Supreme Court of India
GENERAL MANAGER, SECURITY PAPER MILL, HOSHANGABADversusR.S. SHARMA & ORS.
- Citation
- 1986 INSC 16
- Decided
- 14 February 1986
- Disposal
- Dismissed
- Bench
- E S VENKATARAMIAH
Holding
The 1979 agreement is not binding on the respondents and cannot deprive them of rights under the 1973 settlement.
Summary
In 1973 a settlement was reached during conciliation between the management of Security Paper Mill and the SPM Employees Union covering incentive benefits for all workmen and non‑operative staff. The Government later reduced the incentive rates, a decision later held illegal, after which the management entered into a separate agreement with the union on 11 April 1979 reducing the incentive to 50% for non‑operative staff. The respondents, who were non‑union staff, challenged the validity of this 1979 agreement before the Authority under the Payment of Wages Act, claiming rights under the 1973 settlement. The Court examined the definition of "settlement" under the Industrial Disputes Act, distinguishing settlements made in conciliation proceedings (binding on all workmen) from those made by agreement outside such proceedings (binding only on parties). It held that the 1979 agreement was not binding on the respondents as they were not parties to it and the union had no authority to represent them, and no evidence showed the agreement was fair and just. Consequently, the respondents were entitled to the benefits under the 1973 settlement, and the management's appeal was dismissed.
Issues considered
- The legal effect of a settlement agreement entered into outside conciliation proceedings on workmen who are not parties to it.
- Whether the SPM Employees Union could represent non‑union respondents and bind them by the 1979 agreement.
- Whether the 1979 agreement reducing incentive benefits was fair and just and could override the 1973 settlement.
- Whether the management complied with the termination provisions of Section 19(2) of the Industrial Disputes Act.
Legislation cited
- Industrial Disputes Act, 1947s. 12, s. 18, s. 19, s. 2(p)
- Payment of Wages Act
Subjects
settlementconciliationincentive benefitunion representationbinding agreementIndustrial Disputes ActPayment of Wages Actindustrial relations
Judgment
281
A
GENERAL MANAGER, SECURITY PAPER MILL,
HOSHANGABAD .
v.
R.S. SHARMA & ORS.
B
FEBRUARY 14, 1986
[E,S, VENKATARAMIAH AND M.P. THAKKAR, JJ,]
Industrial Disputes Act, 1947 section 2(p) - "Settle-
ment", meaning of - Settlement arrived at by agreement between
the employer and workman otherwise than in the course of
conciliation proceedings, whom it binds, explained - Burden of
c
Proof that a "Settlement" arrived at by agreement between the
employer and the workman binds every workman being parties to
the settlement and that the agreement was fair and just, is
upon the employer.
D
In the course of conciliation proceedings under the
provisions of the Industrial Disputes Act, 1947, a settlement
was arrived at on June 29, 1973 between the management of the
Security Paper Mill, Hoshangabad, the appellant and the SPM
Employees Union, Hoshangabad. One of the terms of the
settlement related to the incentive benefit entered into on
E
behalf of the workmen and other non-operative officers and
staff of the ·security· Paper Mill· at Hoshangabad. When the
above Settlement was in force the Government of India by its
letter· dated December 29, 1975 reduced the rate of group
incentive benefit payable by restricting the entitlements of
the non-operative officers and staff with effect 'from 1.1. 76
F
to 25% of the rate applicable to industrial workmen for
gazetted officers and to 50% in respect of non-gazetted
industrial staff. When the said order was challenged, the
Central Government Industrial Tribunal-cum-Labour Court held
that the modification of the incentive benefit made by the
. Government of India was illegal. After that the management
G
entered into an agreement with one of the trade unions named
SPM Employees Union on ·April 11, .1979 reducing the rate of
incentive benefit to 50% to the non-operative employees that
ie administrative staff, accounts staff; estate employees and
dispensary staff, and paid the benefit accordingly. The said
agreement was not entered into during the course of any H
282 · SUPREME COURT REPORTS [1986] 1 s.c.R.
