Ceat Ltd. Vs. Anand Abasaheb Hawaldar & Ors
 Insc 78 (16 February 2006)
Arijit Pasayat & R.V. Raveendran Arijit Pasayat,
Challenge in this appeal is to legality of the
judgment rendered by a Division Bench of the Bombay High Court in a Letters Patent
Appeal affirming judgment of a learned Single Judge. By the said judgment
learned Single Judge had confirmed the order passed by the Industrial Court, Thane Maharashtra (in
short 'Industrial Court').
The controversy involved in the present appeal
arises in the following background:
By Circular dated 30th June, 1992 the appellant
- a public limited company incorporated under the Companies Act, 1956 declared
a Voluntary Retirement Scheme (hereinafter referred to as the 'VRS-I') for its
employees which was accepted by the 337 employees. On 16th March, 1994 the appellant entered
into a Memorandum of Understanding with the employees' Union containing another
Voluntary Retirement Scheme (hereinafter referred to as the 'VRS-II').
The same was accepted by 179 employees.
Respondents 1 to 6 who had earlier accepted VRS-I filed a complaint before the
Industrial Court, Thane on 20th July, 1994 alleging that the appellant-company
had committed an unfair labour practice in terms of item nos.5, 9 and 10 of
Schedule IV of the Maharashtra Recognition of Trade Unions & Prevention of
Unfair Labour Practices Act, 1971 (in short the 'Act'). It was contended that
one of the benefits which was given to the employees who had accepted VRS-II,
namely payment of a sum of Rs.90,000/- ex-gratia, had not been extended to the
complainants who had retired pursuant to VRS-I in 1992.
This according to them was illegal, unlawful and
amounted to unfair labour practice. The Industrial Court after considering the materials placed
before it came to hold that the grievances of the complainants were well
founded. Accordingly, by award dated 24.10.1996, it directed the appellant to
pay Rs.90,000/- to each of the employees who had retired under VRS-I, as
similar sum had been paid to 179 employees who had accepted VRS-II in 1994. The
order passed by the Industrial Court was challenged by the appellant by filing a writ petition
in the Bombay High Court. A learned Single Judge dismissed the writ petition by
judgment dated 11.7.2001. In fact the learned Single Judge, modified the award
by granting additionally, interest at 6% P.A. from 15.4.1994 till date of
payment. A Letters Patent Appeal was filed before the Division Bench which was
also dismissed by the impugned judgment dated 12/13-6-2003.
It is to be noted that before the High Court the
following grievances were made by the employer:-
complaint of unfair labour practice could be filed only by a recognized union
and not by an individual workman or some of them. Therefore, in a complaint
filed by 6 employees, relief could not be granted to 337 employees.
order to sustain the grievance under Item (5) of Schedule IV to the Act,
something more than mere differential treatment was necessary to be
established. It was incumbent upon the claimants to show that there was any favouritism
or partiality shown to one set of workers regardless of merits.
order to sustain the grievance under Item (9) of Schedule IV to the Act, it was
to be established that there was failure to implement any award, settlement,
agreement, and (iv) In order to sustain the grievance under Item (10) of
Schedule IV to the Act, it was to be established that the employer had indulged
in act of force or violence.
The High Court found that the plea regarding
maintainability of the complaint by individual workman was not correct. Further
it held that in view of the clear statement in the letter dated 11.7.1992 made
by Sri P. Krishnamurthy, Vice-President of the Company, there was an assurance
that all the employees who would accept the VRS-I would be entitled to all
benefits which would be given to other employees and that those who would not
accept VRS-I would not be paid anything more. Therefore, the High Court held
that the fact that Rs.90,000/- was paid to those who accepted VRS-II clearly
indicated discrimination. Accordingly, the orders of the Tribunal and learned
Single Judge were confirmed by the Division Bench.
In support of the appeal Mr. T.R. Andhyarujina,
learned senior counsel submitted that the approach of the High Court is clearly
erroneous. Firstly, it was submitted that the complaint itself was not
maintainable before the Industrial Court as the complainants, at the relevant point of time, were
not workmen. Additionally, Items 5, 9 and 10 of the Schedule IV had no application
to the facts of the case. There was no discrimination, favouritism or
partiality whatsoever in any manner. Those who are covered by VRS-II stood at a
different footing from those who accepted VRS-I and, therefore, the complaint
should not have been entertained. It was further submitted that mere fact that
subsequently some more amount had been paid does not per se establish favouritism
or partiality. The Industrial Court and the High Court did not consider the distinguishing
features. Unnecessary emphasis was laid on the letter written by the
Vice-President referred to above. There was no award or agreement, or
settlement which as alleged was not implemented. No evidence was led to show
that there was any award or agreement or settlement which was to be enforced.
