Rai Bahadur Diwan Badri Das Vs. The
Industrial Tribunal, Punjab  INSC 252 (7 September 1962)
07/09/1962 GAJENDRAGADKAR, P.B.
GUPTA, K.C. DAS MUDHOLKAR, J.R.
CITATION: 1963 AIR 630 1962 SCR (3) 930
CITATOR INFO :
D 1966 SC 808 (23) R 1967 SC1286 (26)
Industrial Dispute-Earned leave-Different
rules for existing and future employees-Whether discriminatory-Industrial
Tribunal-Power to interfere with contract between employer and employee-Indian
Factories Act, 1948 (LXIII of 1948), s.79.
On July 1, 1956, the appellants made a rule
that every workman employed on or before that date would be entitled to 30 days
leave with wages after working for II months and workmen employed after that
date would be entitled to earned leave in accordance with the provisions of
s.79 of the Indian Factories Act, 1948. The State Government referred for
adjudication to the Industrial Tribunal the question whether all the employees
should be allowed 30 days earned leave with full wages for every II months'
service without discrimination. The Tribunal held that ail the workmen were
entitled to 30 days earned leave without making any distinction between workmen
who joined before July 1, 1956, and those who joined subsequently. The
appellants contended that they were entitled to fix the terms of employment on
which they would employ the workmen and it was open to the workmen to accept
those terms or not and the tribunal was not justified in interfering in such a
Held, per Gajendragadkar and Das Gupta, JJ.,
that the Tribunal was justified in directing the appellants to provide for the
same uniform rule as to earned leave for all their employees. The doctrine of
absolute freedom of contract had to yield to the higher claims for social
justice and had to be regulated. In industrial adjudication no attempt should
be made to answer questions in the abstract for evolving any general or
Each dispute has to be decided on its own
facts without enlarging the scope of the enquiry. If some principles have to be
followed or evolved, care has to be taken not to evolve larger 931 principles.
In order that industrial adjudication should be free from the tyranny of dogmas
or the sub-conscious pressure of preconceived notions it is important that the
temptation to lay down broad principles should be avoided.
Accordingly it is not necessary to decide the
broad contention whether industrial adjudication can interfere with the
contract between the employers and the employees.
In the present case, all the workmen were
governed b the same terms and conditions of service, except in regard to earned
leave. The discrimination was not based upon any principle and was bound to
lead to disaffection amongst the new employees. The financial burden imposed by
the award on the employers was slight. The provisions for earned leave in
respect of old employees were not unduly generous or extravagant. Earned leave
provided for by s.79 Factories Act was the minimum statutory leave. If the
appellants thought it necessary to provide for additional earned leave for
their old employees, there was no reason why they should not make a similar
provision in respect of new employees as well.
Western Indian Automobile Association v.
Industrial Tribunal, Bombay, A.I.R. 1949 F.C. 112 and Bharat Bank Ltd. v. The
Employees of Bharat Bank Ltd.  S.C.R. 513, referred to.
Per Mudholkar, J.-The Tribunal was not
justified in interfering with the rule made by the appellants. It was open to
the appellants to grant leave according to s.79 Factories Act, to all the
employees but still they did not wish to reduce the leave of 30 days which they
were already giving to the old employees. The appellants have put into one
category persons who enjoyed the same kind of benefits until July 1, 1956, and
have put in another category persons who did not enjoy such benefits. All
persons in each category were treated alike, and the question of discrimination
did not in fact arise. If the State had provided that persons entering its
service after a certain date would be governed by a set of conditions which
were different and less favorable than those governing the existing servants
its action would not be open to an attack under Art. 14 of the Constitution. An
identical action of a private employer could also not be regarded as
discriminatory. An award made with the intention of promoting social justice
must take into consideration the interests of the community. Even if there was
discrimination it could not be a perpetual source of bitterness as gradually
the old employees would fade out 932 till only one category of workers would
remain. The facts that the dispute was comparatively of a minor character and
that the financial burden imposed on the appellants was small did not entitle
the tribunal to alter the contract between the employer and employees. Since
the appellant had provided for its new entrants such leave facilities as were
recognised by the Factories Act itself as fair, it was not open to the Tribunal
to revise the relevant term of the contract.
Budhan v. State of Bihar, A.I.R. 1956 S. C.
191, Khandige Sham Bhat v. Agricultural Income Tax Officer  3 S.C.R.
809, State of M.P. v. Gwalior Sugar Co. Ltd.
C.A. Nos. 98 & 99 of 1959, dated 30.1 1.60, Ramjilal v. Income-tax Officer,
Mohindargarh, (1951) S.C.R. 127, Sardar Inder Singh v. The State, of Rajasthan,
(1957) S.C.R. 605 and Hathisingh .Mfg.
Co. v. Union of India, A.1 R. 1960S. C. 931
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 20 of 62.
Appeal by special leave from the award dated
September 29, 1960, of the Industrial Tribunal Punjab, Patiala in reference No.
