KARNANI PROPERTIES LTD. vs. STATE OF WEST BENGAL AND ORS.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 9 PETITIONER: KARNANI PROPERTIES LTD. Vs. RESPONDENT: STATE OF WEST BENGAL AND ORS. DATE OF JUDGMENT22/08/1990 BENCH: AGRAWAL, S.C. (J) BENCH: AGRAWAL, S.C. (J) KASLIWAL, N.M. (J) CITATION: 1990 AIR 2047 1990 SCR (3) 933 1990 SCC (4) 472 JT 1990 (3) 624 1990 SCALE (2)322 ACT: Industrial Disputes Act, 1947: Section 2(j)--"Industry"--Real Estate Company--Letting our premises and rendering various services, Electricity and Water sup- ply, washing and cleaning, electrical and sanitary repairs, lift services etc. to tenants--Employing workers for mainte- nance--Held the activity carried on by the company is "industry". Sections 2(b), (p), 19(2), 6 & 7--"Award"--"Settlement"-Termination of--Formal notice of termination of settlement is not necessary--Notice of termi- nation can be inferred from the correspondence between the parties. Constitution of India, 1950: Article 133(1)(a)---Appeal to Supreme Court--Raising fresh plea involving questions of fact cannot be allowed at the appel- late stage. Article 226---Writ petition challenging findings of Industrial Tribunal--High Court should generally consider the material placed before the Tribunal--Fresh and further material should not be allowed to be placed before the High Court. HEADNOTE: The appellant, a real estate company, was engaged in the business of letting out its property on lease, Besides it was also rendering various services to its tenants such as electricity and water supply, washing and cleaning, lift services, electrical and sanitary repairs on payment basis. For rendering these services the appellant-company employed a number of workmen. A dispute arose between the employees and the appellant-company with regard to wages, scales of pay, dearness allowance and gratuity. The State Government re- ferred the disputes to Industrial Tribunal for adjudication. The appellant-company contested the reference before the Tribunal by raising a preliminary objection that the alleged dispute was not an industrial dispute and that the reference was barred by Section 19 of the Industrial Disputes Act, 1947 since there was an earlier binding award, based on settlement with the Union, which was not terminated by http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 9 either parties. 934 By an order dated August 24, 1968 the Tribunal overruled the preliminary objection and gave the award dated March 3. 1969 enhancing the dearness allowance of the employees. The Tribunal also framed a revised gratuity scheme but did not fix any grades and pay scales of workmen for want of con- vincing evidence. The appellant-company filed a writ petition in the High Court challenging the Tribunal’s order dated August 24, 1968 as well as the Award dated March 7, 1969 contending: (i) that the Award was without jurisdiction because the appel- lant-company was not carrying on ’industry’ and the alleged dispute was not an ’Industrial Dispute’ and that the previ- ous Award was not terminated and was still subsisting; (ii) that no dispute was raised between the workmen and the appellant prior to the reference before the Tribunal; and (iii) that the Tribunal did not consider the appellant’s capacity to pay dearness allowance to the workmen. A single judge of the High Court dismissed the writ petition by rejecting all the contentions. The appellant filed an appeal against the judgment of the single judge before a Division Bench of the High Court which was also dismissed. Against the decision of the Division Bench of the High Court the appellant-company filed an appeal to this Court, contending: (i) that the High Court was in error in holding that the appellant was an ’industry’ under Section 2(j) of the Act; (ii) that the Tribunal was not competent to make the Award since the earlier Award, which was in the nature of a settlement under Section 2(p), was not terminated in accordance with section 19(2) by giving a formal written notice; (iii) that there was non-compliance with the provi- sions of Section 19(7) of the Act; and (iv) that the Indus- trial Tribunal was in error in making the Award in relation to Dearness Allowance without examining the capacity to pay the additional amount and that the High Court should have remanded the matter to the Tribunal for considering this issue in the light of the documents which were submitted by the appellant before the High Court. Dismissing appeal, this Court, HELD: 1. The activity carried on by the appellant compa- ny falls within the ambit of the expression "industry" defined in Section 2(j) of the Industrial Disputes Act, 1947. The Award of the Industrial Tribunal cannot, there- fore, be assailed on the basis that the appellant is 935 not carrying on an ’industry’ under the Act. [943E] Bangalore Water Supply & Swerage Board v .R. Rajappa and Ors., [1978] 3 SCR 207, applied. Management of Safdar jung Hospital v. Kuldip Singh Sethi, [1971] 1 SCR 177; State of Bombay v. Hospital Mazdoor Sabha, [1960] 2 SCR 866; D.N. Banerjee v. P.R. Mukherjee, [1953] SCR 302 and Corporation of the City of Nagpur v. Its employees, [1960] 2 SCR 942, referred to. 2. It is not the requirement of Section 19(2) of the Industrial Disputes Act, 1947 that there should be a formal notice terminating a settlement, and notice can be inferred from the correspondence between the parties. [944B] Indian Link Chain Manufacturers Ltd. v. Their Workmen, [1972] I SCR 790, applied. 