Holding

A settlement entered into by a recognised union under Section 18(1) of the Industrial Disputes Act, 1947 is binding on all its members, including dissenting workmen, unless it is shown to be ex‑facie unfair, unjust or mala‑fide.

Summary

K.C.P. Ltd. dismissed 29 workmen after disciplinary action during a strike. The recognised trade union (respondent No.2) raised an industrial dispute under Section 2(k) of the Industrial Disputes Act on behalf of all 29 workmen and later entered into a settlement under Section 18(1) offering either reinstatement without back wages or a lump‑sum compensation. Seventeen workmen accepted the settlement; twelve dissenting workmen did not, and the Labour Court refused to pass an award for them, continuing the dispute. The Supreme Court held that the settlement, being a valid agreement under Section 18(1) and not shown to be unfair, binds all members of the union, including those who did not individually consent. Accordingly, the Labour Court erred, the High Court orders were set aside, and the Court directed the Labour Court to pass an award in terms of the settlement for the dissenting workmen.

Issues considered

Whether a settlement entered into by a recognised trade union under Section 18(1) of the Industrial Disputes Act binds individual workmen who did not approve the settlement.
Whether the Labour Court erred in refusing to pass an award in terms of the settlement for the dissenting workmen.
Whether the settlement is ex‑facie unfair, unjust or mala‑fide, warranting it to be set aside.
Effect of the distinction between disputes raised under Section 2(k) and Section 2‑A on the locus standi of individual workmen.

Legislation cited

Industrial Disputes Act, 1947s. 18(1), s. 2-A, s. 2(k), s. 2(p)

Subjects

industrial disputesettlementSection 18(1)trade unioncollective bargainingreinstatementback wageslabour lawIndustrial Disputes ActSection 2(k)Section 2-Aaward

Judgment

/'

A .' , K.C.P.
' ~.
LIMITED
'.
..., ·~..

. '• 'v. ' .-. '
'. THEJ~,RE§~DiNG OFFI.CER,f;\ND o~s.
··-·
,l ,;I.

. ' :· . . ·· -~ I . ·t ' ; . ,. . • .
B [AM. AHMAm;·a., S.B. MAJMUDAR AND B.N: KlRPAL, JJ.]
• 1 , • • , •n ·~ .~

Labour Law:

IndustlialDisputes Act, 1947: Sections 2(k) & (p), 2-A and 18(1).
c Settlement-Otlwwise than in conciliation proceedings-Dispute be-
tween employer compal.ly and workmen-Resulted in dismissal of certain
workmen-Sole recognised and representative trade u11ion pa,1Jic,ippf~4 ,in
conciliation proceedings on behalf of ail workmen including the dismissed
ones who co1ttini1ed to be members of trade union-Conciliation proceediitgs
D ultimately f ailed-Pursua11t to which industlial dispute raised under S.
2(k)-No industlial dispute raised under S. 2-A by dismissed workmen-
Dwing pe11de11cy of dispute before Labour Cowt, the said trade union and
employer anived at settlemeni:-.Option either to accept reinstatement with
co11tinuity in se1vice without back wages or accept a specified lwnpsum
amount with other mo1ietmy be11efits-Some dismissed workmen did not
E approve settlement-But trade union entered into settlement on behalf of all
dismissed workmen including the dissenting 011es-Howeve1; Labour Court
declined to pass award iii tenns of settlement-Held : settlement was not ex
facie, unjust or un.fai1~77ierefore, it was binding even on such dismissed
workmen who did not approve the settlement-Hence, Labour Cowt should
F. have passed an award in tenns of settlement and should not have continued
the industdal dispute in relation to dismissed workmen who did not approve
settlement.

Settlement-Othe1wise than in conciliation proceedings-Ce1tain dis-
pute between employer company and workmen led to go slow, stdke and lock
G out-Disciplina1y action against 29 workmen for va1ious acts of misconduct
resulted i.u-tll.ejr dismissal-Subsequently, settlement anived at between
employer anti-trade union-Option either to accept reinstatement with con-
tinuity in se1vice without back wages or accept a specified lwnpsum amount
with other nwnet01y benefits-All stdking workmen other than dismissed ones
H reinstated without back wages-Held : In the circumstances of the case, the
148
KC.P. LID. v. PRESIDING OFFICER 149

tenns oj seitlemen't relating to proposed reinstatement of dismissed workmen A
without. back wages neither unfair nor unjust.

The appellant-Company had an Engineering Unit where it manufac-
tured inachinery and employed about 500 workmen. Respondent No. 2 was
the only recognised and a representative trade union of all the workmen
in the said establishment. Certain disputes between the appellant and the B
workmen led to go slow, strike and lock out declared by the appellant-Com-
pany. Disciplinary action against 29 workmen for various acts of miscon-
du~t l'esulted in "their ·m~missal: The respondent No. 2~trade union
participated iri the concilation proceedings on behalf of all workmen
inclu~ng the ·dismissed ones, which ultimately failed. An industrial dis- c
pute under SectiOn 2(k) of the Industrial Disputes Act, 1947 was raised by
the r~sl.iondent No:'. 2~trade union on behalf of the said 29 workmen.
However, none of the said 29 workmen raised industrial dispute in their
• r,. • ·~ I f. ' . ~~ J • • ·-· •
individual "capacity under Section 2-A of the Act.