13 of 1960.
C.K. Daphtary, Solicitor-General of India,
Bhagirath Das and B. P. Maheshewari, for the appellants.
M. K. Ramamurthi, B. K. Gary, D. P. Singh and
Aggarwal, for the respondent No. 2(i).
1962. September 7. The Judgment of
Gajendragadkar and Das Gupta, JJ., was delivered by Gajendragadkar, J.
delivered a dissenting judgment.
GAJENDRAGADKAR, J.-This appeal by special
leave arises out of an industrial dispute in relation to a comparatively minor
demand made against the appellants by the respondentstheir employees but in
challenging the validity of the award passed by the Industrial Tribunal in
favour of the 933 respondents on that demand the learned Solicitor-General has
raised a general question before us. He contends that in granting the demand
made by the respondents, the award has illegitimately and unjustifiably
trespassed on the appellants' freedom of contract. The appellants as employers,
are entitled to fix the terms of employment on which they would be willing to
employ workmen and it is open to the workmen either to accept those terms or
industrial adjudication should not interfere
in such a matter. That is the nature of the general contention which has been
raised before us in the present appeal.
The facts leading to the dispute are few and
they lie within a very narrow compass. The appellants are the Trustees of the
Tribune Press and paper and the Trust is being worked in accordance with the
terms of the will executed by Dyal Singh Majithia on June 15, 1895. In carrying
out the policy of the Trust, the five appellants have executed a power of
Attorney in favour of Mr. R. R. Sharma and the Press is managed and the paper
is conducted to carry out the policy laid down by the will.
It appears that before July 1, 1956, for the
purposes of leave, the appellants had divided their employees into two
categories (1) the Linooperators and (2) the rest of the workmen in the Press
Section; and Rule 57 made provision for leave on the basis of the said
classification. The effect of the said rule was that no Press worker other than
the lino-operator was entitled to any kind of paid leave although he was given
the right to claim 30 days' wages plus dearness allowance payable in January
every year if he had worked for 11 Months. In addition, the said press worker
was entitled to Quarantine leave on the terms mentioned in Rule 53.
934 This position was substantially altered
on the July 12 1956, when the appellants framed a new Rule in respect of earned
leave. This rule abolished the two categories of workers on which the earlier
rule 57 was based and divided the workers into two categories (i) workers who
were employed on or before 1.7.1956 and (ii) those who were employed after 1.7.
1956. In respect of the former category of
workmen, the new Rule made the following provision:
"Subject to the provisions of the Indian
Factories Act, 1948, every workman in the service of the Tribune on the 1st
July, 1956, will be entitled to 30 days' leave with wages after having worked
for a period of 11 months.
This leave shall cease to be earned, when it
amounts to 60 days" In regard to the workmen falling under the latter
category, earned leave was to be governed by the provisions of s. 79 of the
Indian Factories Act. It is common ground that the provision for earned leave
made by the said section is a provision for minimum earned leave which the
employer is bound to give: whether or not additional leave should be granted by
way of earned leave is a matter within the discretion of the employer. As a
result of the new rule, the position was that the employees who had joined the
service of the appellants on or before July 1, 1956, were entitled to 30 days'
earned leave with wages, whereas those who joined after the said date became
entitled to the statutory minimum of 21 days of earned leave.
At the time when this rule came into force
there were 94 old employees to whom the rule applied and 27 new employees to
them by virtue of the new Rule, s. 79 of the Factories Act was made 935
applicable. Gradually, new hands have also been employed and to all such new
employees s. 79 is applicable. It appears that by its resolution passed on
January 8, 1960, the Tribune employees union sent to the Management a charter
embodying about 20 demands. Attempts at conciliation were made but they failed
and so, on April 4, 1960, eight of the said demands were referred by the Punjab
Government to the Industrial Tribunal for its adjudication under s. 10 of the
Industrial Disputes Act. One of these demands was in relation to earned leave.
The demand was that the employees in the Press Section should be allowed 30 days'
earned leave with full wages for every months' service without any
discrimination. The Tribunal has allowed this demand and it bad held that all
workmen of the Press are entitled to 30 days' earned leave without making any
distinction a between workmen who joined before July 1, 1956, and those who
joined subsequently. It is the validity of this award which is questioned
before us by the appellants.
The broad and general question raised by the
learned Solicitor-General on the basis of the employer's freedom of contract
has been frequently raised in industrial adjudication, and it has consistently
been held that the said right is now subject to certain principles which have
been evolved by industrial adjudication in advancing the cause of social justice.
It will be recalled that as early as 1949, it was urged before the Federal
Court in Western India Automobile Association v. The Industrial Tribunal
Bombay(1) that the industrial Tribunal had no jurisdiction to direct an
employer to reinstate his dismissed employees and the plea made was that such a
direction was contrary to the known principles which govern the relationship
between master and servant. This contention was negatived by the Federal Court.
