Holding

A settlement arrived at during conciliation proceedings with a recognised representative union is binding on all workmen of the establishment, so the State Government lacked jurisdiction to refer the dispute and the notification of reference is quashed.

Summary

National Engineering Industries Ltd. (employer) had three unions: a recognised majority Labour Union, a Staff Union and a minority Workers' Union. A tripartite settlement was reached in conciliation proceedings with the Labour and Staff unions covering most demands, and the Workers' Union also received the benefits. The Workers' Union filed a writ petition seeking reference of its remaining demands to an Industrial Tribunal. While the Rajasthan High Court directed the State Government to decide, the Government issued a notification referring the disputes to the Tribunal before hearing. The employer challenged the notification, arguing that the settlement with the representative union was binding on all workmen, leaving no dispute to refer, and that the High Court had jurisdiction to entertain the writ. The Supreme Court held that a settlement arrived at during conciliation with a recognised representative union binds all workmen, including those of minority unions, thus the State Government lacked jurisdiction to make the reference. The Court also affirmed the High Court’s jurisdiction to entertain the writ and quashed the notification.

Issues considered

Whether a settlement reached in the course of conciliation proceedings with a recognised representative union is binding on all workmen, thereby precluding reference of disputes to an Industrial Tribunal.
Whether the High Court has jurisdiction to entertain a writ petition challenging the validity of a reference when no industrial dispute exists.
Whether the State Government’s reference under Section 10(1)(d) was valid in view of the existing settlement and alleged non‑application of mind.
Whether a settlement entered into on a holiday is invalid.
Whether a notice under Section 19 by a minority union is valid.

Legislation cited

Industrial Disputes Act, 1947s. 10(1)(d), s. 12(3), s. 12(5), s. 18(1), s. 18(3), s. 19(2), s. 19(7)
Industrial Employment (Standing Orders) Act, 1946s. 10(2)

Subjects

industrial disputesettlementconciliationrepresentative unionIndustrial Disputes Actreference to tribunaljurisdictioncollective bargainingindustrial peace

Judgment

NATIONAL ENGINEERING INDUSTRIES LTD. A
v.
STA TE OF RAJAS THAN AND ORS.

DECEMBER I, 1999

[S.B. MAJMUDAR, D.P. WADHWA AND A.P. MISRA, JJ.] B

Industrial Disputes Act, 1947.

Sections 10(1) (d), 12(3) and (5), 18 (1) and (3). 19-/ndustrial C
Dispute-Conciliation proceedings-Settlement with representative union in
conciliation proceedings-Other union not party to settlement seeking
reference of dispute-Notification for reference issued-Whether other union
can seek reference of dispute-Held, settlement with representative union in
conciliation proceedings is binding on all workmen of establishment in the
· interest of industrial peace-Recognized union having majority of workers D
expected to protect legitimate interest of labour-Under the facts and
circumstances, notification for reference of dispute quashed-Rajasthan
Industrial Disputes Amendment Act, 1958-Sections 2(000),9-D, 9-E, 9-F-
Trade Union Act, 1926-Section 4.

Sections JO(/) (d) & 12(3) and (5)-Writ petition challenging E
notification of reference of dispute-No existence of industrial dispute
alleged-Jurisdiction of High Court-Held, High Court has jurisdiction to
entertain writ petition and examine question of Jurisdiction of Industrial
Tribunal-If there is no industrial dispute, Government lacks power to make
any reference-Industrial Tribunal cannot go into question of validity of F
reference.

Words & Phrases-'Representative Union'-Meaning of in the contµt
of the Rajasthan Industrial Disputes Amendment Act, 1958 and in common
parlance.
G
Three unions namely, L, Sand Win the factory of appellant made
charter of demands and raised industrial disputes; conciliation proceedings
were initiated and conciliation settlement/tri-partite settlement was arrived
at with L and S but failure report was submitted in respect of proceedings
regarding W. All employees including members ofW accepted benefits under H
87
88 SUPREME COURT REPORTS [1999) SUPP. 5 S.C.R.

A the settlement. L is the representative union and has majority of workers oit
its roll and registered as such under the provisions of the Industrial Disputes
Act as amended by the Rajasthan Industrial Disputes Amendment Act, 1958.
W filed writ petition seeking reference of disputes to Industrial Tribunal and
during its pendency, Government issued notification for reference of disputes
relating to demands raised by W. The fact of said reference was not brought
B to the notice of High Court which allowed writ petition directing the State
Government to decide question of reference of disputes after hearing the
parties. Thereafter, appellant submitted representation to State Government
seeking withdrawal of reference and for fresh decision after hearing it. Since
representation was not accepted by State Government, appellant filed writ
C petition challenging notification and validity of reference which was dismissed
by Single Judge and upheld in appeal by Division Bench • Hence this appeal
by the appellant-employer.

Appellant-employer contended that members of W had taken advantage
of benefits under the settlement and thus, there was no dispute pending
D requiring reference; that charter of demands of W was almost similar/
identical to the other Unions most of which were covered by the said
settlement; that no opportunity was granted to appellant to place its case
before State Government despite judgement of High Court; that L is
representative union and the said settlement with it was binding under Section
E 18(3) of the Act on all workers of appellant; that impugned reference was
destructive of industrial peace and defeated the very purpose and object of the
Act; that Industrial Tribunal could not go into the question of jurisdiction
and also could not examine justness and fairness of the settlement; that
charter of demands of W could not be termed as notice under Section 19 of
the Act; that W was not representing majority of workers and could not give
F notice in view of Section 19 (7) of the Act; and that there was non-application
. of mind by State Government in making reference.

• W contended that tripartite settlement was invalid as it was entered into
on Sunday; that reference could have been made in respect of demands raised
by W which were not covered by the settlement; and that settlement was not
G entered into during conciliation proceedings and hence was not binding on it.

Allowing the appeal, the Court

HELD : 1.1. High Court has jurisdiction to entertain a writ petition when
there is allegation that there is no industrial dispute and none apprehended
H which could be subject matter of reference for adjudication to the Industrial
NATIONAL ENGINEERING INDUS. LTD. v. ST ATE 89
Tribunal under Section 10 of the Act. It is a question of jurisdiction of the A
Industrial Tribunal, which could be examined by the High Court in its writ
jurisdiction. It is the existence of the industrial dispute which would clothe
the appropriate Government with power to make the reference and the
Industrial tribunal to adjudicate it If there is no industrial dispute in existence
or apprehended appropriate Government lacks power to make any reference. B
(112-E-FJ

Workman Employed by Hindustan Lever Ltd. v. Hindustan Lever Ltd.,
(1984) 4 SCC 392 and The Management of Express Newspapers Ltd v.
Workers & Staff Employed under it and Ors., [1963) 3 SCR 540, relied on.

1.2. Industrial Tribunal is the creation of statute and it gets jurisdiction C
on the basis of reference. It cannot go into the question on validity of the
reference. Question before the High Court was one of jurisdiction which it
failed to consider. [115-CJ

2.1. A settlement of dispute between the parties themselves is to be D
preferred, where it could be arrived at, to industrial adjudication, as the
settlement is likely to lead to more lasting peace than an award. Settlement
is arrived at by the free will of the parties and is a pointer to there being
goodwill between them. When there is a dispute that the settlement is not
bonafide in nature or that it has been arrived at on account of fraud, misre-
presentation or concealment of facts or even corruption and other inducements E
it could be subject matter of yet another industrial dispute which an
appropriate Government may refer for adjudication after examining the
allegations as there is an underlying assumption that the settlement reached
with the help of the Conciliation officer must be fair and reasonable.
[112-H; 113-A-B] F
2.2. A settlement which is sought to be impugned has to be scanned and
scrutinized. Sub-sections (1) and (3) of Section 18 divide settlements into two
categories, namely, (1) those arrived at outside the conciliation proceedings
and (2) those arrived at in the course of conciliation proceedings. A settlement
which belongs to the first category has limited application in that it merely G
binds the parties to the agreement but the settlement belonging to the second
category has extended application since it is binding on all the parties to the
industrial disputes, to all others who were summoned to appear in the
conciliation proceedings and to all persons employed in the establishment or
part of the establishment, as the case may be, to which the dispute related on
the date of the dispute and to all others who joined the establishment thereafter. H
90 SUPREME COURT REPORTS [1999) SUPP. 5 S.C.R.

