ONGC Regularisation: Supreme Court Refers Case to Larger Bench on Interpretation of Standing Orders and Unfair Labour Practices

Date of the Judgment: February 7, 2020
Judges: Dr Dhananjaya Y Chandrachud, J and Ajay Rastogi, J.
Can a temporary employee of a public sector undertaking, who has worked for more than 240 days, automatically become a permanent employee? The Supreme Court of India grappled with this question in a batch of appeals concerning Oil and Natural Gas Corporation (ONGC) employees. The core issue revolved around the interpretation of ONGC’s Certified Standing Orders and whether the company had engaged in unfair labor practices by not regularizing long-serving temporary employees. The two-judge bench, comprising Justices Dr. Dhananjaya Y Chandrachud and Ajay Rastogi, decided to refer the matter to a larger bench due to conflicting interpretations of existing laws and precedents.

Case Background

The appeals before the Supreme Court arose from judgments of the High Courts of Andhra Pradesh, Delhi, Madras, and Uttarakhand. These cases involved employees of ONGC who were seeking regularization of their services. The employees had initially been engaged as temporary or casual workers and had continued in service for several years. They argued that ONGC had engaged in unfair labor practices by not regularizing them despite their long service. The High Courts had taken differing views on the issue, with some directing regularization based on a previous Supreme Court judgment (PCLU) and others rejecting it, citing the need to follow the Industrial Disputes Act, 1947.

Timeline:

Course of Proceedings

The High Courts of Andhra Pradesh, Delhi, and Uttarakhand directed the regularization of the employees, relying on a previous Supreme Court judgment in Oil and Natural Gas Corporation Limited v Petroleum Coal Labour Union (PCLU). However, the Madras High Court rejected the plea for regularization, distinguishing the PCLU judgment and emphasizing the need to follow the Industrial Disputes Act, 1947. This divergence in opinions among the High Courts led to the matter being brought before the Supreme Court. The Supreme Court noted that the High Courts had relied on the PCLU judgment to direct regularization and that the decision in PCLU had a significant bearing on the outcome of the appeals.

Legal Framework

The Supreme Court considered the following legal provisions:

• Section 25(T) of the Industrial Disputes Act, 1947: This section prohibits employers, workmen, and trade unions from engaging in unfair labor practices. It states, “No employer or workman or a trade union, whether registered under the Trade Unions Act, 1926 (16 of 1926) or not, shall commit any unfair labour practice.”
• Section 2(ra) of the Industrial Disputes Act, 1947: This section defines “unfair labor practice” as any of the practices specified in the Fifth Schedule of the Act. It states, “unfair labour practice” means any of the practices specified in the Fifth Schedule.”
• Item 10 of Schedule V of the Industrial Disputes Act, 1947: This item lists one of the unfair labor practices as, “To employ workmen as “badlis”, casuals or temporaries and to continue them as such for years, with the object of depriving them of the status and privileges of permanent workmen.”

Arguments

ONGC, represented by Mr. P.S. Narasimha and Mr. J.P. Cama, raised several key arguments:

• PCLU Judgment is Per Incuriam: ONGC argued that the decision in PCLU was per incuriam (i.e., made without due regard to the law) because it did not consider binding precedents on the interpretation of Item 10 of Schedule V of the Industrial Disputes Act, 1947. Specifically, ONGC cited:
  • Mahatma Phule Agricultural University v Nasik Zilla Sheth Kamgar Union
  • Regional Manager, State Bank of India v Raja Ram
  • Regional Manager, SBI v Rakesh Kumar Tewari
  • Oil & Natural Gas Corpn. Ltd v Engg. Mazdoor Sangh
• Interpretation of Certified Standing Orders: ONGC contended that clause 2(ii) of the Certified Standing Orders for contingent employees does not grant an automatic right to regularization. The clause states that a temporary workman who has completed 240 days of attendance and possesses the minimum qualifications “may be considered for conversion as a regular employee,” not that they “shall” be converted.
• Applicability of Umadevi Judgment: ONGC argued that the principles laid down in the Constitution Bench judgment in Secretary, State of Karnataka v Umadevi (which restricts regularization of illegally appointed employees) should apply to labor law cases as well.
• Ingredients of Unfair Labour Practice: ONGC argued that the High Courts had not correctly identified the ingredients of an unfair labor practice under Item 10 of Schedule V of the Industrial Disputes Act, 1947.
• Article 226 Proceedings: ONGC argued that a finding of unfair labor practice cannot be rendered in a proceeding under Article 226 of the Constitution without the workmen leading evidence in a reference under the Industrial Disputes Act, 1947.

