Municipal Corporation Of ... vs Bal Dandavate Smruti
2011 Latest Caselaw 159 Bom

                                     1


         IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                 CIVIL APPELLATE JURISDICTION




                                                                          
                   WRIT PETITION NO.8867 OF 2011




                                                  
    1.Municipal Corporation of Gr.Mumbai
      having its office at Mahapalika Marg,
      Opp.C.S.T.Station, Fort, Mumbai 400 001.




                                                 
    2. The Municipal Commissioner,
       Municipal Corporation of Gr.Mumbai
       having its office at Mahapalika Marg,
       Opp.C.S.T.Station, Fort, Mumbai 400 001            .. Petitioners




                                         
         V/s               
      Municipal Mazdoor Union, Mumbai
                          
      Bal Dandavate Smruti, 237-239,
      N.M.Joshi Marg, Opp.Bawla Masjid,
      Mumbai 400 012.                                     .. Respondents

    Mr.A.V.Bukhari, with Ms.U.H.Deshpande and Mr.M.O.Patil for the
        


    petitioners.
    Mr.S.U.Kamdar, Senior Advocate with Ms.Neeta Karnik and
     



    Mr.M.D.Nagle for the Respondents.

                           CORAM: R.G.KETKAR, J.





                            DATED: 2ND DECEMBER, 2011.

                Judgment Reserved on 9th November, 2011.
               Judgment pronounced on 2nd December, 2011.





    JUDGMENT:

1. Heard Mr.A.V.Bukhari, learned counsel for the petitioners and

Mr.S.U.Kamdar, learned Senior Counsel for the Respondents at

length. Rule. Mr.M.D.Nagle waives service on behalf of the

Respondents. By consent of the parties and in view of the order

dated 26.10.2011 passed in Letter Patent Appeal, Rule is made

returnable forthwith and is heard finally.

2. By this petition under Article 226 of the Constitution of India, the

Municipal Corporation of Greater Mumbai (for short 'the

Corporation') being Petitioner No.1 and the Municipal

Commissioner being Petitioner No.2 have challenged the

judgment and order dated 20.10.2011 passed by the learned

Member, Industrial Court, Mumbai (for short 'the Tribunal')

below Exhibit U-2 in Complaint (U.L.P.) No.326 of 2011. By that

order, the Tribunal has allowed the application Exhibit U-2 made

by the Municipal Mazdoor Union, Mumbai, Respondents herein

(for short 'the Union') and directed the petitioners to pay ex-

gratia amount of Rs.11000/- as per the Circular dated 15.10.2011

to the members of the Union alonwith the other allied unions and

the payment of ex-gratia amount of Rs.11000/- should not be

disallowed to the members of the Union on the ground that they

have participated in the strike of 19th & 20th September, 2011. The

relevant and material facts that are necessary for the disposal of

this petition, briefly stated, are as under.

3. The union instituted complaint (U.L.P.) 326 of 2011 complaining

of commission of unfair labour practices under section 28 (1) read

with Items 5 & 9 of Schedule IV of the Maharashtra Recognition

of Trade Unions and Prevention of Unfair Labour Practices Act,

1971 (for short 'the 1971 Act'). In the complaint it is asserted

that the union is registered as a trade union under the Trade

Unions Act, 1926. It is claimed that the union is having largest

membership of workmen employed in the Corporation as their

members. The union has been recognized by the Corporation

way back in the year 1957. The union has signed several

settlements, agreements, MOUs with the Corporation as well as

their officials. The union has been representing the workmen

employed in the Corporation for the last almost five decades or

so. Because of honest, sincere and bonafide efforts of the union

which believes in the process of collective bargaining that the

workmen employed in the Corporation could get periodical

revisions in wages, allowances, leave facilities and other terms

and conditions of employment from time to time. The union has

challenged the action of the Corporation in issuing the circular

dated 15.10.2011 and in particular clause 2 (1) thereof. By that

clause, the employees of the Corporation who took part in the

strike of 19th and 20th September, 2011 are not eligible for

payment of ex-gratia amount. The union challenged this clause

on the ground that the same is arbitrary, unjustified and

discriminatory and amounts to discrimination and/or unfair labour

practice under Item 5 of Schedule IV of the Act. It was further

averred that the ex-gratia payment is for the period of 01.04.2010

to 31.03.2011. The relevant period therefore is 01.04.2010 to

31.03.2011. However, by virtue of clause 2(1) of the said

Circular, the employees who participated in the strike on 19th &

20th September, 2011 are held ineligible. The said dates are

posterior to the period of financial year for which the ex-gratia is

paid. There is therefore no justification in denying the payment

of ex-gratia to those employees who participated in the strike of

19th & 20th September, 2011. The Corporation has thus created

artificial discrimination in the matter of the payment of ex-gratia.

The Union also specifically contended that there has been a long

standing practice in the Corporation that whenever bonus/ ex-

gratia is paid, it is paid to all the employees without

discrimination. However, during certain years there was no

declaration of bonus/ ex-gratia and no employee of the

Corporation was paid any bonus / ex-gratia. In support of this

contention, the union relied upon the chart showing the years

during which the employees of the Corporation were paid bonus/

ex-gratia without discrimination. Thus, the long standing practice

has ripened into an agreement and the breach of this agreement

amounts to unfair labour practice under Item 9 of Schedule IV of

the Act.

4. During the pendency of this complaint, the Union took out an

application for interim relief under section 30 (2) of the Act. The

Union prayed that the petitioners herein may be directed to pay

ex-gratia to all the municipal employees including the members

of the Union @ Rs.11,000/- per employee.

