PublicationsAn Analysis of the Supreme Court’s Decision in Gujarat Steel Tubes (1980) and its relevance in the COVID ’19 Pandemic

FACTS

Gujarat Steel Tubes v. Gujarat Steel Tubes Mazdoor Sabha was decided by a three-Judge Bench of the Hon’ble Supreme Court of India. The dispute, in this case, arose between the management of Gujarat Steel Tubes Ltd and its workmen. The industry was established in 1960, and since then flourished into making profits year after year. Despite this, however, the workers of the company were highly underpaid and because of this, there have been various instances of disagreements and debates between the workmen and management.[1] Following a violent episode in September 1971 and following conciliation, a settlement agreement was reached between the parties on August 4, 1972.[2]

Among other things, the settlement agreement highlighted that:

• The management would implement the recommendations of the Central Wage Board as revised from time to time,
• No strike or lockout will be implemented for a period of 5 years from the date of the agreement,
• All disputes that may arise between the parties would be attempted to be smoothened through negotiation, failing which it would be referred for arbitration under Section 10A of the Industrial Disputes Act (IDA).[3] While the workmen agreed to the settlement, they consistently argued for immediate negotiation due the long periods taken by the arbitrator for resolving the dispute at hand.[4]

The management failed to implement the Wage Board recommendations and the workers resorted to a strike, following which the management issued numerous warnings and notices. A notice was issued by the management on January 25, 1973 stating that while the management had proposed to implement the Wage Board Recommendations, the Sabha has rejected such proposal and were now misleading the workmen. They further declared that Wage Board Recommendations would apply retrospectively to all workmen.[5] When the workmen continued to strike, the management revoked its offer to apply the Wage Board Recommendations and that owing to the settlement reached on August 4, 1972, the management was entitled to take relevant disciplinary action against the workers involved in such illegal strike.[6] The management further offered to take the matter to arbitration as under the Settlement Agreement.[7] Despite these attempts by the management however, when the workers continued their strike, the company terminated the services of 853 workmen.[8] 419 workmen were re-employed by the company, thus leaving 434 others jobless.[9]

This matter was then referred for arbitration under an arbitral tribunal formed under Section 10A of the IDA, with the aim of reinstatement of 400 terminated workmen. One of the important question before the arbitrator was to decide whether the dismissal of the workmen was a discharge simpliciter or was punitive in nature.[10]The arbitrator held in favour of the management stating that participation in an illegal strike amounted to misconduct and the management was justified in terminating the services of said workmen.[11] The arbitral award was then brought up in the High Court under Article 226 of the Constitution of India, that reversed the award and dictated reinstatement of a substantial number of the workmen that had been terminated. The present case is therefore an appeal preferred before the Hon’ble Supreme Court.

ISSUES

1. Whether the termination of the workmen was a dismissal which was punitive in nature, or if it was a discharge simpliciter? If the discharge was punitive in nature, was proper enquiry conducted by the management before terminating said workmen?

2. In a case where the management has failed to hold enquiry, does the arbitrator have the power to consider the evidence and determine the guilt/punishment of the workmen?

Is the arbitrator a tribunal under Section 11A of the IDA?

3. Whether the High Court has jurisdiction to hear a matter under Article 226 of the Constitution against the award of an arbitral tribunal given under Section 10A. Can the court issue a writ of certiorari to correct errors of fact?

JUDGEMENT AND RATIONALE

Discharge vs Dismissal

The Hon’ble Supreme Court held that the discharge was punitive in nature.[12] It was mutually accepted that the strike was illegal. While Order 23 of the Model Standing Orders provide that an illegal strike counts as misconduct, and can be treated as a ground for termination without notice, such termination can only be executed on the conduction of proper inquiry by the management.[13] It is essential that the individual guilt of a worker be determined in order to punish them.[14] The court used various precedents to establish that the theory of community guilty has been widely rejected in India.[15]

The management, in this case, had not conducted any individual inquiry and had terminated all employees who had any connection with the strike or were absent from work on the day of the strike. In the absence of any such individual inquiry, the termination order was faulty.[16]

Section 11A Interpretation:

Even though Section 11A[17] does not explicitly include arbitrators into its ambit, the court interpreted the Section to mean that the powers enjoyed by the tribunal would also be allowed to the arbitrator, since they perform the same kind of function.[18] The arbitrator would therefore have the power to determine not only guilt but also the punishment of the parties.[19]

This section confers wide powers in the hands of the tribunal to re-evaluate the action taken against the workers. The section, however, does not explicitly mention an arbitral tribunal. The court interprets this Section in a liberal manner to provide an arbitrator with similar powers by stating that the functions performed by both tribunals as well as arbitrator are the same, i.e. acting as a seat of justice.[20] The court also looks into the history and object of the clause and observes that the Section was added to the Act via an amendment based on ILO recommendations, which include an arbitrator when discussing said power.[21] The Hon’ble Supreme Court, after referring to a plethora of judicial decisions, comes to the conclusion that while the judiciary cannot legislate for a casus omissus, they cannot keep their hands folded when a defect appears in the law.[22] The court took into account that even before the introduction of Section 11A, the Labour Court had the power to delve into the quantum of punishment granted by the management as well as the culpability of the workmen if the management had failed to conduct a proper inquiry before dismissing the workers.[23] Additionally, they considered that the law must keep up with the growing economy and must go hand-in-hand with the socio-legal conditions of the country.[24] Thus it was held that the word ‘tribunal’ includes an arbitrator as well.

