M/S. Swadeshi Cotton Mills Co., Ltd.,
Kanpur Vs. Rajeshwar Prashad & Ors  INSC 194 (14 November 1960)
CITATION: 1961 AIR 429 1961 SCR (2) 359
Industrial Dispute--Compromise during
pendency of appeal--- Validity--Procedure--The U. P. Industrial Disputes Act,
1947 (U. P. XXVIII of 1947), ss. 6-c, 2(t)--U. P. Industrial Disputes Rules,
1957, r. 5(1)--Payment of Wages Act, 1936 (Act 4 of 1936), s. 23.
While this appeal by special leave, relating
to an industrial dispute was pending in this Court a Director of the appellant
employer and a representative of the respondents employees made an application
to the Court praying that an order might be passed in terms of a compromise
since an agreement was alleged to have been entered into by the appellants and
the respondents. Some of the respondents contested this compromise and the
court sent issues to the Tribunal for finding whether the alleged com- promise
actually took place between the parties, and if so, was it valid. The Tribunal
returned findings to the effect that the compromise did actually take place and
Those findings were contested in the appeal.
Held, that a compromise agreement seeking to
settle an industrial dispute which was still pending decision in this Court
would not contravene the provisions of S. 23 of the Payment of Wages Act which
contemplated rights not likely to be modified or reversed in any judicial
The procedure prescribed by s. 6-C of the U.
P. Industrial Disputes Act and the provisions thereof did not affect the powers
of this Court, or the competence of the parties, to amicably settle a dispute
pending before it.
The procedure for obtaining an order in terms
of the com- promise entered into between the parties pending the appeal in this
Court is prescribed by its own rules and the provisions of S. 2(t) of the U. P.
Industrial Disputes Act and rule 5(1) of the Rules made thereunder have no
application to such case.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 53 of 1958.
Appeal by special leave from the Decision
dated February 28, 1957, of the Labour Appellate Tribunal, Bombay, in Appeal
No. 111-160 of 1956.
S. P. Varma, for the appellants.
360 L. K. Jha, Janardan Sharma, R. C. Prasad
and Maqbool Ahmad Khan, for the respondents.
1960. November 14. The Judgment of the Court
was delivered by GAJENDRAGADKAR, J.-This appeal by special leave arises from an
industrial dispute between the appellant Messrs.
Swadeshi Cotton Mills and the respondents,
its employees, and the short preliminary question which is raised for our
decision is whether an order should not be passed in this appeal in terms of
the compromise agreement alleged to have been reached between the appellant and
the respondents. It appears that on December 28, 1955, an industrial dispute
between the parties was referred by the Government of Uttar Pradesh to the
Industrial Tribunal, U. P., Allahabad, for adjudication under ss. 3, 4 and 8 of
the U. P. Industrial Disputes Act, 1947 (U.P. Act XXVIII of 1947) and in
pursuance of the provisions of cl. 11 of G. O. No. U- 464(LL)/XXXVI-B-257
(LL)/1954 issued on July 14, 1954. The dispute thus referred was whether the
existing rates of wages of jobbers mentioned in the annexure employed in the
weaving department of the appellant need any revision; if so, with what details
and from what date ? The Tribunal tried this issue and came to the conclusion
that no case for revision had been made out by the respondents. Against this
decision of the Tribunal the respondents preferred an appeal before the Labour
Appellate Tribunal. Their appeal succeeded and the Appellate Tribunal directed
that the award of the original Tribunal should be set aside, and that the
appellant " shall introduce from the date of reference a uniform rate of
two annas in both the old and new sheds irrespective of the number of looms
assigned to the line jobbers ". It would be noticed that as a result of
this decision the existing rates have been revised and the revision has been
ordered to take effect retrospectively from the date of reference. It is
against this decision of the Labour Appellate Tribunal that the appellant has
preferred the present appeal by special leave.
361 Pending this appeal in this Court the
appellant purported to enter into a compromise with the respondents and the
terms of the compromise were reduced to writing, and in pursuance of the said
compromise an application was made to this Court on February 26,1958, signed by
Mr. Bagla, on behalf of the appellant in his capacity as a Director of the
appellant, and Mr. Maqbool Ahmad Khan, for the respondents, in his capacity as
the General Secretary of the Suti Mill Mazdoor Sabha, Kanpur. This application
set out the material terms of the compromise. One of the terms of the compromise
is that the revised rate should take effect not from December 28, 1955, which
is the date of reference but from July 1, 1957. Certain other modifications
have also been made in the decision under appeal.
Before the appeal could be placed on the Board
for passing orders in terms of this compromise an application was made on
behalf of some of the respondents alleging that the General Secretary Mr. Khan
had no authority or power to enter into any compromise as a representative of
the respondents, and that the compromise alleged to have been entered into by
him with the appellant was not acceptable to the respondents. In support of
this case the application referred to a resolution passed by the General
Council of the Mazdoor Sabha whereby it was declared that no office bearer
could conclude an agreement with an employer about an industrial dispute
without the consent of the General Council, and reliance was also placed on the
relevant provisions in the constitution of the Mazdoor Sabha.
