Gujarat High Court
Chief Officer vs Sidi Iqbalbhai Ilmasbhai & on 18 July, 2017
Author: K.M.Thaker
Bench: K.M.Thaker
C/SCA/13171/2013 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 13171 of 2013
TO
SPECIAL CIVIL APPLICATION NO. 13176 of 2013
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE K.M.THAKER Sd/-
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1 Whether Reporters of Local Papers may be allowed YES
to see the judgment ?
2 To be referred to the Reporter or not ? YES
3 Whether their Lordships wish to see the fair copy of NO
the judgment ?
4 Whether this case involves a substantial question of NO
law as to the interpretation of the Constitution of
India or any order made thereunder ?
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CHIEF OFFICER....Petitioner(s)
Versus
SIDI IQBALBHAI ILMASBHAI & 1....Respondent(s)
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Appearance:
MR VAIBHAV A VYAS, ADVOCATE for the Petitioner(s) No. 1
MR PARITOSH CALLA, ADVOCATE for the Respondent(s) No. 2
MR SATYAM Y CHHAYA, ADVOCATE for the Respondent(s) No. 1
MR KM ANTANI, ADVOCATE for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE K.M.THAKER
Date : 18/07/2017
COMMON ORAL JUDGMENT
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1. Heard Mr.Vyas, learned advocate for the petitioner municipality and Mr.Pandya, learned advocate for Mr.Chhaya, learned advocate for the respondents and Mr.Antani, learned advocate for the respondents.
2. In this group of petitions, the petitioner Radhanpur Municipality has challenged common award dated 15.6.2013 passed by the learned Labour Court at Palanpur in Reference No.34 of 2009 to Reference No.39 of 2009. By the impugned award the learned Labour Court partly allowed reference cases by setting aside the order dated 27.2.2009 under which the petitioner municipality terminated services of original claimants, i.e. the respondents in present petitions.
2.1 The learned Labour Court, after setting aside the order dated 27.2.2009 passed by the Chief Officer, Municipality, directed the municipality to reinstate the claimants on their 2 HC-NIC Page 2 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT original posts without backwages.
3. So far as factual background is concerned, it has emerged from the record that six claimants raised industrial dispute with the allegation that the opponent municipality illegally terminated their services. Appropriate government referred the dispute for adjudication to learned Labour Court at Palanpur. The dispute came to be registered as Reference No.34 of 2009 to 39 of 2009.
3.1 In the said reference cases, the claimants filed their respective / separate statement of claims. The claimant in Reference No.34 of 2009 alleged that initially he was appointed on daily wage basis with effect from 12.9.1989 and subsequently in 1994 his service was regularized as employee in ClassIV. He was appointed as Peon in the Street Light Section of the Municipality.
3.2 The claimant in Reference No.35 of 2009
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alleged that initially he was appointed on daily wage basis with effect from 1.9.1993 and subsequently in 1994 his service was regularized as employee in ClassIV. He was appointed as Peon in the Recovery Section of the Municipality.
3.3 The claimant in Reference No.36 of 2009 alleged that initially he was appointed on daily wage basis with effect from 15.7.1991 and subsequently in 1994 his service was regularized as employee in ClassIV. He was appointed as Peon in the Accounts Section of the Municipality.
3.4 The claimant in Reference No.37 of 2009 alleged that initially he was appointed on daily wage basis with effect from 15.6.1990 and subsequently in 1994 his service was regularized as employee in ClassIV. He was appointed as Peon in the Office of the Municipality.
3.5 The claimant in Reference No.38 of 2009 alleged that initially he was appointed on daily wage basis with effect from 1.3.1991 and 4 HC-NIC Page 4 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT subsequently in 1994 his service was regularized as employee in ClassIV. He was appointed as Peon in the Sanitation Section of the Municipality.
3.6 The claimant in Reference No.39 of 2009 alleged that initially he was appointed on daily wage basis with effect from 1.1.1990 and subsequently in 1994 his service was regularized as employee in ClassIV. He was appointed as Peon in the Office of the Municipality.
3.7 The claimants also alleged that they worked regularly and diligently in the municipality and that they had worked for more than 240 days and then the municipality abruptly and illegally terminated their services on and from 27.2.2009 without following any procedure prescribed under the Act or the Rules applicable to the municipality and in breach of principles of natural justice. The claimants alleged that while their services were terminated, other irregularly appointed employees and other daily wagers and other regular employees who were 5 HC-NIC Page 5 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT junior to them were continued in service. With such allegation, the claimants claimed that since their services have been illegally terminated, the municipality may be directed to reinstate them with all benefits.
3.8 The reference cases were opposed by the municipality. The municipality claimed that the claimants were engaged without following procedure prescribed by the Rules and they were taken in employment by way of backdoor entry.
The municipality also claimed that since the appointment of the claimants were irregular and by way of backdoor entry and since the financial position of the municipality was also very weak and deteriorating, the municipality decided to relive irregularly appointed employees and consequently the claimants came to be terminated.
The municipality also claimed that the claimants were engaged on daily wage and then they were working on daily wage basis. It was also claimed that the claimants were engaged for casual work 6 HC-NIC Page 6 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT and they had not worked for 240 days in any year.
The municipality also claimed that Resolution No.87 was passed without any authority and without complying the requirement under the Act and that, therefore, the said resolution was set aside by the Collector. The municipality also claimed that the work which the claimants performed (while they were in service), is not available and does not exist and therefore, even otherwise, there is neither any scope nor justification to enter and grant their claim. Ti was also claimed that there is no sanctioned establishment and any permanent vacancy on sanctioned establishment where the claimants can be engaged also does not and that, therefore also the claim by the claimants is unjustified. With such contention, the municipality opposed the reference cases and submitted before the learned Labour Court that the reference cases may be rejected.
3.9 After the parties concluded their
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pleadings, the learned Labour Court received oral as well as documentary evidence from both sides and after the parties closed their evidence, the learned Labour Court heard rival submissions by contesting parties.
3.10 Upon completion of the proceedings, the learned Labour Court passed impugned common award and the said reference cases with above mentioned directions.
4. Learned advocate for the petitioner municipality claimed that the learned Labour Court failed to appreciate that the claimants were engaged irregularly and that, therefore, the municipality was justified in discontinuing the services of the claimants. The municipality also contended that the work which the claimants performed, does not exist and that, therefore also the services of the claimants are not required. The municipality also put forward defence on ground of weak financial position of the municipality with the contention that in such 8 HC-NIC Page 8 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT circumstances, it is not physical or practical for the municipality to continue irregularly appointed persons. Learned advocate for the petitioner municipality claimed that the resolution which was passed by the municipality for regularization the service of the claimants, was set aside by the Collector and that, therefore, the allegation of the claimants that their services were regularized in 1994, is unjustified. Learned advocate for the claimants also contended that in absence of any sanctioned set up and in absence of vacancy in respect of permanent post and sanctioned set up the demand by the claimants should not have been granted by the Labour Court.
5. Learned advocate for the claimants opposed the evidence and the submissions by learned advocate for the municipality. Learned advocate for the claimants submitted that initially, the claimants were engaged as daily wager, however, subsequently their appointments 9 HC-NIC Page 9 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT were regularized. Learned advocate for the claimants submitted that the claimants were covered under provisions of the Provident Fund Scheme and the benefit of 5th Pay Commission was also extended and they were paid salary in accordance with the recommendations of 5th Pay Commission and that, therefore, the contention that their services were not regularized, is unjustified and contrary to the facts and record.
Learned advocate for the claimants also contended that the claimants worked with the municipality for more than 20 years and during the said period, they worked regularly, continuously and diligently and and in each year they worked for more than 240 day and that the general body of the municipality had passed resolution in 1994 regularizing their service. Learned advocate for the claimants also submitted that after the High Court quashed the order passed by the Collector whereby the Collector set aside the resolution passed by the municipality, the Collector had directed the municipality to consider the cases 10 HC-NIC Page 10 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT of the claimants for regularization and forward the proposal for regularization after separately considering claimants' case on the basis of their educational qualifications, age, experience, etc. Learned advocate for the claimants submitted that instead of following the said direction by the Collector, Chief Officer passed the impugned order and terminated services of the claimants without following any procedure and that, therefore, the award passed by the learned Labour Court is just and proper and does not warrant any interference.
6. I have considered rival submissions by learned advocates for the municipality and the claimants.
7. It is not disputed even by the claimants that they were initially appointed on daily wage basis.
7.1 At the same time, it is also not in dispute that the claimant in Reference No.34 of 11 HC-NIC Page 11 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT 2009 was initially appointed in October 1989, whereas the claimant in Reference No.35 of 2009 was initially appointed in September 1993 and the claimant in Reference No.36 of 2009 was initially appointed in July 1991, whereas the claimant in Reference No.37 of 2009 was initially appointed in June 1990 and the claimant in Reference No.38 of 2009 was initially appointed in March 1991 and the claimant in Reference No.39 of 2009 was initially appointed in January 1990.
