Modi Industries Ltd. v. State of Uttar Pradesh and Ors.

The J udgmenl of the Court was delivered by SWANT, J. Leave granted. The appellant-Company runs a unit known· as Modi Vanaspati Manufacturing Company at Modinagar, District Ghaziabad. At the relevant time, there were about 350 workmen working in this unit. On December 19, 1990, there was dispute between the management and the trade union leaders which resulted in two cross First Information Reports being lodged by the management and the trade union leaders against each other and suspension of 30 workmen form service. According to the Company, from December 21, 1990 the workmen came to the Company's premises but did not discharge their duties. On account of this, there was D a complete halt in production. According to the respondent-trade unions, however, the workmen reported for duty regularly but the production could not be carried on as the suspended 30 workmen were technicians and in their absence it was not possible to operate the machines. On December 27, 1990 an agreement was arrived at between the management and the trade unions which provided that except the suspended workmen, the other workmen will join work and discharge their duties. It appears that in spite of this agreement, the work could not be carried on. According to the management, it was the non-cooperation of the workmen which was responsible for the situation whereas according to the trade unions, the management did not permit the workmen to work and hence the said stalemate. While the situation continued thus, the District Administration and the Labour Department of the State Government took initiative by making efforts to enable the workmen to work in the Company. On February 8, 1991, a meeting was held in the presence of the Additional District Magistrate and the Deputy Labour Commissioner in which the representatives of the management and the leaders of the trade unions G participated. In this meeting, the Additional District Magistrate suggested that out of the suspended workmen, those who had no serious charges against them be reinstated and the inquiry be conducted against all the suspended workmen including those so reinstated so that work could be carried on. The representatives of the management, however, did not agree H 286 SUPREME COURT REPORTS [1993) SUPP. 3 S.C.R. A to the said suggestion and requested for postponement of the meeting to enable them to consult their higher officials. The meeting was therefore, postponed to February 11, b, · No positive reply was received from the management with the result that work could not be carried on upto and inclusive of March 3, 1991. The work started and the production com- B menced only on March 4, 1991. The management did not pay wages to the workmen for the period from Decemuer 21, 1990 to March 3, · 1991. 2. the Additional Labour . Commissioner issued a notice dated . February 27, 199J. under Section 3 of the U.P. Industrial Peace (Temporary Payment of Wages) Act, 1978 (hereinafter referred to as the 'Act') C whereby the appellant-company was called upon to show cause as to why order for payment of wages to the workmen under Section 3 of the Act be not ma~<? against it. The hearing of the notice was fixed on March 10, 1991. The appellant-Company submitted its representation including the sup­ plementary representation. The Company was given personal hearing. After considering the material placed by the Company on record, the D Additional Labour Commissioner passed an order on April 29, 1991 direct­ ing the recovery of Rs. 3,67,474 from the Company for payment of wages to the workmen for the month of January 1991 only. This order was challenged by the Company on various grounds by a writ petition filed in the High Court. The High Court by the impugned order negatived all the E contentions and dismissed the petition. The operative part of the order of the High Court is as follows : "When order is passed under Sec. 3 of the Act for recovery of wages and the aggrieved party approaches the Government of refer the dispute under the Industrial Disputes Act, the Government has hardly any option in view of the reasons given above. The Govern­ ment if required by any party to refer the dispute to ~he Industrial Tribunal, it has to pass an appropriate order in connection there­ with. The writ petition is accordingly dismissed. There shall be no order as to costs. In case the petitioner approaches the Govern­ ment for reference under the Industrial Disputes Act to the In­ dustrial Tribunal, Labour Court, the State Government shall pass . appropriate order within six weeks from the date of presentation of the application for reference along with the certified copy· of -. .. . . MODI INDU. v. STATE (SA WANT, J.) 287 this order. After reference is made, the Industrial Tribunal Labour A Court will decide the dispute expeditiously in accordance with law." The short question that falls for consideration is whether the order passed by the Labour Commissioner on April 29, 1991 directing the recovery of the amount is valid. Shri Salve, the learned counsel appearing B for the appellant-Company contends that since in the present case there