 20 March 1963, the Supreme Court of India delivered its judgment. The opinion was authored by Justice K.N. Wanchoo and the bench comprised Justices K.N. Wanchoo, P.B. Gajendragadkar and K.C. Das Gupta. The petitioners were The Sirsilk Ltd. and others, while the respondents were the Government of Andhra Pradesh and another party. The citation of the decision is 1964 AIR 160 and 1964 SCR (2) 448, with subsequent citations in various reports. The dispute concerned the provisions of the Industrial Disputes Act, 1947, particularly sections 2(p), 17, 18 and 19, relating to awards made by a tribunal, settlements between parties, and the duty of the government to publish such awards.

The factual background of the three appeals was identical. Industrial disputes had arisen between the appellants and their workmen, and the matters were referred to a tribunal for adjudication. After the tribunal rendered its awards and transmitted them to the government, the parties in each case reached a settlement. Following the settlements, the parties sent letters to the government requesting that the awards not be published. The government replied that section 17 of the Act imposed a mandatory duty on it to publish the awards and that it could not withhold publication. Consequently, writ petitions were filed in the High Court under Article 226 of the Constitution, seeking an order directing the government to refrain from publishing the awards.

The High Court held that because the provisions of section 17 were mandatory, it could not grant the relief sought and dismissed the petitions. The present appeals were filed by way of certificates granted by the High Court. The appellants contended that the provisions of section 17 were not mandatory but merely directory, and alternatively argued that even if the provision were mandatory, a conflict would arise between an award published under section 17(1) and a settlement that was binding under section 18(1). They submitted that in such a situation the government should be allowed to withhold publication of the award. The respondents argued that accepting the appellants’ position would create a difficult situation, because it would enable either party to claim that the settlement had been obtained through fraud, misrepresentation, undue influence or corruption, thereby undermining the statutory scheme.

The Court examined the language of sections 17 and 17A together and held that the intention of section 17(1) was to impose a duty on the government to publish the award within thirty days of its receipt, and that this duty was mandatory and not merely directory. The Court further observed that an agreement reached between the parties, even if it was not concluded within conciliation proceedings, qualified as a settlement under the definition in section 2(p), and section 18(1) made such a settlement binding on all parties. The Court concluded that when a settlement under section 18(1) conflicts with an award that would be binding under section 18(3) upon publication, the appropriate remedy was to withhold the award from publication. This withholding did not alter the mandatory character of section 17(1), but recognized a special situation where publication would create a legal conflict. The Court noted that any dispute concerning the validity of the settlement on grounds such as fraud or misrepresentation would constitute another industrial dispute, which the government could refer for adjudication.

In this case, the Court observed that section 17 of the Industrial Disputes Act imposes a duty on the Government to publish an award within thirty days of receiving it, and that this duty is mandatory rather than merely directory. The Court further explained that when the parties to a dispute reach an agreement, even if that agreement is not arrived at through formal conciliation proceedings, the agreement qualifies as a settlement under the definition contained in section 2(p). Section 18(1) then provides that such a settlement is binding on all parties to it. The Court considered a situation in which the existence of a settlement under section 18(1) would conflict with an award that becomes binding on publication under section 18(3). The Court held that the appropriate response to such a conflict is for the Government to refrain from publishing the award. This withholding of publication does not alter the mandatory character of section 17(1); the Government would ordinarily be required to publish the award, but the special circumstances described create an exception. The Court added that if any question arises regarding the validity of the settlement on grounds such as fraud, misrepresentation, undue influence, or corruption, that question constitutes a separate industrial dispute. The Government may then refer the dispute for adjudication. Should the adjudicating authority determine that the settlement does not satisfy the requirements of section 18(1), the Government would be free to publish the award that had earlier been withheld. The Court cited State of Bihar v. D. N. Ganguly, [1959] S.C.R. 1191, in support of this reasoning.

