Holding

Clause 13 requires only a periodical review of financial improvement, not complete loss elimination, so the PSU must pay 55% of the arrears now and the balance in three equal instalments.

Summary

The case concerned Hindustan Machines Tools Ltd., a public sector undertaking, which had introduced voluntary retirement schemes and later negotiated a settlement revising wages and service conditions. Clause 13 of the settlement linked payment of arrears (for the period 1‑Jan‑1992 to 31‑Mar‑1995) to a periodical review of the company’s financial performance. The company argued that because accumulated losses persisted, it was not obliged to pay any arrears, while the employees obtained writ orders from the Andhra Pradesh and Karnataka High Courts directing full payment. The Supreme Court held that Clause 13 does not require complete elimination of losses, only an assessment of financial improvement, and therefore the company could not refuse payment altogether. However, the Court found that the financial improvement was not sufficient to warrant full immediate payment, and ordered the company to pay 55% of the arrears within three months and the balance in three equal annual instalments by March 2005, 2006 and 2007. The appeals were partly allowed, modifying the High Court judgments.

Issues considered

Whether Clause 13 of the settlement conditions payment of arrears only after total eradication of accumulated losses.
Whether the High Courts were justified in directing full immediate disbursement of arrears despite the settlement’s financial‑performance clause.
What quantum and schedule of arrears payment is appropriate given partial improvement in the PSU’s financial performance.
Whether the prior summary dismissal of two Special Leave Petitions precludes hearing of the present petitions.

Subjects

service lawvoluntary retirement schemesettlement agreementarrears paymentfinancial performance reviewpublic sector undertakingwrit jurisdictionpayment schedule

Judgment

A HMT LTD. AND ANR.
v.
P. SUBBARA YUDU AND ORS .

. AUGUST 7, 2003

B [K.G. BALAKRISHNAN AND B.N. SRIKRISHNA, JJ.]

Service law:

Voluntary Retirement Scheme-Settlement between Public Sector
C Undertaking and employees on service con~itions and revision in wage~·
Revision in wages of the retiring employee for the effective period-Payment
of arrears thereof-Improvement in the financial performances of the PSU
vis-a-vis !iability to pay-Held: since as per settlement clause payment of
arrears was subjeci to improvement in financia(performance, PSU was not
D justified in refusing to make payment till losses are completely wiped out-
Since financial performance has not been improved to such extent that entire
liability could be discharged at one go, PSU directed to make disbursement
ofarrears in 3 equal instalments in interval of one year-Directions issued-
Inierpretation of Statutes.

E Practice and Procedure:

SLPs-Summary dismissal of SLPs on similar issue earlier-Relevant;y
of-Held: Not.relevant, as they did not decide any principle/question oflaw-
Merely indicative of the disinclination of this Court to entertain the special
leave petition.
F
Appellant, a Public Sector Undertaking, had introduced voluntary
retirement scheme in its establishments. A large number of its employees
took advantage of the scheme. Later, employees and the PSU had
negotiated for improvement in service conditions and _revision in wages
G and arrived at a settlement. Both categories of employees, viz. those in
service/ceased to be in service, had claimed for disbursement of arrears
due to revision in their wages. Appellants refused to disburse the arrears
as per clause 13 of the Settlement on the ground of having no
improvements in their financial performance as they were continuously
incurring losses. Employees filed writ petitions in .various High Courts.
H 314
HMT LTD. v. P. c;;UBBARAYUDU 315
The High Courts directed disbursement of the arrears. Hence, aggrieved A
PSU filed the present appeals. It was contended for the appellants that as
per clause 13 of the Settlement improvement in the financial performance
,. of the company would be noticed on periodical review ti-en only PSU
would be liable to pay such arrears; and that since there was no
improvement in financial performance of the Company, there was no B
liability.