5. On behalf of the Corporation, Mr.Makarand Narahari Mule,

Dy.Chartered Accountant (Establishment-I) made an affidavit. It

was contended that the payment of ex-gratia is purely a matter of

grace arising out of favour or indulgence and it cannot be

demanded as a matter of right. It was contended that there was no

discrimination as alleged by the Union. In other words, it was

contended that all the employees of the Corporation whether

belonging to the Union or any other Union who participated in the

strike of 19th & 20th September, 2011 were held ineligible for

payment of ex-gratia. It was further contended that the

Corporation is under no legal obligation to pay ex-gratia as it is

neither arising out of any statutory provision nor out of any

agreement / settlement/ award. It was submitted that the

Corporation filed complaint before the Tribunal prohibiting its

employees from going on strike. By order dated 17.09.2011 the

Tribunal issued injunction restraining the employees of the

Corporation from going on strike. Despite this order the

employees of the Corporation, some of whom are members of the

Union participated in the strike. It is in these circumstances they

are not entitled to payment of ex-gratia amount. The Corporation

also denied that the long standing practice has ripened into an

agreement and the breach of agreement amounts to unfair labour

practice under Item 9 of Schedule IV of the Act. The Corporation

also denied that there was hostile discrimination or favouritism or

partiality and consequently denied commission of unfair labour

practice under Item 5 of Schedule IV of the Act.

6. By the impugned order dated 20.10.2011 the Tribunal held that

the Corporation has prima-facie committed unfair labour practice

under Item 5 of Schedule IV of the Act. It is against this order, the

Corporation has preferred this writ petition.

7. In support of this petition, Mr.Bukhari raised the following

contentions:

(i) The first petitioner being a local authority is exempt from

the purview of Payment of Bonus Act, 1965, by virtue of section

32 (iv) thereof. As a result of this, the employees of the

Corporation in law are not entitled to get bonus from the

Corporation. Thus there is no statutory and legal right vested in

the employees of the Corporation to claim bonus.

(ii) No award as contemplated under section 2(b) of the

Industrial Disputes Act, 1947 (for short 'the 1947 Act') is passed

by any Tribunal after adjudication for payment of bonus or ex-

gratia to the employees of the Corporation. Equally there is no

bilateral settlement and bilateral agreement as contemplated under

section 2 (p) of the 1947 Act between the Corporation and the

union in respect thereof. Thus there is no legal obligation on the

Corporation to pay bonus and correspondingly there is no legal

right vested in the employees of the Corporation to claim bonus/

ex-gratia. The right to receive ex-gratia flows from the unilateral

and voluntary action/ decision of the Corporation.

(iii) The dictionary meaning of the word 'ex-gratia' is as under:-

- "Given as favour or gratuitously where no legal obligation

exists and the ex-gratia payment".

- "As a favour not compelled by legal right; 'ex-gratia'

payments made to non striking workers".

The corporation issued circular dated 15.10.2011 which was itself

unilateral and voluntary policy decision for payment of ex-gratia.

By virtue of clause 2 thereof, the Corporation took conscious

decision to deny ex-gratia to certain category of employees

including those employees who went on strike on 19th & 20th

September, 2011 in breach and violation of the Tribunal's order

dated 17.09.2011 and the said decision is perfectly legal, valid

and justified.

(iv) The payment of ex-gratia is neither an implied term of

agreement, nor is a condition of service. In order to ascertain as to

whether the same is implied agreement, the following tests are

required to be complied with simultaneously;

(a) Payment must be over an unbroken series of years,

(b) It must be for a sufficient long period,

(c) The circumstances for which the payment was made

should be such as to exclude the payment made out of bounty.

At any rate, whether it is implied term of employment is a mixed

question of fact and law and not pure question of law and the

same is required to be adjudicated and determined on the basis of

evidence adduced before the Tribunal. In support of this

proposition, he relied upon the judgments of the Apex Court in

the cases of Ispahani Limited V/s Ispahani Employees Union,

AIR 1959 SC 1147 and Gaziabad Zilla Sahakari Bank Limited

V/s.Additional Labour Commissioner, 2007 Lab.I.C.1525, and

in particular Paragraph 69.

(v) He further submitted that the payment of ex-gratia is not in the

nature of customary or traditional bonus. For deciding the said

issue the Tribunal will have to consider -

(a) whether the payment has been over an unbroken series of

years,

(b) whether it has been for a sufficient long period, though

length of the period might depend on the circumstances of

each case, even so the period may normally have to be longer

to justify an inference of traditional and customary bonus ....

may be the case with bonus based on an implied term of

employment.

(c) the circumstances that the payment depended upon the

earning of profits, would have to be excluded and therefore it

must be shown that payment was made in years of loss.

(d) the payments have been made at the uniform rate

throughout.

He submitted that this is also the mixed question of fact and law

and not pure question of law, which requires proper evidence and

adjudication by the Tribunal. In support of this proposition he

relied upon the judgments of the Apex Court in the cases of

Graham Trading Company (India Limited) V/s.Their

Workmen, AIR 1959 SC 1151 and in particular Paragraph 6

thereof and Munshi Dass V/s.Mal Singh, (1977) 4 SCC 65.

