Supreme Court settles the application of Res Judicata in Industrial Disputes: FACT Employees Association vs. FACT Ltd (11 April 2019)

Date of the Judgment: 11 April 2019

Citation: (2019) INSC 354

Judges: Abhay Manohar Sapre, J., Indu Malhotra, J.

Can a dispute already decided by the High Court and affirmed by the Supreme Court be re-agitated in a Labour Court? The Supreme Court of India addressed this critical question in a case involving The Fertilizers And Chemicals Tranvancore Ltd. (FACT) and its employees’ trade unions. The core issue revolved around whether the principle of res judicata, which prevents the re-litigation of decided matters, applies to industrial disputes. The Supreme Court, in this judgment, clarified that the principle of res judicata does indeed apply to industrial disputes, thereby preventing the re-opening of issues that have already been conclusively decided by a competent court.

The bench comprised of Justice Abhay Manohar Sapre and Justice Indu Malhotra. The majority opinion was authored by Justice Abhay Manohar Sapre.

Case Background

The Fertilizers and Chemicals Travancore Ltd. (FACT), a Public Sector Undertaking (PSU), had a long-standing agreement with its employees’ trade unions regarding the age of superannuation. On 23 January 1978, a Memorandum of Settlement was executed between FACT and the trade unions, stipulating that the retirement age for existing workers would remain 60 years, while those recruited after the settlement would retire at 58 years.

However, on 19 May 1998, the Central Government directed all PSUs to increase the retirement age of below-board-level employees from 58 to 60 years. FACT complied with this directive on 27 May 1998. Due to deteriorating financial conditions, FACT sought permission from the Central Government to reduce the retirement age. On 25 April 2003, the Central Government directed FACT to change the retirement age of pre-1978 employees from 60 to 58 years. Consequently, FACT issued an order on 29 April 2003, reducing the retirement age, which led to legal challenges by the trade unions.

The trade unions filed petitions in the High Court of Kerala challenging the order of 29 April 2003. The Single Judge of the High Court upheld the order on 12 August 2003, stating that the decision to reduce the retirement age was essential for the survival of the industry given the financial crisis. The Division Bench of the High Court also dismissed the appeals on 18 December 2003. The trade unions then approached the Supreme Court, which dismissed their Special Leave Petitions (SLPs) on 23 April 2004.

Timeline:

Course of Proceedings

Following the dismissal of their SLPs by the Supreme Court, the State Government, at the instance of the trade unions, made an industrial reference to the Labour Court, Ernakulam on 18 May 2004. The reference asked whether the reduction of the superannuation age of pre-1978 workers from 60 to 58 years by FACT was justifiable. Another reference was made on 2 March 2005 regarding the termination of 42 workmen.

The Labour Court, in its award dated 2 July 2008, ruled against the trade unions, holding that the issue of retirement age was already decided in the earlier round of litigation and was barred by the principle of res judicata. The Labour Court disposed of the other reference on similar lines on 2 August 2008. Aggrieved by the Labour Court’s decision, the trade unions filed writ petitions in the Kerala High Court.

The Single Judge of the High Court allowed the writ petitions on 21 August 2012, quashing the Labour Court’s awards, holding that the reference was not barred by res judicata. The Division Bench of the High Court dismissed the appeals filed by FACT, upholding the Single Judge’s order on 25 January 2017. This led FACT to file the present appeals before the Supreme Court.

Legal Framework

The core legal issue in this case revolves around the application of the principle of res judicata in industrial disputes. The principle of res judicata, as defined in Section 11 of the Code of Civil Procedure, 1908 (CPC), prevents the re-litigation of issues that have been finally decided by a competent court in a previous suit between the same parties. Section 11 of the CPC states:

“No Court shall try any suit or issue in which the matter directly and substantially in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim, litigating under the same title, in a Court competent to try such subsequent suit or the suit in which such issue has been subsequently raised, and has been heard and finally decided by such Court.”

The Industrial Disputes Act, 1947 (ID Act), under Section 10 provides for the reference of industrial disputes to Labour Courts or Industrial Tribunals for adjudication. The question before the Supreme Court was whether a dispute already decided by the High Court and affirmed by the Supreme Court could be re-agitated through a reference under Section 10 of the ID Act.

Arguments

Arguments by the Appellants (FACT):

• FACT argued that the issue of reducing the retirement age from 60 to 58 years was already decided in the earlier round of litigation. The High Court had upheld the decision, and the Supreme Court had dismissed the SLPs against it.
• They contended that the principle of res judicata, as outlined in Section 11 of the CPC, should apply to industrial disputes, preventing the re-agitation of the same issue.
• FACT relied on the decisions of the Supreme Court in R.C. Tiwari vs. MP State Co-operative Marketing Federation Ltd. & Ors. [(1997) 5 SCC 125], Pondicherry Khadi & Village Industries Board vs. P. Kulothangan & Anr. [(2004) 1 SCC 68], and Executive Engineer, ZP Engg. Divn. & Anr. vs. Digambara Rao & Ors. [(2004) 8 SCC 262] to support their claim that res judicata applies to industrial disputes.
• They argued that the State Government lacked the jurisdiction to refer the same issue to the Labour Court under Section 10 of the ID Act, as it had already been conclusively decided by the High Court and the Supreme Court.

