Monday, 26 April 2021

Whether Court should interpret an agreement made between two individuals or entities like a statute?

 Coming now to the last submission of Mr. Anturkar, it is clear

that the agreement between the sugar factory and the union did

acknowledge that considering the financial circumstances of the sugar factory, it was problematic for the factory to implement the agreement according permanent status to the complainants immediately; it provided for implementation by the management by written orders as soon as possible and, at any rate, before 24 November 2015. This does not comprehend a resolution on the part of the board of directors of the sugar factory for implementing the agreement. What the agreement envisages is a written order of the management for implementing the agreement. This written order admittedly was passed on 5 November 2015, that is to say, before the last date of implementation, i.e. 30 November 2015. Mr. Anturkar tried to show some other provisions of the agreement in support of his contention that the word 'management' used in clause-7 of the agreement comprehends the board of directors of the sugar factory and not its executive authority. An agreement made between two individuals or entities cannot be construed like a statute. The meaning to be accorded to individual terms and conditions of the agreement has to be from a common sense and business point of view. When the agreement requires a written order of the management of the factory for its implementation, the written order passed by the Managing Director could very well be subsumed within it. In any event, assessment of this issue by the industrial court cannot be termed as unreasonable or perverse on the basis of submissions advanced by Mr. Anbturkar. 

{Para 11}

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

CIVIL APPELLATE JURISDICTION

WRIT PETITION NO.10372 OF 2018

Shri Bhogawati Sahakari Sakhar  Karkhana, Vs  Shri Ananda Ishwara Kumbhar



CORAM : S.C. GUPTE, J.

DATE : 9 JANUARY 2020

Citation: 2020 (6) MHLJ 493

This writ petition challenges an order passed by the Industrial

Court at Kolhapur on a complaint of unfair labour practice filed by

the Respondents herein (original complainants).

2 The complainants claimed to be in service of the Petitioner

herein (original respondent No.1.), who is a Sugar Factory. The

complainants, who were initially appointed as daily wage workers,

claimed to be working continuously in the sugar factory of Respondent

No.1. According to the complainants, the crushing capacity of the

sugar factory was 4000 M.T. of sugarcane per day (the actual

capacity being more than 5000 M.T. per day). The staff schedule or

staff pattern adopted by the sugar factory in 1993, commensurate this


capacity, envisaged regular and seasonal permanent staff of 1521

workmen. It was submitted that due to superannuation, death,

resignation or other reasons, many posts were lying vacant in the

Respondent-sugar factory for the last many years; the work of these

vacant posts was being performed by the complainants. It was

submitted that the complainants were working practically as regular

permanent employees or seasonal permanent employees of the sugar

factory since 2011-12. A letter of demand was issued, in the premises,

by the representative union of the complainants demanding status of

permanency to various employees working on daily wages

continuously for the sugar factory. In pursuance of this demand and

negotiations between the union and the management as well as

intervention of Labour and Welfare Department of the State, a draft

agreement came to be prepared in this behalf and was placed, along

with an office note of recommendations, by the welfare officer for

approval of the managing director of the sugar factory, who placed

the same for sanction before the Executive Committee. The demands

were accepted and the draft agreement was sanctioned vide resolution

dated 27 November 2015 duly passed by the executive committee of

the sugar factory. The decision of the executive committee was

thereafter approved by the Board of Directors of the sugar factory,

who, by their resolution dated 30 January 2015, sanctioned the

resolution passed by the executive committee in that behalf. In

pursuance of this sanction, an amicable settlement was arrived at on

16 February 2015 between the union and the management of the

sugar factory, under which status of permanency was granted to the


employees, whose names were listed in Annexures-A, B, and C to the

agreement. These included the names of the complainants. It appears

that thereafter office orders dated 5 November 2015, under the

signature of Managing Director of the sugary factory, were issued to

the complainants, according each one the status of 'regular permanent'

or 'seasonal permanent' employees, as specified in the orders, along

with applicable wages and consequential benefits. It appears that

sometime later complaints were received by the sugar factory at the

instance of rival outfits in relation to the permanent status of the

complainants. On account of these, the complainants bona fide

apprehended that Respondent No.1 (who by then was being managed

by another board of directors), under the directions of Commissioner

of Sugar and Registrar of Co-operative Societies, State of Maharashtra,

might terminate the services of the complainants or deprive them of

the status and privileges of permanency by committing a breach of the

agreement of 16 February 2015.