(vi) The action of the Corporation in excluding employees who

participated in the strike on 19th & 20th September, 2011 in terms

of clause 2(1) of the Circular dated 15.10.2011 does not amount

to unfair labour practice within the meaning of Item 5 of Schedule

IV of the 1971 Act. The said item has been interpreted by the

Apex Court in the case of CEAT Limited V/s.Anand Abasaheb

Hawaldar, 2006 LAB. I.C. 1675.

(vii) The Tribunal has not recorded any prima-facie finding

about Item 9 of Schedule IV of the Act. The judgment in the case

of BEST V/s.BEST Kamgar Sena, 1986 (52) FLR 39 is not

applicable in the present case as the said case arose out of the

decision of the Tribunal after a full fledged trial. In the present

case we are concerned with the impugned order passed at the

interim stage.

(viii) The Tribunal was not justified in granting interim relief

which is in the nature of final relief. In support of this

proposition he relief upon the following judgments;

(a) State of U.P. and Others V/s.Sandeep Kumar Balmiki &

Ors., 2009 III CLR 550,

(b) M.S.R.T.C. Nagpur V/s.Raju Mahadevrao Bhagwatkar,

2003 II CLR 797,

(c) V.K.Engineering Workers Private Ltd. V/s.V.B.Gunjotikar, 1997 I CLR 1144.

8. On the other hand Mr.Kamdar raised following contentions;

(i) The present case is squarely covered by the judgment of the

learned Single Judge of this Court in the case of BEST V/s.BEST

Kamgar Sena (supra). Relying upon this judgment, he submitted

that the said judgment is a binding precedent and if this Court is

inclined to take a different view, the only option available is to

refer the matter to a larger Bench.

(ii) The payment of ex-gratia is not by way of gratis, but is a

matter of right as per Part I of the Circular dated 15.10.2011. By

clause 1 of Part I of the Circular the ex-gratia is admissible to all

the full time employees appointed in the regular pay scale. The

right to receive ex-gratia is crystalised by this clause. Clause 2(1)

of the Part II of the said circular is ex-facie arbitrary,

discriminatory and it amounts to an unfair labour practice covered

by Item 5 of Schedule IV of the Act as it takes away the right so

crystalised.

(iii) Clause 2(1) of the Circular dated 15.10.2011 is in the nature

of imposition of penalty, without following the due process of

law. This is also contrary to sections 22, 23 and 26 of the 1947

Act, and consequently clause 2(1) of the said Circular is invalid

and illegal.

(iv) Clause 2 (1) of the said Circular amounts to unfair labour

practice under Item 9 of Schedule IV of the 1971 Act. In the

instant case, on the basis of material available on record, the

payment of ex-gratia amount is established as a long standing

custom, usage and practice. The chart produced by the Union

alongwith the complaint indicates that the payment of ex-gratia

amount in lieu of bonus was made right from the year 1985 to

2010 excluding the period of three years i.e. 1999-2000,

2000-2001 and 2001-2002. During this period the amount was not

paid because of the financial problem faced by the Corporation.

In any case, whenever the payment of ex-gratia was made, it was

made uniformly to all the employees which in itself has become a

long standing practice and therefore it is now an implied term of

agreement and has become a condition of service. At any rate the

assertions made by the Union in that regard were not denied by

the Corporation. In support of his submissions, Mr.Kamdar relied

upon the following judgments;

(a) BEST V/s.BEST Kamgar Sena, 1986 (52) FLR 39,

(b) R.D.Gupta & Ors V/s.Lt.Governor, Delhi Administration & Ors, (1987) 4 SCC 505,

(c) Premier Automobiles Ltd. V/s. Engineering Mazdoor Sabha, 1982 Lab.I.C.1759,

(d) Bombay Tyres International Limited V/s.All India, Bombay, 2000 II CLR 874,

(e) Tata Tea Ltd. (Bombay) Employees Union V/s. Tata Tea

Limited, 2007 (6) Bom.C.R.491,

(f) M/s.Richardson & Cruddas 1971 Ltd. V/s.Mahadeo, 1984

Lab.I.C.1227.

9. I have considered the rival contentions raised by learned counsel

appearing for the parties. I have also gone through the written sub

missions submitted by them. In the instant case, it is not seriously

in dispute that the employees of the Corporation are not entitled

to payment of bonus under section 32 (iv) of the Payment of

Bonus Act, 1965. There is also no serious dispute between the

parties as regards absence of any interim or final award/ an

arbitration award under section 2(b) of the 1947 Act. Equally

there is no settlement/ express written agreement entered into

between the parties towards payment of ex-gratia under section

2(p) of the 1947 Act. It is the case of the union that there is a long

standing practice for payment of ex-gratia amount on the basis of

chart indicating payment made from the year 1985 to 2010

excepting the three years. This long standing practice has become

an implied agreement between the parties and is now a condition

of service.

10.The question that arises in the present petition is whether this can

be decided at an interim stage or whether it requires leading of

evidence by both sides. In order to answer this question, it is

necessary to refer to the judgment of the Apex Court in the case

of Ispahani Ltd. (supra). Paragraph Nos.6 & 7 of that report read

as under:-

"6.Puja is a special festival in Bengal and it has become usual

with many firms there to give bonus before puja to their workmen. This matter came up before the Appellate Tribunal in Mahalaxmi Cotton Mills Ltd., Calcutta v.Mahalaxmi Cotton Mills Workers's Union, 1952 Lab AC 370 (LATI). In that case puja bonus was claimed as a matter of right, payable by the

employer at a special season of the year, namely at the time of the annual Durga Puja. This right was not based on the

general principle that labour and capital should share the surplus profits available after meeting prior charges. It was

held in that case that this right rested on an agreement between the employer and the the employees, and that the agreement might be either express or implied. Where the agreement was not express, circumstances might lead the tribunal to an inference of implied agreement. The

following circumstances were laid down in that case as material for inferring an implied agreement:

(1) The payment must be unbroken;

(2) It must be for a sufficiently long period; and (3) The circumstances in which payment was made should be

such as to exclude that it was paid out of bounty.

