Holding

A settlement reached in the course of conciliation proceedings is binding and may be ignored only if it is shown to be unjust, unfair or malafide; here it was not, so the award stands.

Summary

The case concerned a Platinum Jubilee Pension Scheme introduced by ITC Ltd., whose eligibility was limited to employees retiring on or after 24‑August‑1986 as per a settlement reached under Section 12(3) of the Industrial Disputes Act during conciliation proceedings. Retired workers who left before that date challenged the cut‑off as arbitrary and violative of Article 14. The Industrial Tribunal and the Patna High Court upheld the settlement. The Supreme Court held that a settlement arrived at in conciliation carries a presumption of fairness and can be set aside only if it is demonstrably unjust, unfair or malafide; none of these were shown. Moreover, Article 14 does not apply to a private employer. Consequently, the settlement and the Tribunal’s award were affirmed and the appeal dismissed.

Issues considered

The settlement under Section 12(3) of the Industrial Disputes Act can be challenged on the ground of arbitrariness or unfairness.
Whether Article 14 of the Constitution applies to a private employer’s pension scheme settlement.
Whether the cut‑off date of 24‑August‑1986 for pension eligibility is arbitrary, discriminatory, or irrational.
Whether an Industrial Tribunal can extend pension benefits beyond the terms of a settlement arrived at in conciliation.

Legislation cited

Constitution of Indias. 14, s. 226, s. 227
Industrial Disputes Act, 1947s. 12(3), s. 18

Subjects

Industrial Disputes Actsettlementconciliationpension schemeArticle 14discriminationarbitrarinesscollective bargainingretirement benefits

Judgment

I.T.C. LTD. WORKERS WELFARE ASSOCIATION AND ANR. A
v.

-; THE MANAGEMENT OF I.T.C. LTD. AND ANR.
-- JANUARY 29, 2002

[D.P. MOHAPATRA AND P. VENKATARAMA REDDI, JJ.] B

Labour Laws:

"f Industrial Disputes Act, 1947: Section 12(3)-Settlement in the course
~
of conciliation proceeding-Challenge-Scope of-Platinum Jubilee Pension c
Scheme-Life time pension to employees retiring on or after a prescribed
date-Claim for extension of the scheme to all the retired employees-Rejected
by Industrial Tribunal and High Court-On appeal, Held, settlement arrived
at in the course of conciliation proceedings can be ignored only if it is
demonstrably unjust, unfair or malafide---Extension of pension scheme to
D
· employees retiring on or after a particular date, not palpably unjust or unfair-
... Industrial Tribunal as an a!{judicator not entitled to extend the benefit of
pension scheme to all the employees by substituting the terms of the settlement-
>'
Tribunal and High Court justified in upholding the pension scheme-
Constitution of India, 1950-Articles, 226 and 227.
E
Constitution of India, 1950-Article 14-Whether the validity of cut off
date 24.8.86 prescribed under settlement for the purpose of extending life
pension could be tested in the light of Art., 14.

.,i
... Respondent-Company introduced platinum jubilee pension scheme
for its employees. A settlement was arrived under Section 12(3) of the F
Industrial Disputes Act, 1947 in the course of conciliation proceedings and
it was agreed that the said pension scheme be made part of service
conditions of employees. The said pension scheme entitled workmen who
retired on or after the prescribed date to get life time pension. Appellants
raised industrial dispute contending that the extension of the benefit of
G
pension scheme only to employees who retire on or after prescribed date
was illegal and unjust. Industrial Tribunal answered the reference in
~ favour of the management and held that workmen who retired before the
prescribed date were not entitled to the benefits under the scheme. On
appeal, High Court upheld the award passed by the Industrial Tribunal.
711 H
712 SUPREME COURT REPORTS (2002] 1 S.C.R.

A Hence the present appeal.

On behalf of appellants it was contended that all the workman
drawing pension under the company's Rules belong to one class and there
could not be sub-classification amongst them and thus the prescription of
cut-off date for extending the benefit of pension scheme which has the
B effect of denying greater benefits under the scheme to the workmen who
retire before that date was arbitrary, discriminatory and unjust.

On behalf of respondent-company it was contended that the
settlement which was entered into under Section 12(3) of the Industrial
Disputes Act as a result of conciliation proceeding was binding on all the y
c workmen and no workmen much less any individual workman or group
~.
of workmen could challenge the same especially after the recognised union
which espoused the cause of workmen and participated in the proceeding
before the Tribunal chose to accept the award; that when the settlement
as a whole has not been attacked as fair or malajide, it was not open to
D the union much less to the individual workmen who were not parties to
assail one clause in the settlement dealing with the pension.

Dismissing the appeal, the Court
"
HELD : I. The facts on record do not establish that the platinum
...
E jubilee pension scheme settlement was palpably unjust, unfair or vitiated
by any malajides. Thus, there is no legal infirmity in the award of the
Tribunal which has been affirmed by the High C'lurt. [727-BC)

ITC Ltd v. State of Bihar, (1997) 1 PL.JR 934, approved.