A A settlement arrived at in the course of conciliation proceedings with a
recogni7.ed majority union will be binding on all workmen of the establishment,
even those who f!elong to the minority union which had objected to the same.
Recognized union having majority of members is expected to protect the
legitimate interest of labour and enter into a settlement in the best interest
of labour. This is with the object to uphold the sanctity of settlement reached
B with the active assistance of the Conciliation Officer and to discourage an
individual employee or minority union from scuttling the settlement. When a
settlement is.arrived at during the conciliation proceedings it is binding on
the members of Was laid down by Section 18(3) (d) of the Act. It would ipso
facto bind all the existing workmen who are all parties to the industrial dispute
C and who may not be members of unions that are signatories to such settlement
under Section 12(3) of the Act. Industrial Disputes Act is based on the
principle of collective bargaining for resolving industrial disputes and for
maintaining industrial peace. Thus, reference in itself was bad as the tripartite
settlement did bind the members of W as well. [113-B-F; 116-F]

D The Sirsilk Ltd and Ors. v. Government of Andhra Pradesh and Anr.,
[1964) 2 SCR 448 and K.C.P. Limitedv. Presiding &Officer and Ors., (1996]
10 sec 446, relied on.

Barauni Refinery Pragatisheel Shramik Parishad v. Indian Oil
E Corporation Ltd., (1991) 1SCC4; P. Virudhacham and Ors. v. Management
of Lotus Mills and Anr., (1998) 1 SCC 650 and Ram Pukar Singh and Ors.
v. Heavy Engineering Corporation and Ors., [1994) 6 SCC 145, affirmed.

3. Representative Union and the procedure for its registration is defined
F under Sections 2(000), 9-D, 9-E and 9-F of the Rajasthan Industrial Disputes
Amendment Act, 1958. As to what is representative union is not defined in
the Industrial Disputes Act but in common parlance it would mean that it
represents all the workers. Once L is the representative Union, it is difficult
to see the role of W. It is not the case of W that registration of L is liable to
G be cancelled on any ground whatsoever. (114-A; E-F]

4. Notice given by Wunder sub-section (2) of Section 19 of the Act is
invalid as it did not represent majority of the persons bound by the settlement
nor it is a representative union. [114-F)

H 5. There is no bar in having conciliation proceedings on a holiday and
NATIONAL ENGINEERING INDUS. LTD. v. STATE [D.P. WADHWA, J.] 91

to arrive at a settlement. (115-A) A

6. The recitals to the tripartite settlement clearly show that the
settlement was arrived at during the conciliation proceedings and therefore,
the contention to the contrary is without any basis. (115-E; 116-E)

7. After the judgment had been announced and directions issued by the B
High Court to hear the appellant it was incumbent of the State Government,
in the circumstances of the case, to recall the reference. It could not direct
the appellant to raise its objection to reference before the Industrial Tribunal
for which Industrial Tribunal certainly lacked jurisdiction. State Government
before making the reference did not consider all the relevant considerations C
which would clothe it with the power to make the reference under Section 10
of the Act Wholesale reference of all the disputes in the charter of demands
ofW for adjudication was also bad in as much as many of such disputes were
already the subject matter of tripartite settlement. This also shows non-
!· application of mind by the State Government in making the reference. D
(116-B-D]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 16832 of 1996.

From the Judgment and Order dated 25.3.96 of the Rajasthan High Court
in C.S.A. No. 229of1993.
E
G.B. Pai, K.N. Tripathy, D. Mohanty, K.K. Mahalik and Janaranjan Das
for the Appellant.

Aman Hingorani and Ms. Reema Bhandari, for Mis Hingorani &
Associates for the Respondents. F

The Judgment of the Court was delivered by

D.P. W ADHW A, J. Appellant, and employer, is aggrieved by judgment
dated March 25, 1996 of the Division Bench of the Rajasthan High Court G
affirming in appeal the Judgment dated December 15, 1992 of the learned single
Judge. By this judgment the learned single Judge negatived the challenge of
the appellant to the validity of the notification issued by the State Government

.. _
under Section 10 (1) (d) 1 read with Section 12 (5) 2 of the Industrial Disputes
Act, 1947 (for short, the 'Act') to adjudicate the disputes between the appellant H
92 SUPREME COURT REPORTS [1999] SUPP. 5 S.C.R.

A and the National Engineering Industries Workers' Union (for short, the workers'
Union) in respect of the demands raised by the Workers' Union. This
notification is as under:
"Government of Rajasthan
Department of Labour
B No. Pl ( l) ( 14171 )/L&E/86 Jaipur dated 17 March, 1989

1
10. Reference of disputes to Boards, Courts or Tribunals.-(!) Where the appropriate
Government is of opinion that any industrial dispute exists or is apprehened, it may at
any time, by order in writing,-

(a)
c (b)

(c)

(d) refer the dispute or any matter appearing to be connected with, or relevant to, the
dispute, whether it relates to any matter specified in the Second Schedule or the Third
Schedule, to a Tribunal for adjudication:
D
Provided that where the dispute relates to any matter specified in the Third Schedule
and is not likely to affect more than one hundred workmen, the appropriate Government
may, if it so thinks fit, make the reference to a Labour Court under clause(c) :

Provided further ......... .

Provided also .............. "
E
2 12. Duties of conciliation officers.-(1) Where any industrial dispute exists is apprehended,
the conciliation officer may, or where the dispute relates to a public utility service and
a notice under Section 22 has been given, shall, hold conciliation proceedings in the
prescribed manner.

2. The conciliation officer shall, for the purpose of bringing about a settlement of the
F dispute without delay, investigate the dispute and all matters affecting the merits and
the right settlement thereof and may do all such things as he thinks fit for the purpose
of inducing the parties to come a fair and amicable settlement of the dispute.

3. If a settlement of the dispute or of any of the matters in dispute is arrived at in the
course of the conciliation proceedings the conciliation officer shall send a report
thereof to the appropriate Government or an officer authorised in this behalf by the
appropriate Government together with a memorandum of the settlement signed by
G the parties to the dispute.

4. If no such settlement is arrived at, the conciliation officer shall, as soon as practicable
after the close of the investigation, send to the appropriate Government a full report
setting forth the steps taken by him for ascertaining the facts and circumstances relating
to the dispute and for bringing about a settlement thereof, together with a full statement
of such facts and circumstances, and the reasons on account of which, in his opinion,
H a settlement could not be arrived at.
NATIONAL ENGINEERING INDUS. LTD. v .. STATE [D.P. WADHWA, J.) 93
Notification A
Whereas an industrial dispute3 as described below has arisen between

... the Management of National Engineering Industries Ltd., Jaipur and
President National Engineering Industries Workers' Union, E-4, M.L.A.
Quarters, Jaipur.
B
Whereas the Conciliation officer, Jaipur has reported that no settlement
was arrived at:

Whereas the State Government after considering the report of the
above Conciliation Officer satisfied that the matter is fit to be referred
to the Industrial Tribunal. c
Therefore, now the State Government under powers conferred on it
under section IO sub-section (1) clause (d) read with section 12 sub-
section (3) of the Industrial Disputes Act 1947 (Act 4 of the year 1947)
hereby refers the above dispute for adjudication to Industrial Tribunal
Rajasthan Jaipur duly constituted by the State Government under the D
Industrial Disputes Act, 1947 (Act 4 of the year 1947).

DISPUIE

In the 24 point charter of demands made by the President National.
Engineering Industries Workers' Union, B-4, M.L.A. Quarters before E
the Management of National Engineering Industries Ltd., Jaipur
-< (Charter of demands annexed) is fair and proper.

S. If on a consideration of the report referred to in sub-scction(4), the appropriate
Government is satisfied that there is a case for reference to a Board, Labour Court,
Tribunal or National Tribunal, it may make such reference. Where the appropriate F
government docs not make such a reference it shall record and communicate to the
parties concerned its reasons therefore.

6. A report under this section shall be submitted within fourteen days of the
commencement of the conciliation proceedings or within such shorter period as may
be fixed by the appropriate Government :

Provided that, subject to the approval of the conciliation officer, the time for the G
submission of the report may be extended by such period as may be agreed upon in
c writing by all the parties to the dispute.
3
"2(k) "industrial dispute" means any dispute or difference between employers, or between
emp\o}'ers and workmen, or between workmen and workmen, which is connected wittt
the employment or non-employment or the terms of employment or with the
conditions of labour, of any person; H
94 SUPREME COURT REPORTS [1999) SUPP. 5 S.C.R.