The Appellate Tribunal further pointed out that it was not possible to lay down in terms what should be the length of period to justify the inference of implied agreement and

that would depend upon the circumstances of each case. It also pointed out that the fact of payment in a year of loss would be an important factor in excluding the hypothesis that the payment was out of bounty and in coming to the conclusion that it was as a matter of obligation based on implied agreement. As to the quantum of bonus it was laid down that even if payment was not at a uniform rate

throughout the period, the implied agreement to pay something could be inferred and it would be for the tribunal to decide what was the reasonable amount to be paid as puja bonus. The

tests laid down in that case have since been followed in a number of cases by the Industrial Tribunals and the Labour

Appellate Tribunal. We do not think it necessary to refer to all those cases. It may now be taken as well settled that puja bonus in Bengal stands on a different footing from the profit bonus based on the Full bench formula evolved in Mill

Owners's Association, Bombay v. Rashtriya Mill Mazdoor Sangh, Bombay, 1950-2 Lab LJ 1247 (FB) (LATI-Bom). The claim for puja bonus in Bengal is based on either of two grounds. It may either be a matter of implied agreement between employers and employees creating a term of

employment for payment of puja bonus, or (secondly) even though no implied agreement can be inferred it may be

payable as a customary bonus. In the present case we are concerned with the first category, (namely, that based on an

implied agreement creating a term of employment between the employer and the employees), and so we shall confine ourselves to that category. It was this kind of bonus which was considered by the Appellate Tribunal in Mahalaxmi Cotton Mills Case, 1952 Lab AC 370 (LATI). We are of opinion that

the tests laid down in that case for inferring that there was an implied agreement for grant of such a bonus are correct and it

is necessary that they should all be satisfied before bonus of this type can be granted."

"7. This brings us to the two questions raised on behalf of the

company, as set out above. The first question, (namely, that the Appellate Tribunal had no jurisdiction to interfere with the finding of the Industrial Tribunal that being a question of fact) can be easily disposed of. We are of opinion that the decision whether there is an implied term of employment is

a mixed question of fact and law and not a pure question of fact. This is similar to the decision, for example, on a question whether a custom has been established or whether adverse possession has been proved, or whether a Hindu family has ceased to be joint as a matter of law accepting the facts proved. The Appellate Tribunal will therefore have jurisdiction to consider whether on the facts proved

before the Industrial Tribunal an inference in law can be drawn that an implied term of employment for grant of puja bonus has been established. The Appellate Tribunal

therefore had jurisdiction to consider this matter."

11.Mr.Kamdar, during the course of argument submitted that the

claim made by the Union for payment of ex-gratia is based upon

long standing practice and is not based upon the custom. The long

standing practice in the matter of payment of ex-gratia is evident

and established from the chart produced by the Union alongwith

the complaint and no evidence is required to be adduced for that

purpose.

12.I have already noted earlier that excluding the period of three

years i.e.1999-2000, 2000-2001 and 2001-2002, the Corporation

paid ex-gratia amount in lieu of bonus from the year 1985 to

2010. In the case of Espahani Ltd. (supra), the Apex Court was

considering the tests applied by the Appellate Tribunal in

inferring the implied agreement. It was observed in Paragraph 6

of that report that where an agreement was not express, the

circumstances might lead the Tribunal to an inference of implied

agreement. The following circumstances were laid down in that

case as material for inferring an implied agreement:-

(i) The payment must be unbroken;

(ii) It must be for a sufficiently long period; and

(iii) The circumstances in which payment was made should be

such as to exclude that it was paid out of bounty.

The Appellate Tribunal therein, further pointed out that it was not

possible to lay down in terms what should be the length of period

to justify the inference of implied agreement and that it would

depend upon the circumstances of each case. It was also pointed

out that the fact of payment in a year of loss would be an

important factor in excluding the hypothesis that the payment was

out of bounty and in coming to the conclusion that it was as a

matter of obligation based on an implied agreement. Thus, prima-

facie at this stage, on the basis of judgment of the Apex Court in

the case of Ispahani Ltd. (supra) it is not possible to accept the

submission of the Union that it has established a long standing

practice, as admittedly during the three years noted above the

Corporation did not make payment of ex-gratia.

13.In the case of B.N.E. & Co.Employees Union (supra), the case of

the appellants therein was that, that they were entitled to bonus as

a condition of service irrespective of profit or loss. According to

the appellants the bonus was always paid from 1942 to 1952. The

Respondents contended that they were not in a prosperous

condition and were unable to pay any further bonus besides what

had already been paid for the years in dispute. It was denied by

them that these payments were paid as a condition of service or as

an implied term of agreement irrespective of profit or loss. In

Paragraph 5 of that report, the Apex Court noted that the evidence

showed that though payment was made uninterruptedly from

1942 to 1952 three times a year to the clerical staff and four times

a year to the subordinate staff, it was made clear every time the

payment was made that it was an ex gratia payment. Further, the

receipts given by the employees, a sample of which was produced

showed that the bonus was accepted as ex-gratia bonus. As is

pointed out in M/s.Graham Trading Co.(supra), it would not be

possible to imply a term of service on the basis of an implied

agreement when the payment was clearly made ex-gratia and had

even been accepted as such. In the instant case, prima-facie from

the year 1985 to 2010 excepting the three years, the Corporation

made payment of ex-gratia which was also accepted by the

employees of the Corporation as ex-gratia payment. In view of

this, prima-facie at this stage, in the absence of any evidence on

record, it cannot be said that there is implied agreement between

the parties or that it has become a condition of service.

