- MUKAND LTD. v. MUKAND STAFF AND OFFICERS' ASSOCIATION

According to Mr. Desai if the Company succeeds in its appeal, "it will have to recover Rs. 18 crores already paid to the employees including both workmen and non-workmen and if it does not, it will have to bear the burden H

992 SUPREME COURT REPORTS [2004] 2 S.C.R.

A of having to disburse a further sum of Rs.15.45 crores by way of balance of arrears for the period since 01.01.1996. - Opposing Mr. Singhvi, learned senior counsel for the respondent- Association, contended that the High Court and this Court while exercising powers under Article 226 and 32 of the Constitution for issuance 'Of any writ B against an award of the Industrial Tribunal will normally ·not fake into consideration facts arising subsequent to the date of the award. Arguing ....--;- further, he would submit that a writ will be issued to set aside an award of the Industrial Tribunal on the material placed on record before the Tribunal and under sub-section 3 of Section 19 of the Act, it is, inter alia, provided c that an award shall, subject to the provision of that section remain in operation for a period of one year from the date on which the award becomes enforceable under Section l 7A. Under sub-section 6 of Section 19, it is, inter alia, provided that notwithstanding the expiry of the period of operation under sub-section 3; the award shall continue to be binding on the parties until a period of two months has elapsed from the date on which notice is given by any party D bound by the award to the other party or parties intimating its intention to terminate the award. The above provisions show that an award remains binding on the parties firstly for a period of one year from the date of its publication and secondly until a period of two months has elapsed from the date on which the notice of termination is given by any party bound by the award, and no demand can be raised pertaining to that award during that period. E It was, therefore, submitted by Mr. Singhvi that if a party to an award can raise fresh dispute subsequent to the award and to take into acc_ount events subsequent to that award it will harm the interest of the workmen and ---- that the superior court exercising its power will not entertain such a plea. We F are unable to countenance the said submission. In the instant case, the total accumulated loss suffered by the appellant-Company as on 31.03.2003 is Rs. 225 crores. The appellant-Company is now covered by Section 23 of the Sick Industrial Companies (Special Provisions) Act, 1985 and has become a 'Potentially Sick Industrial Company' as defined thereunder .. The Company has suffered a further loss of Rs. 64.22 crores according to the audited results G for the first half of the year 2003-04. If the estimated loss for the third quarter of 2003-04 is also taken into account, the net-worth of the Company stands totally eroded.

Opposing this submission Mr. Singhvi submitted subsequent events are not at all relevant for the purpose of assailing the award, but may be relevant -- H

MUKAND LTD. 1· MUKAND STAFF AND OFFICERS. ASSON. [LAKSHMANAN. J ) 993 if and when demands are made either by the workmen or the Company for A subsequent period and a reference in that regard is given by appropriate government. He, therefore, submitted that the application for bringing on record the additional documents should be rejected. Mr Singhvi furtiler submitted that the compilation filed by the Management "financial position of the appellant-Company" require a lot of explanation and comments for which evidence will have to be led. Without prejudice to the above submission, B Mr. Singhvi drew our attention to the auditor's notes appended to the balance sheet relating to loans and advances etc. read with item 3 (vi) of the report of the auditor to the members. According to him, the balance-sheet clearly shows that there are no operating losses but the losses are mainly on account of the interest on borrowing for huge investments made in associate/subsidiary/ C group companies and for the expansion of the steel making capacity by setting up a new project at Hospet (where alone about Rs. 600 crores have been invested) etc. and that borrowings were mainly used for such investments and for loans and advances to associate, subsidiary and group companies whieh have not been recovered. D Concluding his arguments, Mr. Ashok Desai submitted that the award, after its infirmities are cured, should be made applicable only to the workmen and not to the non-workmen. We see merit and substance in the above submission. We, therefore, set aside the award and of the judgments of the single Judge and of the Division Bench of the High Court and hold that the award should apply only to the workmen and that the workmen should not, in the facts and circumstances of the case, be permitted to raise demands/ disputes on behalf of the non-workmen. We place on record the undertaking given by the appellant-Company before us ensuring that the total wage packets of the non-workmen to whom the award further modified as above will not be applicable, are not lower than the total wage packets available to the workmen under the said award.

The appellant-Management has a prima facie case on merits and the balance of convenience is entirely in their favour. We also hold that the employer and the employees by their conduct in concluding settlements in the past cannot create or confer upon an adjudicating authority jurisdiction where none existed in respect of employees to whom the provisions of the Act are not applicable. In the instant case, the employer had admittedly not waived their right to issue the status of the employees under the Act in any . of the said settlements. The High Court, both the learned single Judge and of the Division Bench had stepped into the shoes of the adjudicating authority H

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A and virtually modified/altered the award in vital respects like basic linked variable D.A., D.A. fixed in forms of percentages of basic pay, service increments, gratuity and effective dates for increase in emoluments.

