Holding

The Court held that without proof of bias or prejudice, differential treatment does not constitute favouritism or partiality under Item 5, and a breach of assurance does not amount to failure to implement an agreement, so the unfair labour practice complaint fails.

Summary

CEAT Ltd. introduced a Voluntary Retirement Scheme (VRS‑I) which 337 employees accepted, and later a second scheme (VRS‑II) under a Memorandum of Understanding which 179 employees accepted. Six former employees who had retired under VRS‑I alleged that the company committed an unfair labour practice by paying a Rs 90,000 ex‑gratia amount only to VRS‑II retirees, invoking Items 5, 9 and 10 of Schedule IV of the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971. The Industrial Court and the Bombay High Court held that the differential payment amounted to favouritism and ordered the company to pay the same amount to the VRS‑I retirees. The Supreme Court examined whether the alleged differential treatment satisfied the statutory requirement of favouritism or partiality, whether a breach of a letter constituted failure to implement an agreement, and whether former employees could maintain a complaint under the Act. Finding no evidence of bias, prejudice or any act of force, and holding that a mere breach of assurance does not trigger Item 9, the Court set aside the lower courts' orders and allowed the appeal.

Issues considered

Whether the complaint of unfair labour practice under Item 5 (favouritism or partiality) of Schedule IV is established by the payment of Rs 90,000 to VRS‑II retirees but not to VRS‑I retirees.
Whether the alleged breach of a letter/assurance amounts to failure to implement an award, settlement or agreement under Item 9 of Schedule IV.
Whether the complaint is maintainable by former employees who retired under a voluntary retirement scheme, given the definition of "employee" in the Act.
Whether the complaint can be filed by individuals or requires a recognized trade union under the Act.

Legislation cited

Industrial Disputes Act, 1947s. Section 2, s. Section 3
Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971s. Schedule IV Item 10, s. Schedule IV Item 5, s. Schedule IV Item 9

Subjects

unfair labour practicefavouritismpartialityvoluntary retirement schemedifferential treatmentindustrial courtSchedule IVMaharashtra labour lawmaintainabilityemployee definition

Judgment

A CEAT LTD.
V.

ANAND ABASAHEB HAWALDAR AND ORS.

FEBRUARY 16, 2006

B [ARIJ!T PASAYAT AND R.V. RAVEENDRAN, JJ.]

labors Laws:
\ .
C Maharashtra Recognition of Trade Unions and Prevention of unfair
Labour Practices Act, 1971: Schedule IV, Item Nos. 5, 9 and I 0.

Unfair labour practices-On the part of the employer-Voluntary
Retirement Scheme (VRS)-Dijjerential treatment-Favoritism of partiality-·
Allegations of-Company declared VRS-I for its employees which was accepted
D by 337 employees--Subsequently, the company entered into a Memorandum
of Understanding with the employees' union containing another VRS-l/-The
same was accepted by I 79 employees· Some employees who had earlier
accepted VRS-I filed a complaint before the Industrial Court all<!ging that the
company had committed an unfair labour practice in terms of item Nos. 5, 9
and IO of the Schedule IV-It was contended that one of the benefits which
E was given to the employt1es who had accepted VRS-l/, namely, payment of a
sum of Rs. 90,000 ex-gratia, had not been extended t0 the complainants who
had retired pursuant to VRS-1-The Industrial Court directed the company to
pay Rs. 90,000 to each of the employees who had retired under VRS-I-The
High Court held that the fact that Rs. 90,000 was paid to those who accepted
F VRS-l/ clearly indicated discrimination and confirmed the order ofthe Industrial
Court-Correctness of-Held: Every kind of differential treatment is not
'favouritism or partiality'-lt must be a prejudice which is not founded on
reason, and actuated by selfinterest whether pecuniary or personal-The
Memorandum of Understanding which was the foundation for VRS-l gave a
different package but on the clear understanding that litigations of all types
G were to be withdrawn-The backgroundfacts do not establish that the company
was guilty of favouritism or pattiality-Mere breach of assurance is not
favoritism or partiality-Hence, complaint of unfair labour practice not
established

Words & Phrases:
H 254
i

CEA T LTD. v. ANAND ABASAHEB HAW ALDAR 255

7' ''Favouritism or partiality' '-Meaning of-In the context of item 5 of A
Schedule IV of the Maharashtra Recognition of Trade Union & Prevention of
Unfair Labour Practices Act, 1971.