3 The complainants, in the premises, approached the Industrial

Court alleging unfair labour practices under Section 28 read with

Items 5, 9 and 10 of Schedule IV of the Maharashtra Regulation of

Trade Unions & Prevention of Unfair Labour Practices Act, 1971

(“Act”). The complaint was resisted by the sugar factory. It was

submitted by the sugar factory that its earlier management had

wrongly conferred the status of permanency on the complainants, who

did not qualify for, or deserve, the same. It was submitted that

original appointments of the complainants as also according of

permanent status, was an illegal act, made hand-in- glove with the

workers and the union. It was submitted that the appointments were

against the norms comprised in the staffing pattern determined in the

year 2004. It was submitted that legitimate considerations such as

educational qualifications, age and other factors were not taken into

account whilst making these appointments. It was submitted that the

appointments were made without regard to the financial position or

needs of the sugar factory.

4 The Industrial Court, whilst considering the complaint, went into

its maintainability as well as proof of the purported unfair labour

practices under Items 5, 9 and 10 of Schedule IV of the Act as well

as the aspect of relief based on such consideration. The Industrial

Court held the complaint to be maintainable; it rejected the sugar

factory's objection that the relief, in effect, sought directions not to

terminate the services of the complainants and that such relief could

be granted only by the Labour Court under Item 1 of Schedule IV.

The court was of the view that the complaint basically involved

apprehended withdrawal of office orders and breach of statutory

provisions and service conditions and the protection sought against

termination of their services by complainants, was in the nature of an

incidental relief. The Industrial Court also rejected the sugar factory's

objection about the challenge to apprehended withdrawal of office

orders being premature and thus, not not maintainable. On the crucial

issue of staffing pattern, the Industrial Court came to a conclusion

that as per the applicable staffing pattern, i.e. the staffing pattern of

the year 1993, the appointments were in order and not in excess.

The Industrial Court accepted the complainants' grievance under Item

9 of Schedule IV of the Act, whilst not countenancing the grievances

under Items 5 or 10 of Schedule IV. The Industrial Court observed

that, in a broad sense, the sugar factory had not denied initial

appointments of the complainants on daily wages; and without any

material, it was futile to raise any objection to such appointments

either as back door entries or otherwise. The Court noted that there

was a duly passed resolution of the executive committee of the sugar

factory in consideration of the demand of the union for according the

status of permanency to the complainants, followed by the resolution

of the board of directors of the Karkhana. The court did not

countenance any challenge to the resolution passed by the earlier

board of directors of the sugar factory. The court was of the view

that a resolution of a co-operative society could be subjected to

challenge only within the ambit of the Maharashtra Co-operative

Societies Act and not before an industrial adjudicator. The court was

of the view that considering the agreement entered into between the

union and the sugar factory, which was placed on record before the

court, and which was duly signed by the Managing Director of the

sugar factory and the office bearers of the union, granting permanent

status to the daily wagers, there were consequences under the

Industrial Disputes Act and that the agreement could not be resiled

from without following due procedure under Section 42 of the

Maharashtra Industrial Relations Act, 1946 (“MIR Act”). The court

held the agreement to be binding on the parties and any action of the


sugary factory in breach of the agreement (as well as in breach of

law), would amount to an unfair labour practice under Item 9 of

Schedule IV of the Act.

5 The Industrial Court, accordingly, partly allowed the complaint

and directed the sugar factory to cease and desist from engaging in

the unfair labour practice and not to withdraw the office orders dated

5 November 2015 or terminate the services of the complainants

without following due procedure of law. The sugar factory was

directed to accord all benefits to the complainants as per office orders

dated 5 November 2015 and also pay the difference in wages

accordingly, by restoring the office orders, which were sought to be

kept in abeyance by the sugar factory.

6 The impugned order of the Industrial Court is challenged by the

Petitioner-sugar factory on several grounds. Mr. Anturkar, learned

Senior Advocate appearing for the Petitioner, however, presses only

four submissions. Learned Counsel does not dispute the

maintainability of the original complaint before the Industrial Court.