A
conciliation proceedings and in fact there were no
conciliation proceedings pending at the time when the
agreement was entered into. The respondents who belonged to
the non-operative staff and who were not the members of the
Union and parties to the agreement challenged the validity of
the agreement before the Authority under the Payment of Wages
B Act on the basis of the Settlement of the year 1973. While
allowing the claim for Rs, 1,93,357.85 and cost at the rate of
Rs. 10 per worker, it did not, however, allow any compen-
sation. In appeal, the Industrial Court affirmed the decision
of the authority under the Payment of Wages Act but disallowed
the costs at the rate of Rs. 10 per worker. Hence the appeal
c. by special leave by the management alone.
Dismissing the appeal, the Court,
lll!Ul: l. The expression "settlement" defined in section
2(p) of the Industrial Disputes Act, 1947 means a settle111ent
D arrived at in the course of conciliation proceeding and also
includes a written agreement between employer and workmen
arrived at otherwise than in conciliation proceeding where
such agreement has been signed by the parties thereto in such
manner as may be prescribed and a copy thereof has been sent
to an officer authorised in this behalf by the appropriete
E Government and the Conciliation Officer. [286 ~; 287 A]
A distinction is made in the Industrial Disputes Act,
1947 between a settlement arrived at in the course of concili-
ation proceeding and a settlement arrived at by agreement
between the employer and workman otherwise than in concili-
F ation proceeding both as regards the procedure to be followed
in the cases and as regards the persons on whom they are
binding. If a settlement of the dispute or of any of the
matters in dispute is arrived at in the course of the concili-
ation proceeding the Conciliation Officer shall send a report
thereof to the appropriate Government or an officer authorised
G in that behalf by the appropriate Government together with a
Memorandlllll of Settlement signed by the parties. Even though a
Conciliation Officer is not competent to adjudicate upon the
disputes between the management and its workmen he is
expected to assist them to arrive at a fair and just settle-
ment. He has to play the role of an adviser and friend of both ~
H the parties and should see that neither party takes undue
GENERAL. MANAGER v. R.S. SHARMA 283
A
+ advantage of the situation. Any settlement arri'led at should
be a juat and fair one. It is on account of this special
feature of the settlement sub-section 3 of section 18 of the
Industrial Disputes Act, 1947 provides that a settlement
arrived at · in the course of conciliation proceedings under
that Act shall be binding on ( i) all parties to the industrial B
dispute, (ii) where a party referred to in clause (i) is an
employer, his heirs, successors, or .Ssigns in respect of the
establishment to which the dispute relates and (iii) where a
). party referred to in clause (i) is comprised of workmen, all
persons who were employed in th<, establishment of part. Law
thus attaches importance and sanctity to a settlement arrived
at in the course of a conciliation proceeding since it carries c
a presumption that it is just and fair and makes it binding on
all the parties as well as the other workmen in the
establishment or the part of. it to which it relates. But in
the case of a settlement not arrived at in the course of the
conciliation procealings it has to be in writing and signed by
the parties in the prescribed manner and a copy thereof should D
" be sent to the officer. authorised by the appropriate govern-
ment in this behalf and to the Conciliation Officer. Such a
settlement arrived at by agreement between the employer and
workmen otherwise than in the course of conciliation proceed-
ings is binding only on the parties to the agreement as
provided in section 18(1) of the Industrial Disputes Act, E
1947. Such a settlement is not binding on the other workmen
who are not parties to the settlement. [287 A--H; 288 A-DJ
In the instant case, the agreement entered into on April
11, 1979 between the Management and SPM Employees Union is not
binding on· the respondents and therefore, cannot ·have the F
~·
--' effect of depriving them of their right under the settlement
dated June 29, 1983 as long as it is in operation since, (a)