The appellant-company declared a Voluntary Retirement Scheme
(VRS-1) for its employees which was accepted by 337 employees. B
Subsequently, the appellant entered into a Memorandum of Understanding
with the employees' union containing another Voluntary Retirement
Scheme (VRS-11). The same was accepted by 179 employees. Respondents
I to 6 who had earlier accepted VRS-1 filed a complaint before the
Industrial Court alleging that the appellant-company had committed an
unfair labour practice in terms of item Nos. 5, 9 and 10 of Schedule IV to C
the Maharashtra Recognition of Trade Union & Prevention of Unfair
Labour Practices Act, 1971. It was contended that one of the benefits which
was given to the employees who had accepted VRS-11, namely payment
ofa sum of Rs. 90,000 ex-gratia, had not been extended to the complainants
who had retired pursuant to VRS-1. D
The Industrial Court directed the appellant to pay Rs. 90,000 to each
of the employees who had retired under VRS-1. The High Court held that
the fact that Rs. 90,000 was paid to those who accepted VRS-11 clearly
indicated discrimination and confirmed the order of the Industrial Court.
Hence the appeal. E
On behalf of the appellant, it was contended that VRS-11 was offered
in order to curtail litigations and, therefore, a Memorandum of
Understanding was arrived at so that cases of all types were to be
withdrawn by the employees who had raised disputes and had gone to
court by not accepting the terms of VRS-1. F
Allowing the appeal, the Court

HELD: 1. In Item (5) of Schedule IV to the Maharashtra Recognition
of Trade Union & Preven:ion of Unfair Labour Practices Act, 1971, the
Legislature has consciously used the words 'favouritism or partiality to G
one set of workers' and not differential treatment. Thus, the mental
element of bias was necessary to be established by cogent evidence. No
evidence in that regard was led. On the contrary the approach of the
Industrial Court and the High Court was different. One proceeded on the
basis of breach of assurance and the other on the ground of discrimination. H
256 SUPREME COURT REPORTS [2006J 2 S.C.R.

A There was no evidence brought on record as regards the pre-requisite i.e.
favouritism or partiality. Favouritism means showing favour in the matter
of selection on circumstances other than merit. (261-E-F(

P. Ramanatha Aiyar: Advanced law lexicon, 3rd Edn., (2005), referred
to.
B
1.2. It is not every kind of differential treatment which in law is taken
to vitiate an act. It must be a prejudice, which is not founded on reason,
and actuated by self-interest-whether pecuniary or personal. [262-D)

1.3. Every preference does not vitiate an action. If it is rational and
C unaccompanied by considerations of personal interest, pecuniary or
otherwise, it would not vitiate a decision. (262-F(

G.N. Nayak v. Goa University, (2002) 2 SCC 712, relied on.

2. The factual scenario does not establish any favouritism or
D partiality. When VRS-1 Scheme was introduced the same was offered to
every employee. It is nobody's case that there was any hidden intent and/
or that the employer had any previous knowledge at the tine of introducing
the scheme that some of the employees would not accept it. It is not the
case of the complainants that the employer had at that point of time
E intended to pay something more to those who did not accept VRS-1. The
Memorandum of Understanding which was the foundation for the VRS-
11, of course, gives a different package but on the clear understanding that
litigations of all types were to be withdrawn. (262-G; 263-A)

3. Mere breach of assurance is not favouritism or partisan approach.
F It has to be definitely pleaded and proved to show that Item 9 of Schedule
IV was attracted. The Memorandum of Und~rstanding came to be arrived
at because some of the employees went to Court after not accepting VRS-
I. The background facts do not establish that the appellant -company was
guilty of favouritism or partiality. There is also no plea or proof that the
employer indulged in any violence or force to coerce 337 employees to
G accept YRS-I. Therefore, the complaint of unfair labour practice is not
established under Items Sor 9 or 10 of Schedule IV to the Act. (263-8-D)
••
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 9442 of2003.

H From the Judgment and Order dated 12/13.6.2003 of Bombay High
Court Court in L.P.A. No. 197 of 200 I in W.P. No. 1111 '97.
CEAT LTD.'" ANAND ABASAHEB HAW ALDAR [PASAY AT.J.) 257

f T.R. Adhyarujina, L. Nageswara Rao, R.N. Karanjawala, A.O. A
Choudhary, Ms. Ruby Singh Ahuja and Mrs. Manik Karanjawala for the
Appellant.

Kailash Vasdev, Nayana Buch, Sanjay K. Shandilya, Prateek Kumar
and Mrs. V.D. Khanna for the Respondents.
B
The Judgment of the Court was delivered by

ARIJIT PASA YAT, J. Challenge in this appeal is to legality of the

' judgment rendered by a Division Bench of the Bombay High Court in a
Letters Patent Appeal affirming judgment of a learned Single Judge. By the
said judgment learned Single Judge had confirmed the order passed by the
Industrial Court, Thane Maharashtra (in short 'Industrial Court').

