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MYSORE KIRLOSKAR MAZDOOR SANGH VERSUS MANAGEMENT OF MYSORE KIRLOSKAR LIMITED, HUBLI UNIT I, HUBLI

    W.P. 44415 of 1999

    Decided On, 02 June 2000

    At, High Court of Karnataka

    By, THE HONOURABLE MR. JUSTICE KUMAR RAJARATNAM

    For the Appearing Parties: K.Kasturi, M.C.Narasimhan, Mangalamba Rao, Advocates.



Judgment Text

KUMAR RAJARATNAM, J.


( 1 ) THE writ petition is taken up with the consent of parties.


( 2 ) HEARD Mrs. Mangalamba Rao, learned Counsel for the petitioner, Mr. K. Kasturi, learned Counsel for the management, Mr. M. C. Narasimhan, learned Counsel for the respondent and the learned Government advocate for the third respondent.


( 3 ) THE only question that arises for consideration in this writ petition is whether a settlement entered into under Section 18 (3) of the Industrial disputes Act between the recognised union and the management is binding on the minority union.


( 4 ) THE matter relates to shifting of the Hubli Unit to Harihar unit subject to certain benefits being given to the workmen by the management.


( 5 ) THIS Court more or less by an interim order dated 23-2-2000 settled the matter amicably between the petitioner and the first respondent management.


( 6 ) ALTHOUGH that interim order may have brought an end to this litigation it would be appropriate for this Court to deal with the writ petition filed by the petitioner and to state the legal position correctly.


( 7 ) THE second respondent is a registered trade union. It enjoys the majority support of the workmen. The practice was that the union which enjoys the majority support is recognised by the management as the sole collective bargaining agent for a period of three years. The referendum i by the secret ballot is held once in three years to determine which union enjoys the confidence of the workmen.


( 8 ) INDEED, the petitioner-union was the recognised union during the period 1994-96. In 1997, the second respondent on the basis of a referendum enjoyed the majority support of the workmen and was accordingly recognised by the management.


( 9 ) IT is submitted that the respondent-management was engaged in the manufacture of lathes and CMC machines. It has its main factory at Harihar where around 1,800 workmen are employed. There is another unit at Hubli which also is engaged in the manufacture of lathes and machines. There are about 448 workers employed at Hubli unit of the respondent-management. The electoral college for the purpose of collective bargaining consists of workmen of Harihar and Hubli units. The majority union is elected on the basis of a referendum. The majority union represents both Harihar and Hubli units. Wage settlements are signed by the majority union which is binding on all the workmen. Therefore, the settled position is that the union elected in the referendum would represent the workmen of Harihar and Hubli unit. There is no separate referendum or recognition for Hubli unit. It is further submitted that the management of the company addressed a letter on 29-5-1999 stating therein that the company had incurred heavy losses and that on a review of the projections of business, it has been found that the Hubli unit had become unviable. Further, the management stated that it was impossible for them to run the business unless they wiped out the losses accumulated and consolidated their manufacturing operations at one place. It is further submitted that the management proposed to shift the Hubli unit to Harihar. The respondent-union was invited for bilateral discussions in the matter, at Annexure R-1. It is submitted that the management had addressed another letter to the respondent-union on 28-5-1999 at Annexure R-2. The management had also published a notice informing all the workmen about their proposal to shift the Hubli unit to Harihar for consolidating their business and manufacturing operations. It is further submitted that meetings were held in Harihar and Hubli to ascertain the views of the workers and to save the employment of the workmen by avoiding closure of the factory. It is submitted that keeping the employees' interest the respondent-Union agreed in principle for shifting Hubli Unit to Harihar subject to certain favourable package being worked out with the management. This was the unanimous decision of the Committee of the respondent-Union. After discussions the union and the management entered into a settlement on 8-10-1999 which provided for Disturbance Allowance of Rs. 5,500/- (non-refundable) and Rs. 5,000/- interest free loan recoverable in 25 instalments, dormitory facility for two months and joining time of 12 days etc., for those opting to report at Harihar and Rs. 1,85,000/- as VRS benefits for those workmen for the early Voluntary Retirement Scheme. The petitioner had already raised a dispute before the Labour Authorities and subsequently all the unions were notified of the proceedings. The respondent-union participated in the conciliation proceedings held on various dates. The conciliation officer suggested to the management to increase the non-refundable loan from Rs. 5,500/- to Rs. 10,000/ -. The management accepted the same and the settlement was finalised and signed on 6-12-1999. The petitioner-union and another union belonging to CITU refused to sign the settlement. The settlement was certified as fair and reasonable by the certifying officer after hearing all the parties, and after taking into consideration the objections filed by the petitioner. The certifying officer proceeded to register the settlement under Section 18 (3) of the Industrial Disputes Act.