· ·During the pendency of the said industrial dispute before the Labour D
Court the said trade union entered into a settlement with the appellant-
Company under Section 18(1) of the Act otherwise than in the course of
conciliation proceedings on behalf of all the said 29 dismissed workmen
giving option to either accept reinstatement with continuity of service
without back wages or accept a specified lumpsum amount with other E
monetary benefits. However, 12 workmen out of the said 29 workmen did
not accept the aforesaid settlement. The Labour Court·declined to pass an
award in terms -of the settlement on the ground that the 12 workmen had
not approved the settlement and ·industrial dispute in respect of them
would continue and proceed furthe1·. However, out of the said 29 workmen,
17 workmen had agreed to abide by the terms or the settlement and were F
reinstated in exercise of'their·option. The 12 workmen were members of
the respandent No. 2-trade union who were acting on their behalf and still
continued to be members of the union.
;I

The appellant-Company filed a writ petition before the High Court G
challenging the decision of the Labour Court.to continue the dispute in
connection with the said 12 workmen. The High Court dismissed the writ
petition. Hence this appeal.
..jl I\ lt.l'·, •
. . , On behalf of the appellant-Company it was contended that when
respondent No. 2-Union had espoused the cause of all the 29 dismissed H
150 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A workmen, and the reference was made under Section 2(k) of the Act, the
union which represented all the workmen including the said 12 workmen
was entitled to act on behalf of all of them and enter into a settlement;. and
that under these circumstances individual workmen had no independent
right to contest their dismissal orders and were bound by the settlement
which was not in any way ex facie, unfair or unjust.
B
Allowing the appeal, this Court

HELD : 1.1. The settlement arrived at by the respondent No. 2-union
with the appellant-company was not in the course of conciliation proceed-
C ings. Therefore, it would be binding under Section 18(1) of the Industrial
Disputes Act, 1947 to the parties to the agreement, namely, the appellant-
company on the one hand and respondent No. 2-union representing all the
29 dismissed employees, who were its members and on whose behalf it had
raised the industrial dispute under Section 2(k) of the Act, on the other. The
D settlement was duly signed by both the parties. Under these circumstances,
respondent Nos. 3to14 (in all 12 workmen) also would be ordinarily bound
by this settlement entered into by thefr representative union \'tith the com-
pany unless it is shown tl)at the said settlement was ex-facie, unfair unjust
or malafide. No. such case could be even alleged much less made out by the
dissenting respondent Nos. 3 to 14 before the trial court. The entire in-
E dustrial dispute was raised by respondent No. 2-union on behalf of all the
29 dismissed workmen and as it was not an industrial dispute covered by
Section 2A of the Act whereunder individual dismissed workman could
come in the arena of contest, it could not be held, as wrongly assumed by the
Labour Court that this settlement was not entered into under Section 18(1)
F of the Act by these dissenting workmen when the respondent-union did
represent them from beginning to-end and is still representing them as they
are members of the union at present. Tue terms of the settlement cannot be
considered to be in any way ex-facie, unjust or unfair and that the said
settlement consequently must be held to be binding on these contesting
workmen also. Hence, the entire industri.al dispu~e should have been dis-
G posed of in the light of this settlement and an award in terms of the
settlement should have been passed by the first respondent-court in the case
of respondents 3 to 14 also. [157~C-D; 157-F-H]

Ram Prasad Vishwakanna v. The Chaimian, Industrial Tribunal,
H [1961] 3 SCR 196; lferbertsons Ltd. v. The Workmen of Herbertsons Ltd. &
KC.P. LID. v. PRESIDING Ofl!CER [S.B. MAJ MUDAR, J.] 151

Ors., AIR (1977) SC 322 and Banmi Refilwy Pragatisheel Shannik Parishad A
v. Indian Oil C01poration, [1991) 1 SCC 4, relied on.

1.2. The relief of reinstatement without back wages could not be said
to be unreasonable as all other workmen also lost their back wages only
because they they supported the cause of these 29 colleagues of theirs and
·/ I BI
hence there was no reason why the workmen who indulged in the acts or
misconduct and who were also to be taken in service should not also lose,
their wages. Relief of reinstatement was made available to respondents 3
to 14 on the same line as it was made available to their 17 remaining
colleagues who were covered by the very same settlement and who accepted
the same. Such a package deal entered into by respondent No. 2 in the best C
interest of these workmen could not be said to be unfair or unjust from
any angle. On the contrary, if the back wages were given to them, then the
remaining workmen against whom there was no disciplinary action or any
alleged misconduct and who had also lost wages only because they were in
sympathy with these 29 dismissed workmen would have stood dis-
criminated against. Consequently, it is not possible to agree with the D
contention of the respondent Nos. 3 to 14 that the said settlement was in
any way unfair or unjust. [162-F-H; 163-A; BJ

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 11944 of
1996.
E
From the Judgment and Order dated 4.4.95 of the Madras High
Court in W.A. No. 1186 of 1993.

N.B. Shetye, V. Balaji and A.T.M. Sampath for the Appellant.
F
V.G. Pragasam, M.A. Krishnamoorthy and M.A. Chinnasamy for the
Respondents.

The Judgment of the Court was delivered by

S.B. MAJMUDAR, J. Leave granted.
G
This appeal by special leave arises out of the judgment and order
dated 4th April, 1995 of the High Court of Judicature at Madras in Writ
Appeal No. 1186 of 1993. A Division Bench of the High Court dismissed
the appeal of the appellant company and confirmed the judgment and
order of the learned Single Judge in writ petition No. 611 of 1993 dismiss- H
152 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A ing ·the sanie'.
'I ·'
A few relevant facts leading to this appeal deserve to ,be noted at the
''. . ;. • . ; .• .1 - -1..,'. z : ' •, ; 'I' j • .. •.1. ~1 t'-, I -'~I :-; I • • ; •: 1 c. :

outset. The appellant ts havmg
,. . ~. .
an Engmeering
i ... ~ ... ~ ~ I
Umt at Tiruvottiyur,
,tlhl IJ•
Madras
;';" ":i»d·-~n .. •t"•,)f"l'" , •• ol
-·,-.: •
1
' - .. ' ,.- I

where it manufactures machinery for sugar, cement and alhed industries
~-~.1< .· , ... ; . ~ . · ,·'.;·'. ~11·i:. . .. tj; _1;;.a,_·, Jr~!~· J·q[ffl~~'. f'-1!' t".Hl ',f'!l.~b;~v

