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Director, State Farm... v. Judge, Industrial Tr...
Factual and Procedural Background
The appellant, State Farm Corporation of India Ltd., located at Jetsar, Rajasthan, was initially under the administrative control of the Ministry of Agriculture, Government of India, until July 31, 1969, after which control was transferred to the Corporation itself. While under government control, the workers were granted a 10% project allowance by an order dated October 28, 1966. After the transfer of administrative control, the project allowance continued to be paid. On November 30, 1974, the Corporation reduced this allowance from 10% to 8%. Dissatisfied with the reduction, the employees raised an industrial dispute. The appropriate Government referred the question of the legality of this reduction to the Industrial Tribunal, Bikaner, which held on March 31, 1984, that the reduction constituted a change in service conditions and violated the mandatory notice requirement under Section 9A of the Industrial Disputes Act, 1947. The Corporation challenged this decision by filing a writ petition, which was dismissed by the Single Judge on May 14, 1998. The appellant then filed the present civil special appeal against the Single Judge’s order.
Legal Issues Presented
- Whether the reduction of the project allowance from 10% to 8% constituted a change in the conditions of service of the employees.
- Whether such change required prior notice under Section 9A of the Industrial Disputes Act, 1947.
- Whether the project allowance falls within the scope of "conditions of service" covered by the Fourth Schedule to the Industrial Disputes Act.
- Whether the appellant was exempted from giving notice to the employees on the ground that the employees’ unions had been heard by the Third Pay Commission before recommending reduction.
Arguments of the Parties
Appellant's Arguments
- The reduction of the project allowance did not amount to a change in the conditions of service requiring notice under Section 9A.
- Notice is required only when changes relate to matters specified in the Fourth Schedule, and project allowance is not covered under this Schedule.
- The project allowance was initially granted by the Government of India when basic amenities were lacking, but these amenities were subsequently provided, justifying the reduction.
- The Third Pay Commission had heard the employees’ unions and recommended the phased reduction, thereby obviating the need for the appellant to give separate notice to its employees.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Management Of Indian Oil Corporation Ltd. v. Workmen, [1975 (2) L.L.N 338] | Section 9A of the Industrial Disputes Act mandates prior notice of any change in conditions of service affecting workmen, including compensatory allowances. | The Court applied this precedent to hold that project allowance is a condition of service requiring 21 days’ notice before reduction, and since no notice was given, the reduction violated Section 9A. |
Court's Reasoning and Analysis
The Court examined Section 9A of the Industrial Disputes Act and the Fourth Schedule appended thereto, which requires prior notice for any change in specified conditions of service. The Court noted that "compensatory and other allowances" fall within the scope of the Fourth Schedule, and "wages" as defined under Section 2(rr) of the Act includes allowances such as the project allowance. Thus, the project allowance is a condition of service, and any detrimental change to it requires the prescribed notice.
The Court rejected the appellant’s argument that the project allowance was outside the Fourth Schedule and that prior notice was unnecessary because the Third Pay Commission had heard the unions. It held that the Corporation was independently bound by Section 9A to give notice to its own employees, regardless of the Pay Commission’s recommendations or hearings with unions of various enterprises. The failure to give the mandatory 21 days’ notice rendered the reduction unlawful.
The Court further stated that it could not delve into factual questions such as the provision of basic amenities, as these require factual investigation. However, even assuming amenities had been provided, the procedural requirement of notice under Section 9A remained mandatory before any alteration of project allowance.
Finally, the Court observed that the reduction of project allowance was not a quid pro quo for the provision of amenities, as the allowance had been paid for a long period alongside such amenities. Therefore, the reduction resulted in a clear reduction in wages, necessitating compliance with Section 9A.
Holding and Implications
The Court DISMISSED the appeal, upholding the decision of the Single Judge that the reduction of the project allowance without giving the mandatory notice under Section 9A of the Industrial Disputes Act was unlawful.
The direct effect of this decision is that the appellant must comply with the procedural requirements of Section 9A before effecting any change in conditions of service related to allowances. No new precedent was set beyond affirming the mandatory nature of the notice requirement under the Act.
The Judgment of the Court was delivered by
Anil Dev Singh, C.J:— This D.B civil special appeal is directed against the order of the learned Single Judge, dated 14 May 1998, rendered in S.B Civil Writ Petition No. 3240 of 1984. By that order, the learned Single Judge rejected the writ petition challenging the award of the Industrial Tribunal, Bikaner, dated 31 March, 1984. The facts giving rise to the appeal are as follows.
