Supreme Court settles the enforceability of Standing Orders over private agreements in labour disputes (25 July 2023)

Date of the Judgment: 25 July 2023

Citation: 2023 INSC 646

Judges: Abhay S. Oka, J. and Sanjay Karol, J.

Can a settlement between an employer and a trade union waive the rights of workmen granted under the Industrial Employment (Standing Orders) Act, 1946? The Supreme Court of India recently addressed this critical question in a case involving Jet Airways and its contract workers. The Court clarified that the statutory rights of workers, as defined in the Standing Orders, cannot be overridden by private agreements. This judgment reinforces the protective nature of labor laws in India, ensuring that workers’ rights are not undermined by contractual arrangements. The judgment was delivered by a two-judge bench comprising Justice Abhay S. Oka and Justice Sanjay Karol, with the opinion authored by Justice Sanjay Karol.

Case Background

The case involves a dispute between Bharatiya Kamgar Karmachari Mahasangh (the Appellant), a trade union representing around 169 workmen, and M/s. Jet Airways Ltd. (the Respondent), a commercial airline. The workmen were employed on a fixed-term contract basis in various roles such as loader-cum-cleaners, drivers, and operators. The Appellant contended that despite the workers completing 240 days of service, which would typically qualify them for permanent status under the Bombay Model Standing Order, they were still treated as temporary employees. The union had previously raised a charter of demands which included a demand for permanency. However, in a settlement dated 02.05.2002, the union gave up this demand in exchange for other benefits. The Respondent argued that the workers were not entitled to permanency due to this settlement. The matter was referred for adjudication, and the Central Government Industrial Tribunal (CGIT) ruled against the workmen, stating that there was no retrenchment and thus no question of re-employment. The High Court of Bombay upheld this decision.

Timeline

Course of Proceedings

The Central Government Industrial Tribunal (CGIT) initially rejected the union’s demand for reinstatement, holding that the non-renewal of fixed-term contracts did not amount to retrenchment under Section 2(oo)(bb) of the Industrial Disputes Act, 1947. The High Court of Bombay upheld this decision, stating that the completion of 240 days of service did not automatically grant permanency due to the settlement and clause 18 thereof. The High Court also viewed the Model Standing Order as a statutorily imposed condition of service that a settlement or award can alter. The Supreme Court, however, disagreed with both the Tribunal and the High Court.

Legal Framework

The case primarily revolves around the interpretation of the Industrial Employment (Standing Orders) Act, 1946, and the Bombay Industrial Employment (Standing Orders) Rules, 1959. The Industrial Employment (Standing Orders) Act, 1946, mandates that employers in industrial establishments define the conditions of employment. Section 2(b) of the Act defines the ‘appropriate government’ as the Central Government for establishments under its control, and the State Government in all other cases. Section 15 empowers the appropriate government to make rules for carrying out the purposes of the Act. The Bombay Model Standing Order, framed under this Act, specifies the conditions for making a temporary workman permanent. Clause 4C of the Bombay Model Standing Order states that a temporary workman who has completed 240 days of uninterrupted service in an establishment must be made permanent. Clause 32 of the Standing Order states that nothing contained in the Standing Orders shall operate in derogation of any law for the time being in force or to the prejudice of any right under the contract of service, custom or usage or an agreement settlement or award applicable to the establishment.

The relevant clauses of the Bombay Model Standing Order are:

“Clause 4C – A badly or temporary workman who has put in 190 days’ uninterrupted service in the aggregate in any establishment of seasonal nature or 240 days ‘uninterrupted service ‘ in the aggregate in any other establishment during a period of preceding twelve calendar months, shall be made permanent in that establishment by order in writing signed by the Manager, or any person authorised in that behalf by the Manager, irrespective of whether or not his name is on the muster roll of the establishment throughout the period of the said twelve months.”

“Clause 32: Nothing contained in these Standing orders shall operate in derogation of any law for the time in force or to the prejudice of any right under the contract of service, custom or usage or an agreement settlement or award applicable to the establishment.”

Arguments

Appellant’s Arguments:

• The Appellant argued that the workmen had completed 240 days of service and were performing work of a regular and permanent nature. Therefore, they were entitled to be made permanent under Clause 4C of the Bombay Model Standing Order.
• The Appellant contended that the settlement dated 02.05.2002, where the union had given up the demand for permanency, could not override the statutory provisions of the Standing Orders.
• The Appellant relied on the principle that the Standing Orders have statutory force and that any agreement which abridges the rights of the employees under the Standing Orders is not binding.