( 10 ) ACCORDINGLY, a memorandum of settlement was entered into under section 18 (3) of the Industrial Disputes Act between the management and the 2nd respondent at Annexure-A. The minority union challenges the settlement entered into between the management and the majority union in this writ petition.


( 11 ) IT was submitted by the petitioner-Union that the petitioner apprehending the shifting of the unit from Hubli to Harihar approached the Joint Labour Commissioner at Bangalore. The petitioner also filed a civil case in O. S. No. 471 of 1999 at Hubli. While the matter was being agitated by the petitioner-union, the 2nd respondent and the 1st respondent entered into a MOU at Annexure-G and during the pendency of the matter before the Labour Commissioner a settlement was signed by the majority union and the management. This settlement it was submitted was not binding on the petitioner.


( 12 ) THE petitioner had also submitted objections to the settlement. It was further submitted that the purpose of the settlement was only to enable the management to sell valuable land at Hubli for Rs. 18 crores. It was also submitted that there was an agreement entered into to sell the land after shifting of the unit to Harihar to Suresh Enterprises private Limited. This, according to the petitioner, was an unfair labour practice.


( 13 ) IT was further submitted that by treating Hubli and Harihar as a single unit the workmen at Hubli were at a disadvantage. If the views of the workmen at Hubli alone was taken into account the vast majority of the workmen would not have agreed for shifting the unit to Harihar. By virtue of the settlement at Annexure-A it was submitted that the management is bringing pressure and forcing the workmen at Hubli to comply with the settlement under duress and coercion. It was further submitted that the settlement is not in accordance with the wishes of the employees at Hubli.


( 14 ) THE first question that will have to be resolved is whether both the units at Hubli and Harihar could be treated as a single unit for the purpose of collective bargaining by the union.


( 15 ) IT is common ground that this was the practice that was being followed within the knowledge of the petitioner-Union. It is also common ground that when the petitioner-Union was the recognised union during the period 1994-96 it was on the basis that the unit at Hubli and Harihar were treated as a single unit for the purpose of collective bargaining. In fact it was the petitioner-Union that was the representative of the workmen during the period 1994-96. Therefore, it is not permissible for the petitioner to state that the units should be divided and that a separate secret ballet should have been held for the unit at Hubli when it is established that by practice and by agreement that both Hubli and Harihar were to be represented as a single unit for the purpose of collective bargaining. Since the petitioner itself had acquiesced to such an understanding, it cannot go back on its own stand by now taking a different stand that the two units should be treated separately. Indeed as stated earlier, the petitioner-Union represented both Hubli and Harihar during the period 1994-96. Now, that the petitioner is not the majority union, the petitioner cannot be a spoilt-sport in raking up this issue having once earlier represented both the units. I, therefore, hold that the collective bargaining for the purpose of this settlement can be done only by the union that commands the majority in both Hubli and Harihar. In this case, admittedly, the 2nd respondent-Union is the recognised union to enter into any settlement. This leaves us with the next question whether this settlement is binding on the minority union.


( 16 ) IT would not be out of place to mention that the vast majority of the workmen from Hubli unit have accepted the settlement by going in for EVRS and another 104 workmen of the Hubli unit have also come to Harihar on transfer by virtue of the settlement. Indeed there are only 65 members of the petitioner-union who are aggrieved by the settlement.


( 17 ) LET me now advert to the legal position with regard to a settlement under Section 12 (3) read with Section 18 (3) of the Act. Section 18 contemplates two categories of settlement. 18 (1) is a settlement arrived at outside the conciliation proceedings. Section 18 (3) settlement is arrived at in the course of conciliation proceedings. A settlement under Section 18 (1) may not bind all parties except those who are parties to the settlement. But a settlement under Section 18 (3) has an extended application and is binding on all parties to the Industrial Dispute. A 18 (3) settlement is binding on all workmen of the establishment even though they belong to the minority union which had objected to the settlement. (Emphasis supplied) 17-A. A recognised union is expected to champion the genuine cause of the workmen and such a settlement is expected to be in the interest of the workmen. Sanctity of the settlement which is done with the help of the conciliation officer is also expected to be in the interest of industrial peace. It is also binding on the management. It is based on collective bargaining for resolving industrial disputes. It is a settlement that is arrived at by a union that enjoy the support of the majority of the workmen. This settlement is binding both on the management as well as the workmen.


( 18 ) IT is possible that a small group of workmen may have certain personal difficulties in shifting from Hubli to Harihar. These difficulties may well be genuine but in a democracy if a settlement is made in the interest of the vast majority of the workmen such a settlement cannot be assailed merely on the ground that it affects a few workmen.