(1) A.I.R. 1949 F.C. 112,120.
936 Speaking for the Court, Mahajan J. as he
then was, observed that the award of the Tribunal may contain provisions for
the settlement of a dispute which no Court could order if it was bound by
ordinary law, but the Tribunal is not fettered in any way by these limitations.
The same plea was again raised before this Court in The Bharat Bank Ltd.,
The. Employees of The Bharat Bank Ltd., Delhi
(1) and Mukherjea J. as he then was, emphatically rejected it.
"Insettling the disputes between the
employers and the workmen", observed the learned Judge, "the function
of the Tribunal is not confined to administration of justice in accordance with
law. It can confer rights and privileges on either party which it considers
reasonable and proper, though they may not be within the terms of any, existing
agreement. It has not merely to interpret or to give effect to the contractual
rights and obligations of the parties.
It can create new rights and obligations
between them which it considers essential for keeping industrial peace."
This view has been consistently accepted by industrial adjudication since 1949.
The doctrine of the absolute freedom of
contract has thus to yield to the higher claims for social justice. Take, for
instance, the case where an employer wants to exercise his right to employ
industrial labour on any wages he likes. It is not unlikely that in an
economically under-developed country where unemployment looms very large. for
Industrial work, employees may be found willing to take employment on terms
which do not amount to a minimum basic wage.
Industrial adjudication does not recognise
the employer's right to employ labour on terms below the terms of minimum basic
wage. This, no doubt, is an interference with the employer's (1) (1950) S.C.R.
937 right to hire labour, but social justice
requires that the right should be controlled. Similarly the right to dismiss an
employee is also controlled subject to well reorganised limits in order to
guarantee security of tenure to industrial employees. In the matter of earned
leave, s.79 of the Factories Act prescribes a minimum in regard to
establishments to which the Act applies. In the matter of bonus which is not
regarded as an item of deferred wages, industrial adjudication has evolved a
formula by the working of which employees are entitled to claim bonus, We have
referred to these illustration to show bow under the impact of the demand of
social justice, the doctrine of absolute freedom of contract has been
It is, however, necessary to add that the
general question about the employer's right to manage his own affairs in the
best way he chooses cannot be answered in the abstract without reference to the
facts and circumstances in regard to which the question is raised. If a general
question is posed and an answer must be given to it, the answer would be both
yes and no. The right would be recognised and industrial adjudication would not
be permitted or would be reluctant to trespass on that right or on the field of
management functions unless compelled by over-riding considerations of social
justice. The right would not be recognised and would be controlled if social
justice and industrial peace require such regulation. That is why we think
industrial adjudication always attempts not to answer questions in the abstract
in order to evolve any general or inflexible principles. The eat course to
adopt in dealing with industrial disputes is to consider the facts of the case,
the nature of the demand made by employees, the nature of the defence raised by
938 the employer and decide the dispute without unduly enlarging the scope of
the enquiry. If in the decision of the dispute, some principles have to be
followed or evolved, that must be done: but care must be taken not to evolve
larger principles which would tend to prejudge issues not directly raised in
the case before the Industrial Tribunal.
That is why we think we would not be
justified in giving any general answer to the broad contention raised by the
learned Solicitor-General before us in the present appeal.
The development and growth of industrial law
during the last decade presents a close analogy to the development and growth
of constitutional law during the same period. In some respects, it is well-know
that Art. 19 of the Constitution hag guaranteed fundamental rights to
individual citizens and at the same time, has provided for the regulation of
the said fundamental rights subject to the provisions of cls. (2) to (6) of the
Where a conflict arises between the citizen's
fundamental right to hold property and a restriction sought to be imposed upon
that right in the interest of the general public, courts take the precaution of
confining their decision to the points raised before them and not to lay down
unduly broad and generaI propositions. As in the decision of constitutional
questions of this kind, so in industrial adjudication it is always a matter of
making a reasonable adjustment between two competing claims. The fundamental
right of the individual citizen is guaranteed and its reasonable restriction is
permissible in the interest of the general public, so, the claims of the
interest of the general public have to be weighed and balanced against the
claims of the individual citizen in regard to his fundamental right. So too, in
the case of industrial adjudication 939 the claims of the employer based on the
freedom of contract have to be adjusted with the claims of industrial employees
for social justice. The process of making a reasonable adjustment is not always
easy, and so, in reaching conclusions in such a matter, it is essential not to
decide more than' is necessary. If industrial adjudication purports to lay down
broad general principles, it is likely ;to make its approach in future case#;
inflexible and that must always be avoided. In order that industrial
adjudication should be completely free from the tyranny of dogmas or the
sub-conscious pressure of pro-conceived notion, it is of utmost 'importance
that the temptation to lay down broad principles should be avoided. In these
matters, there are no absolutes and no formula can be evolved which would
invariably give an answer to different problems which may be posed in different
cases on different facts. Let us, therefore, revert to the facts of this case
and decide whether the appellant's attack against the validity of the propriety
of the award can be sustained.