Respondent’s Arguments:

• The Respondent argued that the workmen were employed on a fixed-term contract basis and that their employment was supposed to end on the expiry of the contract period.
• The Respondent contended that the settlement dated 02.05.2002, entered into with the union, was binding and that the workmen were not entitled to permanency due to this settlement.
• The Respondent argued that the Model Standing Order is not a statutory provision but a statutorily imposed condition of service that a settlement or award can alter.

Submissions of Parties

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. Which is the Appropriate Authority empowered to issue the Standing Order(s) under the Industrial Employment (Standing Orders) Act, 1946?
2. Whether private agreement/settlement between the parties would override the Standing Order?

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Cases:

• U.P. SEB v. Hari Shankar Jain, (1978) 4 SCC 16, Supreme Court of India: The Court held that the Industrial Employment (Standing Orders) Act, 1946, is a special Act designed to define the terms of employment of workmen in industrial establishments and to give the workmen a collective voice in determining the terms of employment.
• Sudhir Chandra Sarkar v. Tata Iron and Steel Co. Ltd., (1984) 3 SCC 369, Supreme Court of India: The Court held 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.
• Western India Match Co. v. Workmen, (1974) 3 SCC 330, Supreme Court of India: The Court held that the terms of employment specified in the Standing Order would prevail over the corresponding terms in the contract of service. Any agreement inconsistent with the Standing Orders is ineffective and unenforceable.
• Rasiklal Vaghajibhai Patel v. Ahmedabad Municipal Corpn., (1985) 2 SCC 35, Supreme Court of India: The Court held that any condition of service, if inconsistent with certified standing orders, would not prevail, as the certified standing orders would have precedence over all such agreements.

Legal Provisions:

• Section 2(b) of the Industrial Employment (Standing Orders) Act, 1946: Defines the expression ‘appropriate government’.
• Section 15 of the Industrial Employment (Standing Orders) Act, 1946: Empowers the appropriate Government to make rules for carrying out the purposes of the Act.
• Clause 4C of the Bombay Model Standing Order: Specifies the conditions for making a temporary workman permanent.
• Clause 32 of the Bombay Model Standing Order: States that nothing contained in the Standing Orders shall operate in derogation of any law for the time being in force or to the prejudice of any right under the contract of service, custom or usage or an agreement settlement or award applicable to the establishment.

Authorities Considered by the Court

Judgment

The Supreme Court allowed the appeal, holding that the Appellant-Union was entitled to all benefits as per the Bombay Model Standing Order. The Court quashed and set aside the award of the CGIT and the judgment of the High Court of Bombay. The Court emphasized that the Standing Orders have statutory force and that any agreement or settlement that waives the rights of employees under the Standing Orders cannot override them. The Court held that the workmen, having completed 240 days of service, were entitled to be made permanent, irrespective of any settlement to the contrary. The Court stated that the Industrial Employment (Standing Orders) Act, 1946, is a beneficial legislation designed to protect the rights of workmen and that any agreement that undermines these rights is not valid.

How submissions were treated by the Court

How authorities were viewed by the Court

The Court relied on the following authorities:

• U.P. SEB v. Hari Shankar Jain, (1978) 4 SCC 16: The Court used this case to emphasize that the Industrial Employment (Standing Orders) Act, 1946, is a special act designed to protect the rights of workmen.
• Sudhir Chandra Sarkar v. Tata Iron and Steel Co. Ltd., (1984) 3 SCC 369: The Court used this case to reiterate that Standing Orders are part of the statutory terms of service and govern the relationship between the employer and employee.
• Western India Match Co. v. Workmen, (1974) 3 SCC 330: The Court used this case to hold that the terms of employment specified in the Standing Order would prevail over the corresponding terms in the contract of service and that any agreement inconsistent with the Standing Orders is ineffective and unenforceable.
• Rasiklal Vaghajibhai Patel v. Ahmedabad Municipal Corpn., (1985) 2 SCC 35: The Court used this case to emphasize that certified Standing Orders have precedence over all inconsistent agreements.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to protect the rights of workmen under the Industrial Employment (Standing Orders) Act, 1946. The Court emphasized that the Act is a beneficial legislation designed to ensure fair terms of employment and to prevent exploitation of workers. The Court was also guided by the principle that Standing Orders have statutory force and that any agreement that undermines the rights of employees under these orders is not valid. The Court’s reasoning was heavily influenced by previous judgments that have consistently upheld the primacy of Standing Orders over private agreements. The Court also took into account the fact that the workmen had completed 240 days of service, which under Clause 4C of the Bombay Model Standing Order, entitled them to be made permanent. The Court was not swayed by the argument that the workers were employed on a fixed-term contract basis or that the union had given up the demand for permanency in a previous settlement.