was dispute as to whether the workmen were entitled to receive the payment of wages for the period on question, the Labour Commissioner ought to have directed the workmen to raise an industrial dispute or to approach the civil court. He had no jurisdiction to decide the said dispute which he virtually did by passing the impugned order. The learned counsel C further contended that assuming that the Labour Commissioner had such power, he ought to have passed a speaking order dealing with the conten­ tions of the parties and since in the present case the Labour Commissioner has merely given a certificate of recovery without giving any reasons, the order is prima facie bad in law. His third submission was that the Labour D Commissioner could not have entertained the complaint of non-payment of wages since Section 3 of the Act under which the Labour Commissioner has chosen to exercise his power, confers on him jurisdiction to make an order of payment oitly when the industtial establishment is in default of the payment of a wage-bill in respect of the entire establishment and of a few individual workmen. Shri Tarkunde, the learned counsel appearing for E the Workmen, while not q~estioning the submission that the Labour Com­ missioner under the Act cannot go into the disputed questions of law and fact submitted that the disputed question in the present case was only of an incidental· nature and the Labour Commissioner has the authority to decide the same in order to give relief to the workmen. He submitted that the power conferred on the Labour Commissioner under Section 3 of the Act is of a summary nature and it has been conferred on him with a view to give a speedy relief to the workmen who are deprived of their wages . He further contended that the order passed by the Commissioner being administrative ~ nature, he was not bound to give reasons for the same. 3. Jn order to resolve the controversy between the parties, it is first necessary to examine the provisions of the Act. As the title of the Act itself suggests it has been enacted to secure industrial peace by ensuring timely payment of wages to the workmen. The preamble of the Act states that it is an Act to provide "in the interest of maintenance of industrial peace, a H 288 SUPREME COURT REPORTS (1993] SUPP. 3 S.C.R .. A timely payment of wages in bigger industrial establishments and for matters connected therewith". The statement of objects and reasons of the Act states that delays in pay •. · .,t of wages of workmen lead to simmering discontent among them. Sometimes a grave:; threat to law and order is also forced. on this account. The provisions of the Payment of Wages Act, 1936 have been found to be inadeq_1te to ensure timely payment of wages. The incidence of disturbance of indu!>ll idl peace being greater in comparatively bigger establishments, it was considered necessary to provide that if the wage-bill in default exceeds Rs. 50,000 the amount should be recoverable as arrears of land revenue. Further, in order to curb the tendency of the employers to keep large amounts of wages in arrears, it was also necessary to make it a penal offence to be in default of a wage-bill exceeding Rs. 1 lakh. Section 2 (a) of the Act defines " industrial establishment" to mean "any factory, workshop or other establishment in which articles are D produced, processed, adopted or manufactured with a view·to their use, transport or sale". "Wage-bill" is defined by Section 2 (d) to mean "the total amount of wages payable by an industrial establishment to its workmen". Sub-section (1) of Section 3 then states that where the Labour Commis­ sioner is "satisfied" that the occupier of an industrial establishment is in default of payment of wages and that the "wage-bill" in respect of which such occupier is in def~ult "exceeds fifty thousand rupees", he may, without prejudice to the prov1~1ons of Sections 5 and 6, forward to the Collector, a certificate...... specifying the amount of wages due from the industrial establishment concerned. Sub-section (2) of that section states that upon receipt of "the certificate" referred to in sub-section (1), the Collector shall proceed to realise from the industrial establishment, the amount specified therein, besides recovery charges at the rate of ten per cent, as if such amount was in arrear of land revenue. Sub-section (3) of that section states that the amount so realised shall be placed at the disposal of the Labour Commissioner. and he shall disburse the same among the workmen entitled thereto. Sub-section ( 4) states that when the amount so realised falls short G of the wage-bill in respect of which there bas been a default, thf' Labour Commissioner may arrange for disbursement of such proportion or respec­ tive proportions of the wages due to "various categories of workmen", as he may think fit. Sub-section (5) then states that the liability of the occupier towards each workman in respect of payment of wages shall to the extent H of the amount paid to such workman, stand discharged. Section 4 specifies - .. MODllNDU.v. STATE[SAWANT,J.1 289 the powers· of the Labour Commissioner when he entertains the complaint A of the default