7.2 It is also not in dispute that the services of the claimants came to be terminated vide order dated 27.2.2009.
7.3 Thus, before the services of the claimants came to be terminated, they had served with the municipality for almost 19 to 20 years.
7.4 It is also not in dispute that the General Body of the Municipality had passed resolution regularizing the services of the claimants.
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7.5 True it is that subsequently the
Collector had passed order setting aside the said resolution.
7.6 However, when the said order of the Collector was challenged, the High Court set aside the order passed by the Collector on ground of violation of principles of natural justice and directed the Collector to pass appropriate order in accordance with law after granting opportunity of hearing to the claimants.
7.7 It appears that after the High Court's direction the Collector instructed the municipality to consider the case of the claimants individually in light of their educational qualifications, age, experience, etc. and in light of applicable rules and to submit appropriate proposal with regard to the claimants.
7.8 It is also not in dispute that the municipality defended its action on the ground 13 HC-NIC Page 13 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT that the services of the claimants came to be terminated on account of weak financial position.
8. However, from the record, it comes out that the municipality did not place any material on record to demonstrate its financial position and to also demonstrate that its financial position was weak and therefore, it was necessary to reduce strength of employees so as to reduce financial burden.
8.1 From the material which is available on record of these petitions (at pages 87 and 88), it appears that total strength of the employees / staff in the municipality was 113. In that view of the matter, the municipality ought to have established that before terminating the services of the claimants, it had followed the procedure prescribed under Section 25F of the Industrial Disputes Act.
8.2 From the award, it comes out that the municipality did not place any material on record 14 HC-NIC Page 14 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT to establish that it had followed the procedure prescribed under Section 25F and Section 25G of the Act before terminating services of the claimants.
8.3 The municipality also failed to place on record any material to establish that it had followed the procedure prescribed under Rule 81 of the Industrial Disputes (Gujarat) Rules, 1966 before terminating services of the claimants.
9. Having regard to the said fact and details, learned Labour Court reached to the conclusion that the Municipality terminated service of the claimants without following procedure prescribed under the Act and municipality committed breach of mandatory provisions.
9.1 Undisputedly, the Municipality did not serve notice contemplated under Section 25F(a) or Section 25F(c). Likewise, the municipality, undisputedly, did not follow the procedure 15 HC-NIC Page 15 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT prescribed under Rule 81 of the Rules of 1966.
9.2 Similarly, the principle of seniority (last come, first go) under Section 25G was also not followed.
10. From the details mentioned on record by the petitioner municipality, it is also claimed that total strength of the employee/ staff of the municipality was more than 100 and that, therefore, the municipality was under obligation to follow procedure prescribed under Section 25N.
10.1 However, neither procedure prescribed under Section 25N nor the procedure prescribed under Section 25F nor Section 25G was followed.
The municipality has not placed any material on record to prove that the procedure prescribed under the said provisions was followed by it and it terminated the service of the employees.
10.2 Actually, it was not even the case of municipality that it had terminated the service of employees after following prescribed 16 HC-NIC Page 16 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT procedure.
11. Under the circumstances, the findings and conclusion recorded by the learned Labour Court with regard to h Section 25F and/or Section 25G and/or Rule 81, cannot be faulted.
12. As last contention, Mr.Vyas, learned advocate for the petitioner submitted that Municipality terminated service of the claimants in accordance with the conditions prescribed in the appointment order.
12.1 He submitted that the appointment order contained a provision/ condition that service of the claimant can be terminated at any time without serving notice and that, therefore, the municipality was competent to terminate service of the claimants in accordance with the condition of the appointment order.
12.2 Further, in light of the decision by Hon'ble Apex Court in case of Central Inland Water Transport Corporation Ltd. vs. Brojo Nath 17 HC-NIC Page 17 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT Ganguly [(1986) 3 SCC 156] it follows, that the clauses / provisions in the said undertakings, particularly the clauses on which the respondent has relied (i.e. clause Nos. 5,7 and 8 thereof) are unreasonable and amount to unconscionable condition:
"76. ... ... ... ... ...
An unconscionable bargain would, therefore, be one which is irreconcilable with what is right or reasonable.
78. Legislation has also interfered in many cases to prevent one party to a contract from taking undue or unfair advantage of the other. Instances of this type of legislation are usury laws, debt relief laws and laws regulating the hours of work and conditions of service of workmen and their unfair discharge from service, and control orders directing a party to sell a particular essential commodity to another.
81. It would appear from certain recent English cases that the courts in that country have also begun to recognize the possibility of an unconscionable bargain which could be brought about by economic duress even between parties who may not in economic terms be situate differently... ... ... ... ...
82. ... ... ... ... ...
When our Constitution states that it is being enacted in order to give to all the citizens of India "JUSTICE, social, economic and political", when clause (1) of Article 38 of the Constitution directs the State to strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which social, economic and political justice shall inform all the institutions of the national life, when clause (2) of Article 38 directs the State, in particular, to minimize the inequalities in income, not only amongst individuals but also amongst groups of people residing in different areas or engaged in different vocations, and when Article 39 directs the State that it shall, in particular, direct its policy towards securing that the citizens, men and women equally, have the right to an adequate means of 18 HC-NIC Page 18 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT livelihood and that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment and that there should be equal pay for equal work for both men and women, it is the doctrine of distributive justice which is speaking through these words of the Constitution.
88. As seen above, apart from judicial decisions, the United States and the United Kingdom have statutorily recognized, at 1 least in certain areas of the law of contracts, that there can i be unreasonableness (or lack of fairness, if one prefers that phrase) in a contract or a clause in a contract where there is inequality of bargaining power between the parties although arising out of circumstances not within their control or as a result of situations not of their creation. Other legal systems also permit judicial review of a contractual transaction entered into in similar circumstances. For example, i section 138(2) of the German Civil Code provides that a , transaction is void "when a person" exploits "the distressed q situation, inexperience, lack of judgmental ability, or grave weakness of will of another toobtain the grant or promise of pecuniary advantages ... which are obviously disproportionate to the performance given in return." The position according to the French law is very much the same.
89. Should then our courts not advance with the times? Should they still continue to cling to outmoded concepts and outworn ideologies? Should we not adjust our thinking caps to match the fashion of the day? Should all jurisprudential development pass us by, leaving us floundering in the sloughs of nineteenth century theories? Should the strong be permitted to push the weak to the wall? Should they be allowed to ride roughshod over the weak? Should the courts sit back and watch supinely while the strong trample under foot the rights of the weak? We have a Constitution for our country. Our judges are bound by their oath to "uphold the Constitution and the laws".
The Constitution was enacted to secure to all the citizens of this country social and economic justice. Article 14 of the Constitution guarantees to all persons equality before the law and the equal protection of the laws. The principle deducible from the above discussions on this part of the case is in consonance with right and reason, intended to secure social and economic justice and conforms to the mandate of the great equality clause in Article 14. This principle is that the courts will not enforce and will, when called upon to do so, strike down an unfair and unreasonable contract, or an unfair and unreasonable 19 HC-NIC Page 19 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT clause in a contract, entered into between parties who are not equal in bargaining power. It is difficult to give an exhaustive list of all bargains of this type. No court can visualize the different situations which can arise in the affairs of men. One can only attempt to give some illustrations. For instance, the above principle will apply where the inequality of bargaining power is the result of the great disparity in the economic strength of the contracting parties. It will apply where the inequality is the result of circumstances, whether of the creation of the parties or not. It will apply to situations in which the weaker party is in a position in which he can obtain goods or services or means of livelihood only upon the terms imposed by the stronger party or go without them. It will also apply where a man has no choice, or rather no meaningful choice, but to give his assent to a contract or to sign on the dotted line in a prescribed or standard form or to accept a set of rules as part of the contract, however unfair, unreasonable and unconscionable a clause in that contract or form or rules may be. This principle, however, will not apply where the bargaining power of the contracting parties is equal or almost equal. This principle may not apply where both parties are businessmen and the contract is a commercial transaction. In today's complex world of giant corporations with their vast infrastructural organizations and with the State through its instrumentalities and agencies entering into almost every branch of industry and commerce, there can be myriad situations which result in unfair and unreasonable bargains between parties possessing wholly disproportionate and unequal bargaining power. These cases can neither be enumerated nor fully illustrated. The court must judge each case on its own facts and circumstances.