B' '. a~d ~~pl9~~ ~b~u,t ?op,:-;o.~¥~en. R,~sp,?~?f~~I~~·. ~ ,~~J·~~~;o~~¥/;f~pll~§:?~iii
and a representar1ve umon of all th~ workm,en ~orkmg .m the said, estab-
• • . ~. :1 .-: Sn 1 .( .. ·, . . . -.• ·.r.-... ·~ J•L .1:.l ;. 4~• ·p·:!.t... •r':l.'°'' d~l.J Dt•r !~}Ul)."j• 1 .. uh
hshment. In the past alJ mdustnal disputes were settled by the appellant
c6m~~~ 6~· i~~ '~asi~' 'qi '1~ng th~~ 'settl~~~~t~· ~~i i~~d iht~ '~th'i~e: ?~~ii
1 1 1

ret~n<leiit unio~~ 'ike lasl of\'.¥1li~h'~~~· d~t~d Q~ce~~et3(( 1991.!dl ... "
1 1

t;~Hf~ '..~·. nt::·t '.h.c ~n~nLi ~ "".' 'h.tit~(", · n ' j . . !fl .d l)-: t: ·IV<J ....Jll ;~if'! .-''JU:,;~··Jh1·)
c') 1"'' Ikseptembe~: l990 When' tHe ihue of Bb'b'uido~· tlil fina6cia'i'ye~¥j;
1 1 1

1989-9o''"was' 1 uiideV~onsiderktio'i{ th~ ;wo~kin'en ''af the''iri~hHlb~··or··ziili' 1 '
respoiia~ht uniort"resorte~ to go ~16w' insisting· tlie app'e1i~Ht i~ ipaHhoie'"
bonus 1eveii though''as ·coritende(l by' tii'e' app~llan(tirtdef'lii~ prdvisiciil~ ·Sf ·
th'e, faYfueiit1 of 'B.otius 1A1<:i: "only 'diinirilliili. bonus1 ohi'.33% '<Wriib"b.~riici'
..-sh i~·~~·:f .. ~ ... :-r ~t1.r-· • . ·: '1..~ •• t h'l .. "' ~. •tl !'' ·j • j·~t .:t.i,, 1.;~, +:.i:1t·
;j'

wages was payable for ~he financial year 1989-90. The go slow resorted to
D . b{the1\~ori<Ihen re~uit~d iri'totai' stoppag~'~fw6ritalid
•. • ... i ~.. • .t. , ....
). •
1
~H 1 ~1i'eg~d iiibg~I '
ill •·1
·• ,t ,,... ~,., · • ; • :~ ~ ·. ~ .• '- ~---; ~
1

0~11•u""'~~t1, >
strike on 'and'from OCtober 26,' 1990. It is. the case of .the appellant tliat iii
view of the deteriorating situa'tio'n 'a~d 'tith: ·~; ~J\J';to" pr~te~t pe~sb~h1''
11

securi}Y qf th.e §upervisory an~l M~n;;1.~e~i~l, s~~ff, ~t1_h<;tg·: ~~ ~,t;clar7 ,a 1lock
out on October 30, 1990. The appellant also chargesheeted 29 workmen ,
E including respondents 3 to 14 herein on November 5, 1990 for various acts
of misconduct allegedly committed by them between ~eptemher 25, .1990
and October 29, 1990 when the workmen had resorte~ to go slow and other '-
alleged violent acts of misconduct.
;. . i I ..
. •1 The explanation given by 29 workmen having not been found satis-
F factory, the appellant. decided- to hold 'inquiry~ into' .-the ;charges inv61ved
against the said 29 workmen. Inquiries were conducted by the two 'tetired'.>'
District Judges and during the inquiries all the 29 workmen participated
in the inquiry proceedings which contii1ued froni .i'itnuary8,1991 to August
21, 1992.
')
d , On :October 31, 1990 the GovernmentI of Tamil f'Nadu intervened and
!~;:·-·f_' •,::,•,':J!': <. .1 ! p .t ·~ 1 I .J~. '_'r., '. '.; JI ·~( 1 , .. '~ I

imti~~e~. co.ncihation pr9,ce~dings to. bring, about s..ettlem,ent ,in_ !e&P.ect.
!t.""•,·.· 1 .,.~l•a.1 . .,.-.,.~.~ .• ·, (·,lt.H,l .• 1 • j,,l~ .• 0Ji·L+..01"t1
of
the pending dispqtes including lock out.. As no settlement could take .place
durii{g' concili~tiOn ~~~ceedings, .the Co~citi~tio~
·, ,lt' 1
L~\ !
Office~
~ ..
l,•jfj: .'!
submltt~d report:
I · ,• . J;,;f. ; i;._·· If ,I ; ~c I .~ i .i ·a· ·. 1

. J to t~~i !,\pptopr~ate q?v.ern~er-t '.op,. Amil 9,, .19~L On ¥,~y 7, .~9?1 .~~~.,
H Government of Tamil Nadu issued three different orders referring certain
KC.P·. LTD. v. PRESIDING OFFICER [S.B. MAJMlIDAR,J.] 153
, -
indu_strial disputes for adjudication. G.O. No. 485 was in respect of revision A
of scale of pay, revision of dearness allowance, revision of house rent
allowance etc. By G.O. No. 486 the Government of Tamil Nadu declined
to refer cer~in disputes .such ~as leave facility, housing scheme, medical
facilities etc. for adjudication. by giving.reasons in: the said G.O. No. 486.
The third G.O. ,No. 487 was issued under Section 10-B of the Industrial
B
Disputes -Act, 1947 (hereinafter referred to s 'the Act') . directing the
appellant to lift lock out on or before 13.5.1991 and allow all except 29 ·,
workmen to resume work. In the. said G.O. No. 487 the ·appellant was
directed to maintain status quo obtaining prior to the date of.the lock out.·•
in regard to the terms and conditions of service and the appellant was '"\

further directed to· complete inquiry proceedings against 29 workmen on c
or before 10.6.1991 a:hd: to pay 'them full wages during the' period- of
disciplinary proceedings. In the saio G.O. No. 487 the workmen •were·
directed to niallitain norinal'production ·which they whe giving prior to -the · !
date of the High Court order an'd also to maintain di~cipline in the-f~cf6ry.
: - i '
D
By August 19, 1991 inquiries' in respect of all the 29 workmen were
completed and on the basis of the findings by the Inquiry Officer and other
extenuating circllmstances, the 29 workmen were dismissed from service
betweellK 23.8."t991 to 1~16.1991.
. I

