Herbertsons Limited Vs. Workmen of
Herbertsons Limited & Ors  INSC 280 (3 November 1976)
FAZALALI, SYED MURTAZA
CITATION: 1977 AIR 322 1977 SCR (2) 15 1976
SCC (4) 736
RF 1978 SC 982 (5) D 1979 SC1196 (8,19) R
1981 SC2163 (6)
Industrial Disputes Act, 1947---S.
18--Settlement under s. 18(1)--Scope of Union arrived at settlement--Individual
workers--If should know implications.
In respect of certain demands of the workers
of the appellant company an Industrial Tribunal made its award.
When the Special Leave Petition of the
appellant was pending before this Court the parties filed consent terms for
staying the award. In the meantime the 3rd respondent, a Trade Union, wrote to
the employer that all the workers who were members of the 2nd respondent, also
a Trade Union, resigned from that union and joined the 3rd respondent. 'The
employer accordingly recognised the 3rd respondent as the Trade Union
representing/he workers and de-recognised the 2nd respondent.
Under s. 18(1) of the Industrial Disputes Act
the employer entered into a settlement with the 3rd respondent in substitution
of the award pending before this Court. When the 3rd respondent sought to be
substituted in place of the 2nd respondent in the Special Leave Petition, the
2nd respondent resisted the application claiming that it had still the
allegiance of 50 workmen of the company. But this Court added the 3rd
respondent as a respondent. Since the 2nd respondent claimed to have some
workers on its rolls as members and had not .accepted the settlement, this
Court passed a preliminary order to the effect that "in view of the fact
that admittedly a large number of workmen employed by the appellant have accepted
the settlement is it shown by the 2nd respondent union that the said settlement
is not valid and binding on its members and whether the settlement is fair and
just." Before the Tribunal the 2nd respondent did not lead any evidence to
show 'the actual number of its members. The Tribunal recorded its finding that
respondent No. 2 had been able to prove that the settlement was not valid and I
binding on its members and was incomplete to that extent. It was contended by
'the 2nd respondent that even if the settlement was binding on the company and
the 3rd respondent representing a large majority of workmen, it was not binding
.on its members under s. 18(1).
Dismissing the appeal,
HELD: The settlement is fair and just. The
award of the Tribunal shall be substituted by the settlement and the settlement
shall be the substituted award.
[24D] (1) (a) When this Court called for a
finding of the Tribunal it was satisfied that if the settlement was fair and
just it would allow the parties to be governed by the settlement substituting
the award. The Wording of the issue sent to the Tribunal for a finding clearly
shows that there was an onus on the 2nd respondent to show how many workers of
the appellant were its members. Since a recognised and registered union had
entered into. a voluntary settlement this Court thought that if the same was
found to be. just and fair that could be allowed to be binding on all the workers
even if a very small number of workers were not members of the majority union.
[20E-F] (b) In the instant case the numerical strength of the members of the
2nd respondent, who are workers of the company, would also have an important
bearing as to whether the settlement accepted by the majority of the workmen is
to be considered as just and fair. Not a single worker of the company claimed
before the Tribunal to be its member and asserted that the settlement was 16
not fair and just. All the workers of the company had accepted the settlement
and received the arrears and emoluments in accordance with the same [20H] (2)
(a) The assumption of the Tribunal that the quantum of the membership of the
2nd respondent did not call for a finding at all in view of this Court's order
The Tribunal was conscious that under s.
18(1) the settlement was binding on the company and the 3rd respondent Union.
Yet it examined the question whether the workers voluntarily accepted the
settlement knowing all the consequences, which was a wrong approach. [21B-C]
(b) When a recognised union negotiates with an employer the workers as
individuals do not come into the picture. It is not necessary that each
individual worker should know the implications of the settlement since a
which is expected to protect the legitimate
interests of labour enters into a settlement in the best interests of labour.