Arguments by the Respondents (Trade Unions):

• The trade unions argued that the Labour Court had the jurisdiction to examine the matter afresh, despite the earlier decisions of the High Court and the Supreme Court.
• They contended that the principle of res judicata should not apply to industrial disputes, and that the Labour Court should have the power to adjudicate the dispute on its merits.
• The trade unions sought to challenge the legality and justification of the order dated 29 April 2003, which reduced the retirement age of pre-1978 employees.

Issues Framed by the Supreme Court

The Supreme Court framed the following key issue for consideration:

1. Whether the High Court was justified in holding that the reference made by the State to the Labour Court was not barred by the principle of res judicata.
2. Whether the State had the jurisdiction to refer the same issue to the Labour Court under Section 10 of the Industrial Disputes Act, 1947, when the issue had already been decided by the High Court and the Supreme Court in the earlier round of litigation.

Treatment of the Issue by the Court

Authorities

The Supreme Court relied on the following authorities to arrive at its decision:

Cases:

• R.C. Tiwari vs. MP State Co-operative Marketing Federation Ltd. & Ors. [(1997) 5 SCC 125] – The Supreme Court held that the principle of res judicata applies to labor proceedings. The Court ruled that once an issue is decided by a competent authority, it cannot be re-agitated in subsequent proceedings.
• Pondicherry Khadi & Village Industries Board vs. P. Kulothangan & Anr. [(2004) 1 SCC 68] – The Supreme Court reiterated that the principles of res judicata, including constructive res judicata, apply to industrial adjudication. The Court emphasized that the same issue cannot be re-litigated between the same parties.
• Executive Engineer, ZP Engg. Divn. & Anr. vs. Digambara Rao & Ors. [(2004) 8 SCC 262] – The Supreme Court reaffirmed that the general principle of res judicata applies to industrial adjudication, reinforcing the finality of decisions on the same issue.

Legal Provisions:

• Section 11 of the Code of Civil Procedure, 1908 (CPC) – This section defines the principle of res judicata, preventing courts from trying issues that have already been decided in a former suit between the same parties.
• Section 10 of the Industrial Disputes Act, 1947 (ID Act) – This section provides for the reference of industrial disputes to Labour Courts or Industrial Tribunals for adjudication.

Judgment

How each authority was viewed by the Court?

• The Supreme Court relied on R.C. Tiwari vs. MP State Co-operative Marketing Federation Ltd. & Ors. [(1997) 5 SCC 125]* to establish that the principle of res judicata applies to labor proceedings.
• The Court followed Pondicherry Khadi & Village Industries Board vs. P. Kulothangan & Anr. [(2004) 1 SCC 68]* to reiterate that res judicata, including constructive res judicata, applies to industrial adjudication.
• Executive Engineer, ZP Engg. Divn. & Anr. vs. Digambara Rao & Ors. [(2004) 8 SCC 262]* was cited to reinforce the applicability of res judicata to industrial disputes.
• The Court explained that Section 11 of the Code of Civil Procedure, 1908 (CPC) defines the principle of res judicata, which prevents re-litigation of decided issues.
• The Court clarified that while Section 10 of the Industrial Disputes Act, 1947 (ID Act) allows for industrial references, it does not override the principle of res judicata.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily driven by the principle of res judicata and the need to ensure finality in judicial decisions. The Court emphasized that once an issue is conclusively decided by a competent court, it should not be re-opened in subsequent proceedings. The Court’s reasoning was heavily influenced by the following:

• Finality of Judicial Decisions: The Court stressed the importance of finality in judicial decisions. Allowing the same issue to be re-litigated would undermine the authority of the courts and lead to endless litigation.
• Application of Res Judicata: The Court firmly established that the principle of res judicata applies to industrial disputes. This principle, enshrined in Section 11 of the CPC, prevents the re-litigation of issues that have already been decided by a competent court.
• Precedent: The Court relied on its previous decisions in R.C. Tiwari, Pondicherry Khadi, and Executive Engineer to support its conclusion that res judicata applies to industrial adjudication.
• Lack of Jurisdiction: The Court held that the State Government lacked the jurisdiction to refer the issue of retirement age to the Labour Court, as it had already been decided by the High Court and the Supreme Court. The Labour Court, therefore, also lacked the jurisdiction to entertain the reference.

Logical Reasoning:

The Supreme Court considered the argument that the Labour Court should have the power to adjudicate the dispute on its merits but rejected it, emphasizing that the principle of res judicata is paramount in ensuring legal certainty and preventing endless litigation. The Court did not find any alternative interpretations that would justify re-opening the issue.

The Court’s decision was clear and unequivocal: the issue of retirement age reduction was already decided in the earlier round of litigation and could not be re-agitated. The Court held that the High Court should have upheld the awards of the Labour Court, which had rightly held that it had no jurisdiction to entertain the reference.