of payment of the wage-bill. It states that for the purposes of ascertaining the "wage-bill" of an establishment in respect of which default has been committed, the Labour Commissioner shall have all the powers of a civil court while trying a suit under the Code of Civil Proce­ dure, 1908 in respect of enforcing the attendance of witnesses, examining B them on oath and compelling production of documents, and shall be deemed to be a Civil Court for the purposes of Section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973. Section 5 prescribes penalty. It states that no occupier of an industrial establishment shall at any time be in ·default of a wage-bill exceeding Rs. 1 lakh, and every occupier who is so in default shall be punishable with imprisonment for a C term which shall not be less than three months but which may extend to three years and shall be liable to fine. The Court is given power to impose a sentence of imprisonment for a term of less than three months for adequate and special reasons to be recorded in writing. Section 6 provides for punishment of persons when the offence is by the company, which D includes firms and association of individuals. It will thus be clear from the preamble, the statement of objects and reasons and the proVisions of the Act that, firstly, the Act has been placed on the statute book to ensure timely payment of wages by the bigger establishments, the incidence of disturbance of industrial peace being E greater in such establishments on account of the default in payment of wages. Secondly, the Act deals with defaults in payment of the wage-bill of all the workmen in the establishment. It is not meant to provide a remedy for the default in payment of wages of individual workmen. That can be taken care of by the provisions of the Payment of Wages Act, 1936 which F provisions are found inadequate to ensure timely paynient of wages of the whole complement of workmen in an establishment. Thirdly, it is not in respect of the default in payment of every wage-bill but only of a wage-bill exceeding Rs. 50,000 that the Labour Commissioner can be approached under the Act for redressal of the grievance. Fourthly, the Act is not applicable to all establishments but only those establishments which G produce, process, adopt or manufacture some articles. It will, therefore, be evident that the Act does not supplant or substitute the Payment of Wages Act, 1936 but supplements the said Act, in the limited area, viz., where the establishment, as stated above, (i) produces, processes, adopts or manufac- 290 SUPREME COURT REPORTS (1993) SUPP. 3 S.C.R. A tures some articles, (ii) where there is a default in the wage-bill of the entire such establishment and (iii) where such wage-bill exceeds Rs. 50,000. The object of the Act as stated above is not so much to secure payment of wages to individual workmen but to prevent industrial unrest and distur­ bance of industrial peace on account of the default on the part of the B establishment in making payment of wages to their workforce as a whole. It appears that many establishments had a -tendency to delay the payment of wages to their workmen and were playing with the lives of the workmen with impunity. This naturally led to a widespread disturbance of industrial peace in the State. Hence the legislature felt the need for enacting the present statute. This being the case, the inquiry by the Labour Commis- C sioner contemplated under Section 3 of the Act is of a very limited nature, viz., whether the establishment has made a default in timely payment of wages to its workmen as a whole when there is no dispute that the workmen are entitled to them. D · The inquiry under Section 3 being thus limited in ·its scope, the Labour Commissioner's powers extend only to finding out whether the workmen who have put ill the work were paid their wages as per the "terms of their employment and withiti the time stipulated by such terms. If the Labour Commissioner is satisfied that the workmen, though they have E worked and are, therefore, entitled to their wages, are not paid the same within time, he has further to satisfy himself that the arrears of wages so due exceed Rs. 50,000. It is only if he is satisfied on both counts that he can issue the certificate in question. Under the Act, the labour Commis­ sioner act to assist the workmen to recover their wages which are admit- F tedly due to them but are withheld for no fault on their behalf. He does not act as an adjudicator if the entitlement of the workmen to the wages is disputed otherwise than on frivolous or prima f acie untenable ground. When the liability to pay the wages, as in the present case, is under dispute which involves investigation of the question of fact and/or law, it is not function of the Labour Commissioner to adjudicate the same. In such G cases, he has to refer the parties to the appropriate forum. The powers conferred on the Labour Commissioner under Section 3 of the Act are to prevent apprehended or present breach of industrial peace. That is why the inquiry contemplated is of a summary nature. The H exercise of the said powers by the Labour Commissioner does not prevent