it is not shown that the SPM Employees Union which had entered
into an agreement could represent the respondents and that the
respondents were parties to it; (b) no plea of termination or
bringing to an end in some manner :known to law .of the earlier G
agreement under section 19(2) was taken by the manag_ement; and
(c) apart from the bare assertion that the agreement dated
April 11, 1979 reducing the incentive benefit .was fair and
just and therefore it should not be interferred with, no
.;.material was placed by the management before the At.thority
· under the Payment of Wages Act or the Industrial Court to show H
that the said agreement was fair and just. [288 E; 289 A-Bl
284 SUPREME COURT REPORTS [19861 1 s.c.R.
A
CIVIL APPELLATE JURISDICTION Civil Appeal No. 2696 "!-
(NL) of 1984,
From the Judgment and Order dated ol0.11.1983 of the
Madhya Pradesh High Court in Appeal No, 25/PWA of 1981,
II c.v. Subba Rao for the Appellant.
H.N. Shroff for the Respondents.
The Judgment of the Court was delivered by
C VE!llCATARAMUH, J. This app11al by special leave is filed
against the judgment and order dated November 10, 1983 passed
by the Industrial Court, Madhya Pradesh at Indore in Appeal
No, 25/PWA/81 modifying the order dated April 29, 1981 passed
by the Authority under the Payme,llt of Wages Act (Labour Court
No,2), Bhopal in case No. l/PWA/81. The facts of the case are
D briefly these in the course of conciliation proceedings under "
the provisions of the Industrial Disputes Act, 1947 a settle-
ment was arrived at on June 29, 1973 between the management of
the Security Paper Hill, Hoshangabad, the appellant herein,
and the S.P.H. Employees Union, Hoshangabad. In the Memorandum
of Settlement arrived at as per section 12(3) of that Act one
E of the terms related to the incentive benefit. Clause 2(c) and
(d) of the Memorandum of Settlement which relates to incentive
benefit reads as folloiiB :
"2, (c) The settlement on revised group inl:~ntive
F base of 6 H, T. a day will be treated as ad hoc ..._
regardless of merits of the case and will reniliin ~
close and localised to S.P.H. and will not serve· as
precedent for norms of production in other depart-
mental industrial undertakings.
-G
(d) The revised base of 6 H.T. a day and the exist-
ing norms of the processing sections will be tempo-
rary and remain valid till Government take final
decision on. the basis of the revision and recommen-
dations of the Expert Review Committee set up undei:,
H letter No.F8(6)/73 Cy dated 5th April, 1973,"
GENERAL MANAGER v. R.S. SHARMA [VENKATARAMIAH, J,) 285
A
-\ The above settlement was entered into on behalf of all
the workmen and other non-operative officers and staff of the
Security Paper Mill at Hoshangabad. When the above Settlement
was in force the Government of India by its letter dated
December 29, 1975 reduced the rate of incentive benefit
payable by ordering that the entitlements of the non-opera-
B
tive officers and staff to the group incentive benefit shall
be as under :
(i) All Gazetted Officers incharge of non-operative
Section (like Administrative and Chief Accounts
Officers, Accounts Officers, Medical Officer and
Junior Medical Officer) will be entitled to Group
Incentive at 25 per cent of the rate applicable to
c
industrial workmen.
(ii) All non-gazetted non-industrial staff and
supervisor officers in non-operative section such
as office (Accounts, Establishment, Administration
D
and General Sections), Dispensary, Estate etc. will
be entitled to group Incentive at 50 per cent of
the rate applicable to industrial workmen.
It was directed that the above order dated December 29,
1975 would be effective on the incentives to be drawn from
E
January 1, 1976. The above order dated December 29, 1975 was
challenged before the Central Government ~ndustrial
Tribunal-cum-Labour Court and that authority held that the
modification of the incentive benefit made by the Government
of India was illegal. After that the management entered into
an agreement with one of the trade uniona named s:P.M.
