Kays Construction Co. (P) Ltd vs State Of Uttar Pradesh And Others

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

Court: Supreme Court of India

Case Number: Civil Appeals Nos. 1108 and 1109 of 1963

Decision Date: 26 November, 1964

Coram: M. Hidayatullah, P.B. Gajendragadkar, J.C. Shah, S.M. Sikri, R.S. Bachawat

Kays Construction Co. (P) Ltd. appealed against the State of Uttar Pradesh and others, and the Supreme Court of India delivered its judgment on 26 November 1964. The judgment was authored by Justice M. Hidayatullah and was decided by a bench consisting of Justice M. Hidayatullah, Chief Justice P. B. Gajendragadkar, Justice J. C. Shah, Justice S. M. Sikri, and Justice R. S. Bachawat. The case is reported as 1965 AIR 1488 and 1965 SCR (2) 276, and it has been subsequently cited in several later decisions including RF 1966 SC 616 (5) and R 1972 SC 451 (22). The statutory framework in question was the Uttar Pradesh Industrial Disputes Act, 1947, specifically sub‑sections (1) and (2) of Section 6‑H, which deal with the recovery of back wages of workmen and whether such wages are considered “money due” or a “benefit capable of being computed in terms of money.”

The factual background, as set out in the headnote, explained that the appellant company was required to pay back wages to certain workmen under an award of the Labour Tribunal. The Labour Commissioner issued a recovery certificate for a part of those wages to the Collector under Section 6‑H(1) of the Uttar Pradesh Industrial Disputes Act, 1927, and indicated that a further certificate would be issued later once the exact amount of the remaining wages had been worked out. The appellant company contested the certificate before the High Court, arguing that the certificate did not relate to “money due” for which proceedings under sub‑section (1) of Section 6‑H were appropriate, but rather to a “benefit” that had to be computed in monetary terms and therefore fell within sub‑section (2) of the same section. A single Judge of the High Court accepted the appellant’s contention, but a Division Bench of the same court reversed that decision. Consequently, the appellant company filed a special leave appeal before the Supreme Court.

The Supreme Court held that the Division Bench had correctly limited the expression “benefits” in the second clause to items such as rent‑free quarters, free electricity, and other facilities that are not earned through labour. In the present case, the issue was not the valuation of such non‑labour benefits but merely the arithmetic calculation of total money wages over a specified period. The Court observed that the elaborate procedure prescribed in sub‑section (2) of Section 6‑H was not intended for situations where only a straightforward arithmetic computation of wages was required. Accordingly, the appeal could not succeed. The Court cited several precedents to support its reasoning, including M.S.N.S. Transports, Tiruchirapalli v. Rajaram and another (1960 1 L.L.J. 336), Seshmusa Sugar Works Ltd. v. State of Bihar (AIR 1955 Patna 49), S. S. Shetty v. Bharat Nidhi Ltd. (1958 SCR 442), Kasturi & Sons (P) Ltd. v. N. Salivatesaram (1959 SCR 1), Punjab National Bank Ltd. v. Kharbunda (1962 Supp. 2 SCR 977), and Shri Amarsinghji Mills Ltd. Nagarashua (M.P.) (1961 1 L.L.J. 581). The judgment concluded the civil appellate jurisdiction for Civil Appeals Nos. 1108 and 1109 of 1963, which were special leave appeals from the Allahabad High Court judgments dated 15 March 1962 and 9 May 1962 respectively.

