Citation Codes

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Case Number

First Appeal No. 937 of 1996

Advocates

For Appellants.— Sri C.U Singh and Ms Shobha Gopal.
Sri AG. Toraskar, A.G.P, Sri Sanjay Singhavi and Sri Ramesh Dube.

Judges

Sri V.H Bhairavia, J.

Acts

provisions are S. 28 of the Trade Unions Act, 1926, read with rule 17 of the Trade Unions Regulations,
S. 21 of the Trade Unions Act, 1926, read with rule 18-A of the Trade Unions Regulations
provisions of S. 28 read with rule 17 of the Bombay Trade Unions
S. 28(1A) of the Trade Unions Act, 1926.
SECTION 31 TRADE UNIONS ACT
TRADE UNIONS ACT 1926

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Smart Summary

Case Summary — Cancellation of Trade Union Registration (Appeal)

Factual and Procedural Background

This appeal challenges an order dated 18 April 1996 by respondent 1 (the Registrar of Trade Unions) cancelling the registration of the appellant, Tata Memorial Hospital Workers' Union, under S. 10(b) of the Trade Unions Act, 1926.

Respondent 2 made a complaint dated 10 February 1993 alleging improper conduct of the appellant's affairs. Respondent 2 obtained a consent certificate under S. 28(1A) and filed an application (ICTU) No. 1 of 1993 in the Industrial Court complaining of alleged violations concerning accounts, periodical returns and audit returns. Those Industrial Court proceedings remained pending.

The Registrar issued notices and subsequently cancelled the registration by the impugned order of 18 April 1996. The appellants challenged that cancellation as mala fide, as without jurisdiction, and as disproportionate. The appeal was heard by the court (counsel for both parties were heard).

The record also shows reference to an earlier order of cancellation dated 28 March 1994 which had been withdrawn. The parties disputed dates of replies and show-cause responses in the administrative record.

Legal Issues Presented

Whether the Registrar had jurisdiction to issue the notice and cancel the union's registration under S. 10(b) when substantially the same allegations were the subject-matter of pending proceedings in the Industrial Court (ICTU No. 1 of 1993).
Whether the cancellation was tainted by mala fides or non-application of mind (for example, invoking inapplicable provisions such as S. 21 and regulation 18A instead of S. 28 and rule 17).
Whether the cancellation of registration was a proportionate remedy under the Trade Unions Act, 1926, particularly where alleged lapses included delay in filing annual returns and certain financial irregularities noted in an auditor's report.
Whether procedural defects (e.g., alleged failure to consider appellants' replies or acknowledgment of their explanations) vitiate the cancellation order.

Arguments of the Parties

Appellant's Arguments

The impugned order is without jurisdiction because the same allegations that formed the basis of the Registrar's action were already the subject of pending judicial proceedings (ICTU No. 1 of 1993) in the Industrial Court.
Respondent 2 procured a consent certificate under S. 28(1A) by a false complaint; the Industrial Court was seized of those issues and therefore the Registrar had no jurisdiction to proceed on the same allegations.
The Registrar usurped the functions of the Industrial Court by cancelling registration for alleged irregularities (delays in filing annual returns and other matters) that were part of the Industrial Court proceedings.
The cancellation was mechanically applied and showed non-application of mind: the Registrar invoked provisions (S. 21 and regulation 18A) that appellants say did not justify cancellation; an earlier cancellation order (28 March 1994) had been withdrawn and the Registrar reiterated the same (inapplicable) provisions.
The appellants submitted explanations/replies (the record contains references to a reply dated 10 April 1997 to the second show-cause notice, and appellants also contend an explanation was submitted on 10 April 1996 and acknowledged) and complied with auditor's remarks; any delay in filing annual returns was negligible or caused by circumstances beyond their control (documents being with an investigation officer).
Section 10(b) requires wilful contravention after notice; any delay was not wilful nor after notice. Section 31 prescribes penalties for failure to file annual returns and does not contemplate cancellation of registration as the penalty for such delay.