F 2.1. The settlement arrived at in the course of conciliation JI
...
proceedings carries a presumption that it is just and fair. It becomes
binding on all the parties to the dispute as well as the other workmen in
the establishment to which the dispute relates and all other persons who
may be subsequently employed in that establishment. The individual
employee cannot seek to wriggle out of the settlement merely because it
G does not suit him. A settlement which is a product of collective bargaining
is entitled to due weight and consideration, more, so, when a settlement is
arrived at in the course of conciliation proceedings. The settlement can
only be ignored in exceptional circumstances viz., if it is demonstrably
unjust, unfair or the result of malafides such as corrupt motives on the
H part of those who were instrumental in effecting the settlement. That apart,
.
I.TC. LTD. WORKERS WELFARE ASSN. v. MGT. OF l.T.C. LTD. [REDD!, J.] 713

the settlement has to be judged as a whole, taking an overall view. The A
various terms and clauses of settlement cannot be examined in piecemeal
and in vacuum. (722-E; 724-E-F]

Barauni Refinery Pragatisheel Shramik Parishad v. Indian Oil
Corporation Ltd, [1991] 1 SCC 4 and General Manager, Security Paper Mill
v. R.S. Sharma, AIR (1986) SC 954, relied on. B
2.2. Admittedly, the settlement in the instant case was arrived at in
the course of conciliation proceedings and therefore carries a presumption
that it is just and fair. It cannot be said that the settlement in the present
.. case which is otherwise valid and just suffers from any legal infirmity
merely for the reason that one of the clauses in the settlement extends the c
.I>-
benefit of life pension scheme only to the employees retiring after a
particular date. Exclusion of workmen retiring before that date is no
ground to characterise the settlement as unjust or unfair. Of course, the
allegation of malafides such as corrupt motives have not been levelled
against anyone and thus that aspect become irrelevant. [724-E-G] D
3. Article 14 cannot be applied to the instant case as the respondent
. ~ is not a 'State' or 'other authority.' Thus, the issue has to be approached
from the angle whether the settlement can be said to be unjust, unfair or
vitiated by malafides. No malafide is imputed to anyone. Granting the
benefit of life long pension prospectively or with limited retro-active effect E
does not make the settlement unjust or unfair. It is certainly beneficial to
the workmen in service and those who retired few months earlier. The
mere fact that the management did not go the whole hog to extend the
benefit to all the retired employees does not impart an element of
_.
- unjustness or unreasonableness to the settlement. [725-C-F; 726-A-C]

4. In answering the reference the industrial adjudicator has to keep
F

in the forefront of his mind the settlement reached under Section 12(3) of
the Industrial Disputes Act. Once it is found that the terms of the settlement
operate in respect of the dispute raised before it, it is not open to the
Industrial Tribunal to ignore the settlement or even belittle its effect by
applying its mind independent of the settlement unless the settlement is
G

_ __,,
found to be contrary to the mandatory provisions of the Act or unless it
is found that there is non-conformance to the norms by which the
settlement could be subjected to limited judicial scrutiny. The Tribunal
while adjudicating the dispute and the High Court while exercising its
jurisdiction under Article 226/227 should be circumspect and cautious in H
714 SUPREME COURT REPORTS [2002) I S.C.R.

A disturbing the terms of settlement founded on collective bargaining and
conciliation. The adjudicator of industrial dispute could not have directed
the benefit to be extended to all the retired employees by substituting its
own views to those reflected in the settlement, on an application of the usual
principles governing industrial adjudication. [720-G-H; 721-A; 726-G-H)

B Harbertson Ltd v. The Workmen, (1976) 4 SCC 736; KC.P. Ltd v.
Presiding Officer and Ors., (1996) IO SCC 446 and Mis. Tata Engineering
and Locomotive Co. Ltd., v. Their Workmen, AIR (1981) SC 2163, relied on.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 822 of
2002. y
c ,..
From the Judgment and Order dated 10.11.97 of the Patna High
Court in C.W.J. C. No. 5693 of 1995.

Shambhu Prasad Singh, Prem Sunder Jha, Ms. Anithan Shenoy, Ms.
Manjula Gupta and M.D. Pandey for the Appellants Nos. 1-2.
D
Anil B. Divan, K. Kasturi, Ms. Kavita Dahiya, Punit Bhardwaj and
Rajan Narain for the Respondent No. 1 ...
•
The Judgment of the Court was delivered by

E P. VENKATARAMA REDDI, J. Leave granted and appeal taken up
for hearing.

The first appellant which seems to be a representative body of the
retired workmen of Munger Branch of ITC Ltd. and the second appellant
who is a member thereof, have assailed the legality of the judgment of the
F Patna High Court in C.W.J.C. No. 5693of1995 dated 10.11.1997. By that
judgment the High Court upheld the award passed by the Industrial Tribunal,
J.
-
Patna, in Reference No. 3/92, following the earlier decision of the High
Court reported in (1997) I PLJ 934, wherein the identical issues were decided
against the workmen. The Writ Petition out of which the appeal arises was
G filed by the second appellant herein challenging the award passed by the
Industrial Tribunal on 13 .12.1994.