( 19 ) THE only ground on which the binding settlement under Section 18 (3) can be assailed is that if it can be shown that there was mala fide in reaching the settlement or that the settlement is vitiated by fraud played on the workmen. Before I deal with the established principles of law on the effect of a binding settlement, it would be necessary to find out whether the settlement is vitiated for mala fide reasons.


( 20 ) IT would not be open to this Court to sit in appeal or even review a settlement entered into by the recognised union and the management. The Court must satisfy itself that the purpose of the settlement is for valid reasons and was in the interest of both the workmen as well as the management. If that is established, this Court will not interfere with the settlement entered into under Section 18 (3) between the workmen and the management.


( 21 ) IN this case, the facts would indicate that the company had incurred heavy loss and that the unit at Hubli had become unviable. In these circumstances, the management proposed to shift the Hubli unit to Harihar. The union was invited for bilateral discussions. The management also suggested remedial measures to avoid the threat of retrenchment. The management put up a notice informing all the workmen about the proposal to shift the Hubli unit to Harihar for consolidation of the business at Harihar for manufacturing operations. The recognised union felt that it was in the paramount interest to save employment by avoiding closure of the factory at Hubl. It is only after assessing the situation in depth the union agreed to the settlement. This was in keeping with the interest of the employees. It was also a unanimous decision taken by the recognised union. The respondent 2-union did not accept the settlement without further negotiations. Hard bargaining and protracted discussions took place. Disturbance Allowance as a result of the bargain was agreed to. Interest free loans was also incorporated in the settlement. The facilities for workmen who were shifting to Harihar was also conceded to by the management. Rs. 1,85,000/- was offered under the VRS Scheme. The petitioner also participated in the conciliation proceedings on various dates. Some more bargaining was done at the instance of the petitioner and the refundable loan was enhanced from Rs. 5,500/- to Rs. 10,000/ -. The workmen genuinely felt that if the unit was not shifted to Harihar the losses would have mounted and there would have been wholesale retrenchment. The workmen were fully consulted before the settlement was arrived at. The conciliation was held in an impartial manner and reasonable opportunities were given to all the parties including that of the petitioner. The petitioner also filed its objections and the objections of the petitioner was considered by the conciliation officer. In fact all the workmen at Hubli were to be accommodated at Harihar. Although the management did not invite the petitioner-union for negotiations, the petitioner participated in the conciliation proceedings. It cannot be forgotten that when the petitioner-union was in majority it had also signed a similar settlement. Curiously the petitioner-union signed the settlement almost on an identical issue previously. The petitioner-union when it enjoyed majority signed the settlement with the management to shift a unit from Sattur to Harihar. It is now not open to the petitioner to allege that the settlement had not taken into account the welfare of the workmen. It also cannot be forgotten that the vast majority of workmen at Hubli unit have accepted the settlement by going in for EVRS and another 104 workmen of the Hubli unit have already shifted to Harihar. Only 64 members of the petitioner- union out of about 448 are now protesting. As I stated earlier, in a democracy interest of the vast majority of the workmen is paramount. If the jobs of the vast majority of the workmen can be saved by shifting the unit to Harihar, it cannot be said that the majority union acted against the interest of the workmen. One of the vicissitudes of democracy is that the small minority of workmen cannot hold back a settlement which is in the interest of the vast majority. It is possible that in such collective bargaining one or two persons may have genuine grievances, but their grievances cannot be redressed by setting aside a settlement which has been accepted by the majority union and also accepted by vast majority of the minority union. It appears to me that the challenge to the settlement is more in the nature of a rivalry between the majority union and the leaders of the minority union. The legal position is simple and straightforward. (emphasis supplied)


