Rashtriya Chemicals And ... vs Rfc Employees' Union And Ors.
2006 Latest Caselaw 808 Bom

JUDGMENT

D.Y. Chandrachud, J.

1. This proceeding under Article 226 of the Constitution of India, has arisen out of an award of the Central Government Industrial Tribunal. The Tribunal rejected an Application filed by the Management, questioning the maintainability of a Reference under Section 10 of the Industrial Disputes Act, 1947. The ground taken in the application was that the appropriate Government under Section 2(a) is not the Central Government (which made the reference), but the State Government.

2. The controversy in the present case involves the question as to whether the Central Government is the appropriate Government, under Section 2(a) of the Industrial Disputes Act, 1947, in relation to Rashtriya Chemicals and Fertilizers Ltd. The Company is the petitioner before the Court and has submitted: that the appropriate Government in its case under Section 2(a) is not the Central Government, but the State Government and that consequently, the Central Government Industrial Tribunal was in error in rejecting its application, questioning the maintainability of the Reference made to the Tribunal by the Central Government.

3. The dispute between the petitioner and the first respondent relates to the number of days that will constitute a working week in the establishments of the petitioner at Trombay and That in the State of Maharashtra. Initially, a settlement was entered into on August 23, 1985 and February 17, 1987, by which the management agreed to a working week of five days in respect of the units to which those settlements related. The Management issued a notice of change on June 30, 1988 under Section 9-A of the Industrial Disputes Act, 1947, proposing to reintroduce a six day working week. Proceedings took place in conciliation. The Ministry of Labour of the Government of India, by its letter dated January 31, 2001 refused to make a Reference to adjudication. The first respondent challenged the decision of the State Government, in proceedings under Article 226 of the Constitution of India, before this Court. A Division Bench of this Court by its judgment dated June 28, 2001, held that the Central Government was not justified in entering upon the merits of the dispute, and accordingly quashed and set aside the decision of the Central Government, declining to make a Reference. The Union of India, which was impleaded as the first respondent was directed to refer the dispute raised by the petitioner Union to the Industrial Tribunal under Section 10(1) of the Industrial Disputes Act, 1947. The Division Bench, however, declined to stay the notice of change that was issued by the petitioner and an ad-interim stay granted during the pendency of the petition was vacated. In compliance of the order of this Court, the Central Government made a Reference under Section 10, on April 22, 2002.

4. The petitioner raised a preliminary objection to the maintainability of the Reference on August 29, 2002, inter alia on the ground that in view of the judgment of the Supreme Court in Steel Authority of India v. National Union Water Front Workers , the appropriate Government in respect of the petitioner would not be the Central Government but the State Government. The Industrial Tribunal dismissed the application, holding that the petitioner is a Government of India undertaking, over which the Central Government exercises full control. The Industrial Tribunal relied upon the decision of the Supreme Court in Hindustan Aeronautics Ltd. v. Hindustan Aero Canteen K. Sangh 2003-I-LLJ-494 in support of its conclusion that it was the Central Government which was the appropriate Government. Consequently, the Application was dismissed. The award passed by the Industrial Tribunal is challenged under Article 226 of the Constitution of India.

5. The central point in the present proceeding, upon which the outcome of the case will turn relates to the construction of the provisions of Section 2(a) of the Industrial Disputes Act, 1947. The power to make a Reference under Section 10(1) is conferred upon the appropriate Government and therefore, the meaning that is to be ascribed to that expression will depend upon the interpretation of Section 2(a), Section 2(a)(i) inter alia provides that the Central Government is the appropriate Government in relation to an industrial dispute concerning industries carried on by or under the authority of the Central Government. Thereafter, a large number of industries have been specifically mentioned by name. In relation to any other industrial dispute, it is the State Government which is the appropriate Government. The question that arises for consideration before this Court is whether the petitioner is, within the meaning of Section 2(a)(i), any industry carried on by or under the authority of the Central Government. If it is, the appropriate Government, would be the Central Government. If it is not, the appropriate Government would be the State, Government.