The !st appellant sought leave of this Court to file the SLP as it was ·..--
not a party in the Writ Petition out of which this SLP arises. Leave has been
granted by us. It may also be noticed that by an order of this Court dated
H 31.08.200 I on IA 3 of 200 I the 2nd appellant herein, who was respondent
I.TC. LTD. WORKERS WELFARE ASSN. v. MGT. OF I.TC. LTD. [REDD!, J.] 715
No. 3 in SLP, has been transposed as petitioner in the SLP. A

At the outset, it may be stated that the present SLP was filed with a
delay of 460 days. The delay in filing the SLP is sought to be explained in
a very casual manner, the only ground stated being "paucity of funds" which
on the face of it is as vague as it could be. In the normal course, we should
have dismissed the I.A. for condonation of delay and rejected the SLP B
summarily. However, as arguments have been advanced at length on the
merits and as the grievance of retired employees is being projected, we do
not consider it appropriate to dismiss the SLP on the ground of delay. Hence,
leave has been granted and appeal decided on merits.

The following dispute between the Management of ITC Ltd. Basudevpur, C
Munger and their workmen represented by Munger Tobacco Manufacturing
Union which is a recognised union was referred for adjudication by the
Industrial Tribunal:

"Whether to enforce Platinum Jubilee Scheme Pension Plan for the D
workers who retired from service on or after 24.8.1986 and to enforce
other pension scheme for the workers retired before the 24.8.1986
and to give two types of benefits to both types of workers by the
Management ofl.T.C. Ltd., Basudeopur Munger is legal and justified?
If not, whether the workers who retired before 24.8.1986 from I.T.C.
Ltd. Basudeopur Munger are also entitled for the benefits under E
Platinum Jubilee Pension Plan?"

The learned Presiding Officer answered the reference in favour of the
Management and against the Union, having held that the workmen who retired
before 24.8.1986 were not entitled to the benefits under the Platinum Jubilee
Pension Scheme. By that scheme, the workmen who retired on or after the F
date afore-mentioned were made eligible to get life pension. It was the
contention of the workers'-Union before the Tribunal and it is also the
contention of the appellants that the benefits should be extended to all those
workmen who retired during and after 1977 when the pension scheme was
first introduced in this industrial establishment.
G
To have a proper background of the dispute, it is necessary to refer
briefly to the pension scheme prevalent prior to the introduction of the Platinum
Jubilee Pension Scheme. A settlement entered into on 27.6.1977 paved the
way for the introduction of pension scheme for the first time. It applied to
the permanent workmen on the rolls of the company who retired on or after H
716 SUPREME COURT REPORTS [2002] I S.C.R.

A 1.6.1977. Under that scheme, the pension was payable for a period of 10
years. By a subsequent settlement dated 22.4.1982, though the period of
drawal of pension remained the same, the formula was revised and the
maximum pension payable was enhanced to Rs. 225 per month. This benefit
under the settlement dated 22.4.1982 governed the workmen who were on
the Company's pay roll on the date of signing of the settlement. On the eve
B of commemoration of platinum jubilee of ITC Ltd., the Management decided
to introduce a scheme known as Platinum Jubilee Pension Scheme. Under
this scheme, eligible workmen will get the pensionary benefits till their life
time and on their demise, part of the benefits go to their nominees or legal
heirs. In order to implement the pension scheme, a fund named "Platinum
C Jubilee Pension Fund" was created under a trust deed dated 27.5.1987. As a
follow up thereto, ITC Platinum Jubilee Pension Fund scheme Rules were
framed in the year 1988. While so, pursuant to discussions and negotiations
held in the course of conciliation proceedings, there was a settlement under
Section 12(3) of Industrial Disputes Act on I 0.4.1988. As it was agreed fr.at
the Platinum Jubilee Pension Scheme should be made part of the service
D conditions of employees, the following provisions were incorporated in the
settlement dated I 0.4.1988 :-

"PENSION SCHEME

In supersession of clause 14 Part I read with Annexure VII of
E
Memorandum of Settlement dated 28.4.82, the following Pension
Scheme shall apply :-

(i) The company has by a Deed of Trust dated 27.5.87 setup a Trust
Fund entitled the ITC Platinum Jubilee Pension Fund for payment

F
of pension to its workmen. With effect from the date of signing . v-
of this Memorandum of Settlement, all workmen on the rolls of
the company as at 24th August, 1986 and thereafter will be
eligible to become members of the aforesaid ITC Platinum Jubilee
Pension Fund and will be eligible to receive benefits in accordance
with the aforesaid Trust Deed and the ITC Platinum Jubilee
G Pension Fund rules. A copy of the said Trust Deed and Rules is
attached herewith as Annexure XII.

