Usha Spinning & Weaving Mills ... vs Usha India Ltd & Ors.
1998 Latest Caselaw 1040 Del

ORDER

Y.K. Sabharwal, J.

1. The question to be determined in this appeal is whether the settlement recorded by the Deputy Labour Commissioner, Faridabad is binding on the appellants or not. The appellants claim that they were not members of the Union which had entered into the settlement with respondent No.1 and, therefore, they are entitled to pursue their remedies under Industrial Disputes Act, 1947 (for short' the Act') and the settlement in question is not binding on them. It would also have to be examined whether the settlement was arrived at during conciliation proceedings or dehorse said proceedings. But first the brief facts :

2. On a creditor's winding up petition, M/s. Usha Spinning & Weaving Mills Ltd. (for short 'the company') was ordered to be wound up in terms of the order passed on 6th November, 1986. CA.878/93 was filed by M/s. Usha Rectifier Corporation (I) Ltd. under Sections 391(1), 393, 394 and 466 of the Companies Act submitting a Scheme for Revival of the Company under liquidation. On 17th December, 1993 the said application was allowed and directions were issued for convening of meetings of secured creditors, unsecured creditors, equity holders etc. and the winding up order passed on 6th November, 1986 was stayed till further orders. The name of the propounder of the Scheme has since been changed from Usha Rectifier Corporation (I) Ltd. to Usha (India) Ltd., respondent No.1 herein. The scheme with some modification was sanctioned in terms of the orders dated 14th March, 1995 passed by learned Single Judge. The scheme, inter alia, provided that due charges of the workmen will be settled after entering into Agreement with the workers through their union. By the order dated 14th March, 1995 sanctioning the scheme, following directions as regards workers claims were issued:

"1. Within four weeks from today the Company will put up the claim of the workmen for adjudication before the Deputy Labour Commissioner, Faridabad (Haryaya).

2. On submissions of the claims of the workmen, the Deputy Labour Commissioner, after hearing the workers through their Union will make due adjudication, in accordance with law and record his decision within a period of six weeks from the date of submission of the claims.

3. On adjudication of the claim by the Deputy Labour Commissioner, the company will pay and clear the dues of the workmen within one month from the date of adjudication of the claim.

4. This payment will be exclusive of the claim of the workmen towards their dues of Provident Fund and Employees State Insurance Claim and other statutory dues, which will be settled and paid in accordance with the provisions as contained in the Scheme.

5. The company will not commence production till the dues of the workers are duly adjudicated upon, settled and paid. No fresh loan or advances would be invited by the company from financial institutions or banks until the scheme is put in execution and till the dues of the workers are settled and paid.

With this modification, the scheme as proposed for rehabilitation is considered to be in the interest of the company in liquidation and the same is hereby confirmed and sanctioned."

3. It appears that 46 workers filed an application before the Deputy Labour Commissioner, Faridabad stating that they had no connections with the Union and the decision made by the Union is not acceptable to them and also to some other workers. Further it appears that a settlement dated 13th June, 1995 between respondent No.1 and CITU Union was filed before the Deputy Labour Commissioner, Faridabad (Haryana), who has sent it to the Company Court. CA. 562/95 was filed before the Company Court by the workers who were objecting to the settlement and claiming that the same was not binding on them. In that application, it was, inter alia, stated that none of the 53 objectors/applicants is or ever was a member of the Union named CITU and, therefore, the settlement was not binding on them. They claim to have formed an association under the name and style of Usha Spinning & Weaving Mills (Ex-Workmen) Association. In the application it was averred that the settlement was arrived t behind their back.

4. By the impugned judgment dated 28th July, 1995 learned Single Judge has rejected the contention that the objectors are not bound by the settlement recorded by the Deputy Labour Commissioner on the ground that they were never members of the Union. The judgment under appeal also notices that more than 1,000 workers were satisfied with the settlement recorded by the Deputy Labour Commissioner and the objectors ought to have remained vigilant in case they were aggrieved and they should have obtained the appropriate directions from the Company Court before the settlement was recorded by Deputy Labour Commissioner on 13th June, 1995. It has been further observed in the impugned judgment that they had approached the court after a period of more than one month. The application filed CA.562/95 was dismissed. The workers are in appeal before us :