Thereafter the petition for compromise was
placed before this Court for hearing on April 10, 1960, and the Court directed
that the application for recording compromise as well as the appeal itself
should both be placed together for hearing before the Court as soon as the
parties file their respective statements of the case. After the statements were
filed the appeal and the petition were placed before this Court on May 5, 1960,
and the Court by an interlocutory judgment 46 362 sent two issues to the
Tribunal with a direction that the Tribunal should hear the parties on those
issues and make its findings thereon. The two issues were: (1) Has the
compromise set up by the appellant taken place between the parties; (2) If yes,
is the compromise valid ? In pursuance of this order the Tribunal has recorded
evidence, heard the parties and made its findings. It has found that the
compromise in fact has taken place as alleged in the petition made before this
Court in that behalf, and that the said compromise is valid. In dealing with
the first question of fact the Tribunal has considered the evidence
exhaustively in the light of the background of the dispute between the parties;
it has found that negotiations went on between the parties for a fairly long
time during which period the parties discussed the pros and cons of the
compromise, that during these negotiations Mr. Khan was watchful of the
interests of the respondents, that the compromise had been approved by the
workmen concerned, that on the whole it is to their advantage and does not at
all militate against the accepted principles of industrial adjudication, and
what is more it has been acted upon and has not remained a mere paper
transaction. It has explained that the opposition to the compromise proceeded
sub- stantially from the dispute between Mr. Khan, the Secretary, and Mr.
Bajpai, the President, and the Tribunal felt no doubt that the compromise was
the result of bona fide attempt on the part of both the parties to settle the
dispute amicably in order to create goodwill and co- operation amongst the
employer and the employees.
On the question of law raised by the second
issue the Tribunal has held that the compromise is perfectly valid.
It has considered the relevant provisions of
the constitution of this Sabha, the practice prevailing in regard to such
compromises and to several agreements of compromise entered into consistently
with the said practice.
It was urged before the Tribunal that the
compromise is invalid under s. 6-B of the U.P. Industrial Disputes Act, 1947,
as well as s. 2(vi). (c) of the Payment of Wages Act, 1936 (Act 4 of 1936).
363 These contentions have been rejected by
the Tribunal. In the result the findings recorded on both the issues are in
favour of the compromise.
After these findings were received in this
Court, the' appeal and the compromise petition have now come before us for
final disposal. The finding of fact recorded by the Tribunal on the first issue
has not been and cannot be challenged before us. It must ( therefore be taken
to have been established that at the relevant time Mr. Khan was the General
Secretary of the respondents Sabha, and as such was entitled to represent them
and did represent them during the course of the present adjudication
proceedings, and that the compromise reached between him and the appellant is
the result of mutual discussions carried on for some time and its terms on the
whole are beneficial to the respondents.
The practice prevailing in this Sabha and a
large number of precedents which are consistent with the said practice indicate
clearly that the Secretary of the Union who represents the workmen in
industrial disputes has always been authorised and has exercised his authority
to settle such disputes when it was thought reasonable and proper to do so. As
we have often indicated it is always desirable that industrial disputes should
be amicably settled because such settlement conduces to happy industrial
relationship and encourages co-operation between the parties. That is why when
industrial disputes are brought before this Court under Art. 136 of the
Constitution this Court generally appreciates attempts made to settle disputes
amicably, and in proper cases encourages such settlements. Mr. Jha, for the
respondents, however, contends that though amicable settlement of industrial
disputes may otherwise be desirable, in law such settlement or compromise is
If we come to the conclusion that compromise
of industrial disputes pending an appeal is prohibited by law, or is otherwise
inconsistent with such provisions it may be necessary to hold that the present
compromise is bad in law however much amicable settlement of industrial
disputes may otherwise be desirable. Therefore the question which arises for
our 364 decision on the present compromise petition is: Is the contention
raised by Mr. Jha correct that the compromise is invalid in law ? The first
point urged by Mr. Jha in support of this argument is that the present
compromise is prohibited by a. 23 of the Payment of Wages Act. This Act has
been passed to regulate the payment of wages to certain classes of persons
employed in industry, and there is no doubt that the wages as revised by the
Labour Appellate Tribunal in the present case would constitute wages under s. 2
(vi) of this Act. Section 23 provides that any contract or agreement, whether made
before or after the commencement of this Act, whereby an employed person
relinquishes any right conferred by this Act shall be null and void in so far
as it purports to deprive him of such right. The relevant provisions of this
Act require the fixation of wage periods, provide for the time of payment of
wages, authorises certain deductions, and permits the imposition of fines only
subject to the conditions specified in that behalf. Section 15 of the Act
provides for the determination of claims arising out of deduction of wages or
delay in payment of wages and penalty for malicious or vexatious claims.
