Process
Technicians and Analysts' Union Vs. The Union of India & Ors [1997] INSC
260 (10 March 1997)
CJI,
A.M. AHMADI, SUJATA V. MANOHAR
ACT:
HEADNOTE:
Mrs. Sujata
V. Manohar. J.
Bharat
Petroleum Corporation Ltd., the second respondent in this appeal has about
12,000 employees. Out of these about 1850 employees are working in the refinery
division of the second respondent. Process Technicians and Analysts' Union which is the appellant-Union has a membership of
about 411 employees in the refinery division of the second
respondent-corporation.
Prior
to 1976 there were two companies; one was Burmah shell Refineries Ltd. which
was an Indian company and the other was Burmah Shell oil Storage and
Distributing Company which was a foreign company registered in the United
Kingdom and was a marketing company. On or about 24th of January, 1976, the
entire share capital of Burmah Shell Refineries Ltd. was purchased by the
Government of India and Burmah shell Refineries Ltd. became a Government
Company, and later a Public Sector Undertaking. The Burmah Shell oil Storage
and Distributing Company which was a foreign company was acquired by the
Central Government by enacting the Burmah Shell (Acquisition of Undertakings in
India) Act, 1976.
After
the acquisition of the Burmah Shell oil Storage and Distributing Company, both
these companies were merged and a notification was issued under Section 7 of
the said Act vesting the undertakings of the Burmah Shell Oil Storage and
Distributing Company in Burmah Shell Refineries Ltd. The name of the said
company was changed on or about 1st of August, 1977, to Bharat Petroleum
Corporation Ltd. Upto 24th of January, 1976, there were approximately 220 Burmah
Shell workmen who were working in the Refinery Company. After 24th of January,
1976, some of these employees continued with the Government Company. Fresh
workmen were employed thereafter by the Government/Public Sector Company on a
temporary basis on consolidated salaries.
In
February 1978 Petroleum Employees' Union
filed U.L.P.38/1978 under the Maharashtra Recognition of Trade Unions and
Prevention of Unfair Labour Practices Act, 1971, claiming on behalf of post-nationalisation
workmen in the refinery or Bharat Petroleum Corporation Ltd. benefits of Pre-Nationalisation
Wage Settlements signed by the then unions with Burmah Shell Refineries Ltd.
Those settlements were dated 21.2.1973, 31.10.1973 and 16.8.1974.
By a
letter dated 27th of February, 1981 addressed by the Government of India to the
second respondent- corporation, the attention of the second respondent was
invited to existing directions to the effect that the Wage Scales/Service
Conditions which were prevalent before the take-over of the company cannot be
granted to the employees recruited subsequently and that the second respondent-
corporation should recruit all new entrants after take-over of the company on
consolidated wages. It was in compliance with this directive that the second
respondent-corporation had engaged employees after nationalisation on a
temporary basis and on consolidated salaries.
During
the pendency of U.L.P. 38/1978, there were other litigations between the
employees and/or unions of these employees and the second
respondent-corporation pertaining to service conditions of the employees. These
are, however, not relevant for the present purposes. On 29th of April, 1987,
U.L.P. 38/1978 was allowed in favour of the employees.
The
Industrial court held that the second respondent- corporation was a
successor-in-interest of Burmah Shell Refineries Ltd. and that the settlement
of 16th of August, 1974 continued to apply to employees recruited after nationalisation
(hereinafter referred to as `post- nationalisation employees'). It was also
held that the letter from the Government of India to the second
respondent-corporation dated 27-2-1981 was
of no legal effect and legislation was required if it was intended that the
same service conditions would not apply to post- nationalisation employees.
This decision was challenged by the second respondent by filing a writ petition
being Writ Petition No. 1835 of 1987 in the Bombay High Court on or about 1st
of July, 1987. The writ petition prayed for a writ of certiorari to quash the
judgment dated 29th of April, 1987 in U.L.P. 38 of 1978. By an interim order of
the same date the application of the settlement of 16th of August, 1974 was
stayed for the past period but for prospective period from 1.7.1987 the said
settlement of 1974 was made applicable to all workmen of the refinery who were
complainants in U.L.P. 38 of 1978.
On 2nd
of July, 1988, Bharat Petroleum Corporation Ltd. (Determination of conditions
of Service of Employees) Ordinance, 1988, was promulgated. Under Section 3 of
the ordinance power was vested in the Ministry of Petroleum, Government of
India to determine service conditions under a scheme comparable with the
employees of other public sector companies. The Ordinance was replaced by The Bharat
Petroleum Corporation Ltd. (Determination of Conditions of Service of
Employees) Act, 1988, being Act 44 of 1988 (hereinafter referred to as 'the Act
of 1988). The relevant provisions of Section 3 of the said Act are as follows:
"3(1):
Where the Central Government is satisfied that for the purpose of making the
conditions of service of the officers and employees of the Corporation
comparable with the conditions of service of the officers and employees of
other public sector companies, it is necessary so to do. it may,
notwithstanding anything contained in the Industrial Disputes Act, 1947 or any
other law or any agreement, settlement, award or other instrument for the time
being in force, and notwithstanding any judgment, decree or order of any court,
tribunal or other authority, frame one or more schemes for the purpose of
determination of the conditions of service of the officers and employees of the
Corporation.