The core of ONGC’s argument was that the High Courts had erred in applying the PCLU judgment, which ONGC claimed was based on a misinterpretation of both the Certified Standing Orders and the relevant legal precedents. ONGC also argued that the High Courts had overlooked the limitations on regularization set by the Supreme Court in the Umadevi case.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court identified the following key issues for consideration:

1. Whether the decision of the two-judge bench in PCLU is per incuriam for not considering binding precedents on the interpretation of Item 10 of Schedule V of the ID Act.
2. Whether the interpretation of clause 2(ii) of the Certified Standing Orders, as placed in PCLU, is correct, specifically concerning the phrase “may be considered for conversion as regular employee.”
3. Whether the principles in Umadevi are applicable to labor law.
4. What are the ingredients of an unfair labor practice under Item 10 of Schedule V of the ID Act?
5. Whether a finding of an unfair labor practice can be rendered in a proceeding under Article 226 of the Constitution without the workmen leading evidence in a reference under the ID Act?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Supreme Court considered the following authorities:

Judgment

The Supreme Court did not issue a final judgment on the merits of the case. Instead, it analyzed the submissions and authorities to determine whether the matter should be referred to a larger bench. The Court’s findings are summarized below:

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

The Court analyzed the authorities to determine whether the decision in PCLU was correctly decided and whether the principles laid down in Umadevi applied to the present case. The following is an analysis of how the authorities were viewed:

• Oil and Natural Gas Corporation Limited v Petroleum Coal Labour Union [(2015) 6 SCC 494]: The Court found that the interpretation of clause 2(ii) of the Certified Standing Orders in this case was questionable and needed to be revisited. The Court also noted that this decision had not considered earlier binding precedents.
• Mahatma Phule Agricultural University v Nasik Zilla Sheth Kamgar Union [(2001) 7 SCC 346]: This case was cited as a precedent that was not considered in PCLU, which held that there could be no regularization in the absence of posts, and hence, there was no unfair labor practice.
• Regional Manager, State Bank of India v Raja Ram [(2004) 8 SCC 164]: This case was cited as a precedent that was not considered in PCLU, which emphasized that for an action to be termed as an unfair labor practice, it must be found that the workman had been retained on a casual or temporary basis with the object of depriving the workman of the status and privileges of a permanent workman.
• Regional Manager, SBI v Rakesh Kumar Tewari [(2006) 1 SCC 530]: This case followed the ratio in Raja Ram and was cited as a precedent that was not considered in PCLU.
• Oil & Natural Gas Corpn. Ltd v Engg. Mazdoor Sangh [(2007) 1 SCC 250]: This case was cited as a precedent specifically concerning ONGC’s Certified Standing Orders, which was not considered in PCLU. The Court noted that this case had construed clause 2 of the Certified Standing Orders specifically in the context of ONGC itself.
• Secretary, State of Karnataka v Umadevi [(2006) 4 SCC 1]: This case was cited to question the applicability of its principles to labor law. The Court noted that the applicability of the decision in Umadevi in the context of labor adjudication needed to be examined by a larger bench.
• UP Power Corporation Ltd. v Bijli Mazdoor Sangh [(2007) 5 SCC 755]: This case was cited to show that the law propounded in Umadevi was applicable to Industrial Tribunals and Labour Courts.
• Maharashtra State Road Transport Corporation v Casteribe Rajya Parivahan Karmchari Sanghatana [(2009) 8 SCC 556]: This case was cited to show that Industrial and Labour Courts have wide powers to direct the employer to take affirmative action in a case of unfair labour practice, including the power to order regularisation or permanency.
• State of Maharashtra v R S Bhonde [(2005) 6 SCC 751]: This case was cited to show that the creation of posts does not lie within the domain of judicial functions.
• Hari Nandan Prasad v Employer I/R to Management of Food Corporation of India [(2014) 7 SCC 190]: This case was cited to reconcile the divergence between the decisions in Bijli Mazdoor Sangh and Maharashtra SRTC.

What weighed in the mind of the Court?

