Full Judgment Text
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PETITIONER:
PROCESS TECHNICIANS AND ANALYSTS’ UNION
Vs.
RESPONDENT:
THE UNION OF INDIA & ORS.
DATE OF JUDGMENT: 10/03/1997
BENCH:
CJI, A.M. AHMADI, SUJATA V. MANOHAR
ACT:
HEADNOTE:
JUDGMENT:
J U D G M E N T
Mrs. Sujata V. Manohar. J.
Bharat Petroleum Corporation Ltd., the second
respondent in this appeal has about 12,000 employees. Out of
these about 1850 employees are working in the refinery
division of the second respondent. Process Technicians and
Analysts’ Union which is the appellant-Union has a
membership of about 411 employees in the refinery division
of the second respondent-corporation.
Prior to 1976 there were two companies; one was Burmah
shell Refineries Ltd. which was an Indian company and the
other was Burmah Shell oil Storage and Distributing Company
which was a foreign company registered in the United Kingdom
and was a marketing company. On or about 24th of January,
1976, the entire share capital of Burmah Shell Refineries
Ltd. was purchased by the Government of India and Burmah
shell Refineries Ltd. became a Government Company, and later
a Public Sector Undertaking. The Burmah Shell oil Storage
and Distributing Company which was a foreign company was
acquired by the Central Government by enacting the Burmah
Shell (Acquisition of Undertakings in India) Act, 1976.
After the acquisition of the Burmah Shell oil Storage and
Distributing Company, both these companies were merged and a
notification was issued under Section 7 of the said Act
vesting the undertakings of the Burmah Shell Oil Storage and
Distributing Company in Burmah Shell Refineries Ltd. The
name of the said company was changed on or about 1st of
August, 1977, to Bharat Petroleum Corporation Ltd. Upto 24th
of January, 1976, there were approximately 220 Burmah Shell
workmen who were working in the Refinery Company. After 24th
of January, 1976, some of these employees continued with the
Government Company. Fresh workmen were employed thereafter
by the Government/Public Sector Company on a temporary basis
on consolidated salaries.
In February 1978 Petroleum Employees’ Union filed
U.L.P.38/1978 under the Maharashtra Recognition of Trade
Unions and Prevention of Unfair Labour Practices Act, 1971,
claiming on behalf of post-nationalisation workmen in the
refinery or Bharat Petroleum Corporation Ltd. benefits of
Pre-Nationalisation Wage Settlements signed by the then
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unions with Burmah Shell Refineries Ltd. Those settlements
were dated 21.2.1973, 31.10.1973 and 16.8.1974.
By a letter dated 27th of February, 1981 addressed by
the Government of India to the second respondent-
corporation, the attention of the second respondent was
invited to existing directions to the effect that the Wage
Scales/Service Conditions which were prevalent before the
take-over of the company cannot be granted to the employees
recruited subsequently and that the second respondent-
corporation should recruit all new entrants after take-over
of the company on consolidated wages. It was in compliance
with this directive that the second respondent-corporation
had engaged employees after nationalisation on a temporary
basis and on consolidated salaries.
During the pendency of U.L.P. 38/1978, there were other
litigations between the employees and/or unions of these
employees and the second respondent-corporation pertaining
to service conditions of the employees. These are, however,
not relevant for the present purposes. On 29th of April,
1987, U.L.P. 38/1978 was allowed in favour of the employees.
The Industrial court held that the second respondent-
corporation was a successor-in-interest of Burmah Shell
Refineries Ltd. and that the settlement of 16th of August,
1974 continued to apply to employees recruited after
nationalisation (hereinafter referred to as ‘post-
nationalisation employees’). It was also held that the
letter from the Government of India to the second
respondent-corporation dated 27-2-1981 was of no legal
effect and legislation was required if it was intended that
the same service conditions would not apply to post-
nationalisation employees. This decision was challenged by
the second respondent by filing a writ petition being Writ
Petition No. 1835 of 1987 in the Bombay High Court on or
about 1st of July, 1987. The writ petition prayed for a writ
of certiorari to quash the judgment dated 29th of April,
1987 in U.L.P. 38 of 1978. By an interim order of the same
date the application of the settlement of 16th of August,
1974 was stayed for the past period but for prospective
period from 1.7.1987 the said settlement of 1974 was made
applicable to all workmen of the refinery who were
complainants in U.L.P. 38 of 1978.
On 2nd of July, 1988, Bharat Petroleum Corporation Ltd.
(Determination of conditions of Service of Employees)
Ordinance, 1988, was promulgated. Under Section 3 of the
ordinance power was vested in the Ministry of Petroleum,
Government of India to determine service conditions under a
scheme comparable with the employees of other public sector
companies. The Ordinance was replaced by The Bharat
Petroleum Corporation Ltd. (Determination of Conditions of
Service of Employees) Act, 1988, being Act 44 of 1988
(hereinafter referred to as ’the Act of 1988). The relevant
provisions of Section 3 of the said Act are as follows:
"3(1): Where the Central Government
is satisfied that for the purpose
of making the conditions of service
of the officers and employees of
the Corporation comparable with the
conditions of service of the
officers and employees of other
public sector companies, it is
necessary so to do. it may,
notwithstanding anything contained
in the Industrial Disputes Act,
1947 or any other law or any
agreement, settlement, award or
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other instrument for the time being
in force, and notwithstanding any
judgment, decree or order of any
court, tribunal or other authority,
frame one or more schemes for the
purpose of determination of the
conditions of service of the
officers and employees of the
Corporation.