(2) x x
x x x x x (3) The Central Government may make a scheme to amend or vary any
scheme made under sub-section (1).
(4)
The power to make any scheme under sub-section (1) or sub- section (3) shall
include-- (a) the power to give retrospective effect to any such scheme or any
provision thereof; and (b) the power to amend, by way of addition, variation or
repeal, any existing provisions determining the conditions of service of the
officers and employees of the Corporation in force immediately before the
commencement of this Act.
(5)
Every scheme made under sub- section (1) or sub-section (3) shall be laid, as
soon as may be after it is made, before each House of Parliament, while it is
in session for a total period of thirty days which may be comprised in one
session or in two or more successive sessions, and if, before the expiry of the
session immediately following the session or the successive sessions aforesaid,
both Houses agree in making any modification in the scheme, or both Houses
agree that the scheme should not be made, the scheme shall thereafter have
effect only in such modified form or be of no effect, as the case may be; so,
however, that any such modification or annulment shall be without or erejudice
to the validity of anything previously done under that scheme.
Pursuant
to the power given under Section 3, the central government on of about 29th of
April, 1989, framed a scheme by a notification of that date. being the Bharat
Petroleum Corporation Ltd. (Determination of Conditions of Service of Post-Nationalisation
Refinery Employees) Scheme, 1989 (hereinafter referred to as `the Scheme of
1989'). The Scheme was made retrospective and clause 1 (2) of the Scheme
provided that the Scheme shall be deemed to have come into force on and from
the 24th day of January, 1976. The Scheme laid down conditions of service for
the employees covered by the Scheme for five different periods; (1) the period
from 24th of January, 1976 to 31st December, 1979; (2) 1st of January, 1980 to
31st December, 1983; (3) 1st January, 1984 to 31st December, 1987; (4) 1st
January, 1988 to 31st December, 1991; and (5) after 31st of December, 1991,
unless the conditions are altered, varied or repealed by any other scheme.
Two
unions of the employees of the second respondent- corporation, namely, the
appellant union and Petroleum workmen's Union
filed Writ Petition No. 3549 of 1988 in the Bombay High Court challenging the
constitutional validity of the Bharat Petroleum Corporation (Determination of
Conditions of Service of Employees) Act, 1988. Another writ petition being writ
petition No. 3619 of 1988 was filed by another union, namely, Bharat Petroleum
Corporation (Refinery) Employees' Union
challenging the constitutional validity of the said Act of 1988. After the
coming into force of the said Scheme of 1989, these writ petitions were amended
to challenge the validity of the said Scheme which was framed on 29th of April,
1989. These writ petitions were heard together. By a common judgement and
order, a Division Bench of Bombay High Court has dismissed these writ petitions
and has upheld the constitutional validity of the said Act of 1988 and the
Scheme of 1989.
The
present appeal is filed by the appellant-union from the judgment and order of the
Division Bench of the Bombay High Court in writ petition No. 3549 of 1988.
Similarly, an appeal was also filed from the said judgment and order by the
Petroleum workmen's Union who was a joint petitioner in the
said Writ petition No. 3549 of 1988. An appeal was also filed by the Bharat
Petroleum Corporation (Refineries) Employee's Union before this Court from the said judgment and order in writ
Petition No. 3619 of 1988. The other two appeals, however, have been disposed
of before us by earlier orders in view of the settlements arrived at by the
said two unions with the second respondent-corporation on or about 17th May,
1996. The appellant-union, however, has not reached a settlement with the
corporation.
After
the dismissal of the said writ petitions by the Bombay High Court by the
impugned judgment and order, writ petition No. 1835 of 1987 which had been
filed by the second respondent-corporation challenging the judgment and order
of the Industrial court in U.L.P. 38 of 1978 was allowed by the Bobmay High
Court by its judgment and order of the Industrial court dated 29th of April,
1987 in U.L.P. 38 was set aside.
During
the pendency of this appeal before us, the Central Government, Ministry of
Petroleum and Natural Gas, by a notification dated 24th of September, 1996 has
notified a scheme further to amend the Bharat Petroleum Corporation Ltd.
(Determination of conditions of Service of Post- Nationalisation Refinery
Employees) Scheme, 1989. The amended Scheme is known as the Bharat Petroleum
Corporation Ltd. (Determination of Conditions of Service of Post- Nationalisation
Refinery Employees) Amendment Scheme, 1996 (hereinafter referred to as 'the
Scheme of 1996'). It is deemed to have to come into force on and from the 1st
day of January, 1992. Under Clause 3 of the Amended Scheme, it applies to all
clerical and labour employees who have joined the refinery of the Corporation
on or after the 24th day of January, 1976, whose jobs are set out in Part-B of
the Fourth Schedule provided that the Scheme shall cease to have effect in
respect of the employees who shall opt or consent to be governed by the terms
and conditions as may be mutually agreed with the Corporation. As a result, the
employees who are governed by the settlements which have now been entered into
on or about 17th of May, 1996, will not be governed by the Amended Scheme of
1996. While the employees who are members of the appellant-union, who have not
signed such settlements. will now be governed by the Amended Scheme of 1996.
