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Case Number

Writ Petition No. 1627 of 2004

Attorney(S)

Sri Bhaskar Sen, Sri Sumit Talukdar and Sri Gautam Ray.
Sri Samaraditya Pal, Sri Dipak Ghosh and Sri Ranajoy De, Sri Probal Kr. Mukherjee, Sri A. Mukherjee, Sri Dipak Ghosh and Sri Dipayan Choudhury.

Judges

Sri Jayanta Kumar Biswas, J.

Acts

provisions of the General Insurance Business (Nationalization) Act, 1972 the Central Government
REPRESENTATION OF THE PEOPLE ACT 1951

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Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

The petition concerns four petitioners who challenge the consequences of results published under a check-off system introduced by respondent insurance companies on May 31, 2004. Following publication, the first and second petitioners failed to attain the minimum twenty per cent membership threshold and thus lost the status of recognised representative unions and the associated right to further participation in ongoing wage negotiations.

Background chronology (as provided in the opinion):

The Central Government, under provisions of the General Insurance Business (Nationalization) Act, 1972, established General Insurance Corporation of India, which later created four subsidiaries (National Insurance Company Ltd., New India Assurance Company Ltd., Oriental Insurance Company Ltd., and United India Insurance Company Ltd.), the third to sixth respondents in the case.
To resolve disputes between numerous unions about representative status, GIC proposed a check-off system and issued a notice on January 22, 1999, asking unions to apply by February 15, 1999; the system was not immediately implemented.
An association sought mandamus in the Madras High Court to introduce the system; that writ was dismissed on August 29, 2003, but the companies were given six months to implement the system after discussions with unions.
While the companies and their association took steps towards implementing the check-off system, the association initiated preliminary wage negotiation meetings on October 17, 2003 and December 6, 2003. The first and second petitioners participated in those preliminary meetings.
A different union challenged the check-off system in this Court (Writ Petition No. 846 (W) of 2004) and obtained an interim restraint on January 21, 2004; that interim order was modified on appeal on February 25, 2004 to allow preliminary confidential steps but forbade final decisions without the Single Judge's permission. The writ was finally disposed on April 3, 2004 with directions limiting the Madras High Court's earlier order's binding effect on certain parties.
The companies completed the check-off process and published results on May 31, 2004; the system became operational in June 2004. The petition before the Court in this opinion was filed on September 7, 2004.

Legal Issues Presented

Whether the petitioners, having participated in preparatory exercises, retained or acquired a right to further participation in the ongoing wage negotiations such that the companies could not introduce the check-off system in the midst of negotiations.
Whether the petitioners could challenge the introduction of the check-off system without joining the unions that acquired representative status (i.e., are those representative unions necessary or proper parties).
Whether the results of the check-off process (as published on May 31, 2004) are binding and free from mistakes sufficient to deprive affected unions of representative status without remedial measures.

Arguments of the Parties

Petitioners' Arguments

The companies were not empowered to introduce the check-off system in the midst of ongoing wage negotiations because doing so deprived the petitioners of their right of further participation in negotiation exercises.
Participation in preliminary negotiation meetings created, by the respondents' conduct, an accrued or vested right of further participation (counsel relied on a passage from Salmond on Jurisprudence to explain how acts of parties can create rights).
The petitioners also contended that every workman and officer has an inherent right to participate in wage negotiations to represent his own case and that unions representing many workmen/officers should therefore be entitled to participate.
Cited authorities in support of their position included Prabodh Verma v. State of Uttar Pradesh and Tulasi Priya v. Andhra Pradesh State Council of Higher Education.