F
Employees Union on April 11, 1979 reducing the rate of incen-
tive benefit to 50 per cent to the non-operative employees
i.e. administrative staff, accounts staff, estate employees
and dispensary staff, After that the appellant paid the bene-
fit at the reduced rates as per that agreement to the
non-operative employees. The said agreement was not entered
G
into during the course of any conciliation proceedings and in
fact there were no conciliation proceedings pending at the
time when the agreement was entered into. The respondents who
were the non-operative staff and were not the members of the
Union and parties to the agreement.challenged the validity of
the agreement before the Authority under the payment of Wages H
Act on the basis of the Settlement of the year 1973. The claim
286 SUPREME COURT REPORTS [1986] l S.C.R.
A
before that Authority was in respect of the period between May
1, 1979 to April 30, 1980 and the total Bllllllnt claimed was
Rs.l,93,357.85. The management filed a statement of objections
before the Authority under the payment of Wages Act stating
that the S.P.M. Employees Union was the representative Union
and the agreement entered. into by that Union was binding on
B
all the workers including the respondents. The Authority under
the Payment of Wages Act recorded the evidence and thereafter
allowed the claim of the respondents regarding deducted wages
of Rs.1,93,357.85. It did not, however, allow any compensation
but allowed the costs at the rate of Rs.10 per worker.
Aggrieved by the orde:r of the Authority llnder the Payment of
c Wages A.;t, the management preferred an appeal to the
Industrial Court, Indore. Before the Industrial Court the
management raised se,1eral contentions. The Industrial Court
affirmed the decision1 of the Authority under the I'a}>ment of
Wages Act but disallowed the costs at the rate of Rs.10 per
worker which had be1m awarded by the Authority under the
D
Payment of Wages Act 11fter rejecting all other contentions.
This appeal by special leave is filed against the decision of
the Industrial Tribun11l.
The only point urged before us by the management in this
appeal is that the S.P.M. Employees Union which had entet'ed
E
into the agreement dated April 11, 1979 was entitled to
represent all the workers including the respondents herein and
it was binding on the respondents (who were neither members of
the said Union nor p11rties to the agreement) also. On behalf
of the respondents it is pleaded that they were not members of
the said Union and an agreement not entered into in the course
F
of the conciliation proceedings had not the effect of taking
away their rights und1•r the Settlement arrived at in the year
1973. It is also contended that the said Union had no autho-
rity to enter into an agreement binding the respondents who
were not its members.