(2) x x x x
x x x
(3) The Central Government may make
a scheme to amend or vary any
scheme made under sub-section (1).
(4) The power to make any scheme
under sub-section (1) or sub-
section (3) shall include--
(a) the power to give retrospective
effect to any such scheme or any
provision thereof; and
(b) the power to amend, by way of
addition, variation or repeal, any
existing provisions determining the
conditions of service of the
officers and employees of the
Corporation in force immediately
before the commencement of this
Act.
(5) Every scheme made under sub-
section (1) or sub-section (3)
shall be laid, as soon as may be
after it is made, before each House
of Parliament, while it is in
session for a total period of
thirty days which may be comprised
in one session or in two or more
successive sessions, and if, before
the expiry of the session
immediately following the session
or the successive sessions
aforesaid, both Houses agree in
making any modification in the
scheme, or both Houses agree that
the scheme should not be made, the
scheme shall thereafter have effect
only in such modified form or be of
no effect, as the case may be; so,
however, that any such modification
or annulment shall be without or
erejudice to the validity of
anything previously done under that
scheme.
Pursuant to the power given under Section 3, the
central government on of about 29th of April, 1989, framed a
scheme by a notification of that date. being the Bharat
Petroleum Corporation Ltd. (Determination of Conditions of
Service of Post-Nationalisation Refinery Employees) Scheme,
1989 (hereinafter referred to as ‘the Scheme of 1989’). The
Scheme was made retrospective and clause 1 (2) of the Scheme
provided that the Scheme shall be deemed to have come into
force on and from the 24th day of January, 1976. The Scheme
laid down conditions of service for the employees covered by
the Scheme for five different periods; (1) the period from
24th of January, 1976 to 31st December, 1979; (2) 1st of
January, 1980 to 31st December, 1983; (3) 1st January, 1984
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to 31st December, 1987; (4) 1st January, 1988 to 31st
December, 1991; and (5) after 31st of December, 1991, unless
the conditions are altered, varied or repealed by any other
scheme.
Two unions of the employees of the second respondent-
corporation, namely, the appellant union and Petroleum
workmen’s Union filed Writ Petition No. 3549 of 1988 in the
Bombay High Court challenging the constitutional validity of
the Bharat Petroleum Corporation (Determination of
Conditions of Service of Employees) Act, 1988. Another writ
petition being writ petition No. 3619 of 1988 was filed by
another union, namely, Bharat Petroleum Corporation
(Refinery) Employees’ Union challenging the constitutional
validity of the said Act of 1988. After the coming into
force of the said Scheme of 1989, these writ petitions were
amended to challenge the validity of the said Scheme which
was framed on 29th of April, 1989. These writ petitions were
heard together. By a common judgement and order, a Division
Bench of Bombay High Court has dismissed these writ
petitions and has upheld the constitutional validity of the
said Act of 1988 and the Scheme of 1989.
The present appeal is filed by the appellant-union from
the judgment and order of the Division Bench of the Bombay
High Court in writ petition No. 3549 of 1988. Similarly, an
appeal was also filed from the said judgment and order by
the Petroleum workmen’s Union who was a joint petitioner in
the said Writ petition No. 3549 of 1988. An appeal was also
filed by the Bharat Petroleum Corporation (Refineries)
Employee’s Union before this Court from the said judgment
and order in writ Petition No. 3619 of 1988. The other two
appeals, however, have been disposed of before us by earlier
orders in view of the settlements arrived at by the said two
unions with the second respondent-corporation on or about
17th May, 1996. The appellant-union, however, has not
reached a settlement with the corporation.
After the dismissal of the said writ petitions by the
Bombay High Court by the impugned judgment and order, writ
petition No. 1835 of 1987 which had been filed by the second
respondent-corporation challenging the judgment and order of
the Industrial court in U.L.P. 38 of 1978 was allowed by the
Bobmay High Court by its judgment and order of the
Industrial court dated 29th of April, 1987 in U.L.P. 38 was
set aside.
During the pendency of this appeal before us, the
Central Government, Ministry of Petroleum and Natural Gas,
by a notification dated 24th of September, 1996 has notified
a scheme further to amend the Bharat Petroleum Corporation
Ltd. (Determination of conditions of Service of Post-
Nationalisation Refinery Employees) Scheme, 1989. The
amended Scheme is known as the Bharat Petroleum Corporation
Ltd. (Determination of Conditions of Service of Post-
Nationalisation Refinery Employees) Amendment Scheme, 1996
(hereinafter referred to as ’the Scheme of 1996’). It is
deemed to have to come into force on and from the 1st day of
January, 1992. Under Clause 3 of the Amended Scheme, it
applies to all clerical and labour employees who have joined
the refinery of the Corporation on or after the 24th day of
January, 1976, whose jobs are set out in Part-B of the
Fourth Schedule provided that the Scheme shall cease to
have effect in respect of the employees who shall opt or
consent to be governed by the terms and conditions as may be
mutually agreed with the Corporation. As a result, the
employees who are governed by the settlements which have now
been entered into on or about 17th of May, 1996, will not be
governed by the Amended Scheme of 1996. While the employees
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who are members of the appellant-union, who have not signed
such settlements. will now be governed by the Amended Scheme
of 1996. The validity of this Amended Scheme of 1996 is also
challenged before us.