The controversy involved in the present appeal arises in the following
c

background:

By Circular dated 30th June, 1992 the appellant - a public limited D
company incorporated under the Companies Act, 1956 declared a Voluntary
Retirement Scheme (hereinafter referred to as the 'VRS-1') for its employees
+ which was accepted by the 337 employees. On 16th March, 1994 the appellant
entered into a Memorandum of Understanding with the employees' Union
containing another Voluntary Retirement Scheme (hereinafter referred to as
E
the 'VRS-II'). The same was accepted by 179 employees. Respondents 1 to
6 who had earlier accepted VRS-1 filed a complaint before the Industrial
Court, Thane on 20th July, 1994 alleging that the appellant-company had
committed an unfair labour practice in terms of item nos.5, 9 and 10 of
Schedule IV of the Maharashtra Recognition of Trade Unions & Prevention
of Unfair Labour Practices Act, 1971 (in short the 'Act'). It was contended F
.J. that one of the benefits which was. given to the employees who had accepted
VRS-II, namely payment of a sum of Rs.90,000/- ex-gratia, had not been
extended to the complainants who had retired pursuant to YRS-I in 1992.
This according to them was illegal, unlawful and amounted to unfair labour
practice. The Industrial Court after considering the materials placed before
G
it came to hold that the grievances of the complainants were well founded.
Accordingly, by award dated 24. l 0.1996, it directed the appellant to pay
Rs.90,000/- to each of the employees who had retired under VRS-1, as similar
sum had been paid to 179 employees who had accepted VRS-II in 1994. The
order passed by the Industrial Court was challenged by the appellant by filing
a writ petition in the Bombay High Court. A learned Single Judge dismissed H
258 SUPREME COURT REPORTS 120061 2 S.CR.

A the writ petition by judgment dated 11.7.:?.00l. In fact the learned Single
Judge. modified the award by granting additionally. interest at 6% P.A. from
15.4.1994 till date of payment. A Letters Patent Appeal was filed before the
Division Bench which was also dismissed by the impugned judgment dated
12/13-6-2003.

B It is to be noted that before the High Court the following grievances
were made by the employer:-

(i) A complaint of unfair labour practice could be filed only by a
recognized union and not by an individual workman or some of
--
them. Therefore, in a complaint filed by 6 employees, relief
c could not be granted to 137 employees.
(ii) In order to sustain the grievance under Item (5) of Schedule IV
to the Act, something more than mere differential treatment was
necessary to be established. It was incumbent upon the claimants
to show that there was any favouritism or partiality shown to one
D set of workers regardless of merits.
(iii) In order to sustain the grievance under lttm (9) of Schedule IV
to the Act, it was to be established that there was failure to ...
implement any award, settlement, agreement, and
(iv) In order to sustain the grievance under Item ( 10) of Schedule IV
E to the Act, it was to be established that the employer had indulged
in act of force or violence.

The High Court found that the plea regarding maintainability of the
complaint by individual workman was not correct. Further it held that in
F view of the clear statement in the letter dated I 1.7.1992 made by Sri P.
Krishnamurthy, Vice-President of the Company, there was an assurance that .\.
all the employees who would accept the YRS-I would be entitled to all
benefits which would be given to other employees and that those who would
not accept YRS-I would not be paid anything more. Therefore, the High
Court held that the fact that Rs.90,000/- was paid to those who accepted
G VRS-11 clearly indicated discrimination. Accordingly, the orders of the Tribunal
and learned Single Judge were confirmed by the Division Bench.

In support of the appeal Mr. T.R. Andhyarujina, learned senior counsel
, .
submitted that the approach of the High Court is clearly erroneous. Firstly,
it was submitted that the complaint itself was not maintainable before the
H Industrial Court as the complainants. at the relevant point of time. were not
!
CEAT LTD. r. ANAND ABASAHEB HAWALDAR fPASAYAT.J.j 259

workmen. Additionally, Items 5, 9 and 10 of the Schedule IV had no A
application to the facts of the case. There was no discrimination, favouritism
or partiality whatsoever in any manner. Those who are covered by VRS-11
stood at a different footing from those who accepted VRS-1 and, therefore,
the complaint should not have been entertained. It was further submitted that
mere fact that subsequently some more amount had been paid does not pe;· B
se establish favouritism or partiality. The Industrial Court and the High Court
did. not consider the distinguishing features. Unnecessary emphasis was laid
on the letter written by the Vice-President referred to above. There was no
award or agreement, or settlement which as alleged was not implemented.
No evidence was led to show that there was any award or agreement or
settlement which was to be enforced. Similarly, there was no evidence led C
to show that the appellant had indulged in any act of force or violence.