[21D] (c) Prima facie this is a settlement in the course of collective
bargaining and, therefore, is entitled to due weight and consideration. [21E]
(d) Having regard to the totality of the terms of the settlement it is
difficult to hold that the terms are in any way unfair or unreasonable. An
adjudication has to be distinguished from a voluntary settlement. By the
settlement labour has scored in some aspects and saved all unnecessary expenses
in uncertain litigation. The settlement cannot be judged on the touchstone of
the principles laid down by this Court for adjudication. [22D; 23D] (3) There
may be several factors that influence parties to come to a settlement as a
phased endeavour in collective bargaining. Once cordiality is established
between the employer and labour in arriving at a settlement there is always a
likelihood of further advance in the shape of improved emoluments by voluntary
settlement, avoiding friction and unhealthy litigation. This is the
quintessence of settlement which courts and Tribunals should endeavour to
encourage.[23E] (4) It is not possible to scan the settlement in bits and
pieces and hold some parts good and acceptable and others bad. Unless it can be
demonstrated that the objectionable portion is such that it completely
outweighs all the other advantages gained, the Court will be slow to hold a
settlement as unfair and unjust. the settlement has to be accepted or rejected
as a whole. [24B] In the instant case the 3rd respondent representing the large
majority of the workmen has stood by this settlement which is a strong factor
difficult to ignore. When a union backed by a large majority of workmen has
accepted a settlement in the course of collective bargaining, this Court would
not interfere with the settlement. [24C]
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 1901 of 1970.
(From the Award dated 4/6.3.1970 of the
Industrial Tribunal Maharashtra in Ref. (I.T.) No. 158/67, published in
Maharashtra Govt. Gazette, Part I-L dated 16-4-1970).
F.V. Kaka, F.A.K. Faisulla Bhai, O.C. Mathur
and D. N Mishra for the Appellant.
F.D. Damania and B.R.Agarwala for Respondent
Y.S. Chitale, P.H. Parekh and Miss Manjit
Jelley, for Respondent No. 3.
The Judgment of the Court was delivered by
GOSWAMI, J.--This appeal by special leave brings forth a rather disquieting
feature of union rivalry whereby the significance of collective bargaining
which is the forte of a union, is sought to be made 17 a flop. We say this in
the absence of any suggestion of mala fides or of any other ulterior motive
alleged by .the contending union on time part of the rival union or its
principal officer who had negotiated a certain settlement on behalf of the
workmen in substitution of the award of the Industrial Tribunal out of which
this appeal arose.
The appellant before us is the employer,
supported, wholehog, by the Bombay General Kamgar Sabha, respondent NO.
3.Respondent No. 2 is the only contending
union, viz.,MumbaiMazdoor Sabha.
On May 18, 1967, there was a :reference by
the Government of Maharashtra of an industrial dispute under section
10(1)(d).of the Industrial Disputes Act to the Industrial Tribunal for
adjudicating eight demands such as, wage scales, adjustment of. increments,
classification of workmen into different grades, dearness allowance,
restropective effect of the claim from 1st June, 1966, gratuity, sick leave and
wages for Sundays and holidays when called upon to .Work The dispute was
between-the D& P Products (Private) Limited, Bombay and their workmen. A
written statement was submitted 'by the Mumbai Mazdoor Sabha (2nd respondent),
claiming to represent the majority of the workmen on: July 25, 1967. It appears
that this written statement was signed by V. S. Pandit as General Secretary.
The company submitted their written statement on August 17, 1967, in which;
inter alia, they pleaded. incapacity to have
greater burden on account of financial position. It was stated that the company
had been making losses year after year since 1963-64 During the pendency of the
dispute before the Tribunal, D & P Products (Private) Limited was
amalgamated .with Herbertsons Ltd. (the appellant) (hereinafter to be described
as-the company) with effect from 1.10.1968 under the provisions of the"
Companies Act by an order of the Bombay High' Court dated 6th January, 1969.
The wage scales existing at the time. of the
reference were as follows :-Unskilled Rs. 1.25-0.10-2.25 Semi-skilled Rs.
1.50-0.15-3.00 Dearness allowance Rs. 2.16 per day.
The demand of the workmen on the other hand
was as follows.