The appellant-union contends that Section 3 of the
Bharat Petroleum Corporation Limited (Determination of
Conditions of Service of Employees) Act, 1988 confers
unguided and arbitrary powers on the Central Government to
frame schemes. Hence Section 3 of the Act of 1988 must be
struck down. Section 3, however, clearly provides within
itself the guidelines for framing the scheme under that
section. Thus Section 3(1) stipulates that the Central
Government should be satisfied, that for the purpose of
making the conditions of service of the officers and
employees of other public sector companies, it may frame one
or more schemes for the purpose of determination of the
conditions of service of the officers and employees of the
corporation. It can do this notwithstanding anything
contained in the Industrial Disputes Act, 1947 or any other
law, agreement, settlement, award or other instrument for
the time being in force, and notwithstanding any judgment,
decree or order of any court, tribunal or other authority.
The power to frame the scheme, therefore, can be exercised
for the purpose of making the service conditions of the
second respondent’s employees comparable with those of other
public sector companies. This is not unguided power. The
guidelines are contained within Section 3 itself.
It is next submitted that under Section 3(2) while
framing any scheme under sub-section (1) of Section 3, it
shall be competent for the Central Government to provide for
the continuance, after the commencement of any such scheme,
of such of the emoluments and other benefits as were
payable to the officers and employees of the Corporation
immediately before Burmah shell Refineries became a
government Company or before the appointed day under the
Burmah Shell (Acquisition of Undertakings in India) Act,
1976. It is submitted that by reason of Section 3(2)
different service conditions can be permitted for the pre-
nationalisation employees of Burmah Shell Refineries or
Burmah Shell oil Storage and Distributing Company who have
become employees of the second respondent-corporation as
result of the nationalisation. This, according to the
appellant, violates Article 14 of the Constitution as it
discriminates between two sets of employees of the second
respondent-corporation.
This submission, however, ignores the entire historical
background of creation of the second respondent-corporation.
Prior to 1976 the employees of Burmah Shell Refineries as
well as Burmah Shell Oil Storage and Distributing company of
India Limited enjoyed salaries and emoluments and had the
benefit of a wage structure which was very different from
that of other public sector undertakings. When Burmah Shell
Refineries became a Government Company, and when the Burmah
Shell oil Storage and Distributing Company of India Limited
was taken over under the Burmah Shell (Acquisition of
Undertakings in India) Act, 1976, the employees of the
second respondent-corporation, were given protection of
their wages. Section 9 of the Burmah shell (Acquisition of
Undertakings in India) Act, 1976, in this connection,
provides that these employees shall hold office or service
under the Central Government or the Government Company, as
the case may be, on the same terms and conditions and with
the same rights to pension, gratuity and other matters as
would have been admissible to them, had there been no such
vesting. It is to protect the conditions of service of these
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pre-nationalisation employees that Section 3(2) of the 1988
Act provides that a scheme framed under section 3(1) may
provide for the continuance of the salary and other benefits
received by the pre-nationalisation employees. This was done
to treat the pre-nationalisation employees was a dwindling
group. originally, there were about 200 such employees who
were entitled to their pre-nationalisation service benefits.
By the time these appeals came to be filed their numbers had
dwindled to 10. We are now informed that there is only one
employee now left who is entitled to pre-nationalisation
emoluments. In this context, it cannot be said that the
provisions of Section 3(2) violate Article 14 of the
Constitution.
In the case of Life Insurance Corporation of India &777
Ors. v. S.S. Srivastava & Ors. (1988 Supp SCC 1), a
distinction had been made in the age of retirement between
employees transferred to a Government Corporation from its
predecessor private company and employees directly recruited
by the Corporation. The age of retirement for transferred
employees was fixed at 60 years and the age of retirement
for those directly recruited to the Government Corporation
was fixed at 58 years. It was held that the transferees and
direct recruits formed two distinct classes and providing
different ages of retirement was not discriminatory. This
Court noted that the transferred, employees belonged to a
diminishing cadre. Ultimately, the cadre would consist only
of directly recruited employees. Secondly, a separate
classification for transferred employees had become
necessary on account of historical facts and the need for
treating these employees in a fair and just way. This Court
referred with approval to the decision of the Calcutta High
Court in Maninder Chandra Sen v. Union of India & Ors. (AIR
1973 Cal. 385), in which the classification of railway
employees into two categories, namely, those who joined on
or before March 31, 1938 for purposes of fixing the age of
superannuation was upheld. The classification was upheld as
it was based on historical facts, and as necessary for
treating the employees in the just and fair way.