In dealing with the narrow dispute presented
by this appeal, it is necessary to remember that all the employees of the
appellants are governed by the same terms and conditions of ,service, except in
regard to earned leave. It is only in respect of this term and condition of
service that a distinction is made between workmen employed on or before 1.7. 56
and those employed after that date. Generally, in the matter of providing leave
rules, industrial adjudication prefers to have similar conditions of service in
the same industry situated in the same region. There is no evidence adduced in
this case in regard to the condition of earned leave prevailing in the
comparable industry in this region.
But we cannot ignore the fact that this 940
very concern provides for better facilities of earned leave to a section of its
employees when other terms and conditions of service are the same in respect of
both the categories of employees. It is not difficult to imagine that the
continuance of these two different provisions in the same concern is likely to
lead to dissatisfaction and frustration amongst the new employees. It cannot be
denied that the existence of industrial peace and harmony and the continuance
of the said peace and harmony are relevant factors, but their importance should
not be unduly exaggerated. If a frivolous demand is made by the employees and it
is accompanied by a threat that non-compliance with the demand would lead to
industrial disharmony or absence of peace, it would be unreasonable to treat
the thrust as relevant in deciding the merits of the demand. In this
connection, it is necessary to remember that the continuance of harmonious
relations between the employer and his employees is treated as relevant by
industrial adjudication, because it leads to more production and thereby has a
healthy impact on national economy, and so it is necessary that in dealing with
several industrial disputes, industrial adjudication has to bear in mind the
effect of its decisions on national economy. In their zest to fight for their
respective claims, the parties may choose to ignore the demand of national economy,
but industrial adjudication cannot. If the demand is plainly frivolous, it has
to be rejected whatever the consequences may be. In the present case, the
argument that the continuance of two different provisions would lead to
disharmony cannot, however, be treated as frivolous. It is difficult to
understand on what principle the discrimination is based. The only argument
urged in support of the discrimination is the employer's right to provide for
new terms of service to the new entrants in service. In our 941 opinion, the
validity of this argument cannot be accepted in the circumstances of this case.
Take the case of the wages or dearness
allowance which the Appellants paid to their employees. Would the appellants be
justified in assertion of their right of freedom of contract to offer less
favourable terms of wages or dearness allowance to employees who would be
employed after a certain date? If the general point raised by the learned
Solicitor General is upheld without any qualifications, then it would be open
to the employer to fix different wages for different sets of workmen who are
doing the same kind of work in his concern. We have rarely come across A case
where such a claim has either been made or has been upheld. It is well known
that both industrial legislation and industrial adjudication seek to attain
similarity or uniformity of terms of service in the same industry existing in
the same region, as far as it may be practicable or possible, without doing
injustice or farm to any particular employer or a group of employers That being
so, we do not think the Tribunal was in error in holding that in the matter of
earned leave, there should be uniformity of conditions of service governing all
the employees in the service of the appellants.
There is another aspect of this question to
which reference must be made. This is not a case in which the financial
liability imposed on the employer by the award when it directed the employer to
grant the earned leave of 30 days to all the employees, is very heavy; and so,
having regard to the fact that the appellants have been conducting their
business in a profitable way and their financial position is distinctly good,
no attempt has been made before us and rightly, to suggest that the burden
imposed by the award is beyond their means. it is not disputed that the total
annual liability which 942 may accrue as a result of the award may not exceed
1,000/-, and it is also common ground that
the appellants are a flourishing concern and their not profits which were in
the neighbourhood of a lac of rupees in 1949, have shown an upward tendency and
have reached almost rupees eight lacs in 1959. That is another factor which has
to be borne in mind in dealing with the present dispute.
It is not suggested by the appellants that
the provision made by them for earned leave in respect of old employees is
unduly generous of extravagant and so, it has become necessary to invoke the
provisions of section 79 of the Factories Act in respect of new employees. On
the other hand, earned leave provided by s. 79 is the minimum statutory leave
to which employees are entitled and if the appellants thought it necessary to
provide for additional earned leave to their old employees, there is no reason
why they should not make a similar provision in respect of the new employees as
well. We ought to add to that on the record, it does appear that the appellants
are good employees and they are treating their employees in a liberal manner.
It, however, appears that they have brought the present dispute to this Court
more for asserting the general principle of the employer's right to fix
conditions of service with his new employees than for vindicating any real or
substantial grievance against the award which would prejudicially affect their
interest. In our opinion, having regard to the nature of the dispute raised in
the present appeal and the other relevant facts and circumstances, it cannot be
said that the Industrial Tribunal erred in law in directing the appellants to
provide for the same uniform rule as to earned leave for all their employees.
We are satisfied that the award under appeal cannot be set aside only on the
academic or abstract point of law raised by the appellants.
943 The result is, the appeal fails and is
dismissed with costs.