Learned Counsel, firstly, submits that the initial appointments of the

complainants (the Respondents herein) were themselves suspect; they

were made without following due procedure; and were by way of a

back door entry. It is submitted that in accordance with the standing

orders, no permanent appointment could be made except after initial

appointment on probation. Learned Counsel, secondly, submits that

these appointments, including grant of permanent status to the

appointees, amounted to breach of the staffing pattern of the sugar

factory duly sanctioned under Section 79AA of the Maharashtra Cooperative

Societies Act (“MCS Act”). It is submitted that with the

complainants being made permanent, i.e. either as permanent

employees or permanent seasonal employees, the number of staff

would far exceed the sanctioned number. It is submitted that it would

be unmanageable for the sugar factory and would have disastrous

consequences for its financial health, if these appointments, far in

excess of the staffing pattern, were to be countenanced. Thirdly, it is

submitted that the original change by means of the resolution of the

executive committee, followed by the resolution of the board of

directors and the agreements and office orders purportedly issued in

pursuance thereof, was itself a change, which necessitated a notice

under Section 42(1) of the MIR Act, and want of such notice has

rendered it illegal. Fourthly, learned Counsel submits that the

agreement between the Petitioner-sugar factory and union, based on

the resolution of the board of directors of the factory, was not to be

implemented without due resolution to be passed and an order made

in that behalf by the board of directors of the sugar factory.

7 Coming to the initial appointments of the complainants, as

rightly observed by the Industrial Court, there was hardly any

material before the court to show that these were illegal. Mr.

Anturkar submits that the appointments were not made by the

Managing Director. The appointment letters, which are in the form of

'chits', were signed by P.A. to the Chairman. The method, in which

appointments are made, is an internal matter of the sugar factory; its

employees are not concerned with the particular method adopted.

What is important is that it cannot be disputed that, as a matter of

fact, the complainants were employed with the sugar factory and they

were working from 2011-12 onwards. The assessment of the

Industrial Court in this behalf cannot be termed as unreasonable or

perverse. The relevant standing orders, referred to in this behalf by

Mr. Anturkar, namely, Standing Orders 2A and B, applicable to the

sugar factory, deal with permanent employees, who need to complete

a probationary period of three months, whereas seasonal employees

are those, who are appointed by the managing director, mainly for

seasonal work and in writing. As we have noted above, merely

because the managing director has not himself signed appointment

letters issued to the complainants, it cannot be said that they were

not seasonal employees. In any event, as we have noted above, there

were written appointment letters in the form of chits, which were

signed by P.A. to the Chairman of the sugar factory and in the facts

of the case, it is impossible to say that these appointments did not

have the sanction of the Managing Director of the factory. As far as

the alleged probationary period of three months for according

permanent status to the employees is concerned, the explanation to

Standing Order 2A itself makes it clear that if seasonal workers had

continuously worked with the factory for three consecutive seasons,

they could be treated as permanent employees or permanent seasonal

employees of the sugar factory.

8 So far as the argument under Section 79AA of the MCS Act is

concerned, it is pertinent to note that the Registrar, under sub-section

(1), has power to direct the sugar factory, i.e. the society, to make

regulations in that behalf and forward the same to him for his

approval. Under sub-section (2), on receipt of regulations made by

the society, the Registrar may approve the same with or without

modifications and upon such approval, the society is required to carry

on its business in accordance with such regulations. Under sub-section

(3), if the society fails to forward such resolution to the Registrar,

when directed by him to do so under sub-section (1), within a period

of three months from the date of such direction, the Registrar may

himself make, or cause to be made, such regulations and require the

society to carry on its business in accordance with such regulations

and it is only thereupon that the society is bound to comply with

such regualtions. In the present case, the original staffing pattern was

already made in the year 1993. What happened in year 2004 was

that the Registrar had issued a letter to the sugar factory for

implementation of a new staffing pattern, which was proposed by a

committee appointed in that behalf. This direction of the Registrar

cannot be treated as regulations framed by the Registrar himself under

sub-section (3) of Section 79AA. The direction of the Registrar was

rather a direction under sub-section (1) of Section 79AA requiring the

society to make regulations in this behalf. After the society makes

such regulations and they are forwarded to the Registrar and after

they are thereafter approved by the Registrar, they become binding

regulations for the society to follow or conduct its business

accordingly. This never happened in the present case. The society

never made its regulations based on the Registrar's direction or sent

them for approval to the Registrar and the latter never acted under

sub-section (3) and made the regulations himself. It is not possible to

accept Mr.Anturkar's submission that if the society does not make such

regulations, despite directions of the Registrar under sub-section (1),

the original directions of the Registrar themselves become regulations

under sub-section (3) of Section 79AA. If the society fails or neglects

to make regulations despite directions issued to it under sub-section

(1) by the Registrar, the Registrar has himself to make or caused to

be made such regulations and require the society to carry on its

business in accordance with such regulations. This calls for a separate

order on the part of the Registrar and only when such order is

passed by the Registrar, under sub-section (3) of Section 79AA, that

the regulations become binding on the society. There was, in the

premises, no applicable staffing pattern as of 2004 ; what was

applicable was the pattern sanctioned in 1993. The Industrial Court

accordingly assessed the matter and its assessment does not exhibit

any infirmity or call for any interference. Incidentally, it is nobody's

case that the appointments of the complainants were not in

accordance with the staffing pattern of 1993.

