Supreme Court clarifies applicability of Standing Orders vs. CCA Rules in Disciplinary Proceedings for Workmen (29 November 2023)

LEGAL ISSUE: Applicability of Central Civil Services (Classification, Control and Appeal) Rules, 1965 (CCA Rules) versus Standing Orders under the Industrial Employment (Standing Orders) Act, 1946 in disciplinary proceedings against workmen.

CASE TYPE: Service Law/Industrial Law

Case Name: Union of India & Ors. vs. K. Suri Babu & Union of India & Ors. vs. M. Kiran Kumar

Judgment Date: 29 November 2023

Date of the Judgment: 29 November 2023

Citation: 2023 INSC 1033

Judges: Sanjay Kishan Kaul J., C.T. Ravikumar J., Sudhanshu Dhulia J.

Can an employer initiate disciplinary proceedings against a workman under the Central Civil Services (Classification, Control and Appeal) Rules, 1965 (CCA Rules), or are they bound by the Standing Orders certified under the Industrial Employment (Standing Orders) Act, 1946? The Supreme Court recently addressed this crucial question, clarifying the interplay between these two sets of rules in the context of disciplinary actions against workmen. This judgment emphasizes the importance of Standing Orders as a special law for workmen, highlighting the protections afforded to them under the Industrial Employment (Standing Orders) Act, 1946. The majority opinion was authored by Justice Sudhanshu Dhulia.

Case Background

The Nuclear Fuel Complex (NFC), Hyderabad, a unit of the Department of Atomic Energy, appointed the respondent as a ‘helper’ on May 5, 2001. A disciplinary action was initiated against the respondent on April 23, 2003, for allegedly submitting a fake Class VI transfer certificate. The NFC sought to proceed against the respondent under the CCA Rules, 1965. The respondent challenged this, arguing that as a workman, he was governed by the Standing Orders certified for NFC-Hyderabad on August 27, 1973, under the Industrial Employment (Standing Orders) Act, 1946, not the CCA Rules, 1965. The Central Administrative Tribunal (CAT) upheld the initiation of disciplinary proceedings under the CCA Rules, 1965, relying on the appointment order and a department circular. The High Court of Judicature, Andhra Pradesh at Hyderabad, however, set aside the CAT order, leading to the current appeals before the Supreme Court.

Timeline

Course of Proceedings

The respondent initially filed an Original Application (OA) before the CAT, Hyderabad, challenging the disciplinary proceedings initiated against him under the CCA Rules, 1965. The CAT dismissed the OA, relying on the respondent’s appointment order and a circular from the Department stating that their employees were governed by the CCA Rules, 1965, and not the Standing Orders. Subsequently, the respondent filed a writ petition before the High Court of Judicature, Andhra Pradesh at Hyderabad, challenging the CAT order. The High Court allowed the writ petition, setting aside the CAT order and quashing the disciplinary proceedings against the respondent. The Union of India then filed these appeals before the Supreme Court.

Legal Framework

The core legal issue revolves around the interpretation and applicability of two sets of rules:

• Central Civil Services (Classification, Control and Appeal) Rules, 1965 (CCA Rules, 1965): These rules, framed under Article 309 of the Constitution of India, govern the service conditions of Central Government employees. Rule 3 of the CCA Rules, 1965 specifies its applicability to every government servant, with certain exceptions.
• Standing Orders under the Industrial Employment (Standing Orders) Act, 1946: These are rules specific to workmen in an industrial establishment, designed to regulate their working conditions and provide protection, particularly in disciplinary proceedings. Section 2(g) of the 1946 Act defines ‘standing orders’ as rules relating to matters set out in the Schedule. The Schedule includes matters such as classification of workmen, attendance, misconduct, and disciplinary action. Section 3 of the 1946 Act mandates that employers submit draft standing orders for adoption in their industrial establishments.

The Industrial Employment (Standing Orders) Act, 1946, is a worker-friendly legislation enacted to regulate the working conditions of workmen. Standing Orders provide a statutory contract of service between the employer and the workman. The Act mandates that employers define conditions of employment with sufficient precision and make them known to the workmen.