2.1 In view of the finding of the Division bench that the letter of employees Union dated November 24, 1966 was a notice under section 19(6) as well as section 19(2) of the Industrial Disputes Act, 1947 and that the said letter http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 9 contained a clear intimation of the intention of the employ- ees to terminate the Award, the High Court was justified in holding that the earlier award had been validly terminated before the passing of the order of reference. [943H; 944A- B ] 3. The High Court was right in taking the view that while exercising its jurisdiction under Article 226 of the Constitution the High Court should generally consider the materials which were made available to the Tribunal and fresh or further materials which were not before the Tribu- nal should not normally be allowed to be placed before the Court. [944F-G] 3.1 In the instant case the appellant has not been able to show why the documents relied on by it were not produced before the Tribunal. Therefore there is no justification for accepting the plea of the appellant for reconsideration of the Award of the Tribunal in the light of the documents submitted by the appellant during the pendency of the appeal before High Court. [944G-H] 4. A question raised for the first time in the Supreme Court involving an inquiry into questions of fact cannot be allowed to be agitated. [944E] 936 JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2080 (L) of 1977. Appeal by Certificate from the Judgment and Order dated 20.12.74 of the Calcutta High Court in Appeal No. 104 of 1972. R.N. Nath and Rathin Das for the Appellant S.P. Khera, M. Quamaruddin and Mrs. M. Quamaruddin for the Respondents. G.S. Chatterjee for the State. The Judgment of the Court was delivered by S.C. AGRAWAL, J. This appeal, by certificate granted under Article 133(1)(a) of the Constitution, is directed against judgment and order of the High Court of Judicature at Calcutta dated December 20, 1974, in Appeal No. 104 of 1972. Karnani Properties Ltd., appellant herein, is a company incorporated under the Companies Act, 1913. It owns several mansion houses known as Karnani Mansions at Park Street, Calcutta. There are about 300 flats in these mansions which have been let out to tenants. The appellant provides various facilities to its tenants in these flats, e.g. free supply of electricity, washing and cleaning of floors and lavato- ries, lift service, electric repairs and replacing, sanitary repairs and replacing, etc., and for that purpose the appel- lant employ over 50 persons, namely sweepers, plumbers, malis, lift-man, durwans, pumpmen, electric and other mis- tries, bill collectors and bearers, etc., in connection with these properties. A dispute arose between the employees of the appellant represented by Barabazar Zamandar Sangh (hereinafter referred to as ’the union’) and the appellant with regard to wages, scales of pay, dearness allowance and gratuity. The Government of West Bengal, by order dated July 29, 1967, referred for adjudication to the 6th Industrial Tribunal, West Bengal, the industrial dispute relating to: (a) Fixation of Grades and Scales of pay of the different categories of workmen; (b) Dearness Allowance; and (c) Gratuity. http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 9 937 The appellant raised preliminary objections with regard to the validity of the reference before the Industrial Tribunal on the ground that the alleged dispute is not an industrial dispute and that the reference is barred by Section 19 of the Industrial Disputes Act, 1947 (hereinafter referred to as ’the Act’) for the reason that in 1960 there was an Award on the basis of settlement made with the union, and the said Award has not been terminated by either of the parties and is still binding on the parties. The Industrial Tribunal, by its order dated August 24, 1968, overruled the said preliminary objections raised by the appellant and thereafter the Tribunal gave the Award dated March 3, 1969. The Industrial Tribunal expressed its inability to fix any grades and scales of pay of the workmen for the reason that the evidence adduced by the Union on this issue was scrappy, none too convincing and not very much acceptable. As regards dearness allowance the Industrial Tribunal held that since November, 1964 the price index of working class in Calcutta has considerably gone up from 460 to 750 points (as was in October, 