(ii) With effect from 1.4.88, the ITC Workmen's Pension Fund
Schem..: as contained in clause 14, Part I and Annexure VII of
the Memorandum of Settlement dated 28.4.82 will cease to be
----
H applicable to workmen on the rolls of the company as at 24.8.86
I.T.C. LTD. WORKERS WELFARE ASSN. v. MGT. OF IT.C. LTD. [REDD!, J.] 717

and thereafter. It is expressly agreed and understood that such A
workmen will be governed only by the ITC Platinum Jubilee
Pension Fund Deed and Rules.
(iii) It is clarified that workmen who were on the rolls of the company
prior to 24.8.86 and who are in receipt of pension under the ITC
workmen's Pension Scheme as contained in clause 14, Part I and B
Annexure VII of the Settlement dated 28.4.82 will continue to be
governed by the rules of the ITC Workmen's Pension Scheme.
The ITC Platinum Jubilee Pension Fund Deed and Rules will not
be applicable to them."

Under the Trust Deed dated 27.5.1987, ITC Ltd. constituted the ITC C
Platinum Jubilee Pension Fund to be administered by the trustees who are
required to hold the fund in trust for the benefit of the members or other
persons set forth in the Rules. The Fund shall be vested in the trustees who
shall have the entire control of the funds. The Deed enjoins that no money
belonging to the members in the hands of the trustees shall be recovered by D
the Company nor shall the Company have any lien or charge on the same.
The trustees are required to arrange for the investment of the funds and
payment of pension due to the members in accordance with the Rules. Clause
6 stipulates that the funds of the Trust shall consist of accumulations from the
contributions received by the trustees in accordance with the Rules, securities
or other investments, interest and other accretion arising out of the funds as E
reduced by payments and disbursements. The Trust Deed also provides for
possible contingencies.

Let us now advert to ITC Platinum Jubilee Pension Fund Rules. As
already noticed, the fund shall be deemed to have come into operation on or
from 24.8.1986 notwithstanding the date of the Tru$t Deed. Under the caption F
'Membership', it is provided by Rule 8(a) that dn confirmed and regular
workmen of the Company as defined in Rule 2(h) shall be eligible for
membership of the fund. An employee who is eligible for the membership of
the fund may make an application in the prescribed form and furnish the
particulars of the nominees in another form to the trustees through the G
Company. The Company, on scrutiny of such aprlication, has to forward the
same to the trustees with whose approval the employee shall be admitted as
a member. Under the heading 'Contribution', it is provided that the Company
may pay to the trustees in respect of the members an initial contribution as
may be certified by the Actuary subject to Rule 88 of the Income Tax Rules.
Under clause (b) of Rule 9, it is enjoined that the Company shall pay to the H
718 SUPREME COURT REPORTS [2002) I S.C.R.

A trustee in respect of each member an ordinary annual contribution as may be
certified by the Actuary subject to I.T. Rules 87 and 88. Under clause l l(b),
the pension admissible as per the Rules shall be payable through out the life ~-
time of the member and shall be comp11ted at the rate of 1/180 part of the
pensionable salary for each year of pensionable service. The maximum pension
B payable shall be Rs. 400 per month and the minimum shall be Rs. I 00 per
month. Provisions for payment of pension to the widow for her life time in
the event of demise of the member and for the payment of pension for a
period of I 0 years to his nominee if the member is unmarried or widower are
also made.

C Thus the salient features of the Platinum Jubilee Pension Fund are that
a separate fund is created for the purpose of payment of pension and the
same is vested and controlled by the trustees; the eligible person should
become member of the fund on an application submitted by him, the pension
is payable during the life time of the member and in the event of demise of
the member (retired workman), the pension at a stipulated rate is payable to
D the widow or to a beneficiary nominated by member in case of an unmarried
or widower person. The ceiling limit has been raised to Rs. 400 per month.
Thus, the Platinum Jubilee Pension Fund is undoubtedly much more beneficial
to the retired workmen. At this juncture, we may notice that there has been
a controversy on the question whether the pension scheme introduced in
E 1988 is in substance a new scheme or it is a revised or liberalized scheme.
But, it is unnecessary to resolve that issue.

The learned counsel for the appellants has reiterated the contentions
advanced before the Industrial Tribunal and the High Court in the connected
matter. While accepting that Article 14 as such has no application because j

p the Company-ITC Ltd. is not a 'State' or 'ether Authority', the counsel,
however, urged that on the analogy of Article 14, the relevant clauses in the
settlement are to be held to be arbitrary, unjust and irrational, that the
prescription of cut-off date i.e. 24.8.1986 which has the effect of denying
greater benefits under the scheme to the workmen who retired before that
date is equally arbitrary, discriminatory and unjust and therefore the settlement
G entered into on I 0.4.1988 cannot defeat the legitimate rights of the workmen
who retired before 24.3.1986. It is further submitted that all the workmen
drawing pension under the Company's Rules settlements belong to one class Y -
and there cannot be sub-classification amongst them by treating the workmen
who retired between 24.8.1986 and I 0.4.1988 as a different class. It is argued
H that when the benefit is given to the workmen who retired within the two
I.T.C. LTD. WORKERS WELFARE ASSN. v. MGT. OF I.T.C. LTD. [REDDl,J.] 719