Jurisdiction of the High Court under Article 226:

Such arbitrator appointed under Section 10A becomes a part of the sovereign justice system. The arbitrator has the power to bind not only the parties to the reference but only third parties, thus giving immense judicial powers in the hands of the tribunal. Thus, since it falls under the wide arch of statutory tribunals, it would be amenable to the jurisdiction of the High Court under Section 226/227.[25] The court added that the power of the High Court under that Article is broad enough to allow them to not only amend the award of the arbitrator but even substitute it with a new one if it feels necessary.[26]

Earlier the law was such that, while exercising this power under the writ of certiorari, the court can amend the award only on a point of law, and not of fact.[27] Thus, the High Court, in a petition under Article 226, could set aside or amend the award of the arbitrator based on issues of law, but not those that dealt with issues of fact. But in this case, the court expanded the powers of the High Court to allow them to even delve into issues of fact they deem necessary.[28] This allows a wide range of powers in the hands of the High Court and may allow unnecessary interference into the award of the arbitrator. This extension of the power of the High Court under Article 226 must therefore be used sparingly, only in cases where not doing so would result in the miscarriage of justice.

Final Relief:

Of the 400 workers who had appealed, a few passed away owing to the longevity of the litigation. Of the remaining, 100 had found alternate jobs, leaving 239 workmen hopeful of a positive decision from the Hon’ble Supreme Court. The court re-instated 139 workmen with 50% back-wages.[29] The termination of 100 workmen was confirmed but with termination benefits and 75% back-wages.[30]

ANALYSIS

Conflicting Interpretation of ‘Tribunal’:

This judgement includes an arbitrator appointed under Section 10A of the IDA within the meaning of a ‘tribunal’, as observed above. This, however, seems to conflict with the idea of a ‘tribunal’ as presented by the Hon’ble Supreme Court in Engineering Mazdoor Sabha vs Hind Cycles.[31] In that case, the court had held in reference to Article 136 of the Constitution, that an arbitral tribunal constituted under Section 10A is not a tribunal. This is because it lacks the state’s inherent judicial power, as it is formed by the parties involved in the dispute and derives its powers from the agreement between the parties.[32] While in one case the court equates the arbitrator to a tribunal based on their functions, in the other case they refuse the same. The Hon’ble Supreme Court, therefore, thus in my opinion, fails to consider another decision taken in this regard before attaching a liberal interpretation to the term ‘tribunal’ under Section 11A.

Additionally, the core idea behind arbitration is party autonomy. Parties often choose arbitration in order to avoid taking a matter to court and indulging in the long, tedious and expensive process of litigation. By giving such wide powers of review of the arbitral award to the High Court under Article 226, the court is undermining the understanding of the parties to approach an arbitrator. Thus, it is important that the High Court only exercises this power under Article 226 when it is absolutely necessary to intervene to protect the interests of the parties involved.

The relevance of Arbitrator’s Power in the Coronavirus Pandemic:

This case gives immense power to the arbitrator by classifying it in the same category as a tribunal. But we must analyse the effects of this in the contemporary scenario, where thousands of workers are being dismissed from service due to the coronavirus pandemic.[33] In such a case, the workers can take the matter to arbitration, and now under Section 11A, the arbitrator is eligible to analyse the evidence if they are of the opinion that such dismissal was not justified.

However, the arbitrator’s powers may not prove very fruitful because arbitration is a very time taking and expensive process. It has also been recognised by the Supreme Court that it is rather unfortunate that what was developed as a process for speedy justice is actually a very expensive and time-consuming process.[34] Workmen who are out of service, are not in favour of such process as also observed in the Gujarat Steel Tubes case,[35] since they are left without any means of sustenance until the arbitrator’s award is declared. This becomes even more complicated in the current Covid’19 situation as it is practically impossible for the unemployed workers to find an alternate job in the meanwhile.

Moreover, what happens in the months pending the award of the arbitrator? There must be a provision for an interim award that must be given by the arbitral tribunal to enable the discharged workmen to sustain their living. Additionally, arbitration is a foreign idea for most worker’s, and they aren’t often equipped to present their case in a proper manner in front of the arbitrator. It is important that the workers and the management be brought on the same level playing field, so, as to enable a fair and eligible fight.

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