Unskilled Rs. 1.50-0.15-3.00 per day Semi
skilled Rs 1.75 0.20 3.75 " " Skilled Rs. 2.50-0.30-5.50 "
" Highly skilled Rs. 3.50-0.45.8.00 " " Dearness allowance
"as paid to. the Bombay Textile Operatives". 3--1458SCI/76 18 The
Tribunal (Shri R.D. Tulpule) made its award on March 4, 1970. As regards the
demand for wages and dearness allowance, the award of Tribunal was as follows :Grade
I Rs Plus Revised (Unskilled) 1.30-0. 12-2.50 Textile dearness allowance.
Grade II B (Semi-skilled) 1.40--0.15-3.20 do
A (Semi-skilled) 1-60-0.30-3.60 do Grade III 1.80-0.20-2.80-0.25-4.80 do
(Skilled) The company preferred an application for special leave to this Court
on May 12, 1970, against the award. On May 25, 1970, certain consent terms for
staying the award were filed by the parties without prejudice to the rights in
the appeal whereby the company agreed to pay Rs. 2.50 as additional dearness
allowance per day from October 1, 1968.
This Court admitted the special leave
petition and posted the stay application for hearing on September 24, 1970, on
which date in modification of the earlier stay order the parties further agreed
that from 1st September, 1970, till the disposal of the appeal, the total
dearness allowance would be calculated at Rs. 5/per day irrespective of the
index figures. On February 22, 1973, the company agreed to increase the
dearness allowance further by 80 paise with effect from January 1, 1973.
From June 1973 certain new developments took
place. On June 7, 1973, a letter was received by the company from the 3rd
respondent, Bombay General Kamgar Sabha, stating that all the workers of the
company had resigned from the 2nd respondent union (Mumbai Mazdoor Sabha) and
joined the 3rd respondent union. On June 7, 1973, the 3rd respondent sent a
communication to the respondent No. 2 with a copy to the company enclosing a
letter signed by the workers stating that they had resigned from the 2nd
On June 25, 1973, the 3rd respondent sent a
reminder to the company to recognise the Bombay General Kamgar Sabha. By a
letter dated 2nd/5th July, 1973, to the President, Bombay General Kamgar Sabha,
who was incidentally the same V.S. Pandit who had earlier submitted the written
statement in behalf of the Mumbai Mazdoor Sabha, the company granted
recognition to the Bombay General Kamgar Sabha and informed the 2nd respondent
of its derecognition.
On October 18, 1973, the company entered into
a memorandum of settlement with the Bombay General Kamgar Sabha which was in
substitution of the award which was pending appeal before this Court. Copies of
this settlement were forwarded to the Secretary to the Government of
Maharashtra, Industries and Labour Department, the Commissioner of Labour, the
Deputy Commissioner of Labour and the Conciliation Officer. It is common ground
that this is a settlement under section 18 (1) of the Industrial Disputes Act.
The 3rd respondent applied to this Court to
be substituted if place of the 2nd respondent and the Other union.
The 2nd respondent 19 alone resisted the
application claiming that it had still the allegiance of 50 workmen of the
company. This Court allowed the Bombay General Kamgar Sabha to be added as the
The company also submitted a petition to this
Court to decide the appeal in terms of the memorandum of settlement dated
October 18, 1973. This Court on December 19, 1974, passed the following order
:-"The number of workmen concerned in this industrial dispute is 210. The
appellant employer and the 3rd respondent union which claims to have 193
members on its rolls have entered into a settlement. The 2nd respondent union
which claims to have about 55 members on its rolls has not yet accepted the
We think it just, therefore, to pass the same
kind of preliminary order that was passed in Amalgamated Coffee Estate vs.
Their workmen in the following terms :-"In view of the fact that
admittedly a large number of workmen employed by the appellant have accepted
the settlement, is it shown by the 2nd respondent union that the said
settlement is not valid and binding on its members and whether the settlement
is fair and just?" "The Industrial Tribunal, Maharashtra, would
consider the issue and submit its finding within two months from this date.
After the finding is received, the appeal
would be set down for hearing. Parties should be allowed to lead
evidence." When the matter went back, it appears that respondent No. 2 did
not lead any evidence before the Tribunal (Shri D.L. Bhojwani). The company and
the 3rd respondent, on the other hand, examined 7 witnesses including V.S.
