Hochtief Gammon vs Industrial Tribunal, Bhubaneshwar

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

Court: Supreme Court of India

Case Number: Civil Appeal No. 611 of 1963

Decision Date: 01/04/1964

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

In the matter titled Hochtief Gammon versus Industrial Tribunal, Bhubaneshwar, the Supreme Court delivered its judgment on the first day of April in the year 1964. The opinion was authored by Justice P. B. Gajendragadkar, who sat as Chief Justice, and the bench also included Justices K. N. Wanchoo and K. C. Das Gupta. The case is reported in the 1964 volume of the All India Reporter at page 1746 and also appears in the 1964 supplement to the Supreme Court Reporter at page 596. The parties before the Court were Hochtief Gammon, appearing as the petitioner, and the Industrial Tribunal of Bhubaneshwar together with the State of Orissa and certain other respondents, who were designated as the respondents. The citation of the decision includes references to the Industrial Disputes Act of 1947, specifically sections ten and eighteen, and the judgment dealt with questions concerning the addition and summoning of parties, the powers of an industrial tribunal when a dispute is referred, the limitation of liability for workmen’s claims, the identification of the employer, and whether the disputes involved were distinct and substantial.

The Court explained that, following the referral of an industrial dispute between the appellant and the respondents and their workmen, the Office of the Industrial Tribunal issued a notice not only to the appellant and its workmen but also to Hindustan Steel Limited. The Tribunal had done so because a copy of the Government’s notification containing the order of reference had been served on Hindustan Steel. Hindustan Steel appeared before the Tribunal and asserted that it had no concern or interest in the dispute and therefore should not be added as a party to the reference. The appellant argued that Hindustan Steel’s interests were aligned with its own, that material documents likely to be produced were in Hindustan Steel’s possession, and that the Tribunal should include Hindustan Steel as a party. The Tribunal considered the matter and indicated that it would decide the issue at a later stage, but in the meantime it ordered Hindustan Steel to be present during the hearing on the merits of the reference. Dissatisfied with this interim direction because it did not expressly order Hindustan Steel’s addition as a party, the appellant filed a writ petition under Article 226 of the Constitution before the High Court. The High Court dismissed the petition, holding that it was premature since the Tribunal had not yet issued a final order. In its holdings, the Supreme Court stated that the original provision of section eighteen, subsection b, implied a power for the Tribunal to summon persons who were not parties to the dispute. It further observed that when specific points of dispute are referred to the Tribunal, the Tribunal may also deal with incidental matters and may, under the current version of section eighteen, subsection three, sub‑b, summon persons who have not been joined to the reference. The Court noted that section ten, subsection five, now empowers the appropriate Government to add other establishments, groups or classes of establishments of a similar nature to the reference if it is satisfied that they are likely to be interested in or affected by the dispute, and that such additions may be made either at the time of reference or during the pendency of the proceedings, provided they occur before the award is filed. Consequently, persons added in this manner may be summoned under the powers granted by section eighteen, subsection three, sub‑b. The Court emphasized that the language of section eighteen, subsection three, sub‑b, is identical to that of the original subsection b, and therefore the implied power previously residing in subsection b now operates under the current subsection. Finally, the Court clarified that the Tribunal may consider, in addition to the disputes specified in the order of reference, only matters that are incidental to those disputes, and that any improper summoning of parties could be recorded by the Tribunal and would affect the binding nature of any award pronounced.