Section 13B of the 1946 Act states:

“13B. Act not to apply to certain industrial establishments. —Nothing in this Act shall apply to an industrial establishment in so far as the workmen employed therein are persons to whom the Fundamental and Supplementary Rules, Civil Services (Classification, Control and Appeal) Rules, Civil Services (Temporary Services) Rules, Revised Leave Rules, Civil Service Regulations, Civilians in Defence Service (Classification, Control and Appeal) Rules or the Indian Railway Establishment Code or any other rules or regulations as may be notified in this behalf by the appropriate Government in the Official Gazette, apply.”

Arguments

Arguments of the Appellants (Union of India):

• The appointment order of the respondent explicitly stated that matters of discipline would be governed by the CCA Rules, 1965. The relevant clause in the appointment order reads:
  
  “3. I am to add that other terms and conditions of your service including discipline will be governed by the rules as applicable to Central Government employees of your status in NFC from time to time…”
• The CCA Rules, 1965, provide a wide range of benefits to employees, including pension upon superannuation. It is not tenable for an employee to accept the benefits of the CCA Rules, 1965, while denying their applicability in disciplinary proceedings.
• Section 13B of the Industrial Employment (Standing Orders) Act, 1946, exempts industrial establishments from the Act’s purview if the employees are governed by the CCA Rules, 1965. Since the respondent’s appointment order specified the applicability of CCA Rules, 1965, the Standing Orders would not apply.

Arguments of the Respondent (Workman):

• As a workman, the respondent is governed by the Standing Orders certified for NFC-Hyderabad under the Industrial Employment (Standing Orders) Act, 1946. These Standing Orders contain specific provisions to deal with disciplinary proceedings.
• The Standing Orders are a special law for workmen, providing them protection against arbitrary actions by the employer. The CCA Rules, 1965, are general rules applicable to all Central Government employees and cannot override the special provisions of the Standing Orders.
• The appointment order cannot lay down terms of service that are against the Standing Orders, which are binding on the employer.

The innovativeness of the argument by the respondent lies in emphasizing the special nature of the Standing Orders and the protection they provide to workmen, asserting that these cannot be overridden by general rules or contractual terms in the appointment order.

Issues Framed by the Supreme Court

The core issue before the Supreme Court was:

1. Whether the disciplinary proceedings against the respondent (a workman) could be initiated under the CCA Rules, 1965, or whether they should be initiated only under the Standing Orders certified for NFC-Hyderabad under the Industrial Employment (Standing Orders) Act, 1946.

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:

Cases

• Salem-Erode Electricity Distribution Co. (P) Ltd. v. Employees’ Union (1966) 2 SCR 498: The Court referred to this case to highlight the worker-friendly nature of the Industrial Employment (Standing Orders) Act, 1946, and the protections it provides to workmen.
• Management, Shahdara (Delhi) Saharanpur Light Railway Co. Ltd. v. S.S. Railway Workers Union (1969) 2 SCR 131: This case was cited to reinforce the position that labor laws are designed to balance the power between employers and workmen.
• Agra Electric Supply Co. Ltd. v. Sri Alladdin and Others (1969) 2 SCC 598: This case was also cited to emphasize the protective nature of labor laws for workmen.
• Sudhir Chandra Sarkar v. Tata Iron & Steel Co. Ltd. (1984) 3 SCC 369: The court relied on this case to explain the purpose of the Industrial Employment (Standing Orders) Act, 1946, as a legislative response to the “hire and fire” rule. It emphasized that Standing Orders become part of the statutory terms and conditions of service.
• Western India Match Co. Ltd. v. Workmen (1974) 3 SCC 330: This case was cited to show that an appointment order cannot override the provisions of the Standing Orders. The court held that a special agreement inconsistent with the Standing Orders is ineffective.
• U.P. State Electricity Board and Another v. Hari Shankar Jain and Others, AIR 1979 SC 65: This case was extensively relied upon to explain the purpose and scope of the Industrial Employment (Standing Orders) Act, 1946, and to establish that it is a special act dealing with the conditions of service of workmen. The Court also clarified the interpretation of Section 13B of the 1946 Act, stating that a specific notification is required to exclude the applicability of the Act.
• Air India v. Union of India, ILR (1991) 1 Del 88: This Delhi High Court judgment was cited to support the view that a notification by the Government of India is required to exclude the application of the Industrial Employment (Standing Orders) Act, 1946, under Section 13B.
• Oil and Natural Gas Corporation Ltd. v. Petroleum Coal Labour Union & Ors. (2015) 6 SCC 494: This case was relied upon to emphasize that any modification to the service conditions of workmen must be done as per Section 10 of the Industrial Employment (Standing Orders) Act, 1946.