Disposing of the appeals, the Court

HELD: 1.1. Clause 13 of the Settlement does not say that the
disbursement of arrears would be made only after all acc<1mulated losses C
are completely wiped out. It merely says that it would be done on
periodical review of the improvement in the financial performance.
Therefore, the appellant was not justified i11 taking the rigid stand of
ref:Jsing to disburse any of the arrears on the ground that accumulated
losses persisted. This was obviously an unreasonable stand and the High
Courts were justified in exercising writ jurisdiction directing the appellant D
to make the disbursements. However, they were not justified in directing
full disbursement .of arrears at o~e go. [320-.C, D, E]

1.2. No duubt there has been improvement in the fi~ancial
performance, yet at the same tiine, the financial performance had not been
improved to such an extent that the entire liability could be discharged at E
one go. It would be necessary to give some more breathing time to the
appellant to ensure that the trend of financial improvement does not get
reversed. Hence, judgments of the High Courts are modified to the extent
that there was some improvement in the financial performance of the
appellant company subsequent to the settlement and its implementation; F
that the appellant's obligation to discharge the liability towards arrears
under Clause 13 of the settlement has partly arisen; that the appellant shall
• disburse 55% of the arrears payable during the period from 1.1.1992 to
31.3.1995 to all eligible employees, to the extent of their eligibility, within
a period of three months; and that the balance amount of the arrears shall
be computed and disbursed to all eligible employees in three equal annual G
instalments on or before 31st of March, 2005, 31st of March, 2006 and
31st of March, 2007 respectively. [320-E-H; 321-A, BJ

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 6121-6158
of 2003.
H
316 SUPREME COURT REPORTS (2003) SUPP. 2 S.C.R.

A From the Judgment and Order dated 8.4.2002/10.4.2002 and 18.4.2002
of the Andhra Pradesh High Court in W.A. Nos. 494, 540, 541, 542, 549,
550, 551, 552, 553, 554, 556, 557, 566, 568, 569, 570, 571, 572, 595,
596, 598, 599, 600, 601, 611, 613, 616, 623, 638, 642, 643, 687/2002,
697, 698, 702/2002, 478, 492, 529 of 2002.

B with

C.A. Nos. 7483-7792, 6159-6186, 6197-6231, 6232-6259, 6260 of2003.

P.P. Rao, K. Kasturi and Rajesh Mahale for the Appellants.

C T. Bal Reddy, K. Rajeev, Capt. K.K. Rohtagi, Praveen Jain, G.
Ramakrishna Prasad1 Md.Wasay Khan, K.C. Sudershan, Jayant Muthuraj,
T.N. Rao, A. Ramesh, Mrs. Binu Tamta, Mrs. Anil Katiyar and D.S.Mehra
for the Respondents

The Judgment of the Court was delivered by
D
SRIKRISHNA, J. Leave granted.

These appeals arise out of different writ appeals disposed of by the
Andhra Pradesh High Court as well as the High Court of Kamataka. It is not
necessary to refer to the facts in individual cases since the board features of
E all the cases are similar and the question of law urged is identical.

The appellant in all these cases is Hindustan Machines Tools Ltd., a
Public Sector Undertaking under the control of the Department of Public
Enterprises. On or about 5.10.1988 the Department of Public Ent~rprises

..
(hereinafter referred to as DPE) issued an office memorandum giving
F guidelines to Public Sector Enterprises in the matter of introduction of
voluntary retirement schemes. On 3 Ist of March, 1989, the appellant company
introduced a voluntary retirement scheme by different office orders in its
a
establishments. On or about 20th of October, 1992 second voluntary
retirement scheme which slightly extended the benefits, was introduced. A
G large number of employees-both officers and workmen-took advantage of the
voluntary retirement schemes.

The conditions of service of the employees of the appellant are governed
by collective agreements between the management of the appellant and
recognised unions representing the officers and the workmen. Although, the
H previous agreement had expired on 31st Decetnber, 1991, and a fresh Charter
HMT LTD. v. P. SUBBARA YUDU [ SRIKRISHNA, J.] 317