The validity of this Amended Scheme of 1996 is also challenged before us.
The
appellant-union contends that Section 3 of the Bharat Petroleum Corporation
Limited (Determination of Conditions of Service of Employees) Act, 1988 confers
unguided and arbitrary powers on the Central Government to frame schemes. Hence
Section 3 of the Act of 1988 must be struck down. Section 3, however, clearly
provides within itself the guidelines for framing the scheme under that
section. Thus Section 3(1) stipulates that the Central Government should be
satisfied, that for the purpose of making the conditions of service of the
officers and employees of other public sector companies, it may frame one or
more schemes for the purpose of determination of the conditions of service of
the officers and employees of the corporation. It can do this notwithstanding
anything contained in the Industrial Disputes Act, 1947 or any other law,
agreement, settlement, award or other instrument for the time being in force,
and notwithstanding any judgment, decree or order of any court, tribunal or
other authority.
The
power to frame the scheme, therefore, can be exercised for the purpose of
making the service conditions of the second respondent's employees comparable
with those of other public sector companies. This is not unguided power. The
guidelines are contained within Section 3 itself.
It is
next submitted that under Section 3(2) while framing any scheme under
sub-section (1) of Section 3, it shall be competent for the Central Government
to provide for the continuance, after the commencement of any such scheme, of
such of the emoluments and other benefits as were payable to the officers and
employees of the Corporation immediately before Burmah shell Refineries became
a government Company or before the appointed day under the Burmah Shell
(Acquisition of Undertakings in India) Act, 1976. It is submitted that by
reason of Section 3(2) different service conditions can be permitted for the
pre- nationalisation employees of Burmah Shell Refineries or Burmah Shell oil
Storage and Distributing Company who have become employees of the second
respondent-corporation as result of the nationalisation. This, according to the
appellant, violates Article 14 of the Constitution as it discriminates between
two sets of employees of the second respondent-corporation.
This
submission, however, ignores the entire historical background of creation of
the second respondent-corporation.
Prior
to 1976 the employees of Burmah Shell Refineries as well as Burmah Shell Oil
Storage and Distributing company of India Limited enjoyed salaries and
emoluments and had the benefit of a wage structure which was very different
from that of other public sector undertakings. When Burmah Shell Refineries
became a Government Company, and when the Burmah Shell oil Storage and
Distributing Company of India Limited was taken over under the Burmah Shell
(Acquisition of Undertakings in India) Act, 1976, the employees of the second respondent-corporation, were
given protection of their wages. Section 9 of the Burmah shell (Acquisition of
Undertakings in India) Act, 1976, in this connection, provides that these
employees shall hold office or service under the Central Government or the
Government Company, as the case may be, on the same terms and conditions and
with the same rights to pension, gratuity and other matters as would have been
admissible to them, had there been no such vesting. It is to protect the
conditions of service of these pre-nationalisation employees that Section 3(2)
of the 1988 Act provides that a scheme framed under section 3(1) may provide
for the continuance of the salary and other benefits received by the pre-nationalisation
employees. This was done to treat the pre-nationalisation employees was a
dwindling group. originally, there were about 200 such employees who were
entitled to their pre-nationalisation service benefits.
By the
time these appeals came to be filed their numbers had dwindled to 10. We are
now informed that there is only one employee now left who is entitled to pre-nationalisation
emoluments. In this context, it cannot be said that the provisions of Section
3(2) violate Article 14 of the Constitution.
In the
case of Life Insurance Corporation of India &777 Ors. v. S.S. Srivastava & Ors. (1988 Supp SCC 1), a
distinction had been made in the age of retirement between employees
transferred to a Government Corporation from its predecessor private company
and employees directly recruited by the Corporation. The age of retirement for
transferred employees was fixed at 60 years and the age of retirement for those
directly recruited to the Government Corporation was fixed at 58 years. It was
held that the transferees and direct recruits formed two distinct classes and
providing different ages of retirement was not discriminatory. This Court noted
that the transferred, employees belonged to a diminishing cadre. Ultimately,
the cadre would consist only of directly recruited employees. Secondly, a
separate classification for transferred employees had become necessary on
account of historical facts and the need for treating these employees in a fair
and just way. This Court referred with approval to the decision of the Calcutta
High Court in Maninder Chandra Sen v. Union of India & Ors. (AIR 1973 Cal.
385), in which the classification of railway employees into two categories,
namely, those who joined on or before March 31, 1938 for purposes of fixing the
age of superannuation was upheld. The classification was upheld as it was based
on historical facts, and as necessary for treating the employees in the just
and fair way.