The judgment was delivered in a civil appellate jurisdiction concerning Civil Appeals Nos. 220, 423 and 424 of 1962. These appeals arose from the judgment and order dated 12 January 1960 and 19 August 1960 of the Andhra Pradesh High Court in Writ Appeals Nos. 120 and 57 of 1960. Counsel for the appellant in Civil Appeal No. 220 of 1962 comprised S.K. Bose and B.P. Maheshwari. Counsel for the appellants in Civil Appeals Nos. 423 and 424 of 1962 included M.C. Setalvad, S.K. Bose and Sardar Bahadar. Counsel for Respondent No. 1 in all three appeals was K.R. Chaudhuri and P.D. Menon. The judgment was delivered on 20 March 1963 by Justice Wanchoo. The Court noted that the three appeals raised identical questions of law and therefore would be considered together. For the purpose of exposition, the Court referred primarily to the facts of Appeal No. 220, as the factual backdrop of the other appeals was substantially similar. The factual matrix of Appeal No. 220 was that an order was issued on 6 June 1956 referring certain disputes between the appellant employer and its workmen to the Industrial Tribunal of Andhra Pradesh. The Tribunal rendered its award and transmitted it to the Government in September 1957. Under section 17 of the Industrial Disputes Act, No. XIV of 1947, the appropriate Government is required to publish the award within thirty days of receipt, in a manner it deems appropriate. However, before the Government could act upon its duty under section 17, the parties to the dispute entered into a settlement.

On 1 October 1957 a letter was addressed to the Government, bearing the joint signatures of the employer and the employees. In the letter they informed the Government that the dispute referred to the Industrial Tribunal had been settled and requested that the Government not publish the tribunal’s award. The Government replied that it could not comply with the request because it considered Section 17 of the Industrial Disputes Act to impose a mandatory duty to publish any award it received. Consequently the appellants filed writ petitions before the High Court under Article 226 of the Constitution, seeking a directive that the Government be ordered not to publish the award sent by the tribunal. The High Court examined Section 17 and held that the provision created a mandatory obligation on the Government, therefore concluding that the Court could not issue an order directing the Government to refuse publication. Accordingly, the High Court dismissed the writ petitions. After the dismissal the appellants obtained certificates of appeal, and the matter was brought before the Supreme Court for determination. The principal argument raised by the appellants before the Supreme Court was that the word ‘shall’ in Section 17(1) should be interpreted as directory rather than mandatory. In the alternative they contended that even if Section 17(1) were mandatory, an exception should be recognised because a settlement covered by Section 18(1) created a conflict with the publication of an award. They argued that in such special circumstances the Government ought to be permitted to withhold publication of the award. The Court examined the wording of Section 17(1), which provides that every award shall, within thirty days of receipt by the appropriate Government, be published in such manner as the Government thinks fit. The Court noted that the use of the word ‘shall’ ordinarily signals a mandatory requirement, although in some statutes the same word may be employed in a permissive sense. In the present case the Court concluded that Parliament intended to impose a duty on the Government to publish the award within the prescribed period. This interpretation was reinforced by Section 17(2), which declares that an award published under Sub‑section (1) shall be final and shall not be called into question by any court in any manner whatsoever. The Court therefore found that the legislature could not have intended to give the Government the power to withhold publication once the award was to be made final by law.