dates afore-mentioned, the same benefit ought to have been extended at least A
to those who retired after the date of the settlement of 1982 i.e. 28.4.1982.
It is then contended that the date 24.8.1986 has been fixed arbitrarily and the
Management's contention that it coincided with the date of completion of 75
years of Company's existence is factually incorrect, in as much as 75 years
would expire by 24.8.1985, the Company having been incorporated on
24.8.1910. It is also submitted that notwithstanding the settlement which B
according to the appellant's counsel is unjust and discriminatory, all the
workmen retiring after 24th April, 1982, are entitled to the benefit of the
Platinum Jubilee Pension Scheme.

The learned Senior counsel for the respondent-Company while drawing
support from the reasoning and conclusions of the Division Bench in the case C
reported in 1997 1 PLJR 934, has laid considerable stress on the fact that the
employees of the Company - existing or retired - cannot invoke Article 14
and they as well as the Management and other workmen are only governed
by the provisions of the Industrial Disputes Act. The settlement which was
entered into under Section 12(3) as a result of conciliation proceeding was D
binding on all the workmen and no workman much less any individual
workman or group of workmen can challenge the same, especially after the
recognised Union which espoused the cause of workmen and participated in
the proceedings before the Tribunal, chose to accept the award. The learned
senior counsel pointed out that the second petitioner is also a member of the
recognised Union and it is not open to him to assail the settlement or the E
award. He was not even the person who filed the Writ Petition in the High
Court. The present SLP filed after the delay of 460 days is liable to be
dismissed in /imine on the ground of unsatisfactory explanation for the delay.
On the facts of the case highlighted by'1he Tribunal, there is no basis to hold
that settlement is ex facie, unjust or arbitrary. Giving the benefit to the F
employees who retired about two years prior to the date of settlement does
not invalidate the settlement on any ground known to law, but on the other
hand, it is the concession shown by the Management on the occasion of
celebrating Platinum Jubilee. It is further submitted that one clause in the
settlement cannot be legitimately assailed and the settlement has to be viewed
as a whole. When the settlement as a whole, has not been attacked as unfair G
or ma/a fide, it is not open to the Union much less to the individual workmen
-,1 who are not parties to assail one clause in the 3ettlement dealing with the
pension. It is submitted that an overall view has to be taken when the question
·of validity of settlement is put in issue.

Before proceeding further, we shall advert to the findings of the Industrial H
......

720 SUPREME COURT REPORTS [2002] I S.C.R.

A Tribunal. At the outset, the Tribunal overruled the contention of the
Management that the reference was without jurisdiction for the reason that
the retired employees on whose behalf the dispute was raised are not workmen. ). -
The learned Presiding Officer of the Tribunal then observed that all the issues
including the one relating to life time pension with effect from the particular
date were discussed threadbare by the office-bearers of the Union, the
B Negotiating Committee of the Union, the Management representatives and
the Joint Labour Commissioner and then the settlement was arrived at. The
cut-off date i.e. 24.8.1986 was not picked up arbitrarily. It was the date on
which the Company completed 75 years of its existence. The Tribunal after
having referred to the various pronouncements of this Court then observed
C that the cut:off date was introduced after due deliberations and no material
has been placed by the Union to show that the fixation of cut-off date was
arbitrary or mala fide. Earlier the Tribunal clarified that the letter addressed
by the Conciliation Officer-cum-Labour Commissioner subsequent to the
settlement cannot be considered to be a binding direction but it was only an
appeal to the Management to take a compassionate view in the matter of
D extending benefits to other retired persons.

As already noticed, the learned single Judge affirmed the award of
Tribunal and dismissed the Writ Petition filed by the 1st Petitioner herein
following the earlier Division Bench judgment reported in ITC Ltd. v. State
E of Bihar, (1997) 1 PLJR 934. To complete the narration, it is necessary to
refer to the views expressed by the Division Bench in that case. The learned
Judges concentrated on the issue whether the fixation of cut-off date was
irrational and arbitrary, and answered the question in the negative. In reaching
such conclusion, the High Court inter alia took into account the fact that the

F
scheme emanating from the settlement dated 10.4.1988 was entirely a new
scheme and therefore, the ratio of the decision in Nakara 's case has no
-·
application. "The present case is not one of liberalization of the existing
pension scheme, but one of the introduction of a new scheme'', the High
Court observed. Treating the Platinum Jubilee day as the cut-off date was
held to be not an arbitrary decision.

G In answering the reference the industrial adjudicator has to keep in the
forefront of his mind the settlement reached under Section 12(3) of the
Industrial Disputes Act. Once it is found that the terms of the settlement
operate in respect of the dispute raised before it, it is not open to the Industrial
Tribunal to ignore the settlement or even belittle its effect by applying its
H mind independent of the settlement unless the settlement is found to be
J
I.T.C. LTD. WORKERS WELFARE ASSN. v. MGT. OFI.T.C. LTD. [REDD!.].] 721

contrary to the mandatory provisions of the Act or unless it is found that A
there is non-conformance to the norms by which the settlement could be
subjected to limited judicial scrutiny. This is infact the approach of the Tribunal
in the instant case. The High Court which examined the issue from a different
angle as well was, in our view, justified in affirming the award of the Tribunal.