92. The Indian Contract Act does not define the expression "public policy" or "opposed to public policy". From the very nature of things, the expressions "public policy", "opposed to public policy" or "contrary to public policy" are incapable of precise definition. Public policy, however, is not the policy of a particular government. It connotes some matter which concerns the public good and the public interest. The concept of what is for the public good or in the public interest or what would be injurious or harmful to the public good or the public interest has varied from time to time. As new concepts take the place of old, transactions which were once considered against public policy are now being upheld by the courts and similarly where there has been a wellrecognized 20 HC-NIC Page 20 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT head of public policy, the courts have not shirked from extending it to new transactions and changed circumstances and have at times not even flinched from inventing a new head of public policy. There are two schools of thought "the narrow view"
school and "the broad view" school. According to the former, courts can not create new heads of public policy whereas the latter countenances judicial law making in this area. The adherents of "the narrow view" school would not invalidate a contract on the ground of public policy unless that particular ground had been wellestablished by authorities. Hardly ever has the voice of the timorous spoken more clearly and loudly than in these words of Lord Davey in Janson v. Uriefontein Consolidated Mines Limited [1902] A.C. 484, 500 "Public policy is always an unsafe and treacherous ground for legal decision." That was in the year 1902. Seventy eight years earlier, & Burros, J., in Richardson v. Mellish, [1824] 2 Bing. 229, 252; s.c. 130 E.R. 294, 303 and [182434] All E.R. Reprint 258, 266, described public policy as "a very unruly horse, and when once you get astride it you never know where it will carry you." The Master of the Rolls, Lord Denning, however, was not aman to shy away from unmanageable horses and in words which conjure up before our eyes the picture of the young Alexander the Great taming Bucephalus, he said in Enderyby Town Football Club Ltd. v. Football Association Ltd., [1971] Ch. 591, 606. "With a good man in the saddle, the unruly horse can be kept in control. It can jump over obstacles." Had the timorous always held the field, not only the doctrine of public policy but even the Common Law or the principles of Equity would never have evolved. Sir William Holdsworth in his "History of English Law", Volume III, page 55, has said:
In fact, a body of law like the common law, which has grown up gradually with the growth of the nation, necessarily acquires some fixed principles, and if it is to maintain these principles it must be able, on the ground of public policy or some other like ground, to supress practices which, under ever new disguises, seek to weaken or negative them. It is thus clear that the principles governing public policy must be and are capable, on proper occasion, of expansion or modification. Practices which were considered perfectly normal at one time have today become obnoxious and oppressive to public conscience. If there is no head of public policy which D covers a case, then the court must in consonance with public conscience and in keeping with public good and public interest declare such practice to be opposed to public 21 HC-NIC Page 21 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT policy. Above all, in deciding any case which may not be covered by authority our courts have before them the beacon light of the Preamble to the Constitution. Lacking precedent, the court can always be guided by that light and the principles underlying the Fundamental Rights and the Directive Principles enshrined in our Constitution.
94. We will now test the validity of Rule 9(i) by applying to it the principle formulated above. Each of the contesting Respondents was in the service of the Rivers Steam Navigation Company Limited and on the said Scheme of arrangement being sanctioned by the Calcutta High Court, he was offered employment in the Corporation which he had accepted. Even had these Respondents not liked to work for the Corporation, they had not much of a choice because all that they would have got wag "all legitimate and legal compensation payable to them either under the Industrial Disputes Act or otherwise legally admissible". These Respondents were not covered by the Industrial Disputes Act for they were not workmen but were officers of the said company. It is, therefore, difficult to visualize what compensation they would have been entitled to get unless their contract of employment with their previous employers contained any provision in that behalf. So far as 375 the original terms of employment with the Corporation are concerned, they are contained in the letters of appointment issued to the contesting Respondents. These letters of appointment are in a stereotype form. Under these letters of appointment, the Corporation could without any previous notice terminate their service, if the Corporation was satisfied on medical evidence that the employee was unfit and was likely for a considerable time to continue to be unfit for the discharge of his duties.
The Corporation could also without any previous notice dismiss either of them, if he was guilty of any insubordination, intemperance or other misconduct, or of any breach of any rules pertaining to his service or conduct or nonperformance of his duties. The above terms are followed by asset of terms under the heading "Other Conditions". One of these terms stated that "You shall be subject to the service rules and regulations including the conduct rules". Undoubtedly, the contesting Respondents accepted appointment with the Corporation upon these terms. They had, however, no real choice before them. Had they not accepted the appointments, they would have at the highest received some compensation which would have been probably meagre and would certainly have exposed themselves to the hazard of finding another job.
96. The said Rules as also the earlier rules of 1970 22 HC-NIC Page 22 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT were accepted by the contesting Respondents without demur. Here again they had no real choice before them. They had risen higher in the hierarchy of the Corporation. If they had refused to accept the said Rules, it would have resulted in termination of their service and the consequent anxiety, harassment and uncertainty of finding alternative employment.
97. Rule 9(i) confers upon the Corporation the power to 376 terminate the service of a permanent employee by giving him three months' notice in writing or in lieu thereof to pay him the equivalent of three months' basic pay and dearness allowance. A similar regulation framed by the West Bengal State Electricity Board was described by this Court in West Bengal State Electricity Board and others v. Desh Bandhu Ghosh and others (at page 118) as ". . . a naked 'hire and fire' rule, the time for banishing which altogether from employeremployee relationship is fast approaching. Its only parallel is to be found in the Henry VIII clause so familiar to administrative lawyers."
As all lawyers may not be familiar with administrative law, we may as well explain that "the Henry VIII clause" is a provision occasionally found in legislation conferring delegated legislative power, giving the delegate the power to amend the delegating Act in order to bring that Act into full operation or otherwise by Order to remove any difficulty, and at times giving power to modify the provisions of other Acts also. The Committee on Ministers' Powers in its report submitted in 1932 (Cmd. 4060) pointed out that such a provision had been nicknamed "the Henry VIII clause" because "that King is regarded popularly as the impersonation of executive autocracy". m e Committee's Report (at page 61) criticised these clauses as a temptation to slipshod work in the preparation of bills and recommended that such provisions should be used only where they were justified before Parliament on compelling grounds. Legislation enacted by Parliament in the United Kingdom after 1932 does not show that this recommendation had any particular effect.
98. No apter description of Rule 9(i) can be given than to call it "the Henry VIII Clause". It confers absolute and arbitrary power upon the Corporation. It does not even state who on behalf of the Corporation is to exercise that power. It was submitted on behalf of the Appellants that it would be the Board of Directors. me impugned letters of termination, however, do not refer to any resolution or decision of the Board and even if they did, it would be irrelevant to the validity of Rule 9(i). m ere are no guidelines whatever laid down to indicate in what circumstances the power given by Rule 377 9(i) is to be exercised by the 23 HC-NIC Page 23 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT Corporation. No opportunity whatever of a hearing is at all to be afforded to the permanent employee whose service is being terminated in the exercise of this power. It was urged that the Board of Directors would not exercise this power arbitrarily or capriciously as it consists of responsible and highly placed persons. This submission ignores the fact that however highly placed a person may be, he must necessarily possess human frailties. It also overlooks the wellknown saying of Lord Acton, which has now almost become a maxim, in the Appendix to his "Historical Essays and Studies", that "Power tends to corrupt, and absolute power corrupts absolutely." As we have pointed out earlier, the said Rules provide for four different modes in which the services of a permanent employee can be terminated earlier than his attaining the age of superannuation, namely, Rule 9(i), Rule 9(ii), sub clause (iv) of clause (b) of Rule 36 read with Rule 38 and Rule 37. Under Rule 9(ii) the termination of service is to be on the ground of "Services no longer required in the interest of the Company." Subclause
(iv) of clause (b) of Rule 36 read with Rule 38 provides for dismissal on the ground of misconduct. Rule 37 provides for termination of service at any time without any notice if the employee is found guilty of any of the acts mentioned in that Rule. Rule 9(i) is the only Rule which does not state in what circumstances the power conferred by that Rule is to be exercised. Thus even where the Corporation could proceed under Rule 36 and dismiss an employee on the ground of misconduct after holding a regular disciplinary inquiry, it is free to resort instead to Rule 9(i) in order to avoid the hassle of an inquiry. Rule 9(i) thus confers an absolute, arbitrary and unguided power upon the Corporation. It violates one of the two great rules of natural justice the audi alteram partem rule. It is not only in cases to which Article 14 applies that the rules of natural justice come into play. As pointed out in Union of India etc. v. Tulsiram Patel etc.. [1985] 3 S.C.C. 398 (at page
463), "The principles of natural justice are not the creation of Article 14. Article 14 is not their begetter but their constitutional guardian." That case has traced in some detail the origin and development of the concept of principles of natural justice and of the audi alteram partem rule (at pages 463 480). They apply in diverse situations and not only to cases of State action. As pointed out by 0. Chinnappa Reddy, H 378 J., in Swadeshi Cotton Mills v. Union of India, [1981] 2 S.C.R. 533, 591 they are implicit in every decisionmaking function, whether judicial or quasi judicial or administrative. Undoubtedly, in certain circumstances the principles of natural justice can be modified and, in exceptional cases, can even be 24 HC-NIC Page 24 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT excluded as pointed out in Tulsiram Patel's case. Rule 9(i), however, is not covered by any of the situations which would justify the total exclusion of the audi alteram partem rule .