In a meeting held before the Joint Comll).issioner of Labour on E
October 4, 1991 between the appellant and the 2nd respondent, an agree-
ment was reached on the qua~tum of increase in wages: recoverable
advance and issue· of bonus for the years 1989-90 and 1990-91. It was
1
fur,ther agreed that th~ issue of 'nc)n-employment of 29· dismissed workmen
wouta be' discussed sepa~ately ·and on that basis all workin~n except the F
saia 29 workmin ~~eed to resume work in a phased manne~ _not later than
October 12, 1991 although the lock out was lifted on May 13, l991. - '·
1; ,,
Subsequer1tly, a settlemell.t was _arrived at between the appellant a¥d
the 2i;id responc1ent ~nder Section 12(~) of the Act wherein it was agreed G ' '
th~t the is~ue of, non;~mployment of 29 d_ismis&ed workmen w_ould _be .
discussedip. the. pr~ceeciip.gs to be initiated by the Joint Labour C::ommis-
sioner as ~arly as possible. T~e- J9int Labour Commissioner held m~etings,
bety.;een !~uary 8, 199~ and March 6, 19_9~ ap.d as no settlement coµld ,be,
reached report with regard to failure of t}ie conciliation proceedings '¥as 'l

submitted to the Government of Tamil Nadu which by order dated H
154 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

.A 13.5.1992 referred the issue of non-employment of 29 workmen for ad-
judication to the 1st respondent. The said reference was registered as l.D.
No. 708 of 1992 on the file of the 1st respondent.
~-
The said industrial dispute was referred for adjudication pursuant to
the demand espoused by all the workmen and raised by the 2nd respondent
B union under Section 2(k) of the Act. All the said 29 workmen who were
members of the union had also authorised the 2nd respondent to represent
them before the Conciliation Officer whereafter reference was made to the
1st respondent. None of the said 29 workmen raised industrial dispute in
their individual capacity under Section 2A of the Act.
c It appears that thereafter the appellant company on the one hand
and second respondent - union on the other held discussions regarding
non-employment of 29 workmen: Ultimately on 7th November, 1992 an
understanding was reached between the appellant and the 2nd respondent
- union that option would be given to the said 29 workmen either to accept
D reinstatement without backwages or a lumpsum amount of Rs. 75,000 with
other monetary benefit may be accepted by the concerned workmen:

Respondent Nos. 3 to 14 (in all 12 workmen) out of these 29
workmen did not accept the proposed settlement and accordingly ad-
dressed a letter to the Commissioner of Labour on 2nd December, 1992.
E Thereafter, the 2nd respondent entered into a settlement with the appellant
company under Section 18(i) of the Act on behalf of all the 29 workmen
whose industrial dispute with regard to non-employment was espoused and
raised by it under Section 2(k) of the Act. On 14th December, 1992 a
comprehensive settlement was arrived at and signed by the appellant and
F the 2nd respondent - union. Copies of the said settlement were also
forw2.rded to various authorities as contemplated under the provisions of
the Act and Ru'le thereunder.

A joint memorandum signed by respondent No. 2 and the appellant
company was filed before the Presiding Officer. First Additional Labour
G Court, Madras, respondent No. 1 herein, before whom the industrial
dispute was pending for adjudica!ion. It was requested that an award in
terms of the settlement may be passed in the pending industrial dispute
reference No. 708of1992. However, respondent No. 1, by his order dated
28th December, 1992 declined to make an award in terms of the settlement
H dated 14th December, 1992 on the ground that the respondent Nos. 3 to
K.C.P. LTD. v. PRESIDING OFFICER [S.B. MAJMUDAR,J.] 155

14 had not approved the settlement and therefore industrial dispute in A
respect of these respondents will continue and proceed further. It may be
stated that out of the 29 dismissed workmen in connection with .whose
dismissal, respondent No. 2 - union had raised the industrial dispute under
Section 2(k} of the Act., 17 workmen had already agreed to abide by the
terms of the settlement and had got reinstated in exercise of their option.
B
Only the remaining 12 dismissed workmen, respondent Nos. 3 to 14 herein.
proceeded with the dispute and did not agree to the terms of the settlement
even though admittedly they were members of the respondent No. 2 - union
who wa.s acting on their behalf and even till date they have continued to
be the members of the said union.
c
As the 1st respondent decided to continue the reference in connec-
tion with respondent Nos. 3 to 14, the appellant company filed Writ
Petition No. 611 of 1993 before the Madras High Court. As seen earlier,
the learned Single Judge by his Judgment and order dated 29th September.
1993 dismissed the said Writ petition. The appellant thereafter moved the D
Division Bench of the High Court in appeal which also got dismissed on
4th April, 1995 an"d that is how the appellant company has moved this
appeal on special leave.

Learned counsel for the appellant company vehemently submitted
that when respondent No. 2 - union had espoused the cause of all the 29 E
dismissed workmen, and the reference was got made by it under Section
2(k) of the Act, the union which represented all the workmen including the
dismissed respondents 3 to 14 was entitled to act on behalf of all of them
by way of collective bargaining and could legitimately enter into the settle-
ment which was for the benefit of all concerned workmen. Under these F
circumstances, individual workmen had no independent right to contest
their dismissal orders and were bound by the settlement which was not
shown by them to be in any way ex-facie, unfair or unjust; that it was a
package deal entered into by respondent No. 2 - union with the appellant
company and in such a collective industrial bargaining there was always G
give and take; that there were no exceptional grounds for rejecting such a
settlement which was for the benefit of all concerned workmen and the
Labour Court ought to have acted upon the same. Consequently, the order
of the Labour Court refusing to act upon the said settlement so far as
respondent Nos. 3 to 14 are concerned, was patently erroneous in law and
hence, the order of the learned Single Judge of the High Court confirming H
156 SUPREME COURT REPORTS [i996j SUPP: 6 S.C.R.