of Demands was submitted by the unions for negotiations, the management A
~f the appellant was unable to carry on negotiations for revision of wages and
other conditions of service on account of the guidelines issued by the
Government of India sometime in October, I 99 I prohibiting re-negotiations
of terms of India employment. The prohibition continued till or about June,
I 993 after which the embargo on re-negotiations of the conditions of service B
was lifted. Negotiations started thereafter between the management of the
appellant and the trade unions. In the meanwhile, the management had granted
a one time ad-hoc recoverable advance in April, 1994 to all the employees
with a clear understanding that the said advance was liable to be adjusted
against the dues arising as a consequence of the final wage settlement or in
the alternative that it would be recovered from current earnings. C
While the negotiations were being carried on with regard to the charter
of demands, the stand of the management was that its financial position had
considerably deteriorated and that there were huge accumulated losses. A
settlement was arrived at against this background of persistent losses.
D
The collective bargaining between the parties resulted in as settlement
dated 23.4.1995 which substantially revised the wages and other conditions
of service. Though the settlement is dated 23.4.1995, it was actually brought
into effect in different units by different office orders during May to October,
1995.
E
'
Clause 10 of the settlement provides that the settlement would be
operative for a period of five years from I. l .1992 to 31. I 2. I 996. Clause 12
reads as under:

"Clause 12.l - The recovery of the ad -hoc recoverable advance paid
to the WG cadre workmen under Office Order No. 01/94 dated 7th F
April, 1964 will be made as and when the payment of.arrears, if any
which will be decided as per Clause 13. l of this settlement.

12.2 - any other recovery arising out of this settlement will also be
made/adjusted as and when the payment of arrears if any, which will
be decided as per Clause 13.l of this settlement." G
With regard to the question of payment of the arrears under the
settlement, Clause 13 of the settlement provides as under:

"Clause 13 - The arrears from 1. l.1992 to 31.3.1995 as well as the
fringe benefits and amenities will be discussed based on the periodical H
318 SUPREME COURT REPORTS (2003] SUPP. 2 S.C.R.

A review of the Improvement in the financial performance of the
company."

While Clause l3 deals with adjustment of arrears payable to the
employees who were in service, Clause 15 deals with employees who. had
ceased to be in service of the company due to superannuation; voluntary
B. retirement or death during the period from 1.1.1992 to the date of signir:g the
settlement. Clause 15 provides as under:

"Clause 15. l-The workmen who ceased to be the employee of the
company due to superannuation, by availing VRS/volun~ary retirement
on death during the period from 1.1. l 992 to the date of signing this
c settlement are eligible for arrears on a pro-tate basis, subject to clause
l3. l of this settlement. Thus separations on after 1.1.I 992 due to
dismissal, discharge and resignation will be executed.

15.2.,--Workmen who had opted for VRS will only be eligible for
arrears subject to Clause l 3. l ,above and not revision of VR
D compensation already paid to them:.

15 3___:_The ~nions agree. not to reopen any of the m·atters or raise any
fresh demands which would involve··additional financial burden on
I-
the company,_other than those mentioned, in Clause 13.l above, during
the currency of this settlemene'
E
The employees who were no longer in service as on the date of signing/
implementation of the settlement demanded that the benefit of retrospective
implementation of the revised conditions of service from I. I.I 992 should be
made available to them as in the case of employees in service. Since this
F demand was not acceded to, several of such employees moved writ petitions
before the Andhra Pradesh High Court and the Kamataka High Court. It is
not necessary to refer to details of various litigations between the parties on
the subject as the judgments of the different learned Juclges following each
other took the view that the petitioners were entitled to immediate disbursement
of the a~ears arising on account ofretrospective effect given to the settlement.
G
The appellant company did not dispute its liability to make payment of
arrears under the .settlement, not only to the employees in service, but also
to the employees who had ceased to be in service, for the period from 1.1.1992
till the date they. were in employment. The only contention urged to oppose
the claim was that under Clause 13 of the settlement the question of arrears
H . for the period from 1.1.1992 to 31.03 .1995 could only be based on 'the
HMTLTD. v.P.SUBBARAYUDU[SRIKRISHNA, J.) 319
periodical review of the improvement in the financial performance of the A
company', which, according to the appellant, had not improved at all. The
appellant urged that from the financial year 1992-93 to the dates on which
the writ petitions were filed not only had there been no improvement in the
financial performance but that its financial performance had deteriorated.
The High Courts of Andhra Pradesh and Karnataka were not impressed by B
this contention and directed disbursement of the arrears. We may also mention
here that two such cases of individual employees where payments of arrears
were directed, were brought before this Court vide Special Leave Petitions
(c) Nos. 18556 and 18765 of 2000 and were summarily dismissed by this
Court on 24.11.2000 with the observation: "The SLPs are dismissed".
c
In view of the fact that two special leave petitions were summarily
dismissed, the respondents contend that all the present special leave petitions
should also be dismissed. We are unabie to accept this contention. We are not
inclined to read the summary dismissal of the said special leave petitions as
deciding any principle or question of law but merely as indicative of the D
disinclination of this Court to entertain the special leave petitions in two
individual cases.