99. The power conferred by Rule 9(i) is not only arbitrary but is also discriminatory for it enables the Corporation to discriminate between employee and employee. It can pick up one employee and apply to him clause (i) of Rule 9. It can pick up another employee and apply to him clause (ii) of Rule 9. It can pick up yet another employee and apply to him subclause (iv) of clause (b) of Rule 36 read with Rule 38 and to yet another employee it can apply Rule 37. All this the Corporation can do when the same circumstances exist as would justify the Corporation in holding under Rule 38 a regular disciplinary inquiry into the alleged misconduct of the employee. Both the contesting Respondents had, in fact, been asked to submit their explanation to the charges made against them. Sengupta had been informed that a disciplinary inquiry was proposed to be held in his case. The charges made against both the Respondents were such that a disciplinary inquiry could easily have been held. It was, however, not held but instead resort was had to Rule 9(i).
100. The Corporation is a large organization. It has offices in various parts of West Bengal, Bihar and Assam, as shown by the said Rules, and possibly in other States also. me said Rules form part of the contract of employment between the Corporation and its employees who are not workmen. These employees had no powerful workmen's Union to support them. They had no voice in the framing of the said rules they had no choice but to accept the said Rules as part of their contract of employment. m ere is gross disparity between the Corporation and its employees, whether they be workmen or officers. m e Corporation can afford to dispense with the services of an officer. It will find hundreds of others to take his place but an officer cannot afford to lose his job because if he does so, there are not hundreds of jobs waiting for him. A clause such as clause (i) of Rule 9 is against 379 right and reason. It is wholly unconscionable. It has been A entered into between parties between whom there is gross inequality of bargaining power. Rule 9(i) is term of the contract between the Corporation and all its officers. It affects a large number of persons and it squarely falls within the principle formulated by us above. Several statutory authorities have a clause similar to Rule 9(i) in their contracts of employment. As appears from the decided cases, the West Bengal State Electricity Board and Air India International have it. Several Government companies apart from the 25 HC-NIC Page 25 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT Corporation (which is the First Appellant before us) must be having it. There are 970 Government companies with paidup capital of Rs.16,414.9 crores as stated in the written arguments submitted on behalf of the Union of India. The Government and its agencies and instrumentalities constitute the largest employer in the country. A clause such as Rule 9(i) in a contract of employment affecting large sections of the public is harmful and injurious to the public interest for it tends to create a sense of insecurity in the minds of those to whom it applies and consequently it is against public good. Such a clause, therefore, is opposed to public policy and being opposed to public policy, itis void under section 23 of the Indian Contract act.
101. It was, however, submitted on behalf of the Appellants that this was a contract entered into by the Corporation like any other contract entered into by it in the course of its trading activities and the Court, therefore, ought not to interfere with it. It is not possible for us to equate employees with goods which can be bought and sold. It is equally not possible for us to equate a contract of employment with a mercantile transaction between two businessmen and much less to do so when the contract of employment is between a powerful employer and a weak employee.
102. It was also submitted on behalf of the Appellants that Rule 9(i) was supported by mutuality inasmuch as it conferred an equal right upon both the parties, for under it just as the employer could terminate the employee's service by giving him three months' notice or by paying him three months' basic pay and dearness allowance in lieu thereof, the employee could leave the service by giving three months' notice and when he failed to give such notice, the Corporation could deduct an 380 equivalent amount from whatever may be payable to him. It is true that there is mutuality in clause 9(i) the same mutuality as in a contract between the lion and the lamb that both will be free to roam about in the jungle and each will be at liberty to devour the other. When one considers the unequal position of the Corporation and its employees, the argument of mutuality becomes laughable. 10.3 The contesting Respondents could, therefore, have filed a civil suit for a declaration that the termination of their service was contrary to law on the ground that the said Rule 9(i) was void. In such a suit, however, they would have got a declaration and possibly damages for wrongful termination of service but the civil court could not have ordered reinstatement as it would have amounted to granting specific performance of a contract of personal service. As the Corporation is "the State", they, therefore, adopted the far more efficacious remedy of filing a 26 HC-NIC Page 26 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT writ petition under Article 226 of the _ Constitution.
104. As the Corporation is "the State" within the meaning of Article 12, it was amenable to the writ jurisdiction of the High Court under Article 226. It is now wellestablished that an instrumentality or agency of the State being "the State" under Article 12 of the Constitution is subject to the Constitutional limitations, and its actions are State actions and must be judged in the light of the Fundamental Rights guaranteed by Part III of the Constitution (see, for instance, Sukhdev Singh and others v. Bbagatram Sardar Singh Raghuvanshi and another, The International Airport Authority's Case and Ajay Hasia's Case). The actions of an instrumentality or agency of the State must, therefore, be in conformity with Article 14 of the Constitution. The progression of the judicial concept of Article 14 from a prohibition against discriminatory class legislation to an invalidating factor for any discriminatory or arbitrary State action has been traced in Tulsiram Patel's Case (at pages 473
476). The principles of natural justice have now come to be recognized as being a part of the Constitutional guarantee contained in Article 14. In Tulsiram Patel's Case this Court said (at page 476) :
"The principles of natural justice have thus come to be recognized as being a part of the guarantee contained in Article 14 because of the new and 381 dynamic interpretation given by this Court to the concept of equality which is the subjectmatter of that Article. Shortly put, the syllogism runs thus: violation of a rule of natural justice results in arbitrariness which is the same as discrimination; where discrimination is the result of State action, it is violation of Article 14; therefore, a violation of a principle of natural justice by a State action is a violation of Article 14. Article 14, however, is not the sole repository of the principles of natural justice. What it does is to guarantee that any law or State action violating them will be struck down. The principles of natural justice, however, apply not only to legislation and State action but also where any tribunal, authority or body of men, not coming within the definition of 'State' in Article 12, is charged with the duty of deciding a matter."
105. As pointed out above, Rule 9(i) is both arbitrary and unreasonable and it also wholly ignores and sets aside the audi alteram partem rule it, therefore, violates Article 14 of the Constitution.
106. On behalf of the Appellants reliance was placed upon the case of Radhakrishna Agarwal and others v. State of Bihar and others, [1977] 3 S.C.R. 249. The facts in that case were that a contract, called a "lease", to collect and exploit Sal seeds from a forest 27 HC-NIC Page 27 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT area was entered into between the State of Bihar and the appellants in that case. Under one of the clauses of the said contract, the rate of royalty could be revised at the expiry of every three years in consultation with the lessee and was to be binding on the lessee. The State unilaterally revised the rate of royalty payable by the appellants and thereafter cancelled the lease. The Patna High Court dismissed the writ petition filed by the appellants and the appellants' appeal to this Court was also dismissed. In that case it was held that when a State acts purely in its executive capacity, it is bound by the obligations which dealings of the State with individual citizens import into every transaction entered into in exercise of its constitutional powers, but this is only at the time of entry into the field of consideration of persons with whom the Government could contract, and after the 382 State or its agents have entered into the field of ordinary contract the relations are no longer governed by the constitutional provisions but by the legally valid contract which determines rights and obligations of the parties inter se. The court then added (at page 255):
"No question arises of violation of Article 14 or of any other constitutional provision when the State or its agents, purporting to act within this field, perform any act. In this sphere, they can only claim rights conferred upon them by contract and are bound by the terms of the contract only unless some statute steps in and confers some special statutory power or obligation on the State in the contractual field which is apart from contract.""
12.3 In view of the said observation by Apex Court, the contention by learned advocate for municipality on strength of the clause in the appointment order which permitted the Corporation to terminate service of employee at any time and/or without notice, cannot be sustained.
12.4 Such clause in appointment order is against public policy and any action in violation 28 HC-NIC Page 28 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT of provision which permit the employer to terminate the service of the claimants in violation of natural justice cannot be enforced.
12.5 In this context, it would also be appropriate to take into account the observation by Hon'ble the Apex Court in case of D.K. Yadav vs. JMA Industries Limited [(1990) 1 SCC 259], wherein Hon'ble Apex Court observed that:
"5. The contention of Dr. Anand Prakash that since this appeal was deleted from the constitution bench to be dealt with separately, the finding of the constitution bench deprived the respondent of putting forth the contention based on Cl. 13 of the certified standing order to support impugned action and the respondent is entitled to canvass afresh the correctness of the view of the constitution bench is devoid of force. It is settled law that an authoritative law laid after considering all the relevant provisions and the previous precedents, it is no longer open to be recanvassed the same on new grounds or reasons that may be put forth in its support unless the court deemed appropriate to refer to a larger bench in the larger public interest to advance the cause of justice. The constitution bench in fact went into the self same question visavis the right of the employer to fall back upon the relevant provision of the certified standing Orders to terminate the service of the workman/employee. By operation of S. 2(oo) the right of the employer under Cl.13(2) (iv), and the contract of employment has been effected. Moreover in Ambika Prasad Mishra v. State of U.P. and Ors., [1980] 3 SCC 719 at 7223 para 5 & 6. A constitution bench held that every new discovery or argumentative novelty cannot undo or compel reconsideration of a binding precedent. It does not lose its authority 'merely' because it was badly argued, inadequately considered and fallaciously reasoned. In that case the ratio of this court on Art. 31A decided by 13 Judges bench in Keshwanand Bharti v. Union of India [1973] Suppl. SCR was sought to be 29 HC-NIC Page 29 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT reopened but this court negatived the same.