Pandit, the President of the 3rd respondent union. Certain documents were also
filed before the Tribunal by the parties. The Tribunal after hearing the
parties in due course recorded its findings on September 9. 1975 and forwarded
the same to this Court. The findings of the Tribunal recorded are as follows :-(1)
Respondent 2 the Mumbai Mazdoor Sabha has been able to prove that the Disputed
Settlement is not valid and binding on its members.
(2) The Disputed Settlement is incomplete to
the extent mentioned above.
(3) The scheme of D.A. provided for in the
Disputed Settlement in so far as it affects workmen at or just above the
subsistence level is not fair, just and reasonable.
(4) The rest of the Disputed Settlement is
fair, just and reasonable." 20 That is how this appeal has come up for
bearing before us.
The first question that arises for
consideration is whether the findings. of the Tribunal are sustainable. The
appellant and respondent No. 3. with one voice, have assailed the findings 1 to
3 whereas the 2nd respondent has supported all the findings. It is strenuously
submitted by the 2nd respondent that there is no reason why we should interfere
with the findings of fact returned by the Tribunal and relying upon these it is
further contended that we should hear the appeal on the merits ignoring the
Before we proceed further it is necessary to
appreciate the implication of the order of this Court passed on December 19,
1974, set out earlier. This order was passed after hearing the parties for some
time when the appeal was first called for hearing on December 19, 1974. From
the recitals in the order it is apparent that the parties were prepared to
abide by the settlement if the same was fair and just.
We are not prepared to accept the position,
as urged by the 2nd respondent, that even if the settlement is binding on the
parties executing the document, namely, the company and the 3rd respondent
representing a large majority of the workmen, since the same is not binding on
the members of the Mumbai Majdoor Sabha Union, howsoever small the number,
under section 18 (1) of the Industrial Disputes Act, the appeal should be heard
on merits. On the other hand, we take the view that after hearing the parties
this Court was satisfied when it had called for a finding of the Tribunal that
if the settlement was fair and just it would allow the parties to be governed
by the settlement substituting the award. The wording of the issue sent to the
Tribunal for a finding clearly shows that there was an onus on the 2nd
respondent to show how many workers of the appellant were their members upon
whom they could clearly assert that the settlement was not binding under
section 18(1) of the Industrial Disputes Act. It cannot be assumed that the
parties were not aware of the implications of section 18(1) of the Industrial
Disputes Act when the Court passed the order of December 19, 1974. This Court
would not have sent the case back only to decide the legal effect of section
18(1) of the Industrial Disputes Act. Since a recognised and registered union
had entered into a voluntary settlement this Court thought that if the same,
were found to be just and fair that could be allowed to be binding on all the
workers even if a very small number of workers were not members of the majority
union. It is only in that context that after hearing the parties the case was
remanded to the Tribunal for a finding on the particular issues set out above.
The numerical strength of the members of the
2nd respondent, who are workers of the company, would also have an important
bearing as to whether the settlement accepted by the majority of the workmen is
to be considered as just and fair. In that view of the matter we are unable to
appreciate that the 2nd respondent did not choose it fit to produce evidence to
show the actual number of the workers of the company having membership of the
2nd respondent. It is rather odd that not a single worker of the company
claimed before the Tribunal 21 to be a member of the 2nd respondent and to
assert that the settlement was not fair and just. This is particularly so when
all the workers of the company have accepted the settlement and also received
the arrears and emoluments in accordance with the same.
The Tribunal thought that the question of the
quantum of membership of the 2nd respondent did not call for a finding at all
in view of 1his Court's order. As observed above that was not a correct
assumption. On the other hand, we feel that this view of the Tribunal has led
it to approach the matter in an entirely erroneous manner. The Tribunal is,
rightly enough, conscious that under section 18 (1) of the Industrial Disputes
Act the settlement was binding on the company and the members of the 3rd
Even so, the Tribunal devoted nearly half of
its order in scanning the evidence given by the company and respondent No. 3 to
find out whether the terms of the settlement had been explained by the
President of the union to the workmen or not and whether the workers
voluntarily accepted the settlement knowing all the "consequences".