Learned counsel for the respondents on the other hand submitted that
factual findings have been recorded by the Tribunal which have been endorsed
by learned Single Judge and the Division Bench that the act of paying an
amount higher than what was paid to those who had accepted VRS-I itself D
showed favouritism and partisan approach. YRS-I which was accepted by
337 employees was not voluntary and was on account of the threat perceptions.
+
In order to appreciate rival submission the entries in Schedule IV of the
Act need to be noted. They read as follows:-
E
SCHEDULE IV
General Unfair Labour Practices on the part of Employers

I. To discharge or dismiss employees -
(a) by way of victimization; F
(b) not in good faith, but in colourable exercise of employer's
rights;
(c) by falsely implicating an employee in a criminal case on false
evidence or on concocted evidence;
G
(d) for patently false reasons;
(e) on untrue or trumped up allegation of absence without leave;
(f) in utter disregard of the principles of natural justice in the
conduct of domestic enquiry or with undue haste;
H
260 SUPREME COURT REPORTS [20061 2 S.C.R.

A (g) for misconduct of a minor or technical character, without ...
having any regard to the nature of the particular misconduct or
the past record of service of the employee, so as to amount to a
shockingly disproportionate punishment.
2. To abolish the work of a regular nature being done by employees,
B and to give such work to contractors as a measure of breaking
a strike.
3. To transfer an employee ma/a fide from one place to another,
under the guise of following management policy.
4. To insist upon individual employees, who were on legal strike,
c to sign a good conduct-bond, as a pre-condition to allowing
them to resume work.
5. To show favouritism or partiality to one set of workers, regardless
of merits.

D 6. To employ employees as "badlis", casuals or temporaries and to
continue them as such for years, with the object of depriving
them of the status and privileges of permanent employees.
...
7. To discharge or discriminate against any employee for filing
charges or testifying against an employer in any enquiry or
proceeding relating to any industrial dispute.
E
8. To recruit employees during a strike which is not an illegal strike.
9. Failure to implement award, settlement or agreement.
10. To indulge in act of force or violence."

F It will be appropriate to first deal with Item (5) which relates to the act
of favouritism or partiality by the employer to one set of workers regardless
..
of merit.

The factual background which is virtually undisputed is that the
appellant-company took over Murphy India Ltd. (hereinafter referred to as
G the 'Murphy'). Murphy had merged with the appellant-company pursuant to
the order of Board of Industrial & Financial Reconstruction (in short 'BIFR').
Due to recession in the consumer electronic industry, the undertaking became ' .
unviable. Before the VRS I and II the appellant-company had introduced
VRS Schemes in October, 1983 and February. 1988. All the employees who
H were covered by the VRS I and II were ex-Murphy employees.
CEAT LTD. v. ANAND ABASAHEB HAWALDAR [PASAYAT,J.) 261

According to learned counsel for the appellant, a complaint of unfair A
't labour practice can be made only by the existing employees. Under clause
)
(5) of Section 3 of the Act the expression "employee" only covers those who
are workmen under clause (s) of Section 2 of the Industrial Disputes Act,
1947 (in short the 'ID Act'). The expression "workman" as defined in clause
(s) of Section 2 of the ID Act relates to those who are existing employees.
The only addition to existing employees, statutorily provided under Section B
_2(s) refers to dismissed, discharged and retrenched employees and their
grievances can be looked into by the forums created under the Act. In the
instant case, the complainants had resigned from service by voluntary
retirement and, therefore, their cases are not covered by the expression
'workman'. On the factual scenario, it is submitted that after the 337 C
employees had accepted YRS-I, others had raised disputes and had gone to
Court. Order was passed for paying them the existing salary and other
emoluments. This went on nearly two years and, therefore, with a view to
curtail litigation a Memorandum of Understanding was arrived at in 1994.
This basic difference in the factual background was not noticed by either the
Industrial Court or the High Court. D
In Item (5) of Schedule IV to the Act, the Legislature has consciously
+
used the words 'favouritism or partiality to one set of workers' and not
differential treatment. Thus, the mental element of bias was necessary to be
established by cogent evidence. No evidence in that regard was led. On the E
contrary the approach of the Industrial Court and the High Court was different.
One proceeded on the basis of breach of assurance and the other on the
ground of discrimination. There was no evidence brought on as regards the
pre-requisite i.e. favouritism or partiality. Favouritism means showing favour
in the matter of selection on circumstances other than merit. (per Advanced
Law Lexicon by P. Ramanatha Aiyar, 3rd Edition, 2005). The expression F
'favouritism' means partiality, bias. Partiality means inclination to favour a
particular person or thing. Similarly, it has been sometimes equated with
capricious, not guided by steady judgment, intent or purpose. Favouritism as
per the Websters' Encyclopedic Unabridged Dictionary means the favouring
of one person or group over others having equal claims. Partiality is the state G
or character being a partial, favourable, bias or prejudice.