6. His contention that expiry of eight days' absence from duty brings about automatic loss of lien on the post and nothing more need be done by the management to pass an order terminating the service and per force termination is automatic, bears no substance. The constitution bench specifically held that the right of the employer given under the standing Orders gets effected by statutory operation. In Robert D' Souza's case (supra) in para 7, this court rejected the contention that on expiry of leave the termination of service is automatic and nothing further could be done. It was further held that striking of the name from the rolls for unauthorised absence from duty amounted to termination of service and absence from duty for 8 consequitive days amounts to misconduct and termination of service on such grounds without complying with minimum principles of natural justice would not be justified. In Shambhunath's case three Judges bench held that striking of the name of the workman for absence of leave itself amounted to retrenchment. In H.D. Singh v. Reserve Bank of India & Ors. (supra), this court held that striking of the name from the rolls amounts to an arbitrary action. In State Bank of India v. Workmen of State Bank of India and Anr.[1991] 1 SCC 13, a two judge bench of this court to which one of us, K.R.S.,J. was a member was to consider the effect of discharge on one month's notice or pay in 939 lieu thereof. It was held that it was not a discharge simplicitor or a simple termination of service but one camouflaged for serious misconduct. This court lifted the veil and looked beyond the apparent tenor of the order and its effect. It was held that the action was not valid in law.
7. The principle question is whether the impugned action is violative of principles of natural justice. In A.K. Kriapak and Ors. v. Union of India & Ors., [1969] 2 SCC 262 a Constitution bench of this court held that the distinction between quasi judicial and administrative order has gradually become thin. Now it is totally clipsed and obliterated. The aim of the rule of the natural justice is to secure justice or to put it negatively to prevent miscarriage of justice. These rules operate in the area not covered by law validly made or expressly excluded as held in Col. J.N. Sinha v. Union of India & Anr. [1971] 1 SCR 791. It is settled law that certified standing orders have statutory force which do not expressly exclude the application of the principles of natural justice. Conversely the Act made exceptions for the application of principles of natural justice necessary implication from specific provisions in the Act like Ss.25F; 25FF;
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25FFF; etc, the need for temporary hands to cope with sudden and temporary spurt of work demands appointment temporarily to a service of such temporary workmen to meet such exigencies and as soon as the work or service are completed, the need to dispense with the services may arise. In that situation, on compliance of the provisions of s. 25F resort could be had to retrench the employees in conformity therewith particular statute or statutory rules or orders having statutory flavour may also exclude the application of the principles of natural justice expressly or by necessary implication. In other respects the principles of natural justice would apply unless the employer should justify its exclusion on given special and exceptional exigencies.
8. The cardinal point that has to be borne in mind, in every case, is whether the person concerned should have a reasonable opportunity of presenting his case and the authority should act fairly, justly, reasonably and impartially. It is not so much to act judicially but is to act fairly, namely' the procedure adopted must be just, fair and reasonable in the particular circumstances of the case. In other words application of the principles of natural justice that no man should be condemned unheard intends to prevent the authority to act arbitrarily effecting the rights of the concerned person.
9. It is a fundamental rule of law that no decision must be taken which will affect the right of any person without first being informed of the case and be given him/ her an opportunity of putting forward his/her case. An order involving civil consequences must be made consistently with the rules of natural justice. In Mohinder Singh Gill & Anr. v. The Chief Election Commissioner & Ors. [1978] 2 SCR 272 at 308F the Constitution Bench held that 'civil consequence' covers infraction of not merely property or personal right but of civil liberties, material deprivations and non pecuniary damages. In its comprehensive connotion every thing that affects a citizen in his civil life inflicts a civil consequence. Black's Law Dictionary, 4th Edition, page 1487 defined civil rights are such as belong to every citizen of the state or country they include rights capable of being enforced or redressed in a civil action. In State of Orissa v. Dr. (Miss) Binapani Dei & Ors., this court held that even an administrative order which involves civil consequences must be made consistently with the rules of natural justice. The person concerned must be informed of the case, the evidence in support thereof supplied and must be given a fair opportunity to meet the case before an adverse decision is taken. Since no such opportunity 31 HC-NIC Page 31 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT was given it was held that superannuation was in violation of principles of natural justice.
10. In State of West Bengal v. Anwar Ali Sarkar [1952] SCR 289, per majority, a seven Judge bench held that the rule of procedure laid down by law comes as much within the purview of Art. 14 of the Constitution as any rule of substantive law. In Maneka Gandhi v. Union of India,. [1978] 2 SCR 62 1, another bench of seven judges held that the substantive and procedural laws and action taken under them will have to pass the test under Art, 14. The test of reason and justice cannot be abstract. They cannot be divorced from the needs of the nation. The tests have to be pragmatic otherwise they would cease to he reasonable. The procedure prescribed must be just, fair and reasonable even though there is no specific provision in a statute or rules made thereunder for showing cause against action proposed to be taken against an individual, which affects the right of that individual. The duty to give reasonable opportunity to be heard will be implied from the nature of the function to be performed by the authority which has the power to take punitive or damaging action. Even executive authorities which take administrative action involving any deprivation of or restriction on inherent fundamental rights of citizens, must take care to see that justice is not only done but manifestly appears to be done. They have a duty to proceed in a way which is free from even the appearance of arbitrariness, unreasonableness or unfairness. They have to act in a manner which is patently impartial and meets the requirements of natural justice.
11. The law must therefore be now taken to be well settled that procedure prescribed for depriving a person of livelihood must meet the challenge of Art.
14. and such law would be liable to be tested on the anvil of Art. 14 and the procedure prescribed by a statute or statutory rule or rules or orders effecting the civil rights or result in civil consequences would have to answer the requirement of Art. 14. So it must be right,just and fair and not arbitrary, fanciful or oppressive. There can be no distinction between a quasijudicial function and an administrative function for the purpose of principles of natural justice. The aim of both administrative. inquiry as well as the quasi.judicial enquiry is to arrive at a just decision and if a rule of natural justice is calculated to secure justice or to put it negatively, to prevent miscarriage of justice, it is difficult to see why it should be applicable only to quasijudicial enquiry and not to administrative enquiry. It must logically apply to both.
15. In this case admittedly no opportunity was given to the appellant and no enquiry was held. The 32 HC-NIC Page 32 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT appellant's plea put forth at the earliest was that despite his reporting to duty on December 3, 1980 and on all subsequent days and readiness to join duty he was prevented to report to duty, nor he be permitted to sign the attendance register. The Tribunal did not record any conclusive finding in this behalf. It concluded that the management had power under Cl. 13 of the certified Standing Orders to terminate with the service of the appellant. Therefore, we hold that the principles of natural justice must be read into the standing order No. 13 (2) (iv). Otherwise it would become arbitrary, unjust and unfair violating Arts. 14. When so read the impugned action is violative of the principles of natural justice.
16. This conclusion leads us to the question as to what relief the appellant is entitled to. The management did not conduct any domestic enquiry nor given the appellant any opportunity to put forth his case. Equally the appellant is to blame himself for the impugned action. Under those circumstances 50 per cent of the back wages would meet the ends of justice. The appeal is accordingly allowed. The award of the Labour Court is set aside and the letter dated December 12, 1980 943 of the management is quashed. There shall be a direction to the respondent to reinstate the appellant forthwith and pay him back wages within a period of three months from the date of the receipt of this order. The appeal is allowed accordingly. The parties would bear their own costs."