A If not to what the workmen are entitled ?

Annexed: Charter of demands
By Order of the Governor

(R.P. Tiwari)
Special Secretary to the Government
B
It would be appropriate at this stage to know the backgro:.md under
which the reference came to be made.

Appellant is a company registered under the Companies Act with its
registered office at Calcutta. One of its factories is located at Khatipura Road,
C Jaipur in the State of Rajasthan. There are three unions with which we are
concerned and these are:

(I) National Engineering Industries Labour Union (for short, the 'Labour
Union'); (2) National Engineering Industries Staff Union (for short, the 'Staff
D Union'); and (3) the Workers' Union referred to above. It is stated that Labour
Union has majority of the workers on its roll; is recognised, and is the
representative union and registered as such under the provisions of the Act
as amended by the Rajasthan Industrial Disputes Amendment Act, 1958. In
1983 all the three unions made their charter of demands. A tripartite settlement"
arrived at between the management, Labour Union and the staff union. In
E respect of demand made by the Workers Union failure report was submitted.
Worker' Union made representation to the State Government for referring their
disputes for adjudication. This request was, however, declined by the State
Government in view of the tripartite settlement already reached between the
repre.sentative union, the Staff Union and the management. The settlement
F was to remain valid and operative till September, 1986. All the three union
made fresh charter of demands in 1986 which were identical in almost all
respect. Conciliation proceedings were initiated and though failure report was
submitted by the Conciliation Officer in respect of the proceedings regarding
the Workers' Union, conciliation settlement was arrived at with the Labour
Union and the Staff Union . It was a conciliation settlement and was to be
G in operation for a period of the three years ending September 30, 1989. It is
4 2(p) "settlement" means a settlement arrived at in the course of conciliation proceeding
and includes a written agreement between the employer and workmen arrived at
otherwise than in the course of conciliation proceeding where such agreement has been
signed by the parties thereto in such manner as may be prescribed and copy thereof has
been sent to an officer authorised in this behalf by the appropriate Government and
H the conciliation officer. ...
NATIONAL ENGINEERING INDUS. LTD. v. STATE [D.P. WADHWA, J.] 95

not disputed that all the employees of the appellant including the members A
of the 'Workers' Union accepted the benefits under this tripartite settlement.

On the charter of demands raised by the Workers' Union and on which
the Conciliation Officer had submitted a failure report, the State Government
did not make any order for reference of the disputes nor did it refuse to make
reference. Workers' union then filed a writ petition in the High Court requiring B
the State Government to make reference of their disputes to the Industrial
Tribunal under the provisions of the Act. This writ petition was decided by
Division Bench of the High Court on March 23, 1989 whereby it was Q_irected
to the State Government to decide the question on the failure report of the
Conciliation Officer whether to make or not to make the reference. The· State C
Government was required to decide the question within two months from the
date of the judgment, i.e., March 23, 1989. High Court also observed that it
would be open to the appellant to raise all the contentions before the state
Government and the State Government would or would not make a reference
only after hearing the parties. However before the decision of the High Court,
the State Government, in the meantime, issued the notification dated March D
17, 1989 for reference of the disputes relating to the demands raised by the
Workers' Union. We have already set out above the notification dated March
17. 1989 making reference of the disputes to the Industrial Tribunal. Appellant
thereafter submitted a representation dated April 3, 1989 to the State Government
drawing its attention to the decision of the High Court and requesting that E
the State Government might withdraw the reference and take a fresh decision
after hearing the appellant. This, it appears, was not acceded to. The fact that
the State Government had already made a reference on March 17, 1989 was
not brought to the notice of the High Court when it decided the writ petition
of the Workers' Union on March 23,1989. Since the state Government did not
accept the request of the appellant, it filed a writ petition in the High Court F
challenging the validity of the reference. As noted above, the writ petition
was dismissed by the learned single Judge. The appeal filed by the appellant
before the Division Bench also met the same fate. That is how the matter has
come before us, after this court granted leave to appeal against the judgment
of the High Court. G
Appellant has challenged the notification on the following counts:

I. There was no dispute pending at the time which could be the
subject matter of the reference inasmuch as under the tripartite
settlement the members of the Workers' Union had also already H
96 SUPREME COURT REPORTS (1999) SUPP. 5 S.C.R.

A taken advantage of the benefits thereunder. State Government
had thus no jurisdiction to make the reference.
2 Workers' Union was not a representative union within the
meaning of section 9-Es of the Rajasthan Act, 34 of 1958 as
amended by the Rajasthan Act 14 of 1970.
B 3. Charter of demands by the Workers' Union Contained as many
as 24 demands, most of which were already covered by the
tripartite settlement, Reference could not have been made in
respect of those very demands. Moreover, the State Government
failed to consider that the Workers' Unions was not representing
c the majority of workers' and could not have given notice in view
of Section 19(7)6 of the Act. There was non-application of mind
by the state Government in making the reference. In spite of the
judgment of the High Court no opportunity was granted to the
appellant to place its case before the State Government. The
order of the State Government making reference could not be
D
'9-E. Registration of Union-( I) On receipt of an application from a Union for
registration under. Section 9-0 and on payment of the fee prescribed, the Registrar
shall, if, after holding such inquiry as he deems tit he comes to the conclusion that the
conditions requisite for registration specified in the said section are satisfied and that
the Union is not otherwise disqualified for registration, enter the name of the union in
the appropriate register in such form as Section 9-C and issue a certificate of registration
E in such form as may be prescribed:

Provided that-

{i) Where two or more Unions fulfilling the conditions necessary for registration under
this Act apply for registration in respect of the same unit of an industry, the Union
having the largest membership of employees employed in the unit of the industry shall
F be registered; and

(ii) the Registrar shall not register any Union if he is satisfied that application for its
registration is not made bona fide in the interest of the workmen but is made in the
interest of the employers to the prejudice of the interest of the workmen.

(2) Once a union has been registered as a representative union under this Act the
registration of the union shall be held valid for a period of two years from the date of
G its registration and shall continue to hold valid unless the registration is cancelled under
Section 9·F of this Act or another union is registered in its place according to Section
9-G of this Act.

6
19. Period of operation of settlement and awards.-( I )A settlement shall come into
operation on such date as is agreed upon by the parties to the dispute, and if no date is
agreed upon, on the date on which the memorandum of the settlement is signed by the
H parties to the dispute. ·
NATIONAL ENGINEERING INDUS. LTD. v. STATE [D.P. WADHWA, J.) 97

termed as administrative order inasmuch as there was a direction A
by the Higlt Court that appellant be heard. The State Government
should have brought to the notice of the High Court the reference
having already been made when the matter was still pending
before the High Court.
On the other hand, it was contended by the Workers' Union that: B
1. The tripartite settlement was invalid inasmuch as it was entered
into on a Sunday.

2 All the demands raised by the Workers' Union had not been
covered in the tripartite settlement and reference could have C
been made in respect of those demands.
3. Tripartite settlement was not entered into during the course of
conciliation proceedings and, thus, a bar could not have been
raised against the reference. In this connection reference be
made to Section 18 (I)' of the Act.
D
In support of his submissions, Mr. G.B. Pai, learned counsel for the
appellant, said that it was not open to the State Government to invoke its
power of reference under Section I 0 of the Act during the pendency of the
tripartite settlement dated 4.10.1986 arrived at during the conciliation
E
(2) Such settlement shall be 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 aforesaid, until the expiry
of two months from the date on which a notice in writing of an intention to terminate
the settlement is given by one of the parties to the other party or parties to the
settlement. F
(3) ................. .

(4) ................. .

(5) ................. .

(6) ................ .
G
(7) No notice given under sub-section (2) or sub-section (6) shall have effect, unless it
is given by a party representing the majority of persons bound by the settlement or
award, as the case may be.
7
18. Persons on whom settlements and awards are binding.-( I) A settlement arrived
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. H
98 SUPREME COURT REPORTS [1999) SUPP. 5 S.C.R.