In the case of B.S. Yadav & Anr. v. Chief Manager,
Central Bank of India & Ors. (1987 [3] SCC 120), this Court
upheld rules fixing 60 years as the age of superannuation
for those inducted prior to bank nationalisation, but 58
years for those inducted after that date. These rules were
held as not violative of Articles 14 and 16 of the
Constitution. The Court said that the classification of the
employees into these two categories was a valid
classification involving justice and fairness. There was
good reason to make a distinction between the employees who
had entered service prior to nationalisation and those who
joined thereafter. At the time of nationalisation the
corresponding new banks did not have their own employees to
run the wide business taken over under the Act. There was,
therefore, necessity to secure the services of the employees
of the former banking companies without causing much
dissatisfaction to them. There was also need for
standardising the conditions of service of all such
employees belonging to the 14 banks. Hence the age of
retirement of the new entrants was fixed consistent with the
conditions prevailing in almost all the sectors of public
employment.
The considerations which have impelled the provisions
of Section 3(1) and 3(2) in the 1988 Act are very similar to
those cited in B.S. Yadav’s case (supra). In the case of
Imperial Bank of India Pensioners’ Association & Ors. v.
State Bank of India & Ors. (1989 Supp.[1] SCC 236), This
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Court upheld a distinction made between the India-based and
London-base pensioners of Imperial Bank of India which was
later taken by the State Banks of India. The Court said that
such a distinction did not violate Articles 14 and 16 of the
Constitution. It said that London-based employees constitute
a class by themselves and there was no discrimination within
the same class. The contention of the appellant, therefore,
in this regard, cannot be sustained.
The appellant has drawn our attention to the Statement
of Objects and Reasons of the 1988 Act. Paragraph 3 of the
Statement of Objects and Reasons accompanying the said Act
points out that the Bharat Petroleum now consists of three
categories of employees. They are the employees of the
Burmah Shell Refineries who continued to serve in that
company even after it became a government Company; the
employees of Buramh Shell whose services were transferred to
Burmah Shell Refineries under the provisions of the 1976
Take-over Act. and the employees recruited by Bharat
Petroleum after it became a Government Company. In paragraph
4 it is pointed out that out of the first two categories of
employees mentioned above, a few have not agreed to abide by
the public sector wage policy and, therefore, continue to
enjoy the emoluments and other conditions of service to
which they were entitled under the aforesaid companies even
after the Burmah Shell. The emoluments and other conditions
of service of the third category of employees mentioned
above and who were recruited by Bharat Petroleum were,
however, sought to be regulated after taking into
consideration the conditions of service applicable to
employees in other public sector companies in accordance
with the wage policy of the Government of Public Sector.
This was with a view that there should be, as far as
possible, parity in the conditions of service of Public
Sector Companies.
The Statement of objects and Reasons goes on to point
out that since the service conditions of this large category
of employees were less favourable than the employees of
Burmah Shell Refineries and Burmah Shell, a dispute was
raised by them which was taken to the Industrial Court. The
Industrial Court has held that in view of the provisions
Section 18(3) of the Industrial Disputes Act, 1947, these
employees are also entitled to the same conditions of
service as are applicable to other two categories of
Employees. The Statement goes on to say, "The award of the
Industrial Tribunal if given effect to in Bharat Petroleum
will amount to giving a higher wage structure in this
Corporation alone and other employees in similar
undertakings may demand that they should also get the
benefits of the higher scales of pay on the principle of
equal pay for equal work. This may eventually result in high
wage islands and depart radically from the public sector
wage policy." As the continuance of the conditions of
service of the employees of the former company was due to
historical reasons and as the conditions of service of the
employees of Bharat Petroleum were arrived at as a result of
settlements make between the company and the workmen, the
demand of post-nationalisation employees for parity with the
employees of the former company may have to be conceded in
view of the provisions of the Industrial Disputes Act and
the award of the Industrial Tribunal. Any attempt to make
the conditions of service comparable with the conditions of
service of other public sector companies can only be done by
legislation. Such a legislation could provide for
determination of comparable conditions of service for all
the categories of employees of Bharat Petroleum but at the
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same time provide for protection to those pre-
nationalisation employees of their conditions of service.
It is to achieve this objective that the Act of 1988
came to be enacted. The appellant contends that the entire
basis of the Act is unfounded because there is no such thing
as public sector wage policy. It contends that wage
structures in different public sector undertakings are
different. The appellant has submitted charts of wages in
different public sector companies. There is, for example, a
chart showing the wages of the lowest category if workmen of
the second respondent in the refinery compared with other
public sector units at different levels at starting, 5th,
10th and maximum level. At the beginning the total wages in
RCF, for example, are Rs. 2421/-, which at the 5th level go
upto Rs. 2559/-, and at the 10th level to Rs. 2693/-. In
comparison, under the 1989 BPCL Refinery Scheme, the total
at the beginning is Rs. 2323/-, at the 5th level it is Rs.
2399/-, and at the 10th level it is Rs. 2480/-. In BPCL
Marketing Division, the comparable figures are Rs. 2630/-,
Rs. 2814/- and Rs. 3062/-. we are not referring in detail to
these charts which have been submitted and which we have
perused. The contention of the appellant that the figures in
different public sector unions do not tally is correct. But
what we have to see is not the actual figure but the pattern
or the structure of the wage, or what the respondents
describe as the public sector wage pattern.