Respondent's Arguments

The appellants filed returns for 1991 on 4 February 1993; the auditor's remarks accompanying those returns pointed to receipts for legal fees that could not be vouched and recommended improved internal controls and committee approvals for significant expenses.
Respondents 2–5 complained on 10 February 1993 and sought a consent certificate under S. 28(1A); the Registrar granted consent on 12 April 1993 for respondents to take appropriate proceedings.
Although the impugned order referred to S. 21 and rule 18-A, the correct applicable provisions were S. 28 read with rule 17 of the Trade Unions Regulations; the court may, if the exercise of power can be traced to a legitimate source, uphold an order even if the authority cited the wrong statutory provision.
The appellants had notice of the substance of the Registrar's queries from an earlier notice dated 8 June 1993 and their replies show they understood the matters to be met; thus any misquotation of provisions does not demonstrate absence of application of mind.
The impugned order is an administrative order and, according to respondents, need not contain reasons in the manner of judicial orders; the appellants' replies were said to be irrelevant and unsatisfactory on the points called for.
Respondents argued that the principal contravention was not merely delay in returns but failure to explain financial irregularities in the 1991 auditors' report; S. 10's general power to cancel registration cannot be curtailed by the existence of a fine for delayed returns under S. 31.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court accepted the factual position that the allegations against the appellant-union were disputed and had been referred to the Industrial Tribunal (Industrial Court) in ICTU No. 1 of 1993. The Registrar had issued a notice under S. 10(b) and later cancelled the registration on the same allegations that were pending before the Industrial Court.

The court reasoned that proceeding under S. 10(b) on the same allegations that were the subject of pending judicial proceedings was not permissible under the law. Because the matter was already before the Industrial Court, the Registrar's initiation of an administrative proceeding and cancellation based on the same allegations was improper.

The court further considered proportionality. It found that cancellation of registration is an extreme penalty and, on the facts before it, was not a proportionate response to the alleged defaults or irregularities (which included delay in filing annual returns and financial irregularities noted in an auditor's report). The court emphasized that the penalty of cancellation was unjustified in the circumstances.

While the respondents argued that the Registrar had cited incorrect statutory provisions in parts of the record, the court's decision focused on the jurisdictional and proportionality defects: the overlap with pending Industrial Court proceedings and the extremity of the sanction imposed. On those grounds the court concluded that the order dated 18 April 1996 was "bad-in-law", illegal, and required to be quashed and set aside.

Holding and Implications

HOLDING: The appeal is allowed; the order dated 18 April 1996 passed by respondent 1 cancelling the registration of the appellant trade union under S. 10(b) is quashed and set aside.

Immediate Relief and Directions: Respondent 1 is directed to restore the registration of the appellant-union forthwith. The court declared that the appellant-union had been validly in existence prior to the filing of the case.

Implications: The direct effect of the court's decision is to invalidate the Registrar's cancellation and to restore the union's registration. The opinion does not set out or claim to establish any broader precedent beyond the decision on the facts before the court; it addresses the impropriety of an administrative cancellation where identical issues are pending before the Industrial Court and the disproportionality of cancellation as a penalty in the circumstances of this case.

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Tata Memorial Hospital Workers' Union And Another v. Madhukar S. Wani And Others

1. This appeal is directed against the order, dated 18 April 1996, passed by respondent 1, cancelling the registration of the appellant trade union registered under the Trade Unions Act, 1926.

2. In exercise of the power vested under S. 10(b) of the Act, the Registrar of Trade Unions cancelled the registration of the appellant-Tata Memorial Hospital Workers' Union. The said order is challenged. It is alleged that it is a mala fide action taken with a view to show favour to the respondents rival union leaders.

3. Heard Sri Singh, learned counsel for the appellants and Sri Sanjay Singhavi, learned counsel for the respondents.

4. It has been contended by Sri Singh, learned counsel for the appellants, that the impugned order passed by respondent 1 is without jurisdiction inasmuch as a judicial proceeding is already pending on the self same allegations, which has formed the basis of the cancellation of the registration of the appellant. It is further contended that the learned Registrar had issued a consent certificate and the respondents had filed an application being (ICTU) No. 1 of 1993 which is pending and, therefore, the notice issued by the Registrar is wholly without jurisdiction and ought to be quashed and set aside.