In the
case of B.S. Yadav & Anr. v. Chief Manager, Central Bank of India &
Ors. (1987 [3] SCC 120), this Court upheld rules fixing 60 years as the age of
superannuation for those inducted prior to bank nationalisation, but 58 years
for those inducted after that date. These rules were held as not violative of
Articles 14 and 16 of the Constitution. The Court said that the classification
of the employees into these two categories was a valid classification involving
justice and fairness. There was good reason to make a distinction between the
employees who had entered service prior to nationalisation and those who joined
thereafter. At the time of nationalisation the corresponding new banks did not
have their own employees to run the wide business taken over under the Act.
There was, therefore, necessity to secure the services of the employees of the
former banking companies without causing much dissatisfaction to them. There
was also need for standardising the conditions of service of all such employees
belonging to the 14 banks. Hence the age of retirement of the new entrants was
fixed consistent with the conditions prevailing in almost all the sectors of
public employment.
The
considerations which have impelled the provisions of Section 3(1) and 3(2) in
the 1988 Act are very similar to those cited in B.S. Yadav's case (supra). In
the case of Imperial Bank of India Pensioners' Association & Ors. v. State
Bank of India & Ors. (1989 Supp.[1] SCC 236), This Court upheld a
distinction made between the India-based and London-base pensioners of Imperial
Bank of India which was later taken by the State Banks of India. The Court said
that such a distinction did not violate Articles 14 and 16 of the Constitution.
It said that London-based employees constitute a class by themselves and there
was no discrimination within the same class. The contention of the appellant,
therefore, in this regard, cannot be sustained.
The
appellant has drawn our attention to the Statement of Objects and Reasons of
the 1988 Act. Paragraph 3 of the Statement of Objects and Reasons accompanying
the said Act points out that the Bharat Petroleum now consists of three
categories of employees. They are the employees of the Burmah Shell Refineries
who continued to serve in that company even after it became a government
Company; the employees of Buramh Shell whose services were transferred to Burmah
Shell Refineries under the provisions of the 1976 Take-over Act. and the
employees recruited by Bharat Petroleum after it became a Government Company.
In paragraph 4 it is pointed out that out of the first two categories of
employees mentioned above, a few have not agreed to abide by the public sector
wage policy and, therefore, continue to enjoy the emoluments and other
conditions of service to which they were entitled under the aforesaid companies
even after the Burmah Shell. The emoluments and other conditions of service of
the third category of employees mentioned above and who were recruited by Bharat
Petroleum were, however, sought to be regulated after taking into consideration
the conditions of service applicable to employees in other public sector
companies in accordance with the wage policy of the Government of Public
Sector.
This
was with a view that there should be, as far as possible, parity in the
conditions of service of Public Sector Companies.
The
Statement of objects and Reasons goes on to point out that since the service
conditions of this large category of employees were less favourable than the
employees of Burmah Shell Refineries and Burmah Shell, a dispute was raised by
them which was taken to the Industrial Court. The Industrial Court has held
that in view of the provisions Section 18(3) of the Industrial Disputes Act,
1947, these employees are also entitled to the same conditions of service as
are applicable to other two categories of Employees. The Statement goes on to
say, "The award of the Industrial Tribunal if given effect to in Bharat
Petroleum will amount to giving a higher wage structure in this Corporation
alone and other employees in similar undertakings may demand that they should
also get the benefits of the higher scales of pay on the principle of equal pay
for equal work. This may eventually result in high wage islands and depart
radically from the public sector wage policy." As the continuance of the
conditions of service of the employees of the former company was due to
historical reasons and as the conditions of service of the employees of Bharat
Petroleum were arrived at as a result of settlements make between the company
and the workmen, the demand of post-nationalisation employees for parity with
the employees of the former company may have to be conceded in view of the
provisions of the Industrial Disputes Act and the award of the Industrial Tribunal.
Any attempt to make the conditions of service comparable with the conditions of
service of other public sector companies can only be done by legislation. Such a
legislation could provide for determination of comparable conditions of service
for all the categories of employees of Bharat Petroleum but at the same time
provide for protection to those pre- nationalisation employees of their
conditions of service.
It is
to achieve this objective that the Act of 1988 came to be enacted. The
appellant contends that the entire basis of the Act is unfounded because there
is no such thing as public sector wage policy. It contends that wage structures
in different public sector undertakings are different. The appellant has
submitted charts of wages in different public sector companies. There is, for
example, a chart showing the wages of the lowest category if workmen of the
second respondent in the refinery compared with other public sector units at
different levels at starting, 5th, 10th and maximum level. At the beginning the
total wages in RCF, for example, are Rs. 2421/-, which at the 5th level go upto
Rs. 2559/-, and at the 10th level to Rs. 2693/-. In comparison, under the 1989
BPCL Refinery Scheme, the total at the beginning is Rs. 2323/-, at the 5th
level it is Rs. 2399/-, and at the 10th level it is Rs. 2480/-. In BPCL
Marketing Division, the comparable figures are Rs. 2630/-, Rs. 2814/- and Rs.
3062/-. we are not referring in detail to these charts which have been
submitted and which we have perused. The contention of the appellant that the
figures in different public sector unions do not tally is correct. But what we
have to see is not the actual figure but the pattern or the structure of the
wage, or what the respondents describe as the public sector wage pattern.