The respondents have explained the fundamental
rationale behind evolving a public sector wage patter, which
is to achieve consistency and uniformity in the wage
structure of the public sector enterprises so as to ensure
that the wages drawn by various public sector companies are
not so disproportionate with one another as to create any
imbalance in the public sector. Towards this end, the
Government of India has issued, from time to time,
directives and orders to public sector enterprises to
maintain uniform it and consistency in that wage pattern.
For this purpose the Department of public Enterprises has
been set up to ensure, inter alia, parity of public sector
wages. The method of computation of dearness allowance etc.
is in identical for all the public sector enterprises. The
components of the total wage packet consist of a basic
salary scale which is formulated by merging a portion of the
dearness allowance with the pre-existing basic salary at the
beginning of each wage settlement period, which is currently
a period of five years. The basic salary scale has a minimum
and maximum value which is arrived at by providing for
increments. The second component is dearness allowance which
is linked to the All India Consumer price Index Simla Series
(Base 1960=100). All public sector enterprises follow the
same industrial D.A. pattern. The third component is house
rent allowance which is payable at the rate of 30% of the
basic salary in the metropolitan cities, 25% of basic salary
in other A class cities, 15% of basic salary in B1 and B2
class cities and 7-1/2%/10% for C class cities and
unclassified areas. The other components are city
compensatory allowance and wage revision which generally
take place now every five years. The respondents have
prepared a table of emoluments drawn by the employees in the
public sector oil companies for the highly skilled category
at the maximum of the scale as of now. In HPCL Refinery, the
total emoluments are Rs. 11,964/-, in IOC Refinery it is Rs.
11,574/- and in the BPCL Refinery it is Rs. 12.386/-. The
essential features, therefore, of the public sector wage
pattern are variable industrial D.A. payment of
H.R.A./C.C.A. based on Department of public Enterprises
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guidelines, linkage of revision in wages to productivity,
permissible limits to rise in wages and adoption of the
principle of region-cum-industry as the basis for any wage
revision. The respondents have pointed out that the wage
structure of the pre-nationalisation Burmah Shell Refineries
was at complete variance with this wage pattern. Hence it
needed to be changed.
The scheme of 1989 which has been framed under the Act
of 1988 is for the purpose of introducing the public sector
wage pattern in the second respondent-corporation for post-
nationalisation employees. It would not, therefore, be
correct to say that there is no such thing as a public
sector wage pattern. The variations pointed out by the
appellant are a result of revisions being made in different
public sector enterprises at different times and under
different settlements. In fact the disparity in the wages
paid by the second respondent in its Marketing Division and
its Refinery Division is also on account of the differences
in the settlements which the second respondent has arrived
at with its employees in the Marketing Division. We are
informed that the employees of the Marketing Division were
the first group of employees of the second respondent who
agreed to a change-over to the public sector wage pattern
under the Settlement of 1986. The revision in their wages
thereafter is in accordance with the pattern so adopted for
the Marketing Division. The Refinery Division, however, did
not agree to such a settlement and hence there are some
differences in the wages paid in these two divisions. Such
differences cannot nullify the basic intention of the second
respondent to bring about parity in the wage pattern of
their employees with the wage pattern in other public sector
undertakings especially in the oil sector which is the
relevant sector.
The appellant has challenged the power given under
Section 3 of 1988 Act to frame a scheme retrospectively. The
appellant has also challenged the 1989 Scheme framed under
the said Act on the ground that it has been made applicable
retrospectively from 24th of January, 1976. The appellant
has contended that the Scheme cannot be made operative
retrospective from 24th of January, 1976 when the Act under
which it is framed came into force only on 2nd of July,
1988. This submission is based on a misconception. Under
sub-section (4) of Section 3 of the said Act an express
power is given to the Central Government to give
retrospective effect to any scheme framed under sub-section
(1) or sub-section (3) of Section 3. The retrospective
operation which is given to the Scheme of 1989 is,
therefore, under a statutory power so given to the Central
Government. Since the scheme regulates the conditions of
service of post-nationalisation refinery employees, it must
necessarily cover the post-nationalisation period which
began from 24th of January, 1976. It is open to the
legislature to make retrospective laws. Therefore, the
statutory scheme which has been made retrospective in
exercise of statutory power expressly granted to the Central
Government cannot be faulted on that ground.
The appellant further contends that the Industrial
court by its order dated 29.4.1987 in U.L.P. 38 of 1978 held
that the Settlement of 16th of August, 1974 which was
arrived at by the Burmah Shell Refinery with its employees
would apply to the employees recruited after nationalisation
by the second respondent. It was to override this decision
of the Industrial Court that the Bharat Petroleum
Corporation Ltd. (Determination of Conditions of Service of
Employees) Act, 1988, came to be enacted. In fact, the
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Statement of Objects and Reasons which has been set out
earlier clearly shows that as a result of the decision of
the Industrial Court there would be a high wage island in
the public sector in the form of high wages being paid to
the employees of the Refinery Division of second respondent
which may lead to imbalances in the public sector. It was to
overcome such imbalance that the Act was being passed.