Respondents' Arguments

The check-off introduction could not properly be challenged without joining the representative unions that benefited from the results; such representative unions are necessary or at least proper parties to a challenge to the results.
Because the petitioners participated in the check-off process leading to the results, they are estopped or have waived their right to challenge introduction of the system.
The mere right to form associations (or unions) does not automatically lead to a right of collective bargaining or entitlement to be treated as a representative union; respondents cited A.I.B.E Association v. N.I Tribunal and Dharam Dutt v. Union of India to advance that proposition.
Regarding rejected letters of authority, companies initially defended rejections as based on incompleteness; they later agreed to examine certain specified objections disclosed by the petitioners.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Tewari v. Zilla Mansavi Shikshak Sangh, (1998) 2 SCC 332 (A.I.R 1998 S.C. 331)	Relied on by respondents to support the proposition that representative parties may be necessary to challenge a process affecting representation.	The court noted this authority was relied on by respondents; it agreed that representative unions should have been joined as proper parties, though it held they were not strictly necessary parties for adjudication of the dominant issue.
Khetrabasi Biswal v. Ajaya Kumar Baral, 2004 (1) L.L.N 483	Relied on by respondents on the point of necessary parties and challenges to representative-determining processes.	The court recorded that this authority was cited by respondents; the court nonetheless concluded that while representative unions were proper parties, they were not indispensable to decide the main question of whether petitioners had a right to continue participation.
Prabodh Verma v. State of Uttar Pradesh, 1985 (2) L.L.N 585	Cited by petitioners in response to the respondents' authorities (context: contesting respondents' procedural/contentions).	The court observed the petitioners cited this case but ultimately found that the petitioners' participation did not create a vested right to continued participation; the case did not persuade the court to rule for the petitioners on that principal issue.
Tulasi Priya v. Andhra Pradesh State Council of Higher Education, (1998) 6 SCC 284	Cited by petitioners among other authorities invoked to support their contentions on rights arising from processes.	The court acknowledged the citation but concluded on the facts that participatory steps did not vest a right to further participation; the court's decision did not adopt the petitioners' reliance on this authority to support a vested right.
A.I.B.E Association v. N.I Tribunal, A.I.R. 1962 S.C. 171	Invoked by respondents to support the proposition that the right to form an association does not automatically confer a right of collective bargaining or representational entitlement.	The court accepted the force of this submission and agreed that the contention that formation of association automatically leads to a right to collective bargaining was legally unsound.
Dharam Dutt v. Union of India, (2004) 1 SCC 712	Also cited by respondents to indicate limits on rights flowing from association formation and collective bargaining claims.	The court acknowledged this authority in support of respondents' legal proposition and relied on the general principle that the right to form an association does not automatically create a right of collective bargaining in the circumstances of the case.

Court's Reasoning and Analysis

The court's reasoning proceeded in several linked steps, grounded on procedural facts and legal principles expressly stated in the opinion:

Necessary/proper parties: The court held that while unions that acquired representative strength were not strictly necessary parties for adjudication, they were proper parties who should have been joined because a declaration that the check-off results were invalid would likely affect them.
Effect of participation — estoppel and waiver: The court accepted the respondents' submission that once the petitioners participated in the exercises that culminated in the check-off results, they could not thereafter challenge the introduction of the system. The court characterized this consequence as arising from principles of estoppel and waiver.
Distinction between a process and a created right: The court analyzed the nature of rights and their sources, stating that a right must be conferred or created and is inseparably connected with a corresponding obligation. The court reasoned that a procedural process (e.g., preliminary meetings or processes leading up to a settlement) does not itself create an enforceable right; it is the settled agreement or the legal source that creates rights.
Participation in preliminary meetings: Applying the above principle, the court concluded that mere participation by the petitioning unions in preliminary meetings did not create a vested or enforceable right to future participation in negotiations.
Introduction of the check-off system during negotiation: The court found nothing unfair or unreasonable about introducing the check-off system during ongoing negotiation. The employers (companies) were not statutorily obliged to initiate negotiation, and they sought negotiation to avoid unilateral changes and industrial unrest. Because the companies were uncertain as to which unions were representative, it was reasonable to conduct the check-off process and rely on its results to identify representative unions.
Consequence of published check-off results: Once the check-off results were known, they created the right for those unions reaching the prescribed percentage to participate as representative unions and simultaneously created the obligation on the first respondent to call only such representative unions to participate.
Challenges to the process and doubts about accuracy: The court acknowledged that objections to certain rejected letters of authority were not wholly without merit; some rejections may have been for inconsequential omissions and deserved rectification. However, the court rejected broad allegations of manipulation as speculative and insufficient to invalidate results entirely.
Remedial direction: Rather than quashing the entire system or suspending its introduction, the court directed a focused remedial process: the companies must inform persons whose letters of authority were rejected, state reasons, and permit rectification only in cases where the rejection was not due to failure to specify clearly the union. Corrections, if made, required issuance of corrigenda to the May 31, 2004 results; if as a result any union (including the first and second petitioners) attained requisite representative strength, they must be afforded an opportunity to participate and negotiations must recommence only after these exercises are completed.
Prior judicial orders: The court held that earlier orders (including the Madras High Court order and orders in the prior writ petition in this Court) did not create or take away substantive rights; they only, in effect, created obligations or permitted procedures to be followed.