Section 16 prescribes for the making of an application in which such claims can
be set up; and a. 18 provides for the powers for the authorities appointed under
the Act. Mr. Jha contends that the revised wage structure directed by the
Labour Appellate Tribunal entitles the respondents to claim the respective
amounts there indicated as their wages, and the effect of the impugned
compromise is that the respondents are relinquishing a part of their right in
that behalf. Mr. Jha con. tends that in giving up their claim for the
retrospec- tive operation of the decision of the Labour Appellate Tribunal for
a substantial part of the period the res- pondents are required to contract
themselves out of their legal rights conferred by the award and there. fore
referable to this Act, and that makes the compromise invalid. This argument is
misconceived because it fallaciously assumes that the decision under appeal has
become final and that the rights accruing under 365 the said decision would not
be and cannot be affected by any compromise. The most significant fact to
remember in this connection is that the decision on( which the alleged rights
are based is itself subject to an appeal before this Court, and in that sense
it is not a final decision at all; it is liable to be reversed or modified, and
that being so the rights claimable under the said decision are also liable to
be defeated, or materially affected. In such a case the industrial' dispute
would undoubtedly be pending before this Court, and it would be idle for Mr.
Jha to contend that an attempt to settle such a dispute and not to invite a
decision of this Court contravenes the provisions of a. 23 of this Act. Just as
an industrial dispute could have been settled between the parties either before
it was referred for adjudication to the Industrial Tribunal, or after it was
referred and before the award was pronounced by the Tribunal, so would it be
open to the parties to settle the dispute so long as it was pending either
before the Labour Appellate Tribunal or before this Court. The provisions of s.
23 of this Act postulate certain definite rights which are not likely or liable
to be modified or reversed in any pending judicial proceedings, and since this
factor is absent in cases where an appeal is pending before this Court it would
not be reasonable to rely on the said provisions and contend that they in
substance prevent or prohibit amicable settlement of disputes.
The other argument urged against the validity
of the compromise is based on the provisions of s. 6-C of the U. P. Industrial
Disputes Act, 1947. This section corresponds substantially to s. 19 of the Industrial
Disputes Act XIV of 1947. It provides, inter alia, that an award shall in the
first instance remain in operation for the period of one year or such shorter
period as may be specified therein, and gives the State Government power to
extend the period of operation from time to time if it thinks fit. It also
provides that the State Government, either on its own motion or on the
application of any party bound by the award, shorten the period of its
operation, if it is shown that there has been a material change in the
circumstances 366 on which the award was based. The argument is that any
modification in the award can only be made by adopting the procedure prescribed
by s. 6-C. In our opinion there is no substance in this argument. Section 6-C
undoubtedly confers upon the State Government certain powers to fix the
duration of the operation of the award, but there can be no doubt that the
section can have no bearing on the powers of this Court in dealing with an
industrial dispute brought before it under Art. 136 of the Constitution. The
award to which s. 6-C refers is an award which has become final in the sense
that it is no longer subject to consideration by any Tribunal or Court. So long
as an award is pending before a Tribunal or a Court the jurisdiction of the
Tribunal or the Court to deal with it in accordance with law is not affected by
s. 6-C, and the competence of the parties to settle their dispute pending before
the Tribunal or the Court is also not affected or impaired by the said section.
In other words, what we have said about the argument based on the provisions of
s. 23 of the Payment of Wages Act applies with equal force to the present
argument as well.
Then it is contended that the impugned
compromise is a settlement within the meaning of s. 2(t) of the U. P. Act and
as such it can be executed only in the manner prescribed by the Act. Section
2(t) defines a settlement as one which is arrived at in the course of
conciliation proceedings and as including a written agreement between the
employer and the workmen arrived at otherwise than in the course of
conciliation proceedings when such an agreement has been signed between the
parties thereto in such manner as may be prescribed and a copy thereof has been
sent to the State Government and the conciliation officer. Rule 5(1) of the U.
P. Industrial Disputes Rules, 1957, prescribes the procedure for recording a
settlement as defined by s. 2(t).
It is true that this procedure has not been
followed, but it is difficult to understand how s. 2(t) or the procedure
prescribed by r. 5(1) can have any application to a compromise agreement which
has been entered into between the parties pending the 367 appeal in this Court.
The compromise in question is intended to be filed in this Court for the
purpose of enabling the parties to request this Court to pass an, order in
terms of the said compromise. The procedure for obtaining such an order which
has to be followed is the procedure prescribed by the rules of this Court, just
as if a compromise was reached before the Tribunal the procedure to be followed
before it would be, the procedure prescribed by its rules. Therefore we have no
doubt that the compromise in question cannot attract the procedure prescribed
by r. 5(1).
The result is that the finding recorded by
the Tribunal that the compromise in question is valid is obviously right and
must be confirmed. Since it is found that the compromise in fact has taken
place and is otherwise valid, we have no hesitation in directing that an order
should be drawn in terms of the said compromise in the present appeal.