Legal Provisions

• Article 309 of the Constitution of India: This article empowers the government to make rules regulating the service conditions of government employees. The CCA Rules, 1965, are framed under this article.
• Section 2(g) of the Industrial Employment (Standing Orders) Act, 1946: This section defines “standing orders” as rules relating to matters set out in the Schedule.
• Section 3 of the Industrial Employment (Standing Orders) Act, 1946: This section mandates employers to submit draft standing orders for adoption in their industrial establishments.
• Section 10 of the Industrial Employment (Standing Orders) Act, 1946: This section provides the procedure for modifying the Standing Orders.
• Section 13B of the Industrial Employment (Standing Orders) Act, 1946: This section provides an exclusion clause, stating that the Act will not apply to certain industrial establishments where the employees are governed by specific rules, including the CCA Rules, 1965, or other rules notified by the government.
• Rule 3 of the CCA Rules, 1965: This rule specifies the applicability of the CCA Rules, 1965, to government servants, with certain exceptions.

Judgment

The Supreme Court held that the Standing Orders, being a special law for workmen, would prevail over the general CCA Rules, 1965. The Court emphasized that the Industrial Employment (Standing Orders) Act, 1946, is a worker-friendly legislation designed to protect the interests of workmen. The Court also held that the appointment order cannot override the provisions of the Standing Orders.

The Court also clarified that for Section 13B of the 1946 Act to apply, a specific notification from the government is necessary. In the absence of such a notification, the Standing Orders would prevail. The Court also relied on the case of U.P. State Electricity Board and Another v. Hari Shankar Jain and Others, AIR 1979 SC 65, to emphasize that the Industrial Employment (Standing Orders) Act, 1946, is a special act dealing with the conditions of service of workmen.

How each authority was viewed by the Court?

• The authorities Salem-Erode Electricity Distribution Co. (P) Ltd. v. Employees’ Union (1966) 2 SCR 498, Management, Shahdara (Delhi) Saharanpur Light Railway Co. Ltd. v. S.S. Railway Workers Union (1969) 2 SCR 131 and Agra Electric Supply Co. Ltd. v. Sri Alladdin and Others (1969) 2 SCC 598 were cited to emphasize the worker-friendly nature of the Industrial Employment (Standing Orders) Act, 1946, and the protections it provides to workmen.
• Sudhir Chandra Sarkar v. Tata Iron & Steel Co. Ltd. (1984) 3 SCC 369 was used to explain the purpose of the Industrial Employment (Standing Orders) Act, 1946, as a legislative response to the “hire and fire” rule. It emphasized that Standing Orders become part of the statutory terms and conditions of service.
• Western India Match Co. Ltd. v. Workmen (1974) 3 SCC 330 was used to show that an appointment order cannot override the provisions of the Standing Orders. The court held that a special agreement inconsistent with the Standing Orders is ineffective.
• U.P. State Electricity Board and Another v. Hari Shankar Jain and Others, AIR 1979 SC 65 was extensively relied upon to explain the purpose and scope of the Industrial Employment (Standing Orders) Act, 1946, and to establish that it is a special act dealing with the conditions of service of workmen. The Court also clarified the interpretation of Section 13B of the 1946 Act, stating that a specific notification is required to exclude the applicability of the Act.
• Air India v. Union of India, ILR (1991) 1 Del 88 was cited to support the view that a notification by the Government of India is required to exclude the application of the Industrial Employment (Standing Orders) Act, 1946, under Section 13B.
• Oil and Natural Gas Corporation Ltd. v. Petroleum Coal Labour Union & Ors. (2015) 6 SCC 494 was relied upon to emphasize that any modification to the service conditions of workmen must be done as per Section 10 of the Industrial Employment (Standing Orders) Act, 1946.

The Court quoted from U.P. State Electricity Board and Another v. Hari Shankar Jain and Others, AIR 1979 SC 65, stating:

“The Industrial Employment (Standing Orders) Act is thus seen to be an Act specially designed to define the terms of employment of workmen in industrial establishments, to give the workmen a collective voice in defining the terms of employment and to subject the terms of employment to the scrutiny of quasi -judicial authorities by the application of the test of fairness and reasonableness.”