The reference may be amended either when it is first made or at any time while the reference proceedings are pending, but any such amendment must be completed before the Tribunal issues its award. If, for example, five hundred ninety‑seven persons were added to the reference, the Industrial Tribunal would be empowered, under section 18(3)(b), to summon those persons to appear before it. The wording of section 18(3)(b) is identical to the wording that originally appeared in section 18(b); consequently, the implied authority that the Tribunal previously exercised under section 18(b) is now available to it under section 18(3)(b). Should the Tribunal determine that a person was summoned without a proper basis, it may record that opinion, and any award it makes would not be binding upon that person. The Tribunal’s jurisdiction to consider matters beyond those expressly listed in the order of reference is confined to issues that are incidental to the disputes specified. This limitation imposes a natural boundary on the Tribunal’s implied power to add parties under section 18(3)(b). When the Tribunal finds that a party named in the order of reference does not fully or adequately represent the employer’s or employee’s interests, it may order that additional persons be joined to represent those interests. In the same way, if the union named in the reference does not represent all employees, the Tribunal may add other unions it deems necessary. The guiding test is whether the inclusion of the additional party is essential to render the adjudication effective and enforceable. Applying this test constrains the Tribunal’s implied power to expand the roster of parties. The Court referred to the authorities P G Brooks, Receiver appointed by the Trustees for the mortgagee debenture holders of the Madras Electric Tramways (1904) Ltd. v. Industrial Tribunal, Madras, AIR 1954 Mad 369; Radhakrishna Mills Ltd., Peelamadu, Coimbatore Ltd. v. Special Industrial Tribunal, Madras, AIR 1954 Mad 606; and Anil Kumar Upadhaya v. P K Sarkar, AIR 1961 Cal 60 in support of this analysis.

The issue of who bears responsibility for paying the respondents’ claim that arises from the contract between the appellant and Hindustan Steel constitutes a completely separate dispute, unrelated to the industrial dispute that has been referred to the Tribunal for adjudication. Similarly, the determination of which entity is the employer in the relationship between the appellant and Hindustan Steel is a substantial question between those parties and cannot be treated as merely incidental. When the appropriate Government wishes the Tribunal to resolve the question of employer identity, it normally frames the reference in sufficiently broad terms and includes as parties to the reference all persons alleged to be employers, ensuring that the Tribunal can address that substantive issue.

The reference involved different persons who were alleged to be the employers. The case proceeded in the civil appellate jurisdiction as Civil Appeal No 611 of 1963, which was taken by special leave from the judgment and order dated 10 January 1962 of the Orissa High Court in O J.C. No 128 of 1961. Counsel for the appellant comprised N C Chatterjee, G Narayanaswamy, J B Dadachanji, O C Mathur and Ravinder Narain, while counsel for respondent No 3 consisted of S V Gupte, the Additional Solicitor‑General, G B Pai and R H Dehbar. The judgment was delivered on 1 April 1964 by Chief Justice Gajendragadkar. The principal issue that the appeal raised for determination concerned the construction of section 18(3)(b) of the Industrial Disputes Act, 1947 (No 14 of 1947), hereinafter referred to as “the Act”. The factual backdrop was that an industrial dispute concerning the payment of bonus had arisen between the appellant, Hochtief Gammon, and its workmen, who were represented by the Rourkela Workers Union, Rourkela. The Government of Orissa referred the dispute for adjudication to the Industrial Tribunal, Orissa on 14 November 1960. Upon receipt of the reference, the Tribunal issued an order on 17 November 1960 directing that notice of the reference be served on the parties concerned. Acting on that order, the Tribunal’s office dispatched notices not only to the appellant and the respondents but also to the Deputy General Manager of M/s Hindustan Steel Ltd., because a copy of the Government’s notification containing the reference had been served on that officer. After receiving the Tribunal’s notice, the Deputy General Manager of Hindustan Steel appeared before the Tribunal and argued that Hindustan Steel Ltd. was neither concerned nor interested in the dispute and therefore should not be added as a party to the reference. Subsequently, on 21 March 1961, the appellant filed an application before the Tribunal asserting that its interests and those of M/s Hindustan Steel Ltd. were common in the pending proceedings, and consequently that Hindustan Steel Ltd. should be joined as a party. In support of that application, the appellant claimed that Hindustan Steel Ltd. was a necessary party because material documents likely to be required as evidence were in its possession, and that the enquiry could not be completed without the presence of that concern as a party. The Tribunal considered the request to join Hindustan Steel Ltd. as a party and indicated that it would decide the matter at a later stage. In the interim, the Tribunal ordered that Hindustan Steel Ltd., having responded to the notice, should remain present during the hearing of the reference on its merits. This interim order did not satisfy the appellant, which continued to seek a specific direction from the Tribunal to formally add Hindustan Steel Ltd. as a party to the reference.