2. The appellant is the State Farm Corporation of India Ltd. It is located at Jetsar, Rajasthan. The appellant was established on 3 March, 1964. Till July 31, 1969, its administrative control vested with the Ministry of Agriculture, Government of India. While the administrative control over the appellant was still being exercised by Government of India the latter by its order, dated October 28, 1966, granted 10 per cent project allowance to the workers employed at Jetsar project. Subsequently, with effect from August 1, 1969 the administrative control was transferred to the Corporation itself vide notification of the Government of India, dated June 23, 1969. By virtue of the notification pay, leave, travelling and other allowances and service conditions of the staff remained unchanged. The notification provided that pay, leave, travelling and other allowances and service conditions of the workers shall be governed mutatis mutandis by the existing rules and regulations applicable to the employees or as may be issued by the Government of India from time to time till they stand replaced by the rules framed by the Corporation. As a consequence of the notification project allowance to the workers employed at Jetsar site was continued to be paid to them even after the administrative control was vested in the Corporation itself. On November 30, 1974, the appellant reduced the project allowance from 10 per cent to 8 per cent.
3. The employees of the appellant not being satisfied with the reduction of the project allowance raised an industrial dispute. The appropriate Government by its order, dated June 2, 1978, referred the question namely, whether or not reduction of the project allowance from 10 per cent to 8 per cent was legally justifiable. The Industrial Tribunal, Bikaner to whom the reference was made concluded by its order, dated March 31, 1984, that the reduction of project allowance from 10 per cent to 8 per cent brought about a change in the service conditions of the employees. Since the reduction was made without giving 21 days' notice of change to the workmen provisions of S. 9A of the Industrial Disputes Act, 1947 (for short the Act) were violated.
4. The appellant being aggrieved by the order passed by the Industrial Tribunal, Bikaner filed a writ petition S.B No. 3240 of 1984. The writ petition came to be dismissed by the learned Single Judge of this Court on 14 May, 1998. Having failed before the learned Single Judge, the appellant has filed the instant special appeal.
5. The learned counsel appearing for the appellant submitted that the conditions of service of the employees of the appellant did not undergo a change by reduction of the project allowance from 10 per cent to 8 per cent. According to him, only in those cases notice of change is required to be given where the employer pro poses to effect change in the condition of service applicable to a workmen in respect of matters specified in the Fourth Schedule to the Act. As per the learned counsel project allowance which is being given to the workmen is not covered by the Fourth Schedule.
6. In order to appreciate the submission' of the learned counsel it may be necessary to refer to S. 9A of the Act and the Fourth Schedule appended thereto. Section 9A of the Act and the Fourth Schedule, the extent relevant, read as follows:
“9A. Notice of change.— No employer, who proposes to effect any change in the conditions of service applicable to any workman in respect of any matter specified in the Fourth Schedule, shall effect such change,—
(a) without giving to the workman likely to be affected by such change a notice in the prescribed manner of the nature of the change proposed to be effected; or
(b) within twentyone days of giving such notice.”
THE FOURTH SCHEDULE
CONDITIONS OF SERVICE FOR CHANGE OF WHICH NOTICE IS TO BE GIVEN
“1. Wages, including the period and mode of payment;
………………
………………
3. Compensatory and other allowances.”
7. Thus, according to S. 9A no employer is permitted to effect any change in the conditions of service applicable to a workman in respect of any matter specified in the Fourth Schedule without giving to the workman likely to be affected by such change a notice in the prescribed manner, of the nature of the change proposed to be effected. Item (3) of the Fourth Schedule shows that compensatory and other allowances are to be treated as conditions of service for change of which notice is to be given. The words “other allowances” cannot be read in a restricted manner. These are words of wide amplitude which will take into their ambit the project allowance as well. Besides, item (1) of the Fourth Schedule refers to wages including the period and mode of payment. Therefore, the wages are to be treated as conditions of service. The term wages is defined in S. 2(rr) of the Act. Section 2(rr), to the extent is relevant, reads as follows:
“2(rr). ‘wages’ means all remuneration capable of being expressed in terms of money, which would, if the terms of employment, express or implied, were fulfilled, be payable to a workman in respect of his employment or of work done in such employment, and includes—
(i) such allowances (including dearness allowance) as the workman is for the time being entitled to.