The
respondents have explained the fundamental rationale behind evolving a public
sector wage patter, which is to achieve consistency and uniformity in the wage
structure of the public sector enterprises so as to ensure that the wages drawn
by various public sector companies are not so disproportionate with one another
as to create any imbalance in the public sector. Towards this end, the
Government of India has issued, from time to time, directives and orders to
public sector enterprises to maintain uniform it and consistency in that wage
pattern.
For
this purpose the Department of public Enterprises has been set up to ensure,
inter alia, parity of public sector wages. The method of computation of
dearness allowance etc.
is in
identical for all the public sector enterprises. The components of the total
wage packet consist of a basic salary scale which is formulated by merging a
portion of the dearness allowance with the pre-existing basic salary at the
beginning of each wage settlement period, which is currently a period of five
years. The basic salary scale has a minimum and maximum value which is arrived
at by providing for increments. The second component is dearness allowance
which is linked to the All India Consumer price Index Simla Series (Base
1960=100). All public sector enterprises follow the same industrial D.A.
pattern. The third component is house rent allowance which is payable at the
rate of 30% of the basic salary in the metropolitan cities, 25% of basic salary
in other A class cities, 15% of basic salary in B1 and B2 class cities and
7-1/2%/10% for C class cities and unclassified areas. The other components are
city compensatory allowance and wage revision which generally take place now
every five years. The respondents have prepared a table of emoluments drawn by
the employees in the public sector oil companies for the highly skilled
category at the maximum of the scale as of now. In HPCL Refinery, the total
emoluments are Rs. 11,964/-, in IOC Refinery it is Rs. 11,574/- and in the BPCL
Refinery it is Rs. 12.386/-. The essential features, therefore, of the public
sector wage pattern are variable industrial D.A. payment of H.R.A./C.C.A. based
on Department of public Enterprises guidelines, linkage of revision in wages to
productivity, permissible limits to rise in wages and adoption of the principle
of region-cum-industry as the basis for any wage revision. The respondents have
pointed out that the wage structure of the pre-nationalisation Burmah Shell
Refineries was at complete variance with this wage pattern. Hence it needed to
be changed.
The
scheme of 1989 which has been framed under the Act of 1988 is for the purpose
of introducing the public sector wage pattern in the second
respondent-corporation for post- nationalisation employees. It would not,
therefore, be correct to say that there is no such thing as a public sector
wage pattern. The variations pointed out by the appellant are a result of
revisions being made in different public sector enterprises at different times
and under different settlements. In fact the disparity in the wages paid by the
second respondent in its Marketing Division and its Refinery Division is also
on account of the differences in the settlements which the second respondent
has arrived at with its employees in the Marketing Division. We are informed
that the employees of the Marketing Division were the first group of employees
of the second respondent who agreed to a change-over to the public sector wage
pattern under the Settlement of 1986. The revision in their wages thereafter is
in accordance with the pattern so adopted for the Marketing Division. The
Refinery Division, however, did not agree to such a settlement and hence there
are some differences in the wages paid in these two divisions. Such differences
cannot nullify the basic intention of the second respondent to bring about
parity in the wage pattern of their employees with the wage pattern in other
public sector undertakings especially in the oil sector which is the relevant
sector.
The
appellant has challenged the power given under Section 3 of 1988 Act to frame a
scheme retrospectively. The appellant has also challenged the 1989 Scheme
framed under the said Act on the ground that it has been made applicable
retrospectively from 24th of January, 1976. The appellant has contended that
the Scheme cannot be made operative retrospective from 24th of January, 1976
when the Act under which it is framed came into force only on 2nd of July,
1988. This submission is based on a misconception. Under sub-section (4) of
Section 3 of the said Act an express power is given to the Central Government
to give retrospective effect to any scheme framed under sub-section (1) or
sub-section (3) of Section 3. The retrospective operation which is given to the
Scheme of 1989 is, therefore, under a statutory power so given to the Central
Government. Since the scheme regulates the conditions of service of post-nationalisation
refinery employees, it must necessarily cover the post-nationalisation period
which began from 24th of January, 1976. It is open to the legislature to make
retrospective laws. Therefore, the statutory scheme which has been made
retrospective in exercise of statutory power expressly granted to the Central
Government cannot be faulted on that ground.
The
appellant further contends that the Industrial court by its order dated
29.4.1987 in U.L.P. 38 of 1978 held that the Settlement of 16th of August, 1974
which was arrived at by the Burmah Shell Refinery with its employees would
apply to the employees recruited after nationalisation by the second
respondent. It was to override this decision of the Industrial Court that the Bharat
Petroleum Corporation Ltd. (Determination of Conditions of Service of
Employees) Act, 1988, came to be enacted. In fact, the Statement of Objects and
Reasons which has been set out earlier clearly shows that as a result of the
decision of the Industrial Court there would be a high wage island in the
public sector in the form of high wages being paid to the employees of the
Refinery Division of second respondent which may lead to imbalances in the
public sector. It was to overcome such imbalance that the Act was being passed.
