Full Judgment Text
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PETITIONER:
RAI BAHADUR DIWAN BADRI DAS
Vs.
RESPONDENT:
THE INDUSTRIAL TRIBUNAL, PUNJAB
DATE OF JUDGMENT:
07/09/1962
BENCH:
GAJENDRAGADKAR, P.B.
BENCH:
GAJENDRAGADKAR, P.B.
GUPTA, K.C. DAS
MUDHOLKAR, J.R.
CITATION:
1963 AIR 630 1962 SCR (3) 930
CITATOR INFO :
D 1966 SC 808 (23)
R 1967 SC1286 (26)
ACT:
Industrial Dispute-Earned leave-Different rules for existing
and future employees-Whether discriminatory-Industrial
Tribunal-Power to interfere with contract between employer
and employee-Indian Factories Act, 1948 (LXIII of 1948),
s.79.
HEADNOTE:
On July 1, 1956, the appellants made a rule that every
workman employed on or before that date would be entitled to
30 days leave with wages after working for II months and
workmen employed after that date would be entitled to earned
leave in accordance with the provisions of s.79 of the
Indian Factories Act, 1948. The State Government referred
for adjudication to the Industrial Tribunal the question
whether all the employees should be allowed 30 days earned
leave with full wages for every II months’ service without
discrimination. The Tribunal held that ail the workmen were
entitled to 30 days earned leave without making any distinc-
tion between workmen who joined before July 1, 1956, and
those who joined subsequently. The appellants contended
that they were entitled to fix the terms of employment on
which they would employ the workmen and it was open to the
workmen to accept those terms or not and the tribunal was
not justified in interfering in such a matter.
Held, per Gajendragadkar and Das Gupta, JJ., that the
Tribunal was justified in directing the appellants to
provide for the same uniform rule as to earned leave for all
their employees. The doctrine of absolute freedom of
contract had to yield to the higher claims for social
justice and had to be regulated. In industrial adjudication
no attempt should be made to answer questions in the
abstract for evolving any general or inflexible principles.
Each dispute has to be decided on its own facts without
enlarging the scope of the enquiry. If some principles have
to be followed or evolved, care has to be taken not to
evolve larger
931
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principles. In order that industrial adjudication should be
free from the tyranny of dogmas or the sub-conscious
pressure of preconceived notions it is important that the
temptation to lay down broad principles should be avoided.
Accordingly it is not necessary to decide the broad
contention whether industrial adjudication can interfere
with the contract between the employers and the employees.
In the present case, all the workmen were governed b the
same terms and conditions of service, except in regard to
earned leave. The discrimination was not based upon any
principle and was bound to lead to disaffection amongst the
new employees. The financial burden imposed by the award on
the employers was slight. The provisions for earned leave
in respect of old employees were not unduly generous or
extravagant. Earned leave provided for by s.79 Factories
Act was the minimum statutory leave. If the appellants
thought it necessary to provide for additional earned leave
for their old employees, there was no reason why they should
not make a similar provision in respect of new employees as
well.
Western Indian Automobile Association v. Industrial
Tribunal, Bombay, A.I.R. 1949 F.C. 112 and Bharat Bank Ltd.
v. The Employees of Bharat Bank Ltd. [1950] S.C.R. 513,
referred to.
Per Mudholkar, J.-The Tribunal was not justified in
interfering with the rule made by the appellants. It was
open to the appellants to grant leave according to s.79
Factories Act, to all the employees but still they did not
wish to reduce the leave of 30 days which they were already
giving to the old employees. The appellants have put into
one category persons who enjoyed the same kind of benefits
until July 1, 1956, and have put in another category persons
who did not enjoy such benefits. All persons in each
category were treated alike, and the question of dis-
crimination did not in fact arise. If the State had pro-
vided that persons entering its service after a certain date
would be governed by a set of conditions which were
different and less favorable than those governing the
existing servants its action would not be open to an attack
under Art. 14 of the Constitution. An identical action of a
private employer could also not be regarded as
discriminatory. An award made with the intention of
promoting social justice must take into consideration the
interests of the community. Even if there was
discrimination it could not be a perpetual source of
bitterness as gradually the old employees would fade out
932
till only one category of workers would remain. The facts
that the dispute was comparatively of a minor character and
that the financial burden imposed on the appellants was
small did not entitle the tribunal to alter the contract
between the employer and employees. Since the appellant had
provided for its new entrants such leave facilities as were
recognised by the Factories Act itself as fair, it was not
open to the Tribunal to revise the relevant term of the
contract.
Budhan v. State of Bihar, A.I.R. 1956 S. C. 191, Khandige
Sham Bhat v. Agricultural Income Tax Officer [1963] 3 S.C.R.
809, State of M.P. v. Gwalior Sugar Co. Ltd. C.A. Nos. 98 &
99 of 1959, dated 30.1 1.60, Ramjilal v. Income-tax Officer,
Mohindargarh, (1951) S.C.R. 127, Sardar Inder Singh v. The
State, of Rajasthan, (1957) S.C.R. 605 and Hathisingh .Mfg.