A proceedings. The settlement was binding on the members of the Workers'
Union as well under Section 18(3) of the Act who had in fact taken advantage
of the benefits under the settlement. It could not be said that any industrial
~ispute existed or was even apprehended at the time the State Government
invoked its power under Section, I 0(1) of the Act in making the impugned
reference of the alleged dispute between the management and the Workers
B 'Union. The State Government lacked jurisdiction in making the reference and
that was the question which was not addressed by the High Court . The
Industrial Tribunal to whom the reference was made could not have gone into
the question of jurisdiction. High Court erred in leaving the issue of settlement
being just and fair to be decided by the Industrial Tribunal.
c Elaborating Mr. Pai submitted that the impugned reference was
destructive of the industrial peace and defeated the very purpose and objective
of the Act. Once a conciliation settlement is entered into, there is no scope
under the Act for further investigation by an Industrial Tribunal about the
justness or fairness again of the settlement and no individual workmen or
D even a union representing few workmen not party ro conciliation proceedings ,.
could question the validity of settlement during its pendency. This was
particularly so in the present case as the charter of demands raised by the
Workers' Union was itself claimed by it to be identical to the charter of
demands raised by the recognised representative Labour Union. Reference by
E the State Government was not only ex facie bad and incompetent but the

(2) Subject to the provisions of sub-section (3), an arbitration award which has become
enforceable shall be binding on the parties to the agreement who referred the dispute
to arbitration .

(3) A settlement arrived at in the course of conciliation proceeding under this Act or
an arbitration award in a case where a notification has been issued under sub-section (3-
F A) of Section 10-A or an award of a Labour Court, Tribunal· or National Tribunal
which has become enforceable shall be binding on-

(a) all parties to the industrial dispute;

(b) all other parties summoned to appear in the proceedings as parties to the dispute,
unless the Board arbitrator, Labour Court, Tribunal or National Tribunal, as the case
G may be, records the opinion that they were so summoned without proper cause;

(c) where a party referred to in clause (a) or clause (b) is an employer, his heirs, successors
or assigns in respect of the establishment to which the dispute relat~~;

(d) where.a party refe,r:re,~.to in cla~~~.(a) o,r- c.lause (b) is composed .ofw~rkmen, all
persons who .were employed in the establishment or part of the establishment, as the
'H :towhich the di~put~ ie1ates on'the' d~te:ort1ie dispute and 1111 persons who

-
case may .be
subsequently becoille em"pi~yed. i~· that e~t~bii~hme~t or part'. ,., ,, .".. .
-c'.

NATIONAL ENGINEERING INDUS. LTD. v. STATE (D.P. WADHWA. J.] 99

demands in respect of which the reference was made had already been settled A
during the course of conciliation proceedings by way of the tripartite settlement
between the recognised representative Labour Union and the Staff Union.
This settlement was binding on all the workers of the appellant. The State
Government before making the reference did not examine whether there was
a genuine dispute between the workmen and the management. The State
Government was under a legal obligation to see that the reference was not B
opposed to any other provision of the Act . The State Government by making
the reference dated March 17, 1989 rendered ineffective and inoperative the
directions issued by the High Court by its order dated March 23, 1989 to give
an opportunity to the appellant of hearing before taking a decision as to
whether or not any reference should be made at the instance of the Workers' c
Union. The order of reference was made during the pendency of writ petition
by the Workers' Union and only six days before the High Court passed the
order. In these circumstances the State Government was not justified in
directing the appellant to raise the issue of contravention of the direction of
the High Court before the Industrial Tribunal. The State Government should
have recalled its order of reference and heard the appellant before taking final D
decision to make the reference or not.

Mr. Pai further submitted that the conciliation settlement has been
equated with an award by various judgments of this Court. A settlement
being conciliation settlement was, thus, fully binding on the members of the
E
Workers' Union. The settlement could be challenged on the grounds of fraud,
.. undue influence or it being ma/a fide. There was no such plea raised by the
Workers 'Union. Industrial Tribunal could not examine the justness and fairness
of the settlement entered into during the conciliation proceedings. As a matter
of fact, a perusal of the comparative charter of demands that raised by the
Labour Union and the Workers' Union would show that what had been F
demanded by the Labour Union on either being the same, similar or identical
to the demands raised by the Workers' Union. Rather the Labour Union had
raised some additional demands not raised by the Workers' Union. There was
total non-application of mind by the State Government in making the reference.
Reference was not proper or legal which was made after two and a half years
G
of the settlement dated October 4, 1986 by the order dated March 17, 1989, By
entertaining the reference, Industrial Tribunal would be acting beyond its
jurisdiction inasmuch as any aware: or reference would be directly and
substantially against the conciliation settlement which is binding on all the
workmen. The High Court failed to consider that the very purpose of creating

.. a machinery under the Act is for establishing industrial peace and harmony . H
100 SUPREME COURT REPORTS (1999] SUPP. S S.C.R.

A It is in consonance with the said aim and object of the Act that the settlement
arrived at in between the parties during the course of conciliation proceedings
are kept at the highest pedestal and the courts have been consistently taking
a view that when a particular charter of demands is decided by means of
conciliation proceedings then the same would not be allowed to be satisfied
on any ground whatsoever including the ground of conflict between the
B various unions. High Court was not correct in observing that disputed
questions of fact were involved in the present ca.se. There are no disputed
questions of fact because both the charter of demands raised by the Labour
Union and that raised by the Wor\<ers' Union were on record. The authority
assigned with the duty of finding as to whether any industrial dispute exists
C between the parties was required to see both the charter of demands and to
come to a conclusion as to whether the same, similar or identical demands
have been raised by both the unions for which the tripartite settlement had
been arrived at during the course of conciliation proceedings. As stated
earlier, the Workers' Union has itself stated in their writ petition that its
demands were of similar and identical nature to the demands of the Labour
D Union. There was, thus, no disputed question of fact invol~ed and the High
Court failed to exercise its jurisdiction envisaged under Article 226 of the
Constitution. All through this period since 1972, appellant has entered into
more than six settlements with the Labour Union which is recognised. and
representative Union. Substantial number of workers· of the appellant are
E members of the representative Labour Union which fact has not been denied
by the Workers' Union. It is not necessary to give any notice to the Workers'
Union for entering into any settlement when settlement is with the recognised
representative union. Charter of demands of the Workers' Union cannot be
termed as a notice under Section 19 of the Act. Thus concluded Mr. Pai.

F In the counter affidavit filed by the Workers' Union, the fact that the
charter of demands of the Workers' Union was identical to that of the Labour
Union has been denied though if we refer to the writ petition filed by the
Workers' Union, it has· been so stated. This is how Workers' Union said in
its writ petition :
G
"The petitioner union was also not asked to participate in that
conciliation proceedings though the demand charter was identical in
almost all the respects."

The learned single Judge in his judgment which was upheld by the
H Division Bench, however, stated ~hat "it is also born out from the charter of
NATIONAL ENGINEERING INDUS. LTD. v. STATE [D.P. WADHWA, J.] 101

demands submitted b¥ respondent No. 3. (Workers' Union) and the settlement A
/ dated October 4, 1986 that all the demands raised by respondent No. 3 are
not covered by the settlement". It is submitted by the Workers' Union that
its demands at serial numbers 5, 6, 11, 18, 19, 20, 21 and 23 of its charter of
demands dated July 24, 1986 were not raised in the charter of demands dated
June 16, 1986 of the Labour Union and, thus, they were not covered by the B
settlement dated October 4, 1986. It was in these circumstances that the
Workers' Union requested the Conciliation Officer to treat its charter of
demands as notice of two months in terms of Section 19(2) of the Act for
termination of the earlier settlement dated November 11, 1983. Tripartite
settlement dated November 11, 1983 was valid for three years with the Labour
Union and the Staff Union while again ignoring the demands of the Workers' C
Union submitted earlier to November 11, 1983. It is admitted by the Workers'
Union that at that time it did not challenge the settlement dated November
11, 1983.

It was further submitted by Mr. Aman Hingorani, learned counsel for
the Workers' Union, that when the Conciliation Officer gave notice to the D
appellant in pursuance to its charter of demands dated July 24, 1986, appellant
company by its letter dated September IO, 1986 said that the Workers' Union
has no locus standi to give the notice under Section 19(2) of the Act. It was
on this account that the Conciliation Officer on October I, 1986 gave his
failure report and then, at the same time, appellant entered into negotiations E
with Labour Union and the Staff Union and entered into the settlement dated
October 4, 1986 again ignoring the Workers' Union. It was on this account
that the Workers' Union approached the High Court for a direction to the
State Government to make a reference of the industrial dispute raised by it
to the Industrial Tribunal which writ petition was allowed by order dated
March 23, 1989 but before that the State Government itself made the reference F
which was impugned by the appellant and is the subject matter of the present
appeal.

We may now refer to the decisions of this Court cited at the Bar .