6. The provisions of Section 2(a)(i) came up for consideration before the Supreme Court in Heavy Engineering Mazdoor Union v. State of Bihar and Ors. . The Corporation before the Supreme Court in that case case, was a company incorporated under the Companies Act, 1956 and the share capital was contributed and registered in the name of the Central Government. The Memorandum of Association and Articles of Association conferred large powers on the Central Government, including the power to give directions in regard to the functioning of the company. The wages and salaries were determined in accordance with the directions of the Central Government. The Directors were appointed by the President of India. The State of Bihar referred an industrial dispute, on the question as to the number of holidays in a month to the Industrial Tribunal for adjudication. One of the Unions questioned the validity of the Reference on the ground that the appropriate Government to make the Reference was the Central Government and not the State Government. The Supreme Court held that it was undisputed that the Corporation was a Company incorporated under the Companies Act, 1956 and it was the Company which carried on the undertaking. Hence, the undertaking was not carried on directly by the Central Government or by one of its departments as in the case of the Post and Telegraphs or Railways. The industry was, therefore, not carried on by the Central Government. The issue, that however, arose before the Supreme Court was whether the industry was carried on under the authority of the Central Government. Rejecting the contention that the Heavy Engineering Corporation was an industry carried on under the authority of the Central Government, the Supreme Court held that the Company derived its powers and functions by virtue of its Memorandum and Articles of association. The mere fact that the entire share capital of the Company was contributed by the Central Government, did not make any difference to the position. The Supreme Court held as follows:

A person is said to be authorised or to have an authority when he is in such a position that he can act in a certain manner without incurring liability, to which he would be exposed but for the authority, or, so as to produce the same effect as if the person granting the authority had for himself done the act.

The word "under the authority" mean pursuant to the authority, such as where an agent or servant acts under or pursuant to the authority, of his principal or master. Can the respondent-company, therefore, be said to be carrying on its business' pursuant to the authority of the Central Government? That obviously cannot be said of a company incorporated under the Companies Act whose constitution, powers and functions are provided for and regulated by its memorandum of association and the articles of association. An incorporated company, is well known, has a separate existence and the law-recognises it as a juristic person separate and distinct from its members. This new personality emerges from the moment of its incorporation and from that date the persons subscribing to its memorandum of association and others joining it as members are regarded as a body incorporate or a corporation aggregate and the new person begins to function as an entity.

The following principles of law emerge from the decision in Heavy Engineering Corporation (supra):

i) Though the Central Government may have contributed the share capital of an incorporated company and extensive powers are conferred on the Governments those powers are derived from the Memorandum of Association and Articles of Association and not by reason of the company being an agent of the, Central Government, the Company cannot be regarded as a company carried on under the authority of the Central Government;

ii) The question as to whether a Government company is carried on under the authority of the Central Government will depend upon the existence or non-existence of the relationship of agency between the Company and the Government. Whether the relationship of agency exists in the facts of a particular case would fall for determination upon a consideration of all the circumstances;

iii) Where a statutory provision sets up a Corporation, such a Corporation can easily be identified as the agent of the State. However, in the absence of a statutory provision, a commercial corporation carrying on its own behalf activities in the nature of business would not ordinarily be presumed to be an agent of the State, even though it is controlled wholly or partially by a Government Department;

iv) The inference of the Corporation being an agent of the State may be drawn where it is performing substantial Governmental, as distinguished from commercial, functions.

7. The decision in Heavy Engineering (supra) was followed by three other decisions. The first of them was the judgment in Hindustan Aeronautics Ltd. v. Workmen and Ors. , where following the decision in Heavy Engineering case, the Supreme Court held that the Government of West Bengal was entitled to make a reference in respect of the establishment of the aforesaid company to adjudication where there was a likelihood of a disturbance of industrial peace in the territory of the State. The appropriate Government concerned was held to be the State Government. The second decision was in Rashtriya Mill Mazdoor Sangh v. Model Mills Nagpur in which the Supreme Court held that the appointment by the Central Government of an authorised controller to replace the Management of the Mills under Section 18-A of the Industries (Development & Regulation) Act, 1951 would not render that industrial undertaking as being carried on by or under the authority of the Central Government. The third decision was in Food Corporation of India v. Dock Workers Union , where the Supreme Court held that the State Government was the appropriate Government pertaining to the Regional offices and Warehouses of FCI situated in various States.