1968), i.e. roughly by 300 points. The Industrial Tribunal awarded enhanced DA at the rate of Rs.60 per month (Rs.20 per 100 points) to the sweeper, bearer, helper, mali, mazdoor, lift-man, head sweeper, durwan, pumpman, and as- sistant electric mistry. DA at the ,’ate of Rs.54 per month (Rs. 18 per 100 points) was awarded to the plumber, raj mistry, head durwan, electric mistry and driver and bill collector. It was also directed that the said rates of DA would remain in force as long as the price index will remain between 600 to 800 points and if the price index goes up beyond 800 points the rate of DA will be revised according to the rates mentioned and if it goes below 600 points it also may be revised accordingly. With regard to gratuity the Industrial Tribunal pointed out that under the existing scheme gratuity is payable to every workmen after completion of three years continued, faithful and satisfactory service at the rate of 10 days consolidated salary for every com- pleted year of service since the date of appointment. The Industrial Tribunal held that three years’ period was too short to make a workman entitled to gratuity and that "satisfactory" and "faithful" are vague terms. The Industri- al Tribunal framed a scheme of gratuity whereunder after completion of six years of continuous service with the appellant every workmen on retirement or on death will get an amount of gratuity at the rate of 10 days’ consolidated salary for every completed year of service since the date of appointment and a workman who resigns voluntarily would also be entitled to get the gratuity at the same rate provided he completed 10 years of continuous service. The Industrial Tribunal also directed that if the termination of service is the result of misconduct which caused financial loss to the employer 938 that loss would first be compensated from the gratuity payable to employee and the balance, if any, should be paid to him. It was also directed that the services of the work- men prior to 1950 would not be taken into consideration for the purpose of payment of gratuity. The appellant filed a writ petition in the High Court under Article 226 of the Constitution wherein the. order dated August 24, 1968 and the Award dated March 7, 1969 given by the Industrial Tribunal were challenged. The said writ petition was heard by a learned single Judge, who by his judgment dated March 17 & 20, 1972, dismissed the said writ petition. Before the learned single Judge it was urged http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 9 that the Award made by the Industrial Tribunal was without jurisdiction for the reason that the appellant does not carry on an "industry" as defined in the Act and that the dispute between the appellant and the workmen cannot come within the ambit of industrial dispute, and also. for the reason that there was a previous Award dated March 3, 1960 which has not been terminated and was still subsisting and in view of the said Award the present reference was invalid and further that no dispute was raised between the workmen and the appellant prior to the reference before the Indus- trial Tribunal and as such the Tribunal has no jurisdiction to deal with the matter. The learned single Judge rejected all these objections. He held that in view of the nature of the activity carried on the appellant does carry on an industry within the meaning of the Act and the dispute between the appellant and its workmen come within the ambit of the Act. As regards the Award dated March 3, 1960 the learned single Judge found that the workmen concerned had given notice to terminate the previous Award and as such the existence of previous Award and as such the existence of previous Award would not preclude a fresh reference. The learned single Judge observed that no specific plea was raised by the appellant before the Industrial Tribunal challenging the order and the reference on the ground that there was no such dispute prior to the reference between the workmen and the appellant about the questions referred to in the order of reference and that whether there was any demand or not is a question of fact. the learned single Judge, however, held that from the evidence it is clear that the workmen concerned had demanded before the order of reference in their charter of demands dearness allowance and provident fund and gratuity and as such there was a dispute between the workmen concerned and the employers before the order of reference was made. The Award was challenged on merits before the learned single Judge on the ground that the Industrial Tribunal did not consider the appellant’s capaci- ty to pay in granting dearness allowance to the workmen concerned. The learned single Judge 939 rejected the said contention on the view that reading the Award as a whole it could not be contended that the Tribunal did not take into consideration either the capacity to pay or the leval of the cost of living. The appellant filed