Section 3(1) of the Act clearly provides that a scheme
which may be framed under Section 3(1) can "be framed
notwithstanding anything contained in the Industrial
Disputes Act or any other law, settlement of other
instrument for the time being in force and notwithstanding
any judgment, decree or order of any court. tribunal or
other authority." The scheme of 1989 is accordingly framed
with retrospective effect from 24th of January, 1976 and it
provides for detailed conditions of service of the employees
for five different periods. The appellant contends that the
Act of 1988 and the Scheme of 1989 are designed to overcome
the judgment of the Industrial court. such legislation,
according to the appellant, is invalid.
Learned counsel for the appellant has placed strong
reliance upon the decision of the Court in the case of A.V.
Nachane and Anr. v. Union of India & Anr. (1982 (2) SCR 246)
in support of his contention that a statute such as the 1988
Act, and the Scheme of 1989 formed under it, are invalid in
so far as they are retrospective because they are aimed at
setting aside the judicial decision of the Industrial Court.
This cannot be done by legislation. This contention,
however, does not bear any detailed scrutiny. As far back as
in 1969, in the case of Shri Prithvi cotton Mills Ltd, &
Anr. v. Broach Borough Municipality & Ors. (1970 (1) SCR
388) a Bench of five judges of this Court examined the
efficacy of a validating Act which retrospectively validated
the levy of a tax. It said that ordinarily a court holds a
tax to be invalidly imposed because the power to tax is
wanting or the statue or the rules or both are invalid or do
not sufficiently create jurisdiction. Validation of a tax so
declared illegal may be done only if the grounds of
illegality or invalidity are capable of being removed and
are in fact removed and the tax thus made legal. Observing
that there are several methods of doing this, the Court said
that the legislature may, by following one method or the
other, neutralise the effect of an earlier decision of the
court which becomes ineffective after the change of the law.
If the legislature has the power over the subject-matter and
competence to make a valid law, it can, at any time, make
such a valid law and make it retrospectively so as to cover
even past transactions.
A Bench of seven judges of this Court was required to
consider the validity of the Life Insurance Corporation
(Modification of Settlement) Act, 1976 in the case of Madan
Mohan Pathak v. Union of India & Ors. etc. (1978 (3) SCR
335). Life Insurance Corporation had arrived at a settlement
with its employees relating to the terms and conditions of
service of Class III and Class IV employees including bonus
payable to them. Under one of the clauses of this
settlement, an annual cash bonus was payable by the Life
Insurance Corporation to all Class III and Class IV
employees. This settlement was valid for a period of four
years from 1st of April, 1973, In 1976, the payment of Bonus
(Amendment) Act which was enacted considerably curtailed the
rights of employees to bonus. Although this Act was not
applicable to the employees of the Life Insurance
Corporation, the Corporation issued administrative
instructions not to pay cash bonus to its employees.
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Thereupon, the employees moved the Calcutta High Court for a
writ directing the Life Insurance Corporation to pay a cash
bonus in accordance with the terms of the settlement. A
Single Judge of the High Court allowed the writ petition.
While a Letters Patent Appeal was pending, Parliament passed
the Live Insurance Corporation (Modification of Settlement)
Act, 1976. The effect of the Act was to deprive Class III
and Class IV employees of the Life Insurance Corporation of
bonus payable to them under the settlements. After the
enactment, the Letters Patent Appeal which was filed by the
Corporation was not pursued by the Corporation under the
belief that after the Act was passed, there was no necessity
for proceeding with the appeal. As a result, the writ of
mandamus issued by the Single Judge of the Calcutta High
Court remained in tact. The Associations of employees filed
writ petitions before this Court challenging the
constitutional validity of the Life Insurance Corporation
(Modification of Settlement) Act, 1976. This Court said that
the real objective of this Act was to set aside the result
of the mandamus issued by the Calcutta High Court, Bhagwati,
J., who delivered the majority judgment said that
irrespective of whether the impugned Act was
constitutionally valid or not, the Corporation was bound to
obey the writ of mandamus issued by the High Court. Section
3 of the impugned Act merely provided that the provisions of
the settlement shall not have any force or effect. But the
writ of mandamus issued by the High Court was not touched by
the impugned Act. The judgment continued to subsist and the
Corporation was bound to honour it. The majority held that
the impugned Act which took away the rights of the employees
to receive bonus was violative of Article 31(2). The
observations of Bhagwati J. (as he then was) are in the
context of the L.I.C. being bound to obey the writ of
mandamus issued by the High Court. Also, Section 3 of the
impugned Act did not override any judgment or order of my
court. The position in the case before us is very different
and we shall examine it a little later.
After the above decision, L.I.C. issued notices
terminating the settlement and issued a notification
changing staff regulations. The validity of the two notices
and the notification issued for the purpose of nullifying
any further claim to annual cash bonus was challenged by the
workmen in the case of The Life Insurance Corporation of
India v. D.J. Bahadur & Ors. (1981 (1) SCR 1083) and this
Court had directed the Corporation to give effect to the
terms of the settlement of 1974 relating to bonus until
superseded by a fresh settlement, industrial award or
relevant legislation.
