The Management Of Sh... v. Shri N.L Kakkar, Pre...

V.S Deshpande, J.:— Three questions of law arise in this case:—

(1) Whether the meaning and content of the terms of reference made under section 10 read with section 12 of the Industrial Disputes Act, 1947 is determined by the nature of the industrial dispute which has been referred for adjudication?

(2) Whether a claim referred for industrial adjudication cannot be enlarged by amendment of pleadings beyond the terms of reference?

and (3) Whether the termination of services by way of a discharge simpliciter which may be valid as being bona fide or invalid as being mala fide or as amounting to dismissal or victimisation or imposition of a penalty etc. does not include “retrenchment” which is made for a totally different reason, namely, surplusage resulting from reduction of production or economies effected by the management, etc.?

2. The respondent Girraj Mal was in-charge of the Library of the petitioner Shri Ram Institute for Industrial Research. He was appointed by order dated 30th January 1963 which included the condition that his services could be terminated at one month's notice for every year of service completed (subject to a minimum of one month and maximum of three months' notice) or payment in lieu thereof. On 1st May 1971 his services were terminated by the following letter:—

“With reference to the discussions which our Management has been having with you, this is to inform you, as per your appointment letter that we would not be requiring your services with immediate effect. We are asking our Accounts Department to settle your accounts as early as possible.”

3. The Delhi Trade Union Panchayat took up the case of the respondent and wrote to the petitioner on 6th May 1971 that the action of the petitioner in terminating the services of the respondent was improper, unjust, illegal, void and patently mala fide amounting to wrongful termination of service victimisation and unfair labour practice. A demand for reinstatement was made. Another demand for reinstatement was made by the respondent himself on 18th May, 1971, inter alia, in the following words:—

“1. Your order is in fact dismissal from service on account of alleged mistakes and serious omissions including loss of books and alleged in record-keeping etc.

2. Your action is, therefore, improper and mala fide. Your action is also tantamount to “victimisation for my not submitting a letter of apology which you demanded from me for making representation to the Vice-Chairman against the imposition of penalty of stopping two increments on the above charges.

3. The letter by which you have terminated my services does not disclose any reason for termination of my services, although during the discussions referred to in the above letter you again asked me either to tender apology for my making the representation to Vice-Chairman or to tender resignation and threatened me that in case I do not do so my services would be terminated.

4. I also submit that the allegations levelled against me are false. I have also not been given opportunity to explain my position in my enquiry. No charge sheet was ever served on me. Moreover, management has already imposed the penalty of stopping my two increments in the aforesaid charges and it is not open to the management to impose the penalty of termination of service on the same charges.”

4. The dispute so raised was first considered by the conciliation officer. On failure of conciliation and on a report submitted by the Conciliation officer under section 12 (4) of the Industrial Disputes Act, 1947, it appeared to the Delhi Administration that an industrial dispute was, therefore, referred to the Labour Court:—

“Whether the termination of service of Shri Girraj Mal is legal and justified and if not, what directions are necessary in this respect?”

5. Before the Labour Court also the case of the respondent was the same as it was in the demand made on the employer and in the statement of claim filed before the Conciliation officer, namely, that the termination of service was not a discharge simpliciter and that it was either malafide or by way of a penalty for alleged lapses. The pendency of the case before the Labour Court was prolonged probably because the petitioner disputed that it was an industry and that the respondent was a workman and took up the matter to the superior courts to challenge the Jurisdiction of the Labour Court. On 30th April 1977 the respondent applied to the Labour Court for permission to amend his statement of claim by urging the following additional grounds, namely:—

(1) That the termination of the service was tantamount to retrenchment as defined in section 2 (00) of the Industrial Disputes Act in view of the latest decisions of the Supreme Court in State Bank of India v. Sundramoney and Hindustan Steel Limited and in view of the everments of the management which everment is mala fide that the post of Librarian was upgraded to meet the growing requirement of the Institute in the grade of Rs. 700 — 1250 and the workman was not according to the Management qualified to hold the upgraded post and his services as Librarian were not required. This obviously shows that he was surplus and retrenched and it is not a case of discharge simpliciter.

(2) That admittedly the workman was neither offered nor paid retrenchment compensation and notice under section 25F of the Act and, therefore, the two conditions precedent to valid retrenchment were not satisfied. The termination is, therefore, void ab initio. The application for amendment was allowed by the Labour Court by the impugned order dated 14th October 1977 against the objection of the employer that the amendment set up a new case which is not even the subject-matter of the reference. The main reason for allowing the amendment was the reference to the Supreme Court decisions made in the application for amendment. The decisions referred to by the employer reported in Vallamalai Estate v. Workers of Vallamalai Estate (1972) 25 F.L.R 290 (1), and Lachman Das v. Indian Express, 1977 Lab. I.C 823 (2), were held to be not applicable. The amendment was subject to payment of costs probably because of the delay in making the application for amendment.