5. It is not in dispute that an application dated 5th June, 1995 was filed by the appellants before the Deputy Labour Commissioner stating that the settlement being arrived by the Union was not acceptable to them and they had no connection with the said Union. The settlement dated 13th June, 1995 recorded by Deputy Labour Commissioner does not make any reference to the objection having been filed by any workers. The said settlement also does not show whether the 9 workers who were signatories to the settlement were office bearers of M/s. Usha Spinning & Weaving Mills Employees Union or they had been duly authorised to enter into the said settlement. The fact that large number of workmen were satisfied with the settlement and had accepted it, by itself is not of much significance so as to make settlement binding on those who were not parties to it and were not accepting it. Further the diligence of appellants is apparent from the fact that they had objected to the settlement eve efore the Deputy Labour Commissioner. Be that as it may, let us also examine the question subject matter of this appeal, in the light of the provisions of the Act.

6. Section 2(p) of the Act defines "Settlement". It would be useful to reproduce the said provision:

Section 2(p)

"Settlement" means a settlement arrived at in the course of conciliation proceeding and includes a written agreement between the employer and workmen arrived at otherwise than in the course of conciliation proceeding where such agreement has been signed by the parties thereto in such manner as may be prescribed and a copy thereof has been sent to (an officer authorised in this behalf by) the appropriate Government and the conciliation officer).

7. Chapter-III of the Act deals with reference of disputes to Boards, Courts or Tribunals, the appropriate Government can make reference of an industrial dispute to Board for promoting a settlement thereof as provided in Section 10(1)(a) and for adjudication of dispute to Court or Tribunal as provided in Section 10(1)(c)(d).

8. "Board" means a Board of Conciliation constituted under the Act. (Sec. 2(c)., "Labour Court" means a Labour Court constituted under Section 7 (Sec. 2(kkb) and "Tribunal" has been defined in Sec. 2(r).

9. Chapter-IV sets out Procedure, Powers and Duties of Authorities. Section- 11 which is in Chapter-IV deals with procedure and powers of Conciliation Officers, Boards, Courts and Tribunals. Section- 12 sets out the duties of the Conciliation Officers. The Conciliation Officer is defined in Section 2(d) of the Act. Section 12(3) provides that "If a settlement of the dispute or of any of the matters in dispute is arrived at in the course of the conciliation proceedings the conciliation officer shall send a report thereof to the appropriate Government or an officer authorised in this behalf by the appropriate Government together with a memorandum of the settlement signed by the parties to the dispute."

10. Rule 58(1) of Industrial Disputes (Central) Rules, 1957 provides that the settlement arrived at in the course of conciliation proceedings or otherwise, shall be in Form 'H'. Rule-58 (2) provides as to who are required to sign the settlement. Rule-58(2)(b), inter alia, stipulates that the settlement shall be signed by any officer of a trade union of the workmen or by 5 representatives of the workmen duly authorised in this behalf at a meeting of the workmen held for the purpose. Rule-58(3) provides that where a settlement is arrived at in the course of conciliation proceeding the conciliation officer shall send a report thereof to the Central Government together with a copy of the memorandum of settlement signed by the parties to the dispute.

11. The aforesaid requirements have been provided with a view to safeguard the interests of the workmen also keeping in view the binding nature of the settlement. It also deserves to be noticed that, in a way, a settlement has been given the status at par with the Awards which may be made by the Labour Courts or the Tribunals since any money due to a workman from an employer under a settlement, can be recovered in the manner provided under Section 33(C)(1).

12. Section 18 of the Act provides on whom settlements and awards are binding". Section 18(1) provides that a settlement arrived at by agreement between the employer and workman otherwise than in the course of conciliation proceeding shall be binding on the parties to the agreement. Section 18(3) which sets out on whom a settlement arrived at in the course of conciliation proceedings, shall be binding, reads as under :

Section- 18(3)

"A settlement arrived at in the course of conciliation proceedings under this Act or an arbitration award in a case where a notification has been issued under sub-section (3-A) of Section 10-A or an award of a Labour Court, Tribunal or National Tribunal which has become enforceable shall be binding on-

(a) all parties to the industrial dispute;

(b) all other parties summoned to appear in the proceedings as parties to the dispute, unless the Board, Arbitrator, Labour Court, Tribunal or National Tribunal, as the case may be, records the opinion that they were so summoned without proper cause;

(c) Where a party referred to in clause (a) or clause (b) is an employer, his heirs, successors or assigns in respect of the establishment to which the dispute relates;

(d) Where a party referred to in clause (a) or clause (b) is composed of workmen, all persons who were employed in the establishment or part of the establishment, as the case may be, to which the dispute and all persons who subsequently become employed in that establishment or part."

