“The Anatomy of Section 29 : A Legal Autopsy “
by R. Sridhar
Head – India, Labour Relations, Caterpillar India Private Limited
Section 19 (2) of the Industrial Disputes Act (hereinafter referred to as the Act) deals with the period of operation of settlement which reads as follows:
Such settlement shall be binding for such period as is agreed upon by the parties, and if no such period is agreed upon, for a period of six months 1[from the date on which the memorandum of settlement is signed by the parries to the dispute], and shall continue to be binding on the parties after the expiry of the period aforesaid, until the expiry of two months from the date on which a notice in writing of an intention to terminate the settlement is given by one of the parties to the other party or parties to the settlement.
The purport of the provisions of Sub Section (2) of Section 19 are succinctly defined with mathematical precision in Life Insurance Corporation of India and others Vs D. J. Bahadur and others 1981 1 LLJ 1. The relevant portion of this judgement in this regard reads as under:
There are three stages or phases with different legal effects in the life of an Award or Settlement. There is a specific period contractually or statutorily fixed as the period of operation. Thereafter, the Award or Settlement does not become non-est, but continues to be binding. This is the second chapter of legal efficacy but qualitatively different. Then comes the last phase. If notice of intention to terminate is given under section 19(2) or 19(6), then the third stage opens where the Award or the Settlement does survive and is in force between the parties as a contract which has superseded the earlier contract and subsists until a new Award or negotiated settlement takes its place. Like nature, Law abhors a vacuum and even on the notice of termination under section 19(2) or (6), the sequence and consequence cannot be just void but a continuance of the earlier terms, but with liberty to both sides to raise disputes, negotiate settlements or seek a reference and Award. Until such a new contract or Award replaces the previous one, the former settlement or Award will regulate the relation between the parties. Industrial law frowns upon a lawless void and under general law the contract of service created by an Award or Settlement lives so long as a new lawful contract is brought into being. The precedents on the point, the principles of Industrial Law, the constitutional empathy of Part IV and the sound rules of statutory construction converge to the same point that when a notice intimating termination of an Award or Settlement is issued the legal import in merely that the stage is set for fresh negotiations or industrial adjudication and until either effort ripens into a fresh set of conditions of service the previous Award or Settlement does regulate the relations between the employer and the employees.
The authority to the above proposition was drawn from the earliest case : The South Indian Bank Vs A R Chacko 1964 1 LLJ 19 wherein the law pertaining to the period of operation of the settlement or award has been explained in clear terms which reads as follows:
¦¦¦. there is difference between an award being in operation and an award being binding on the parties. The different provisions made by the legislature in s. 19(3) and s. 19(6) illustrate this distinction. Under s. 19(3) the award remains in operation for a period of one year. Section 19(6) is in these words :-
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 bound by the award to the other party or parties intimating its intention to terminate the award.”
This makes it clear that after the period of operation of an award has expired, the award does not cease to be effective. For, it continues to be binding thereafter on the parties until notice has been given by one of the parties of the intention to terminate it and two months have elapsed from the date of such notice.
¦¦¦¦¦¦¦¦¦even if an award has ceased to be in operation or in force and has ceased to be binding on the parties under the provisions of Section 19(6) , it will continue to have its effect as a contract between the parties that has been made by industrial adjudication in place of the old contract. So long as the award remains in operation under Section 19(3), Section 23(c) stands in the way of any strike by the workmen and lock-out by the employer in respect of any matter covered by the award. Again, so long as the award is binding on a party, breach of any of its terms will make the party liable to penalty under Section 29 of the Act, to imprisonment which may extend to six months or with fine or with both
Taking the cue from the ratio laid down by the Hon™ble Supreme Court in A R Chacko (vide supra), the law pertaining to the period of operation of the Award or Settlement under Section 19(2) . (3) and (6) has been made clear by the Supreme Court in D.J.Bahadur , by proper dissection of the provisions of Section 19 with an eagle eye. Against this legal position, the question is when can the provisions of Section 29 be invoked for breach of any term of any settlement or award.