In this matter, the Court observed that the appeals were filed under special leave against a judgment of the Allahabad High Court dated 15 March 1962 and an order dated 9 May 1962. Counsel for the appellant consisted of Sir Iqbal Ahmad, K. Rajendra Chaudhuri and K. R. Chaudhuri, while counsel for respondents numbered one to four were C. B. Agarwala and O. P. Rana. The opinion of the Court was articulated by Justice Hidayatullah, who delivered the judgment in a clear and concise manner. These proceedings comprised two separate special leave appeals in which Kays Construction Co. (P) Ltd. acted as the appellant. Civil Appeal No. 1108 of 1963 challenged the Allahabad High Court judgment dated 15 March 1962, whereas Civil Appeal No. 1109 of 1963 contested the High Court order of 9 May 1962 that declined to certify the case under Article 133 of the Constitution. The High Court had expressed the view that the proceedings from which the appeal arose were not civil matters within the meaning of Article 133. Since special leave was granted against the judgment and the Court was of the opinion that the appeal against that judgment must be dismissed, the Court found it unnecessary to decide the second appeal. The factual background of the dispute may now be summarized for the purpose of this judgment before the Court. The appellant company succeeded a private concern previously named Kays Construction Company, which had been owned and managed by Mr. H. M. Khosla, who now serves as Managing Director of the appellant. It appears that Mr. Khosla found the continuation of the business under his personal ownership unprofitable and consequently suspended the operation for a period before Kays Construction Co. (Private) Ltd. was incorporated. The newly formed private limited company subsequently took over the business and, together with that acquisition, employed some of the former workmen, though not all of them. This incomplete absorption of the workforce gave rise to an industrial dispute that was brought before the Allahabad Industrial Tribunal (Sugar). The Tribunal rendered its award on 31 January 1958, addressing among other matters the reinstatement and back wages of the workmen who had not been re‑employed by the appellant. Although the parties to the present appeals did not produce the full award, the Court recorded an extract that was pertinent to the controversy. The Court reproduced the operative part of the Tribunal’s award, which read as follows for the purpose of this proceeding: “As a result of my findings above, I hold that management of Messrs. Kays Construction Co. (Private) Limited, Allahabad, are required to reinstate the old workmen given in the Annexure of Messrs. Kays Construction Co., Allahabad.” The second part of the award stated: “They will be restored in their old or equivalent jobs and given continuity of service.” The final clause of the award read: “In view of the somewhat peculiar features of this case and in the largest interest of the Industry, I would, however, order that the workmen be paid only 50 per cent, of their back wages for the period they were forcibly kept out of employment.” Subsequent to the award, a large number of workmen lodged claims for their back wages, contending that they were entitled to the amounts specified by the Tribunal.

In this matter the Court referred to the first sub‑section of section 6‑H of the Uttar Pradesh Industrial Disputes Act, 1947. The provision, after deleting parts that were not relevant to the present dispute, read as follows: “(1) Where any money is due to the workmen from an employer under the provisions of sections 6‑H to 6‑R, whether by a settlement, an award, or an award made by an adjudicator or the State Industrial Tribunal appointed under this Act before the Uttar Pradesh Industrial Disputes (Amendment and Miscellaneous Provisions) Act, 1956 came into force, the workman may, without prejudice to any other mode of recovery, apply to the State Government for recovery of the money due. If the State Government is satisfied that money is due, it shall issue a certificate for the amount to the collector, who shall recover the sum as if it were arrears of land revenue. (2) Where any workman is entitled to receive from the employer any benefit that can be measured in monetary terms, the amount of such benefit may, subject to any rule that may be made under this Act, be determined by a Labour Court specified by the State Government, and the amount so determined may be recovered in the manner provided in subsection (1).” The appellant company raised numerous objections to the demand addressed to the Labour Commissioner of Uttar Pradesh, who had been entrusted with the powers of the State Government under the first sub‑section of section 6‑H. In brief, the company contended that some of the claimed workmen had already accepted employment either with the appellant company itself or elsewhere, that certain claimants were not parties to the original dispute, and that some claimants had died after the award was made. The company further argued that because the precise number of days each workman had been forcibly kept out of employment had not been ascertained, an order under section 6‑H(1) could not be validly issued. The Court noted that additional contentions were raised, but they were not necessary to consider because the dispute had been narrowed to a specific point. On 21 July 1958 the Labour Commissioner, claiming authority under the first sub‑section of section 6‑H, issued a certificate to the Collector of Allahabad directing the recovery of Rs 1,06,588‑6‑6. After the appellant company filed objections before the State Government, the Regional Conciliation Officer of Allahabad was directed to verify the claims. While verification was pending, the Labour Commissioner issued a second certificate on 9 September 1959, reducing the recoverable sum to Rs 50,654‑9‑6, stating that this amount was certainly due and that a further certificate would be issued for the balance after full verification of the claims. On 10 September 1959 the Collector issued an order, which was communicated by telegraph to the Chief Mechanical Engineer of the North‑East Railway at Gorakhpur, demanding that the stated sum be paid to the workmen from the security deposited by the appellant company.