9 Coming now to the aspect of applicability of Section 42(1) of

the MIR Act, as the Industrial Court rightly noted, the reduction of

workmen or keeping office orders of 5 November 2015 in abeyance or

resiling from the same, clearly amounted to a change in respect of the

industrial matters specified in Schedule II. Item 1 of Schedule II,

includes reduction intended to be of permanent or semi-permanent

character in the number of persons employed or to be employed in

any occupation or process. Item 2 includes permanent or semipermanent

increase in the number of persons employed or to be

employed in any occupation or process. Item 3 includes dismissal of

any employee, except as provided for in the standing orders applicable

under the MIR Act. After passing of a resolution and agreeing to

accord permanent status to the complainants and after entering into

an agreement in that behalf with the union and after issuing office

orders in case of individual employees, it was not permissible to the

sugar factory to either reduce the number of persons employed or to

dismiss any employee except in accordance with the standing orders.

If any such change was to be effected, a notice of such change, would

have to be given under sub-section (1) of Section 42 of the MIR Act

and this not being done, the proposed dismissal or withdrawal of

office orders, was clearly illegal.

10. Mr. Anturkar submits that even an increase of permanent or

semi-permanent nature in the number of persons employed or to be

employed in an occupation or process, is a change coming within

Section 42. Learned counsel submits that when the original resolution

was passed or agreement made or office orders issued, there was no

notice under sub-section (1) of Section 42 of the change proposed and

that the original orders issued by the sugar factory according

permanent status to the complainants were themselves illegal. The

Industrial Court has duly considered this issue. It has noted in its

impugned order (paragraph -63) that an agreement was entered into

between the union and the sugar factory for according permanent

status to the complainants on the basis of resolutions duly passed by

the board of directors of the Petitioner; the agreement was duly

signed by the Managing Director of the sugar factory and the office

bearers of the union. The court held that this being an agreement

entered into under Section 2(5) of the Industrial Disputes Act, it was

not by itself covered under the industrial matters specified in Schedule

II of the MIR Act and, therefore, the mandatory provisions of Section

42 were not applicable to such agreement and that there was

accordingly no illegality. Besides, any illegal change has to be

declared illegal by the Labour Court under section 78(1) of the MIR

Act. There was no application by any party for declaring such change

to be illegal and it was not impermissible, in the premises, to the

industrial court to proceed on the basis that the initial change itself

was illegal on a complaint made by the employees in respect of

permanent status to be accorded to them on the basis of such change.

11 Coming now to the last submission of Mr. Anturkar, it is clear

that the agreement between the sugar factory and the union did

acknowledge that considering the financial circumstances of the sugar factory, it was problematic for the factory to implement the agreement according permanent status to the complainants immediately; it provided for implementation by the management by written orders as soon as possible and, at any rate, before 24 November 2015. This does not comprehend a resolution on the part of the board of directors of the sugar factory for implementing the agreement. What the agreement envisages is a written order of the management for implementing the agreement. This written order admittedly was passed on 5 November 2015, that is to say, before the last date of implementation, i.e. 30 November 2015. Mr. Anturkar tried to show some other provisions of the agreement in support of his contention that the word 'management' used in clause-7 of the agreement comprehends the board of directors of the sugar factory and not its executive authority. An agreement made between two individuals or entities cannot be construed like a statute. The meaning to be accorded to individual terms and conditions of the agreement has to be from a common sense and business point of view. When the agreement requires a written order of the management of the factory for its implementation, the written order passed by the Managing Director could very well be subsumed within it. In any event, assessment of this issue by the industrial court cannot be termed as unreasonable or perverse on the basis of submissions advanced by Mr. Anbturkar. It is clearly a possible view; it is supported by some

evidence; it takes into account all relevant and germane circumstances

and materials; and it does not take into account any irrelevant or

non-germane material or circumstance. It accordingly passes muster

from the standpoint of this court's scrutiny under Articles 226 or 227

of the Constitution of India.

12 There is, thus, no merit in the writ petition. The petition is

dismissed.

13 At the request of learned Counsel for the Petitioner, it is

ordered that no coercive steps shall be taken against the Petitioner sugar factory for a period of eight weeks from today, subject to

condition that the Petitioner pays at least minimum wages payable

under law to the complainants in whose favour the impugned order is

passed.

(S.C. GUPTE, J.)

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