Holding

The settlement under Section 12(3) of the Electricity Supply Act, 1948 is valid and its cut‑off date does not constitute discrimination prohibited by Article 14.

Summary

The respondents, who retired on 30 April 1990, sought parity in pension and terminal benefits with employees retiring on or after 1 July 1990, arguing that the corporation's pay‑scale revision dated 1 July 1990 discriminated against them. The corporation relied on a Memorandum of Settlement executed under Section 12(3) of the Electricity Supply Act, 1948, which applied prospectively to employees on the rolls as of 1 July 1990. The High Court held that the respondents were discriminated against and allowed their writ petition; the corporation appealed. The Supreme Court observed that the settlement was not challenged on its fairness or legality and that a settlement reached under the Act binds all workers unless shown to be ex facie unfair, unjust or mala fide. Consequently, the cut‑off date was held to be a valid, non‑arbitrary criterion and not violative of Article 14. The appeal was allowed, setting aside the High Court's order.

Issues considered

Whether the exclusion of employees who retired before 1 July 1990 from the benefits of the settlement violates Article 14 of the Constitution.
Whether a settlement made under Section 12(3) of the Electricity Supply Act, 1948 can be challenged on the ground of being unfair or unjust.
Whether the cut‑off date of 1 July 1990 for the application of the revised pay scales is arbitrary or discriminatory.

Legislation cited

Electricity (Supply) Act, 1948s. 12(3), s. 78(C)
Industrial Disputes Act, 1947s. 12(3)

Subjects

Article 14discriminationsettlementElectricity Supply Actpensionterminal benefitsindustrial disputebinding settlementpay scale revision

Judgment

A TRANSMISSION CORPN., A.P. LTD. AND ORS.
v.
P. RAMACHANDRA RAO AND ANR.

APRIL 17, 2006

B [ARIJIT PASAYAT ANDTARUN CHATTERJEE, JJ.]

Constitution of lndia--Article 14-Electricity Supply Act, 1948--
Sections 12(3) and 78(C)--Revision of pay scales of employees with effect
C from I. 7.1990 in pursuance to a Memorandum of Settlement- -Respondents,
who retired on 30. 4.1990, filed Writ Petition to ftx their pension and 01her
terminal benefits at par with other employees who retired on or ajier
1.7.1990-High Court allowed the Writ Petition on the ground of
discrimination-Correctness of-Held, the settlement cannot be said to be
unfair and unjust since the respondents did not challenge the moJulity of the
]) settlement.
,
Respondents retired on 30.4.1990 after attaining the age of
superannuation. Pay scales of the employees of appellant Corporation were
revised with effect from 1.7.1990. The pay scales were revised in pursuance
to a Memorandum of Settlement. The revised pay scales permitted grant of
E three annual increments beyond the time scale in regard to those who had
reached or crossed the maximum pay as on 1.7.1986.

The respondents filed Writ Petition before High Court to direct the
appellants to fix their pension and other terminal benefits at par with other
F employees who retired on or after 1.7.1990 and to pay all the arrears of
pensions and other terminal benefits. The respondents contended that the
appellants revised the pay scales previously with effect from 1.4.1981 which
was only for a period of 4 years and the same was required to be revised with
effect from 1.4.1985; that the appellants revised it only with effect from
1.7.1986. Hence the respondents submitted that the classification done was
G violative of Article 14 of the Constitution of India. The appellants contested
the Writ Petition contending that the scheme of revised pay scales is applicable
only to those who were on its rolls as on 1.7.1990 and that since they retired
before that d<1te, the scheme is not applicable to them. Single Judge of the
High Court allowed the Writ Petition of the respondents by holding that the

H 18
TRANSMISSION CORPN. v. P. RAMACHANDRA RAO 19

respondents have been discriminated. The Writ Appeal filed by the appellants A
was dismissed by Division Bench of the High Court.