On the basis of the security that the appellant Company had deposited with the Chief Mechanical Engineer, the appellant filed a petition under Article 226 of the Constitution on 2 November 1959, seeking to have the orders dated 9 September 1959 and 10 September 1959 set aside either by a writ of certiorari or by any other appropriate order, and also requesting the release of certain property that had been attached after the first certificate was issued.

The petition was subsequently heard by a Justice of the Allahabad High Court, who rendered a judgment in favour of the appellant. That judge annulled both the Labour Commissioner’s orders and the attachment of the property, imposing the condition that the company provide satisfactory security to the District Magistrate of Allahabad before the release could be effected. At this stage the dispute was substantially narrowed before the judge, and the sole remaining issue was to determine whether the workmen’s claim before the Labour Commissioner should be examined under the first sub‑section or the second sub‑section of section 6‑H.

In resolving that issue, the Justice relied on the reasoning of two earlier decisions: M. S. N. S. Transports, Tiruchirapalli v. Rajaram and Another (1), decided under section 33‑C of the Industrial Disputes Act, and Sesamusa Sugar Works Ltd. v. State of Bihar and Others (2), decided under section 20 of the Industrial Disputes (Appellate Tribunal) Act, 1950. He concluded that because the precise monetary amount of the benefit claimed needed to be ascertained, the appropriate proceedings had to be instituted before the Labour Court under the second sub‑section of section 6‑H, which requires determination of the money equivalent of the “benefit” before any certificate could be issued. In other words, the judge expressed the view that invoking the first sub‑section of section 6‑H at that stage was premature and therefore incorrect.

An appeal against this judgment was filed under the Letters Patent of the High Court, and the appeal led to the present order being examined. The Division Bench that heard the appeal reversed the earlier judgment. It held that the expression in the second sub‑section, “any benefit which is capable of being computed in terms of money,” refers to benefits such as free quarters or free electricity, and does not extend to benefits earned by a workman through his own labour. The Bench relied on the Supreme Court decision in S. S. Shetty v. Bharat Nidhi Ltd. (3), where Bhagwati J. observed that when a benefit awarded by a tribunal is not expressed in monetary terms, it must first be quantified in money before the appropriate Government may be approached for recovery under section 20(2) of the Industrial Disputes (Appellate Tribunal) Act, 1950.

According to the Division Bench, this principle supported its conclusion that converting a “benefit” into a monetary figure is a distinct exercise from simply calculating the amount of back wages owed. The Bench further distinguished the case of Kasturi & Sons (P) Ltd. v. N. Salivatesaram & Anr. (2), on the ground that section 17 of the Working Journalists (Conditions of Service & Miscellaneous Provisions) Act, 1955 expressly refers to money due in the form of compensation, gratuity, and wages. The Bench also differentiated the ruling in Punjab National Bank Ltd. v. Kharbunda (4), which held that monetary advantage or profit is not necessarily excluded from the term “benefit” under section 33‑C of the Industrial Disputes Act, 1947. Consequently, the Division Bench declined to follow the two High Court rulings previously cited, as well as the decision reported in Shri Amarsinghji Mills Ltd. v. Nagarashua (M.P.) & Ors. (5). The appellant now contends before this Court that the Division Bench’s interpretation of sections 6‑H(1) and 6‑H(2) is erroneous.