MUDHOLKAR, J.-This is an appeal by special
leave from the award of the Industrial Tribunal, Punjab. The appellants before
us are the trustees of 'The Tribune' Ambala Cantt. and the opposite party to
the appeal consists of the workmen of the Tribune through their two unions, one
the Tribune Employees' Union and the other the Tribune Workers' Union.
The Trust was founded in Lahore by the late
Sardar Dayal Singh Majithia on February 1, 1881. It publishes the newspaper
"Tribune". By the will of the founder dated June 15, 1895 the
Management of the Tribune was vested in a public trust in September, 1898.
After the partition of India the offices of the newspaper had to be shifted
from Lahore and they are now located at Ambala. The Trust naturally had to
leave the entire machinery and other equipment of the Tribune Trust along with
its immovable property in Lahore. The value of that property is stated by the
appellants to be Rs. 25 lakhs or so. The Trust was however, able to transfer
its bank accounts and Government securities to India a few days before the
partition. With the help of these assets it reestablished the Tribune Press and
office at Ambala and established new machinery at a cost of Rs. 15 lakhs or so.
Gradually the Trust has been able to rehabilitate its fortunes. It is not
disputed before us that despite the heavy loss entailed by the Trust by reason
of being uprooted from Pakistan, the employees quite a number of whom are old employees
who were able to migrate to India, have been treated with a great deal of
After the Tribune started making profits the
employees are being given bonus every year. Moreover even before the Employees
Provident Fund scheme applicable to newspaper 944 industry and even before the
scheme of gratuity for all categories of employees were enforced by statute be
Tribune had provided for both provident fund and gratuity to its employees. In
addition to this it has provided free housing accommodation to its workmen in
two colonies, one built in 1955 with the help of subsidy from the Government of
India and the other in the year 1958 at a cost of Rs. 6 lakhs.
The quarters in the two colonies are provided
with modern sanitation Besides that, there are extensive recreation grounds,
lawns etc., in these colonies. Even electricity is supplied free to the
employees. Several other amenities are also provided by the Trust. It would
thus appear that the welfare of the employees has been kept prominently in mind
by the trustees.
Even so, some disputes arose between the
management and the employees. Ultimately eight demands made by the employees
were referred by the Government of Punjab for adjudication under s. 10(1) of
the industrial Disputes Act, 1947 (14 of 1947) to the Industrial Tribunal,
Punjab, Patiala constituted under s.7A of the Act. Four demands were rejected
by the Tribunal as having been withdrawn, one was settled amicably and on the
remaining three the Tribunal has made its award. One of those three demands is
"Whether the employees in the Press
Section should be allowed 30 days' earned leave with full wages for every 11
months' service without discrimination?" The Tribunal hold in favour of
the workmen and it is only against this part of the award of the Tribunal that
the trustees have come up in appeal before us. Certain facts have to be stated
in connection with this demand. The Trust had framed certain rules governing
the conditions of service of 945 its employees. Rule 57 of those rules deals
with leave and reads thus :
"The Lino Operators shall be entitled to
30 days' leave of all description (luring the course of a calendar year, which
will be with pay plus all allowances.
Press employees, other than the
Lino-operators may be granted leave by the competent authority from time to
time as the authority may determine. Such leave shall be without pay or
allowance. They shall, however, be entitled to in the month of January every
year to receive a sum amounting to the leave pay plus ordinary dearness
allowance for the preceding month of December for the period of II months'
service or to a proportionate amount for a lesser period. In addition, Press
workers will be entitled to quarantine leave on the terms mentioned in Rule
On July 1, 1956 a new rule was framed which
reads as follows :
"(1) Subject to the provisions of the
Indian Factories Act, 1948, every workman in the service of the Tribune on the
1st July, 1956, will be entitled to 31 days' leave with wages,, after having
worked for a period of II months. This leave shall cease to be earned, when it
amounts to 60 days.
(2) A workman joining the service of the
Tribune after the 1st July, 1956 will be entitled to leave, in accordance with
the provisions of section 79 of the Indian Factories Act, 1948." Under the
old rule the Lino Operators in the press section were allowed 30 days' leave on
full wages 946 including dearness allowance. The other workers in the press
section were, however, allowed not leave with pay, but 30 days' wages in the
month of January calculated on the basis of the full wages drawn in the
preceding month provided that an employee had served for a period of II months
till the beginning of the month of January. If he had served for a lesser
period he was to be paid proportionately less amount. Bearing in mind the fact
that in industries leave, vacation and holidays with pay are regarded as
supplemental pay practices (see Collective Bargaining-principles and Cases by
John T. Dunlop and James J. Healy, revised edn., p. 433), in substance even the
employees in the press section other than lino operators got the same money
equivalent of the leave allowed to lino operators. It may be mentioned that
these other press section employees were also entitled to take leave but the
rule provided that they will Dot be paid any pay and allowances for such leave.