On January 31, 1981, the Life Insurance Corporation
(Amendment) Ordinance, 1981, was promulgated which was later
replaced by an Act. Sub-section (2)(c) which was added to
Section 48 provided that the provisions of clause (cc) of
sub-section (2) and sub-section (2)(B) and any rule made
under clause (cc) shall have effect notwithstanding any
judgment, decree or order of any court, tribunal or other
authority, the Industrial Disputes Act etc. New statutory
rules also were promulgated. Of these, Rule 3 was given
retrospective operation with effect from July 1, 1979. It
provided that the employees shall not be entitled to any
cash bonus. The validity of Life Insurance Corporation
(Amendment) Ordinance and Act of 1981 and the 1981 Rules
were challenged in the case of A.V. Nachane (supra). The
court said that the effect of the two judgments in Madan
Mohan Pathak’s case and D.J. Bahadur’s case (supra) was
clear. Rule 3 operating retrospectively cannot nullify the
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effect of the subsisting writ issued in D.J. Bahadur’s case
(supra) which directed the Life Insurance Corporation to
give effect to the terms of the 1974 settlement relating to
bonus until superseded by a fresh settlement. industrial
award or relevant legislation. The impugned Act of 1981 and
the rules were relevant legislation. However, in view of the
decision in Madan Mohan Pathak’s case (supra) these Rules in
so far as they seek to abrogate the terms of the 1974
settlement relating to bonus can operate only prospectively,
i.e. from the date of publication of the rules.
We fail to see how these decisions help the appellant
in the present case. The decision in A.V. Nachane‘s case
(supra) on which strong reliance is placed by Mr. Phadnis,
learned senior counsel for the appellant, has turned upon an
existing writ of mandamus which was issued by the Calcutta
High Court and which the court said would have to be obeyed.
This was the reason why only prospective operation was given
to the Rules of 1981 in A.V. Nachane’s case (supra). In the
present case, there is no writ of mandamus or any other writ
issued by the High Court in favour of the appellant
directing the second respondent to apply the pre-
nationalisation settlements of 1974 to the post-
nationalisation employees. Even the judgment and order of
the Industrial Court has been set aside by the High Court in
writ Petition No. 1835 of 1987. The retrospective operation
given to the scheme framed under the present Act, is within
the legislative competence of Parliament. Since the scheme
provides for the conditions of service of all employees who
joined the second respondent-corporation after 24th of
January, 1976. it necessarily lays down these terms and
conditions operative from 24th of January. 1976. The scheme
also provides emoluments which are higher than the
emoluments which the post-nationalisation employees were
receiving prior to the coming into effect of the scheme. The
scheme also brings into effect the avowed purpose of the
1988 Act which is to make the wage pattern in the second
respondent-corporation conform to the wage pattern of public
sector undertakings. A legislation which imposes
retrospectively a wage pattern may thereby discontinue the
application of any earlier settlement by an express
legislative provision to that effect. Such legislation is
within the legislative competence of Parliament. The ratio
of Nachane’s case (supra) does not apply in the present
circumstances.
The decisions in Madan Mohan Pathak’s case (supra) and
Nachane’s case (supra) have been recently explained by this
Court in two judgments. The first of these is Comorin Match
Industries (P) Ltd. v. State of T.N. (1996 [4] SCC 281)
where this Court has reiterated the ratio laid down Shri
Prithvi Cotton Mills’ case (supra). The court has observed
that in Madan Mohan Pathak’s case (supra) what was sought to
be done was to reverse a decision of a court of law given in
the exercise of judicial power by legislation. This was not
permissible. The Court also said that Nachane’s case (supra)
was a sequence to the decision in Madan Mohan Pathak’s case
(supra) and the principles laid down in Shri Prithvi Cotton
Mills’ case (supra) had not been overruled or doubted by the
majority view in Madan Mohan Pathak’s case (supra).
The second case is P. Kannadasan and Ors. v. State of
T.N. & Ors. (1996 [5] SCC 670). Referring to the doctrine of
separation of powers this Court said that where an Act made
by State legislature is invalidated by the courts on the
ground that the State legislature was not competent to enact
it, the State legislature cannot enact a law declaring that
the judgment of the court shall not operate; it cannot
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overrule or annul the decision of the court. But this does
not mean that the legislature which is competent to enact
that law cannot enact that law. Similarly, it is open to a
legislature to alter the basis of the judgment while
adhering to the constitutional limitation. In such a case
the decision of the Court become ineffective. The new law
cannot be challenged on the ground that it seeks to
circumvent the decision of the Court. The Court observed
that this is what is meant by "checks and balances" inherent
in a system of Government incorporating the concept of
separation of powers. Referring to the decisions in Madan
Mohan Pathak’s case (supra) and Nachane’s case (supra), this
Court said that these two cases do not affect the above
principle in any manner.
Since these two decision have been explained at length
in the cases of P. Kannadasan as well as Comorin Match
Industries (P). Ltd. (supra) we need not reiterate the same
position. In any case, these two decisions have no bearing
on the present case when there is no subsisting order of the
Court which is sought to be overturned by the impugned 1988
Act or 1989 Scheme.