A such order of respondent No. 1 and 'further order of the Divisio~ B~~~hl
also equally suffered from pat~nt errors of l~~. ln ~~pport of thes~, sub~ ,
1
missions, various decisions of this Court' 'were 'died to which we wili r~fe~
1
. . ~-' ~ . :• . ' ( .,/ -. ; ~. . . u
a little later.

H Learned counsel fO'r· respondent Nos'. j to 14 ori' tlie ·otl~dr 'hand .
B submitted 'that though these respondents w~}e admittedly ·fhemBers ~f ! t~e L
respondiri(~ ufliort, tlief
haH acrept~d iilhgrms' th:e'!~eit16~eiit'ano 1 '
Ii.or of
the said s~ttlem~h.t '\v'as'Mt biAciing on'ihenr;' that iH;fa tt:l~b&'irmh1{t6 'tlie'
1

ie.l:rnb<l ·cc1unseVa0 at by'Ve~pOn'lterir N'<r2·,. ·uiiion
s1etttetneirt\Jas arrivea'
1

not on behalf of these contesting workmen'lhit only fck the 'iefuaffiing 17
C · ·workmen 1 i:_
who had ac:cept~d the settlemep.t by givirg it in wr,iting to the
' l· ,..., ·11,~rf ,'.Li·'J1i;i"' .. t·~,,~,.,.,. .. !1

Preside11t of respondent No, 2 · uniori. He also tried to suomit that in any
j~ >\• ' ' ll""'·I -'"! · !1• (}! Cl~· 1;~ ·l '·
I }..: !:,O

case, the settlement was ncit fafr 'and just as the workmen were: required to
givb 'up" all the bac.:k wages ~~eri tliough tngy were gi~~n r6instateinent with
·i.'• • ~
,·· I, !i 11'
1,. ~ '-,J~. ·J· •·f, i~",I,
,. '~ 1'1'1 ,,. 'i

continuity
'I 1 ·,
of service
-
and t:J:iey
j-',
were't farther' required
"·t~ (~ _f.1 i'
to givej a letter in
• fll\r/'~)~r f ' ·_ .

D t fwrj,tin~· t? the Manage~ent,~fat~~g t~?t .trey,_wa,u~~ ~~qujt themselves in an
orderly manner and would assure that they would not give a room for any
m1sc~n~uct and dis~l.plina~y acti6~ i~· It wa~'s'ubWiitted that under future:
these circumstances the contesting respondents were e~'titled to insist that ;·
their dispute should be adjudicated on merits by the Labour Court.
.,j:J•, •.1, ' t ,j •'lj • • (! ' .1 l '• I •' I

-' H:aiing given our aniious consideration to these rival submissiOris, we
E
find thafthe 'terink of th~ settlement cann6t be·considered to be' in any way·
1

ex~fdi:ie; tlnjbst .or unfair and that the'said 'settleili.ent 'consequently must b~ ·
held to be biu'Ciing dn thes.e contesting workmen a:lso. - ·. · '1' · ' · • .!
i '~: ; : 1j ! f i ,, ~. • ~: ' • ... . ' 1

·:It has to
be; I<ept in. ·view that the :industriai dispute was ta:is'ed 'Dy .
F respo'rident Nd. 2 ~ri Jnioii ·on behalf of all 'th-e· 29 ·wo~km:en· ·\vho were· ,
disinlsse·<l fioni service ~by 'the app~ltaiit" company: It \Jas an iiiaristrial' 7
dispute' as defined::by Sectioh.2.(k)·ofthe Act'taised by the uniotl:\)ii behalf·
of its n1embers. Respondent Nos. r3 tiV1:'4"were .at 'the, 'tekvaht tihl'e,;,•1
; 1members of the union and even till date they cciritinue 'to be t~e :members '
1

G ofthe sponsoring union. This was not ~a reference r~is~d'by a dis~issed.
employee as per·secti6n'2A. of tKe :Act. Conseque'ntly, ·as pe'r'Se~tfoii
{ · • 1 .. , · ~ , · • • · . • , i • '. ·u. -; j-.. .• -- ,_ -· . • , 1 , , 1
36
of .the Act, it was respondent No. 2 union which was. 'in charge of tlie
"~ • n Jii!·. ;,~-
-" I•. ·' :·-
·· Ur ·,l{ _;I "\
· 1 •• ·••. t'

procee<l,~gs_ari.d could repres~nt an the29,dismissed.workmen on whose .
l .... liJ. ~,, • , !"' •.••.' ! ; -. ·f~. r. ~~ 1·; '.I , ,~f.i 1 _, 1 rt;.J
H be~~l~l~~ 1 di~p)lte ~~~ rais>ed by ~tJYh~~ 1 fh~ said, 11ni9n}1a,yi11g; c9nsi?e~ed .
H the pros and cons of the situation, entered into the settlement on behalf of
I,
l(.C,P.LID.
•
v. PRESIDINGOFFICER[S.B.MAJMUDAR,J.J
,
157

~· <
all the workmen for whom it had taken cudgels unless the said settlement A
,~l , ' ,,, I ( ,

was found.to ex- facie, unjust or unfair it could not be gone behind by these
·respo~?ents who, can' ~e said to be parties t~ the same through their
representative union - respondent No. 2. In this connection a reference is
,also ~~q~ired to be made t.o Se,ction 18(1) of the Act which lays down as
under: B

"A settle~ent arriv~d at by agreement between the employer and
workman. otherwise than in the course of conciliation proceeding
shall be binding on. the parties to the agreement."