That was perfectly reasonable because they got pay in lieu of paid leave for an
additional period in the month of January. However, even this slight
distinction in the mode of conferring benefits on the two categories of
employees was abolished by the new rule which came into force on July 1, 1956,
and all employees in the press section upto that date were made eligible for
the grant of 30 days' leave with wages after having worked for a period of 11
months. It 'May be mentioned here that the Factories Act of 1948 provided in a.
79 that every worker who has worked for a period of 240 days or more in a
calendar year shall be given at least one days' leave for every 20 days of
service. No doubt this was the minimum provided by the Act but since the press
section is governed by the Factories Act it was open to the Trust to modify its
rules with regard to all employees of this section and grant leave according to
the provisions of this 947 section. There is no prohibition in law against
doing so but still it did not wish to revise unfavourably its rules regarding
the quantum of leave to its existing employees.
It, however, felt that in view of the
statutory provision there was no obligation upon it to provide for a longer
leave than that laid down in s. 79 of the Factories Act. It was for this reason
that it provided that all employees engaged on or after July 1, 1956, will be
granted leave according to the provisions of s. 79 of the Factories Act, the
idea being that eventually all employees should be governed by the rules.
Apparantly, to forestall this consequence the employees contend that the new
rule has introduced discrimination. That is why they raised a dispute relating
to this matter and it was referred to the Tribunal along with the other
disputes they had raised.
The Tribunal, dealing with this matter, has
observed as follows :
"It may be of some importance to note
that till 1st July, 1956 the workmen who had entered service before that date
and those who had been employed thereafter were in the matter of leave compensation,
It was on 1st July, 1956 for the first time
that the workmen who had been in service before that date were given 30 days'
paid leave but for now entrants the number of days of that leave was reduced to
that permitted by section 79 of the Factories Act. The Union's contention is
that to allow 3 days' earned leave with full wages in an year to a certain
group of workmen in Press Section and to deny that benefit to the rest of the
workmen of that section simply on the score of their having entered service
after 1st July, 1956, is to acknowledge the prominent element of discrimination
which has been responsible for the heart burning, resentment and dissatisfaction
of the workmen. It is further urged with emphasis that all workers for the
Press Section should in the matter of earned leave be treated equally.
For the long space of seven years even after
the Factories Act had come into force the management had continued to treat all
workmen of the Press Section alike irrespective of the date of their
employment. There is no reason why a distinction of a discriminatory nature and
effect be made between the two artificially created sets of workmen belonging
to the same section." It seems to me that the Tribunal's ultimate finding
is vitiated by a misconception entertained by it. The first sentence in the
above quotation would show that the Tribunal thought that those persons who
were employed after July 1, 1956 were treated in the matter of leave on par
with those employed before July 1, 1956, ,till July 1, 1956" but were
sought to be discriminated against only thereafter. It is difficult to understand
how persons who were employed after July 1, 1956, could possibly be treated
before July 1, 1956, equally with employees who were in service on that day.
Apparently it is this confusion in the mind
of the Tribunal which has influenced its ultimate conclusion. That apart, it is
quite clear that what the Trust has done is to put in one category persons who
enjoyed in substance the same kind of benefit uptil July 1, 1956 and permit
them to enjoy the benefit they bad hitherto enjoyed. Then it put in a separate
category those persons who could never possibly lay any claim to have enjoyed a
similar benefit because they were not its employees till July 1, 1956, and
decided that they will get leave only as provided in s. 79 of the Factories Act.
All persons in each category are intended to be alike and, therefore the 949
question of discrimination does not in fact arise. It was, in my opinion, open
to the management to offer to the new entrants now terms. When the new entrants
entered service accepting the new terms and knowing full well that one of those
terms i. e., the one relating to annual leave was different and less beneficial
from the one which obtained in the case of the old employees, it is not
reasonable for them now to say that they are being discriminated against.
The Tribunal, however, thinks otherwise. It
has held that the Trust, by treating the now entrants less favourably in the
matter of leave than its old employees has practiced discrimination and that
this discrimination has caused heart burning. Presumably, therefore, the
Tribunal felt impelled to interfere and direct that the new entrants should be
treated' in the matter of leave on par with the old employees in' order to avoid
industrial unrest which may result 'from' heart burning amongst the new
What we must first consider is whether the
existing of heart burning has at all been established in this case. It is said
that the continuance of different provisions in the same concern has caused
heart burning, dissatisfaction and frustration among the new employees and this
would lead to unrest in the industry. For one thing, there is no evidence
before us to show that the new employees are making a very serious grievance of
the fact that they would get a few days less of leave than the old employees.
All that Mr.
Ramamurti could point out to us was the
statement in the evidence of Som Nath, A. W. 7. that he should also be given 30
days, privilege leave in a year. Merely saying that he should be given
privilege leave does not mean that he is harbouring bitterness in his mind.