12.6 It would also be appropriate to refer to the decision in case of Punjab Land Development and Reclamation Corporation Ltd., Chandigarh vs. Presiding Officer, Labour Court, Chandigarh and others [(1990 3 SCC 682], wherein Hon'ble Apex Court observed that:
"33. Next comes the decision in State Bank of India v. Shri N. Sundara Money, reported [1976] 3 SCR 160, (Y.V. Chandrachud, V.R. Krishna lyer and A.C. Gupta, JJ.). In an application under Article 226, the respondent on automatic extinguishment of his service consequent to the preemptive provision as to the temporariness of the period of his employment in his appointment letter claiming to have been deemed to have had continuous 33 HC-NIC Page 33 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT service for one year within the meaning of s. 25(B)(2) of the Act, the Single Bench of the High Court having allowed his writ petition and the writ appeal of the appellant having also failed, this Court in appeal found as fact that the appointment was purely temporary one for a period of 9 days but might be terminated earlier, without assigning any reason therefor at the petitioner's discretion; and the employment unless terminated earlier, would automatically cease at the expiry of the period i.e. 18.11.1972. This 9 days' employment added on to what had gone before ripened to a continuous service for a year "on the antecedent arithmetic of 240 days of broken bits of service" and considering the meaning of 'retrenchment' it was held that the expression for any reason whatso ever 134 was very wide and almost admitting of no exception. The contention of the employer was that when the order of appointment carried an automatic cessation of service, the period of employment worked itself out by efflux of time, not by act of employer and such cases were outside the concept of retrenchment. This Court observed that to re trench is to cut down and one could not retrench without trenching or cutting, but "dictionaries are not dictators of statutory construction where the benignant moo&of a law and, more emphatically, the definition clause furnish a different denotation."
34. Accepting the literal meaning, Krishna Iyer, J. observed:
"A break down of s. 2(00) unmistakably expands the semantics of retrenchment. 'Termination ..... for any reason whatsoever' are the key words. Whatever the reason, every termination spells retrenchment. So the sole question is, has the employee's service been terminated? Verbal apparel apart, the substance is decisive. A termination takes place where a term expires either by the active step of the master or the running out of the stipulated term. To protect the weak against the strong this policy of comprehensive definition has been effectuated. Termination embraces not merely the act of termination by the employer, but the fact of termination howsoever produced. May be, the present may be a hard case, but we can visualise abuses by employers, by suitable verbal devices, circumventing the amount of s. 25F and s. 2(00). Without speculating on possibilities, we may agree that 'retrenchment' is no longer terrain cognita but area covered by an expansive definition. It means 'to end, conclude, cease.' In the present case the employment ceased, concluded, ended on the expiration of 9 days automatically may be, but cessation all the same. That to write into the order of appointment the date of 34 HC-NIC Page 34 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT termination confers no mokshas from s. 25F (b) is inferable from the proviso to s. 25F(1). True, the section speaks of retrenchment by the employer and it is urged that some act of volition by the employer to bring about the termination is essential to attract s. 25F and a omatic extinguishment of service by effluxion of time cannot be sufficient."
39. The question whether the positive content of s. 2(00) restricting the definition of workmen rendered surplus, for any reason, whatsoever, is part of the ratio or not, submits Mr. Venugopal, is wholly an academic question in view of the fact that as many as 9 High Courts have restricted the applicability of s. 25F, 25G and 25H to only cases of termination of services of surplus labour for any reason whatsoever and not to other types of termination, whatever may be the reason for such termination. Even if a Judgment was to be based on two alternative reasons or conclusions, each one of these alternative reasons or basis, would form the ratio of the Judgment. It is also urged that the argument would equally apply to the ratio of Anakapalla's case rendering the Judgments in Sundra Money's case and the later decisions per incuriam, for not having noticed or followed a binding precedent of the Supreme Court itself, as the Judgment of the Constitution Bench binds smaller Divisions of the Court.
54. In Hindustan Steel Ltd. v. The Presiding Officer, Labour Court, [1977] 1 SCR 586 the question was whether termination of service by efflux of time was termination of service within the definition of retrenchment in section 2(oo) of the Act. Both the earlier decisions of the Court in Hariprasad (supra) and Sundara Money (supra) were considered and it was held that there was nothing in Hariprasad which was inconsistent with the decision in Sundara Money's case. It was observed that the decision in Hariprasad was only that the words "for any reason whatsoever" used in the definition of retrenchment would not include a bona fide closure of the whole business because it would affect the entire scheme of the Act. The decisions in L. Robert D'Souza v. Executive Engineer, Southern Railway and Anr., [1979] 1 L.L.J. 211; The Managing Director, National Garages v.J. Gonsalves, [1962] 1 L.L.J. 56; Goodlas Nerolac Paints v. Chief Commissioner, Delhi, [1967] 1 L.L.J. 545 and Rajasthan State Electricity Board v. Labour Court, [1966] 1 L.L.J. 381, in which contrary view was taken, were overruled in Santosh Gupta holding that the discharge of the workman on the ground that she did not pass the test which would have enabled her to be confirmed was 'retrenchment' within the meaning of section 2(oo) and 35 HC-NIC Page 35 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT therefore, the requirement of section 25F had to be complied with. The workman was em ployed in the State Bank of Patiala from July 13, 1973 till August, 1974 when her services were terminated. According to the workman she. had worked for 240 days in the year preceding August 21, 1974 and the termination of her services was retrenchment as it did not fall within any of the three accepted cases. The management's contention was that termination was not due to discharge of surplus labour but due to failure of the workman to pass the test which could have enabled her to be confirmed in the service and as such it was not retrenchment. This contention was repelled.
61. When we analyse the mental process in drafting the definition of "retrenchment" in s. 2(00) of the Act we find that firstly it is to mean the termination by the employer of the service of a workman for any reason whatsoever. Having said so the Parliament proceeded to limit it by excluding certain types of termination, namely, termination as a punishment inflicted by way of disciplinary action. The other types of termination excluded were (a) voluntary retrenchment; or (b) retrenchment of the workman on reaching the age of superannuation if the contract of employment between the employer and the workman concerned contains a stipulation on that behalf; or (c) termination of service of a workman on the ground of continued ill health. Had the Parliament envisaged only the question of termination of surplus labour alone in mind, there would arise no question of excluding (a), (b) and (c) above. The same mental process was evident when s. 2(00) was amended inserting another exclusion clause (bb) by the Amending Act 49 of 1984, with effect from 18.8.1984, "termination of the service of work man as a result of the nonrenewal of the contract of employment between the employer and the workman concerned on its expiry of such contract being terminated under a stipulation in that behalf contained therein."
76. For the purpose of harmonious construction, it can be seen that the definitions contained in section 2 are subject to their being anything repugnant in the subject or context. In view of this, it is clear that the extended meaning given to the term 'retrenchment' under clause (00) of section 2 is also subject to the context and the subject matter. Section 25F prescribed the conditions precedent to a valid retrenchment of workers as discussed earlier. Very briefly, the conditions prescribed are the giving of one month's notice indicating the reasons for retrenchment and payment of wages for the period of the notice. Section 25FF pro vides for compensation to workmen in case of 36 HC-NIC Page 36 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT transfer of undertakings. Very briefly, it provides that every workman who has been in continuous service for not less than one year in an undertaking immediately before such transfer shall be entitled to notice and compensation in accordance with the provisions of section 25F "as if the workman had been retrenched". (Emphasis supplied). Section 25FFA provides that sixty days' notice must be given of intention to close down any undertaking and section 25 FFF provides for compensation to workmen in case of closing down of undertakings. Very briefly stated section 25FFF which has been already discussed lays down that "where an undertaking is closed down for any reason whatsoever, every workman who has been in continuous service for 153 not less than one year in that undertaking immediately before such closure shall, subject to the provisions of subsection (2), be entitled to notice and compensation in accordance with the provisions of section 25F, as if the workman had been retrenched". (Emphasised supplied). Section 25H provides for reemployment of retrenched workmen. In brief, it provides that where any workmen are retrenched, and the employer proposes to take toto his employment any person, he shall, give an opportunity to the retrenched workmen to offer themselves for re employment as provided in the section subject to the conditions as set out in the section. In our view, the principle of harmonious construction implies that in a case where there is a genuine trans fer of an undertaking or genuine closure of an undertaking as contemplated in the aforesaid sections, it would be inconsistent to read into the provisions a right given to workman "deemed. to be retrenched" a right to claim re employment as provided in section 25H. In such cases, as specifically provided in the relevant sections the workmen concerned would only be entitled to notice and compensation in accordance with section 25F. It is significant that in a case of transfer of an undertaking or closure of an under taking in accordance with the aforesaid provisions, the benefit specifically given to the workmen is "as if the workmen had been retrenched" and this benefit is restricted to notice and compensation in accordance with the provisions of section 25F.
77. The last submission is that if retrenchment is under stood in its wider sense what would happen to the rights of the employer under the Standing Orders and under the con tracts of employment in respect of the workmen whose service has been terminated. There may be two answers to this question. Firstly, those rights may have been affected by introduction of ss. 2(00), 25F and the other relevant sections. Secondly, it may be said, the rights as such are not affect ed 37 HC-NIC Page 37 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT or taken away, but only an additional social obligation has been imposed on the employer so as to give the retrenchment benefit to the affected workmen, perhaps for immediate tiding over of the financial difficulty. Looked at from this angle, there is implicit a social policy. As the maxim goesStat pro ratione voluntas populi; the will of the people stands in place of a reason.
78. Regarding the seeming gaps in the definition one would aptly remember what Lord Simonds said against the view that the court having discovered the intention of Parliament must proceed to fill in the gaps and what the legislature had not written the court must write.