Holding and Implications

Writ petition disposed of with directions.

Direct holdings and immediate consequences imposed by the court:

The petitioners are not presently entitled to participate further in the ongoing wage negotiation solely by virtue of their participation in preliminary meetings; mere participation did not vest a right to continued participation.
The court did not set aside or prevent the introduction of the check-off system; it declined to interfere with the system's actual introduction.
The court directed remedial steps concerning rejected letters of authority:
- Companies shall promptly inform workmen/officers whose letters of authority were rejected and state reasons for rejection.
- Companies shall allow rectification only where the rejection was not due to failure to specify the choice of union clearly (i.e., permit rectification for inconsequential omissions/commissions but not where the choice itself was unclear).
- If rectification results in a change to the representative strength of any union, the companies shall issue corrigenda to the May 31, 2004 results and permit any newly qualifying union to participate in negotiations.
- Until the directed exercises are completed, respondents shall not hold any meetings regarding the wage negotiation; meetings must be held immediately after completion of the directed exercises and any necessary rectification.
No order as to costs was made; an urgent certified copy of the judgment would be supplied if applied for.

Broader legal implications: The court applied established principles (estoppel, waiver, and the requirement that rights be created by identifiable sources) in the context of union representation and collective bargaining. The decision resolves a factual dispute by directing a limited remedial process but does not purport to establish a new general legal precedent beyond the application of these principles to the facts of the case.

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All India General Insurance Employees' Congress And Others v. General Insurers' (Public Sector) Association Of India And Others

1. The four petitioners in this writ petition are aggrieved by the fact that because of the results of the check-off system published by the respondent insurance companies on May 31 2004, the first and second petitioners have lost the status of representative union; and consequently, the right of further participation in the ongoing wage negotiation.

2. In exercise of powers conferred on it by provisions of the General Insurance Business (Nationalization) Act, 1972 the Central Government established a Government company, called — General Insurance Corporation of India. In course of time it floated four subsidiaries (National Insurance Company Ltd., New India Assurance Company Ltd., Oriental Insurance Company Ltd., and United India Insurance Company Ltd.), the third, fourth, fifth and sixth respondents in this case.

3. Facing with the problem of claims made by the ever increasing number of unions regarding right of representation in structured meetings and discussions on matters relating to employees of the industry General Insurance Corporation of India decided to introduce the check-off system; and consequently. Issued a notice, dated January 22, 1999, calling upon the unions to submit application in prescribed form by February 15, 1999. But, for some reasons or other, the system was not actually introduced.

4. Praying for a writ of mandamus directing the companies to introduce the system, an association (the National Confederation of General Insurance Officers' Association) moved the Madras High Court. By order, dated August 29, 2003, such writ petition was dismissed granting the companies six months' time to implement the system after full discussion with the unions.