Shri Rao, learned counsel for the appellant, urged that, although the
appellant does not dispute its liability to disburse the arrears under the terms
of the settlement dated 23rd April, 1995, the appellant seriously disputes its E
liability to pay such arrears at the present juncture. He contends that the
timing of disbursement has been left to the discretion of the appellant
management by reason of Clause 13. As to whether there has been
"improvement in the financial performance of the company" is to be
determined by "periodical review"; after carrying out this periodical review, F
the management was satisfied that there was no requisite improvement in the
financial performance. Hence the appellant took the view that, for the
disbursement of the arrears for the period from l. l. I 992 to the employees
who were not in service, the time had not yet arrived.

Learned counsel on both sides have taken us through the performance G
highlights of the company over the financial years 1991-92 to 2000-01. We
notice therefrom that from the financial year 1998-99 the financial performance
of the company has shown steady improvement The financial figures show
net Joss of Rs. 3657 lakhs during the year 1998-99 and net earnings Rs. 2441
lakhs during the year 2000-01. The net worth of the company rose from Rs. H
320 SUPREME COURT REPORTS (2003) SUPP. 2 S.C.R.

A 2410 Iakhs to Rs. 5414 lakhs during the same period. Learned counsel for the
appellant company, however, attempted to focus our attention on the figures
of the accumulated losses which are Rs. 139.60 lakhs in 1998-99, Rs. 436.51
lakhs in 1999-2000 and Rs. 379.99 lakhs in 2000-01. Even here, the figures
show that the company was able to bring down the accumulated losses
B substantially in the last of the year referred to. We were also shown the
figures for the year 2000-02. The net earnings of this year were Rs. 1024
lakhs and the accumulated losses as on 3 lst March, 2002 were Rs. 368 cores.
We are informed that as on 31st March, 2003 the accumulated losses would
be about403.33 crores.

C On this basis of these figures it was submitted that the time was not yet
ripe to meet the liability towards disbursement of arrears under the settiement.
In our view, the contention is unsound. ·clause 13 does not say that the
disbursement of arrears would be made only after all accumulated losses are
completely wiped out. It merely says that it would be done on periodical
D review of the improvement in the financial performance. In our view, therefore,
the appellant was not justified in taking the rigid stand of refusing to disburse
any of the arrears on the ground that accumulated losses persisted. This was
obviously an unreasonable stand and the. High Courts were justified in
exercising their writ. jurisdiction in directing the appellant to ma~e the
disbursements. However, w~ are not satisfied that the High Courts were
E justified in directing full disbursement of arrears at one go. We are conscious
of the fact that there has been improvement in the financial performance, yet
at the same time, we are also not satisfied that the financial perfomiance had
improved to such extent that the entire liability needs to be discharged at one
go. In our view., it would be necessary to give some more breathing time to .
F the appellant· to ensure that the trend of financial improvement does not get
reverse.

In the result, we allow the appeals partly and modify the judgments of
the Karantaka and Andhra Pradesh High Courts as under:

G (A) It is held that there is some improvement in the financial
performance of the appellant company subsequent to the
settlement dated 23.4.1995 and its implementation.
(B) It is held that the appellant's obligation to discharge the liability
towards arrears under Clause 13 of the said settlement has partly
H arisen.
HMTLTD. v.P.SUBBARAYUDU[SRIKRISHNA, J.] 321
(C) It is directed that the appellant shall disburse 55% of the arrears A
payable during the period from l.1.1992 to 31.3.1995 to all
eligible employees, to the extent of their eligibility, within three
months from today.
(D) The balance amount or'the arrears payable as aforesaid shall be
computed and disbursed to all eligible employees in three equal B
annual instalments on· or before 3 lst of March, 2005, 3 lst of
March, 2006 and 3 lst of March, 2007 respectively.

The appeals are accordingly disposed of with no order as to costs.

S.K.S Appeals disposed of.