The Court also quoted from Sudhir Chandra Sarkar v. Tata Iron & Steel Co. Ltd. (1984) 3 SCC 369:

“The intendment underlying the Act and the provisions of the Act enacted to give effect to the intendment and the scheme of the Act leave no room for doubt that the Standing Orders certified under the 1946 Act become part of the statutory terms and conditions of service between the employer and his employee and they govern the relationship between the parties.”

The Court also quoted from Western India Match Co. Ltd. v. Workmen (1974) 3 SCC 330:

“The special agreement, in so far as it provides for additional four months of probation, is an act in contravention of the Standing Order. We have already held that. It plainly follows from Sections 4, 10 and 13(2) that the inconsistent part of the special agreement cannot prevail over the Standing Order. As long as the Standing Order is in force, it is binding on the Company as well as the workmen.”

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• Special Nature of Standing Orders: The Court emphasized that the Industrial Employment (Standing Orders) Act, 1946, is a special legislation designed to protect the interests of workmen. Standing Orders are not merely administrative rules but have a statutory mandate and are intended to provide certainty in the service conditions of workmen.
• Protection of Workmen’s Rights: The Court recognized that the 1946 Act was enacted to address the unequal bargaining power between employers and workmen. Standing Orders provide a framework for fair employment conditions, including disciplinary procedures, which cannot be easily overridden.
• Interpretation of Section 13B: The Court clarified that Section 13B of the 1946 Act requires a specific notification by the government to exclude the applicability of the Act. The mere existence of general service rules like the CCA Rules, 1965, is not sufficient to exclude the application of Standing Orders.
• Hierarchy of Rules: The Court established that Standing Orders, being special rules applicable to workmen, would override general rules like the CCA Rules, 1965, in the absence of a specific notification under Section 13B of the 1946 Act.

The sentiment analysis of the reasons given by the Supreme Court indicates a strong emphasis on the protection of workmen’s rights and the statutory nature of the Standing Orders. The court’s reasoning reflects a clear preference for the special provisions designed for workmen over general service rules.

The ratio of fact:law shows that the Court was heavily influenced by the legal aspects of the case and the interpretation of the relevant statutes and precedents.

Logical Reasoning

Key Takeaways

• Standing Orders certified under the Industrial Employment (Standing Orders) Act, 1946, are a special law for workmen and cannot be overridden by general service rules like the CCA Rules, 1965.
• An appointment order cannot stipulate terms of service that are against the provisions of the Standing Orders.
• A specific notification under Section 13B of the Industrial Employment (Standing Orders) Act, 1946, is required to exclude the applicability of the Act. The mere existence of general service rules is not sufficient.
• Employers must follow the procedure under Section 10 of the 1946 Act to modify the Standing Orders.
• This judgment reinforces the protection afforded to workmen under the Industrial Employment (Standing Orders) Act, 1946, and clarifies the hierarchy of rules in disciplinary proceedings.

Directions

The Supreme Court dismissed the appeals and upheld the order of the High Court of Judicature, Andhra Pradesh at Hyderabad. The order of status quo granted by the Supreme Court on 02.03.2009 was vacated.

Development of Law

The ratio decidendi of this case is that Standing Orders under the Industrial Employment (Standing Orders) Act, 1946, are a special law for workmen and will prevail over general rules like the CCA Rules, 1965, in the absence of a specific notification under Section 13B of the 1946 Act. This judgment reinforces the importance of Standing Orders in regulating the service conditions of workmen and provides clarity on the interplay between different sets of rules. The decision reaffirms the legislative intent behind the Industrial Employment (Standing Orders) Act, 1946, which is to protect the interests of workmen and ensure fair employment practices. This ruling also highlights that an appointment order cannot override the provisions of the Standing Orders, which are binding on the employer. Furthermore, it clarifies the interpretation of Section 13B of the 1946 Act, emphasizing the need for a specific notification to exclude the applicability of the Act. This judgment will have significant implications for employers and workmen in industrial establishments, ensuring that disciplinary proceedings are conducted in accordance with the Standing Orders, which are specifically designed to protect the rights of workmen.