"It appears to me to be a naked usurpation of the legislative function under the thin disguise of interpretation. And it is the less justifiable when it is guess work with what material the legislature would, if it had discovered the gap, have filled it in. If a gap is disclosed, the remedy lies in an amending Act."
79. The Court has to interpret a statute and apply it to the facts. Hans Kelsen in his Pure Theory of Law (P.
355) makes a distinction between interpretation by the science of law or jurisprudence on the one hand and interpretation by a lawapplying organ (especially the court) on the other. According to him "jurisprudential interpretation i., purely cognitive ascertainment of the meaning of legal norms. In contradistinction to the interpretation by legal organs, jurisprudential interpretation does not create law". "The purely cognitive interpretation by jurisprudence is there fore unable to fill alleged gaps in the law. The filling of a socalled gap in the law is a lawcreating function that can only be performed by a lawapplying organ; and the function of creating law is not performed by jurisprudence interpreting law. Jurisprudential interpretation can do no more than exhibit all possible meanings of a legal norm. Jurisprudence as cognition of law cannot decide between the possibilities exhibited by it, but must leave the decision to the legal organ who, according to the legal order, is authorised to apply the law." According to the author if law is to be applied by a legal organ, he must determine the meaning of the norms to be applied; he must 'interpret' those norms (P. 348). Interpretation therefore is an intellectual activity which accompanies the process of law application in its advance from a higher level to a lower level. According to him, the law to be applied is a frame. "There are cases of intended or unintended indefiniteness at the lower level and several possibilities are open to the appli cation of law." The traditional theory believes that the statute, applied to a concrete case, can always supply only one correct decision and that the positivelegal 'correctness' of this decision is based 38 HC-NIC Page 38 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT on the statute itself. This theory describes the interpretive procedure as if it consisted merely in an intellectual act of clarifying or under standing; as if the lawapplying organ had to use only his reason but not his will, and as if by a purely intellectual activity, among the various existing possibilities only one correct choice could be made in accordance with positive law. According to the author: "The legal act applying a legal norm may be performed in such a way that it conforms
(a) with the one or the other of the different meanings of the legal norm, (b) with the will of the norm creating authority that is to be determined somehow',
(c) with the expression which the normcreating authority has chosen, (d) with the one or the other of the contradictory norms; or (e) the concrete case to 155 which the two contradictory norms refer may be decided under the assumption that the two contradictory norms annul each other. In all these cases, the law to be applied constitutes only a frame within which several applications are possible, whereby every act is legal that stays within the frame."
80. The definitions is s. 2 of the Act are to be taken 'unless there is anything repugnant in the subject or con text'. The contextual interpretation has not been ruled out. In R.B.I. v. Peerless General Finance, reported in [1987] 2 SCR 1, O. Chinnappa Reddy, J. said:
"Interpretation must depend on the text and the context. They are the bases of interpretation. One may well say if the text is the texture, context is what gives the colour. Neither can be ignored. Both are important. That interpretation is best which makes the textual interpretation match the contextual. A statute is best interpreted when we know why it was enacted. With this knowledge, the statute must be read, first as a whole and then section by section, clause by clause, phrase by phrase and word by word. If a statute is looked at, in the context of its enactment, with the glasses of the statute maker, provided by such context, its scheme, the sections, clauses, phrases and words may take colour and appear different than when the statute is looked at without the glasses provided by the context. With these glasses we must look at the Act as a whole and discover what each section, each clause, each phrase and each word is meant and designed to say as to fit into the scheme of the entire Act. No part of a statute and no word of a statute can be construed in isolation. Statutes have to be construed so that every word has a place and everything is in its place. It is by looking at the definition as a whole in the setting of the entire Act and by reference to what preceded the enactment and the reasons for it that the Court construed the expression 'Prize Chit' in Srinivasa and 39 HC-NIC Page 39 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT we find no reason to depart from the Court's construction."
81. As we have mentioned, industrial and labour legislation involves social and labour policy. Often they are passed in conformity with the resolutions of the International Labour Organisation. In Duport Steels v. Sirs, [1980] 1 W.L.R. 142. the House of Lords observed that there was a difference between applying the law and making it, and that judges ought to avoid becoming involved in controversial social issues, since this might affect their reputation in impartiality. Lord Diplock said:
"A statute passed to remedy what is perceived by Parliament to be a defect in the existing law may in actual operation turn out t0 have injurious consequences that Parliament did not anticipate at the time the statute was passed; if it had, it would have made some provision in the Act in order to prevent them ..... But if this be the case it is for Parliament. not for the judiciary, to decide whether any changes should be made to the law as stated in the Acts ..."
8.2 Applying the above reasonings; principles and precedents, t0 the definition in s. 2(00) of the Act, we hold that "retrenchment" means the termination by the employer of the service of a workman for any reason whatsoever except those expressly excluded in the section."
13. To support and justify his submission based on the provision in the appointment letter, learned advocate relied on the decision of Hon'ble Apex Court in case of Municipal Council, Samrala v. Rajkumar [2006(3) SCC 81].
14. I have considered the said decision. In light of the facts of the present case, the said judgment does not render any assistance to the petitioners inasmuch as the facts of the cited 40 HC-NIC Page 40 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT case are materially different then the fact involved in present case.
14.1 On this count, it is relevant to note that it was not the case even of the municipality that the appointment of the claimants was covered and protected by clause (bb) of Section 2(oo) and that, therefore, the said decision would not help the petitioners inasmuch as is the cited decision, the Hon'ble Apex Court found, from the facts involved in the said case, that the employees' service was covered under provision of clause (bb) of Section 2(oo). In present case, it was neither claimed nor proved before the learned Labour Court that the claimants were appointed for limited and fixed period and by virtue of appointment order itself or by special contract, the claimants were informed that their appointment would be for fixed and limited period and that their appointment would automatically come to end on expiry of period of appointment.
Besides this, it is not even the case of the 41 HC-NIC Page 41 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT Corporation that the service of the claimants automatically came to end on expiry of fixed/ limited period specifically stipulated and mentioned in the appointment order. On the contrary the corporation claimed that the service of the claimants were terminated for austerity measures they were appointed irregularly.
14.2 Thus, from any perspective the appointment of the claimants neither fall under Section 2(oo)(bb). Besides this, as mentioned above, such case was neither pleaded nor proved by the employer before learned Labour Court.
Under the circumstances, the said decision does not help the petitioners.
15. In this context, it would be appropriate to take into account the decision of Hon'ble Apex Court in case of S.M. Nilajkar & Ors. v. Telecom District Manager, Karnataka [(2003) 4 SCC 27], the Hon'ble Apex Court observed, inter alia, that:
"13. The termination of service of a workman engaged 42 HC-NIC Page 42 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT in a scheme or project may not amount to retrenchment within the meaning of Subclause (bb) subject to the following conditions being satisfied:
(i) that the workman was employed in a project or scheme of temporary duration;
(ii) the employment was on a contract, and not as a dailywager simplicitor, which provided inter alia that the employment shall come to an end on the expiry of the scheme or project; and
(iii) the employment came to an end simultaneously with the termination of the scheme or project and consistently with the terms of the contract.
(iv) the workman ought to have been apprised or made aware of the abovesaid terms by the employer at the commencement of employment.
14. The engagement of a workman as a dailywager does not by itself amount to putting the workman on notice that he was being engaged in a scheme or project which was to last only for a particular length of time or upto to occurrence of some event, and therefore, the workman ought to know that his employment was short lived. The contract of employment consciously entered into by the workman with the employer would result in a notice to the workman on the date of the commencement of the employment itself that his employment was short lived and as per the terms of the contract the same was liable to termination on the expiry of the contract and the scheme or project coming to an end. The workman may not therefore complaint that by the act of employer his employment was coming to an abrupt termination. To exclude the termination of a scheme or project employee from the definition of retrenchment it is for the employer to prove the abovesaid ingredients so as to attract the applicability of Subclause (bb) abovesaid.
In the case at hand, the respondentemployer has failed in alleging and proving the ingredients of Subclause (bb), as stated hereinabove. All that has been proved is that the appellants were engaged as casual workers or dailywagers in a project. For want of proof attracting applicability of Subclause (bb), it has to be held that the termination of the services of the appellants amounted to retrenchment.