Section
3(1) of the Act clearly provides that a scheme which may be framed under
Section 3(1) can "be framed notwithstanding anything contained in the
Industrial Disputes Act or any other law, settlement of other instrument for
the time being in force and notwithstanding any judgment, decree or order of
any court. tribunal or other authority." The scheme of 1989 is accordingly
framed with retrospective effect from 24th of January, 1976 and it provides for
detailed conditions of service of the employees for five different periods. The
appellant contends that the Act of 1988 and the Scheme of 1989 are designed to
overcome the judgment of the Industrial court. such legislation, according to
the appellant, is invalid.
Learned
counsel for the appellant has placed strong reliance upon the decision of the
Court in the case of A.V.
Nachane
and Anr. v. Union of India & Anr. (1982 (2) SCR 246) in support of his
contention that a statute such as the 1988 Act, and the Scheme of 1989 formed
under it, are invalid in so far as they are retrospective because they are
aimed at setting aside the judicial decision of the Industrial Court.
This
cannot be done by legislation. This contention, however, does not bear any
detailed scrutiny. As far back as in 1969, in the case of Shri Prithvi cotton
Mills Ltd, & Anr. v. Broach Borough Municipality & Ors. (1970 (1) SCR
388) a Bench of five judges of this Court examined the efficacy of a validating
Act which retrospectively validated the levy of a tax. It said that ordinarily
a court holds a tax to be invalidly imposed because the power to tax is wanting
or the statue or the rules or both are invalid or do not sufficiently create
jurisdiction. Validation of a tax so declared illegal may be done only if the
grounds of illegality or invalidity are capable of being removed and are in
fact removed and the tax thus made legal. Observing that there are several
methods of doing this, the Court said that the legislature may, by following
one method or the other, neutralise the effect of an earlier decision of the
court which becomes ineffective after the change of the law.
If the
legislature has the power over the subject-matter and competence to make a
valid law, it can, at any time, make such a valid law and make it
retrospectively so as to cover even past transactions.
A
Bench of seven judges of this Court was required to consider the validity of
the Life Insurance Corporation (Modification of Settlement) Act, 1976 in the
case of Madan Mohan Pathak v. Union of India & Ors. etc. (1978 (3) SCR
335). Life Insurance Corporation had arrived at a settlement with its employees
relating to the terms and conditions of service of Class III and Class IV
employees including bonus payable to them. Under one of the clauses of this
settlement, an annual cash bonus was payable by the Life Insurance Corporation
to all Class III and Class IV employees. This settlement was valid for a period
of four years from 1st of April, 1973, In 1976, the payment of Bonus
(Amendment) Act which was enacted considerably curtailed the rights of
employees to bonus. Although this Act was not applicable to the employees of
the Life Insurance Corporation, the Corporation issued administrative
instructions not to pay cash bonus to its employees.
Thereupon,
the employees moved the Calcutta High Court for a writ directing the Life
Insurance Corporation to pay a cash bonus in accordance with the terms of the
settlement. A Single Judge of the High Court allowed the writ petition.
While
a Letters Patent Appeal was pending, Parliament passed the Live Insurance
Corporation (Modification of Settlement) Act, 1976. The effect of the Act was
to deprive Class III and Class IV employees of the Life Insurance Corporation
of bonus payable to them under the settlements. After the enactment, the
Letters Patent Appeal which was filed by the Corporation was not pursued by the
Corporation under the belief that after the Act was passed, there was no
necessity for proceeding with the appeal. As a result, the writ of mandamus
issued by the Single Judge of the Calcutta High Court remained in tact. The
Associations of employees filed writ petitions before this Court challenging the
constitutional validity of the Life Insurance Corporation (Modification of
Settlement) Act, 1976. This Court said that the real objective of this Act was
to set aside the result of the mandamus issued by the Calcutta High Court, Bhagwati,
J., who delivered the majority judgment said that irrespective of whether the
impugned Act was constitutionally valid or not, the Corporation was bound to
obey the writ of mandamus issued by the High Court. Section 3 of the impugned
Act merely provided that the provisions of the settlement shall not have any
force or effect. But the writ of mandamus issued by the High Court was not
touched by the impugned Act. The judgment continued to subsist and the
Corporation was bound to honour it. The majority held that the impugned Act
which took away the rights of the employees to receive bonus was violative of
Article 31(2). The observations of Bhagwati J. (as he then was) are in the
context of the L.I.C. being bound to obey the writ of mandamus issued by the
High Court. Also, Section 3 of the impugned Act did not override any judgment
or order of my court. The position in the case before us is very different and
we shall examine it a little later.
After
the above decision, L.I.C. issued notices terminating the settlement and issued
a notification changing staff regulations. The validity of the two notices and
the notification issued for the purpose of nullifying any further claim to
annual cash bonus was challenged by the workmen in the case of The Life
Insurance Corporation of India v. D.J. Bahadur & Ors. (1981 (1) SCR 1083)
and this Court had directed the Corporation to give effect to the terms of the
settlement of 1974 relating to bonus until superseded by a fresh settlement,
industrial award or relevant legislation.