In appeal to the Court, the appellants contended that the respondents
did not challenge the settlement scheme but only challenged the rationale of
fixing the cut off date with effect from 1. 7.1990 which is untenable.
B
Allowing the appeal, the Court

·-; HELD: 1.1. The Memorandum of Settlement clearly shows that the period
of settlement was from 1. 7.1990 to 30.6.1994. The settlement was made under
Section 12(3) of the Electricity Supply Act, 1948. There was no challenge to
the settlement which was the foundation for the Board's decision. No finding C
has been recorded by either the Single Judge or the Division Bench of the
High Court that the modality adopted is wrong. Under the Act, consequences
flow for failure to implement the award, settlement or agreement. There is
no dispute that the Board's decision is prospective. There is also no challenge
to the legality of the Board's decision on the ground that there is no rationale D
--1 for fixing the date, except saying that it should have been done from an earlier
date i.e. 1985 and not from 1.7.1986 as done earlier. Exclusion of workmen
retiring before the date fixed is no good ground to characterise settlement as
unjust and unfair. [22-D, H; 23-A, B; 24-EI

1.2. A settlement cannot weigh in golden scales and the question whether E
it is just and fair has to be answered on the basis of principles different from
those which comes into play when an industrial dispute is under adjudication.
If the settlement had been arrived at by a vast majority of 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 made under the Act merely because a small number of workers F
were not parties to it or refused to accept it. 125-D-EI

Herbertsons ltd v. Workmen, [197614 SCC 736; K.C.P. ltd. v. Presiding
Officer, [1996110 SCC 446; Tata Engg. and locomQlive Co. ltd. v. Workmen,
[19811 4 SCC 627; ITC Ltd. Workers' Welfare Association and Anr. v. G
Management of ITC ltd. and Anr., [20021 3 SCC 411; Barauni Rejine1y
Pragatisheel Shramik Parishad v. Indian Oil Corpn. Ltd., [ 1991 I 4 SCC 4
and D.S. Nakara and Ors. v. Union of India, [1983) I SCC 305, referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7378 of2003.
H
20 S\IPREME coL:RT REPORTS [2006] SUPP. I S.C.R.
\.._.
A From Order and Judgment dated 10.10.2001 of the High Court of
Judicature Andhra Pradesh at Hyderabad in W.A. No. 1411/2001.

Ashuk Grover and Rakesh K. Sharma for the Appellants.

K. Murthi Rao, K. Radha and Anjani Aiyagari for the Respondents.
B
The Judgment of the Court was delivered by

ARIJIT PASAYA T, J. Challenge in this appeal is to the judgment rendered
by a Division Bench of the Andhra Pradesh High Court dismissing the writ
appeal filed under Clause 15 of the Letters Patent. Order of learned Single
C Judge allowing writ petition filed by the respondents was affirmed.

Background facts in a nutshell are as follows:

Respondents retired from the services of the Andhra Pradesh State
Electricity Board (in short the 'Boa;d') on 30.4.1990 after attaining the age of
D superannuation. The Transmission Corporation of Andhra Pradesh Ltd. (in
short the ·corporation'). is the succes~or company of the Board which came
into existence with effoct from 1.2.1990 by virtue of the Andhra Pradesh State
Electricity Reforms Act, 1998 (in short the 'Reforms Act'). The pay scales of
the employees were revised with effect from 1.7 .1990 by which time the
respondents herein were drawing maximum pay in the concerned scale. The
E rational of fixing the date with effect from 1. 7 .1990 was that employees who
retired prior to l.7.1990 are entitled to.D.A. at the rate of 38% on the pension
whereas the D.A. payable to pensioners retired on or after I. 7 .1990 is 12.4%,
but not before the date of issue of the order. The revised pay scales permitted
grant of three annual increments beyond the time scale in regard to those who
F had reached or crossed the maximum pay as on 1. 7.1986. However, in respect
of the respondents herein the additional amount was shown as personal pay
and the stagnation increments were adjusted towards the said additional
amount.

QuestiOning correctness of the action of the Corporation and its
G functionaries the respondents herein filed writ a petition. Prayer was to direct
the appellants herein to fix their pension and other terminal benefits at par
with other UDCs. retired on or after I. 7 .1990 and to pay all the arrears of
pensions and other terminal benefits. Learned Single judge having regard to
the intended purpose of the scheme held that the respondents have been
H discriminated while calculating the pension on the ground that they had
TRANSMISSION COR.PN. v. P. RAMACHANDRA RAO [PASAYAT, J.] 21

retired prior to the introduction of the scheme. Stand of the employer in A
essence was that the Board's proceedings Ms No. 481 dated 4.2.1991 had
application only to.those who were on its rolls as on 1.7.1990. In view of the
fact that the respondents retired on 30.4.1990 the said scheme has no
application to them .. In any event the scheme was introduced keeping in view
the settlement dated 29.1.1991 entered into between the Wage Negotiation B
Committee and the Board before the Joint Commissioner of Labour and State
Conciliation Officer in tenns of Section !2(3) of the Industrial Disputes Act,