It is not in dispute that the settlement arrived at by respondent No. C
2 - union with the appellant company was not in the course of conciliation
proceedings. Therefore, it would' be binding to the parties to the agree-
ment, namely, the appellant company on the one hand and respondent No.
· 2 ~ union representing all the 29 dismissed employees, who were its
members and on whose behalf it had raisea the industrial dispute under D
Section·2(k) of the Act, on the other.
f~ I } ; ' f 1 l~ ' : · .!~

Section 2(p) of the Act .defines a settlement to mean a settlement
arrived at in the course of_ conciliation proceedings and includes a written
agreement between the employer and workmen arrived at otherwise than E
in the course of conciliation proceedings where such agreement has been
signed by the parties thereto in such manner as may be prescribed and a
copy thereof ha~ been. sent to an officer authorised in this behalf by the
appropriate, Government and the Conciliati9n Officer.
' I

It, is .. also ~o~ in dispute that parties to the settlement were the· t F
1.appellant conipany on th~ one hand and respondent No. 2 - . union on
tl}e. other,_ which acted_ on .qehalf of all .the 29. dismissed workmen for
.• ~horn refenmce,.w._a~ pending in the, I.abour C,qurt I_t was duly .signe,d by
both these parties. Under these circumstances, respondent Nos, 3 to 14
also would be ordinarily bound by this settlement entered into by their: ' G
r_epreseptath:'e.u11i911: ~ti! t~e compa!J,y it.is shown that the said settlement
was..: ex-facie, unfair,· ,unjust ·or malafide. No such case could .. be even
alleged ,much less,made.·out by the.dissent~ng respondent Nos. 3 tgi 14
before the..trial, court.. It is interesting to note. that.before the Labour
.·. CoutHhe,only argument put forward.on behalf of respondent Nos. 3 to·' H
158 SUPREME CoURT REPORTS [1996) SUPP. 6 S.C.R.

A 14 was that they were not parties to the settlement and therefore, it was
not binding on them. Once it is kept in view thii.t the entire industrial
dispute was raised by respondent No. 2 union on behalf of all the 29
dismissed workmen and as it was not an industrial dispute covered by
Section 2A whereunder individual dismissed workman could come in the
B arena of contest, it could not be held, as wrongly assumed by the Labour
Court that this settlement was not entered into •mder Section 18(1) of
the Act by these dissenting workmen when the respondent - union did
represent them from beginning to end and is still representing them as
they are members of the union even at present. In the case of Ram Prasad
C Vishwakanna v. The Chainnan, lndustlial Tlibzmal, [1961) 3 SCR 196 a
Bench of three Hon'ble Judges of this Court had an occasion to consider
the effect of a settlement entered into by the union of workmen which
had espoused the cause of its members by raising an industrial dispute
under Section 2(k) of the Act and the further question whether under
D these circumstances an individual workman had any independent locus
standi in proceedings before the reference court. Rejecting the contention
on behalf of the individual workman, it was observed by ·oas Gupta., J.
speaking for the Court that the concerned workman was not entitled to
separate representation when already represented by the Secretary of the
union which espoused his cause. A dispute between an individual
E workman and an employer cannot be an industrial dispute as defined in
Section 2(k) of the Act unless it is taken up by a union of ~orkmen or
by a considerable number of workmen. When an individu.al workman
becomes a party to a dispute under the Act he is a party, not inde-
pendently of the union which has espoused his cause. It was further
F observed that although no general rule can be laid down in the matter,
the ordinary rule should be that representation by an officer of the trade
union should continue throughout the proceedings in the absence of
exceptional circumstances justifying other representation of the workman
concerned.
G
It is true that the said decision was rendered prior to the insertion
of Section 2-A in the Act by which individual workmen were also given a
fight to raise industrial dispute in case of discharge, dismissal or retrench-
ment or otherwise termination of service. It is also true that the present
H controversy has arisen after the coming into operation of Section 2-A but
KC.P. LTD. v. PRESIDING OFFICER [S.B. MAIMUDAR,J.] 159

as noted earlier the industrial dispute raised for 29 dismissed workmen was A
raised by the union - respondent No. 2 under Section 2(k) of the Act and
there was no reference under Section 2-A of the Act, so far as respondent
nos. 3 to 14 are concerned.

In the case of Herbe1tsons Ltd. v. 771e Workmen of Herbensons Ltd.
and Ors., AIR (1977) SC 322 another Bench of three learned Judges of this
B
Court considered the effect of a settlement arrived at by recognised union
of majority of workers pending appeal to Supreme Court. It was observed
by Goswami, J., speaking for the Court that 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 c
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. There may be
exceptional cases where there may be allegations of ma/a fides, fraud or
even corruption or other inducements. But in tl1e absence of such allega- D
tions a settlement in the course of collective bargaining is entitled to due
weight and consideration.

In connection with the justness and fairness of the settlement it was
observed that this has to be considered in the light of the conditions that
were in force at the time of the reference. When, therefore, negotiations
E
lake place which have to be encouraged. particularly between labour and
employer in the interest of industrial peace and well-being, there is always
give and take. 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 F
be said that the settlement as a whole is unfair and unjust. It was further
observed that 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
outweights all the other advantages gained the Court will be slow to hold G
a settlement as unfair and unjust. The settlement has to be accepted or
rejected as a whole.

It has to be kept in view that under the Scheme of labour legislations
like the Act in the present case, collective bargaining and the principle of
industrial democracy t>ermiate the relations between the management on H
160

,A the one hand and the union which resorts.to collective bargaining on behalf
'6('it~' 1 fuembers- workmen ~ith 'thelUci~kaiJdierif'6n 'the' other. 'siich a
. ' 'tblle~tiv~' bargaining whlc;h inay result 1 i~' jtist 'all1d f~ir ''sbttl~m~n't would
1

· • •'f . r · ''' ' ' JI,.•
f ./ 1 ,I ~1
· ~ I /' ;" ·' 11 ., "r
7
•

always be beneficial to the managemenca:s well as to the oody of workmen
and society at large as there would b~ indtistri~l 'p'eace 'an~ ttlntjullity
1