( 22 ) THE Supreme Court in the case of Ramnagar Cane and Sugar company Limited v Jatin Chakravorty and Others, held as follows: ?in appreciating the merits of the rival contentions thus raised in this appeal, it is necessary to bear in mind the scheme of the act. It is now well-settled that an industrial dispute can be raised in regard to any matter only when it is sponsored by a body of workmen acting through a union or otherwise. When an industrial dispute is thus raised and is decided either by settlement or by an award, the scope and effect of its operation is prescribed by section 18 of the Act. Section 18 (1) provides that a settlement arrived at by agreement between the employer and the workmen otherwise than in the course of conciliation proceeding shall be binding on the parties to the agreement; whereas Section 18 (3) provides that a settlement arrived at in the course of conciliation proceedings which has become enforceable shall be binding on all the parties specified in clauses (a), (b), (c) and (d) of sub-section (3). Section 18 (3) (d) makes it clear that, where a party referred to in clause (a) or (b) is composed of workmen, all persons who were employed in the establishment or part of the establishment, as the case may be, to which the dispute relates on the date of the dispute and all persons who subsequently become employed in that establishment or part, would be bound by the settlement. In other words, there can be no doubt that the settlement arrived at between clear that the said demands cover all employees of the appellant and not only one section of them; in other words, both the charters have made demands the benefit of which was intended to accrue to all the workmen of the appellant; they are not demands by one section of the workmen belonging to one separate part of the establishment run by the appellant. The demands made are no doubt by two unions but they cover the same ground and in effect they represent the demands made by the whole body of workmen. In fact the conciliation settlement reached between the appellant and the Employees' Union has benefited the members of the workers' Union as much as those of the Employees' Union. That being so, we think the Courts below were in error in putting an unduly narrow and restricted construction on the provisions of section 22 (1) (d) of the Act. In our opinion, the pendency of the conciliation proceedings between the appellant and the employees' Union attracts the provisions of Section 22 (1) (d) to the strike in question and makes the said strike illegal under Section 24 (1) (i) of the Act. If the strike is illegal, it follows that the respondents have taken part in a subversive activity as defined by section 2 (9) (e) of the West Bengal Security Act and as such have committed an offence punishable under Section 11 of the said act". (Emphasis supplied)


( 23 ) IN a recent judgment in the case of National Engineering Industries limited v State of Rajasthan and Others, the Supreme Court has reiterated the same proposition of law and held that a settlement made under Section 18 (3) binds the management, the recognised majority union and the members of the minority union. The Supreme Court after dealing with the relevant case laws in paragraph 25 held as follows: ?it will be thus seen that High Court has jurisdiction to entertain a writ petition when there is allegation that there is no industrial dispute and none apprehended which could be subject-matter of reference for adjudication to the Industrial tribunal under Section 10 of the Act. Here it is a question of jurisdiction of the Industrial Tribunal, which could be examined by the High Court in its writ jurisdiction. It is the existence of the industrial Tribunal which would clothe the appropriate government with power to make the reference and the Industrial tribunal to adjudicate it. If there is no industrial dispute in existence or apprehended appropriate Government lacks power to make any reference. A settlement of dispute between the parties themselves is to be preferred, where it could be arrived at, to industrial adjudication, as the settlement is likely to lead to more lasting peace than an award. Settlement is arrived at by the free will of the parties and is a pointer to there being goodwill between them. When there is a dispute that the settlement is not bona fide in nature or that it has been arrived at on account of fraud, misrepresentation or concealment of facts or even corruption and other inducements it could be subject-matter of yet another industrial dispute which an appropriate Government may refer for adjudication after examining the allegations as there is an underlying assumption that the settlement reached with the help of the Conciliation Officer must be fair and reasonable. A settlement which is sought to be impugned has to be scanned and scrutinized. Sub-sections (1) and (3) of Section 18 divide settlements into two categories, namely, (1) those arrived at outside the conciliation proceedings and (2) those arrived at in the course of conciliation proceedings. A settlement which belongs to the first category has limited application in that it merely binds the parties to the agreement but the settlement belonging to the second cate

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gory has extended application since it is binding on all the parties to the industrial disputes, to all others who were summoned to appear in the conciliation proceedings and to all persons employed in the establishment or part of the establishment, as the case may be, to which the dispute related on the date of the dispute and to all others who joined the establishment thereafter. A settlement arrived at in the course of conciliation proceedings with a recognised majority union will be binding on all workmen of the establishment, even those who belong to the minority union which has objected to the same. Recognised union having majority of members is expected to protect the legitimate interest of labour and enter into a settlement in the best interest of labour. This is with the object to uphold the sanctity of settlement reached with the active assistance of the conciliation officer and to discourage an individual employee or minority union from scuttling the settlement. When a settlement is arrived at during the conciliation proceedings it is binding on the members of the workers' Union as laid down by Section 18 (3) (d) of the Act. It would ipso facto bind all the existing workmen who are all parties to the industrial dispute and who may not be members of unions that are signatories to such settlement under Section 12 (3) of the act. Act is based on the principle of collective bargaining for resolving industrial disputes and for maintaining industrial peace. 'This principle of industrial democracy is the bedrock of the Act', as pointed out in the case of P. Virudhachalam v Management of lotus Mills. In all these negotiations based on collective bargaining individual workman necessarily recedes to the background. Settlements will encompass all the disputes existing at the time of the settlement except those specifically left out". ( 24 ) HAVING stated the law clearly based on the pronouncements of the supreme Court it would be well-nigh impossible to set aside the binding settlement since by no stretch of imagination can it be said that the settlement is not bona fide in nature or that it has been arrived at on account of fraud, misrepresentation or concealment of facts. ( 25 ) THERE is no merit in the writ petition. The writ petition is liable to be dismissed and accordingly it is dismissed. No costs.
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