an appeal against the judgment of the learned single Judge which was dismissed by a Division Bench of the High Court by its judgment and order dated December 20, 1974. The learned Judges agreed with the deci- sion of the learned single Judge that the appellant is carrying on an industry under Section 2(j) of the Act. Before the Division Bench it was contended on behalf of the appellant that the earlier Award was made on the basis of a settlement between the two parties and that since the said Award was in a nature of settlement it could only be termi- nated in accordance with the provisions of Section 19(2) of the Act relating to termination of a settlement. The learned Judges of the Division Bench held that the said contention was not raised by the appellant before the Tribunal and also before the learned single Judge and it could not be raised for the first time at the stage of the appeal and that it cannot be considered to be a pure question of law because for a settlement under Section 2(p) of the Act the necessary requirements of settlement as laid down in the statute and the rules have to be satisfied and whether the necessary recruitments have been satisfied or not will involve inves- tigation into facts. The learned Judges were, however, of http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 9 the view that even if the said plea was allowed to be raised it could not be accepted inasmuch as the materials on record do not establish that the requirement of "settlement" as defined in Section 2(p) of the Act are satisfied in respect of the earlier Award. It was held that an Award does not necessarily cease to be an Award merely because the same was made on the basis of a settlement arrived at between the parties and that the earlier Award was an "Award" within the meaning of Section 2(b) of the Act and was not a settlement as contemplated by Section 2(p) of the Act. With regard to the termination of the earlier Award, the learned Judges have held that in the facts and circumstances of the case it had been validly terminated in accordance with Section 19(6) as well as Section 19(2) of the Act. Before the Division Bench it was urged on behalf of the appellant that the Tribunal has not considered the financial capacity of the appellant while making the Award with regard to dearness allowance and reliance was placed on certain documents which were filed before the Division Bench. The learned Judges held that in considering the findings arrived at by the Tribunal the Court should generally consider the materials which were made available to the Tribunal and fresh or further materials which were not before the 940 Tribunal should not be allowed to be placed before the Court in a writ petition for determining whether the findings of the Tribunal are justified or not and that in the instant case no proper grounds have been made out for not producing the materials which were then available at the time of the hearing before the Tribunal and why the said documents could not be produced even before the learned single Judge. The learned Judges further held that even if the said documents are taken into consideration the same would be of no partic- ular assistance to the appellant inasmuch as the said docu- ments consist mainly of balance sheets and assessment or- ders, and that the legal position is settled that while computing gross profits for the purpose of revising wage structure and dearness allowance the provision made for taxation, depreciation and development rebate cannot be deducted and the provisions of the Companies Act contained in Sections 205 and 211 and the principles of accountancy involved in preparation of profit and loss accounts have no relevance or bearing while considering the revision of wages and dearness allowance. The learned Judges have held that on the materials on record the Tribunal was justified in making the Award and that the materials on record before the Tribu- nal establish that the amount ordered by the Tribunal was not beyond the financial capacity of the appellant. Aggrieved by the decision of the Division Bench of the High Court the appellant has flied this appeal after obtain- ing leave to appeal from the High Court under Article 133(1)(a) of the Constitution. Shri R.N. Nath, the learned counsel for the appellant, has submitted that the High Court was in error in holding that the appellant is an industry under Section 2(j) of the Act. Shri Nath has submitted that in arriving at the said conclusion the learned Judges of the Division Bench of the High Court have relied upon the decision of this Court in Management of Safder Jung Hospital v. Kuldip Singh Sethi, [ 1971] 1 S.C.R. 177 which decision was overruled by this Court in Bangalore Water Supply & Sewerage Board v. R. Rajappa and Others, [1978] 3 S.C.R. 207. The submission of Shri Nath is that in accordance with the principles laid down in Bangalore Water Supply & Sewerage Board Case, (supra) the appellant cannot