B pursuant to such settlement a.nd; w~if~i~W~I.~. ~~.oi? ~1!:?e~~~s~~'Y social
strife and tribulation .
on the -one
, .·' ,!l
hand and promote
·~· ...-'1 l:;n;.,f~.i· '.:--~
industrial
It'\.·,~, _:nl1
and commer- .~r ~ 1. ·

cial development on tpe -~ther ~~!1~·, Keepmg m, .~ew ,t\le aforesaid salient
-,;i n. /,1) _ I, · ' . 10 JI t .
l' )a L J [_1(,.).I ·fl
features of the Act the settlement. whidi is sought to,oe impugned has to
be scanned and scrutinised: 's~itlg~enr ~f '1a~o tfr '<li~~utes 'by '<liiect
1

negotiation and collective bargaini'1,1g is1~l~ayi t~ ·be pref6rred 1t'ls' the for
c best guarantee of industrial peace' \Vhidl'is 'tl-i'e
·f. I ,.
aim
of aihegislatio~~ ,for
.
settlement of labour disputes. In order to bring about such a settlement
more easily and to make it more wci}k'able ·ifod effectiv~ ifni~y"riO't'be
always possible or necessary thgt\hcli\i· settlement 'is hrfi~e1d %'the at
course of conciliation proce~airibL~\thiCh ·m~y tie 'fhe first' step'lto~a~ds
1

D · 'r~solvlng the industrial llisp~tc: \~hitli _niaY. 1b'ti ·'lingering 'between , the
l : · • employers and theit workmen 'tepresenteU' oy th~ih.iriions but' even if· at
that stage: such settlement dJes ..Vat. thke ·pfaee a:iid 'the industrial disj>Ute
gets referred for adjudication, even pending such'disputes; the·par.ties fan
arrive at amicable settlement which may be binding to the parties to the
settlement unlike settlement l ~irived a'( Cluririg! !contili'ation pr'ohe~dings
E which may be binding not 6'nl)it~ 'the1 part'iesJt~· the shtt!ein'efit but' everi, to
the entire labour force working in th'e coli'cerned''6rgahisatfon even tliough
they may not be members of the uni6n' which might have entered into
settlement during conciliation proceedings. The differe1we between the _
l'f I f' '' ' .,. I• ,..f , '

settlement arrived at under the Act during conciliation proce·edings · by
F " parti~s and the settlement arr~~e~}t_'·o~~er~s(t~~n. :.~u,ri~g c?~'t~li~t.ion
proceedings has been succinctly br.ought ciut by the decision of thi's Court
in Barauni Refi1\J,!y 'Pragatisheel' slt'/aiiiik Palishad Etc. Et~. V. b;didn Oil
~ ~
, ! , . ~ ·, · ' · . , r ;
1, . '"" . . •.. .1 J J ir , 't
l •• • • .., ·1 1 L" .. · <I. 1

C01poi·dtion Ltd. ~tc. 'Etc.; [199~) 1 SCC, 4 wnerein Alimadi, J... (as His
·~~'·'· i· .......'.)· '1."; _J,.d'·•l··t: 4 ·ttt ~.J)')!;4-i:
1 ~ ... ·/· •-';,ri.·c~·o·1·~i1tJr~
Lordship then ~as) spoke for the Court to the followmg effect :
,~liL"'h?.1 f1;1"..> l: ft,.r;J ,·l,.iJ' .. , n1i(t1·1rJ ·:;·f{IL~l1• L·· (<J1; 1 ·d h.o11! t·;JJ.~lfr1.,,ra-;b
--QL!tui IJ! ·,J<1f..- · ·i !tf.t:t n ·,·; ) : i:i b·..;IHt. -1 ~"'-';.h--lrh~l:;t ... ;';HJ1 · ·..d~! t!h 1.;1l:H.1¥/J11"
1

L· :r1 D'.lfj'J'.; ..11 .~~yHl~m-.e1?-.~S W~1?Jyi~i9 i~~? s~o!~~!e~~~i~J" ,.ip~~lyJi) ,~h?se
arrived at outside the conciliation proceedin~~ [~E<'.ti~p. i}§~i))_ ~rd
(ii) those arrived at in the course of conciliation proceedings
~r;, ,; , .:. · , 1 .~S~c.:~k~~ l8(~)r A. set!Jt:~P~.1Y4~!~~·J?e~ongs;t~ .the;first,c:at~gory has
i, ; ·, lr, -.... , .Nn};it~~ 1 ~ppli~~~!9µ,in Jh~t it1 IJl_er~ly _b~n<!s thf .pjir~i~~ ~~- tl,t~, agr_ee-
i 1H~,, 1,r ,,, _,,pl~pt1 ~,Utra s~gtcnwJJ:.t,_~r.riveci at;jp, ,tJi~ .sou~~;i9f S9n~i!i_atipn
KC.P. LID. v. PRESIDING OFFICER [S.B. MAJMUDAR, J.] 161

proceedings with a recognised majority union has extended ap- A
plication as it will be binding on all workmen of the establishment,
even those who belong to the minority union which had objected
to the same. To that extent it departs from the ordinary law of
contract. The object obviously is to uphold the sanctity of settle-
ments reached with the active assistance of the Conciliation Officer
B
and to discourage an indiVidual employee or a minority union from
scuttling the settlement. There is an underlying assumption that a
settlement reached with the help of the Concilition Officer must
be fair and reasonable and can, therefore, safely be made binding
not only on the workmen belonging to the union signing the
settlement but also on the others. That is why a settlement arrived C
at in the course of conciliation proceedings is put on par with an
award made by an adjudicatory authority.'