, 1947 (in short the 'Act') and the same cannot be the subject matter of
interpretation in the writ petition. In the Appeal its stand before learned Single
Judge was reiterated before the Division Bench. Stand of the writ petitioners
»'as that the learned s,ingle Judge ~as justified in its conclusio~. ' . c
Th'e Division Bench upheld the view taken by the learned Single· Judge.
Pfacing reliance on the decision of this Court in D.S. Nakdra & Ors. v. Union
of India,' [ 1983] I SCC 305 it was held that the cut off date fixed was
discriminatory.
D
In support of the appeal learned counsel for the appellant highlighted
that the learned Single Judge and the Division Bench had not considered the
issues in their proper perspective. D.S. Nakara's case (supra) has no application
to the facts of the present case. There was no challenge to the settlement and
the only challenge relating to rational of fixing the cut off date with effect from
l. 7.1990. The conclusion that the respondents were entitled to the stagnation E
increment deducting the same from the personal pay is clearly tenable.

Learned. counsel for the respondents on the other .hand supported the
judgment of learned Single Judge as affirmed by the Division Bench .

A brief refere11ce to. the factual position would be necessary. Relevant F
portion of the Board's proceedings dated 4.2.1991 are as follo~s: . . . ·

"The scales of pay of Office Staff, 0 & M Staff, Construction
Staff, Medical ~taff, Fire Fighting Staff, Security Staff and Teaching
Staff etc. were revised with effect from 1.7.86 in the B.P. first read G
. above ·as subsequently amended, as per the negotiated settlements
with the employees Unions. The said settlements expired on 30.6.90."

As result.the earlier settlement expired on 30.6.1990 the paras 5 & 6 are
also relevant and they read as follows : .

H
22 SUPREME COURT REPORTS [2006) SUPP. I S.C.R.

A "The A.P.S.E. Board also directs that the amount of stagnation
increments not released earlier in 1986 pay scales but adjusted against
P. P. shall now be released on 30.6.1990 but effect shall be given from
I. 7.1990 or from the date of going over to the revised scales, as the
case may be, this amount will be taken into account for the purpose
of fixation of pay in the revised pay scales.
B
The date of option for the revised pay scales shall be 1.7.1990 or the
date on which an employee earns his next increment in the existing
scale of pay."

The notification issued on 4.2.1991 is in exercise of powers conferred
C under Section 79(C) of the Electricity Supply Act, 1948, which notified Boards'
regulations. It is stated at Para I (ii) that the regulations shall be deemed to
have come into force with effect from 1.7.1990. In Ciause2(iv) it is stated that
"Pensioner" means an employee who retired on or after I .7 .1990 but before
the date of issue of the order. Grievance of the writ petitioners basically was
D that the persons who retired from service after 1.7 .1990 were drawing more
pension than the writ petitioners. Learned Single judge referred to the
Memorandum of Settlement but did not attach much importance to it. The
Memorandum of Settlement clearly shows that the period of settlement was
from 1.7.1990 to 30.6.1994. Claim of the writ petitioners was that the employer
and its functionaries were liable to fix the pension and other terminal benefits
E of the writ petitioners at par with the other UDCs retired on or after 1.7 .1990.
As noted above, the grievance was that the said category of persons was
drawing more pensions. It was pointed out that the revision of pay scale in
BP Ms. No. 878 dated 5.10. I 98 I effective from I .4.198 I was only for a period
of 4 years and the same. was required to be revised after expiry of the period
F i.e. with effect from 1.4.1985. The Board instead of revising the pay scales
with effect from I .4.1985 revised the same with effect from 1.7 .1986. It was,
therefore, submitted that the classification as done was violative of Article 14
of the Constitution of India, 1950 (in short the 'Constitution').

Learned Single Judge and the Division Bench clearly overlooked the
G fact that there was no challenge to the settlement. Undisputedly, the three
stagnation increments deducted from personal pay have been added to the
basic pay.