Apart from that it would be extremely unreasonable to take notice of
bitterness, if any, in the minds of 950 these new employees in regard to this matter
because. as already stated, they voluntarily took up employment knowing that
they would got less leave than the old employees. Som Nath's statement is no
evidence of the fact that there is any heart burning. To say that the very fact
that two sets of people are governed by different rules will necessarily lead
to heartburning, without establishing anything more, such as inadequacy of the
benefit enjoyed by one set will be to ignore that such differences are a matter
of common occurrence and no reasonable person is expected to magnify their
consequences. It seems to me, further, that the workers as a body did not think
much of the distinction between the extent of leave enjoyed by old and new
employees because during all the four years while the rule has been in force
they raised no protests. No doubt they did ultimately make a protest in the
year 1960 when the dispute was referred to the Tribunal. But then, this was not
the sole dispute but was one of eight disputes, at least four of which were
withdrawn by the Unions, apparently after realising that there was no substance
in them. The mere fact that they did not withdraw this dispute would not of
itself indicate that they regarded it as of great importance. It may well be
that they did not withdraw it in an erroneous belief that anything which is
characterised as discrimination will at once earn the sympathy of Industrial
Tribunals and the Courts.
Even assuming that is creating heartburning
amongst the employees the question arises whether they have a real grievance.
They say that the Trust has discriminated against the new entrants and this is
their grievance. In this connection it may be observed that the more refusal or
failure of an employer to treat equally all its employees doing a particular kind
of work would not necessarily amount to discrimination. The subject of is-d 951
crimination has come up for consideration before this Court in a large number
of cases in which a complaint has been made that the equality clause of the
Constitution, Art. 14, has been violated. This Court has held that It is open
to the State to make reasonable classification both as regards persons and as
regards things (see in particular Budhan v. State of Bihar(1) ; Khandige Sham
Bhatt v. Agricultural Income-tax Officer (2); This Court has laid down that a
classification made by the, State will be reasonable provided that (1) it is
founded on an intelligible differentia which distinguishes persons or things
that are grouped together from other left out of the group; and (2) that the
differentia has a rational relation to the object sought to be achieved by the
statute. In the State of Madhya Pradesh v. Gwalior Sugar Co. Ltd. (4); it has
been held that it is permissible to make classification on historical grounds,
by putting in one class one set of persons or things and in 'other all those
left out from the first class Court. In Ramjilal v. Income-tax Officer,
Mohindargarh(5) this Court has held that a taxing law may provide that a law
imposing a new rate shall not apply to pending proceedings. In other words this
Court has upheld the law where one rate of income-tax shall be applicable to
persons whose cases were pending for assessment and another rate to persons
whose cases were not so pending. Thus, this Court has hold as reasonable
classification made by reference to difference in time. In Sardar Inder Singh
The State of Rajasthan (6) this Court has
held that it is open to the legislature to decide the date from which a law
should be given operation and that the law made by it cannot be challenged as
discriminatory because it (1) A.I.R. (1955) S.C. 191 (2) (1963) 3 S.C.R. 809.
(3) C A. Nos. 98 & 98 of 1959 decided on
November 30, 1960.
(4)  S.C.R. 127. (5)  S.C.R. 605.
952 does not apply to prior transactions.
Thus in this case also classification made on the basis of difference in time
has been upheld. Finally in Hathising Mfg. Co. v. Union of (India (1) this
Court has held that there is no discrimination if the law applies generally to
all persons who come within its ambit as from the date on which it is made
operative. This case likewise accepts that it will not amount to discrimination
if one set of persons is treated differently from another by reference to a
point of time.
It would follow from these decisions that if
the State as an employer provided that persons entering its service after a
certain date will be governed by a set of condition which will be different
and, may be less favourable than those governing the existing entrants that law
will not be open to attack under Art. 14 of the Constitution on the ground that
it discriminates between one set of employees and another.
In my judgment the principle laid down by
this Court that reasonable classification does not amount to discrimination is
of general application. Therefore, when an employer's action is challenged
before an Industrial Tribunal as discriminatory, the Tribunal will also have to
bear it in mind. For if an action cannot be regarded as discriminatory and
violative of Art. 14 of the Constitution because it is based on a reasonable
classification an identical action of a private employer affecting his
employees can also not be regarded as discriminatory. The content and meaning
of 'discrimination', wherever the term is used, must necessarily be the same
and we cannot adopt one standard for judging whether an action when it emanates
from the State, is discriminatory or not and another standard for judging an
identical action, when it emanates from a private citizen.
Looked at this way, I have no doubt that the
Trust has not practiced what can in law be regarded as discrimination against
its now entrants (1) A.I.R. 1960 S.C. 931.
953 by allowing them lesser leave than it has
allowed to its old entrants.