MODI INDU. v. STATE (SAWANT,J.] 291 either party from approaching the regular forum for the redressal of its A grievance. Construing a more or less similar provision of Section 3 (b) of the U.P. Industrial Disputes Act, 1947 in State of Uttar Pradesh and Others v. Basti Sugar Mills Co. Ltd., (1961] 2 SCR 330, this Court had taken the same view. The provisions of the said Section 3 (b) read as follows : "3. Power to prevent strikes, lock-outs, etc. - If, in the opinion of B the State Government, it is necessary o.r expedient so to do for securing the public safety or convenience or the maintenance of . public order or supplies and services essential to the life of the community, or for maintaining· employment, it may by general or special order, make provision- C (a) xx xx xx xx xx xx xx xx (b) for requiring employers, workmen or both to observe for such period, as may be specified in the order, such terms and conditions . of employment as may be determined in accordance with the order; D xxxxxxxx" In that case, the State Government under the above provision had directed the sugar factories to pay bonus to the workmen. Repelling the challenge to the direction of the Government, this Court observed as E follow: · "We entirely agree with Mr. Pathak that the normal way of dealing with an industrial dispute under the Act would be to have it dealt with judicially either by conciliation or by adjudication and F that judicial process cannot be circumvented by resort to executive action. The proceeding before a conciliator or an adjudicator is, in a sense, a judicial proceeding because therein both the parties to the dispute would have the opportunity of being heard and of placing the relevant material befo~e the conciliator or adjudicator.. G But there my be an emergency and the Government may have to act promptly "for securing the public safety or convenience or the maintenance of public order or supplies and services essential to the life of the community or maintaining employment" .1 It was, therefore, necessary to arm it with additional powers for; dealing with sue~ an emergency. aause (b) of S.3 was apparently enacted H 292 SUPREME COURT REPORTS (1993) SUPP. 3 S.C.R. for this purpose. An order made thereunder would be in the nature of a temporary or interim order as would be clear from the words "for such period as may be specified" appearing therein and from the second proviso to s.3. Under this proviso where an industrial dispute is referred for adjudication under cl. ( d) an order made under cl. (b) cannot be enforced after the decision of the adjudicating authority is announced by or with the consent of the State Government. It would, therefore, follow from this that where the Government has an executive order, as it did in this case, under cl. (b) of s.3, it is open to the aggrieved party to move the Government to refer the industrial dispute for conciliation or adjudication under cl. (d) of s.3 ........... " A similar view is expressed in Basti Sugar Mills Co. Ltd. v. State of U.P. & Anr., [1979) 1 SCR 590. This nature of the provisions of Section 3 of the present Act emphasises two aspects which are relevant for our D purpose. Firstly, the power conferred on the Labour Commissioner being meant to be used speedily to prevent apprehended or continuing industrial unrest, the procedure to be adopted by him is essentially of a summary nature. It does not contemplate a protracted inquiry. Secondly, the purpose of the inquiry being to redress the grievance of the non-payment of wages, the authority of the Labour Commissioner extends only to finding out whether on the admitted fact that the workmen had worked, the grievance of the workmen has a substance in it or not. It does not, however, mean that the employer can defeat the provisions of the Act by raising frivolous pleas to avoid the payment of wages and when the employer does so, the Labour Commissioner has to wash his hands off the complaint of the workmen. While looking into the grievance of the workmen, the Labour Commissioner will undoubtedly have power to find out whether the employer has a plausible defence or not. Hence the Labour Commissioner would have to examine the please and to deal with them. He would have, therefore, to give reasons for accepting or not accepting them .. To that G extent, he is called upon to give reasons while issuing or refusing to issue the certificate. It must be remembered that Labour Commissioner is not a mere recovery officer. While the recovery officer acts on a claim which is already crystallised in some other, the Labour Commissioner in the present case, has to ascertain himself whether and to what extent, the worY.men are H entitled to the wages and then issue or refuse to issue the certificate. The MODI INDU. v. STATE [SA WANT, J.] 293 inquiry that the Labour Commissioner conducts for the purpose is thus of A a quasi-judicial nature. It is the Collector to whom he forwards the certifi- cate who in fact acts as the recovery officer. As is provided in. Section 3 itself, on receipt of the claim or complaint of the workmen, the Labour Commissioner has to satisfy himself that the occupier of the industrial establishment