In this matter the appellant sought the inclusion of M/s Hindustan Steel Ltd. as a party to the reference. To achieve that aim, the appellant filed a writ petition in the Orissa High Court under Article 226 of the Constitution, asking that the order of the Industrial Tribunal which declined to consider the question of joining M/s Hindustan Steel Ltd. be set aside and that the company be added as a party to the reference. The High Court dismissed the writ petition, holding that the petition was premature. The High Court observed that the Industrial Tribunal had not yet issued a final order pursuant to section 18(3)(b) of the governing Act, and consequently, without expressing any view on the substantive merits of the dispute, the Court characterised the appellant’s application as incompetent because it was filed too early. Dissatisfied with that decision, the appellant obtained special leave to appeal to the Supreme Court. On behalf of the appellant, counsel argued that the Industrial Tribunal possessed the jurisdiction to add a party to the proceedings before it and, on the merits, that M/s Hindustan Steel Ltd. was a necessary party whose presence was essential for the full resolution of the dispute.

The principal question that arose for determination was the proper scope and effect of the provisions contained in section 18(3)(b) of the Act. To resolve this issue, it was necessary first to examine the language of section 18(b) as it existed in the original enactment of the Act and then to consider the present form of section 18(3)(b). In the original statute, section 18 was divided into four sub‑clauses identified as (a), (b), (c) and (d). The appeal focused specifically on sub‑clauses (a) and (b). Those provisions stated: “A settlement arrived at in the course of conciliation proceedings under this Act, or an award which is declared by the appropriate Government to be binding under sub‑section (2) of section 15 shall be binding on: (a) all parties to the industrial dispute; (b) all other parties summoned to appear in the proceedings as parties to the dispute, unless the Board of Tribunal, as the case may be, records the opinion that they were so summoned without proper cause.” The initial issue to be addressed was whether section 18(b), as then drafted, implied an inherent power in the Tribunal to summon persons as parties who were not originally parties to the industrial dispute. It was observed that clause (a) expressly referred to “all parties to the industrial dispute,” whereas clause (b) spoke of “all other parties summoned to appear.” The use of the term “other” suggested that the parties contemplated in clause (b) were distinct from those identified in clause (a). Section 2(k) of the Act defines an “industrial dispute” as, inter alia, any dispute or difference between employers and workmen; therefore, the parties to the industrial dispute contemplated in clause (a) were those persons between whom the dispute had arisen under the definition contained in section 2(k).