The majority opinion, authored by Justice Abhay Manohar Sapre, did not have any dissenting opinions.

Key quotes from the judgment include:

• “In our considered view, the question, as to whether the principle of res judicata defined in Section 11 of the Code of Civil Procedure, 1908 (hereinafter referred to as “the Code”) applies to the labour proceedings or not, remains no more res integra and stands answered by three decisions of this Court.”
• “In our opinion, no judicial forum at the instance of any party to the Lis had jurisdiction to try these issues again on its merits. It was barred for being tried again by virtue of principles of res judicata contained in Section 11 of the Code, which has also application to the labour/industrial proceedings.”
• “Once we hold that the references made to the Labour Court by the State were without jurisdiction, it is not necessary to examine the merits of the case. Indeed, it is not legally permissible because it does not survive for consideration having once decided in the earlier round of litigation upto this Court which resulted in termination of the dispute against the respondents/Trade Unions.”

Key Takeaways

• Res Judicata in Industrial Disputes: The principle of res judicata applies to industrial disputes. Issues that have been conclusively decided by a competent court cannot be re-agitated in subsequent proceedings before a Labour Court or any other forum.
• Finality of Judicial Decisions: The Supreme Court emphasized the importance of finality in judicial decisions. Once an issue is decided by a higher court, it is binding on all subordinate courts and tribunals.
• Jurisdiction of Labour Courts: Labour Courts do not have the jurisdiction to re-examine issues that have already been decided by the High Court and the Supreme Court.
• State Government’s Power of Reference: The State Government’s power to refer industrial disputes under Section 10 of the ID Act is subject to the principle of res judicata. The State cannot refer an issue that has already been conclusively decided by a competent court.

Potential Future Impact:

• This judgment reinforces the principle of res judicata in industrial disputes, preventing the re-opening of settled matters.
• It clarifies the limitations on the jurisdiction of Labour Courts and the State Government’s power to make references under the ID Act.
• The decision ensures that industrial disputes are resolved efficiently and that there is finality in legal proceedings, reducing the burden of litigation.

Directions

The Supreme Court did not issue any specific directions in this case, other than setting aside the impugned order of the High Court and restoring the awards of the Labour Court. The Court’s decision was primarily focused on clarifying the applicability of res judicata in industrial disputes.

Specific Amendments Analysis

There was no discussion on any specific amendments in this judgment.

Development of Law

The ratio decidendi of this case is that the principle of res judicata, as defined in Section 11 of the Code of Civil Procedure, 1908, applies to industrial disputes. This means that issues that have been finally decided by a competent court cannot be re-litigated in subsequent proceedings before a Labour Court or any other forum. This judgment reinforces the finality of judicial decisions and prevents the re-opening of settled matters, thus clarifying the law on the applicability of res judicata in industrial disputes.

Conclusion

In conclusion, the Supreme Court allowed the appeals filed by FACT, setting aside the High Court’s order and restoring the Labour Court’s awards. The Court held that the issue of reducing the retirement age was already decided in the earlier round of litigation and was barred by the principle of res judicata. The State Government lacked the jurisdiction to refer the same issue to the Labour Court, and the Labour Court also lacked the jurisdiction to entertain the reference. This decision reinforces the principle of res judicata in industrial disputes and ensures the finality of judicial decisions.

Category

• Industrial Law
  • Res Judicata
  • Industrial Disputes Act, 1947
  • Section 10, Industrial Disputes Act, 1947
• Code of Civil Procedure, 1908
  • Section 11, Code of Civil Procedure, 1908

FAQ

Q: What is res judicata, and how does it apply to industrial disputes?

A: Res judicata is a legal principle that prevents the re-litigation of issues that have been finally decided by a competent court. The Supreme Court has clarified that this principle also applies to industrial disputes, ensuring that issues decided in earlier proceedings cannot be re-opened in subsequent proceedings.

Q: Can a Labour Court re-examine an issue that has already been decided by the High Court and the Supreme Court?

A: No, a Labour Court does not have the jurisdiction to re-examine an issue that has already been decided by the High Court and the Supreme Court. The principle of res judicata prevents the re-litigation of such issues.

Q: What is the significance of this judgment for employers and employees?

A: This judgment provides clarity on the application of res judicata in industrial disputes. It means that once a dispute has been conclusively decided by a higher court, it cannot be re-opened in subsequent proceedings. This ensures finality and reduces the burden of litigation.

Q: Can the State Government refer a dispute to the Labour Court if the same issue has already been decided by the High Court and the Supreme Court?

A: No, the State Government cannot refer a dispute to the Labour Court if the same issue has already been conclusively decided by the High Court and the Supreme Court. The principle of res judicata prevents such references.

Q: What should employers and employees do if they face a similar situation?

A: Employers and employees should be aware of the principle of res judicata and ensure that they do not re-litigate issues that have already been decided by a competent court. They should seek legal advice to understand their rights and obligations.