14.Mr.Kamdar strenuously relied upon the judgment of the learned

Single Judge of this Court in the case of B.E.S.T. Undertaking

(supra). The said order reads as under:-

"Admittedly the petitioner refused to pay to the workers on whose behalf the complaint was filed the ex-gratia payment in lieu of bonus for the accounting year 1983-84 which as per the Resolution dated 3rd October, 1984 was payable to the

entire staff. The payment was refused on the basis of a subsequent resolution dated 15th October, 1984 which

made the amount payable only to those workers who attended duty at least for three days during the period

when some workers were on strike. This resolution was ridiculously discriminatory, unreasonable and arbitrary and itself amounted to an unfair labour practice, within the meaning of item 5 of Sch.IV of the MRTU & PULP Act, 1971. The learned Member of the Industrial Court is also right in

holding that the practice of paying ex-gratia amount in lieu of bonus to all workers for several years has ripened into an

agreement which was breached by the impugned agreement. The question that the concerned authorities of the undertaking did not sanction the amount required for payment to the

concerned workers, is irrelevant. Hence rejected. "

15.Perusal of extracted portion indicates that as per the resolution

dated 03.10.1984 the bonus was payable for the accounting year

1983-1984 to the entire staff. The payment was refused on the

basis of subsequent resolution dated 15.10.1984 which made the

amount payable only to those workers who attended the duties

atleast for three days during the period when some workers were

on strike. The facts therein appear that the strike was for a period

longer than three days. By Resolution of 15.10.1984 the amount

was made payable to those workers who attended the duty atleast

for three days during the period when some of the workers were

on strike. Thus further classification was made between the

employees who participated in the strike. The payment was made

under Resolution dated 15.10.1984 to those who attended the

duties atleast for three days and was denied to those employees

tho did not attend the duties for atleast three days during the strike

period. It is in that context it was observed that the Resolution

dated 15.10.1984 was ridiculously discriminatory, unreasonable

and arbitrary and that it is amounted to unfair labour practice

within the meaning of Item 5 of Schedule IV of the 1971 Act. The

learned Single Judge of this Court affirmed the finding of the

Tribunal that the practice of paying ex-gratia amount in lieu of

payment of bonus to all workers for several years has ripened into

an agreement. In my opinion, the question where the practice for

payment of ex-gratia amount has ripened into an agreement is a

disputed question of fact which has to be established by the

parties by leading evidence in support of their respective

contentions. The judgment in the case of BEST (supra) was

decided by the Tribunal after a full fledged trial. After considering

the material on record, the Tribunal recorded a finding that the

practice of paying ex-gratia in lieu of bonus has ripened into an

agreement. In the present case while allowing the application

Exhibit U-2, the Tribunal has not recorded any finding as regards

commission of unfair labour practice under Item 9 of Schedule IV

of the 1971 Act. That apart, the Tribunal is considering the

application for interim relief where the parties have yet to

substantiate their rival case by leading evidence. I am therefore of

the considered opinion that at the interlocutory stage, the

judgment in the case of BEST undertaking (supra) will not be

applicable.

16.Mr.Kamdar heavily relied upon the judgment of the Apex Court

in the case of R.D.Gupta (supra). In that case, the question was

about the grant of pay-scales at the rates recommended by the

Shivshankar Committee (SS Committee) for the employees of

Delhi Electricity Supply Undertaking (DESU) to only section of

ministerial staff of New Delhi Municipal Committee (NDMC),

who happened to be working in the electricity wing at the relevant

time. One of the questions that was raised in C.W.280 of 1979

was pertaining to the grant of ex-gratia payment to only section of

NDMC employees. In the Union Territory of Delhi, there are two

main civic bodies viz. NDMC and the Municipal Corporation of

Delhi (MCD). The NDMC comprises of New Delhi as it existed

prior to 1947 and was constituted under the Punjab Municipal

Act, 1911. The NDMC discharges all civic functions including

supply of water and electricity in the area falling within its

jurisdiction. The MCD was constituted in pursuance of the Delhi

Municipal Corporation Act, 1957 by amalgamating within itself

few other smaller civic bodies, which existed independent of

NDMC and the resultant position was that the rest of the areas

fell within the jurisdiction of the MCD.

17.The NDMC forming a compact unit had divided civic work into

various departments. Besides engaging technical staff, the NDMC

engaged non-technical staff, such as municipal staff, clerks, etc

for working in various departments including the electricity and

water supply. In so far as non technical staff are concerned, they

constitute one unified cadre and are liable to be transferred from

one department to another. They are governed by a common

channel of seniority, in respect of each class of employees with

common seniority list. The set up of the MCD is however

different since the Delhi Municipal Corporation Act provides for

constitution of three separate and independent wings viz. (i)

electricity wing, (ii) general wing and (iii) water, sewage and

disposal Wing. The electricity wing came to be designated as

DESU and is governed by independent budget and headed by a

separate and independent General Manager and its employees are

governed by a separate cadre and a separate seniority list. The

general wing of the MCD performs the other general civic duties

and functions. The third wing is concerned with distribution of

water and disposal of sewage etc. and it is also independent of the

general wing.