Clause (b) therefore looks at persons who are not actually and directly involved in the dispute that is the subject‑matter of reference under section 10. Consequently, section 18(b) appears to provide for the possibility that persons other than the parties to the industrial dispute may be summoned before the Tribunal. This raises the question of who has the authority to summon such persons. Section 11(3) of the Act, inter alia, provides that the Tribunal shall possess the same powers that a civil court enjoys under the Code of Civil Procedure when trying a suit with respect to the matters enumerated in clauses (a) to (d). Clause (a) authorises the enforcement of attendance of any person and the examination of that person on oath. Clause (b) authorises the power to compel the production of documents and material objects. Clause (c) authorises the issuance of commissions for the examination of witnesses. Clause (d) authorises any other matters that may be prescribed. It is clear, therefore, that the power to add a party to the proceedings, a power that could be exercised under Order 1 Rule 10 of the Code of Civil Procedure, is not included in section 11(3), and no other provision of the Act confers such a power on the Tribunal. Hence, if section 18(b) contemplates that persons other than the parties to the industrial dispute may be summoned, there is no specific statutory provision granting the Tribunal that power; the power must therefore be read as being implicit in section 18(b) itself. In this connection it is necessary to refer to section 10 as it then stood. Section 10(1) comprised three clauses, which read as follows: “If any industrial dispute exists or is apprehended, the appropriate Government may, by order in writing— (a) refer the dispute to a Board for promoting a settlement thereof; or (b) refer any matter appearing to be connected with or relevant to the dispute to a Court for inquiry; or (c) refer the dispute to a Tribunal for adjudication.” It is significant that, with respect to the reference to the Tribunal, section 10(1)(c) empowered the appropriate Government to refer the dispute itself to the Tribunal, and, unlike clause (b), it did not extend to any matter merely appearing to be connected with or relevant to the dispute. Thus, the power to refer an industrial dispute to the Government Tribunal for adjudication allowed the Government to refer the dispute itself, but it was not expressly equipped with the power to refer any ancillary matter that might be connected with or relevant to that dispute. The effect of these provisions is that, if the Industrial Tribunal, while dealing with an industrial dispute, concluded that persons other than those identified as parties to the dispute were necessary for a valid determination of that dispute,

In this case the Court observed that the Tribunal possessed the authority to summon individuals who were not originally parties to the dispute, and that any award finally rendered by the Industrial Tribunal would be binding upon those summoned persons. The Court noted that whenever additional persons were joined to an industrial dispute, a question commonly arose as to whether such joinder was justified; consequently section 18(b) required the Tribunal to record its view on whether the persons had been summoned without proper cause. Accordingly, the Court was inclined to accept the submission of Mr Chatterjee that, as originally drafted, section 18(b) implied that the Tribunal had an inherent power to call before it persons other than the dispute parties. This implication, the Court held, naturally raised the issue of the extent of that power. In examining that issue, the Court emphasized the essential fact that the Industrial Tribunal is a body of limited jurisdiction. Its jurisdiction is confined to hearing an industrial dispute that has been referred to it for adjudication by the appropriate Government pursuant to an order of reference issued under section 10. The Tribunal is not permitted to go beyond the terms of reference, because it is well‑settled that the reference order determines the scope of the Tribunal’s power and jurisdiction on a case‑by‑case basis. The Court further explained that section 10 has been amended repeatedly over time. The Industrial Disputes (Amendment) Act 1952 introduced substantial changes to section 10, one of which was the insertion of clause 10(1)(d). That clause now authorises the appropriate Government to refer not only the dispute itself but also any matter appearing to be connected with or relevant to the dispute, whether such matter falls within the Second Schedule or the Third Schedule, to a Tribunal for adjudication. In other words, under section 10(1)(d) the Government’s power to refer industrial disputes to the Tribunal has been broadened to include matters that are related or pertinent to the dispute. The Court also pointed to the addition of section 10(4) by the same amendment, which provides, inter alia, that the Tribunal’s jurisdiction is limited to the points of dispute specified in the reference order, but that jurisdiction may also encompass matters incidental to those points. Thus, when the Tribunal is dealing with the specified points of dispute and encounters incidental issues, it may, if it deems necessary, order the appearance of persons who were not originally joined to the reference. Such an order can be made under section 18(3)(b) as it currently stands.

Section 10(5) now gives the appropriate Government authority to enlarge a reference made to an Industrial Tribunal by adding other establishments, groups or classes of establishments that are of a similar nature, provided that the Government is satisfied those establishments are likely to be interested in or affected by the industrial dispute. In practical terms, when an industrial dispute is referred to a Tribunal for adjudication, and there exist within the territorial jurisdiction of the Government other establishments that would be affected by, or have a legitimate interest in, that dispute, the Government may include those establishments in the reference. Such inclusion may be effected at the moment the reference is initially issued or at any time while the reference proceedings are pending, but in every case the addition must be completed before the Tribunal submits its award.