5. It is alleged that respondent 2 approached the Registrar by a false complaint, dated 10 February 1993, and claimed that the affairs of the appellant were not being conducted in a proper manner and got a consent certificate issued under the provisions of S. 28(1A) of the Act and filed an application (ICTU) No. 1 of 1993 in the Industrial Court complaining therein that the appellant had violated the provisions of the Act relating to the accounts, periodical returns and audit returns. The appellant had filed their reply along with relevant documents and the said proceedings is pending before the Industrial Court Therefore, the alleged violation of the provisions of the aforesaid Act has already formed the subject-matter of the dispute pending before the Court of law and cannot form the subject-matter of another proceeding.

6. It is submitted that cancellation of registration of the appellant-union has also been resorted to for certain irregularities and violation of the provisions of the said Act relating to the delay in filing the annual returns and thus the Registrar has usurped the functions of the Industrial Court and passed the impugned order. It is further submitted that the complaint of respondent 2 Sri Naik has formed the basis of both the proceedings, viz., before the Registrar and also the Industrial Court and, therefore, the impugned order passed is without jurisdiction and deserves to be set aside on this ground. It is also stated that respondent 2 Sri Basavaraj Naik and the other respondents are no longer the members of the appellant-union and have formed a separate splinter trade union. It is stated that Registrar has failed to consider the various contentions raised by the appellants in their replies to the various notices. The delay in filing the annual returns of the year 1991–92 is very negligible. It is further stated that delay in respect of filing annual returns for subsequent years was entailed by circumstances beyond the control of the documents were in possession of the investigation officer for investigating the allegations forming the subject-matter of Application (ICTU) No 1 of 1993 The appellants have explained the aforesaid facts in detail in their reply, dated 10 April 1997, to the second show-cause notice. It is stated that S. 10(b) of the Act, makes it clear that the violation of the provisions of the aforesaid Act should be wilful and also after the notice is issued by the Registrar to the trade union. In the present case, the delay in filing the annual returns if any, is neither wilful nor after the notice has been issued by the Registrar. Hence, lapses if any, does not call for the extreme step of effecting the appellants and cancelling their registration. In the present case, no violation of any provision of the Act is brought out. It is submitted that perusal of the show-cause notice and the impugned order reveal that the cancellation is resorted to for violation of S. 21 of the said Act and regulation 18A of the Mumbai Trade Union Regulations. Section 21 deals with rights of minor members and regulation 18A of the aforesaid regulations with the maintenance of the registers. The allegations in the notices do not pertain to the provisions for which the registration has been cancelled. This establishes that the Registrar has acted with total non-application of mind. The Registrar has invoked the same provisions when he cancelled the registration of the appellant by his earlier order, dated 28 March 1994. The earlier order of cancellation had been withdrawn. The Registrar has once again invoked the same inapplicable provisions which reflects the total non-application of mind. The cancellation of registration has been done mechanically.

7. It is submitted by the learned counsel for the appellants that the Registrar has proceeded on the misconception that no explanation was submitted on or before the stipulated period and also on 16 April 1997 when in fact the same was submitted on 10 April 1996 and has been duly acknowledged. It is submitted that in the reply, the appellants have categorically stated that the remarks of the auditor had also been complied with. It is further submitted that respondent 1 has failed to realize that the negligible delay in filing the annual returns by a trade union does not entail the cancellation of the registration. Even the failure to file annual returns cannot be visited with the penalty of cancellation of the registration of the union. Section 31 of the Trade Unions Act clearly lays down the penalty for failure to file annual returns and which definitely does not mean cancellation of the registration.