This to our mind is again an entirely wrong approach.
When a recognised union negotiates with an
employer the workers as individuals do not come into the picture. It is not
necessary that each individual worker should know the implications of the
settlement since a recognised union, which is expected to protect the
legitimate interests of labour, enters into a settlement in the best interests
of labour. This would be the normal rule. We cannot altogether rule out
exceptional cases where there may be allegations of mala fides, fraud or even
corruption or other inducements. Nothing of that kind has been suggested
against the President of the 3rd respondent in this case. That being the
position, prima facie, this is a settlement in the course of collective
bargaining and, therefore, is entitled to due weight and consideration.
It is true that in the course of evidence
given by the 'President as also by two workmen and other officers of the
company the Tribunal has found certain discrepancies. For example, the
President in the course of cross-examination stated that since the workers had already
agreed he only tried to improve upon the settlement by negotiating .with the
company for 85% and 871/2% dearness allowances instead of 80% earlier agreed to
by the workers on their own. We do not think that this admission by the
President would reduce the efficacy of the settlement or affect its validity.
It may be that negotiations had been going on for some time and even some
important workers had been individually approached by the management, but it is
clear that the President of the union had taken upon himself the responsibility
for the settlement upon which he. on his own turn, succeeded in making some
effective improvements beneficial to the Workmen. The Tribunal further made
some observations that Shri Pandit was actually unaware of the consequences
that would ensure to the workmen as a result of the settlement Reading the
evidence of Shri Pandit as a whole. we, however. find "hat it cannot be
said that he was unaware of the consequences. We are also unable to hold that
he had knowingly and deliberately suppressed the fact about the importance of
the consequences 22 to the workers if the settlement were accepted. As a matter
of fact it has been stated by the workmen. who were examined, that Shri Pandit
did mention that they would lose Rs.
12/to Rs. 15/in dearness allowance if the
settlement superseded the award. Mathematically this may not be correct as
perhaps, on account of the rise of consumer price index, the loss in dearness
allowance could have been even double the figure given by the President. That,
however, per se, does not make the settlement unfair or unreasonable.
It is found by the Tribunal that in the
matter of wages the settlement has given better terms and that the same cannot
be said to be unfair. The Tribunal has stated in more than one place that the
only objection to this settlement levelled by the 2nd respondent is with regard
to the quantum of dearness allowance. While the award has given the Revised
Textile dearness allowance, the settlement has substituted 86% and 871/2% of
the Revised Textile allowance for the first and the second period respectively.
While the award is for one year, subject to the provisions of the Industrial
Disputes Act, the settlement is for a period of three years. Having regard to
the totality of the terms of the settlement we are unable to agree with the
Tribunal that the terms are in any way unfair or unreasonable.
Besides, the settlement has to be considered
in the light of the conditions that were in force at the time of the reference.
It will not be correct to judge the settlement merely in the light of the award
which was pending appeal before this Court. So far as the parties are concerned
there will always be uncertainty with regard to the result of the litigation in
a court proceedings. When, therefore, negotiations take place which have to be
encouraged, particularly between labour and employer in the interest of general
peace and well being, there is always give and take. Having regard to the
nature of the dispute, which was raised as far back as 1968, the very fact the
existence of a litigation with regard to the same matter which was bound to
take some time must have influenced both the parties to come to some
settlement. The settlement has to be taken as a package deal and when labour
has gained in the matter of wages and if there is some reduction in the matter
of dearness allowance so far as the award is concerned, it cannot be said that
the settlement as a whole is unfair and unjust.
There are three categories of workers,
permanent workers, listed casual workmen and certain other casual workmen.
It is said that the third category of workmen
are employed seasonally for a period of 20 days or so. Their number is also
said to be not more than 20 or 30. The terms and conditions relating to this
category of casual workmen were left, under the settlement, to be mutually
decided by the parties. It is because of this feature in the settlement that
the Tribunal held that the settlement was incomplete.