Co. v. Union of India, A.1 R. 1960S. C. 931 referred to.
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JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 20 of 62.
Appeal by special leave from the award dated September 29,
1960, of the Industrial Tribunal Punjab, Patiala in
reference No. 13 of 1960.
C.K. Daphtary, Solicitor-General of India, Bhagirath Das
and B. P. Maheshewari, for the appellants.
M. K. Ramamurthi, B. K. Gary, D. P. Singh and S. C.
Aggarwal, for the respondent No. 2(i).
1962. September 7. The Judgment of Gajendragadkar and Das
Gupta, JJ., was delivered by Gajendragadkar, J. Mudholkar J.
delivered a dissenting judgment.
GAJENDRAGADKAR, J.-This appeal by special leave arises out
of an industrial dispute in relation to a comparatively
minor demand made against the appellants by the respondents-
their employees but in challenging the validity of the award
passed by the Industrial Tribunal in favour of the
933
respondents on that demand the learned Solicitor-General has
raised a general question before us. He contends that in
granting the demand made by the respondents, the award has
illegitimately and unjustifiably trespassed on the
appellants’ freedom of contract. The appellants as
employers, are entitled tofix the terms of employment on
which they would be willing to employ workmen and it is open
to the workmen either to accept those terms or not;
industrial adjudication should not interfere in such a
matter. That is the nature of the general contention which
has been raised before us in the present appeal.
The facts leading to the dispute are few and they lie within
a very narrow compass. The appellants are the Trustees of
the Tribune Press and paper and the Trust is being worked in
accordance with the terms of the will executed by Dyal Singh
Majithia on June 15, 1895. In carrying out the policy of
the Trust, the five appellants have executed a power of
Attorney in favour of Mr. R. R. Sharma and the Press is
managed and the paper is conducted to carry out the policy
laid down by the will.
It appears that before July 1, 1956, for the purposes of
leave, the appellants had divided their employees into two
categories (1) the Linooperators and (2) the rest of the
workmen in the Press Section; and Rule 57 made provision for
leave on the basis of the said classification. The effect
of the said rule was that no Press worker other than the
lino-operator was entitled to any kind of paid leave
although he was given the right to claim 30 days’ wages plus
dearness allowance payable in January every year if he had
worked for 11 Months. In addition, the said press worker
was entitled to Quarantine leave on the terms mentioned in
Rule 53.
934
This position was substantially altered on the July 12 1956,
when the appellants framed a new Rule in respect of earned
leave. This rule abolished the two categories of workers on
which the earlier rule 57 was based and divided the workers
into two categories (i) workers who were employed on or
before 1.7.1956 and (ii) those who were employed after 1.7.
1956. In respect of the former category of workmen, the new
Rule made the following provision:
"Subject to the provisions of the Indian
Factories Act, 1948, every workman in the
service of the Tribune on the 1st July, 1956,
will be entitled to 30 days’ leave with wages
after having worked for a period of 11 months.
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This leave shall cease to be earned, when it
amounts to 60 days"
In regard to the workmen falling under the latter category,
earned leave was to be governed by the provisions of s. 79
of the Indian Factories Act. It is common ground that the
provision for earned leave made by the said section is a
provision for minimum earned leave which the employer is
bound to give: whether or not additional leave should be
granted by way of earned leave is a matter within the
discretion of the employer. As a result of the new rule,
the position was that the employees who had joined the
service of the appellants on or before July 1, 1956, were
entitled to 30 days’ earned leave with wages, whereas those
who joined after the said date became entitled to the
statutory minimum of 21 days of earned leave.
At the time when this rule came into force there were 94 old
employees to whom the rule applied and 27 new employees to
them by virtue of the new Rule, s. 79 of the Factories Act
was made
935
applicable. Gradually, new hands have also been employed
and to all such new employees s. 79 is applicable. It
appears that by its resolution passed on January 8, 1960,
the Tribune employees union sent to the Management a charter
embodying about 20 demands. Attempts at conciliation were
made but they failed and so, on April 4, 1960, eight of the
said demands were referred by the Punjab Government to the
Industrial Tribunal for its adjudication under s. 10 of the
Industrial Disputes Act. One of these demands was in rela-
tion to earned leave. The demand was that the employees in
the Press Section should be allowed 30 days’ earned leave
with full wages for every months’ service without any
discrimination. The Tribunal has allowed this demand and it
bad held that all workmen of the Press are entitled to 30
days’ earned leave without making any distinction a between
workmen who joined before July 1, 1956, and those who joined
subsequently. It is the validity of this award which is
questioned before us by the appellants.
The broad and general question raised by the learned
Solicitor-General on the basis of the employer’s freedom of
contract has been frequently raised in industrial
adjudication, and it has consistently been held that the
said right is now subject to certain principles which have
been evolved by industrial adjudication in advancing the
cause of social justice. It will be recalled that as early
as 1949, it was urged before the Federal Court in Western
India Automobile Association v. The Industrial Tribunal
Bombay(1) that the industrial Tribunal had no jurisdiction
to direct an employer to reinstate his dismissed employees
and the plea made was that such a direction was contrary to
the known principles which govern the relationship between
master and servant. This contention was negatived by the
Federal Court.