18.To satisfy the demands of the employees of the MCD and NDMC

etc, the Government accepted the report of the Third Pay

Commission appointed by it, and the pay-scales as recommended

by the Pay Commission were also accepted by NDMC as well as

general wing of the MCD. The technical staff of DESU claimed

higher scales of pay as they were not satisfied with the pay-scales

recommended by the Pay Commission. The Government

therefore constituted SS Committee to go into the question of

revision of pay-scales of the technical staff alone of DESU and

the SS Committee submitted report in 1973. The non technical or

ministerial staff of DESU who were not governed by the report of

the SS Committee, demanded and agitated that they should also

be granted pay at the rates recommended by the SS Committee.

At its meeting held in May, 1973 the DESU conceded the

demands of the ministerial staff and decided to revise the pay-

scales of the non technical staff working in DESU to the level

recommended by the SS Committee. Since the technical and

ministerial staff working in DESU were granted SS Committee

pay-scales by the MCD, on the assumption that the staff working

in the electricity wing of the NDMC were performing the same or

similar functions & duties, as those performed by the staff of

DESU, the NDMC was of the view that the technical and

ministerial staff working in the electricity wing of NDMC should

also have the benefit of revised pay-scales recommended by the

SS Committee and hence the parity of pay and allowances should

be maintained. Accordingly, the NDMC passed resolution on

19.10.1073 that the benefits of pay & allowances as per the SS

Committee, be given to the staff of electricity wing of NDMC. By

another resolution dated 07.01.1974 the NDMC decided to give

benefit of the revised pay-scales w.e.f.01.04.1972 to fall in the

line with actions of DESU.

19.The grant of SS Committee pay-scales to only those members of

the ministerial staff working in the electricity wing brought about

discontentment among the staff working in the general wing of

the NDMC. They claimed that they should also be paid at the rate

prescribed by the SS Committee and not as per the pay-scales

recommended by the Third Pay Commission. The petition was

filed in the Delhi High Court and the Delhi High Court directed

the NDMC to consider afresh the question of revision of pay-

scale for all the sections of ministerial staff in accordance with

law. After giving an opportunity to all sections of the employees

to make their representations, the NDMC passed resolution on

27.06.1978 constituting the electricity wing w.e.f. 01.05.1978

among other things.

20.The said resolution was challenged in the Delhi High Court. In so

far as CW 280 of 1979 is concerned, it pertained to the grant of

ex-gratia payment to the only section of NDMC employees. Ever

since 1972, the employees and their unions were demanding ex-

gratia payment on the ground that since the employees of DESU

were being paid ex-gratia amount they should also be paid

likewise. By letter dated 01.02.1972 the Delhi Administration

permitted the NDMC to make ex-gratia payment to the employees

of electricity wing on the same lines as was being valid in DESU.

Similarly, on 07.02.1973 the Delhi Administration permitted the

grant of ex-gratia payment to the employees working in the water

supply and sewage disposal wing of the NDMC also on the

ground that their counter parts in the water supply and sewage

disposal undertaking in the MCD were being paid ex-gratia

amount.

21.The ministerial staff in the general wing who were not granted ex-

gratia payment raised the protest. Eventually the NDMC passed

the resolution on 25.07.1977 that the ex-gratia payment be made

to all the employees of common categories such as clerks,

superintendents etc. and the payment be made subject to the

condition that the employees would refund the amounts if the

proposal was not approved by the Delhi Administration.

Subsequently the Delhi Administration did not approve the

proposal and consequently, the NDMC called upon the staff of

the general wing to refund the ad-hoc payment given by way of

advance towards the ex-gratia payment, which gave rise to filing

of CW 280 of 1978.

22.In so far as the refusal to grant payment of ex-gratia amount to the

staff of the general wing of NDMC is concerned, the High Court

saw justification in payment of ex-gratia amounts to the

employees in the electricity wing and water supply & sewage

disposal wing also because of the nature of their duties and

because of the precedent afforded by the MCD in granting such

payment to the staff of the DESU and the water supply & sewage

disposal department. However the High Court took into

consideration long delay that had occurred and the hardship that

would result to the employees of the general wing by complying

with the order of refund, and therefore, directed the NDMC to

treat the payment as one time special ad-hoc payment, not

serving as a precedent, and refrain from recovering the said

amount. In that context, the Apex Court observed in Paragraph 29

as under:-

"29.We are unable to appreciate the reasoning of the High Court and sustain its conclusion on this aspect of the matter. The High Court has failed to see that no rational or acceptable reason is put

forward for justifying the ex gratia payment only to the ministerial staff working in the electricity wing and the

waterworks wing and denying the same to the staff working in the general wing. The only reason given is that the payment of ex gratia amount is patterned on the lines of the DESU and the Water Supply and Sewage Disposal Undertaking of the MCD. The

pattern of payment adopted by the MCD cannot have any binding force on the NDMC because the three units of MCD are different and distinct entities whereas the three wings of the NDMC are interdependent wings of an integrated Municipal Committee. Therefore, in the absence of justifiable reasons of a compulsive

nature, the payments, whether as salary or as ex gratia amount have to be on the same and equal basis and not differently for the

different wings of the NDMC. In fact, what all we have said regarding the payment of uniform pay at the scales recommended

by SS Committee would squarely apply to the payment of ex gratia amount also. Hence CA No.2969 of 1983 and SLP No. 11270 of 1982 (CA No.1688) deserve to succeed.".