Similarly, there was no evidence led to show that the appellant had indulged in
any act of force or violence.
Learned counsel for the respondents on the other
hand submitted that factual findings have been recorded by the Tribunal which have
been endorsed by learned Single Judge and the Division Bench that the act of
paying an amount higher than what was paid to those who had accepted VRS-I
itself showed favouritism and partisan approach. VRS-I which was accepted by
337 employees was not voluntary and was on account of the threat perceptions.
In order to appreciate rival submission the
entries in Schedule IV of the Act need to be noted. They read as follows:-
SCHEDULE IV General Unfair Labour Practices on the part of Employers
To discharge or dismiss
by way of victimization;
not in good faith, but
in colourable exercise of employer's rights;
by falsely implicating
an employee in a criminal case on false evidence or on concocted evidence;
for patently false
on untrue or trumped up
allegation of absence without leave;
utter disregard of the principles of natural justice in the conduct of domestic
enquiry or with undue haste;
for misconduct of a
minor or technical character, without having any regard to the nature of the
particular misconduct or the past record of service of the employee, so as to
amount to a shockingly disproportionate punishment.
To abolish the work of a
regular nature being done by employees, and to give such work to contractors as
a measure of breaking a strike.
To transfer an employee mala
fide from one place to another, under the guise of following management policy.
To insist upon
individual employees, who were on legal strike, to sign a good conduct-bond, as
a pre-condition to allowing them to resume work.
To show favouritism or
partiality to one set of workers, regardless of merits.
To employ employees as
"badlis", casuals or temporaries and to continue them as such for
years, with the object of depriving them of the status and privileges of
To discharge or
discriminate against any employee for filing charges or testifying against an
employer in any enquiry or proceeding relating to any industrial dispute.
To recruit employees
during a strike which is not an illegal strike.
Failure to implement
award, settlement or agreement.
To indulge in act of
force or violence." It will be appropriate to first deal with Item (5)
which relates to the act of favouritism or partiality by the employer to one
set of workers regardless of merit.
The factual background which is virtually
undisputed is that the appellant-company took over Murphy India Ltd.
(hereinafter referred to as the 'Murphy'). Murphy had merged with the
appellant-company pursuant to the order of Board of Industrial & Financial
Reconstruction (in short 'BIFR'). Due to recession in the consumer electronic
industry, the undertaking became unviable. Before the VRS I and II the
appellant-company had introduced VRS Schemes in October, 1983 and February,
1988. All the employees who were covered by the VRS I and II were ex-Murphy
According to learned counsel for the appellant,
a complaint of unfair labour practice can be made only by the existing
employees. Under clause (5) of Section 3 of the Act the expression
"employee" only covers those who are workmen under clause (s) of
Section 2 of the Industrial Disputes Act, 1947 (in short the 'ID Act'). The
expression "workman" as defined in clause (s) of Section 2 of the ID
Act relates to those who are existing employees. The only addition to existing
employees, statutorily provided under Section 2(s) refers to dismissed,
discharged and retrenched employees and their grievances can be looked into by
the forums created under the Act. In the instant case, the complainants had
resigned from service by voluntary retirement and, therefore, their cases are
not covered by the expression 'workman'. On the factual scenario, it is
submitted that after the 337 employees had accepted VRS-I, others had raised
disputes and had gone to Court. Order was passed for paying them the existing
salary and other emoluments. This went on nearly two years and, therefore, with
a view to curtail litigation a Memorandum of Understanding was arrived at in
1994. This basic difference in the factual background was not noticed by either
the High Court.
In Item (5) of Schedule IV to the Act, the
Legislature has consciously used the words 'favouritism or partiality to one
set of workers' and not differential treatment. Thus, the mental element of
bias was necessary to be established by cogent evidence. No evidence in that
regard was led. On the contrary the approach of the Industrial Court and the High Court was
different. One proceeded on the basis of breach of assurance and the other on
the ground of discrimination. There was no evidence brought on as regards the
pre-requisite i.e. favouritism or partiality. Favouritism means showing favour
in the matter of selection on circumstances other than merit. (per Advanced Law
Lexicon by P.Ramanatha Aiyar, 3rd Edition, 2005). The expression 'favouritism'
means partiality, bias.