13. In the light of the Afore noticed provisions of the Act and the Rules, we would examine the question whether the settlement dated 13th June, 1995 comes within the Purview of Section 18(3) and, therefore, it is binding on the appellants as contended by Dr. Singhvi. It cannot be disputed that in case Section 18(3) is not applicable to the settlement in question, it would not be binding on the appellants, and they would be free to agitate their claims under the Act before the appropriate forums in accordance with law.

14. The settlement dated 13th June,1995 is not in the form as provided in Rule-58(1). The settlement does not show that it was signed by any officer of the union. It purports to be signed by 9 workmen. Their authority to sign is, however, not stated in the settlement. It is also not in dispute that the conciliation officer had not sent a report to the Central Government together with a copy of the memorandum of settlement as provided in Rule-58(3). As already noticed, these provisions have been made with a view to safeguard the interests of the workmen. The Deputy Labour Commissioner ought to have followed the rules and procedures, particularly when, number of the workers were objecting to the settlement and claiming that they were not members of the union and had no concern with the union and to that effect they had filed an application before the Deputy Labour Commissioner. The order dated 14th March, 1995 makes reference of workers claims to the Deputy Labour Commissioner for adjudication of their claims. However, under the provisions of the Act, conciliation officer has no power to adjudicate the claims. The said power vests with the Labour Courts and the Tribunals. The duties of the conciliation officers are those which are provided in Section 12 of the Act. The said Section, inter alia, provides that if no settlement is arrived at, a report is required to be sent by the conciliation officer as provided under Section 12(4). If the settlement is arrived then the report in terms of Section 12(3) is required to be sent. Thus, it cannot be held that settlement was arrived at in the course of conciliation proceedings.

15. In M/s. Tata Chemicals Ltd., Vs. the Workmen employed under M/s. Tata Chemicals Ltd., 1978 LAB.I.C. 637, the Supreme Court has held that there were two categories of settlement: (i) which is arrived at in the course of conciliation proceedings i.e. which is arrived at with the assistance and concurrence of the conciliation officer who is duty bound to promote a right settlement and to do everything he can to induce the parties to come to a fair and amicable settlement of the dispute and (ii) a written agreement between employer and workmen arrived at otherwise than in the course of conciliation proceeding. It has been further held that settlement arrived at by agreement between the employer and the workmen otherwise than in the course of conciliation proceedings is binding only on the parties to the agreement. A settlement arrived at at the course of conciliation proceedings under the Act is binding not only on the parties to the Industrial Disputes but also on the other persons specified in Clauses (b),(c) and (d) of sub-Section-3 of Section 18 of the Act. The Supreme Court rejected the theory of implied agreement by acquiescence sought to be built up on behalf of the management on the basis of the acceptance of the benefits flowing from the agreement even by the workmen who were not signatories to the settlement.

16. Dr. Singhvi has, however, placed strong reliance on the Supreme Court decision in the case of Herbertsons Ltd. Vs. The Workmen of the Herbertsons Ltd. and others, 1977 LAB.I.C.162, in particular, para 18 thereof, which reads as under:

"When a recognised union negotiates with an employer the workers as individuals do not come into the picture. It is not necessary that each individual worker should know the implications of the settlement, since a recognised union, which is expected to protect the legitimate interests of labour, enters into a settlement in the best interests of labour. This would be the normal rule. We cannot altogether rule out exceptional cases where there may be allegations of mala fides, fraud or even corruption or other inducements. Nothing of that kind has been suggested against the President of the 3rd respondent in this case. That being the position, prima facie, this is a settlement in the course of collective bargaining and, therefore, is entitled to due weight and consideration."