On
January 31, 1981, the Life Insurance Corporation (Amendment) Ordinance, 1981,
was promulgated which was later replaced by an Act. Sub-section (2)(c) which
was added to Section 48 provided that the provisions of clause (cc) of
sub-section (2) and sub-section (2)(B) and any rule made under clause (cc)
shall have effect notwithstanding any judgment, decree or order of any court,
tribunal or other authority, the Industrial Disputes Act etc. New statutory
rules also were promulgated. Of these, Rule 3 was given retrospective operation
with effect from July 1, 1979. It provided that the employees shall not be
entitled to any cash bonus. The validity of Life Insurance Corporation
(Amendment) Ordinance and Act of 1981 and the 1981 Rules were challenged in the
case of A.V. Nachane (supra). The court said that the effect of the two
judgments in Madan Mohan Pathak's case and D.J. Bahadur's case (supra) was
clear. Rule 3 operating retrospectively cannot nullify the effect of the
subsisting writ issued in D.J. Bahadur's case (supra) which directed the Life
Insurance Corporation to give effect to the terms of the 1974 settlement
relating to bonus until superseded by a fresh settlement. industrial award or
relevant legislation. The impugned Act of 1981 and the rules were relevant legislation.
However, in view of the decision in Madan Mohan Pathak's case (supra) these
Rules in so far as they seek to abrogate the terms of the 1974 settlement
relating to bonus can operate only prospectively, i.e. from the date of
publication of the rules.
We
fail to see how these decisions help the appellant in the present case. The
decision in A.V. Nachane`s case (supra) on which strong reliance is placed by
Mr. Phadnis, learned senior counsel for the appellant, has turned upon an
existing writ of mandamus which was issued by the Calcutta High Court and which
the court said would have to be obeyed.
This
was the reason why only prospective operation was given to the Rules of 1981 in
A.V. Nachane's case (supra). In the present case, there is no writ of mandamus
or any other writ issued by the High Court in favour of the appellant directing
the second respondent to apply the pre- nationalisation settlements of 1974 to
the post- nationalisation employees. Even the judgment and order of the Industrial Court has been set aside by the High
Court in writ Petition No. 1835 of 1987. The retrospective operation given to
the scheme framed under the present Act, is within the legislative competence
of Parliament. Since the scheme provides for the conditions of service of all
employees who joined the second respondent-corporation after 24th of January,
1976. it necessarily lays down these terms and conditions operative from 24th
of January. 1976. The scheme also provides emoluments which are higher than the
emoluments which the post-nationalisation employees were receiving prior to the
coming into effect of the scheme. The scheme also brings into effect the avowed
purpose of the 1988 Act which is to make the wage pattern in the second
respondent-corporation conform to the wage pattern of public sector
undertakings. A legislation which imposes retrospectively a wage pattern may
thereby discontinue the application of any earlier settlement by an express
legislative provision to that effect. Such legislation is within the legislative
competence of Parliament. The ratio of Nachane's case (supra) does not apply in
the present circumstances.
The
decisions in Madan Mohan Pathak's case (supra) and Nachane's case (supra) have
been recently explained by this Court in two judgments. The first of these is Comorin
Match Industries (P) Ltd. v. State of T.N.
(1996 [4] SCC 281) where this Court has reiterated the ratio laid down Shri Prithvi
Cotton Mills' case (supra). The court has observed that in Madan Mohan Pathak's
case (supra) what was sought to be done was to reverse a decision of a court of
law given in the exercise of judicial power by legislation. This was not
permissible. The Court also said that Nachane's case (supra) was a sequence to
the decision in Madan Mohan Pathak's case (supra) and the principles laid down
in Shri Prithvi Cotton Mills' case (supra) had not been overruled or doubted by
the majority view in Madan Mohan Pathak's case (supra).
The
second case is P. Kannadasan and Ors. v. State of T.N. & Ors. (1996 [5] SCC 670). Referring to the
doctrine of separation of powers this Court said that where an Act made by
State legislature is invalidated by the courts on the ground that the State
legislature was not competent to enact it, the State legislature cannot enact a
law declaring that the judgment of the court shall not operate; it cannot
overrule or annul the decision of the court. But this does not mean that the
legislature which is competent to enact that law cannot enact that law.
Similarly, it is open to a legislature to alter the basis of the judgment while
adhering to the constitutional limitation. In such a case the decision of the
Court become ineffective. The new law cannot be challenged on the ground that
it seeks to circumvent the decision of the Court. The Court observed that this
is what is meant by "checks and balances" inherent in a system of
Government incorporating the concept of separation of powers. Referring to the
decisions in Madan Mohan Pathak's case (supra) and Nachane's case (supra), this
Court said that these two cases do not affect the above principle in any
manner.
Since
these two decision have been explained at length in the cases of P. Kannadasan
as well as Comorin Match Industries (P). Ltd. (supra) we need not reiterate the
same position. In any case, these two decisions have no bearing on the present
case when there is no subsisting order of the Court which is sought to be
overturned by the impugned 1988 Act or 1989 Scheme.