In this part of the judgment the Court explained that the Government did not possess the authority to withhold publishing the award. The Court noted that Section 17A expressly sets out the limited powers of the Government concerning an award. Under that provision the Government may, in certain situations, declare that the award shall not become enforceable until thirty days after its publication; the date of publication is therefore the date on which the award becomes enforceable under Section 17A. Section 17A also requires that the award be published, although the Government may, in particular circumstances, declare that the award will not be enforceable. Sub‑section (2) of Section 17A further authorises the Government to issue an order either rejecting or modifying the award within ninety days from the date of its publication. Consequently, when Sections 17 and 17A are read together, the Court held that Section 17(1) imposes a mandatory duty on the Government to publish the award within thirty days of receiving it, and that the requirement of publication is not merely directory. The Court further observed that the issue did not end with the publication requirement, because the Act had been amended by Central Act XXXVI of 1956, which introduced Section 18(1). Section 18(1) provides that a settlement reached by agreement between the employer and the workmen, even if the agreement is reached outside the conciliation proceedings, shall be binding on the parties to the agreement. The term “settlement” is defined in Section 2(p) as a settlement arrived at in the course of a conciliation proceeding, and also includes a written agreement between the employer and the workmen that is executed outside the conciliation process, provided the agreement is signed in the manner prescribed and a copy is sent to the appropriate Government and to the conciliation officer. When such an agreement is executed, it qualifies as a settlement and, under Section 18(1), it becomes binding on the parties. Section 18(3) further states that an award that has become enforceable is binding on all parties to the industrial dispute and on others. Section 19(1) declares that a settlement takes effect on the date agreed by the parties, and if the parties do not agree on a date, it takes effect on the date the memorandum of settlement is signed. In the case before the Court, the settlement between the parties was signed on 1 October 1957; because the settlement did not specify a commencement date, it became operative on the same day, 1 October 1957, and bound the parties, who were also before the industrial tribunal and would thereafter be bound by the award after its publication. The appellant, in the alternative, advanced the following contention.

The Court observed that the primary objective of the Act is to preserve industrial peace among the parties engaged in a concern. Accordingly, when the parties to an industrial dispute achieve a settlement that is enforceable under section 18(1), the dispute is regarded as having been resolved. In such circumstances, the Court noted that the settlement should be given effect and that industrial harmony must not be disrupted by the publication of an award that could differ from the terms of the settlement. The Court acknowledged that a settlement reached directly between the parties is invariably preferable to adjudication, because a settlement, being the product of the parties’ free will, tends to foster a more durable peace and reflects mutual goodwill. Nevertheless, the Court held that it must reconcile the mandatory requirement of section 17(1), which obliges the publication of an award, with the equally mandatory binding nature of a settlement under section 18(1). Ordinarily, the Court explained, no difficulty should arise when a settlement is concluded while the dispute remains pending before the tribunal, because the parties can submit the settlement to the tribunal, which would then issue an award in conformity with the settlement. The Court referred to the decision in State of Bihar v. D. N. Ganguly, where an argument was raised that, when a settlement is reached during pending proceedings, the appropriate remedy is to cancel the reference. In that case, the Court observed that although the Act does not expressly empower an industrial tribunal to record a compromise and to pass an award in the manner prescribed by Order XXIII, Rule 3 of the Code of Civil Procedure, it would be unreasonable to presume that the tribunal would continue to decide the merits after being informed that the dispute had been amicably settled. The Court further emphasized that, where a dispute before a tribunal is settled amicably, the tribunal would inevitably agree to render an award that reflects the terms of the settlement. However, the Court pointed out that the present matter presents a distinct difficulty because the tribunal’s proceedings had already concluded, and the tribunal had transmitted its award to the Government before the settlement dated 1 October 1957 was executed. The Court noted that the Act contains no provision to address a situation in which a settlement is reached after the tribunal has finalized its award, just as the Act is silent on comparable scenarios.

In this case, the Court examined the problem that arose when the parties reached an agreement while their dispute was still pending before the industrial tribunal. The Court referred to the decision in Ganguly’s case, where it had been held that, if a settlement or compromise was reached during the pendency of the proceedings, the parties were required to file the settlement before the tribunal and the tribunal was then to make an award in accordance with the terms of that settlement. The present matter, however, presented a difficulty because the proceedings had already moved beyond the jurisdiction of the tribunal when the settlement was concluded. The Court recognised that this difficulty must be resolved so that there would be no conflict between the provision of section 18(1), which makes a settlement arrived at between the parties outside the conciliation process binding on them, and the provisions of section 18(3), which render the terms of an award binding on publication and which might differ from the terms of the settlement under section 18(1). The Court concluded that the only way to avoid such a conflict was to withhold publication of the award once the Government had been jointly informed by the parties that a settlement binding under section 18(1) had been reached. Although section 17(1) ordinarily required the Government to publish any award sent to it by the tribunal, the Court held that in the special situation where publication could create a clash between a binding settlement and a potentially binding award, the appropriate solution was to refrain from publishing the award. The Court further observed that this approach did not undermine the mandatory character of section 17(1), because the provision was intended to apply in ordinary circumstances, not in the exceptional circumstance now before it. The Court also considered the purpose of referring a dispute to the tribunal, namely to resolve disagreements between employers and workmen. When a settlement is reached after the award has been submitted to the Government but before its publication, there is no longer any dispute for the award to resolve, rendering the award effectively useless. Consequently, the Court advised that the Government should not publish such an award because the underlying dispute no longer exists. The Court acknowledged, however, that this solution could give rise to a difficulty if one party were to allege that the settlement had been obtained through fraud, misrepresentation, or undue influence, thereby challenging the validity of the settlement.