17. In order to understand the ratio decidendi of Herbertsons case and aforequoted observations, it would be necessary to examine the facts of that case. Briefly, facts were that on 18th October, 1973 company had entered into an agreement for settlement with the Bombay General Kamgar Sabha which was in the substitution of the award which was pending appeal before the Supreme Court. Copies of the settlement were forwarded to the Secretary to the Government of Maharashtra, Industries and Labour Department, the Commissioner of Labour, the Deputy Commissioner of Labour and Conciliation Officer. It was common ground that this settlement was under Section 18(1) of the Act. The Company submitted a petition before the Supreme Court to decide the appeal in terms of the Memorandum of Settlement dated 18th October, 1973. On that petition an order dated 19th December, 1974 was passed by the Supreme Court which as to the following effect:

"The number of workmen concerned in this industrial dispute is 210. The appellant employer and the 3rd respondent union which claims to have 193 members of its rolls have entered into a settlement. The 2nd respondent union which claims to have about 55 members on its rolls has not yet accepted the settlement. We think it just, therefore, to pass the same kind of preliminary order that was passed in Amalgamated Coffee Estates Vs. Their workmen in the following terms:

"In view of the fact that admittedly a large number of workmen employed by the appellant have accepted the settlement, is it shown by the 2nd respondent union that the said settlement is not valid and binding on its members and whether the settlement is fair and just?"

"The Industrial Tribunal, Maharashtra, would consider the issue and submit its finding within two months from this date. After the finding is received, the appeal would be set down for hearing. Parties should be allowed to lead evidence."

18. When the matter went back to the Tribunal, after hearing the parties, it recorded its finding on 9th September, 1995 and forwarded the same to the Supreme Court. The finding recorded by the Tribunal was as follows:

"(1) Respondent No. 2 the Mumbai Mazdoor Sabha has been able to prove that the Disputed Settlement is not valid and binding on its members.

(2) The Disputed Settlement is incomplete to the extent mentioned above.

(3) The scheme of D.A. provided for in the Disputed Settlement in so far as it affects workmen at or just above the subsistence level is not fair, just and reasonable.

(4) The rest of the Disputed Settlement is fair, just and reasonable."

19. The Supreme Court held that from the recitals in the order dated 19th December, 1974 it was clear that the parties were prepared to abide by the settlement, if the same was fair and just and that it was not possible to accept the contention of second respondent that even if the settlement is binding on the parties executing the documents, namely, the company and the third respondent representing a large majority of the workmen, since the same is not binding on the members of respondent No. 2, howsoever, small the number, under Section 18(1) of the Act, the appeal should be heard on merits. The Supreme Court took the view that after hearing the parties the court was satisfied when it had called for a finding of the Tribunal that if the settlement was fair and just, if would allow the parties to be governed by the settlement substituting the Award and that it cannot be assumed that the parties were not aware of the implications of Section 18(1) of the Act when the order dated 19th December, 1974 was passed.

20. When observation in para-18 of Herbertsons decision are seen in the above light and circumstances, it becomes clear that this decision, on which strong reliance has been placed by Dr. Singhvi, has no applicability to the present case. Viewed from this angle, it is also clear that neither there is any conflict of opinion between Tata Chemicals case and Herbertsons case, nor can it be held that the decision in Tata Chemicals case is per incuriam, having been rendered without considering Herbertsons case. Accordingly the contention of Dr. Singhvi that the opinion of Herbertsons case having been rendered by three Hon'ble Judges of the Apex Court and opinion of the Tata Chemicals having been rendered by two Hon'ble Judges, the former decision is binding on this court, has not applicability to the present case.

21. From the above discussions, it is clear to us that the settlement dated 13th June, 1995 cannot be said to be binding on the appellants and other applicants who are objecting to the settlement. It cannot be said to have been arrived at in the course of Conciliation Proceedings. A settlement arrived at otherwise than in the course of conciliation proceedings is binding only on the parties to the agreement. The appellants were not parties to the settlement and, therefore, their rights and claims, if any, cannot be effected by the settlement. Thus the appellants would be free to seek redressal of their claims in accordance with law before appropriate authorities and would not be non-suited only on the ground that the settlement dated 13th June, 1995 is binding on them. The management would, of course, have a right to raise such objections as may be permissible to it. Likewise the workmen who had filed CM. 29/97 will also have the same rights as the appellants in this appeal.

22. The result is that impugned judgment dated 28th July, 1995 is modified in the above terms and the appeal is, accordingly, allowed leaving the parties to bear their own costs.