Supreme Court Upholds Differential Treatment of Regular and Work Charge Employees in Kandla Port Transfer Case (06 December 2019)

Introduction

Date of the Judgment: 06 December 2019

Citation: Not Available in the source

Judges: L. Nageswara Rao, J., Hemant Gupta, J.

Can a group of employees, initially hired on a work-charge basis, claim the same benefits as their regular counterparts when their employment is transferred to a new organization? The Supreme Court of India recently addressed this question in a case involving the transfer of employees from the Kandla Port Trust to the Food Corporation of India. This judgment clarifies the distinction between regular and work-charge employees in the context of service benefits following a transfer. The bench comprised of Justice L. Nageswara Rao and Justice Hemant Gupta.

Case Background

In 1965, the Government of India and the Kandla Port Trust (KPT) entered into an agreement where KPT would manage wheat discharging machines. The agreement stipulated that upon its conclusion, the Government would take over the staff. In 1973, the Food Corporation of India (FCI) took over the staff of the Vacuvator Division of KPT, effective from January 1, 1973. This order distinguished between regular and work-charge employees. Regular employees were confirmed in their posts and governed by FCI service regulations, while work-charge employees were made regular from the same date but also subject to FCI regulations.

An industrial dispute arose regarding pay scales and regularization of the employees’ Contributory Provident Fund (CPF). The Industrial Tribunal ruled in favor of the employees, stating that all employees of the Vacuvator Division were entitled to exercise an option under Section 12A(4) of the Food Corporation of India Act, 1964. However, the operative part of the award was limited to 15 employees. Subsequently, the Central Government issued an order on May 9, 1996, transferring only 15 employees to FCI w.e.f. 01.01.1973, leading the Kandla Port Workers Union to file a case claiming that all 321 employees should be treated equally.

Timeline

Course of Proceedings

The Kandla Port Workers Union filed a Special Civil Application in the High Court of Gujarat, challenging the transfer of only 15 employees and seeking the same benefits for all 321 employees. A single judge of the High Court ruled in favor of the Union, directing FCI to treat all 321 employees as transferred under Section 12A of the Food Corporation of India Act, 1964, effective from 01.01.1973.

However, a Division Bench of the High Court overturned the single judge’s decision, holding that the benefit of transfer was only applicable to the 15 regular employees. The Division Bench also noted that the work-charge employees had signed agreements with KPT that did not include pension or gratuity benefits. The Division Bench directed FCI to pay gratuity for the service rendered by the work charge employees prior to 1973 while they were employed with the KPT. The Kandla Port Workers Union then appealed to the Supreme Court.

Legal Framework

The case primarily revolves around Section 12A of the Food Corporation of India Act, 1964. This section deals with the transfer of employees to the Food Corporation of India. The Industrial Tribunal had previously held that the transfer of employees from KPT to FCI must be governed by Section 12A of the Food Corporation of India Act, 1964.

Section 12A of the Food Corporation of India Act, 1964 states:

“12A. Transfer of employees of Central Government to the Corporation.—(1) The Central Government may, in such manner and subject to such conditions as it may by order determine, transfer any of its employees to the Corporation. (2) Where an employee of the Central Government is transferred to the Corporation under sub-section (1), the terms and conditions of service applicable to such employee after such transfer shall not be less advantageous than those applicable to him immediately before such transfer: Provided that notwithstanding anything contained in this Act or in any other law for the time being in force, the Corporation may, with the previous approval of the Central Government, alter such terms and conditions of service as it thinks fit. (3) Where any employee of the Central Government is transferred to the Corporation under sub-section (1), the Corporation shall take such employee into its employment and shall treat his service under the Central Government as service under the Corporation for the purpose of leave, pension, provident fund and gratuity. (4) Where the Central Government transfers any of its employees to the Corporation under sub-section (1), it shall be lawful for the Corporation to give such employee an option to elect to continue to be governed by the terms and conditions of service applicable to him immediately before such transfer.”

