Supreme Court Upholds Union’s Locus Standi in Standing Order Modification: Bank Employees Union vs. Rajarshi Shahu Bank (2021)

Date of the Judgment: July 6, 2021

Citation: 2021 INSC 411

Judges: Rohinton Fali Nariman, J., K.M. Joseph, J., B.R. Gavai, J.

Can a trade union, instead of an individual employee, apply for changes to a company’s standing orders? The Supreme Court of India recently addressed this question in a case involving a dispute over the retirement age of bank employees. The core issue was whether a registered trade union had the legal right to request a modification to the standing order regarding retirement age under the Maharashtra Industrial Relations Act, 1946. The Supreme Court bench, comprising Justices Rohinton Fali Nariman, K.M. Joseph, and B.R. Gavai, delivered the judgment, with Justice Rohinton Fali Nariman authoring the opinion.

Case Background

The case revolves around a dispute between the Bank Employees Union (the appellant) and the Rajarshi Shahu Govt. Servants Co-operative Bank Ltd., Kolhapur (the respondent). The original standing order of the bank stated that employees would retire at the age of 55. However, through two settlements in 2004 and 2010, the bank agreed to increase the retirement age to 58 years. These settlements were formalized through an award by the Industrial Court on March 10, 2010. When it was discovered that the standing order had not been formally modified to reflect the new retirement age, the appellant union filed an application on April 26, 2011, to modify the standing order under Section 38(2) of the Maharashtra Industrial Relations Act, 1946.

The Additional Labour Commissioner approved the modification on October 25, 2012, but the bank appealed, arguing that only an individual employee, not a union, could apply for such a modification under the Act. The Industrial Court sided with the bank, a decision that was upheld by the Bombay High Court. The Bank Employees Union then appealed to the Supreme Court.

Timeline

Course of Proceedings

The Additional Labour Commissioner initially approved the modification of the standing order based on the settlements between the bank and its employees. However, the bank appealed to the Industrial Court, arguing that the union lacked the legal standing to apply for such a modification under Section 38(2) of the Maharashtra Industrial Relations Act, 1946. The Industrial Court agreed with the bank, stating that only an individual employee could make such an application. The Bombay High Court upheld the Industrial Court’s decision, leading the union to appeal to the Supreme Court.

Legal Framework

The core legal provision at the heart of this case is Section 38(2) of the Maharashtra Industrial Relations Act, 1946, which deals with the modification of standing orders. The section states:

“38(2) Any employer or employee desiring a change in the standing orders settled under sub-section (1) may apply to the Commissioner of Labour for such change.”

The dispute arises from the interpretation of the term “employee” in this section, and whether it includes a registered trade union representing the employees. The Act also defines “employee” and “representative union” separately, which was a point of contention in the lower courts. Section 27A of the Act was also brought up by the appellant, which deals with the rights of a representative union.

Arguments

Appellant’s Arguments (Bank Employees Union):

• The union argued that it had the locus standi to apply for the modification of the standing order, particularly under Section 27A of the Maharashtra Industrial Relations Act, 1946.
• It was contended that the bank, having agreed to the change in retirement age through settlements, should not be allowed to retract at the implementation stage on a technicality of locus standi.
• The union emphasized that the settlements were not just agreements but were also sanctified by an award of the Industrial Court.
• The union argued that the implementation of the settlement was a ministerial duty for both the employer and the employees, and therefore, the union’s application should be seen as a step towards that implementation.

Respondent’s Arguments (Rajarshi Shahu Bank):

• The bank argued that Section 38(2) of the Maharashtra Industrial Relations Act, 1946, explicitly allows only an “employee” to apply for a change in standing orders, and a “representative union” is a separate legal entity.
• The bank pointed out that the Act differentiates between “employee” and “representative union” in various sections, such as Section 42, indicating that they are not interchangeable.
• The bank contended that since Section 38(2) specifically mentions “employee” and not “representative union,” the union had no locus standi to file the application.
• The bank argued that the settlements, while agreed upon, did not automatically amend the standing order, and a formal application under Section 38(2) was necessary, which could only be filed by an employee.

Issues Framed by the Supreme Court

The core issue before the Supreme Court was:

1. Whether the appellant – Registered Trade Union – had locus to prefer an application to modify a standing order that applies to the employees of the respondent under Section 38(2) of The Maharashtra Industrial Relations Act, 1946.

Treatment of the Issue by the Court

Authorities

The Supreme Court did not rely on any specific case laws or books in its judgment. The judgment primarily focused on the interpretation of Section 38(2) of the Maharashtra Industrial Relations Act, 1946, and the specific facts of the case.

Judgment

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the fact that the bank had twice agreed to increase the retirement age to 58 years through settlements with its employees, and these settlements had been formalized through an award by the Industrial Court. The Court emphasized the ministerial duty of both the employer and the employees to implement these settlements. The Court was of the view that the bank should not be allowed to use a technicality of locus standi to avoid its obligations.

The Court emphasized that the bank should not be allowed to use a technicality to avoid its obligations. The Court stated:

“…it would be clear that any technical objection as to a registered union having no locus to file an application under Section 38(2) of the said Act, cannot be countenanced.”

The Court also noted the Industrial Court’s observation that the bank should have been a model employer by initiating the change in the standing order itself. The Court stated:

“…the Industrial Court ought to have given some teeth to Paragraph 10 of its own Judgment and held that the very appeal which was filed before it be dismissed for the very good reason that the bank should not be allowed at the stage of implementation of two settlements (culminating in an award) solemnly entered into between itself and its employees, to now turn around and question the locus standi of the appellant.”

The Court further observed:

“Ultimately, as correctly argued by Mr. Gonsalves, the Ministerial duty of implementing the settlement was on both the employer and the employees.”

Key Takeaways

• A registered trade union can, in certain circumstances, apply for modification of standing orders, especially when the employer has already agreed to the change through settlements and an award.
• Employers should not be allowed to use technicalities to avoid their obligations under settlements and awards.
• The implementation of settlements is a ministerial duty for both employers and employees.

Directions

The Supreme Court directed that all consequential benefits, as a result of this judgment, be given to the employees of the respondent within a period of six months from the date of the judgment.

Development of Law

The ratio decidendi of the case is that while the legal question of locus standi of a union to file an application under Section 38(2) of the Maharashtra Industrial Relations Act, 1946, was kept open, the Supreme Court held that in the facts of the present case, the bank should not be allowed to question the locus standi of the union at the stage of implementation of the settlements and award. This case emphasizes the importance of implementing settlements and awards, and that employers should not be allowed to use technicalities to avoid their obligations.

Conclusion

The Supreme Court allowed the appeal filed by the Bank Employees Union, setting aside the judgments of the Industrial Court and the Bombay High Court. The Court held that the bank should not be allowed to question the union’s locus standi at the stage of implementation of the settlements and award, and directed that the employees be given all consequential benefits within six months. This decision underscores the importance of implementing settlements and awards in industrial relations and prevents employers from using technicalities to avoid their obligations.