6. It is this order of the Labour Court which is challenged in the present writ petition. Since in ordinary proceedings amendments of pleadings are to be freely allowed because the parties must have the chance of taking up every possible ground in their favour, the question for consideration is whether such a latitude can be allowed in the amendment of pleadings before the Labour Court. The difference between the two kinds of proceedings is obvious. In an ordinary civil proceeding or in a proceeding before a quasi-judicial authority initiated by a party and opposed by another party, the matter is treated as a free fight between the two. It is an adversary proceeding in which the position of the court or the tribunal is that of an umpire. Each party is allowed full change to say whatever it wants to say. Even if an amendment is applied late, it is allowed subject to adjournment costs, if necessary. The only limitation on the making of averments by the parties by way of amendment is that the averment must be relevant to the cause of action and the defence. The exceptional cases in which the amendment may not be allowed have been pointed out by a Full Bench of this Court in Smt. Abnash Kaur v. Dr. Avinash Nayyar, AIR 1975 Delhi 46 (3). Otherwise allowing the amendment is the rule.

7. A reference received by the Labour Court, however, stands on a different footing. A party does not have a right to file a claim before the Labour Court directly. It is only the appropriate Government which can make a reference to it under section 10 read with section 12 of the Industrial Disputes Act. The jurisdiction of the Labour Court is, therefore, confined to the reference made to it. It has no jurisdiction to decide any matter which is not comprised in the reference.

8. The short question, therefore, is whether the plea that the termination of the service of the respondent amounted to retrenchment falls outside the terms of reference.

9. This brings up the question — how the scope of the reference is to be determined? In our view, the scope may be found out by reference to the following provisions of the Industrial Disputes Act:—

(1) An “industrial dispute” as defined in section 2 (k) of the Act arises when a demand is made by the workman or workmen and is rejected by the employer.

(2) It is only after the industrial dispute has arisen that it may be considered by a Conciliation Officer with a view to settle it under section 4 of the Act. It is only when the dispute has already arisen that the conciliation takes place. Statements made before the Conciliation Officer cannot, therefore, be taken to be the material from which the nature of the dispute can be ascertained. It is the demand preceding the conciliation and its rejection by the employer which constitutes the dispute. (Fodders Lloyd Corporation (Pvt.) Ltd. v. Lt. Governor, Delhi, AIR 1970 Delhi 60) (4).

(3) On considering the report of the Conciliation Officer under section 12 (4), the Government may make a reference of the dispute and matters connected with it under section 10 or it may decide not to make a reference and record reasons for such decision in view of sub-section (5) of section 12.

10. The language of the reference is general. Its subject js the termination of the service of the respondent by the petitioner. But the termination under the Act may be of different kinds, for example:—

(1) It may be a discharge simpliciter in terms of the contract of employment. An employer may be dissatisfied with the employee for various reasons such as inefficiency, bad work, loss of confidence, etc. The security of employment offered to the workman by the Industrial Disputes Act does not go to the length of disabling the employer from terminating the service of the employee for these reasons. The discharge simpliciter is, therefore, a well established mode of termination of service which does not give rise to any valid dispute between the parties. Among others, the following decisions support this proposition:—

The Chartered Bank, Bombay v. The Chartered Bank Employees' Union, (1960) 3 S.C.R 441, (5);

Assam Oil Company Limited, New Delhi v. Workmen, (1960) 3 SCR 457 (6);

The Tata Oil Mills Co., Ltd. v. Workmen & Another (1964) 2 S.C.R 125 (7);

The Workmen of Sudder Office Cinnamara v. The Management of Sudder Office, (1971) 2 L.L.J 620 (8);

and Air-India Corporation, Bombay v. V.A Rebellow, (1972) 1 S.C.C 814 (9).

(2) But a termination may be unjustified as being mala fide or in contravention of the contract of employment and would then be liable to be set aside. This statement of law is supported by the following decisions:—

The Management of U.B Dult & Co. v. Workmen of U.B Dutt & Co., (1962) Supp. 2 S.C.R 822 (10);

Utkal Machinery Ltd. v. Santi Patnaik, 1965-66 (28) I.F.J 131 (11);

Bihar State Road Transport Corporation v. State of Bihar, (1970) 1 S.C.C 490 (12);

The Management of Management Of Panitole Tea Estate v. Workmen, (1971) 1 S.C.C 742 (13);

and Claud Fernandez v. Giovanola Binny Co. Ltd., 1972 (25) I.F.L.R 131 (14);

(2) A workman may be dismissed by way of disciplinary action for alleged mis-conduct.

and (4) A workman may be retrenched as being surplus.