Ratio: Fact:Law

Logical Reasoning

Key Takeaways

• The Supreme Court has reaffirmed that the statutory rights of workers under the Industrial Employment (Standing Orders) Act, 1946, cannot be overridden by private agreements or settlements.
• Workmen who have completed 240 days of uninterrupted service are entitled to be made permanent, irrespective of any fixed-term contract or settlement to the contrary.
• The Bombay Model Standing Order has statutory force, and any agreement that abridges the rights of employees under these orders is not valid.
• This judgment reinforces the protective nature of labor laws in India, ensuring that workers’ rights are not undermined by contractual arrangements.

Directions

The Supreme Court quashed and set aside the award of the CGIT and the judgment of the High Court of Bombay, holding that the Appellant -Union was entitled to all benefits as per the Bombay Model Standing Order.

Development of Law

Ratio Decidendi: The ratio of the judgment is that the statutory rights of workers under the Industrial Employment (Standing Orders) Act, 1946, cannot be overridden by private agreements or settlements. The Standing Orders have statutory force, and any agreement that abridges the rights of employees under these orders is not valid. This decision reinforces the principle that labor laws are designed to protect the rights of workers and that contractual arrangements cannot undermine these protections.

Change in Previous Positions of Law: The Supreme Court clarified that the Model Standing Order is not merely a statutorily imposed condition of service that can be altered by a settlement or award. Instead, it has statutory force and prevails over any inconsistent agreement. This clarifies the legal position that the rights of the workmen under the Standing Orders cannot be waived off by any settlement.

Conclusion

In conclusion, the Supreme Court’s judgment in Bharatiya Kamgar Karmachari Mahasangh vs. M/s. Jet Airways Ltd. clarifies that the statutory rights of workers under the Industrial Employment (Standing Orders) Act, 1946, cannot be overridden by private agreements. The Court emphasized that Standing Orders have statutory force and that any agreement that undermines the rights of employees is invalid. This judgment reinforces the protective nature of labor laws and ensures that workers’ rights are not undermined by contractual arrangements. The Court held that workmen who have completed 240 days of service are entitled to be made permanent, irrespective of any fixed-term contract or settlement to the contrary.

Category

Parent Category: Labour Law

Child Categories:

• Industrial Employment (Standing Orders) Act, 1946
• Bombay Industrial Employment (Standing Orders) Rules, 1959
• Permanent Employee
• Fixed-Term Contract
• Settlement
• Section 2(b), Industrial Employment (Standing Orders) Act, 1946
• Section 15, Industrial Employment (Standing Orders) Act, 1946

FAQ

Q: What is the main issue in the Bharatiya Kamgar Karmachari Mahasangh vs. M/s. Jet Airways Ltd. case?

A: The main issue was whether a private agreement or settlement between an employer and workmen can override the statutory provisions of the Standing Orders, specifically regarding the permanency of workers.

Q: What did the Supreme Court decide about the enforceability of Standing Orders?

A: The Supreme Court decided that Standing Orders have statutory force and cannot be overridden by private agreements or settlements that are less beneficial to the employees. Any agreement that waives the rights of employees under the Standing Orders is not valid.

Q: What is the significance of completing 240 days of service?

A: According to Clause 4C of the Bombay Model Standing Order, a temporary workman who has completed 240 days of uninterrupted service in an establishment is entitled to be made permanent.

Q: Can an employer avoid making a worker permanent by using a fixed-term contract?

A: No, the Supreme Court clarified that the completion of 240 days of service entitles the workmen to permanency irrespective of the fixed-term nature of the contract.

Q: What should I do if my employer is not following the Standing Orders?

A: You should seek legal advice and can approach the appropriate labor authorities to enforce your rights under the Standing Orders.