(1) A.I.R. 1949 F.C. 112,120.
936
Speaking for the Court, Mahajan J. as he then was, observed
that the award of the Tribunal may contain provisions for
the settlement of a dispute which no Court could order if it
was bound by ordinary law, but the Tribunal is not fettered
in any way by these limitations. The same plea was again
raised before this Court in The Bharat Bank Ltd., Delhi. v.
The. Employees of The Bharat Bank Ltd., Delhi (1) and
Mukherjea J. as he then was, emphatically rejected it.
"Insettling the disputes between the employers and the
workmen", observed the learned Judge, "the function of the
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Tribunal is not confined to administration of justice in
accordance with law. It can confer rights and privileges on
either party which it considers reasonable and proper,
though they may not be within the terms of any, existing
agreement. It has not merely to interpret or to give effect
to the contractual rights and obligations of the parties.
It can create new rights and obligations between them which
it considers essential for keeping industrial peace." This
view has been consistently accepted by industrial
adjudication since 1949.
The doctrine of the absolute freedom of contract has thus
to yield to the higher claims for social justice. Take, for
instance, the case where an employer wants to exercise his
right to employ industrial labour on any wages he likes. It
is not unlikely that in an economically under-developed
country where unemployment looms very large. for Industrial
work, employees may be found willing to take employment on
terms which do not amount to a minimum basic wage.
Industrial adjudication does not recognise the employer’s
right to employ labour on terms below the terms of minimum
basic wage. This, no doubt, is an interference with the
employer’s
(1) (1950) S.C.R. 459, 513.
937
right to hire labour, but social justice requires that the
right should be controlled. Similarly the right to dismiss
an employee is also controlled subject to well reorganised
limits in order to guarantee security of tenure to
industrial employees. In the matter of earned leave, s.79
of the Factories Act prescribes a minimum in regard to
establishments to which the Act applies. In the matter of
bonus which is not regarded as an item of deferred wages,
industrial adjudication has evolved a formula by the working
of which employees are entitled to claim bonus, We have
referred to these illustration to show bow under the impact
of the demand of social justice, the doctrine of absolute
freedom of contract has been regulated.
It is, however, necessary to add that the general question
about the employer’s right to manage his own affairs in the
best way he chooses cannot be answered in the abstract
without reference to the facts and circumstances in regard
to which the question is raised. If a general question is
posed and an answer must be given to it, the answer would be
both yes and no. The right would be recognised and
industrial adjudication would not be permitted or would be
reluctant to trespass on that right or on the field of
management functions unless compelled by over-riding consi-
derations of social justice. The right would not be
recognised and would be controlled if social justice and
industrial peace require such regulation. That is why we
think industrial adjudication always attempts not to answer
questions in the abstract in order to evolve any general or
inflexible principles. The eat course to adopt in dealing
with industrial disputes is to consider the facts of the
case, the nature of the demand made by employees, the nature
of the defence raised by
938
the employer and decide the dispute without unduly enlarging
the scope of the enquiry. If in the decision of the
dispute, some principles have to be followed or evolved,
that must be done: but care must be taken not to evolve
larger principles which would tend to prejudge issues not
directly raised in the case before the Industrial Tribunal.
That is why we think we would not be justified in giving any
general answer to the broad contention raised by the learned
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Solicitor-General before us in the present appeal.
The development and growth of industrial law during the last
decade presents a close analogy to the development and
growth of constitutional law during the same period. In
some respects, itis well-know that Art. 19 of the
Constitutionhag guaranteed fundamental rights to
individualcitizens and at the same time, has provided
forthe regulation of the said fundamental rights subject
to the provisions of cls. (2) to (6) of the said Article.
Where a conflict arises between the citizen’s fundamental
right to hold property and a restriction sought to be
imposed upon that right in the interest of the general
public, courts take the precaution of confining their
decision to the points raised before them and not to lay
down unduly broad and generaI propositions. As in the
decision of constitutional questions of this kind, so in
industrial adjudication it is always a matter of making a
reasonable adjustment between two competing claims. The
fundamental right of the individual citizen is guaranteed
and its reasonable restriction is permissible in the
interest of the general public, so, the claims of the
interest of the general public have to be weighed and
balanced against the claims of the individual citizen in
regard to his fundamental right. So too, in the case of
industrial adjudication
939
the claims of the employer based on the freedom of contract
have to be adjusted with the claims of industrial employees
for social justice. The process of making a reasonable
adjustment is not always easy, and so, in reaching
conclusions in such a matter, it is essential not to decide
more than’ is necessary. If industrial adjudication pur-
ports to lay down broad general principles, it is likely ;to
make its approach in future case#; inflexible and that must
always be avoided. In order that industrial adjudication
should be completely free from the tyranny of dogmas or the
sub-conscious pressure of pro-conceived notion, it is of
utmost ’importance that the temptation to lay down broad
principles should be avoided. In these matters, there are
no absolutes and no formula can be evolved which would
invariably give an answer to different problems which may be
posed in different cases on different facts. Let us,
therefore, revert to the facts of this case and decide
whether the appellant’s attack against the validity of the
propriety of the award can be sustained.