11. Some difficulty was created by the definition of “retrenchment” in section 2 (00) of the Act which is as follows:—

“Retrenchment” means the termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action, but does not include:—

(a) voluntary retirement of the workman; or

(b) retirement of the workman on reaching the age of superannuation if the contract of employment between the employer and the workman concerned contains a stipulation in that behalf; or

(c) termination of the service of a workman on the ground of continued ill-health.”

It would be seen that a literal interpretation of this definition would mean that any termination which does not fall under the four exceptions stated therein would be retrenchment. The concept of “retrenchment”, however, was well settled even from before 1953 when this definition was inserted in the Act. It always meant termination of service because the workman had become surplus either on account of the fall in the production or because of rationalisation or economies necessary to be effected etc. In other words, the expression “for any reason whatsoever” in section 2 (00) has been read down as relating to only to the termination of surplus staff or establishment. Therefore, while all retrenchment is termination of service, all termination of service is not retrenchment (Pipraich Sugar Mills Ltd. v. Pipraich Sugar Mills Mazdoor Union , 1957-1 L.L.J 235 (SC) (15), Barsi Light Railway Company Ltd. v. Joglekar, 1957-1 L.L.J 243 (SC) (16), and Haji Ismail Said v. Fourth Industrial Tribunal, 1966-2 L.L.J (59) (17).

12. The decision in State Bank of India v. Sundaramoney, 1976-1 L.L.J 478 (18), strongly relied upon by the respondent has to be understood on the facts of that particular case. In that case, the dispute between the employer and the employee was centered round the question whether the employee had been retrenched or not. The employer urged that the appointment had come to an end by efflux of time and did not, therefore, amount to retrenchment. The employer contended that the termination by efflux of time was not covered by the definition of “retrenchment” which requires that the termination has to be by the “employer”. This contention was rejected by the Supreme Court because the termination would be “by the employer” where the decision to terminate is taken by the employer at the time of employing the workmen itself or later. The reason for termination was not inefficiency or bad work or loss of confidence but simply that the workman was no longer needed by the employer, that is to say, he had become surplus. This would appear from the facts stated by the Court in paragraph 6 of the report in the following words:—

“one of the two employees involved in these appeals has been re-absorbed in service and his case is, therefore of lesser import, but the other is “still out in the cold.”

This would show that the only reason why Sundaramoney was not continued in employment or was not taken back was that he was surplus and no job could be made available to him. Similarly, in Messrs Hindustan Steel Limited v. Presiding Officer, Labour Court, (1976) L. & I.C 1766, (19) the termination of the workman was caused by an alleged policy to “streamline the organisation and to effect economies wherever possible”. The workman became, therefore, surplus and was retrenched. On these facts, the decision in Sundaramoney's case was followed. It was also pointed out that the previous decisions in Hariprasad Shivshankar Shukla v. A.D Divikar-Barsi Light Railway Company Ltd. v. Joglekar, (1957) S.C.R 121 (20), following Pipraich Sugar Mills Ltd. v. Pipraich Sugar Mills Mazdoor Union , (1956) S.C.R 872, (15) did not apply to the facts of the case and the decision of the Supreme Court in Sundaramoney's case did not run contrary to these previous decisions which were given by larger Benches.

13. On the contrary, the decisions in Barsi Light Railway Company and Pipraich Sugar Mills cases give reasons for reading down the definition of “retrenchment” which are relevant in the case before us. In Pipraich Sugar Mills case it was observed as follows:—

“Retrenchment connotes in its ordinary acceptation that..... a portion of the staff or the labour force is discharged as surplusage.”

In the Barsi Light Railway Company case it was observed as follows:—

“The adoption of the ordinary meaning gives to the expression ‘for any reason whatsoever’ a somewhat narrower scope; one may say that it gets a colour from the context in which the expression occurs; but we do not agree that it amounts to importing new words in the definition. What after all is the meaning of the expression ‘for any reason whatsoever’? When a portion of the staff or labour force is discharged as surplusage in a running or continuing business, the termination of service which follows may be due to a variety of reasons; e.g, for economy, rationalisation industry, installation of a new labour-saving machinery, etc.... It is true that an artificial definition may include a meaning different from or in excess of the ordinary acceptation of the word which is the subject of definition; but there must then be compelling words to show that such a meaning different from or in excess of the ordinary meaning is intended. Where, within the framework of the ordinary acceptation of the word, every single requirement of the definition clause is fulfilled, it would be wrong to take the definition as destroying the essential meaning of the word defined.... Retrenchment means discharge of surplus workmen in an existing or continuing business.”