The
other challenges to the Scheme of 1989 are similar to the challenge to the Act
of 1988. It is contended that under the Scheme there is discrimination between
pre- nationalisation and post-nationalisation employees of the refinery. The
distinction made between these two categories of employees does not violate
Article 14, for the reasons which we have already set out in connection with
the provisions of the 1988 Act. It is also submitted that the wages given to
the refinery employees under the 1989 Scheme are different from the wages and
emoluments received by the employees of the Marketing Division employees. however,
were the first to reach settlements with the second respondent agreeing to the
application of public sector wage pattern to their wages and emoluments. As a
result under the settlements which are arrived at, the Marketing Division has
been receiving emoluments and revised emoluments from time to time. Since the
refinery employees did not reach any settlement with the second respondent they
are now being governed by the Scheme which was framed by the Central Government
under the Act of 1988. It is in these circumstances that there is difference
between the wages received by the employees of the two different departments of
the second respondent. Each of these employees constitutes a distinct class
which is receiving different pay packets because of different circumstances
which have affected the wage structure of each class. This cannot be considered
as discrimination under Article 14.
The
next challenge is to the Scheme of 1996 which has been framed while the present
appeal was pending before this Court. The Scheme of 1996 excludes from its
ambit those employees who have entered into settlements with the second
respondent pending the disposal of this appeal. These settlements cover
approximately 77% of the employees in the refinery. There are two settlements:
one arrived at with the Bharat Petroleum Corporation Refinery Employees' Union and the other with the Petroleum Workers' Union. Both these settlements are dated 17.5.1996. They
were signed pursuant to memoranda of understanding dated 25.3.1996 and 5.4.196.
In
view of these memoranda this Court passed orders on 26.4.1996 disposing of the
appeals filed by these two unions. While doing so this Court recorded that
learned Solicitor General had stated at the Bar that he had instructions to
convey to the Court that the Government of India had studied the memoranda of
understanding and would exclude the employees who are covered by these
memoranda of understanding from the operation of the 1989 Scheme with effect
from 1.1.1992 which is the effective date of the two memoranda of
understanding. This Court, therefore, in its above order of 26th of April, 1996
gave a direction to the Central Government to forthwith take action to exclude
the employees covered under the two memoranda of understanding from the
operation of the 1989 Scheme with effect from 1.1.1992. The Central Government
has accordingly amended the 1989 Scheme in 1996 expressly excluding the
employees who have arrived at the above settlements from the operation of the
amended scheme with effect from 1.1.1992. The appellant submits that this is
discriminatory. We fail to see how the distinction made between those employees
who have entered into a settlement and those employees who have not entered
into a settlement can be considered as discriminatory. The second respondents
have even now stated before us that they are willing to sign a similar
settlement with the appellant union. The appellant union, however, has declined
to do so.
Having
declined to do so the appellant to do so. Having declined to do so the
appellant cannot complain of discrimination. The amended Scheme of 1996 grants
further benefits to the employees of the appellant union who are the only group
of employees in the refinery not covered by the settlements. by giving them
further increases in the manner set out in the amended scheme. The appellant
cannot compare the benefits which they get under the amended scheme with the
benefits which other employees have got under settlements may be the result of negotiations
between the employer and the employees. There are various considerations which
go into finalising such settlements on the part of the employer. These include
(1) industrial peace so that the workers can concentrate on their work without
agitations (2) putting an end to expensive litigation between the employer and
the employees and establishment of goodwill and harmony between the employer
and the employees leading to better functioning of the establishment. These
considerations are very different from considerations which govern the framing
of a statutory scheme by the Central Government. Such a scheme must necessarily
bear in mind the wage pattern in other public sector undertakings. The
considerations for framing the amended scheme are different. Those who are
governed by a statutory scheme cannot compare themselves with employees who
have entered into a negotiated settlement with their employer. The charge of
discrimination under Article 14, therefore, cannot be sustained in this regard.
It is
also pointed out by the appellant that the amended scheme of 1996 now covers
only 400 and odd employees who are members of the appellant union. They should
not have been singled out. There is, however, no question of singling out any
one set of employees out of a large group. The employees who are members of the
appellant union being the only set of employees who have not entered into a
settlement with their employer, have necessarily to be provided for under a
statutory scheme. Such a scheme, therefore, has been framed and the employees
cannot complain that they have been singled out. They cannot expect a statutory
scheme to give them the benefits of the settlements which the other employees
have entered into with the employer. The amended scheme of 1996 is not framed
by the employer. It is framed by the Central Government under the statutory
provisions of the 1988 Act. The amended scheme of 1996 gives substantial
additional benefits to the employees. It is in valid exercise of statutory
powers, and is brought into effect from 1.1.1992 since the earlier scheme
covered periods upto 1.1.1992.
In the
circumstances, we agree with the reasoning and conclusion of the High Court. We
further hold that the amended scheme of 1996 is also a valid exercise of power
under the Act of 1988. The appeal is therefore, dismissed with costs.
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