When the Government adds persons or establishments to the reference, the Industrial Tribunal is empowered, under section 18(3)(b), to summon those added parties to appear before it. The provision previously known as section 18(b) was amended by Act 36 of 1956 and renumbered, so that the former section 18(b) is now contained within section 18(3)(b). Section 18(3) provides, inter alia, that an award of an Industrial Tribunal that has become enforceable shall be binding on (a) all parties to the industrial dispute and (b) all other parties who were summoned to appear in the proceedings as parties to the dispute, unless the Tribunal records an opinion that such summons was made without proper cause. The wording of section 18(3)(b) is identical to that of the former section 18(b); consequently, the implied power that the Tribunal could exercise under the earlier provision may now be exercised under section 18(3)(b). If the Tribunal believes that a party was summoned without proper cause, it may record that opinion, and any award it pronounces will not be binding on that party.

The Court examined the scope of the implied power in section 18(3)(b) and concluded that the Tribunal cannot use that power to materially expand the scope of the reference itself. The Tribunal’s jurisdiction to adjudicate an industrial dispute originates solely from the order of reference issued by the appropriate Government under section 10(1). The Tribunal may consider, in addition to the disputes expressly specified in the reference order, only matters that are incidental to those disputes. This limitation naturally curtails the Tribunal’s implied power to add parties to the reference. The Tribunal may, however, act if it finds that a party named in the reference order does not fully or adequately represent the interests of either the employer or the employees; in such a situation the Tribunal may direct that other persons be joined to ensure that the adjudication is effective and enforceable.

In this case the Tribunal was held to have authority to join additional persons only when those persons were required to adequately represent an interest that was not fully covered by the parties originally named in the reference. The Court explained that if the employer named in the reference did not completely embody the interests of the employer as a whole, the Tribunal could invite other persons who had a stake in the employer’s undertaking to become parties to the proceedings. Likewise, when the unions specified in the reference failed to represent all of the employees of the undertaking, the Tribunal was permitted to add such other unions that it considered necessary. The Court emphasized that the decisive test for permitting such addition was whether the inclusion of the new party was essential to render the adjudication effective and enforceable. In other words, the Tribunal had to consider whether the arbitration would be ineffective or unenforceable if the party were not joined. This test, the Court observed, imposed a limitation on the Tribunal’s implied power to add parties. The Court noted that the Madras High Court had examined this question in two reported decisions. In the first decision, P. G. Brooks, Receiver appointed by the Trustees for the mortgage debenture holders of the Madras Electric Tramways (1904) Ltd. v. The Industrial Tribunal, Madras & Ors., the Division Bench held that section 18(b) necessarily conferred a power on the Tribunal to add parties, even if those parties were not the employer or the employee. In that case the party added was a Receiver, and the Court found that without the Receiver the adjudication would have become ineffective. The judgment described the Receiver not as an outsider or a disinterested spectator but as a person who was vitally concerned with the proceedings and whose presence was necessary to make the final award effective, valid and enforceable (A.I.R. 1954 Mad. 369). The second decision, Radhakrishna Mills Ltd. Peelamedu, Coimbatore Dt. v. The Special Industrial Tribunal, Madras & Ors., was decided by a single Judge of the Madras High Court, who followed the earlier ruling. In that case a party summoned by the Tribunal had been added to the reference by the State Government under section 10(5) of the Act. A later decision, Anil Kumar Upadhaya v. V. P. K. Sarkar & Ors., was decided by a single Judge of the Calcutta High Court, who likewise accepted the same view. In that matter the Trustee of the Provident Fund, who had not originally been impleaded, was summoned by the Tribunal, and the Court held that without the Trustee the award would have been nugatory. The Court observed that in all these decisions the implied power of the Tribunal to summon additional parties was confined to situations where such addition appeared necessary to make the reference complete and to ensure that the award was effective and enforceable. The power could not be employed to broaden the scope of the reference or to introduce matters that were not the subject‑matter of the reference nor incidental to the dispute that had been referred.