5. At around that time the first respondent (the association of the respondent insurance companies) took steps for initiating the wage negotiation with the unions for reaching a settlement for the period from 2002 to 2007. As a result, while the companies were taking steps for actually introducing the check-off system, their association decided to hold the preliminary meetings regarding wage negotiation. It held such meetings on October 17, 2003 and December 6, 2003; and in these meetings, along with other unions, the first and second petitioners participated.

6. The steps taken by the companies for introducing the system made a union (All India S.C/S.T General Insurance Employees' Welfare Association) aggrieved; and consequently, through its general secretary it moved this Court by filing a Writ Petition (No. 846 (W) of 2004). An interim order, dated January 21, 2004, was made in it to restrain the companies from giving effect to the system. Appeal (M.A.T No. 373 of 2004) preferred against such interim order was disposed of by a Division Bench of this Court by order, dated February 25, 2004; the interim order was modified to the effect that though, maintaining secrecy, the companies would be free to complete the preliminary works for introducing the system, they would not take the final decisions without permission from the Single judge. All the unions, including the first and second petitioners herein, were added as respondents in that writ petition, which was finally disposed of by order, dated April 3, 2004, directing that the petitioner union and the added respondents therein, who were not parties in the writ petition filed before the Madras High Court, would not be bound by the order, dated August 29, 2003, passed by that Court.

7. The petitioners in this case duly participated in all the exercises carried out by the companies for introducing the system. The process came to an end with the publication of the results on May 31 2004; the system came into operation from June, 2004. Both the first and second petitioners failed to attract the requisite minimum twenty per cent membership for acquiring the status of a recognised representative union. This was the factual background on September 7, 2004, when this writ petition was taken out.

8. Counsel for the petitioners has argued that in the midst of the ongoing wage negotiation the companies were not empowered or entitled to introduce the system, because for such introduction of the system the petitioning unions have lost their right of further participation in the negotiation. While arguing that the respondents, by their conduct, created his clients' right of further participation, he referred me to Salmond on Jurisprudence (12th Edn.), and read (from p. 334):

“The distinction between these two classes of vestitive facts may be variously expressed. We may make use, for example, of the contrasted expressions act of the party and act of the law. An act of the party is any expression of the will or intention of the person concerned, directed to the creation, transfer, or extinction of a right, and effective in law for that purpose; such as a contract or a deed of conveyance.”

9. Counsel for the respondents has argued that introduction of the system cannot be challenged without joining the representative unions, which are necessary parties. They contended that after participating in the process that brought about the results, the petitioners were not entitled to challenge the introduction of the check-off system.

10. As to these points, as against the two authorities cited by them: Tewari v. Zilla Mansavi Shikshak Sangh, [(1998) 2 SCC 332 : A.I.R 1998 S.C 331] and Khetrabasi Biswal v. Ajaya Kumar Baral [2004 (1) L.L.N 483], counsel for the petitioners cited to me Prabodh Verma v. State of Uttar Pradesh [1985 (2) L.L.N 585], Tulasi Priya v. Andhra Pradesh State Council of Higher Education, [(1998) 6 SCC 284].

11. It seems to me that though the unions which acquired the representative strength are not necessary parties, they should have been joined as respondents, since the petitioners have prayed for a declaration that the check-off results are bad. It is not that without them the issues raised cannot be adjudicated, but the decision on the declaration issue is likely to affect them. So, in my view, they are proper parties.

12. I agree with counsel for the respondents that the petitioners are not entitled to challenge the introduction of the check-off system. To my mind, once they participated, without any reservation, in the exercises carried out in furtherance of actual introduction of the system, they lost the right to challenge the decision taken to introduce the system; this is due to the principles of estoppel and waiver.

13. However, because of the nature of the dominant issue, which I find after hearing the parties, and which really requires determination, I do not think purpose of justice will be served by deferring the final decision in the case for bringing the proper parties on record. The dominant issue is whether the first and second petitioners have right of further participation in the ongoing wage negotiation.