It is obvious from the definition of ‘wages’ that allowances are included therein. Since the project allowance falls within the meaning of the term ‘wages’ it is a condition of service and for effecting any change to the detriment of the employees notice is required to be given to the employees.
8. In Management Of Indian Oil Corporation Ltd. v. Workmen, [1975 (2) L.L.N 338], the Supreme Court held that S. 9A of the Act would come into operation the moment the employer proposes to change any condition of service applicable to any workman. It was also held that grant of compensatory allowance to the employees of the Indian Oil Corporation posted in far off and backward area like Assam was undoubtedly an implied condition of service and proposal to change the same attracted the mandatory provisions of S. 9A of the Act requiring 21 days' prior notice of change to be given to the workman. Since notice of change was not given the withdrawal of the compensatory allowance to the employees clearly falls foul of S. 9A of the Act.
9. Keeping in view the aforesaid decision of the Supreme Court and having regard to the above discussion, we have no hesitation in holding that the project allowance is part of the conditions of service of the workmen and the mandatory procedure laid down in S. 9A of the Act for effecting the change was not followed.
10. Learned counsel for the appellant then contended that project allowance was given at the rate of 10 per cent by the Government of India vide order, dated October 28, 1966, when the basic minimum amenities were not available to them at place which were under developed and out of way. The learned counsel asserted that basic amenities have been made available over the years to the workers from 1964 to 1973. He also submitted that the appellant following the report of the third pay commission reduced the project allowance. It was pointed out by the learned counsel that the employees Unions and Associations were heard by the third pay commission before recommendation for phased reduction in the quantum of project allowance. As a sequitur, the learned counsel canvassed that since the unions were heard by the pay commission it was not necessary for the appellant to give a notice to the workmen of an individual Corporation likely to be affected by the reduction in the rate of project allowance.
11. We have considered the submissions of the learned counsel for the appellant. We, however, regret our inability to accept the same. The fact that the unions of workmen belonging to various companies were heard by the Pay Commission before making its recommendations with regard to the project allowance did not obviate the requirement of giving a prior notice of the proposed change by the appellant-Corporation to the workmen under S. 9A of the Act before reducing the rate of project allowance from 10 per cent to 8 per cent. The Corporation was bound to follow the mandate of S. 9A of the Act. After recommendations of the Third Pay Commission were accepted by the Government, the appellant blindly followed the same without taking an independent and voluntary decision on their own with regard to the question whether or not to reduce the project allowance. The dependence of the appellant on the report of the Pay Commission was so heavy that it thought that since the unions of workmen of various enterprises have already pleaded their case before the Pay Commission it was not necessary to give the mandatory 21 days' notice to its employees working in the projects before effecting the change. This was clearly a wrong approach which cannot be countenanced in law. Since the appellant-Corporation failed to comply with the provisions of S. 9A, the change effected in the rate of the project allowance payable to the workmen cannot be sustained.
12. We also cannot go into the question whether or not basic amenities were provided by the appellant to the workmen at the project site. That question will require investigation into facts. Assuming that basic facilities have been provided to the employees at the project sites, still the appellant was required to give notice of the proposed change in the rate of project allowance in accordance with S. 9A of the Act as project allowance, as already held, is a condition of service of the workmen. Project allowance can be altered only by following the procedure known to law.
13. Moreover we are informed by the learned counsel for the parties that amenities extended to workmen, which is now used as shield to defend the action of management in unilateral reduction of project allowance from 10 per cent to 8 per cent, had already come into existence long before the unilateral reduction of the allowance and for long workmen were receiving project allowance at 10 per cent in addition to amenities made available to them. Thus no nexus between the reduction in project allowance as quid pro quo for extending additional benefits in lieu thereof is discernible. The reduction in project allowance undoubtedly results in reduction of wages as defined in S. 2(rr) of the Industrial Disputes Act, 1947 and falls within “conditions of service for change of which notice is to be given” under items (1) and (3) of Sch. IV appended to the Act which attracted operation of S. 9A of the said Act; which has been held to be mandatory requirement before any such alteration can be affected.
14. For the foregoing reasons, we hold that the view of the learned Single Judge that the change in the rate of project allowance adversely affected the conditions of service of the employees working in project and they were required to be given notice under S. 9A of the Act, which the appellant failed to do cannot be faulted and must be sustained. We order accordingly. The appeal, therefore, fails and is hereby dismissed.
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