As in the present case the settlement arrived at between the parties
was not during conciliation proceedings, it would remain binding to parties D
to the settlement as per Section 18(1) of the Act. But as we have seen
above, respondent No. 2 union while entering into that settlement acted on
behalf of all the 29 dismissed workmen who were its members including
the present respondent nos. 3 to 14 who are also its members as noted
earlier. We have also seen earlier that the Labour Court had erred in taking E
the view that respondents 3 to 14 were not parties to the said settlement
as individually they had no locus standi and they were represented by their
union respondent no. 2 which had signed the settlement on behalf of its
members for whom the dispute was raised by the union. Nothing could be
alleged by respondents 3 to 14 to the effect that the said settlement was in
any way unjust or unfair or was a ma/a fide one. There were no exceptional
F
circumstances to reject this settlement qua even the contesting respon-
dents. However, as learned counsel for the respondent-workmen tried to
faintly suggest to that effect we have carefully gone through the circumstan-
ces which are brought on record which had led to the settlement. It may
be noted that about 500 workmen had gone on strike and that had resulted G
in the lock-out by the appellant company and ultimately disciplinary action
was initiated against 29 workmen who had indulged into various acts of
misconduct. It is for these 29 workmen who were ultimately dismissed from
service that the respondent-union had raised a dispute under Section 2(k)
of the Act on their behalf. Earlier the remaining workmen had gone on H
162 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A strike for nearly 5 months Ultimately. the strike was withdrawn; lock-out
was lifted and broad understanding was reached between the appellant
company and the workmen represented by their union whereby it was
agreed that 29 workmen, who were dismissed, would be either given Rs.
75,000 as compensation or reinstatement with continuity of service without
B back wages and the concerned workmen should express apology for mis-
conduct and also assure good conduct in future.

Out of 29 workmen for whom the industrial dispute was raised 17
workmen agreed and accepted this settlement and joined the service
C Remaining 12 workmen (respondent Nos, 3 to 14) have not agreed to the
said settlement. It is under these circumstances that the settlement arrived
at by the union on behalf of all of them has to be scrutinised. It has clearly
transpired on the record of this case that all the 500 workmen excluding
29 dismissed workmen had espoused the cause of these dismissed workmen
and had struck the work. Ultimately, when they were reinstated in service
D leaving aside the 29 workmen for whom industrial dispute lingered on, all
the remaining workmen lost their wages from_20.10.1990 to 12.5.1991 and
also from 13.5.1991 to 6.10.1991. They lost their wages because they were
expressing sympathy for their 29 colleagues who were facing disciplinary
action and even for these 29 workmen respondent no. 2 union entered into
E a settlement so that they could be reinstated in service with continuity of
service or could walk out from service with Rs. 75,000 and other monetary
benefits. All that was agreed to by the union as a condition for reinstate-
ment was that the workmen would give up back wages and had to sign a
written undertaking to behave properly in future. In our view there was
F nothing unreasonable or unfair in these terms of settlement. The relief of
reinstatement without back wages could not be said to be unreasonable as
for nearly 12 months all the other workmen lost their back wages only
because they supported the cause of these 29 colleagues of theirs and hence
there was no reason why the workmen who indulged in the acts of miscon-
duct and who were also to be taken in service should not lose their wages
G for 12 months. Relief of reinstatement was made available to respondents
3 to 14 on the same line as it was made available to their 17 remaining
colleagues who were covered by the very same settlement and who ac-
cepted the relief of settlement without back wages or a lumpsum compen-
sation of Rs. 75,000 and other monetary benefits in lieu of that. In our view
H such a package deal entered into by respondent no. 2 in the best interest
K.C.P.LTD. v. PRESIDINGOFFICER(S.B.MAJMUDAR,J.] 163

of these workmen could not be said to be unfair or unjust from any angle. A
On the contrary, it the back wages were given to them, then the remaining
workmen against whom there was no disciplinary action or any alleged
misconduct and who had also lost wages for 12 months only because they
were in sympathy with these 29 dismissed workmen would have stood
discriminated against. Consequently, it is not possible to agree with the B
learned counsel for respondent nos. 3 to 14 that the said settlement was in
any way unfair or unjust. Once this conclusion is reached it is obvious that
the entire industrial dispute should have been disposed of in the light of
this settlement and an award in terms of the settlement should have been
passed by the first respondent-court in the case of respondents 3 to 14 also.
Consequently, the judgment and order of the Division Bench of the High C
Court dated 4th April, 1995 and the order of learned Single Judge dated
29th September, 1993 are quashed and set aside. The writ petition filed by
the appellant company will stand allowed with a direction to the first
respondent-Labour Court to pass award in terms of the settlement dated
14th December, 1992 by treating it to be binding to respondent nos. 3 to D
14 also.

Learned counsel for these respondents ultimately submitted that the
time during which the concerned workmen had to exercise their option as
per the terms of the settlement is now over and the appellant company may
not make available the said option to them. His apprehension on behalf of E
the respondents was set at rest by learned counsel for the appellant
company who stated that the appellant company is·willing to make available
the option to these respondent nos. 3 to 14 to either accept reinstatement
with continuity of service without back wages on their executing the writing
as per the said settlement or to be paid Rs. 75,000 each in addition to F
gratuity as per the payment of Gratuity Act, wages for unavailed leave and
bonus, if any payable.

In view of this fair stand taken by the appellant company it is directed
that if the respondent nos. 3 to 14 exercise their option as per the proce- G
dure laid down in the settlement dated 14th December 1992 either to get
reinstatement without back wages for the period of non-employment and
· with continuity of service or to accept a lumpsum monetary compensation
as laid down in the settlement within a period of 8 weeks from today, the
appellant company will ad upon the said option exercised by th~ said
workmen and shall give appropriate benefit of the option as per the H
164 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A settlement to the concerned workmen. As the period of lumpsum payment
of Rs. 75,000 by instalments (as laid down by the settlement) is already
over, it is directed that if any of the concerned workmen-respondents 3 to
14 exercises the option of receiving the lumpsum arnoun: of Rs. 75,000 in
lieu of the reinstatement, a sum of Rs. 40,000 out of the said amount shall
be paid to the concerned workmen within 15 days of the exercises of su<;:h
B
option and the balance of the Rs. 35,000 with other monetary benefits as
indicated in the settlement shall be paid to the concerned workmen within
a further period of 2 months thereafter.

The appeal is allowed in the aforesaid terms. In the facts and
C circumstances of the case, there shall be no order as to costs.

v.s.s . Appeal allowed.

•