We are, however, informed that as a matter of
fact by mutual agreement some terms have been settled even for this third
category of casual workmen. At any rate, because no decision was arrived at
with regard to this small number of seasonal workmen, it cannot be said that
the settlement is bad on that account.
23 The Tribunal next dealt with the
principles applicable in granting dearness allowance to workers. It is while
dealing with this part of the Tribunal's award that Shri Damania for the 2nd
respondent sought to make a strong plea in favour of sustaining the award by
disregarding the settlement. According to counsel the wage level of the workers
is more or less at subsistence level and, therefore, cent per cent
neutralisation of the cost of living or, at any rate, 95% neutralisation should
have been allowed while setting dearness allowance. Since the Tribunal has
rightly taken that settled principle into consideration and the settlement has
departed from it, the same should be held as unjust and unfair to the workmen.
We should point out that there is some
misconception about this aspect of the case. The question of adjudication has
to be distinguished from a voluntary settlement. It is true that this Court has
laid down certain principles with regard to the fixation of dearness allowance
and it may be even shown that if the appeal is heard the said principles have
been correctly followed in the award. That, however, will be no answer to the
parties agreeing to a lesser amount under certain given circumstances. By the
settlement, labour has scored in some other aspects and will save all
unnecessary expenses in uncertain litigation. The settlement, therefore, cannot
be judged on the touchstone of the principles which are laid down by this Court
There may be several factors that may
influence parties to come to a settlement as a phased endeavour in the course
of collective bargaining. Once cordiality is established between the employer
and labour in arriving at a settlement which operates well for the period that
is in force, there is always a likelihood of further advances in the shape of
improved emoluments by voluntary settlement avoiding friction and unhealthy
litigation. This is the quintessence of settlement which courts and tribunals
should endeavour to encourage. It is in that spirit the settlement has to be
judged and not by the yardstick adopted in scrutinising an award in
adjudication. The Tribunal fell into an error in invoking the principles that
should govern in adjudicating a dispute regarding dearness allowance in judging
whether the settlement was just and fair.
Mr. Damania has drawn our attention to
several authorities of this Court with regard to the principles of fixation of
dearness allowance including the recent decision of this Court in Killick Nixon
Limited v. Killick & Allied Companies Employees Union and earnestly
submitted that there is a "peremptive necessity" to grant cent per
cent or at any rate 95% neutralisation of the cost of living as dearness allowance
(5th principle of Killick Nixon Limited supra).
Even the Tribunal has relied upon the above
decision. But, as we have pointed out, that is not the correct way to decide
whether a settlement voluntarily arrived at by the parties is just and fair.
The matter would have been absolutely different if on the face of it the
settlement was highly unconscionable or grossly unjust. Even according to the
Tribunal, the reduction of the dearness allowance to 85% and 871/2% from cent
per cent is the only objectionable feature to enable it to hold that that part
of the (1) Supp. S.C.R. 453.
24 settlement is unjust and unfair. The
Tribunal found that all other terms of the settlement were "fair, just and
It is not possible to scan the settlement in
bits and pieces and hold some parts good and acceptable and others bad. Unless
it can be demonstrated that the objectionable portion is such that it
completely outweighs all the other advantages gained the Court will be slow to
hold a settlement as unfair and unjust. The settlement has to be accepted or
rejected as a whole and we are unable to reject it as a whole as unfair or
unjust. Even before this Court the 3rd respondent representing admittedly the
large majority of the workmen has stood by this settlement and that is a strong
factor which it is difficult to ignore. As stated elsewhere in the judgment, we
cannot also be oblivious of the fact that all workmen of the company have
accepted the settlement. Besides, the period of settlement has since expired
and we are informed that the employer and the 3rd respondent are negotiating
another settlement with further improvements. These factors, apart from what
has been stated above, and the need for industrial peace and harmony when a
union backed by a large majority of workmen has accepted a settlement in the
course of collective bargaining have impelled us not to interfere with this
That being the position, we unhold the
settlement as fair and just and order that the award of the Tribunal shall be
substituted by the settlement dated October 18, 1973.
The said settlement shall be the substituted
award. The appeal is disposed of accordingly. There will be no order as to
B.P.R. Appeal dismissed.