be taken to be carrying on an http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 9 "industry" under Section 2(j) of the Act. In our opinion there is no substance in this contention. It is no doubt true that the learned Judges of the Division Bench of the High Court have placed reliance on the decision of this Court in the Safdar Jung Hospital Case, (Supra) for holding that the appellant is carrying on an industry under Section 2(j) of the Act and the decision in Safdar Jung Hospital case, (supra) has 941 been overruled by a larger Bench of this Court in Bangalore Water Supply & Sewerage case, (supra). But this does not mean that the view of the High Court that the appellant is carrying on an industry under Section 2(j) of the Act is erroneous. In Safdar Jung Hospital case, (supra), a six member Bench of this Court had overruled the earlier deci- sion in State of Bombay v. Hospital Mazdoor Sabha, [1960] 2 S.C.R. 866 and gave a restricted interpretation to the definition of "industry" contained in Section 2(j) of the Act. Bangalore Water Supply & Sewerage Board, case (decided by a seven member Bench of this Court) by overruling the decision in Safdar Jung Hospital case, has restored the Hospital Mazdoor Sabha case. In other words, the effect of decision on Bangalore Water Supply & Sewerage Board case, is that the expression "industry" as defined in Section 2(j) has to be given the meaning assigned to it by this Court in the earlier decisions in D.N. Banerjee v. P.R. Mukherjee, [1953] S.C.R. 302, Corporation of the of Nagpur v. Its employees, [ 1960] 2 S.C.R. 942 and the Hospital Mazdoor Sabha case Krishna Iyer, J., who delivered the main judgment in Bangalore Water Supply & Sewerage Board case, has summed up the principles which are decisive, positively and nega- tively, of the identity of "industry" under the Act. The first principle formulated by the learned Judge is as under: "I, Industry, as defined in Section 2(j) and explained in Banerjee has a wide import: (a) Where (i) systematic activity (ii) organised by cooper- ation between employer and employee, (the direct) and sub- stantial element is chimerical) (iii) for the production and/or distribution of goods and services calculated to satisfy human wants and wishes (not spiritual or religious but inclusive of material things or services geared to celestial bliss e.g. making, on a large scale prasad or food), prima facie, there is an industry in that enterprise. (b) Absence of profit motive or gainful objective is irrele- vant, be the venture in the public joint or other sector. (c) The true focus is functional and the decisive test is the nature of the activity with special emphasis on the employer-employee relations. (d) If the organisation is a trade or business it does not cease to be one because of philanthropy animating the under- taking." 942 If the said principles are applied to the facts of the present case and there can be no doubt that the activity carried on by the appellant satisfies the requirements of the definition of "industry" contained in Section 2(j) of the Act. In this regard, it may be mentioned that the learned Judges of the Division Bench of the High Court have found as under: "(i) The Memorandum of Association of the appellant company indicate that the principal object for which the appellant company was incorporated is to acquire by purchase, trans- fer, assignment or otherwise lands, buildings and landed properties of all description and in particular to acquire from the Karnani Industrial Bank Ltd., the immovable proper- http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 9 ties now belonging to the said Bank and to improve, manage and develop the properties and to let out the same on lease or otherwise dispose of the same. (ii) The principal business of the company is to deal with the real property and it is a real estate company. (iii) The income which the appellant derives is not from mere letting out the properties to the tenants and that the tenants pay not only for mere occupation of the property but also for enjoyment of the various services which are ren- dered by the appellant to the tenants and to which services the tenants are entitled as a matter of right for the occu- pation of the premises. (iv) The services which are rendered to the tenants and about which there does not appear to be any dispute are: (a) elaborate arrangements for supply of water; (b) free supply of electricity; (c) washing and cleaning of floors and lavatories; (d) lift services; (e) electric repairs and replacing; and (f) sanitary repairs and replacing etc. 943 (v) For offering-these services to the tenants, the appel- lant has employed a number of workmen and these services which undoubtedly confer material benefits on the tenants and constitute material services, are rendered by the em- ployees. (vi) The employees of the appellant company are engaged in their respective calling or employment to do their work in rendering