In The Management of Express Newspapers Ltd v. Workers & Staff G
Employed under it and Ors., (1963] 3 SCR 540 the State Government made
reference to the Industrial Tribunal under Section 10(1) (d) of the Act on the
following two items of dispute:-

"l. Whether the transfer of the publication of Andhra Prabha and
Andhra Prabha Illustrated Weekly to Andhra Prabha Private Ltd. in H
102 SUPREME COURT REPORTS (1999] SUPP. 5 S.C.R.

A Vijaywada is justified and to what relief the workers and the working
Journalists are entitled?

2. Whether the strike of the workers and working Journalists from 27th
April, 1959, and the consequent lockout by the management of the
Express Newspapers Private Ltd. are justified and· to what relief the
B workers and the wor~ing Journalists are entitled ?"

This was challenged by the appellant by filing a writ petition in the Madras
High Court. While the learned Single Judge held in favour of the appellant,
the Division Bench in appeal filed by the respondents reversed the same. This
C Court said that the true legal position in regard to the jurisdiction of the High
Court to entertain the appellant's petition even at the initial stage of the
proceedings proposed to be taken before the District Tribunal was not in
dispute. It said that there was no dispute that in law, the appellant was
entitled to move the High Court even at the initial stage to seek to satisfy
' '
it that the dispute is not an industrial dispute and so, the Industrial Tribunal
D has no jurisdiction to embark upon the proposed enquiry. The Division Bench
of the High Court in appeal was, however, of the view that having· regard to
the nature of the enquiry involved in the decision of the preliminary issue,
it would be inappropriate for the High Court to take upon itself the task of
determining the relevant facts on affidavits. A proper and a more appropriate
course to adopt would be to let the material facts be determined by the
.
H Industrial Tribunal in the first instance. This was the question which was
'

before this Court if the view taken by the Division Bench was erroneous in
law. This Court after examining the facts of the case was of the opinion that
having regard to the nature of the dispute, the Division Bench was right in
taking the view that the preliminary issue should be more appropriately dealt
F . with by the Industrial Tribunal. This Court noticed that the Division Bench
had made it clear that any party who felt aggrieved by the finding of the
Industri;il Tribunal on this plea of the issue might move to the High Court
in accordance with law. Then this Court said as under :

"It is hardly necessary to emphasise that since the jurisdiction of the
G Industrial Tribunal in dealing with industrial disputes referred to it
under section I 0 is limited by section I 0 (4) to the points specifically
mentioned in the reference and matters incidental thereto, the
appropriate Government should frame the relevant orders of reference.,
carefully and the questions which are intended to be tried by the
H Industrial Tribunal should be so worded ·as to leave no scope for
NATIONAL ENGINEERING INDUS. LTD. v. STATE [D.P. WADHWA, J.J 103

ambiguity or controversy. An order of reference hastily drawn or A
drawn in a casual manner often gives rise to unnecessary disputes
and thereby prolongs the life of industrial adjudicatiOn which must
always be avoided."

) In The Sirsilk Ltd and Ors. v. Government ofAndhra Pradesh and Anr.,
[1964] 2 SCR 443· industrial disputes were referred for adjudication. The B
Industrial Tribunal gave its award and forwarded the same to the State
Government for publication as required under Section 17 of the Act. Before,
however, the publication of the award, parties to the dispute came to a
settlement. Request was, therefore, made to the State Government to withhold
the publication of the award. The State Government, however, did not accede C
to this request as, according to it, it was mandatory provision of law to
publish the award. A writ petition was filed in the High Court under Article
226 of the Constitution praying that the Government might be directed to
withhold the publication of the award. This was dismissed as the High Court
was also of the view that the provisions of Section 17 of the Act were
mandatory and no writ, therefore, could be issued. The matter then came to D
this Court. The Court rejected the argument that the provisions of Sectiori-17
of the Act were directory and not mandatory. This Court then noticed the
provisions of Section 2(p), Section 18( 1) and (3) and Section 19 of the Act.
It was contended that the main purpose of the Act was to maintain peace
between the parties in an industrial concern and where, therefore, parties to E
industrial disputes had reached a settlement which was binding under Section
18 (1), the dispute between them really came to an end. It was submitted that
the settlement arrived at between the parties should be respected and industrial
peace should not be allowed to be disturbed by the publication of the award
which might be different from the settlement. The Court observed that there
was no doubt that the settlement of disputes between the parties themselves F
was to be preferred, where it could be arrived at, to industrial adjudication,
as the settlement was likely to lead to more lasting peace than an award, as
it is arrived at by the free will of the parties and is a pointer to there being
goodwill between them. The Court said that even though that might be so,
still the provisions of Section 17 (1) which are mandatory requiring publication G
of the award had to be reconciled with the equally mandatory character of the
binding nature of the settlement arrived at between the parties as provided
under Section 18( l) of the Act. Then the Court went to hold as under :

"Difficulty, however, arises when the matter has gone beyond the
purview of the tribunal as in the present case. That difficulty in our H
104 ' SUPREME COURT REPORTS (1999} SUPP. 5 S.C.R.

A
I
,
opinion has to be resolved in ordered to avoid possible conflict
between s.18(1) which makes the settlement arrived at between the
part~es otherwise than in the course of conciliation proceeding binding
on the parties and the terms of an award which are binding under
s.18(3) on publication and which may not ·be the same as the terms
of the settlement binding under s. 18(1). The only way in our view to ,
B resolve the possible conflict which would arise between a settlement
which is binding under s.18(1) and an award which may become
binding under s.18(3) on publication is to withhold the publication of
the award once the Government has been informed jointly by the
parties that a settlement binding under s. 18(1) has been arrived at .
c It is true thats. 17(1) is mandatory and ordinarily the Government has
to publish an award sent to it by the tribunal; but where a situation
like the one in the present cases arises which may lead to a conflict
between a settlement under s.18( 1) and an award binding under s 18(3)
on publication the only solution is to withhold the award from
publication this would not in our opinion in any way affect the
D mandatory nature of the provision in s.17(1) for the Government
would ordinarily have to publish the award but for the special situation
arising in such cases."

The court also examined the issue from another angle and said :

E "The reference to the tribunal is for the purpose of resolving the
dispute that may have arisen between employers and their workmen.
Where a settlement is arrived at between the parties to a dispute
before the tribunal after the award has been submitted to Government
but before its publication, there is in fact no dispute left to be resolved
by the publication of the award. In such a case, the award sent to
F
Government may very well be considered to have become infructuous
and so the Government should refrain from publishing such an award
because no dispute remains to be resolved by it.

This Court also said that in case there is a dispute r~garding the bona
G fide nature of the settlement that would be yet another industrial dispute
which the Government may refer to for adjudication.

In Barauni Refinery Pragatishee/ Shramik Parishad v. Indian Oil
Corporation Ltd, [ 1991] 1 SCC 4, the appellant was a trade union representing
a faction of workmen in the Indian Oil Corporation Ltd. (IOCL). There were
H two divisions in the IOCL, namely, {l) the Marketing Division and (2) Refinery
NATIONAL ENGINEERING INDUS. LTD. v. STATE [D.P. WADHWA, J.) 105

