Mario Raposo v. H.M Bhandarkar And Others

1. Rule, heard forthwith by consent of parties.

2. A very interesting question of law arises in this petition. The petitioner and the respondents are members of a union called UCO Bank Employees' Association, Nagpur (hereinafter referred to as the union) which is a registered union under the Trade Unions Act (hereinafter referred to as the Act). A complaint came to be made under S. 28(1A)(2) of the Trade Unions Act, 1926. before the Industrial Court whereby it was pointed out that the office-bearers of the union who were in custody of the cash account of union, had purchased the shares floated by the Unit Trust of India to the extent of Rs. 75,000 and that the shares were purchased in the personal names of the concerned office-bearers. A complaint was, therefore, made before the Registrar of Trade Unions, but that was not considered. An application was, therefore, made before the Industrial Court praying therein that the Executive Body should be “dissolved” as it had abused its powers and a committee should be appointed for the administration of the union. An interim relief was also prayed for whereby it was prayed that the accounts of the union should be frozen till such time the committee is constituted for the purposes of proper accounting.

3. The Industrial Court by its order has come to a conclusion that the applicant had no prima facie case and in effect it has endorsed that there is no need of freezing the accounts of the union and consequently, rejected the application for interim reliefs of the petitioner. This interim order is under challenge before this Court in the instant petition.

4. Sri Adtani, the learned counsel for the petitioner has relied upon the constitution of the union and has contended that it specifically says that all the moneys shall he kept in the scheduled banks which is the dictate of Cl. 14 of the Constitution. According to him, the office-bearers of the union could not have engaged themselves in the speculative activities of purchase of share's and that was quite beyond their duties and powers. He also points out that the said shares have been purchased in the personal name of the office-bearers which offended the principle S. 15 of the Act. According to him, S. 15 of the Act provides the objects on which the general funds could be spent. Under such circumstances, the purchase of shares worth Rs. 75,000 by the union could, not be justified. Sri Wankhede appearing on behalf of the union has supported the purchase of shares saying that the lofty object in purchase of these shares was to increase the economic viability of the union. He contended that there were ho mala fides in purchase of the shares. He further pointed out that the net asset value of the “Master gain” has increased and, therefore, e the union has been benefitted on account of increase in the net asset value of these shares. His contention is that the action has been taken in conformity with the Act and in the best interests of the union.

5. If we turn to the provisions of the Trade Unions Act, 1926, S. 15 provides the objects on which the general funds could be spent for payment of salaries, allowances and expenses of the office-bearers of the trade union and for payment of expenses for the administration of the trade union, including audit of the accounts of the general funds of the trade union. Then they could he spent for legal proceedings in which the trade union or any member is a party. The other objects on which the general funds could be spent are:

(i) the conduct of trade dispute on behalf of the trade union or any member thereof.

(ii) the compensation of members for loss arising out of trade disputes;

(iii) allowances to members or their dependants on account of death, old age, sickness, accidents or unemployment of such members;

(iv) the issue of, or the undertaking of liability under, policies of assurance on the lives of the members or policies insuring members against sickness, accident or unemployment.

Besides the above, the general funds can be used for educational, social or religious benefits for members or their dependants and for the upkeep of a periodical published mainly for the purpose of discussing question affecting employers or workmen as such, as also on any object notified by “appropriate Government” in the official gazette. Section 16 of the Act provides for constitution of separate fund for political purposes. However, the position is clear that no provision of the Act allows the union to spend on a speculative activity. Purchase of share which is being floated and is in existence in the current share market, cannot be termed as an “investment.” It is undoubtedly a speculative activity and such speculative activity bristles against, the Industrial Jurisprudence and the philosophy behind the Trade Unions Act. The purpose of forming a union is for the welfare of its members. It provides collective bargaining power to them as against the employer and also infuses in them the sense of security which is a natural concomitant of unity. A union undoubtedly needs money for its activities. The Act provides the mechanism for generating funds and via Ss. 15 and 16 controls the expenditure thereof. “Profit making” can never be an objective of the union. “Purchase of shares” is clearly an attempt towards profit making and carries with it an odour of “speculation.” This would be clearly outside the scope of union activity. The general fund of the union which is generated by the contribution of poor workers cannot be allowed to be lightly treated and will have to be jealously guarded. The mandate in S. 15 is not an empty formality. The commands therein will have to be strictly followed. Sri Wankhede, the learned counsel for the respondents terms this purchase of shares as wise and fruitful investment. He is clearly incorrect as firstly, no speculative activity can be termed as wise investment and secondly, such so-called “wise investment” are impermissible under the Act. Clear language of S. 15 admits of no doubts.

6. Apart from this, Cl. 14 of the constitution of the association specifically says that the general funds of the Association shall consist of the subscriptions and donations from the members and they shall be deposited in a scheduled bank approved by the Executive Committee is the name of the association and the accounts shall be operated by the President or the General Secretary with the Treasurer jointly. It is also provided that the General Secretary shall not keep with him more than Rs. 25 for current expenses. In the teeth of this clause, one fails to understand as to how the office-bearers including the Secretary, the President and the Treasurer could have purchased the shares of the vast amount of Rs. 75,000. The action was patently against the provisions of the constitution of the union and was bad on that count. Apart from this, the other shocking feature of the whole episode is that these shares have been purchased in the individual names of the office-bearers. This action can never be explained or understood. The only reason given by Wankhede was that the shares could not have been purchased otherwise in the name of the union. If that was so the shares should have never been purchased at all and the individuals had no business to purchase shares in their own names particularly when there is an embargo on the office-hearers to keep the amount of not more than Rs. 25 with them. One fails to understand as to why speculative activity was undertaken by the union at all. The trade union is not supposed to engage itself in a speculative activity like this. The learned member of the Industrial Court has completely ignored this aspect, strangely enough, the learned Member accepts that this is a speculative activity. However, the learned member does not look at this transaction as an expenditure. If the cash Rs. 75,000 was locked in the share, one fails to understand as to how it would be available for the emergencies which the union might face or might have faced. Undoubtedly, the learned Member has made reference to S. 15 of the Act and Cl. 14 of the constitution of the association. However, merely because the General Body has approved of this transaction, the learned Member sees no lack of bona fides in the whole affair. This is not a case where the bona fides have to be inferred. On the face of the transaction itself, it can he said that the transaction offends against the spirit of the Act. Even if, therefore, the general body approved of this transaction, it could not give the transaction the colour of legality. The order, therefore, is patently illegal and incorrect. It has to be set aside. The Industrial Court shall decide the application within one month from today in the light of the observations made by this Court. With these observations, the petition stands allowed with costs.