Partiality means inclination to favour a
particular person or thing. Similarly, it has been sometimes equated with
capricious, not guided by steady judgment, intent or purpose.
Favouritism as per the Websters' Encyclopedic
Unabridged Dictionary means the favouring of one person or group over others
having equal claims. Partiality is the state or character being a partial, favourable,
bias or prejudice.
According to Oxford English Dictionary "favouritism"
means - a deposition to show, or the practice of showing favour or partiality
to an individual or class, to the neglect of others having equal or superior
claims; under preference.
Similarly, "partiality" means the
quality or character of being partial, unequal state of judgment and favour of
one above the other, without just reason. Prejudicial or undue favouring of one
person or party: or one side of a question; prejudice, unfairness, bias.
Bias may be generally defined as partiality or
preference. It is true that any person or authority required to act in a
judicial or quasi-judicial matter must act impartially.
"If however, 'bias' and 'partiality' be
defined to mean the total absence of preconceptions in the mind of the Judge,
then no one has ever had a fair trial and no one ever will. The human mind,
even at infancy, is no blank piece of paper. We are born with predispositions
and the processes of education, formal and informal, create attitudes which precede
reasoning in particular instances and which, therefore, by definition, are
prejudices." (per Frank, J. in Linahan, Re, (1943) 138 F 2d 650, 652). It
is not every kind of differential treatment which in law is taken to vitiate an
act. It must be a prejudice which is not founded on reason, and actuated by
self-interest - whether pecuniary or personal.
Because of this element of personal interest,
bias is also seen as an extension of the principles of natural justice that no
man should be a judge in his own cause. Being a state of mind, a bias is
sometimes impossible to determine. Therefore, the courts have evolved the
principle that it is sufficient for a litigant to successfully impugn an action
by establishing a reasonable possibility of bias or proving circumstances from
which the operation of influences affecting a fair assessment of the merits of
the case can be inferred.
As we have noted, every preference does not
vitiate an action. If it is rational and unaccompanied by considerations of
personal interest, pecuniary or otherwise, it would not vitiate a decision. The
above position was highlighted in G.N. Nayak v. Goa University and Ors. (2002 (2) SCC 712).
The factual scenario does not establish any favouritism
or partiality. When VRS-I Scheme was introduced same was offered to every
employee. It is nobody's case that there was any hidden intent and/or that the
employer had any previous knowledge at the time of introducing the scheme that
some of the employees would not accept it. It is not the case of the
complainants that the employer had at that point of time intended to pay
something more to those who did not accept VRS-I. The Memorandum of
Understanding which was the foundation for the VRS-II, of course gives a
different package, but on the clear understanding that litigations of all types
were to be withdrawn.
In order to bring in application of Item 9, it
was submitted by the respondents that there was an agreement/assurance which
was not implemented. It has been urged that a letter can also be construed as
an agreement. But that logic is not applicable in all cases. It will depend
upon the nature of the letter/communication. As a matter of fact, there is no
dispute that there was no Memorandum of Understanding or agreement in writing.
The letter of Vice- President on which the Industrial Court and the High Court
have placed reliance does not anywhere indicate that even if the fact situation
was different the same amount would be paid at all future times. Mere breach of
assurance is not favouritism or partisan approach. It has to be definitely
pleaded and proved to show that Item 9 of Schedule IV was attracted. As noted
above, the Memorandum of Understanding in 1994 came to arrive at because some
of the employees went to Court after not accepting VRS-I. The background facts
do not establish that the appellant-company was guilty of favouritism or
partiality. There is also no plea or proof that the employer indulged in any
violence or force to coerce 337 employees to accept VRS-I. Therefore, the complaint
of unfair labour practice is not established under Items 5, or 9 or 10 of
Schedule IV to the Act.
That being the factual position the relief
granted by the Industrial Court to the complainants cannot be maintained.
The judgment of the High Court upholding the
view of the learned Single Judge and the Industrial Court stands set aside. In view of this
finding of fact it is not necessary to go into the question of maintainability
of the proceedings before the Industrial Court, by employees who retired voluntarily from
The appeal is allowed but in the circumstances
without any order as to costs.