and Pipe Lines Division. The age of superannuation of the staff in the A
Marketing Division was 60 years whereas the age of superannuation for the
Refinery and Pipe Lines Division was fixed at 58 years. Clause 20 of the
standing orders framed under the Industrial Employment (standing Orders)
Act, 1946 concerning the Barauni Refinery provided that every employee shall
retire from service on completing the age of 58 years. Extension of service B
could be granted for a maximum period of five yeas subject to the employee
being certified to be fit by the company's Medical Officer. Fourteen recognised
unions representing the employees of the IOCL working in different refineries
by their letter dated December 15, 1981 submitted the Charter of Demands and
one of such demands was that the superannuation age be enhanced to 60
years. Barauni Telshodahak Mazdoor Union also raised the similar demand in C
its charter of demands addressed to the General Manager, IOCL, Barauni
Refinery. Meetings were held between the management and the recognised
union and in the result a settlement arrived at on May 24,1983. Under clause
(21) of the settlement, the unions agreed that during the operation of the
settlement they shall not raise any demand having financial burden on the
IOCL. The settlement was to remain in force from may 1, 1982 to April 30, 1986. D
A separate settlement on similar lines was signed between IOCL and its
workmen represented by Barauni Telshodhak Mazdoor Union under Section
12(3 ) and 18(3) of the Act in the conciliation proceedings. In spite of the .
specific demand made in the charter of demands for the upward revision of
the age of superannuation, no specific provision was made in that behalf in E
the settlement. Rather under a clause in the settlement, it was provided that
the terms and conditions of service which are not changed under the settlement
shall remain unchanged and operative during the period of settlement.
Subsequent to the settlement, another union served a notice on the Regional
Labour Commissioner (Central) under Section 10 (2) of the of the Industrial
Employment (Standing Orders) Act 1946 for modification of clause (20) of the F
Standing Orders of Barauni Refinery for 58 years to 60 years. The Regional
Labour Commissioner after hearing both the parties by his order dated October
11, 1984 directed modification of clause (20) of the Standing Orders now fixing
the retirement age of the workmen at 60 years. IOCL filed an appeal against
that order before the appellate authority . Its appeal though dismissed but it G
was ordered to that every workmen shall generally retire on attaining the age
of 58 years and if the workmen is found medically fit, he shall be retained in
service up to the age of 60 years. Both IOCL as well the union filed two
different writ petitions in the Delhi High Court. IOCL challenging the
modification of clause (20) of the Standing Orders and the union challenging
the condition of medical fitness. One of the questions raised was thus: H
106 SUPREME COURT REPORTS [1999) SUPP. 5 S.C.R.

A ~'Whether the settlement arrived at under Section 18(3) and Section
19(2) of the Industrial Disputes Act, 1947, between the petitioner and
the workmen represented by their recognised majority union and
which settlement was in force when impugned orders were mad.e, h~d
put any bar on the rights of the workmen to approach the authorities
under the Industrial Employment (Standing Orders) Act, .1946 for
B seeking modification of the Standing Orders with regard to the fixation
of the age of superannuation of the workmen?"

The High Court came to the conclusion that the settlement arrived at
in conciliation proceedings was binding on the workmen and one of the
C clauses of the settlement kept the service conditions intact and another
clause did not permit raising of any demand throwing an additional financial
burden on the IOCL, it was not permissible to modify the certified Standing
Order by an amendment as that would alter the service conditions and inf?rease
the financial burden on the management. High Court, therefore, quashed the
orders amending the Standing Orders. Aggrieved the union approached this
D Court. This Court analysed the provisions of Sections 2(p), 18(1) and 18(3)
of the Industrial Disputes Act, 1947 and it also refers to the provisions of the
Industrial Employment (Standing Orders) Act, 1946 and held as under:

"It may be seen on a plain reading of sub-sections (1) and (3) of
Section 18 that settlements are divided into two categorise, namely, (i)
E those arrived at outside the conciliation proceedings and (ii) those
amved at in the course of conciliation proceedings. A settlement
which belongs to the first category has limited application in that it
merely binds the parties to the agreement but the settlement belonging
to the second category has extended application since it is binding·
F on all parties to the industrial dispute, to all others who were summoned
~o appear in the conciliation proceeding and to all persons employed
in the establishment or part of the establishment, as the case may be,
to which the dispute related on the date of the dispute and to all
others whoJ·oined the establishment/ thereafter. Therefore,
.
a settlement
arrived at in the course of conciliation proceedings with a recognised
G majority union 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 settlements reached
with the active assistance of the Conciliation Officer and discourage
H an individual employee or a minority union from scuttling the
NATIONAL ENGINEERING INDUS. LTD. v. STATE [D.P. WADHWA, J.] 107

settlement. There is an underlying assumption that a settlement reached A
with the help of the Conciliation 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 others. That
is why a settlement arrived at in the course of conciliation proceedings
is put on par with an award made by an adjudicatory authority".
B
This ~ourt upheld the Judgment of the High Court.

In K. C.P. limited v. Presiding Officer and Ors., [ 1996] I 0 SCC 446 a
labour dispute had erupted at the engineering unit of the appellant employing
about 500 workmen. The workmen were demanding higher amount of bonus. C
There were strike and lockout. Appellant dismissed 29 workmen on the charges
of misconduct after holding enquiries. An agreement was reached between
the appellant and the union representing all the workmen on the quantum of
increase in wages etc. It was further agreed that the issue of non-employment
of 29 dismissed workmen would be discussed separately. On that basis all the
workmen except the 29 dismissed workmen agreed to resume work. D
Subsequently a settlement was arrived at between the appellant and the
respondent union under Section 12(3) of the Act that the issue of non-
employment of 29 dismissed workmen would be discussed in proceedings to
be initiated by the Joint Labour Commissioner. Meetings were held by the
Joint Labour Commissioner but no settlement could be reached. Report of the E
failure of conciliation proceedings was submitted to the State Government
which referred issues of non-employment of 29 workmen for adjudication to
·the J+abour Court. This court noticed that the industrial dispute was referred
for adjudication pursuant to the demand espoused by all the workmen and
raised by the second respondent union under section 2(k) of the Act and that
of the said 29 workmen who were members of the respondent union had · F
•
autho~ised the second respondent to represent them before the Conciliation
. Offic~ whereafter reference was made before to the Labour Court. This Court
noticed that none of the said 29 workmen raised industrial dispute in their
individual capacity under Section 2-A8 of the Act. During the pendency of
the dispute before the Labour Court, appellant and the respondent-union G
'held discussions regarding non-employment of 29 workmen and ultimately
understanding was reached that option would be given to the 29 workmen
either to accept reinstatement without back wages or a lump sum amount of
Rs. 75, 000 with ~ther monetary benefits. Some of the workmen out of these
29 workmen did not accept the proposed settlement. Nevertheless, respondent-
Union entered into a settlement with the appellant under Section 18(1) of the H
108 SUPREME COURT REPORTS (1999] SUPP. 5 S.C.R.

A Act on behalf of the 29 workmen. A joint memorandum was signed between
them and it was filed before the Labour Court before whom the industrial
dispute was pending. It was requested that award in terms of the settlement
may be passed. First respondent who was presiding over the Labour Court
declined to do so on the ground that some of the workmen had not approved
B settlement and, therefore, industrial dispute in respect qua them would continue.
The Order of the Labour Court not to make the award in terms of the
settlement was challenged by the appellant in a writ petition before the
Madras High Court. High Court did not agree with the contention raised by
the appellant and dismissed. the writ petition. Aggrieved, appellant came to
this Court. This Court held that terms of the settlement couid not be considered
C to be in any way ex facie, unjust or unfair and the settlement consequently
must be held to be binding on the workmen who did not accept the settlement.
This Court referred in great detail to the provisions of Sections 2(k), 2(p) and
18(1) of the Act and noticed the decision of this Court in Herbertsons Ltd
v. Workmen, [1976] 4 SCC 736, where this court had said that when a recognised
Union negotiates with an employer the workers an individuals do not come
D into the picture. It is not necessary that each individual worker should know
the implications of the settlement since a recognised Union, which is expected
to protect the legitimate interests of labour enters into a settlement in the best
interests of labour. This would be the normal rule. There may be exceptional
cases where there may be allegations of ma/a fides, fraud or even corruption
E or other inducements. But in the absence of such allegations settlement in the
course of collective bargaining is entitled to due weight and consideration.
This Court then observed as under: .-
"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
F of industrial democracy permeate the relations between the man
management on the one hand and the Union which resorts to collective
bargaining on behalf of its members workmen with the management
on the other. Such a collective bargaining which may result in just and
fair settleme!lt would always be beneficial to the management as well
as to the body of workmen and society at large as there would be
G
industrial peace and tranquillity pursuant to such- settlement and
82-A Dismisal, etc., of an individual workman to be deemed to be an industrial disputes-

• Where any employer discharges,dismisses, retrenches or otherwise terminates the
services of an individual workman, any dispute of difference between that workmen
and his employer connected with, or arising out of, such discharge, dismissal,
retrenchment or temination shall be deemed to be an industrial dispute notwithstanding
H that no other workman nor any union of workmen is a party to the dispute.
NATIONAL ENGINEERING INDUS. LTD. v. STATE [D.P. WADHWA, J.J 109

which would avoid unnecessary social strife and tribulation on the A
one hand and promote industrial and commercial development on the
other hand. Keeping in view the aforesaid salient features of the Act
the settlement which is sought to be impugned has to be scanned and
scrutinised. Settlement of labour disputes by direct negotiation and
collective bargaining is always to be preferred for it is the best guarantee
of industrial peace which is the aim of all legislations for settlement B
of labour disputes. In order to bring about such a settlement more
easily and to make it more workable and effective it may not be always
possible or necessary that such a settlement is arrived at in the course
of conciliation proceeding which may be the first step towards
resolving the industrial dispute which may be lingering between the C
employers and their workmen represented by their unions but even if
at that stage such settlement does not take place and the industrial
dispute gets referred for adjudication, even pending such disputes,
the parties can arrive at amicable settlement which may be binding to
the parties to the settlement unlike settlement arrived at during
conciliation proceedings which may be binding not only to the parties D
to the settlement but even to the entire labour force working in the
organisation concerned even though they may not be members of the
Union which might have entered into settlement during conciliation
proceedings".