Arguments

Arguments of the Appellant (Kandla Port Workers Union):

• ✓ The Union argued that the 1965 agreement stipulated that the government would take over all staff engaged by KPT upon the conclusion of the agreement.
• ✓ The Union contended that the Industrial Tribunal’s 1991 award, while specifically mentioning 15 workmen in one aspect, also addressed the issue of CPF/GRP regularization for all work-charge employees.
• ✓ The Union argued that the cause of action arose only after the 1996 order, which limited the benefit of transfer to 15 employees.
• ✓ The Union supported the single judge’s view that work-charge employees should not be discriminated against and that the Industrial Tribunal had found that they were in service prior to 01.01.1973.
• ✓ The Union criticized the Division Bench for focusing on the operative part of the Industrial Tribunal’s award, which was restricted to 15 employees.

Arguments of the Respondent (FCI):

• ✓ The FCI argued that the work-charge employees were appointed in FCI from 01.01.1973 and were governed by FCI regulations.
• ✓ The FCI contended that the work-charge employees did not raise any grievances until 1996, when the benefit was granted to regular employees.
• ✓ The FCI submitted that the work-charge employees could have been retrenched in 1973 and had agreed to be bound by FCI regulations.
• ✓ The FCI highlighted that the 1973 Office Order stated that employees would be governed by FCI CPF regulations.
• ✓ The FCI supported the Division Bench’s judgment.

Issues Framed by the Supreme Court

The Supreme Court considered the following issue:

1. Whether the work charge employees of KPT are entitled to the same benefits as the 15 regular employees who were transferred to FCI w.e.f. 01.01.1973.

Treatment of the Issue by the Court

Authorities

The Court considered the following authorities:

Judgment

The Supreme Court held that the distinction between regular employees and work-charge employees could not be ignored. The Court noted that the Industrial Tribunal’s award, while addressing the issue of CPF/GRP regularization, was specifically limited to 15 regular employees in its operative portion. The Court also emphasized that the work-charge employees had accepted their employment in FCI as per the Office Order dated 18.09.1973 and were bound by the FCI regulations.

The Court observed that, “The Office Order dated 18.09.1973 by which all the employees who were working in the Vacuvator Division of the KPT were employed in the FCI also shows that regular employees and work charge employees were treated differently.”

The Court further stated, “Even assuming that the work charge employees also had a right to be appointed in the FCI, they cannot claim parity with the regular employees, that too in 1996. After having accepted the appointment in FCI as per the Office Order dated 18.09.1973, it is not open to the Appellant-Union to take up the cause of the work charge employees and claim on their behalf benefits similar to those granted to the regular employees.”

The Court also noted that the Division Bench of the High Court had directed FCI to make payment of gratuity to the work-charge employees for their service with KPT. The Supreme Court upheld the Division Bench’s decision, stating that the work-charge employees were not entitled to the same benefits as the regular employees.

The Court stated, “Though, we are not in agreement with the judgment of the Division Bench that the award of the Industrial Tribunal did not deal with question No.2 in the reference made to it, for the reasons recorded above we hold that the Appellants are not entitled to the relief claimed by them.”

Key Takeaways

• ✓ The Supreme Court upheld the distinction between regular and work-charge employees in the context of service benefits.
• ✓ Work-charge employees cannot claim parity with regular employees if they have accepted different terms of employment.
• ✓ The operative part of an Industrial Tribunal’s award is crucial in determining the extent of relief granted.
• ✓ Employees must raise grievances in a timely manner.

Directions

The Supreme Court did not give any specific directions in this case, but upheld the Division Bench’s direction to FCI to pay gratuity to the work-charge employees for their service with KPT.

Specific Amendments Analysis

Not Applicable

Development of Law

The ratio decidendi of this case is that work-charge employees cannot claim parity with regular employees if they have accepted different terms of employment. This judgment reinforces the principle that the terms of employment, as accepted by the employees, are binding and that the operative part of an Industrial Tribunal’s award is crucial in determining the extent of relief granted.

Conclusion

The Supreme Court dismissed the appeals filed by the Kandla Port Workers Union, upholding the Division Bench’s decision that work-charge employees of KPT are not entitled to the same benefits as regular employees upon transfer to FCI. The Court emphasized the distinction between regular and work-charge employees and the importance of the operative part of the Industrial Tribunal’s award. The Court also noted that the work-charge employees had accepted their employment terms in FCI and were bound by the FCI regulations.