14. To my mind, a right is either conferred or created; and it is always inseparable connected with a corresponding obligation, simultaneously created. When the source of the right is identifiable, there is no difficulty in locating the obligation. It means that without a source, there can be no right. It can, therefore, be logically said that the process through which a source of a right is born, does not confer or create a right. I think, if I am right in this proposition, then I can perhaps say that. In the context of labour laws, the process through which a settlement is reached and recorded, by and between the employer and his workmen, does not create any enforceable right in favour of either of them, though the settlement does.

15. I agree with counsel for the companies that mere participation of the petitioning unions in the preliminary meetings of the ongoing wage negotiation did not create any vested right regarding their future participation in it. On the facts, I do not see any reason to say that introduction of the check-off system in the midst of the wage negotiation is unfair or unreasonable; everyone, including the petitioners, knew that this was bound to happen.

16. The wage negotiation has been initiated for reaching a settlement with the workmen. It is nobody's case that the companies are under any statutory obligation to initiate the negotiation. It seems to me that instead of following the procedure of changing the conditions of service of their workmen unilaterally, which might have led to an industrial dispute, and hence disturbance in essential industrial peace and harmony, they decided to explore the possibility of reaching a settlement through negotiation.

17. They have a large number of unions and associations functioning in their establishments. They were free to enter into negotiation with the representative union and reach a settlement. It is clear that they were not sure about the representative strength of the unions for treating one or some of them as the representative unions. The picture became clear to them only after they got the results regarding membership through the check-off system.

18. So till the results through the check-off system came to be known, it was not unnatural for the first respondent to call the first and second petitioners and other similar unions to participate in the negotiation; when a step to the contrary would have been vulnerable to a challenge on the ground of discrimination and breach of the rule of fairness.

19. But the moment the results came to be known to all concerned, the first respondent was no longer under the obligation to call the petitioning and other similarly placed unions to participate in the negotiation; the results of the check-off process created right of the unions which reached the prescribed percentage of strength for participating in the negotiation as representative unions; and simultaniously they created an obligation on the first respondent to call only such representative unions for participation.

20. All the parties that participated in the exercises of the check-off process are to remain bound by the results thereof during the period the results will remain in force in terms of provisions of the system. I, therefore, do not find any reasons to say that the past participation of the first and second petitioners in the ongoing wage negotiation created their right of further participation in it.

21. I am unable to agree with counsel for the petitioners that right of his clients to participate in the negotiation accrued from the orders passed in the previous Court proceedings, I have already noted. Counsel for the respondents, in my view, have rightly pointed out that no right of any nature was created or curtailed or taken away by any of the orders passed in any of the previous proceedings. The Madras High Court writ petition was dismissed, once the companies informed the Court that they needed some time to introduce the system. That order neither created any right in favour of anyone, nor took away any right that was being enjoyed or was to be enjoyed by anyone; though, for the statement they made in Court, it created a sort of obligation of the companies to introduce the system.

22. The order passed in the previous writ petition by this Court once again did not create, curtail or take away any right of anyone. The Madras High Court order did not give the power or right to the companies to take away any existing right of anyone. Hence the order passed in the previous writ petition filed in this Court, that the Madras High Court order would not be binding on the petitioner and the added respondents therein, in my judgments, does not create any right of the petitioners to participate in the ongoing negotiation.

23. Counsel for the petitioners has argued that since the negotiation is for settling the issues connected with wages of workmen and officers of the companies, every workman and officer has an inherent right to participate in it for representing his own case; and hence the first and second petitioners, representing a sizeable number of workmen and officers, have the right to participate in the negotiation along with others.

24. In my view, counsel for the respondents are fully justified in saying that the contention is based on a wrong proposition of law. By citing to me A.I.B.E Association v. N.I Tribunal [A.I.R 1962 S.C 171] and Dharam Dutt v. Union of India, [(2004) 1 SCC 712], they have proposed that right to form association does not automatically lead to right of collective bargaining. I acknowledge the force of their submission. I should not be thought of unappreciative of their arguments for not referring to a few more cited authorities which decided how an industrial dispute is raised and what membership strength is reasonable for determining representative status.