As the settlement entered into in the course of conciliation proceedings B
assumes crucial importance in the present case, it is necessary for us to
recapitulate the fairly well settled legal position and principles concerning the
binding effect of the settlement and the grounds on which the settlement is
vulnerable to attack in an industrial adjudication. Analysing the relative scope
of various clauses of Section 18, this Court in the case of Barauni Refinery C
Pragatisheel Shramik Parishad v. Indian Oil Corporation Ltd., (1991 (1)
sec 4) succinctly summarized the position thus:-
"Settlements are divided into two categories, namely, (i) those arrived
at outside the conciliation proceedings (Section 18(i) and (ii) those
arrived at in the course of conciliation proceedings (Section 18(3)). D
A settlement which belongs to the first category has limited application
in that it merely binds the parties to the agreement. But a settlement
arrived at in the course of conciliation proceedings with a recognised
majority union has extended application as it will be binding on all
workmen of the establishment, even those who belong to the minority
union which had objected to the same. To that extent it departs from E
the ordinary law of contract. The object obviously is to uphold the
sanctity of settlements reached with the active assistance of the
Conciliation officer and to discourage an individual employee or a
minority union from scuttling the settlement. There is an underlying
assumption that a settlement reached with the help of the conciliation F
Officer must be fair and reasonable and can, therefore, safely be
made binding not only on the workmen belonging to the union signing
the settlement but also on the others. That is why " settlement arrived
at in the course of conciliation proceedings is put on par with an
award made by an adjudicatory authority."
G
In General Manager, Security Paper Mill v. R.S. Sharma, (AIR) 1986 SC
~ -i 954), E.S. Venkataramiah, J. Speaking for the Court explained the rationale
behind Section 18(3) thus :-

"Even though a Conciliation Officer is not competent to adjudicate
upon the disputes between the management and its workmen he is H
722 SUPREME COURT REPORTS (2002] I S.C.R.

A expected to assist them to arrive at a fair and just settlement. He has
to play the role of an adviser and friend of both the parties and should
see that neither party takes undue advantage of the situation. Any
settlement arrived at should be a just and fair one. It is on account of
this special feature of the settlement sub-sec. (3) of S.18 of the
Industrial Disputes Act, 194 7 provides that a settlement arrived at in
B the course of conciliation proceeding under that Act shall be binding
on (i) all parties to the industrial dispute, (ii) where a party referred
to in clause (i) is an employer, his heirs, successors, or assigns in
respect of the establishment to which the dispute relates and (iii)
where a party referred to in clause (i) is comprised of workmen, all
c persons who were employed in the establishment or part of the ....
establishment as the case may be to which the dispute relates on the
date of the dispute and all persons who subsequently become employed
in that establishment or part. Law thus attaches importance and sanctity
to settlement arrived at in the course of a conciliation proceedi~g
since it carries a presumption that it is just and fair and makes it
D binding on all the parties as well as the other workmen in the
establishment or the part of it to which it relates as stated above." ..
Admittedly, the settlement arrived at in the instant case was in the
course of conciliation proceedings and therefore it carries a presumption that
E it is just and fair. It becomes binding on all the parties to the dispute as well
as the other workmen in the establishment to which the dispute relates and
all other persons who may be subsequently employed in that establishment.
An individual employee cannot seek to wriggle out of the settlement merely
because it does not suit him.

The next principle to be borne in mind is that in a case where the
F validity of the settlement is assailed, the limited scope of enquiry would be,
whether the settlement arrived at in accordance with sub-section(!) to (3) of
S.12, is on the whole just and fair and reached bonafide. An unjust, unfair
or malafide settlement militates against the spirit and basic postulate of the
agreement reached as a result of conciliation and, therefore, such settlement
G will not be given effect to while deciding an industrial dispute. Of course, the
issue has to be examined keeping in view the presumption that is attached to
the settlement under Section 12(3 ).

In Herbertsons Limited v. The Workmen, [1976] 4 SCC 736, this Court
called for a finding on the point whether the settlement was fair and just and
H it is in the light of the findings of the Tribunal that the appeal was disposed
}
l.T.C. LTD. WORKERS WELFARE ASSN. v. MGT. OF l.T.C. LTD. [REDDI, J] 723
of. Goswami, J. speaking for the three-Judge Bench made it clear that the A
settlement cannot be judged on the touch stone of the principles which are
.+ relevant for adjudication of an industrial dispute. It was observed that the
Tribunal fell into an error in invoking the principles that should govern the
adjudication of a dispute regarding dearness allowance in judging whether
the settlement was just and fair. The rationale of this principle was explained B
thus:-

"There may be several factors that may influence parties to come to
a settlement as a phased endeavour in the course of collective
bargaining. Once cordiality is established between the employer and
labour in arriving at a settlement which operates well for the period C
that is in force, there is always a likelihood of further advances in the
shape of improved emoluments by voluntary settlement avoiding
friction and unhealthy litigation. This is the quintessence of settlement
which courts and tribunals should endeavour to encourage. It is in
that spirit the settlement has to be judged and not by the yardstick
adopted in scrutinizing an award in adjudication." D
The line of enquiry whether settlement was unfair and unjust in K.C.P.