The Court observed that a difficulty could arise when the workmen’s representative allegedly exchanged the workers’ interests for personal gain, thereby calling into question the validity of a settlement. The Court noted that such a difficulty would persist even where a settlement had been reached in the ordinary manner between the employer and the workmen and was declared binding by section 18(1) of the Act, even though no dispute relating to that settlement had been referred to a tribunal. However, the Court explained that this difficulty ought not to arise if sections 2(p), 18(1) and 19(1) of the Act are read together. Section 2(p) defines a settlement as a written agreement between the employer and the workmen that is concluded outside the course of conciliation proceedings, provided that the agreement is signed by the parties in the manner prescribed by the rules and that a copy of the signed agreement is sent to the appropriate Government authority and to the conciliation officer. Consequently, for a settlement to be valid, it must be executed in the prescribed form and a copy must be forwarded to both the Government and the conciliation officer. The Court held that compliance with these procedural requirements ordinarily guarantees that the agreement is free of the defects previously mentioned, such as fraud, misrepresentation or undue influence. Section 18(1) then makes such a settlement binding on the parties, while section 19(1) provides that the settlement becomes operative on the date on which it is signed, or on any later date expressly specified in the settlement for its commencement. Accordingly, the moment an agreement is signed in the manner required by the rules and a copy is transmitted to the Government and the conciliation officer, the agreement instantly acquires binding effect upon the parties and comes into force on the signing date or on the date stipulated therein. At that point, the Court said, there is no room for the Government to conduct any inquiry into the bona‑fide nature of the settlement, because the settlement has already become binding and operative upon compliance with the statutory formalities. The Court further emphasized that, once a settlement has become binding and, in many instances, already operative, the Government cannot question the settlement’s authenticity. In view of the potential conflict that could arise between a settlement that is binding under section 18(1) and an award that might become binding upon publication under section 18(3), the Court directed that the appropriate course for the Government is to refrain from publishing the award so as to avoid any such conflict. The Court added that if a dispute subsequently arises concerning the settlement, that dispute would constitute a separate industrial dispute, which the Government may refer for adjudication; if, upon adjudication, the settlement is found not to be binding under section 18, then the Government would be free to publish the award it had previously withheld.

The Court observed that, under the Act, the Government always retained the power to publish an award that it had previously withheld, although the Court considered that such situations would be exceedingly uncommon. The Court further explained that Section 17 (1) imposed a mandatory duty on the Government to publish any award received from an industrial tribunal. However, the Court held that the present case presented an exceptional circumstance that required a balancing of the provisions contained in Section 18 (1) and Section t8 (3). In order to reconcile these two statutory provisions, the Court concluded that the only viable approach was to withhold publication of the award because a settlement that had become binding under Section 18 (1) was already in effect. The Court stressed that publishing the award could create a conflict between the binding settlement under Section 18 (1) and a binding award that might arise under Section 18 (3). Consequently, the Court opined that the Government should not publish the award pursuant to Section 17 (1). In cases where the Government intended to publish the award, the Court indicated that it could be directed not to do so, given the existence of a binding settlement between the parties concerning the very matters that formed the subject of the adjudication in the award. Accordingly, the Court allowed the appeals, directed the Government not to publish the awards sent to it by the industrial tribunal in these specific cases, and ordered each party to bear its own costs. The appeals were therefore allowed.