8. The question as to whether the Central Government or the State Government would be the appropriate Government in the context of the provisions of Section 2(1)(a) of the Contract Labour (Regulation & Abolition) Act, 1970 came up for consideration before a Bench of three learned Judges of the Supreme Court in Air India Statutory Corporation v. United Labour Union and Ors. . The Supreme Court held that the expression "control" was required to be interpreted in the changing commercial scenario particularly having regard to Constitutional goals and perspectives. The Court held that the interpretation of the expression "appropriate Government" must derive sustenance from public law principles. The Supreme Court held that the decision in the Heavy Engineering case had narrowly interpreted the expression "appropriate Government" and was to that extent incorrect. The view that was taken in Air India was that the judgment in Heavy Engineering (supra) was based on a concession.

9. The correctness of the decision in Air India (supra) inter alia with regard to the interpretation of the expression "appropriate Government" was referred to a Constitution Bench of the Supreme Court. In Steel Authority of India v. National Union Water Front Workers (supra) the issue was set at rest. The. Supreme Court held that the concession in' Heavy Engineering Corporation (supra) was in regard to whether Corporation was carried on by the Central Government and not on the question whether it was carried on under the authority of the Central Government. The judgment in Steel Authority lays down the principle that the question as to whether a body corporate is State within the meaning of Article 12 or is an instrumentality of the Central or, State Government, is not determinative of the question as to whether it is an industry carried on by or under the authority of that Government. The Supreme Court held thus 2004-II-LLJ-1087 at p. 1107:

37. To hold that the Central Government is "the appropriate Government" in relation to an establishment, the Court must be satisfied that the particular industry in question is carried on by or under the authority of the Central Government. If this aspect is kept in mind it would be clear that the Central Government will be the "appropriate Government" under the CLRA Act and the I.D. Act provided the industry in question is carried on by a Central Government company an undertaking under the authority of the Central Government. Such an authority may be conferred, either by a Statute or by virtue of relationship of principal and agent or delegation of power. Where the authority, to carry on any industry for or on behalf of the Central Government, is conferred on the Government company or an undertaking by the Statute under which it is created, no further question arises. But if it is not so, the question that arises is whether there is any conferment of authority on the Government company or an undertaking by the Central Government to carry on the industry in question. This is a question of fact and has to be ascertained on the facts and circumstances of each case.

(emphasis supplied)

The Supreme Court upheld the correctness of the view taken in its decisions in Heavy Engineering Corporation (supra), Hindustan Aeronautics (supra), Rashtriya Mill Mazdoor Sangh (supra), and Food Corporation of India (supra) and held that the interpretation placed in Air India (supra) on the expression "appropriate Government" did not reflect the correct position in law.

10. The position therefore, that emerges from the line of precedent is that the question as to whether a company can be regarded as being carried on by or under the authority of Central Government under Section 2(a), cannot turn on the question as to whether it is an instrumentality of the Central Government or State under Article 12 of the Constitution of India. An industry may be regarded as carried on by the Central Government when it is carried on directly by the Central Government as for instance by a department of the Government. The question as to whether an industry is carried under the authority of the Central Government has to be decided on the basis of the facts of each case. The facts, in order to sustain such an inference, must demonstrate a relationship of principal and agent or a delegation of power by the Central Government for carrying on the industry. Where a statutory provision under which the body corporate has been constituted, confers such power, the matter may then be at an end. In the absence of any statutory provision to that effect, the circumstances of the case must demonstrate a relationship of principal and agent before an inference that an industry was carried on under the authority of the Central Government can be made. Ordinarily, the presumption is that a Corporation which carries on commercial functions is not carried on under the authority of the State. Here again the circumstances may justify a different inference where the Corporation carries on Governmental functions.

11. The Tribunal in the present case has rested its decision on the basis that the petitioner is a Government of India undertaking and the Central Government exercises full control. This is plainly not a determinative circumstance for coming to the conclusion that the Corporation is carried on under the authority of the Central Government. The control which the Central Government exercises is control referrable to the Memorandum and Articles of Association. The fact that the Central Government holds 92.5% of the share capital again is not dispositive, in view of the law laid down by the Supreme Court. The power of the Central Government to nominate directors is a power conferred by the Memorandum and by the Articles of Association. Plainly, on the facts of this case, there was nothing before the Industrial Tribunal and nothing before this Court to demonstrate the existence of a relationship of principal and agent. Consequently, it is impossible to draw the inference that the petitioner is carried on by or under the authority of Central Government, within the meaning of Section 2(a)(i) of the Industrial Disputes Act, 1947. In the circumstances, the Industrial Tribunal was clearly in error in dismissing the application, questioning the maintainability of the Reference on this ground.