23.Relying upon this judgment, Mr.Kamdar contended that the

Corporation has shown favouritism or partiality between the two

sets of its employees regardless of merits. The members of the

Union who participated in the strike of 19th & 20th September,

2011 are also the employees of the Corporation. However, ex-

gratia payment is denied to them on the ground that they

participated in the strike on 19th & 20th September, 2011. He has

submitted that the Corporation has discriminated between the

employees of the Corporation and thus violated Article 14 of the

Constitution of India. In paragraph 29 extracted herein-above, the

Apex Court recorded that there was no rational or acceptable

reason put forward for justifying ex-gratia payment only to the

ministerial staff working in the electricity wing and water supply

wing and denying the same to the staff working in the general

wing. The only reason given was that the payment of ex-gratia

amount is patterned on the lines of DESU and the water supply

and sewage disposal undertaking of the MCD. The pattern of

payment adopted by the MCD cannot have any binding force on

the NDMC because the three units of MCD are different and

distinct entities where as the three wings of the NDMC are

interdependent wings of an integrated Municipal Committee.

Therefore, in the absence of justifiable reasons of compulsive

nature, the payments, whether as a salary or as ex-gratia amount,

had to be on the same and equal basis and not differently for

different wings of the NDMC.

24.In the instant case the Corporation prima-facie has reason to deny

ex-gratia payment to those employees, whether they are the

members of the Union or any other allied union on account of

their participation in the strike of 19th & 20th September, 2011,

despite the order of injunction issued on 17.09.2011 by the

Tribunal. Though there was the order of injunction restraining the

employees of the Corporation from going on strike inforce, some

of the employees including some of the members of the union

went on strike on 19th & 20th September, 2011. Since the

Corporation is a civic body and is under a statutory obligation to

provide several amenities to the residents within its municipal

limits, the Corporation was justified, in order to maintain

discipline, to deny ex-gratia payment to those employees who

participated in the strike on 19th & 20th September, 2011. By

clause 2(1) of the Circular dated 15.10.2011, the Corporation has

denied the said payments to the employees who participated in the

strike on 19th & 20th September, 2011, irrespective of the fact

whether they belong to the Respondent union or any other union.

25.That apart, as observed by the Apex Court in the case of CEAT

Ltd. (supra) in paragraph 11, the Legislature has consciously used

the words "favouritism or partiality between the set of workers' in

Item 5 of Schedule IV of 1971 Act and not differential treatment.

The mental element of bias is necessary to be established by

cogent evidence. Thus, at the interlocutory stage, in my opinion,

prima-facie the Tribunal was not justified in recording the finding

to the effect that the Corporation has committed unfair labour

practice covered by Item 5 of Schedule IV of the Act. In

paragraph 14 of the said report, the Apex Court has observed that

it is not every kind of differential treatment which in law, is taken

to vitiate an Act. It must be prejudice which is not founded on

reason and actuated by self interest - whether pecuniary or

personal. As noted earlier, in the present case, the evidence is yet

to be recorded and at the interim application stage, in my opinion,

the Tribunal was not prima-facie justified in arriving at this

finding in the absence of any evidence on record.

26.Mr.Kamdar submitted that at any rate, the Corporation committed

serious error in denying payment of ex-gratia amount on the

specious ground that these employees participated in the strike of

19th & 20th September, 2011, particularly when the ex-gratia

payment is for the accounting/ financial year 2010-2011 i.e.to say

for the period from 01.04.2010 to 31.03.2011. The employees

participated in the strike on 19th & 20th

September, 2011, which is posterior to the period of said financial

year for which the ex-gratia is paid. There is therefore no

justification in denying ex-gratia on the spacious ground of

participation in the strike of 19th & 20th September, 2011.

27.Mr.Bukhari countered this submission by contending that in the

Circular dated 15.10.2011 the period 01.04.2010 to 31.03.2011 is

given only for the purpose of calculation of actual working days,

on the basis of which the pro-rata ex-gratia payment is to be made

to the employees and it is nothing to do with the accounting/

financial year, as the Corporation is not making the payment on

the basis of profits earned during the said accounting/ financial

year. Perusal of Circular dated 15.10.2011 and in particular

clauses (2) & (3) of Part I, prima-facie supports the contention of

Mr.Bukhari. In order to calculate the actual working days, on the

basis of which pro-rate ex-gratia payment is to be made to the

employees, it is necessary to identify the period.

28.Mr.Kamdar further submitted that the right of the employees of

the Corporation is crystalized in clause 1 of Part I of the said

Circular, and that cannot be taken away by clause 2 (1) of Part II.

29.Mr.Bukhari is right when he contends that the Circular has to be

read in its entirety and if read as a whole, it cannot be said that by

clause 1 of Part I right is conferred and by Part II the said right is

taken away. For instance under clause (4) of Part II the teaching

staff in the Municipal Medical College & Hospital and who are

getting pay-scale of U.G.C., are excluded from payment of ex-

gratia, though they may be permanent and appointed on regular

basis.

30.Mr.Kamdar further contended that at any rate, it amounts to

imposition of penalty without following the due process of law.