15. The appropriate provision which should govern the cases of the appellants is Section 25FFF, the relevant part whereof is extracted and reproduced hereunder: "25FFF. Compensation to workmen in case of closing down of undertakings.(1) Where an undertaking is closed down for any reason whatsoever, every workman who has been in continuous service for not less than one year in that undertaking immediately before such closure shall, subject to the provisions of Subsection (2), be 43 HC-NIC Page 43 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT entitled to notice and compensation in accordance with the provisions of Section 25F, as if the workman had been retrenched:
Provided that where the undertaking is closed down on account of unavoidable circumstances beyond the control of the employer, the compensation to be paid to the workman under Clause (b) of Section 25F shall not exceed his average pay for three months. [Explanation : An undertaking which is closed down by reason merely of
(i) financial difficulties (including financial losses); or
(ii) accumulation of undisposed of stocks; or
(iii) the expiry of the period of the lease or licence granted to it; or
(iv) in a case where the undertaking is engaged in mining operations, exhaustion of the minerals in the area in which such operations area carried on, shall not be deemed to be closed down on account of unavoidable circumstances beyond the control of the employer within the meaning of the proviso to this sub section.] 1A. [Not reproduced] 1B. [Not reproduced] (2) Where any undertaking setup for the construction of buildings, bridges, roads, canals, dams or other construction work is closed down on account of the completion of the work within two years from the date on which the undertaking had been set up, no workman employed therein shall be entitled to any compensation under Clause (b) of Section 25F, but if the construction work is not so competed within two years, he shall be entitled to notice and compensation under that section for every [completed year of continuous service] or any part thereof in excess of six months."
16. It is pertinent to note that in Hariprasad Shivshanker Shukla and Anr. v. A.D. Divikar and Ors. (1957) SCR 121 the Supreme Court held that 'retrenchment' as defined in Section 2(oo) and as used in Section 25F has no wider meaning than the ordinary accepted connotation of the worked, that is, discharge of surplus labour or staff by the employer for any reason whatsoever otherwise than by way of punishment inflicted in disciplinary action. Retrenchment was held to have no application where the service of all workmen were terminated by the employer on a real and bona fide closure of business or on the business or undertaking being taken over by another employer. The abovesaid view of the law taken by the Supreme Court resulted in promulgation of the Industrial Disputes (Amendment) Ordinance, 1957 with effect from 27.4.1957, later on replaced by an Act of Parliament (Act 18 of 1957) with effect from 6.6.1957 whereby Section 25FF and Section 44 HC-NIC Page 44 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT 25FFF were introduced in the body of the Industrial Disputes Act, 1957. Section 25FF deals with the case of transfer of undertakings with which we are not concerned. Section 25FFF deals with closing down of undertakings. The term 'undertaking' is not defined in the Act. The relevant provision use the term 'industry'. Undertaking is a concept narrower than industry. An undertaking may be a part of the whole, that is, the industry. It carries a restrict meaning. (see Bangalore Water Supply & Sewerage Board etc. v. A. Rajappa and Ors. etc. and the Management of Hindustan Steel Ltd. v. The Workmen and Ors. ). With this amendment it is clear that closure of a project or scheme by the State Government would be covered by the closing down of undertaking within the meaning of Section 25FFF. The workman would therefore be entitled to notice and compensation in accordance with the provisions of Section 25F though the right of employer to close the undertaking for any reason whatsoever cannot be questioned. Compliance of Section 25F shall be subject to such relaxations as are provided by Section 25FFF. The undertaking having been closed on account of unavoidable circumstances beyond the control of the employer, i.e. by its own force as it was designed and destined to have a limited life only, the compensation payable to the workman under Clause (b) of Section 25F shall not exceed his average pay for three months. This is so because of failure on the part of respondent employer to allege and prove that the termination of employment fell within Subclause (bb) of Clause (oo) of Section 2 of the Act."
As mentioned above, in present case, it has emerged that the petitioner failed to establish that the respondents were engaged in respect of scheme or project for which a special contract with specific provision which prescribed fixed period or duration of the contract of appointment was executed or that the appointment order itself contained such condition with regard to period of appointment. The petitioner also 45 HC-NIC Page 45 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT failed to prove that the respondents were informed, at the time of appointment, that their appointment is for fixed period and limitation duration. Under the circumstances, the contention raised on ground of Section 2(oo)(bb) cannot be entertained. The said contention is raised as an afterthought and therefore also it does not deserve to be accepted.
16. As mentioned above, in light of the facts and circumstances of the case, the findings and conclusion recorded by the learned Labour Court cannot be faulted.
17. Now so far as the final direction issued by the learned Labour Court is concerned, it has emerged from the award that learned Labour Court has directed the Corporation to merely reinstate the claimants on their original post. Learned Labour Court has neither awarded backwages nor any other benefits except continuity of service are granted.
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18. When the said direction are examined in light of the fact that the claimants have regularly and continuously worked with the Corporation from 1990, 1991 and in one case from 1993 i.e. for almost 20 to 22 years, the final direction by the learned Labour Court i.e. reinstatement without backwages cannot be said to be arbitrary or unreasonable. In this context, it would be appropriate to take into account the observation by Hon'ble Apex Court in case of Deepali Gundu Surwase vs. Kranti Junior Adhyapak Mahavidyalaya (D.ED.) [(2013) 10 SCC 324] wherein Hon'ble Apex Court has observed that:
"38.1 In cases of wrongful termination of service, reinstatement with continuity of service and back wages is the normal rule.
38.2 The aforesaid rule is subject to the rider that while deciding the issue of back wages, the adjudicating authority or the Court may take into consideration the length of service of the employee/workman, the nature of misconduct, if any, found proved against the employee/workman, the financial condition of the employer and similar other factors.
38.3 Ordinarily, an employee or workman whose services are terminated and who is desirous of getting back wages is required to either plead or at least make a statement before the adjudicating authority or the Court of first instance that he/she was not gainfully employed or was employed on lesser wages. If the employer wants to avoid payment of full back wages, then it has to plead and also lead cogent evidence to prove that the employee/workman was gainfully employed 47 HC-NIC Page 47 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT and was getting wages equal to the wages he/she was drawing prior to the termination of service. This is so because it is settled law that the burden of proof of the existence of a particular fact lies on the person who makes a positive averments about its existence. It is always easier to prove a positive fact than to prove a negative fact. Therefore, once the employee shows that he was not employed, the onus lies on the employer to specifically plead and prove that the employee was gainfully employed and was getting the same or substantially similar emoluments.
38.4 The cases in which the Labour Court/Industrial Tribunal exercises power under Section 11A of the Industrial Disputes Act, 1947 and finds that even though the enquiry held against the employee/workman is consistent with the rules of natural justice and / or certified standing orders, if any, but holds that the punishment was disproportionate to the misconduct found proved, then it will have the discretion not to award full back wages. However, if the Labour Court/Industrial Tribunal finds that the employee or workman is not at all guilty of any misconduct or that the employer had foisted a false charge, then there will be ample justification for award of full back wages.
38.5 The cases in which the competent Court or Tribunal finds that the employer has acted in gross violation of the statutory provisions and/or the principles of natural justice or is guilty of victimizing the employee or workman, then the concerned Court or Tribunal will be fully justified in directing payment of full back wages. In such cases, the superior Courts should not exercise power under Article 226 or 136 of the Constitution and interfere with the award passed by the Labour Court, etc., merely because there is a possibility of forming a different opinion on the entitlement of the employee/workman to get full back wages or the employer's obligation to pay the same. The Courts must always be kept in view that in the cases of wrongful / illegal termination of service, the wrongdoer is the employer and sufferer is the employee/workman and there is no justification to give premium to the employer of his wrongdoings by relieving him of the burden to pay to the employee/workman his dues in the form of full back wages.
38.6 In a number of cases, the superior Courts have interfered with the award of the primary adjudicatory authority on the premise that finalization of litigation has taken long time ignoring that in majority of cases the parties are not responsible for such delays. Lack of infrastructure and manpower is the principal cause for delay in the disposal of cases. For this the litigants cannot be blamed or penalised. It 48 HC-NIC Page 48 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT would amount to grave injustice to an employee or workman if he is denied back wages simply because there is long lapse of time between the termination of his service and finality given to the order of reinstatement. The Courts should bear in mind that in most of these cases, the employer is in an advantageous position visàvis the employee or workman. He can avail the services of best legal brain for prolonging the agony of the sufferer, i.e., the employee or workman, who can ill afford the luxury of spending money on a lawyer with certain amount of fame. Therefore, in such cases it would be prudent to adopt the course suggested in Hindustan Tin Works Private Limited v. Employees."
18.1 In light of the foregoing discussion and for reasons mentioned above, this Court is of the view that learned Labour Court has not committed any error either in recording the conclusion and findings or in passing final direction. Learned advocate for the petitioner failed to make out any case against impugned award and final direction by learned Labour Court. Learned advocate for petitioners also failed to establish that the learned Labour Court has committed any error of law or jurisdiction and that the award suffers from any infirmity.
Under the circumstances, the petitions fail and deserve to be rejected and they are accordingly rejected. Rule is discharged.
49 HC-NIC Page 49 of 50 Created On Sun Aug 20 22:19:15 IST 2017 C/SCA/13171/2013 JUDGMENT Sd/ (K.M.THAKER, J.) Bharat 50 HC-NIC Page 50 of 50 Created On Sun Aug 20 22:19:15 IST 2017