- Ltd. v. Presiding Officer and Ors., [1996] 10 SCC 446, was adopted by a
three-Judge Bench of this Court speaking through Majmudar, J. It was observed
at paragraph 21 that "under these circumstances, respondents 3 to 14 also
would be ordinarily bound by this settlement entered into by their E
representative Union with the Company unless it is shown that the said
settlement was ex facie, unfair, unjust or mala fide". The Court came to the
conclusion thatthe settlement cannot be characterised to be unfair or unjust.
It was further observed that "once this conclusion is reached it is obvious that
. another industrial dispute should have been disposed of in the light of this F
settlement". It was reiterated i'l1 the case of Mis. Tata Engineering and
locomotive Co. ltd. v. Their Workmen, AIR ( 1981) SC 2163, that "a settlement
cannot be weighed in any golden scales and the question whether it is just
and fair has to be answered on the basis of principles different from those
which come into play when an industrial dispute is under adjudication".
Earlier, it was observed :- G
"If the settlement had been arrived at by a vast majority of the
concerned workers with their eyes open and was also accepted by
them in its totality, it must be presumed to be just and fair and not
liable to be ignored while deciding the reference merely because a
small number of workers (in this case 71, i.e., 11.18 per cent) were H
~-
724 SUPREME COURT REPORTS (2002] I S.C.R.

A not parties to it or refused to accept it, or because the Tribunal was
of the opinion that the workers deserved marginally higher emoluments ~

~
than they themselves thought they did."

Another principle which deserves notice is the one firmly laid down in
Herbertsons case (supra). It was emphasised that the settlement has to be
B taken as a package deal and it should not be scanned 'in bits and pieces' to
hold some parts good and acceptable and others bad. Then, it was observed
"unless it can be demonstrated that the objectionable portion is such that it
-
completely outweighs all the other advantages gained, the Court will be slow
to hold a settlement as unfair and unjust. The settlement has to be accepted
or rejected as a whole and we are unable to reject it as a whole as unfair or
"
c unjust."

Having noted that the only objectionable feature of the settlement as
found by the Tribunal was reduction of dearness allowance from cent per
cent to 85 per cent, it was held that, that part of the settlement cannot be held
to be invalid or inoperative. This proposition laid down in Herbertsons case
D was reiterated in K.C.P. Ltd. case (supra), approvingly citing the said decision.
The passages in Herbertsons case were quoted in extenso and approved by
the three-Judge Bench in TELCO case (supra) as well.
'"'
What follows from a conspectus of these decisions is that a settlement
which is a product of collective bargaining is entitled to due weight and
E consideration, more so when a settlement is arrived at in the course of
conciliation proceeding. The settlement can only be ignored in exceptional
circumstances viz. if it is demonstrably unjust, unfair or the result of ma/a
fides such as corrupt motives on the part of those who .were instrumental in
~-
effecting the settlement. That apart, the settlement has to be judged as a ...
F whole, taking an overall view. The various'• terms and clauses of settlement
cannot be examined in piecemeal and in vacuum.

Viewed in the light of these principles, it cannot be said that the
settlement in the present case which is otherwise valid and just suffers from
any legal infirmity merely for the reason. that one of the clauses in the
G settlement extends the benefits of life pension scheme only to the employees
retiring after a particular date i.e. 24.8.1986. Exclusion of workmen retiring
before that date is no ground to characterise the settlement as unjust or >-- -
unfair. Of course, the allegations of ma/a fides such as corrupt motives have
not been levelled against anyone and that aspect becomes irrelevant here.