I may point out that it is not an unusual
thing even in Government service to find new entrants being treated differently
in the matter of leave, emoluments etc., from the old entrants. It is a
well-know fact that in most of the provinces of India in the year 1932 or 1933
pay scales in various categories of Government service were revised and new
scales less favourable than the old ones were introduced. Therefore, a largo
body of men were performing the same duties as other large body of men but were
getting lesser pay than the latter. That happens often, is happening today in
several of the recently reorganised States and may happen hereafter also. But
merely because new terms of service are less favourable than the old ones,
would it be correct to say that there is discrimination between the new
entrants and the old entrants? As already pointed out, it is open to the
employer to offer different and even less favourable terms to new entrants and
if the new entrants entered service with their eyes wide open they cannot
reasonably complain of being discriminated against. Mr. Ramamurthi who appears
for the employees, however, contends that it is open to an employee to take up
employment on the existing conditions of service and immediately start
clamouring for improving his conditions of service. It is sufficient to say
that without establishing that there was a change in circumstances subsequent
to the time when a workman accepted service a demand for improvement in the
conditions of service cannot, with justice, be entertained unless of course the
original conditions of service were plainly unfair. Mr. Ramamurthi does not say
that the term regarding leave in the rule applicable to the new entrants is
unfair in the sense that the 954 leave allowed is inadequate. But, Mr.
Ramamurthi said that where a service condition causes heartburning amongst two
sections of employees discontent and unrest would be its natural outcome and so
it is open to the Tribunal to revise the condition and thus eliminate that
discontent. I am unable to accept the argument. No doubt, the provisions of the
Industrial Disputes Act are wide enough, like those of other legislative
enactments placed on the statute book, for promoting the welfare of the
employees to permit an Industrial Tribunal to override the contract between an
employer and his employees governing conditions of service of the employees.
But it does not follow from this that no sooner a reference of a dispute is
made to a Tribunal for adjudication than the contract of service ceases to have
any force. The power to interfere with a contract of service can only be
resorted to in certain limited circumstances.
As has been pointed out by this Court in
State of Madras v. C. P. Sarathy(1), the adjudication by a Tribunal is only an
alternative form of settlement of disputes on a fair and just basis, having
regard to the prevailing conditions of the industry. Bearing in mind this
principle, it would follow that it is only for securing a fair and just
settlement of an industrial dispute that the Tribunal can over-ride the
contract between the parties. For deciding what is fair and just, it is not
enough for the Tribunal to say that a particular demand be granted for doing
social justice. What it must ascertain is whether the grievance is a real one
and whether it is of a type of which the employees can justly complain. In Muir
Mills Co., Ltd. v. Suti Mills Mazdoor Union, Kanpur (2) it has been pointed out
social justice is a very vague and indeterminate expression and no clear-cut
definition can be laid down which will cover all the situations and that the
fancy of an (1)  S.C.R. 334.
(2) (1955) 1 S.C.R. 991.
955 individual adjudicator is not social
justice. But, of course., that does not mean that social justice has no place
in the settlement of industrial disputes. It is indeed a relevant consideration
but it is well to bear in mind that doing social justice in an industrial
dispute is not merely doing justice between the employer and the employee. The
question of doing anything in the interest of social justice comes in when the
State has a social interest in a situation or in an activity because of its
repercussions on the community at large. Therefore, when the social interest of
the community is involved in a situation or an activity, the interests of all parties
who are affected by it have to be borne in mind, the parties being not merely
the employers and the employees but also the community at large which includes
also the consumers. So, where a direction in an award is sought to be sustained
on the ground that it was made with the intention of promoting social justice
it must be shown that the adjudicator had borne in mind also the interests of
the community. This aspect of the matter has not been borne in mind by the
Tribunal and, therefore, the relevant direction in its award cannot be
sustained on the ground that it is actuated by the need of promoting social
The ground given by the Tribunal, as already
stated, is that there is discrimination and the existence of the discrimination
will be a perpetual source of unrest.
Granting, again, that there is discrimination
it is difficult to appreciate now it can be a perpetual source of bitterness
for. with the efflux of time, the old employees will gradually be fading out
till at last there will be left only that category of workers to which the
provisions of is 79 of the Factories Act apply.
956 Nor again. do I think the fact that a
dispute a comparatively of minor character and that the financial burden
entailed on the employer is inconsiderable, a matter which would entitle the
Tribunal to alter a contract between an employer and his employees. In fact
these factors are not relevant for consideration. If the leave terms offered to
new employees were on their face unfair, the mere fact that the employer did
not have the capacity to pay would not have been allowed to influence the
determination of the issue. I would go further and say that since the Trust has
provided for its new entrants such leave facilities as are recognised by the Factories
Act itself as fair, it was not open to the Tribunal to revise the relevant term
of the contract,.
For all these reasons I am of opinion that
the appeal must succeed and the award of the Tribunal should beset aside in so
far as it refers to the demand made by the employees for grant of the same
leave to new entrants as is being granted to old employees.
By COURT. In accordance with the opinion, of
the majority, the appeal fails and is dismissed with costs.