14. The decisions in Sundaramoney and Hindustan Steel Limited were given by a Bench of three judges and cannot be construed to depart from the law laid down earlier as to the meaning of “retrenchment” by a Bench of five judges. The only reason why these later decisions did not emphasise that “retrenchment” means discharge of surplus staff as was done in the earlier decisions is that this emphasis was uncalled for to meet the sole contention of the employer that a discharge by efflux of time was not discharge by the “employer”.

15. From the scheme of the Act itself it can be demonstrated that “retrenchment” means only termination of surplus staff and does not include the discharge of a workman for unsatisfactory work. Section 25G of the Act applies the rule of last come first go to retrenchment. Such a rule can be applied only when the only distinction between the several persons retrenched is who was employed last so that he may be retrenched first. This emphasises that the termination is not due to unsatisfactory work. Similarly, Item 10 of the Fourth Schedule of the Act is “rationalisation, standardisation or improvement of plant or technique which is likely to lead to retrenchment of workmen”. This also shows that the word “retrenchment” in the Act has been used to denote termination of surplus for reasons of economy etc. but not for unsatisfactory work.

16. In Champaklal v. Union of India, (1964) 5 S.C.R 190 (21) at 202, a distinction was drawn by the Supreme Court between discharge for unsatisfactory work and retrenchment in the following words:—

“This is not a case where services of a temporary employee are being retrenched because of the abolition of a post..... The present however is a case where the appellant's services were terminated because his work was found to be unsatisfactory.”

17. The question is whether the “termination of service” which is the subject-matter of reference can include “retrenchment”. When the industrial dispute arose, the case of the employer was that the termination was a discharge simpliciter while that of the workman was that it was more than a discharge simpliciter and amounted to dismissal for alleged mistakes, victimisation or termination without opportunity to explain and penalty without a chargesheet being served on the workmen. There is no suggestion from either side that the discharge was due to the abolition of the post or that because of reasons of economy or rationalisation, the services of the workman were no longer needed by the employer. The meaning of “termination” in the reference, therefore, was whether it was discharge simpliciter as contended by the employer or whether it was a dismissal, victimisation, imposition of a penalty without a chargesheet and without a hearing as contended by the respondent. It could not include “retrenchment”. The concept of “retrenchment” is completely opposed to the kinds of termination which were pleaded by the employer on the one hand and the respondent on the other hand. If amendment were to be allowed in the pleading of the respondent to take up the plea that his discharge was by way of retrenchment then this would amount to an amendment of the reference itself which the Labour Court is not empowered to do. The respondent realising this difficulty supported the application for amendment on the following ground:—

“In view of the averments of the management which averment is mala fide that the post of librarian was ungraded to meet the growing requirement of Institute in the grade of Rs. 700 — 1250 and the workman was not according to the management qualified to hold the upgraded post and his services as Librarian were not required. This obviously shows that he was surplus and retrenched and it is not a case of discharge simpliciter.”

The respondent, however, could not show that such a pleading was made or such a stand was ever taken by the management. The very reason given for the amendment was, therefore, untrue and could no support the application for amendment. What the management had said was that the respondent was not up to the mark with his work as librarian. It is because the employer was not satisfied with his work that the respondent was discharged. The employer also does not admit that the respondent is a workman.

18. We, therefore, come to the following conclusions:—

(1) The reference did not comtemplate that the respondent was retrenched.

(2) The respondent cannot, therefore, take up the plea that he was retrenched.

(3) By allowing the respondent to take up such plea, the Labour Court virtually amended the reference which it could not do. In Jaipur Udyog Ltd. v. The Cement Work Karamcharl Sangh, 1972-1 L.L.J 437 (22) the dispute referred to Industrial, adjudication was whether the employer was justified in coming to the conclusion that the workman concerned had reached the age of 55 years or whether the workman was only 50 as contended by him. The workman was, therefore, not allowed to take up the plea by way of amendment that the age of superannuation governing the workman was not 55 but 58.

19. For these reasons, the order allowing the amendment was beyond the jurisdiction of the Labour Court. It is, therefore, quashed. The dispute has, however, been pending with the Labour Court for a very long time which is causing great hardship to the respondent. The Labour Court is, therefore, directed to give the first priority to this case and to dispose of the case as soon as possible. The parties are directed to appear before the Labour Court on 10th April, 1978.

20. The writ petition is allowed in the above terms without any order as to costs.

Petition allowed.