While elaborating this submission, he relied upon sections 22, 23

and 26 of the 1947 Act. Section 22 prohibits the persons

employed in public utility service from going on strike in breach

of contract without complying the mandatory requirements set out

therein. Section 23 prohibits the workmen from going on strike in

breach of contract as also prohibits the employer of any such

workmen from declaring lockout without complying with the

requirements set out therein. Section 24 declares the strike or the

lockout as the case may be illegal, if it is commenced or declared

in contravention of section 22 or 23. Section 26 provides that any

workmen who commences, continues or otherwise acts in

furtherance of the strike which is illegal under the 1947 Act, shall

be punishable with imprisonment for a term which may extend to

one month or with fine which may extend to 50 rupees or both.

Relying upon these provisions, Mr. Kamdar submitted that even

the penalty of denying ex-gratia to those employees who

participated in the strike of 19th & 20th September, 2011 is not

authorised by the statute. I do not find any substance in this

submission. In the first place, prima-facie I have already held that

in order to maintain discipline and having regard to the very

nature of functioning of the Corporation, the Corporation is

justified in denying ex-gratia to those employees who participated

in the strike on 19th & 20th September, 2011 despite the order of

injunction issued against them. Secondly, having regard to the

scheme of section 22 to 26 of the 1947 Act, the authority to

impose penalty is conferred upon the Court. Thirdly, the

Corporation has denied ex-gratia to the employees who

participated in the strike on 19th & 20th September, 2011, and the

said denial cannot be termed as penalty, as prima-facie, the said

payment is based neither on an agreement nor on any settlement.

The said right is also not flowing from any statutory provision

and is purely given as a measure of grace.

31.Mr.Kamdar further submitted that the Corporation violated Article

14 of the Constitution of India while denying ex-gratia to those

employees who participated in the strike of 19th & 20th September,

2011. I do not find any substance in this submission for the

reasons already recorded.

32.Mr.Kamdar further contended that the timing to make payment of

ex-gratia is very significant. The Corporation is paying ex-gratia

during the festival of Diwali every year. The Tribunal was

therefore justified in ordering the payment of ex-gratia and no

interference is called for. At any rate, the interest of the

Corporation is properly secured by the Tribunal. It is

undoubtedly true that the festival of Diwali has significance

through out India. However, what is important to note is that the

right of the employees of the Corporation flows from the Circular.

I have already noted that prima-facie, at this stage, it cannot be

said that the Union has established its case either of an implied

term of agreement or a condition of service. I therefore do not

find any substance in this submission.

33.Finally, Mr.Kamdar submitted that the Tribunal has power under

section 30 (2) to grant appropriate interim relief under the 1971

Act. There is no dispute with this proposition. Section 30 (2)

undoubtedly, empowers the Tribunal to grant interim relief and

declare engagement of unfair labour practice and further directing

and specifying any person to cease and desist from practicing

such unfair labour practice.

34.While the Tribunal has jurisdiction to grant interim orders, such

orders ought not be passed as a matter of course unless prima

facie case is made out in regard to commission of unfair labour

practice. Equally the Labour Courts under the 1971 Act do have

power to grant interim relief and in exceptional cases may grant

relief of mandatory nature, but, this power has to be exercised

sparingly and with great caution in the cases such as where the

employer is acting manifestly malafide and for extraneous

purposes. Otherwise, the interference by the Labour Court at an

interlocutory stage is unwarranted and such interference is likely

to impede the efficiency of service and to lead to grave

consequences, particularly in the context of an employer such as

the Corporation who discharges duties having a bearing on the

provision of utility service to the public and the community at

large.

35.The question is whether in the facts and circumstances of the

present case the Tribunal is justified in passing such interim order.

In the first place, in my considered view, the Corporation was

justified in denying ex-gratia payment to those employees who

participated in the strike on 19th & 20th September, 2011 having

regard to the very nature of functioning of the Corporation.

Secondly, despite the Tribunal granting injunction on 17.09.2011

thereby prohibiting the employees of the Corporation from going

on strike, some of the employees of the Corporation participated

in the strike. To say the least, prima-facie this amounts to acting

in breach of the said order dated 17.09.2011. Whether the strike

of 19th & 20th September, 2011 is legal or illegal will be decided at

the appropriate stage, but nonetheless, prima-facie, in my opinion,

in the teeth of the order of the Tribunal dated 17.09.2011 the

employees of the Corporation were not justified in participating in

the strike. This is necessary for maintaining the discipline in the

establishment, otherwise the employees who participated in the

strike would get signal that despite acting contrary to the order

passed by the competent Court, they are getting benefits

conferred on the other employees who did not participate in the

strike. In other words it will amount to putting premium on the

wrong doer.

36.Taking overall view of the matter, I am clearly of the opinion that

the Tribunal committed serious error in passing the impugned

order in the nature of granting monetary relief at the interim stage.

The impugned order cannot be sustained and requires to be

quashed and set aside and it is accordingly set aside. Application

Exhibit U-2 in Complaint (U.L.P.) No.326 of 2011 stands

dismissed. Rule is made absolute in terms of prayer clause (a).

In the circumstances of the case, there shall be no order as

to costs.

37.It is expressly made clear that the observations made and the

findings recorded herein are only for the purpose of disposal of an

Application Exhibit U-2 and the Tribunal will decide the

complaint on the basis of material on record and on its own

merits, in accordance with law, without being influenced by the

observations made and the findings recorded herein.

38.At this stage, Ms.Neeta Karnik, learned counsel for the

Respondent Union has orally prayed for stay of this order.

Learned counsel for the Corporation opposes the said application.

Having regard to clause (iv) of the order dated 26.10.2011 passed

by this Court in LPA, it is not possible to grant stay of this order.

The oral application for stay is accordingly rejected.

(R.G.KETKAR, J.)