concerned is in default of payment of wages and that the B wage-bill in respect of which the default is complained of exceeds Rs. 50,000. He cannot satisfy himself without hearing the occupier of the industrial establishment on the claim made. That is why under Section 4, he is clothed with the powers of the Civil Court in the matter of enforcing the attendance of the witnesses, examining them on oath and compelling C production of documents. It has further to be borne in mind that the consequences to the parties of the issues or non-issuance of the certificate are grave. When the certificate is not issued, the employees' claim stands deferred to an indefinite period. When, however, it is issued, the employer is saddled with a sizeable financial liability and the non-payment of the amount indicated in the certificate visits him with penal consequences of D both imprisonment and fine. The decisions of this Court in Mahabir Jute Mills Ltd. Gorakhpur v. Shibban Lal Saxena and ors., (1976] 1 SCR 168, /Maharashtra State Board of Secondary and Higher Secondary Education v. KS. Gandhi & Ors., (1991) 2 SCC 716, C.B. Gautam v. Union of India & Ors., (1993) 1 SCC 78, on which Shr~ Tarkunde relied in support of his E proposition that administrative orders need not contain reasons for the same, according to us, therefore, have only a limited application in the present case. The Labour Commissioner may have to deal with broadly three different situations, viz., (i) where there is no defence whatsoever raised by the employer to the claim of the workmen; (ii) where the F employer raises frivolous and untenable pleas to resist the claim; and (iii) where there is a genuine dispute with regard to the entitlement of the workmen to the wages and the said dispute cannot be resolved without investigating the disputed questions of fact or law. In the first case, the Labour Commissioner is not called upon to give any reason while issuing G the certificate. In the second case, the Labour Commissioner has to give reason as to why according to him, the pleas raised are untenable. In the third situation, the Labour Commissioner when he rejects the claim of the workmen, has to indicate the disputed question of law or fact which prevent him from exercising his limited jurisdiction. Thus, both for issuing the 294 SUPREME COURT REPORTS [1993) SUPP. 3 S.C.R. A certificate as well for rejecting it, the Labour Commissioner may be called upon to give his reason depending upon the fact in each case. It is well-settled by a series of decisions beginning with A.K. Kraipak & Ors. etc. v. Union of India & ors., (1970) 1 SCR 457, that even administrative decision must bear reasons for some of them. may have more vital consequences of B the right of the parties than even judicial decisions. It is not, therefore, correct to say that the Labour Commissioner is not required to give reasons for his order. · As stated earlier, whether the certificate is issued or not, the parties' remedy to approach the appropriate forum for the adjudication of their C claim is not taken away. They can still approach the regular forum meant for the resolution of the dispute. The provisions of the Act are only of the summary nature meant to deal speedily with situations requirffig urgent solution. D 4. On the facts of the present -case, we are more than satisfied that there did exist a genuine dispute between the parties as to whose. acts of omission of commission were responsible for the halting of the production in the factory for the period in question. This was put into issue before the Labour Commissioner by the appellant-company. The Labolir Commis- E sio~er, in the circumstances, could not have proceeded to issue the certifi- ' eate. He ought to have referred the parties to industrial adjudication which was the proper forum for the purpose. Under the circumstances, we set aside the impugned certificate dated April 29, 1991 issued by the Labour Commissioner. F 5. The record shows that this Court, while granting interim stay of the recovery proceedings, directed the appellant-Company to pay to the workmen, 50 per cent of the wages as per the certificate issued by the Labour Commissioner. The dispute has been pending since 1990. We, therefore, direct the respondent-State of Uttar Pradesh to refer the dispute G between the parties with regard to the entitlement of the workmen to receive the wages and the liability of the app~llant-Company to pay the same for the period between December 21, 1990 to March 3, 1991, for , adjudication to the appropriate authority under the U .P. Industrial Dis­ putes Act, 1947, within four weeks from to-day. In the meanwhile, with a H view to mitigate hardship of the workmen, the appellant-company will pay I' MODllNDU. v. STATE(SAWANT,J.). 295 to the workmen additional 25 per cent of the wages as found due by the A Labour Commissioner under his impugned certificate. The payments made shall be ~object to the outcome of industrial adjudication. The appeal is allowed accordingly and the order of the High Court is modified in the above terms. In the circumstances of the case, there \\ill be no order as to costs. B G.N. Appeal allowed.