Section 29 of the Industrial disputes Act, 1947 reads as under:
Any person who commits a breach of any term of any settlement or award, which is binding on him under this Act, shall be punishable with imprisonment for a term which may extend to six months, or with fine, or with both, 2[ and where the breach is a continuing one, with a further fine which may extend to two hundred rupees for every day during which the breach continues after the conviction for the first] and the Court trying the offence, if it fines the offender, may direct that the whole or any part of the fine realised from him shall be paid, by way of compensation, to any person who, in its opinion, has been injured by such breach. (emphasis supplied by me ).
There is an authority from the decision of the Constitutional Bench of the Supreme Court reported in State of Madras Vs C P Sarathy 1953 1 LLJ Page 174 which held that an offence under Section 29 of the Act would arise only when the alleged breach of some of the terms of the award have taken place at the time when the award was in force. ( emphasis supplied by me )
In a Textile Mill at Ahmedabad , bonus was paid on industry wise basis for a specified period and even after that period was over, the workmen demanded that the mill should continue to pay bonus as per the industry wide settlement. However, the mill took the stand that industry wide settlement was applicable only for the specific period and beyond and when once that period was over, the workmen were not entitled to demand bonus as per the industry wise settlement. This stand of the Mill was accepted by the Supreme Court in New Maneck Chowk Spinning and weaving Company Limited, Ahmedabad and others Vs The Textile Labour Association, Ahmedabad reported in 1961 (1) LLJ 521.
The Lordships in the South Indian Bank Vs A R Chacko 1964 1 LLJ 19 further stated that
Quite apart from this, however, it appears to us that even if an award has ceased to be in operation or in force and has ceased to be binding on the parties under the provisions of S.19(6), it will continue to have its effect as a contract between the parties that has been made by industrial adjudication in place of the old contract. So long as the award remains in operation under Section 19(3), Section 23 (c ) stands in the way of any strike by the workmen and lock out by the employer in respect of any matter covered by the award. Again, so long as the award is binding on a party, breach of any of its terms will make the party liable to penalty under Section 29 of the Act, to imprisonment which may extend to six months or with fine or with both. After the period of its operation and also the period for which the award is binding have elapsed, Section 23 and 29 can have no operation. (emphasis supplied by us).
Even in the ruling of the Supreme Court in Bahadur™s case, Justice Pathak concurring with Iyer J clarified further that the phraseology employed in the settlement should be given due consideration while dealing with question pertaining to the operation of the settlement . The relevant portion of his observation is reproduced below:
It is desirable to appreciate what is a settlement as understood in the Industrial Disputes Act. In essence, it is a contract between the employer and the workmen prescribing new terms and conditions of service. These constitute a variation of existing terms and conditions. As soon as the settlement is concluded and becomes operative, the contract embodied in it takes effect and the existing terms and conditions of the workmen are modified accordingly. Unless there is something to the contrary in a particular term or condition of the settlement the embodies contract endures indefinitely, continuing to govern the relation between the parties in the future, subject of course to subsequent alteration through a fresh settlement, award or valid legislation. ( emphasis supplied by us).
It is clear from the above that Section 29 will have operation and can be invoked only during the three stages as explained in Bahdur™s case by the Supreme Court, Beyond the three stages as explained in the Bahadur and AR Chacko cases, the Settlement would assume the role of Contract and Section 29 will not have operation at all. It may further be understood that the Drafters of the Act had incorporated specific provision to provide penalty for breach of any term of the settlement under Section 29 of the Act. There is a subtle difference between Section 29 and Section 25 U of the Act. Section 29, by virtue of the phraseology employed in the Section itself , can be invoked only if there is a breach of any term of the settlement but not when there is a breach of the settlement in its entirety.
Entry 13 of Schedule V of the Act should be read with 25T and 25U of the Act. In accordance with the above provisions, failure to implement a settlement, award or agreement is an unfair labour practice and as such it will attract the penal provisions of Section 25U of the Act. However, Section in 29 confines its operation to breach of any term of any settlement and for that it provides the penalty in the Section itself. It is clear from the above that the Drafters consciously made a clear distinction between the breach of any term of any settlement and failure to implement the settlement and provided specific penalties for the same. Hence, it can safely deduced that for breach of any term of the settlement, Section , Section 25T and 25 U can not be invoked and as such the same can not be treated as an unfair labour practice and brought under Entry 13 of Schedule V to the Act. 25T , 25 U read with Entry 13 of Schedule V to the Act can be invoked only if there is a failure to implement the terms of the Settlement in its entirety.