12. On behalf of the first respondent, however, it has been submitted that the Reference in the present case was made in pursuance of the order of this Court of June 28, 2001 which was rendered at a time when the law laid down by the Supreme Court in Air India (supra) held the field. The judgment in Steel Authority (supra) was delivered by the Constitution Bench on August 30, 2001 and the Reference in the present case was made on April 17, 2002. On behalf of the first respondent reliance has been placed on the summation by the Supreme Court in the judgment in Steel Authority which is to the following effect-

We over-rule the judgment of this Court in Air India's case (supra) prospectively and declare that any direction issued by any industrial adjudicator/any Court including High Court for absorption of contract labourer following the judgment in Air India's case (supra), shall hold good and that the same shall not be set aside, altered or modified on the basis of this judgment in cases where such a direction has been given effect to and it has become final.

It was submitted before the Court that the decision in Air India was overruled prospectively and the declaration which has been issued in the subsequent part of the aforesaid observation may be read disjunctively from the first part of the observation. It is not possible to accept the submission. In paragraph 5 of the judgment in Steel Authority, the Supreme Court formulated the points which arose for consideration before the Constitution Bench in the following terms 2001-II-LLJ-1087 at p. 1098:

5. The three points arise for determination in these appeals:

(i) What is the true and correct import of the expression "appropriate Government" as defined in Clause (a) of Sub-section (1) of Section 2 of the CLRA Act;

(ii) Whether the notification dated December 9, 1976 issued by the Central Government under Section 10(1) of the CLRA Act is valid and applies to all Central Government companies; and

(iii) Whether automatic absorption of contract labour, working in the establishment of the principal employer as regular employees, follows on issuance of a valid notification under Section 10(1) of the CLRA Act, prohibiting the contract labour in the concerned establishment.

13. The judgment in Air India (supra) had construed the definition of the expression "appropriate Government" for the purposes of the Contract Labour (Regulation & Abolition) Act, 1971 and held that the appropriate Government in that case was the Central Government. In the Air India case the Court had also held that upon abolition of contract labour, the intermediary contractor is removed from the scene with the result that a direct relationship of employer and employee is established between the contract workmen and the principal employer. The correctness of the decision in Air India fell for consideration of the Constitution Bench in Steel Authority. The judgment in Air India was overruled. The observations of the Supreme Court however indicate that the decision in Air India was overruled prospectively and that a direction issued by an Industrial Adjudicator or by any Court for the absorption of Contract labour would not stand set aside even if it was based on the decision in Air India's case, if such a direction had been given effect to and had attained finality. These directions of the Supreme Court make it abundantly clear that the Court did not intend to unsettle those cases where, based on the decision in Air India directions in the matter of absorption had been given effect to and had attained finality. The impact of the judgment in SteelAuthority is that it lays down what should be the correct interpretation of the expression "appropriate Government", for the purpose of Section 2(a), since the definition in the Contract Labour (Regulation & Abolition) Act, adopts a definition corresponding to the provisions of the Industrial Disputes Act, 1947. It is impossible for this Court to come to the conclusion that the interpretation that has been placed by the Supreme Court, on the expression "appropriate Government" under Section 2(a) of the Industrial Disputes Act, 1947 would only be prospective. In fact the observations quoted earlier are a sufficient indicator of the fact that the Court placed beyond the pale of consideration only those cases in which a direction in regard to absorption which had been issued by an adjudicator or a Court had attained finality and had been implemented. These observations in fact militate against accepting the contention of the first respondent that the interpretation of the Supreme Court in regard to the meaning of the expression "appropriate Government" under Section 2(a)(i) would not apply to a pending reference.