In dealing with the narrow dispute presented by this appeal,
it is necessary to remember that all the employees of the
appellants are governed by the same terms and conditions of
,service, except in regard to earned leave. It is only in
respect of this term and condition of service that a
distinction is made between workmen employed on or before
1.7. 56 and those employed after that date. Generally, in
the matter of providing leave rules, industrial adjudication
prefers to have similar conditions of service in the same
industry situated in the same region. There is no evidence
adduced in this case in regard to the condition of earned
leave prevailing in the comparable industry in this region.
But we cannot ignore the fact that this
940
very concern provides for better facilities of earned leave
to a section of its employees when other terms and
conditions of service are the same in respect of both the
categories of employees. It is not difficult to imagine
that the continuance of these two different provisions in
the same concern is likely to lead to dissatisfaction and
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frustration amongst the new employees. It cannot be denied
that the existence of industrial peace and harmony and the
continuance of the said peace and harmony are relevant
factors, but their importance should not be unduly
exaggerated. If a frivolous demand is made by the employees
and it is accompanied by a threat that non-compliance with
the demand would lead to industrial disharmony or absence of
peace, it would be unreasonable to treat the thrust as
relevant in deciding the merits of the demand. In this
connection, it is necessary to remember that the continuance
of harmonious relations between the employer and his
employees is treated as relevant by industrial adjudication,
because it leads to more production and thereby has a
healthy impact on national economy, and so it is necessary
that in dealing with several industrial disputes, industrial
adjudication has to bear in mind the effect of its decisions
on national economy. In their zest to fight for their
respective claims, the parties may choose to ignore the
demand of national economy, but industrial adjudication
cannot. If the demand is plainly frivolous, it has to be
rejected whatever the consequences may be. In the present
case, the argument that the continuance of two different
provisions would lead to disharmony cannot, however, be
treated as frivolous. It is difficult to understand on what
principle the discrimination is based. The only argument
urged in support of the discrimination is the employer’s
right to provide for new terms of service to the new
entrants in service. In our
941
opinion, the validity of this argument cannot be accepted in
the circumstances of this case.
Take the case of the wages or dearness allowance which the
Appellants paid to their employees. Would the appellants be
justified in assertion of their right of freedom of contract
to offer less favourable terms of wages or dearness
allowance to employees who would be employed after a certain
date ? If the general point raised by the learned Solicitor-
General is upheld without any qualifications, then it would
be open to the employer to fix different wages for different
sets of workmen who are doing the same kind of work in his
concern. We have rarely come across A case where such a
claim has either been made or has been upheld. It is well
known that both industrial legislation and industrial
adjudication seek to attain similarity or uniformity of
terms of service in the same industry existing in the same
region, as far as it may be practicable or possible, without
doing injustice or farm to any particular employer or a
group of employers That being so, we do not think the
Tribunal was in error in holding that in the matter of
earned leave, there should be uniformity of conditions of
service governing all the employees in the service of the
appellants.
There is another aspect of this question to which reference
must be made. This is not a case in which the financial
liability imposed on the employer by the award when it
directed the employer to grant the earned leave of 30 days
to all the employees, is very heavy; and so, having regard
to the fact that the appellants have been conducting their
business in a profitable way and their financial position is
distinctly good, no attempt has been made before us and
rightly, to suggest that the burden imposed by the award is
beyond their means. it is not disputed that the total annual
liability which
942
may accrue as a result of the award may not exceed Rs.
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1,000/-, and it is also common ground that the appellants
are a flourishing concern and their not profits which were
in the neighbourhood of a lac of rupees in 1949, have shown
an upward tendency and have reached almost rupees eight lacs
in 1959. That is another factor which has to be borne in
mind in dealing with the present dispute.
It is not suggested by the appellants that the provision
made by them for earned leave in respect of old employees is
unduly generous of extravagant and so, it has become
necessary to invoke the provisions of section 79 of the
Factories Act in respect of new employees. On the other
hand, earned leave provided by s. 79 is the minimum
statutory leave to which employees are entitled and if the
appellants thought it necessary to provide for additional
earned leave to their old employees, there is no reason
why they should not make a similar provision in respect of
the new employeesas well. We ought to add to that on the
record, it does appear that the appellants are good
employees and they are treating their employees in a liberal
manner. It, however, appears that they have brought the
present dispute to this Court more for asserting the general
principle of the employer’s right to fix conditions of
service with his new employees than for vindicating any real
or substantial grievance against the award which would
prejudicially affect their interest. In our opinion, having
regard to the nature of the dispute raised in the present
appeal and the other relevant facts and circumstances, it
cannot be said that the Industrial Tribunal erred in law in
directing the appellants to provide for the same uniform
rule as to earned leave for all their employees. We are
satisfied that the award under appeal cannot be set aside
only on the academic or abstract point of law raised by the
appellants.