H The High Court proceeded to consider whether even that particular
}
l.T.C. LTD. WORKERS WELFARE ASSN. v. MGT. OF I.T.C. LTD. [REDD!, J.) 725
clause in the settlement dealing with the pension is per se arbitrary or A
discriminatory and reached a conclusion that it is not so for the reason that
a new scheme for pension has been introduced by the impugned settlement
and that the question of arbitrariness in fixing the cut-off date does not
therefore arise. The High Court further held that the fixation of cut-off date
for the purpose of entitlement of life pension cannot be said to be arbitrary
or irrational as such fixation becomes imperative from financial point of view B
and moreover the date coincided with the Platinum Jubilee Celebrations of
the Company. The date was not 'picked up from the hat', the High Court
observed. The High Court approached the issue more from the angle of
Article 14 and referred to the decisions in which the State's action in making
the classification for the purpose of extending the pensionary benefits or C
additional benefits fell for consideration of this Court. Strictly speaking, such
approach is not apt and appropriate. The present case is one where Article 14
cannot be applied as the respondent is not 'State' or 'other Authority'. On
this, there is practically no dispute. If so, the approach should be as we
indicated earlier; that is to say, whether the settlement can be said to be
unjust, unfair or vitiated by malafides. No malafides is imputed to anyone. D
What remains to be considered is whether it is fair and just, viewed from a
• broader angle and taking a holistic view of the matter. It is true that certain
considerations germane to Article 14 may also be germane while deciding
the issue whether the settlement is just and fair. But, it does not follow that
the doctrine of classification and the principles associated with it should be E
projected wholesale into the process of consideration of justness and fairness
of the settlement. There may be some overlapping and there may be some
facets which apply in common to determine the crucial issue whether the
settlement on the whole is just and fair, but that is not to say that the settlement
is liable to be tested on the touchstone of Article 14, more so when it has no
application in the instant case. Keeping this distinction in mind and considering F
the grounds of attack on the particular clause of settlement, we are unable to
hold that it is vulnerable to challenge on any well-recognised grounds. The
facts on record do not establish that the settlement which was reached was
palpably unjust or unfair from the point of view of the entire body of workmen.
The preponderence of circumstances and the material on record do not in our G
view, displace the presumption attached to the settlement arrived at in the
course of conciliation.

Firstly, it is to be borne in mind that there was no challenge at any time
to any of the terms of the settlement other than the clause relating to pension
in so far as it confines the benefit of life-long pension only to those who H
726 SUPREME COURT REPORTS [2002] l S.C.R.

A retire on or after 24.08.1986. Secondly, we must give due weight to the fact
that the settlement was reached as a result of collective bargaining and with
the assistance of Conciliation officer. Invariably, there would be an element
..
of give and take in the deal leading to the settlement. Granting the benefit of
life-long pension prospectively or with limited retro-active effect does not
make the settlement unjust or unfair. It is certainly beneficial to the workmen
-
~-

B in service and those yvho retired few months earlier. The mere fact that the
Management did not go the whole hog to extend the benefit to all the retired
employees does not impart an element of unjustness or unreasonableness to
the settlement. Financial implications apart, the benefits granted to workmen

c
under various other clauses of settlement have to be kept in view. This
particular clause relating to pension cannot be considered in isolation. The ..
learned senior counsel for the petitioners argued that there was no justification ...
in making a sub-classification amongst the retired employees by giving the
benefit to those who retired only between 24.08.1986 and the date of
settlement. In our view, conferment of such additional benefit to workmen
who retired after the date of platinum jubilee celebration and before the date
D of culmination of settlement, far from making it unjust or irrational,
tantamounts to extending benefit to some more workmen who would not
have got it otherwise, if the decision was implemented prospectively. JI
Apparently, such decision was taken to arrive at an amicable settlement and
to comply with the demands of the workmen to the. extent feasible and
...
practicable. The argument that either all the retired employees should be
E
given the benefit or none at all cannot cut ice if the principles of collective
bargaining and justness of the settlement viewed as a whole is kept in view.
There is nothing which is palpably unjust or irrational in giving the benefit
only to those who retired during and after the platinum jubilee year. Though
there was some dispute as to the correctness of the date on which the platinum ._
F jubilee falls, no material has been placed before us excepting the date of
incorporation of the Company to establish the version of the appellants in
this regard. Picking up that date by going a little backwards from the date of
settlement cannot be regarded as a whimsical or arbitrary step, more so when
it was done with the consent of large majority of workmen. The Tribunal
while adjudicating the dispute and the High Court while exercising its
G
jurisdiction under Art. 226/227 should be circumspect and cautious in
disturbing the terms of settlement founded on collective bargaining and
conciliation. The adjudicator of industrial dispute could not have directed the It- -
benefit to be extended to all the retired employees by substituting its own
views to those reflected in the settlement, on an application of the usual
H principles governing industrial adjudication.
}-
ITC.LTD WORKERS WELFARE ASSN. "· MGT. OF l.T.C. LTD. [REDD!, J.] 727
Another factor to be taken into account is that the recognised union of A
workmen which espoused the cause of the retired employees and contested
the issue before the Industrial Tribunal did not pursue the matter further
obviously because they felt that in the larger interests of maintaining industrial
hannony and peace, the matter should be left off at that stage. A member of
that recognised union had taken up the issue before the High Court.
B
Considering all these factors, we find no legal infinnity in the award of
the Tribunal which has been affirmed by the High Court and we say so
without going into the subtle question whether the scheme is•a new one for
all practical purposes or only a revision or liberalization of the pre-existing
pensionary benefits. C
In the view we have taken it is not necessary to dwell on the contention
raised by the learned senior counsel for the respondent regarding the
maintainability of the writ petition and SLP at the instance of the appellants.

We see no merit in the appeal and it is hereby dismissed. No costs. D
S.V.K.l. Appeal dismissed.

...

-;