The Court’s decision to refer the case to a larger bench was primarily influenced by the need to reconcile conflicting interpretations of the law and to ensure consistency in the application of legal principles. Several factors weighed heavily on the Court’s mind:

• Doubt on the correctness of the PCLU judgment: The Court had serious doubts about the correctness of the judgment in PCLU, particularly its interpretation of clause 2(ii) of the Certified Standing Orders and its failure to consider earlier binding precedents.
• Need for clarity on the applicability of Umadevi: The Court recognized the need for clarity on whether the principles laid down in Umadevi, which restrict the regularization of illegally appointed employees, apply to labor disputes.
• Inconsistency in High Court decisions: The Court noted the inconsistency in the decisions of various High Courts, with some relying on PCLU and others distinguishing it. This inconsistency highlighted the need for a definitive ruling from a larger bench.
• Importance of fair labor practices: The Court recognized the importance of addressing unfair labor practices but also noted that the High Courts had not correctly identified the ingredients of an unfair labor practice under Item 10 of Schedule V of the ID Act.
• Limitations on the powers of Labour Courts: The Court was also concerned about the limitations on the powers of Labour and Industrial Courts to order regularization, especially in the absence of sanctioned posts.

Sentiment Analysis of Reasons Given by the Supreme Court

Ratio Table: Fact vs. Law

Logical Reasoning

The Court’s reasoning was primarily based on the need to ensure that the law is applied consistently and that there is no ambiguity in the interpretation of the relevant provisions. The Court recognized that the issues involved were complex and required a more comprehensive analysis by a larger bench.

The Supreme Court did not provide a final decision on the merits of the case. Instead, it outlined the reasons for referring the matter to a larger bench. The Court highlighted the following:

• The decision in PCLU had not considered earlier binding precedents.
• The interpretation of clause 2(ii) of the Certified Standing Orders in PCLU was questionable.
• The applicability of the principles in Umadevi to labor law needed to be clarified.
• The ingredients of an unfair labor practice under Item 10 of Schedule V of the ID Act needed to be correctly identified.
• There was a need to determine whether a finding of unfair labor practice could be rendered in a proceeding under Article 226 without the workmen leading evidence in a reference under the ID Act.

The Court emphasized that the decision in PCLU needed to be revisited to ensure conformity with the principles emerging from earlier precedents. The Court also noted that the issues involved were of significant importance and required a more comprehensive examination by a larger bench.

Key Takeaways

The key takeaways from this Supreme Court order are:

• The Supreme Court has expressed doubts about the correctness of the PCLU judgment, which had been used by several High Courts to direct the regularization of ONGC employees.
• The interpretation of clause 2(ii) of ONGC’s Certified Standing Orders, specifically the phrase “may be considered for conversion as regular employee,” is now under scrutiny.
• The applicability of the principles laid down in Umadevi to labor disputes will be reviewed by a larger bench.
• The ingredients of an unfair labor practice under Item 10 of Schedule V of the Industrial Disputes Act, 1947, will be re-examined.
• The powers of Labour and Industrial Courts to order regularization, especially in the absence of sanctioned posts, will be further considered.

The referral of the case to a larger bench indicates that the Supreme Court is taking a serious view of the issues involved and is seeking to clarify the legal position on the regularization of temporary employees in public sector undertakings. This decision could have significant implications for similar cases across the country.

Directions

The Supreme Court directed the Registry to place the proceedings before the Hon’ble Chief Justice of India so as to enable His Lordship to consider placing this batch of appeals before an appropriate Bench.

Development of Law

The ratio decidendi of this case is that the Supreme Court has expressed doubts about the correctness of the PCLU judgment and has referred the matter to a larger bench for reconsideration. This indicates a potential change in the previous position of law, particularly regarding the interpretation of Certified Standing Orders and the applicability of the principles in Umadevi to labor disputes. The Court’s decision to refer the matter to a larger bench suggests that the previous position of law may be altered after the larger bench renders its judgment.

Conclusion

The Supreme Court’s decision to refer the ONGC regularisation case to a larger bench underscores the complexity and significance of the legal issues involved. The Court’s concerns about the correctness of the PCLU judgment, the interpretation of Certified Standing Orders, and the applicability of the Umadevi principles highlight the need for a comprehensive review of the legal framework surrounding the regularization of temporary employees. The outcome of this case could have far-reaching implications for labor law and the rights of temporary workers across India. The referral to a larger bench ensures that these important issues will be thoroughly examined and that the legal position will be clarified, providing much-needed guidance for employers and employees alike.