943
The result is, the appeal fails and is dismissed with costs.
MUDHOLKAR, J.-This is an appeal by special leave from the
award of the Industrial Tribunal, Punjab. The appellants
before us are the trustees of ’The Tribune’ Ambala- Cantt.
and the opposite party to the appeal consists of the workmen
of the Tribune through their two unions, one the Tribune
Employees’ Union and the other the Tribune Workers’ Union.
The Trust was founded in Lahore by the late Sardar Dayal
Singh Majithia on February 1, 1881. It publishes the
newspaper "Tribune". By the will of the founder dated June
15, 1895 the Management of the Tribune was vested in a
public trust in September, 1898. After the partition of
India the offices of the newspaper had to be shifted from
Lahore and they are now located at Ambala. The Trust
naturally had to leave the entire machinery and other
equipment of the Tribune Trust along with its immovable
property in Lahore. The value of that property is stated
by the appellants to be Rs. 25 lakhs or so. The Trust was
however, able to transfer its bank accounts and Government
securities to India a few days before the partition. With
the help of these assets it reestablished the Tribune Press
and office at Ambala and established new machinery at a cost
of Rs. 15 lakhs or so. Gradually the Trust has been able to
rehabilitate its fortunes. It is not disputed before us
that despite the heavy loss entailed by the Trust by reason
of being uprooted from Pakistan, the employees quite a
number of whom are old employees who were able to migrate to
India, have been treated with a great deal of consideration.
After the Tribune started making profits the employees are
being given bonus every year. Moreover even before the
Employees Provident Fund scheme applicable to newspaper
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944
industry and even before the scheme of gratuity for all
categories of employees were enforced by statute be Tribune
had provided for both provident fund and gratuity to its
employees. In addition to this it has provided free housing
accommodation to its workmen in two colonies, one built in
1955 with the help of subsidy from the Government of India
and the other in the year 1958 at a cost of Rs. 6 lakhs.
The quarters in the two colonies are provided with modern
sanitation Besides that, there are extensive recreation
grounds, lawns etc., in these colonies. Even electricity is
supplied free to the employees. Several other amenities are
also provided by the Trust. It would thus appear that the
welfare of the employees has been kept prominently in mind
by the trustees.
Even so, some disputes arose between the management and the
employees. Ultimately eight demands made by the employees
were referred by the Government of Punjab for adjudication
under s. 10(1) of the industrial Disputes Act, 1947 (14 of
1947) to the Industrial Tribunal, Punjab, Patiala
constituted under s.7A of the Act. Four demands were
rejected by the Tribunal as having been withdrawn, one was
settled amicably and on the remaining three the Tribunal has
made its award. One of those three demands is :
"Whether the employees in the Press Section
should be allowed 30 days’ earned leave with
full wages for every 11 months’ service
without discrimination ?"
The Tribunal hold in favour of the workmen and it is only
against this part of the award of the Tribunal that the
trustees have come up in appeal before us. Certain facts
have to be stated in connection with this demand. The Trust
had framed certain rules governing the conditions of service
of
945
its employees. Rule 57 of those rules deals with leave and
reads thus :
"The Lino Operators shall be entitled to 30
days’ leave of all description (luring the
course of a calendar year, which will be with
pay plus all allowances.
Press employees, other than the Lino-operators
may be granted leave by the competent
authority from time to time as the authority
may determine. Such leave shall be without
pay or allowance. They shall, however, be
entitled to in the month of January every year
to receive a sum amounting to the leave pay
plus ordinary dearness allowance for the
preceding month of December for the period of
II months’ service or to a proportionate
amount for a lesser period. In addition,
Press workers will be entitled to quarantine
leave on the terms mentioned in Rule 53".
On July 1, 1956 a new rule was framed which
reads as follows :
"(1) Subject to the provisions of the Indian
Factories Act, 1948, every workman in the
service of the Tribune on the 1st July, 1956,
will be entitled to 31 days’ leave with
wages,, after having worked for a period of II
months. This leave shall cease to be earned,
when it amounts to 60 days.
(2) A workman joining the service of the
Tribune after the 1st July, 1956 will be
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entitled to leave, in accordance with the
provisions of section 79 of the Indian
Factories Act, 1948."