the services. (vii) Activity carried on by the appellant company is un- doubtedly not casual and is distinctly systematic. (viii) The work for which labour of workmen is required is clearly productive of the services to which the tenants are entitled and which also form a part of the consideration for the payments made by the tenants. (ix) The appellant carries on its business with a view to profits and it makes profits and declares dividends out of the profits earned. From the aforesaid findings recorded by the High Court, with which we find no reason to disagree, it is evident that the activity carried on by the appellant falls within the ambit of the expression "industry" defined in Section 2(j) of the Act as construed by this Court in Bangalore Water Supply & Sewerage Board case (supra). The Award of the Industrial Tribunal cannot, therefore, be assailed on the basis that the appellant is not carrying on an industry under the Act. Shri Nath has next contended that the Industrial Tribu- nal was not competent to make the Award as the earlier Award dated March 3, 1960, had not been validly terminated. He has urged that the earlier Award was in the nature of a settle- ment under Section 2(p) of the Act and it could be terminat- ed only in accordance with Section 19(2) of the Act. Shri Nath has pointed out that for terminating a settlement under Section 19(2) a written notice is necessary whereas for termination of an Award under Section 19(6) of the Act a written notice is not required and a notice is sufficient. In our opinion this contention does not require consid- eration in view of the finding recorded by the learned Judges of Division Bench of the High Court that the letter dated November 24, 1966 was a notice 944 under Section 19(6) as well as under Section 19(2) of the Act. It has been found that the said letter of the union which was addressed to the Labour Commissioner was sent to http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 9 the appellant company and that in the said letter there is a clear intimation of the intention of the employees to termi- nate the Award and from the letter of the appellant dated February 13, 1967 it appears that the appellant had become aware of the intention of the union to terminate the Award and that the order of reference was made on July 29, 1967, long after the expiry of the period of two months. It is not the requirement of Section 19(2) of the Act that there should be a formal notice terminating a settlement and notice can be inferred from the correspondence between the parties (See: Indian Link Chain Manufacturers Ltd. v. Their Workmen, [1972] 1 S.C.R. 790. In the aforesaid facts and circumstances the High Court was justified in holding that the Award dated March 3, 1960 had been validly terminated before the passing of the order of reference. Shri Nath has urged that there has been non-compliance of the provisions of Section 19(7) of the Act which lays down that no notice given under sub-section (2) or sub-sec- tion (6) shall have effect unless it is given by a party representing the majority of the persons bound by the set- tlement or Award as the case may be. This question has been raised by the appellant for the first in this Court. It involves an inquiry into questions of fact which cannot be made at this stage. The same, therefore, cannot be allowed to be agitated. Shri Nath has lastly urged that the Industrial Tribunal was in error in making the Award in relation to Dearness Allowance without examining the capacity of the appellant to pay the additional amount and that the High Court should have remanded the matter to the Tribunal for considering this issue in the light of the documents which were submit- ted by the appellant before the High Court. We find no substance in this contention. The High Court has rightly held that in considering the finding arrived at by the Tribunal the High Court while exercising its jurisdiction under Article 226 of the Constitution should generally consider the materials which were made available to the Tribunal and fresh or further materials which were not before the Tribunal should not normally be allowed to be placed before the Court. The appellant has not been able to show why the said documents were not produced before the Tribunal. It is not the case of the appellant that the Tribunal had precluded the appellant from producing these documents. In these circumstances we find no justification for accepting the plea of the learned counsel for the appel- lant for 945 reconsideration of the Award of the Tribunal in the light of the documents submitted by the appellant during the pendency of the appeal before the High Court. The appeal is, therefore, dismissed with costs. During the pendency of this appeal, the appellant has made a deposit before the Tribunal. The respondent .union will be entitled to withdraw the said amount along with the interest that has accrued on it. T.N.A. Appeal dismissed. 946