The other challenges to the Scheme of 1989 are similar
to the challenge to the Act of 1988. It is contended that
under the Scheme there is discrimination between pre-
nationalisation and post-nationalisation employees of the
refinery. The distinction made between these two categories
of employees does not violate Article 14, for the reasons
which we have already set out in connection with the
provisions of the 1988 Act. It is also submitted that the
wages given to the refinery employees under the 1989 Scheme
are different from the wages and emoluments received by the
employees of the Marketing Division employees. however, were
the first to reach settlements with the second respondent
agreeing to the application of public sector wage pattern to
their wages and emoluments. As a result under the
settlements which are arrived at, the Marketing Division has
been receiving emoluments and revised emoluments from time
to time. Since the refinery employees did not reach any
settlement with the second respondent they are now being
governed by the Scheme which was framed by the Central
Government under the Act of 1988. It is in these
circumstances that there is difference between the wages
received by the employees of the two different departments
of the second respondent. Each of these employees
constitutes a distinct class which is receiving different
pay packets because of different circumstances which have
affected the wage structure of each class. This cannot be
considered as discrimination under Article 14.
The next challenge is to the Scheme of 1996 which has
been framed while the present appeal was pending before this
Court. The Scheme of 1996 excludes from its ambit those
employees who have entered into settlements with the second
respondent pending the disposal of this appeal. These
settlements cover approximately 77% of the employees in the
refinery. There are two settlements: one arrived at with the
Bharat Petroleum Corporation Refinery Employees’ Union and
the other with the Petroleum Workers’ Union. Both these
settlements are dated 17.5.1996. They were signed pursuant
to memoranda of understanding dated 25.3.1996 and 5.4.196.
In view of these memoranda this Court passed orders on
26.4.1996 disposing of the appeals filed by these two
unions. While doing so this Court recorded that learned
Solicitor General had stated at the Bar that he had
instructions to convey to the Court that the Government of
India had studied the memoranda of understanding and would
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exclude the employees who are covered by these memoranda of
understanding from the operation of the 1989 Scheme with
effect from 1.1.1992 which is the effective date of the two
memoranda of understanding. This Court, therefore, in its
above order of 26th of April, 1996 gave a direction to the
Central Government to forthwith take action to exclude the
employees covered under the two memoranda of understanding
from the operation of the 1989 Scheme with effect from
1.1.1992. The Central Government has accordingly amended the
1989 Scheme in 1996 expressly excluding the employees who
have arrived at the above settlements from the operation of
the amended scheme with effect from 1.1.1992. The appellant
submits that this is discriminatory. We fail to see how the
distinction made between those employees who have entered
into a settlement and those employees who have not entered
into a settlement can be considered as discriminatory. The
second respondents have even now stated before us that they
are willing to sign a similar settlement with the appellant
union. The appellant union, however, has declined to do so.
Having declined to do so the appellant to do so. Having
declined to do so the appellant cannot complain of
discrimination. The amended Scheme of 1996 grants further
benefits to the employees of the appellant union who are the
only group of employees in the refinery not covered by the
settlements. by giving them further increases in the manner
set out in the amended scheme. The appellant cannot compare
the benefits which they get under the amended scheme with
the benefits which other employees have got under
settlements may be the result of negotiations between the
employer and the employees. There are various considerations
which go into finalising such settlements on the part of the
employer. These include (1) industrial peace so that the
workers can concentrate on their work without agitations (2)
putting an end to expensive litigation between the employer
and the employees and establishment of goodwill and harmony
between the employer and the employees leading to better
functioning of the establishment. These considerations are
very different from considerations which govern the framing
of a statutory scheme by the Central Government. Such a
scheme must necessarily bear in mind the wage pattern in
other public sector undertakings. The considerations for
framing the amended scheme are different. Those who are
governed by a statutory scheme cannot compare themselves
with employees who have entered into a negotiated
settlement with their employer. The charge of discrimination
under Article 14, therefore, cannot be sustained in this
regard.
It is also pointed out by the appellant that the
amended scheme of 1996 now covers only 400 and odd employees
who are members of the appellant union. They should not have
been singled out. There is, however, no question of singling
out any one set of employees out of a large group. The
employees who are members of the appellant union being the
only set of employees who have not entered into a
settlement with their employer, have necessarily to be
provided for under a statutory scheme. Such a scheme,
therefore, has been framed and the employees cannot complain
that they have been singled out. They cannot expect a
statutory scheme to give them the benefits of the
settlements which the other employees have entered into with
the employer. The amended scheme of 1996 is not framed by
the employer. It is framed by the Central Government under
the statutory provisions of the 1988 Act. The amended scheme
of 1996 gives substantial additional benefits to the
employees. It is in valid exercise of statutory powers, and
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is brought into effect from 1.1.1992 since the earlier
scheme covered periods upto 1.1.1992.
In the circumstances, we agree with the reasoning and
conclusion of the High Court. We further hold that the
amended scheme of 1996 is also a valid exercise of power
under the Act of 1988. The appeal is therefore, dismissed
with costs.