Under the old rule the Lino Operators in the press section
were allowed 30 days’ leave on full wages
946
including dearness allowance. The other workers in the
press section were, however, allowed not leave with pay, but
30 days’ wages in the month of January calculated on the
basis of the full wages drawn in the preceding month
provided that an employee had served for a period of II
months till the beginning of the month of January. If he
had served for a lesser period he was to be paid propor-
tionately less amount. Bearing in mind the fact that in
industries leave, vacation and holidays with pay are
regarded as supplemental pay practices (see Collective
Bargaining-principles and Cases by John T. Dunlop and James
J. Healy, revised edn., p. 433), in substance even the
employees in the press section other than lino operators got
the same money equivalent of the leave allowed to lino
operators. It may be mentioned that these other press
section employees were also entitled to take leave but the
rule provided that they will Dot be paid any pay and
allowances for such leave. That was perfectly reasonable
because they got pay in lieu of paid leave for an additional
period in the month of January. However, even this slight
distinction in the mode of conferring benefits on the two
categories of employees was abolished by the new rule which
came into force on July 1, 1956, and all employees in the
press section upto that date were made eligible for the
grant of 30 days’ leave with wages after having worked for a
period of 11 months. It ’May be mentioned here that the
Factories Act of 1948 provided in a. 79 that every worker
who has worked for a period of 240 days or more in a
calendar year shall be given at least one days’ leave for
every 20 days of service. No doubt this was the minimum
provided by the Act but since the press section is governed
by the Factories Act it was open to the Trust to modify its
rules with regard to all employees of this section and grant
leave according to the provisions of this
947
section. There is no prohibition in law against doing so
but still it did not wish to revise unfavourably its rules
regarding the quantum of leave to its existing employees.
It, however, felt that in view of the statutory provision
there was no obligation upon it to provide for a longer
leave than that laid down in s. 79 of the Factories Act. It
was for this reason that it provided that all employees
engaged on or after July 1, 1956, will be granted leave
according to the provisions of s. 79 of the Factories Act,
the idea being that eventually all employees should be
governed by the rules. Apparantly, to forestall this
consequence the employees contend that the new rule has
introduced discrimination. That is why they raised a
dispute relating to this matter and it was referred to the
Tribunal along with the other disputes they had raised.
The Tribunal, dealing with this matter, has observed as
follows :
"It may be of some importance to note that
till 1st July, 1956 the workmen who had
entered service before that date and those who
had been employed thereafter were in the
matter of leave compensation, treated alike.
It was on 1st July, 1956 for the first time
that the workmen who had been in service
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before that date were given 30 days’ paid
leave but for now entrants the number of days
of that leave was reduced to that permitted by
section 79 of the Factories Act. The Union’s
contention is that to allow 3 days’ earned
leave with full wages in an year to a certain
group of workmen in Press Section and to deny
that benefit to the rest of the workmen of
that section simply on the score of their
having entered service after 1st July, 1956,
is to acknowledge the prominent element of
discrimination which has been res-
948
ponsible for the heart burning, resentment and
dissatisfaction of the workmen. It is further
urged with emphasis that all workers for the
Press Section should in the matter of earned
leave be treated equally.
For the long space of seven years even after
the Factories Act had come into force the
management had continued to treat all workmen
of the Press Section alike irrespective of the
date of their employment. There is no reason
why a distinction of a discriminatory nature
and effect be made between the two
artificially created sets of workmen belonging
to the same section."
It seems to me that the Tribunal’s ultimate finding is
vitiated by a misconception entertained by it. The first
sentence in the above quotation would show that the Tribunal
thought that those persons who were employed after July 1,
1956 were treated in the matter of leave on par with those
employed before July 1, 1956, ,till July 1, 1956" but were
sought to be discriminated against only thereafter. It is
difficult to understand how persons who were employed after
July 1, 1956, could possibly be treated before July 1, 1956,
equally with employees who were in service on that day.
Apparently it is this confusion in the mind of the Tribunal
which has influenced its ultimate conclusion. That apart,
it is quite clear that what the Trust has done is to put in
one category persons who enjoyed in substance the same kind
of benefit uptil July 1, 1956 and permit them to enjoy the
benefit they bad hitherto enjoyed. Then it put in a
separate category those persons who could never possibly lay
any claim to have enjoyed a similar benefit because they
were not its employees till July 1, 1956, and decided that
they will get leave only as provided in s. 79 of the
Factories Act. All persons in each category are intended to
be alike and, therefore the
949
question of discrimination does not in fact arise. It was,
in my opinion, open to the management to offer to the new
entrants now terms. When the new entrants entered service
accepting the new terms and knowing fully well that one of
those terms i. e., the one relating to annual leave was
different and less beneficial from the one which obtained in
the case of the old employees, it is not reasonable for them
now to say that they are being discriminated against.
The Tribunal, however, thinks otherwise. It has held that
the Trust, by treating the now entrants less favourably in
the matter of leave than its old employees has practiced
discrimination and that this discrimination has caused heart
burning. Presumably, therefore, the Tribunal felt impelled
to interfere and direct that the new entrants should be
treated’ in the matter of leave on par with the old
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employees in’ order to avoid industrial unrest which may
result ’from’ heart burning amongst the new entrants.
What we must first consider is whether the existing of heart
burning has at all been established in this case. It is
said that the continuance of different provisions in the
same concern has caused heart burning, dissatisfaction and
frustration among the new employees and this would lead to
unrest in the industry. For one thing, there is no evidence
before us to show that the new employees are making a very
serious grievance of the fact that they would get a few days
less of leave than the old employees. All that Mr.