8. Sri Sanjay Singhavi, learned counsel for the respondents, submitted that on 4 February 1993 the appellants had filed returns for the year 1991 and the auditor along with the returns submitted his remarks stating therein that the appellants could not vouch the receipts for the legal fees paid to the lawyers. It was advised to devise a proper internal control in the areas of payments made and the recipient of the payment should not be the same person authorising the payment. It was also advised to get the approval of the committee for significant expenses incurred occasionally time to time in its behalf. It is further stated that respondents 2 to 5 have made a complaint against the office-bearers of the appellants-union on 10 February 1993 and sought a consent certificate from respondent 1 under S. 28(1A) of the Trade Unions Act, 1926. However, the appellants did not attend the proceedings before respondent 1 though duly served. Thereafter, on 12 April 1993, respondent 1 granted consent to respondents 2 to 5 to take appropriate proceedings against the appellants.

9. It is contended that the impugned order refers to S. 21 of the Trade Unions Act, 1926, read with rule 18-A of the Trade Unions Regulations which have no application in the present case. The applicable provisions are S. 28 of the Trade Unions Act, 1926, read with rule 17 of the Trade Unions Regulations, which will not vitiate the order. It is well settled that if the exercise of power can be traced to a legitimate sources, the fact that the same was purported to have been exercised under a different power does not vitiate the exercise of the power in question. It has been further contended that the appellants had full knowledge of what they were expected to meet since the first notice, dated 8 June 1993, had clearly referred to the correct provisions and their replies also show that they know the substance of respondent 1's queries and hence the order should be read as having been passed for wilfully contravening the provisions of S. 28 read with rule 17 of the Bombay Trade Unions Regulations. It is further submitted that the impugned order, by its nature, being an administrative order, is not required to have reasons. Further, since the replies of the appellants to the various notices did not contain any explanations on the points upon which an explanation was called for, the only reason that could be given was that the replies were irrelevant and unsatisfactory. It has been further contended that the issue before the Industrial Court was whether the officers of the appellants must be ousted from their posts or not. The Industrial Court is not required to give a finding on whether the appellants have wilfully contravened any provision of the Act after notice or not. Merely because both proceedings may bear upon the auditors report of 1991, it does not mean that respondent 1 was barred from proceeding either on the principle of subjudices on any other analogous principle. It is further submitted that merely because the wrong provisions of law have been quoted, it is not sufficient to make the conclusion that the impugned order was passed without application of mind especially when the impugned order clearly and specifically recounts the whole history of the matter in detail.

10. It is submitted that provision of a fine for delay in filing returns cannot operate to curtail the generality of S. 10 which empowers respondent 1 to withdraw or cancel the registration of the union. It is further submitted that the main contravention committed by the appellant consisted not of the delay in filing returns but of its failure to provide any explanation as regards the financial irregularities pointed out in the auditors report for 1991.

11. Having heard the contentions of the learned counsel for the parties, in my opinion, the order, dated 18 April 1996, passed under S. 10(b) of the Act, cancelling the registration of the trade union, is bad-in-law and, therefore, it is illegal and deserves to be quashed and set aside. It reveals from the record that it is a matter of disputed allegations against the appellant-union which was referred to the Industrial Tribunal and the notice issued under S. 10(b) of the Act is also on the same allegations, seeking explanation, which in my view, is not permissible under the law and, therefore, on that count also, the notice and the subsequent order, dated 18 April 1996, cancelling the registration of the appellant-union, is required to be quashed and set aside. Further, me extreme penalty of cancellation of registration of the majority. Trade union for the alleged default or irregularities, alleged to have been committed is not proportionate under the Act. Respondent 1 has taken illegal decision by cancelling the registration of the trade union which is unjustified Therefore, the order requires to be set aside.

12. In the result, appeal is allowed. The order, dated 18 April 1996, passed by respondent 1 is set aside. Respondent 1 is directed to restore the registration forthwith. It is declared that the appellant-union was validly in existence prior to filing of the case.

Tata Memorial Hospital Workers' Union And Another v. Madhukar S. Wani And Others

Case Summary — Cancellation of Trade Union Registration (Appeal)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's Arguments

Respondent's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Tata Memorial Hospital Workers' Union And Another v. Madhukar S. Wani And Others

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