G
The expression '!•ettlement' is defined in section 2(p) of
the Industrial Disputes Act, 1947. It means a settlement
arrived at in the course of conciliation proceeding and also
includes a written .ogreement between employer and workmen
arrived at otherwise than in conciliation proceeding where
such agreement has be1•n signed by the parties thereto in such
H
manner as msy be pre,.cribed and a copy thereof has been sent
GENERAL MANAGER v. R.S. SHARMA [VENKATARAMIAH, J.] 287
A
to an officer authorised in this behalf by the appropriate
Govt. and the Conciliation Officer. A distinction is made in
the Industrial Disputes Act, 1947 between a settlement arrived
at in the course of conciliation proceeding and a settlement
arrived at by agreement between the employer • and workmen
otherwise than in conciliation proceeding both as regards the B
procedure to be followed in the two cases and as regards the
persons on whom they are binding. Section 12 of the Industrial
Disputes Act, 1947 lays down the duties of Conciliation
Officer. Under sub-section (1) of section 12 where any indust-
rial dispute exists or is apprehended, the Conciliation
Off leer is required to hold conciliation proceedings in the
prescribed manner. By sub-section (2) thereof he ~s charged c
with the duty of p,romptly investigating the dispute and all
matters affecting the merits and the right settlement thereof
for the purpose of bringing about the settlement of the
dispute and he is required to do all necessary things as he
thinks fit for the purpose of inducing the parties to come to
a fair and amicable settlement of the dispute. If a settlement D
of the dispute or of any of the matters in dispute is arrived
I at in the course of the conciliation proceedings the concilia-
tion Officer shall send a report thereof to the appropriate
Government or an off icerauthorised in that behalf by the
appropriate Government together with a Memorandum of Settle-
ment signed by the· parties. Even though a Conciliation Officer E
is not competent to adjudicate upon the disputes between the
management and its workmen he is ei<pected to assist them to
arrive at a fair and just settlement. He has to play the role
of an adviser and friend of both the parties and should see
that neither party takes undue advantage of the situation. Any
settlement arrived at should be a just and fair one. It. is on F
account of this special feature of the settlement sub-section
• (3) of section 18 of the Industrial Disputes Act, 1947 pro-
vides that a settlement arrived at in the course of concilia-
tion proceeding under that Act shall be binding on (i) all
parties to the industrial dispute, (ii) where a party referred
to in clause (i) is ·an employer, his heirs, successors, or G
assigns in respect of the establishment to which the dispute
relates and (iii) where a party referred to in clause (i) is
comprised of workmen, all persons who were employed in the
establishment or part of the establishment as the case may be
to which the dispute relates on the date of the dispute and
all persons who subsequently become employed in that esta- H
blishment or part. Law thus attaches importance and sanctity
288 SUPREME COURT REPORTS [19861 1 s.c.a.
A
to a settlement arrived at in the course of a conciliation
proceeding since it carries a presumption that it is just and
fair and makes it binding on all the parties as well as the
other workmen in the establishment or the part of it to which
it relates as stated a.bove. But in the case of a settlement
not arrived at in the course of the conciliation proceeding it
has to be in writing and signed by the parties in the pres-
B
cribed manner and s copy thereof should be sent to the
officer authorised by the appropriate Government in this
behalf arui to the conciliation Officer •. Such a settlement
arrived at by agreement between the employer and workmen
otherwise than in the course of conciliation proceedings in
binding only on the parties to the agreement as provided in
c section i8(1) of the Industrial Disputes Act, 1947. Such a
settlement is not binding on the other workmen who are not
parties to the settlement.
It is seen from the material placed before us that there
were three Unions and there was no evidence to show that the y
D
respondents were the members of the S.P.M, Employees Union
which had entered into the agreement dated April 11, 1979.
Since it is not shown that S,P,M. Employees Union which had
I
entered into the agreement could represent the respondents
herein and that the respondents were parties to it, the agree-
ment was not binding on them.
E
The settlement -.arrived at in the course of conciliation
proceeding on June 29, 1973 which was binding on the appellant
and the respondents herein would remain in operation until it
is terminated or brought to an end in some manner known to
law. Section 19(2) of the Industrial Disputes Act, 1947 pro-
F
vides that a settlement shall be binding on the persons on
whom it is binding for such period as is agreed upon by the
parties and if no such period is agreed upon for a period of
six·months from the date on which the memorandum of settlement
is signed by the parties to the dispute and shall continue to
be binding on the parties after the expiry of the period
G
aforesaid until the expiry of two months from the date on
which a notice in writl.ng of an intention to terminate the
settlement is given by one of the parties to the other party
or parties to the settlement. No notice given under section
19(2) shall have effect unless it is given by a party
representing the majority of papers bound by the settlement in
H
view of the provisions contained in sub-section (7) of section
GENERAL MANAGER v. R.S. SHARMA [VENKATARAMIAH, J,] 289
A
19 of the Industrial Disputes Act, 1947. No such plea of ter-
4 mination under section 19(2) is taken in this case by the
management. The agreement· entered into on April 11, 1979
between the management· and the S.P.M. Employees Union which is
not binding on the respondents cannot have the effect of
depriving them of their right under the settlement dated June B
29, 1973 as long as it is in operation. The first contention,
therefore, fails.
It was, however, alternatively argued on behalf of the
~ management that the agreement dated April 11, 1979 reducing
the incentive benefit was fair and just and therefore it
should not be interferred with. Apart from this bare assertion c
no material was placed by the management before the Authority
under the Payment of Wages Act or the Industrial Court to show
that the said agreement was fair and just. A reduction of
incentive benefit in the circumstances of the case cannot be
considered as either fair or just.
D
The Authority under the Payment of Wages . Act and the
Industrial Court were, therefore, right in rejecting the
defence of the management. The appeal, therefore, fails and
it is dismissed with costs.
E
S.R. Appeal dismissed.
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