Ramamurti could point out to us was the statement in the
evidence of Som Nath, A. W. 7. that he should also be given
30 days, privilege leave in a year. Merely saying that he
should be given privilege leave does not mean that he is
harbouring bitterness in his mind. Apart from that it would
be extremely unreasonable to take notice of bitterness, if
any, in the minds of
950
these new employees in regard to this matter because. as
already stated, they voluntarily took up employment knowing
that they would got less leave than the old employees. Som
Nath’s statement is no evidence of the fact that there is
any heart burning. To say that the very fact that two sets
of people are governed by different rules will necessarily
lead to heartburning, without establishing anything more,
such as inadequacy of the benefit enjoyed by one set will be
to ignore that such differences are a matter of common
occurrence and no reasonable person is expected to magnify
their consequences. It seems to me, further, that the
workers as a body did not think much of the distinction
between the extent of leave enjoyed by old and new employees
because during all the four years while the rule has been in
force they raised no protests. No doubt they did ultimately
make a protest in the year 1960 when the dispute was
referred to the Tribunal. But then, this was not the sole
dispute but was one of eight disputes, at least four of
which were withdrawn by the Unions, apparently after
realising that there was no substance in them. The mere
fact that they did not withdraw this dispute would not of
itself indicate that they regarded it as of great
importance. It may well be that they did not withdraw it in
an erroneous belief that anything which is characterised as
discrimination will at once earn the sympathy of Industrial
Tribunals and the Courts.
Even assuming that is creating heartburning amongst the
employees the question arises whether they have a real
grievance. They say that the Trust has discriminated
against the new entrants and this is their grievance. In
this connection it may be observed that the more refusal or
failure of an employer to treat equally all its employees
doing a particular kind of work would not necessarily amount
to discrimination. The subject of is-d
951
crimination has come up for consideration before this Court
in a largo number of cases in which a complaint has been
made that the equality clause of the Constitution, Art. 14,
has been violated. This Court has held that It is open to
the State to make reasonable classification both as regards
persons and as regards things (see in particular Budhan v.
State of Bihar(1) ; Khandige Sham Bhatt v. Agricultural
Income-tax Officer (2); This Court has laid down that a
classification made by the, State will be reasonable
provided that (1) it is founded on an intelligible
differentia which distinguishes persons or things that are
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grouped together from other left out of the group; and (2)
that the differentia has a rational relation to the object
sought to be achieved by the statute. In the State of
Madhya Pradesh v. Gwalior Sugar Co. Ltd. (4); it has been
held that it is- permissible to make classification on
historical grounds, by putting in one class one set of
persons or things and in ’other all those left out from the
first class Court. In Ramjilal v. Income-tax Officer,
Mohindargarh(5) this Court has held that a taxing law may
provide that a law imposing a new rate shall not apply to
pending proceedings. In other words this Court has upheld
the law where one rate of income-tax shall be applicable to
persons whose cases were pending for assessment and another
rate to persons whose cases were not so pending. Thus, this
Court has hold as reasonable classification made by
reference to difference in time. In Sardar Inder Singh v.
The State of Rajasthan (6) this Court has held that it is
open to the legislature to decide the date from which a law
should be given operation and that the law made by it cannot
be challenged as discriminatory because it
(1) A.I.R. (1955) S.C. 191
(2) (1963) 3 S.C.R. 809.
(3) C A. Nos. 98 & 98 of 1959 decided on November 30, 1960.
(4) [1951] S.C.R. 127. (5) [1957] S.C.R. 605.
952
does not apply to prior transactions. Thus in this case
also classification made on the basis of difference in time
has been upheld. Finally in Hathising Mfg. Co. v. Union of
(India (1) this Court has held that there is no
discrimination if the law applies generally to all persons
who come within its ambit as from the date on which it is
made operative. This case likewise accepts that it will not
amount to discrimination if one set of persons is treated
differently from another by reference to a point of time.
It would follow from these decisions that if the State as an
employer provided that persons entering its service after a
certain date will be governed by a set of condition which
will be different and, may be less favourable than those
governing the existing entrants that law will not be open to
attack under Art. 14 of the Constitution on the ground that
it discriminates between one set of employees and another.
In my judgment the principle laid down by this Court- that
reasonable classification does not amount to discrimination
is of general application. Therefore, when an employer’s
action is challenged before an Industrial Tribunal as
discriminatory, the Tribunal will also have to bear it in
mind. For if an action cannot be regarded as discriminatory
and violative of Art. 14 of the Constitution because it is
based on a reasonable classification an identical action of
a private employer affecting his employees can also not be
regarded as discriminatory. The content and meaning of
’discrimination’, wherever the term is used, must
necessarily be the same and we cannot adopt one standard for
judging whether an action when it emanates from the State,
is discriminatory or not and another standard for judging an
identical action, when it emanates from a private citizen.
Looked at this way, I have no doubt that the Trust has not
practised what can in law be regarded as discrimination
against its now entrants
(1) A.I.R. 1960 S.C. 931.
953
by allowing them lesser leave than it has allowed to its old
entrants.