In discussing the meaning of “money due” and “benefit” under the relevant provisions, the Court noted that the decision in Punjab National Bank Ltd. v. Kharbunda (3) held that a monetary advantage or profit could fall within the term “benefit” as used in section 33C of the Industrial Disputes Act 1947. The Division Bench, however, distinguished that case and accordingly declined to follow the two High Court rulings that had been cited earlier, as well as the decision reported in Shri Amarsinghji Mills Ltd. v. Nagarashua (M.P.) & Ors. (4). Counsel before the Court argued that the Division Bench’s interpretation of sections 6‑H(1) and (2) was erroneous. The Court therefore examined how the two sub‑sections should be read. It observed that section 6‑H is analogous to section 33C of the Industrial Disputes Act 1947 and to section 20 of the Industrial Disputes (Appellate Tribunal) Act 1950, and that in all three statutes the comparable provision is split into two parts. The first part provides for the recovery of “money due” to a workman under an award, while the second part deals with a “benefit” that can be computed in monetary terms. Under the first sub‑section, when the State Government—or its delegate—finds that any money is due, it may issue a certificate to the collector, who then recovers the amount as an arrear of land revenue. The second sub‑section, by contrast, speaks of a benefit that, after being quantified in money by a Tribunal, becomes recoverable in the same manner as money due under the first part. This dual scheme is reflected in sections 6‑H(1) and (2). The Court explained that the difference between the two sub‑sections is clear: the benefit contemplated in the second sub‑section is not “money due” but an advantage or perquisite that can be expressed in monetary terms.

The Division Bench had supplied suitable examples of benefits that are computable in money yet, until they are so quantified, are not “money due.” For instance, the loss of the benefit of free quarters does not constitute loss of “money due,” although that loss can be measured in monetary terms through inquiry and calculation. The Court emphasized that the contrast between “money due” on one hand and a “benefit” that is not “money due” but can become so after a monetary equivalent is determined on the other delineates the respective scopes of the two sub‑sections. If the term “benefit” were interpreted to cover any mere arithmetic calculation of wages, the first sub‑section would have little practical effect, because every calculation—however simple—would have to be placed before a Tribunal. In the present case, the Court held that the amount in dispute consists of back wages for a period of unemployment, which falls squarely within the domain of the first sub‑section and not within the second. Consequently, the procedural machinery applicable to “money due” under the first sub‑section governs the recovery of the back wages in question.

The Court explained that, although a calculation was necessarily involved in fixing the amount for which the certificate would ultimately be issued, that calculation did not fall within the category described in the second sub‑section. The second sub‑section required a “benefit which is capable of being computed in terms of money”, a phrasing the Court held was not applicable to the simple arithmetic required to determine the sum of back wages. By contrasting the two sub‑sections, the Court showed that the first sub‑section dealt with “money due” directly, whereas the second sub‑section concerned a scenario where a benefit had first to be quantified in monetary terms before it could be considered “money due”. Consequently, mere arithmetic computation of the amount owed did not trigger the elaborate procedural regime of the second sub‑section. The appellant, the Court observed, had raised several objections that appeared to impede this straightforward calculation. Those objections concerned the “amount due” and were being examined because the State Government needed to confirm that the claimed amount was indeed payable. Nevertheless, the Court stressed that the distinction between “money due” and a “benefit which must be computed in terms of money” remained clear. The inquiry at hand related to the verification of a monetary claim under the first sub‑section, not to the valuation of a benefit in monetary terms as required by the second sub‑section. Accordingly, the Court affirmed that the Division Bench’s judgment was correct. It concluded that the appeal failed and ordered its dismissal with costs. The companion appeal was also dismissed, but the Court made no order regarding costs in that proceeding. The overall appeal was thus dismissed.