This Court then referred to the difference between the settlement arrived at E
under the Act during conciliation proceedings by the parties and the settlement
arrived at otherwise than during conciliation proceedings as pointed out in
Barauni Refinery Pragatishee/ Shramik Parishad's case [1991] 1 SCC 4.

In P. Virudhachalam and Ors. v. Management of Lotus Mills and Anr., F
[ 1998] l sec 650 the point for consideration was :

"Whether an individual workman governed by the Industrial Disputes
Act, 1947 can claim lay off compensation under Section 2s:c of the
Act despite settlement arrived at during conciliation proceedings under
Section 12(3) of the Act by a Union of which he is not a member, G
though the union of which he is a member had taken part in the
conciliation proceedings but had refused to sign the settlement and
when such settlement seeks to restrict the right of lay-off compensation
payable to such workman as per the first proviso to Section 25-C of
the Act." H
· llO SUPREME COURT REPORTS [1999] SUPP. 5 S.C.R.

A Labour Court' had held in favour of the workmen. It was. challenged by
the respondent in· a writ petition in the Madras High Court. The High Court
by its impugned judgment held that the settlement arrived at during conciliation
proceedings under Section 12(3) was binding on all the workmen being parties
to industrial dispute as per Section 18(3) of the Act and consequently the said
settlement could be treated as an agreement arrived at between all the workmen
B as per the first proviso to Section 25-C and, therefore, the appellants could
not claim anything more than what was permissible and payable to them as
per the binding terms of the settlement dated 5.5.1980. The writ petition of
Respondent, I was, therefore, allowed and the claim petition under Section
32-C(2) as moved by the appellants was dismissed.
c
To answer the question so raised, ilikcourt had a look at the statutory
scheme of the Act in depth and observed :

"The aforesaid relevant provisions of the Act, therefore, leave no
room for doubt that once a written settlement is arrived at during the
D conciliation proceedings such settlement under Section 12(3) has a
binding effect not only on the signatories to the settlement but also
on all parties to the industrial 'dispute which would cover the entire
body ofworkmen, not only existing workmen but also future workmen.
Such a settlement during conciliati6n proceedings ·has the same legal
E effect as an award of Labour Court, or Tribunal or National Tribunal
or an arbitration award. They all stand on a par."

It then held :

"On the aforesaid scheme of the Act, therefore, it must be held that
F the settlement arrived at during conciliation proceedings on 5.5.1980
between respondent I -management on the one hand and the four out
of five unions of workmen on the other, had a binding, effect under
Section .18(3) of the Act not only on the members of the signatory
unions but also on the remainin~ workmen who were represented by
the fifth . union which, though having taken part in conciliation
G
proceedings, refused to sign the settlement. It is axiomatic that if such
settlement arrived at during the conciliation proceedings is binding on
even future workmen as laid down by Section 18 (3)(d), it would ipso
facto bind all the existing workmen who are all parties to the industrial
dispute and who may not be members of unions that are singnatories
H to such settlement under sectioo 12(3) of the Act."
NATIONAL ENGINEERING INDUS. LTD. v. STATE [D.P. WADHWA, J.] lll
. ~:··

The court stressed the principle of collective bargaining in these words: A
"It has to be kept in view that the Act is based on the principle of
collective bargaining for resolvfog industrial disputes and for
maintaining industrial peace. Thus principle of industrial democracy is
the bedrock of the Act. The employer or a class of employers on the
one hand and the accredited representatives of the workmen on the B
other are expected to resolve the industrial dispute amicably as far as
possibl~ by entering into the settlement outside the conciliation
proceedin•gs, or if no settlement is reached and the dispute reaches
the conciliator even during conciliation proceedings. In all those
negotiations based on collective bargaining the individual workman C
necessarily recedes to the background. The reins of bargaining on his
behalf are handed over to the union representing such workman. The
union espouse the common cause on behalf of all· their members
Consequently, Settlement arrived at by them with management would
bind at least their members and if such settlement is arrived at during
conciliation proc_eedings, it would bind even non-members. Thus, D
settlements are the live wires under the Act for ensuring industrial
peace and prosperity ... "

In Ram Pukar Singh and Ors. v. Heavy Engineering Corporation and
Ors., [I 994) 6 SCC 145 this Court said that a settlement arrived at between the
management and the sole recognised union of workmen under section 12(3) E
read with section 18 of the Act would be binding on all the workmen whether
members of the union or not. This is how this Court considered this question:

"A settlement was, however, arrived at between the management and
the Ui:iion thereafter, whereunder it was among other things, agreed F
that the employees who were holding the post of Office Superintendent
(Non~Supervisory) would be deemed to have been appointed to the
post of Assistant Personnel Officer from·the dat~ they were appointed
as Officer Superintendent (Non-Supervisory) and that the services
rendered by them both in the post of Office Superintendent (Non-
supervisory) as well as in the post of Assistant Personnel Officer G
would together be taken into consideration as a qualifying period for

- promotion to the post of the Junior Executive Officer. It was further
agreed that the employees concerned would not, however, claim any
arrears of pay. This was done because the respondent-Corporation
was in a bad financial shape. The contention that the ·settlement of H
112 SUPREME COURT REPORTS [1999) SUPP. 5 S.C.R.

A 13.9.1990 is not binding on the appellants because they were in a
supervisory category and were not workmen and hence the union had
no right to represent them, has no substance in it for two reasons.
Firstly, in the settlement of 14.5.1987 arrived at with the union they
had not only received the benefit of the arrears of salary of Rs. 1600
but also of the revised pay scales since then. They could not have
B had this benefit if they were not workmen and, therefore, considered
themselves as belonging to the Non-Supervisory category. They had
continued to be workmen, i.e., in Non-Supervisory category till the
next settlement of 13.9.1990. Admittedly, there was only one Union
representing all workers during all the relevant period. The settlement
c dated 13.9.1990 was admittedly under Section 12(3) read with Section
18 and other provisions of the Industrial Disputes Act., The settlement
was therefore binding on all the workmen whether they were members
of the Union or not."

In .Workmen Employed by Hindustan Lever ltd v. Hindustan Lever
....
D ltd., [1984] 4 sec 392 this Court said as under:
"Section 10( I) confers power on the appropriate Government to refer
an existing or apprehended industrial dispute, amongst others, to the
Industrial Tribunal for adjudication. The dispute therefore, which can
be referred for adjudication, of necessity, has to be an industrial
E dispute which wQuld clothe the appropriate Government with power
to make the reference and the Industrial Tribunal to adjudicate it."
It will be thus seen that High Court has jurisdiction to entertain a writ
petition when there is allegation that there is no industrial dispute and none
apprehended which could be subject matter of reference for adjudication to
F the Industrial Tribunal under Section 10 of the Act. Here it is a question of
jurisdiction of the Industrial Tribunal, which could be examined by the High
Court in its writ jurisdiction. It is the existence of the industrial tribunal which
would clothe the appropriate Government with power to make the reference
and the Industrial Tribunal to adjudicate it. If there is no industrial dispute
G in existence or apprehended appropriate government lacks power make any
reference. A settlement of dispute between the parties themselves is to be
preferred, where it could be arrived at, to industrial adjudication, as the
settlement is likely to lead to more lasting peace then an award. Settlement
is arrived at by the free will of the parties and is a pointer to there being
goodwill between them. When there is a dispute that the settlement is not
H bona fide in nature or that it has been arrived at on account of fraud,
NATIONAL ENGINEERING INDUS. LTD. v. STATE [D.P. WADHWA, J.) 113