The Industrial Tribunal did not have jurisdiction to adjudicate the present dispute inasmuch as it pertains to the conditions of service of non-workmen. B The learned single Judge and the Division Bench of the High Court failed to appreciate that parties cannot by their conduct create or confer jurisdiction on an adjudicating authoritY when no such jurisdiction exists. We have already noticed that the Division Bench has erred in holding that there is community of interest between the workmen and the non-workmen and holding further that the workmen could raise a dispute regarding the service conditions of non-workmen.

The High Court further failed to appreciate that in order to secure revision of their own grades or other items of emoluments, it was not necessary for employees who are 'workmen' under the Act to agitate also for the revision of the emoluments of those who are not 'workmen', and that as such the 'workmen' in the present, have no direct or substantial interest in the revision of emoluments of employees who are not 'workmen', nor could the workmen be held to be vitally interested in the tenns of employment of the non-workmen.

E The High Court also failed to appreciate that 'workmen' as well as non-workmen being in the same grade did not imply that the distinction between the two categories ceased to exist, or that they belonged to the same class.

The Division Bench has further erred in relying on the various settlements concluded between the parties in the past regarding the service conditions of the employees including the settlement of 1974 relating to welfare scheme. Both the Division Bench and the learned single Judge failed to appreciate that none of the said settlements contained any provision, or even a whisper thereof, of any waiver by the appellant-Company of its rights with regard to the status of the employees under the Act.

During the pendency of the proceedings in this Court, supplementary affidavit was filed by the Vice President, Finance of the appellant-Company bringing to this Court's notice certain crucial events that have occurred subsequent to the admission of the appeal, which have a vital bearing on the case. It is stated therein that the appellant-Company is in dire financial straits.

MUKAND I.TD. 1·. MUKAND STAFF AND OFFICERS' ASSON. [LAKSHMANAN. J.] 995

The Company has already placed on record financial difficulties which it has been encountering. The present affidavit was placed on record with the updated situation as at present. The Company has suffered a loss before tax of about Rs. 210 crores in the financial year 2002-03 which was reduced to Rs. 157 crores after considering waivers and reduction in interest rate aggregating to Rs. 53 crores on the basis of concessions given by the banks and financial institutions under a restructuring package. The loss as stated above follows B a loss before tax of Rs. 11 l crores in the previous financial year i.e. year 200 l -02 and that the losses as above are without taking into account the arrears payable to the employees amounting to Rs. 15.45 crores. The appellant being suffered a further loss before tax at Rs. 40 crores in the first quarter of the current year i.e. year 2003-04 as per the unaudited financial results and C the accumulated loss is Rs. 269 crores as on 30.06.2003 leaving a net worth of Rs. 28 crores. Along with the affidavit annexures were filed for the year ended 31.03.2003. According to the learned senior counsel, the Company has now become a potentially sick industrial Company as defined by The Sick Industrial Companies (Special Provisions) Act, 1985 since there has been an erosion of more than 50% in the Company's peak net worth in the four D \ ' preceding years on the basis of the audited financial results for the financial year 2002-03. The Appellant Company Is required under the provisions of Section 23 of the said Act to report the fact of such erosion to the Board for Industrial and Financial Reconstruction within sixty days from the date of finalisation of the duly audited accounts of the Company for the financial year 2002-03 and also to take further actions specified in the said provisions. The appellant-Company is now in the process of submitting the necessary report to the Board for Industrial and Financial Reconstruction as required under the said Act.

On account of adverse market conditions and unviability of the business, the appellant-Company was compelled to close down permanently its Machine Tools Division at Ballabgarh in Haryana with effect from 18.12.2002.

Several other details in regard to the sickness of the company has also been furnished. Since we are remitting .the matter to the Industrial Tribunal, it is for the appellant-Company to place the additional materials before the said Tribunal for its adjudication. During the pendency of the proceedings before the High Court and of this Court, certain directions were given in

... ,. regard to the disbursement of certain amounts. The amounts already paid will be adjusted towards future payments after fresh adjudication . H

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A In the circumstances of the case, we are of the opinion it is proper to remit the matter back to the Industrial Tribunal for adjudication according to law since there are grave and fundamental errors including errors in assessing financial capacity burden etc. in the award of the Tribunal.

The Industrial Tribunal is directed to adjudicate the claim of the workmen B alone within six months from the date of receipt qf this judgment.

In the result, Civil Appeal No. 560 l of 200 I filed by Mukand Ltd. is allowed and Civil Appeal Nos. 7340-7341 of 2001 filed by Mukand Staff and Officers Association are dismissed. No costs.

C B.K.M. C.A. No. 5601/2001 allowed. C.A. No. 7340-7341/2001 dismissed.