According to Oxford English Dictionary "favouritism" means - a
deposition to show, or the practice of showing favour or partiality to an
individual or class, to the neglect of others having equal or superior claims;
under preference. Similarly, "partiality" means the quality or character of H
262 SUPREME COURT REPORTS 120061 2 S.C.R.

A being partial, unequal state of judgment and favour of one ahove the other, ,...
without just reason. Prejudicial or undue favouring of one person or party:
or one side of a question; prejudice. unfairness, bias.

Bias may be generally defined as partiality or preference. It is true that
any person or authority required to act in a judicial or quasi-judicial matter
B must act impartially.

"If however, 'bias' and 'partiality' be defined to mean the total absence
of preconceptions in the mind of the Judge, then no one has ever had
. .

a fair trial and no one ever will. The human mind, even at infancy,
is no blank piece of paper. We are born with predispositions and the
c processes of education, formal and informal, create attitudes which
precede rea~oning in particular instances and which, therefore, by
definition, are prejudices." (per Frank, J. in Linahan, Re, (1943) 138
F 2d 650, 652).

D It is not every kind of differential treatment which in law is taken to
vitiate an act. It must be a prejudice which is not founded on reason, and
actuated by self-interest - whether pecuniary or personal.

Because of this element of personal interest, bias is also seen as an
extension of the principles of natural justice that no man should be a judge
E in his own cause. Being a state of mind, a bias is sometimes impossible to
determine. Therefore, the courts have evolved the principle that it is sufficient
for a litigant to successfully impugn an action by establishing a reasonable
possibility of bias or proving circumstances from which the operation of
influences affecting a fair assessment of the merits of the case can be inferred.

F As we have noted, every preference does not vitiate an action. If it is
rational and unaccompanied by considerations of personal interest, pecuniary •-
or otherwise, it would not vitiate a decision. The above position was
highlighted in G.N. Nayak v. Goa University and Ors., [2002] 2 SCC 712.

The factual scenario does not establish any favouritism or partiality.
G When VRS-l Scheme was introduced same was offered to every employee.
It is nobody's case that there was any hidden intent and/or that the employer
had any previous knowledge at the time of introducing the scheme that some ~ ,
of the employees would not accept it. It is not the case of the complainants
that the employer had at that point of time intended to pay something more
H to those who did not accept VRS-1. The Memorandum of Understanding
CEAT LTD.~·. ANAND ABASAHEB HAW ALDAR [PASAYA T.J.] 263

which was the foundation for the VRS-11, of course gives a different package, A
but on the clear understanding that litigations of all types were to be withdrawn.

In order to bring in application of Item 9, it was submitted by the
respondents that there was an agreement/assurance which was not
implemented. It has been urged that a letter can also be construed as an
agreement. But that logic is not applicable in all cases. It will depend upon B
the nature of the letter/communication. As a matter of fact, there is no dispute
that there was no Memorandum of Understanding Qr agreement in writing.
The letter of Vice-President on which the Industrial Court and the High Court
have placed reliance does not anywhere indicate that even if the fact situation
was different the same amount would be paid at all future times. Mere breach C
of assurance is not favouritism or partisan approach. It has to be definitely
pleaded and proved to show that Item 9 of Schedule IV was attracted. As
noted above, the Memorandum of Understanding in 1994 came to arrive at
because some of the employees went to Court after not accepting VRS-1.
The background facts do not establish that the appellant-company was guilty
of favouritism or partiality. There is also no plea or proof that the employer D
indulged in any violence or force to coerce 337 employees to accept VRS-
) 1. Therefore, the complaint of unfair labour practice is not established under
+ Items 5, or 9 or I0 of Schedule .JV to the Act.

That being the factual position the relief granted by the Industrial Court E
to the complainants cannot be maintained. The judgment of the High Court
upholding the view of the learned Single .Judge and the Industrial Court
stands set aside. In view of this finding of fact it is not necessary to go into
the question of maintainability of the proceedings before the Industrial Court,
by employees who retired voluntarily from service.
F
The appeal is allowed but in the circumstances without any order as to
costs.

v.s. Appeal allowed.