misrepresentation or concealment of facts or even corruption and other A
inducements it could be subject matter of yet another industrial dispute which
an appropriate Government may refer for adjudication after examining the
allegations as there is an underlying assumption that the settlement reached
with the help of the Conciliation Officer must be fair and reasonable. A
settlement which is sought to be impugned has to be scanned and scrutinized.
Sub-sections (I ) and (3) of section 18 divide settlements into two categories, B
namely, (1) those arrived at outside the conciliation proceedings and (2) those
arrived at in the course of conciliation proceedings. A settlement which
belongs to the first category has limited application in that it merely binds the
parties to the agreement but the settlement belonging to the second category
has extended application since it is binding on all the parties to the industrial C
disputes, to all others who were summoned to appear in the conciliation
proceedings and to all persons employed in the establishment or part of the
establishment, as the case may be, to which the dispute related on the date
of the dispute and to all others who joined the establishment thereafter. A
settlement arrived at in the course of conciliation proceedings with a recognized
majority union will be binding on all workmen of the establishment, even D
those who belong to the minority union which had objected to the same.
Recognized union having majority of members is expected to protect the
legitimate interest of labour and enter into a settlement in the best interest of
labour. This is with the object to uphold the sanctity of settlement reached
with the active assistance of the Conciliation Officer and to discourage an E
individual employee or minority union from scuttling the settlement. When a
settlement is arrived at during the conciliation proceedings is binding on the
members of the workers' union as laid down by section 18(3) (d) of the Act
...
. It would ipso facto bind all the existing workmen who are all parties to the
industrial dispute and .who may not be members of Unions that are signatories
to such settlement under section 12(3) of the Act. Act is based on the F
principle of collective bargaining for resolving Industrial disputes and for
maintaining industrial peace. "This principle of industrial democracy is the
bedrock of the Act", as pointed out in the case of P. Virudhanchalam & Ors.
v. Management ofLotus Mills & Anr., [1998] I SCC 650. In all these negotiations
based on collective bargaining individual workman necessarily records to the G
background. Settlements will encompass all the disputes existing at the time
of the settlement except those specifically left out.

There can be many splinter groups each forming a separate trade union.
Under Section 4 of the Trade Union Act, 1926 any seven or more members
of a trade union can get the trade union registered under that Act. If every H
...
114 SUPREME COURT REPORTS [1999) SUPP,. 5 S ..C..R.

A trade union having few members is to go on raising a dispute and the State
Government making reference again and again the very purpose of s~ttlement
is defeated. Once there is a representative union, which in th~ pre~ent case,
is the Labour Union, it is difficult to see the role of the Workers' Union~ If
there are number of trade unions registered under the Trade Union A~ [ 1926)
B not entitled to be registered as representative unions and they raise disputes,
industrial peace would be far cry. Under Section 2(0000)9 ofthe Rajasthan Act'
representative Union' means a union for the time being registered as a
representative union under the Rajasthan Act (Rajasthan Act XXXIV of
1950). Under Section 9.:0 10 of the aforesaid Rajasthan Act any Union which
has for the whole of the period of at least three months during the period of
r--
C six months immediately preceding the: calendar month in which it so applies
under this section a membership of not less than fifteen per cent of the total
number of workmen employed in unit of an industry may apply in the prescribed
fonn to the Registrar for registration as a Representative Union. Then under·
Section 9-F' 1 registration of a representative union can be canc~lled :on
various grounds mentioned therein and one of such grounds is \if, after
D holding such an inquiry, if any, as th~ Registrar deems fit he is satisfied that
the registered union is being conducted not bona tide in the interest of the
workmen but in the interest of the employers to the prejudice of the interest
of the workmen. We have already quoted Section 9-E as to how a representativ~
union is to be registered. Proviso to that Section makes it clear that· if there
E are two or more unions fulfilling the criteria laid down in Section 9-D and
apply for registration then the union having the largest membership of ~he
employees has to be registered. As to what is representative union is not
defined in the Act but in common parlance it would mean that it represents
all the workers. It is not the case of the Workers' Union that registration of
the Labour Union is liable to be cancelled on any ground whatsoever. Notice
F given by Workers' Union under sub-section (2) of Section 19 of the Act is
obviously invalid as it did not represent majority of the persons bound by ,.
the settlement nor it is a repersentative union. In this view of the matter it
is not necessary for us to consider what were the demands raised by the

G
Workers' Union in its charter which were not covered by the tripartite

•2(0000) 'Representative Union' means a Union for t!Je time being registered as a
representative Union under this Act.
-
''.____
,..
10
9-D. Application for registration-Any Union which has for the whole of the period
'
of at least three months during the period of six months immediately preceding the
calendar month in which it so applies under this section a membership of not less than
H fifteen per cent of the total number of workmen employed in unit of an industry may
NATIONAL ENGINEERING INDUS. LTD. v. STATE [D.P. WADHWA, J.J 115

settlement. A
It has not been shown to us as to how a settlement arrived at on a

-
holiday would be invalid. We do not think there is any bar in having conciliation
proceedings on a holiday and to arrive at a settlement. On a holiday atmosphere
is rather more relaxed. Learned single Judge in his judgment did not examine
with reference to each of the demands raised by the Workers' Union as to why B
it was not covered under the tripartite settlement and even the earlier settlement
of 1983.

Industrial Tribunal is the creation statute and it gets jurisdiction on the
basis of reference. It cannot go into the question on validity of the reference. C
Questjon before the High Court was one of jurisdiction which it failed to
I
consjder. A tripartite settlement has been arrived at among the management,
Labour Union and the Staff Union. When such a settlement is arrived at it
• is a package deal. In such a deal some demands may be left out. It is not that
demands which are left out, should be specifically mentioned in the settlement.
It is not the contention of Workers' Union that tripartite settlement is in any D
way mala fide. It has been contended by the Workers' Union that the settlement
was not arrived at during the conciliation proceedings under Section 12 of the
Act and as such not binding on the members of the Workers' Union. This
contention is without any basis as the recitals to the tripartite settlement.
clearly show that the settlement was arrived at during the conciliation
-: proceedings.
E

State Government failed to give due consideration to the direction of
...
apply in the prescribed fonn to the Registrar for registration as a Representative Union.
11
9-F. Cancellation for registration.-The Registrar shall cancel the registration of a F
Union-

(a) if, after holding such an inquiry, if any, as he deems fit he is satisfied :-

(i)

(ii)
G
(iii) that the registered Union is being conducted not bona fide in the interests of
workmen but in the interest of employers to the prejudice of the interest of workmen,
or

(iv)

(b) If its registration under the Indian Trade Unions Act, 1926 (Central Acl XVI of H
1926) is cancelled.
116 SUPREME COURT REPORTS [1999] SUPP. 5 S.C.R.

A the High Court in its judgment dated March 23, 1989. State Government also
failed in its duty to bring to the notice of the High Court of its notification
dated March 17, 1989 making the impugned reference. It appears to us that
the reference had occasioned while· the judgment had been reserved by the
High Court. In any case it was expected of the State Government to bring to
B the notice of the High Court before making a reference its decision to make
the reference. After the judgment had been announced and dµ-ections issued
by the High Court to hear the appellant it was incumbent of the State
Government, in the circumstances of the case, to recall the reference. It could
not direct the appellant to raise its objection to reference before the Industrial
Tribunal for which Industrial Tribunal certainly lacked jurisdiction. State
C Government before making the reference did not consider all the relevant
considerations which would clothe it with the power to make the reference
under Section 10 of the Act We find substance in the submissions of Mr.
Pai. Wholesale reference of all the disputes in the charter of demands of
Workers' Union for adjudication was also bad inasmuch as many of such
disputes were already the subject matter of tripartite settlement. This also
D shows non-application of mind by the State Government in making the
reference .

When notice was issued on the special leave petition proceedings on
the reference were stayed. Earlier also during the pendency of the writ petition
E before the High Court, which led to the impugned judgment proceedings, had
been stayed. There has not been any progress before the Industrial Tribunal
and all these years have passed. During the course of hearing we have been
told that there have been even two more settlements and also that President
of'the Workers' Union is now himself the President of the Labour Union. Even
otherwise it would be futile to allow the reference to continue after lapse of
F all these years. This is apart from the fact that in our view reference in itself
was bad as the tripartite settlement did bind the members of the Workers'
Union as well.

This appeal is accordingly allowed. Impugned judgment of the High
Court is set aside and the Notification dated March 17, 1989 issued by the
G State Government under Section 10(1) read with Section 12(5) of the Industrial
Disputes Act, is quashed. In the circumstances there will be no order as to
costs.

A.K.T. Appeal allowed.