14. The learned Counsel on behalf of the respondent relied upon the judgment of this Court in Saudi Arabian Airlines v. Shehnaz Mubhatkal (Ms.) and Anr. 1999-II-LLJ-109. That was a case where the expression "appropriate Government" was amended by the Industrial Disputes (Amendment) Act, 1996, which was brought into force from October 11, 1995. Prior to the amendment the only airline industries which fell within the ambit of Section 2(1), were Air India & Indian Airlines. As a result of the amendment, air transport services were brought within the fold of Section 2(a)(i). The reference was in that case made to adjudication before the amendment. This Court held that the principles contained in Section 6 of the General Clauses Act, 1987 were attracted and the amendment itself was not retrospective. Now, it is a well settled principle of law that an amendment of substantive law is presumed to be prospective, unless Parliament or the State legislature have expressly or by necessary implication made the amendment retrospective. In that case there was nothing to indicate that the legislature had intended to make the amendment retrospective. Therefore, it was held that it would not affect the authority of a Reference made before the amendment. That apart, it is also evident from the judgment of this Court that the Labour Court had in fact proceeded to pass an award, and no objection to the jurisdiction of the Court was squarely raised either in the pleadings before the Trial Court or before this Court. Another decision relied on behalf of the first respondent was the decision of the Gujarat High Court in Indian Oil Corporation v. Mahendrabhai R. Patel 1987 (54) FLR 490. That case was again one where the definition of the expression "appropriate Government" was altered on the basis of a notification. The notification necessarily being an administrative instrument would have prospective effect. In the present case, it is abundantly clear that the only transactions which were intended to be saved were those in which based on the decision in Air India's case orders of absorption had been fully implemented and were final,

15. In the circumstances, the Tribunal was clearly in error in rejecting the application questioning the maintainability of the Reference. The appropriate Government, under Section 2(a) in so far as the petitioner is concerned, is the State Government and not the Central Government. Hence, it is the State Government which is competent to make a Reference under Section 10 of the Industrial Disputes Act, 1947. The consequence therefore is that it would now be for the State Government to make a reference to adjudication. The delay involved in the first respondent moving the State Government and the State Government passing orders can be obviated by appropriate directions in these proceedings. There is merit in the submission urged on behalf of the first respondent that it will be open to the Court while disposing of this petition, to mould the reliefs to obviate the hardship that would be caused to the workmen as a result of the long pendency of the dispute. The learned Counsel appearing on behalf of the petitioner has also fairly assisted the Court in joining the submission which was made on behalf of the first respondent that the State Government which is the "appropriate Government" be impleaded as a party to this proceeding, so that directions can be issued to the State Government to make a reference to adjudication. The petitioner was allowed to amend the petition accordingly. The learned AGP has appeared in this proceeding. The underlying purpose and spirit of the order passed by the Division Bench of this Court on June 28, 2001 was that the industrial dispute should be expeditiously resolved by the competent industrial forum. The judgment of the Supreme Court in Steel Authority which has been delivered after the order of the Division Bench necessitates that a reference be made by the State Government which is the Appropriate Government.

16. Both the learned Counsel for the petitioner and the first respondent have agreed to a direction that the State Government shall make a Reference for adjudication in terms of Section 10(1) of the Industrial Disputes Act, 1947, of the following dispute:

Whether the action of the management of Rashtriya Chemicals & Fertilizers Ltd. Trombay and Thai Units, in increasing the five day working week to a six day working week and in changing the working hours is justified? If not waht relief are the workmen entitled to?

17. The State Government shall accordingly make a reference in the aforesaid terms under Section 10(1) of the Industrial Disputes Act, 1947 within a period of two weeks. By consent of the parties hereto, there shall be a direction that the Central Government Industrial Tribunal shall within one week of the order of Reference transfer the records and proceedings in the pending Reference to the Industrial Tribunal to which a Reference would be made by the State Government. The parties or any of them, will place a copy of this judgment on the record of the Central Government Industrial Tribunal together with the order of reference that is issued by the State Government to enable the Central Government Industrial Tribunal to proceed to transfer the papers and proceedings. On the request of the petitioner, it is clarified that it will be open to the petitioner to apply before the Industrial Tribunal for adducing evidence. The rights and contentions of the parties on merits as well as the contentions of the petitioner, with reference to the provisions of Section 59 of the MRTU & PULP Act, 1971 are kept open, to be decided in the reference. The Tribunal shall make an endeavour to dispose of the Reference expeditiously and preferably within a period of one year from the date of the Reference. The Tribunal shall decide all the issues that have been raised in its final award. The impugned order of the Tribunal is quashed and set aside. This petition is accordingly disposed of. No orders as to costs.