25. The concept of collective bargaining has withstood the test of time; and for maintaining industrial peace and avoiding industrial disputes employers and workmen have successfully adhered to the concept for nearly a century. An employer, in ordinary course, is under no obligation to enter into negotiation with his workmen. Trade unions came to be formed to provide an employer a hassle free avenue to settle issues or disputes with his workmen through their representative unions. So once the representative unions are there, the employer does not need to negotiate issues or disputes with his workmen individually.

26. I, however find that argument of counsel for the petitioners that the results obtained on completion of the process of the check-off system are not entirely free from mistakes, is not totally meritless. By referring me to the relevant documents and statements, he has commented that objections raised by some of the persons, regarding their memberships on the basis of letters of authority submitted by them, did not receive the required attention from the companies, for taking the corrective measures. I am, however, unable to agree with him that the objections are sufficient to scrap the results lock, stock, and barrel. I also do not think that he is justified in criticizing the presence of representatives of the companies at the time of scrutiny of the letters of authority by the competent agency or authority. His comments about likely manipulation of the results are in my view entirely based on speculation.

27. Counsel for the respondents, though initiaily resisted, finally agreed to take steps for looking into the few objections of the persons concerned, as have been disclosed by the petitioners in their writ petition and reply. Their initial resistance was on the basis of the case made out by their clients that the letters of authority suffered rejection, since they were not complete in every respect. They have informed me that there may be some more cases of similar rejection.

28. As to the rejection of the letters of authority by the companies, it seems to me that the procedure followed by them does not advance the purpose of the system. I think, it will be unjust to compare the situation (as done by counsel for the respondents) with the one that may arise in case of elections held under Representation of the People Act, 1951. The system has been introduced for the benefits of the workmen and officers of the companies. Any procedure that is likely to cause any undesired harm or disadvantage to any workman or officer, it seems to me, is not in conformity with the spirit and object of the system.

29. So I think that while a workman or an officer who committed a fatal mistake in specifying the union or association of his choice, is not to be cajoled into making his choice known, the same should not be the case, where, though a workman or an officer unambiguously specified his choice of the union, his letter of authority suffered rejection for some inconsequential omissions or commissions. I, therefore, think that the rejection aspect needs a fresh look so that the workmen and officers whose letters of authority suffered rejection know the reasons for rejection, and those who committed insignificant mistakes get a chance to rectify such mistakes. In my opinion, such a course is necessary for the benefit of the persons for whom the system has been introduced.

30. For these reasons, while I am not minded to interfere in the actual introduction of the check-off system by the companies, and though I find no reason to hold that at present the first and second petitioners are entitled to participate in the ongoing wage negotiation, I am of the view that suitable directions should be given regarding the cases of rejection of the letters of authority. Accordingly, I dispose of the writ petition by the following order:

The companies shall take steps forthwith for informing the workmen and officers whose letters of authority suffered rejection. While the companies shall state the reasons for rejection, they shall give an opportunity to rectify mistakes only to those workmen and officers whose letters of authority were not rejected for not specifying clearly the choice of the union. If the persons who are given the chance to rectify their mistakes comply with the directions, then credit thereof shall be given to the unions concerned by issuing necessary corrigendum to the results published on May 31 2004. If because of such steps the first and second petitioners or any other union acquires the requisite representative strength for participating in the ongoing negotiation, then the respondents shall proceed with the negotiation after giving such union opportunity to participate. Till the exercises required to be carried out in terms of this order are completed, the respondents shall not hold any meeting regarding the wage negotiation in question. The meetings shall be held immediately after the exercises are completed, and the results published on May 31, 2004 are rectified, if necessary.

31. In the facts and circumstances of the case there will be no order for costs in the writ petition.

32. Urgent certified xerox copy of this judgment and order shall be supplied to the parties if applied for.

Writ petition disposed of with directions.

All India General In... v. General Insurers' (P...