I may point out that it is not an unusual thing even in
Government service to find new entrants being treated
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differently in the matter of leave, emoluments etc., from
the old entrants. It is a well-know fact that in most of
the provinces of India in the year 1932 or 1933 pay scales
in various categories of Government service were revised and
new scales less favourable than the old ones were
introduced. Therefore, a largo body of men were performing
the same duties as other large body of men but were getting
lesser pay than the latter. That happens often, is
happening today in several of the recently reorganised
States and may happen hereafter also. But merely because
new terms of service are less favourable than the old ones,
would it be correct to say that there is discrimination
between the new entrants and the old entrants?
As already pointed out, it is open to the employer to offer
different and even less favourable terms to new entrants and
if the new entrants entered service with their eyes wide
open they cannot reasonably complain of being discriminated
against. Mr. Ramamurthi who appears for the employees,
however, contends that it is open to an employee to take up
employment on the existing conditions of service and
immediately start clamouring for improving his conditions of
service. It is sufficient to say that without establishing
that there was a change in circumstances subsequent to the
time when a workman accepted service a demand for
improvement in the conditions of service cannot, with
justice, be entertained unless of course the original
conditions of service were plainly unfair. Mr. Ramamurthi
does not say that the term regarding leave in the rule
applicable to the new entrants is unfair in the sense that
the
954
leave allowed is inadequate. But, Mr. Ramamurthi said that
where a service condition causes heartburning amongst two
sections of employees discontent and unrest would be its
natural outcome and so it is open to the Tribunal to revise
the condition and thus eliminate that discontent. I am
unable to accept the argument. No doubt, the provisions of
the Industrial Disputes Act are wide enough, like those of
other legislative enactments placed on the statute book, for
promoting the welfare of the employees to permit an
Industrial Tribunal to override the contract between an
employer and his employees governing conditions of service
of the employees. But it does not follow from this that no
sooner a reference of a dispute is made to a Tribunal for
adjudication than the contract of service ceases to have any
force. The power to interfere with a contract of service
can only be resorted to in certain limited circumstances.
As has been pointed out by this Court in State of Madras v.
C. P. Sarathy(1), the adjudication by a Tribunal is only an
alternative form of settlement of disputes on a fair and
just basis, having regard to the prevailing conditions of
the industry. Bearing in mind this principle, it would
follow that it is only for securing a fair and just
settlement of an industrial dispute that the Tribunal can
over-ride the contract between the parties. For deciding
what is fair and just, it is not enough for the Tribunal to
say that a particular demand be granted for doing social
justice. What it must ascertain is whether the grievance is
a real one and whether it is of a type of which the
employees can justly complain. In Muir Mills Co., Ltd. v.
Suti Mills Mazdoor Union, Kanpur (2) it has been pointed out
social justice is a very vague and indeterminate expression
and no clear-cut definition can be laid down which will
cover all the situations and that the fancy of an
(1) [1953] S.C.R. 334.
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(2) (1955) 1 S.C.R. 991.
955
individual adjudicator is not social justice. But, of
course., that does not mean that social justice has no place
in the settlement of industrial disputes. It is indeed a
relevant consideration but it is well to bear in mind that
doing social justice in an industrial dispute is not merely
doing justice between the employer and the employee. The
question of doing anything in the interest of social justice
comes in when the State has a social interest in a situation
or in an activity because of its repercussions on the
community at large. Therefore, when the social interest of
the community is involved in a situation or an activity, the
interests of all parties who are affected by it have to be
borne in mind, the parties being not merely the employers
and the employees but also the community at large which
includes also the consumers. So, where a direction in an
award is sought to be sustained on the ground that it was
made with the intention of promoting social justice it must
be shown that the adjudicator had borne in mind also the
interests of the community. This aspect of the matter has
not been borne in mind by the Tribunal and, therefore, the
relevant direction in its award cannot be sustained on the
ground that it is actuated by the need of promoting social
justice.
The ground given by the Tribunal, as already stated, is
that there is discrimination and the existence of the
discrimination will be a perpetual source of unrest.
Granting, again, that there is discrimination it is
difficult to appreciate now it can be a perpetual source of
bitterness for. with the efflux of time, the old employees
will gradually be fading out till at last there will be left
only that category of workers to which the provisions of is.
79 of the Factories Act apply.
956
Nor again. do I think the fact that a dispute a
comparatively of minor character and that the financial
burden entailed on the employer is inconsiderable, a matter
which would entitle the Tribunal to alter a contract between
an employer and his employees. In fact these factors are
not relevant for consideration. If the leave terms offered
to new employees were on their face unfair, the mere fact
that the employer did not have the capacity to pay would not
have been allowed to influence the determination of the
issue. I would go further and say that since the Trust has
provided for its new entrants such leave facilities as are
recognised by the Factories Act itself as fair, it was not
open to the Tribunal to revise the relevant term of the
contract,.
For all these reasons I am of opinion that the appeal must
succeed and the award of the Tribunal should beset aside in
so far as it refers to the demand made by the employees for
grant of the same leave to new entrants as is being granted
to old employees.
By COURT. In accordance with the opinion, of the majority,
the appeal fails and is dismissed with costs.
957