The Court explained that the Tribunal’s implied authority to summon additional parties is limited to situations where the inclusion of such parties is essential to render the reference complete and to ensure that any award issued is effective and enforceable. This power cannot be used to broaden the subject‑matter of the reference by bringing in issues that are not part of the dispute that has been referred, nor can it be employed to introduce matters that are unrelated to the industrial dispute before the Tribunal.

Having set out that principle, the Court turned to the appellant’s submission that M/s Hindustan Steel Ltd should be treated as a necessary party and therefore be added to the proceedings before the Industrial Tribunal. Counsel for the appellant, Mr Chatterjee, advanced two separate arguments in support of this request. The first argument was that, if the Tribunal ultimately determines that the respondents’ claim for bonus for the relevant year is well‑founded on the basis of the contract between the appellant and M/s Hindustan Steel Ltd, the liability to pay that bonus would lie with Hindustan Steel Ltd and not with the appellant. According to Mr Chatterjee, the appellant is a firm that was created solely for a single project involving construction, foundation and civil‑engineering works at Rourkela, and it was engaged by Hindustan Steel Ltd as its agent. An agreement between the two parties, containing specific clauses referred to by counsel, allegedly shows that any liability for the bonus, if established against the appellant, would in fact belong to Hindustan Steel Ltd. The Court stated that it would not examine the substantive merits of this contention, but it was satisfied that even assuming the clauses do allocate liability to Hindustan Steel Ltd, such a contractual relationship does not satisfy the requirement of section 18(3)(b) for a party to be deemed “necessary.” The Court observed that this line of argument merely raises a distinct dispute between the appellant and its alleged principal, a dispute that is completely separate from the industrial dispute that has been referred to the Tribunal for adjudication.

The second argument presented by counsel was that Hindustan Steel Ltd should be considered a necessary party because it is the actual employer of the workmen represented by the respondents’ union, rather than the appellant. In other words, although the appellant formally engaged the workmen, it did so in the capacity of an agent of Hindustan Steel Ltd, and therefore, for the purpose of resolving the industrial dispute referred by the State of Orissa, the principal—namely Hindustan Steel Ltd—ought to be added as a party. The Court noted that the appellant does not contest the union’s claim that the workmen were employed by the appellant. The Court further observed that the State Government could have asked the Tribunal to examine the question of who the employer was, and in that event the terms of reference could have been drafted to include all alleged employers. Since the State chose not to frame the reference in that broader manner, the Court concluded that the issue of employer identity is not an incidental question within the scope of the present industrial dispute, and consequently, the argument that Hindustan Steel Ltd must be added as a necessary party under the implied powers of section 18(3)(b) does not succeed.

The Court observed that when a government wishes to resolve the question of who the employer is, it normally frames the reference broadly and includes in that reference every person alleged to be an employer. In the present proceedings, the Court noted that such a broad reference had not been made, and consequently it could not conclude that the issue of employer identity between the appellant and M/s Hindustan Steel Ltd. was merely incidental to the industrial dispute referred under section 10(1)(d). The Court further held that the dispute between the appellant and M/s Hindustan Steel Ltd. was a substantial disagreement and could not be characterised as incidental in any sense. Accordingly, the Court found that this ground did not justify treating M/s Hindustan Steel Ltd. as a necessary party who could be added and summoned under the Tribunal’s implied powers granted by section 18(3)(b). While the Court accepted the argument that section 18(3)(b) creates an implied power for the Tribunal to add parties and summon them, it ruled that in the present case that power could not be exercised because, given the limited scope of the implied power, M/s Hindustan Steel Ltd. could not be regarded as a necessary party under the provisions of section 18(3)(b). As a result, the Court dismissed the appeal, ordered that it fail, and awarded costs to the other side.