There was no challenge to the settlement made under Section 12(3) of
the Act. No finding has been recorded by either learned Single Judge or the
H Division Bench that the modality adopted is wrong. It has to be noted that
TRANSMISSION CORPN. v. P. RAMACHANDRARAO [PASA YAT, .I.] 23
in terms of the Fifth Schedule to the Act under Section 2(ra) as per Sr. No. A
13 consequences flow for failure to implement the award, settlement or
agreement. There is no dispute that the Board's decision is prospective. There
is also no challenge to the legality of the Board's decision on the ground that
there is no rational for fixing the date, except saying that it should have been
done from an earlier date i.e. 1985 and not from 1.7.1986 as done earlier. There B
was no challenge at the stage it was done. The line of enquiry whether
settlement was unfair and unjust has been examined by this Court in several
decisions.
1
In Herbertsons Ltd v. Workmen, [1976] 4 SCC 736 this Court called for
a finding on the point whether the settlement was fair and just and it is in C
the light of the findings of the Tribunal that the appeal was disposed of.
Goswami, J. speaking for the three-Judge Bench made it clear that the settlement
cannot be judged on the touchstone 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 D
was just and fair. The rationale of this principle was explained thus :

"25. 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 E
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 F
adopted in scrutinizing an award in adjudication."

The line of enquiry whether settlement was unfair and unjust in K.C.P.
Ltd v. Presiding Officer, [I 996] 10 SCC 446 was adopted by a three-Judge
Bench of this Court speaking through Majumdar, J. It was observed at SCC
p. 451, paragraph 21 that: G
"Under these circur.1stances, Respondents 3 to 14 also would be
ordinarily bound by this settlement entered into by their representative
Union with the Company unless it is shown that the said settlement
was ex facie, unfair, unjust or ma/a fide."
H
24 SUPREME COURT REPORTS [20061 SUPP. I S.C.R.

A The Court came to the conclusion that the settlement cannot be
characterised to be unfair or unjust. It was further observed that "once this
conclusion is reached it is obvious that the entire industrial dispute should
have been disposed of in the light of this settlement". It was reiterated in the
case of Ta1a Engg. and Locomotive Co. Ltd. v. Workmen, [1981) 4 SCC 627.
that :
B
·'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."

C Earlier, it was observed :

"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
D small number of workers (in this case 71 i.e. 11.18 per cent) were 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."

E These aspects were highlighted in ITC Lid. Workers' Welfare Association
and Anr. v. Managemenl of ITC Lid. and Anr., [2002) 3 SCC 411.

Exclusion of workmen retiring before the date fixed is no good ground
to characterize settlement as unjust or unfair. In fact in the instant case there
is no challenge to the legality of the settlement.
F
As the settlement entered into in the course of conciliation proceedings
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
G of various clauses of Section 18, this Court in the case of Barauni Refinery
Pragatisheel Shramik Parishad v. Indian Oil Corpn. ltd., [1991] I SCC 4
succinctly summarized the position thus:

"Settlements are divided into two categories, namely, (i) those arrived
at outside the conciliation proceedings [Section I 8(i)) and (ii) those
H arrived at in the course of conciliation proceedings [Section 18(3)]. A
TRANSMISSION CORPN. v. P. RAMACHANDRA RAO [PASAYA T, J.] 25

settlement which belongs to the first category has limited application A
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
~orkmen of the establishment, even those who beiong to the n1inority
union which had objected to the same. To that extent it departs frotn
the ordinary law of contract. The object obviously is to uphold the B
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
Officer must be fair and reasonable and can, therefore, safely be made C
binding not only on the workmen belonging to the union signing the
settlement but also on the others. That is why a settlement arrived at
in the course of conciliation proceedings is put on par with an award
• made by an adjudicatory authority."

As observed by this Court in Tata Engineering's case (supra) a settlement D
cannot weigh 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
comes into play when an industrial dispute· is under adjudication. If the
settlement had been arrived at by a vast majority of concerned workers with
their eyes open and was also accepted by them in its totality, it must be E
presumed to be just and fair and not liable to be ignored while deciding the
reference made under the Act merely because a small number of workers were
not parties to it or refused to accept it or because the Tribunal was on the
opinion that the workers deserved marginally higher emoluments than they
themselves thought they did. The decision in Herbertsons ltd. 's case (supra)
was followed. F
\
• As noted above there was no challenge to the settlement which was the
foundation for the Board's decision. A copy of the Memorandum of Settlement
under Section 12(3) of the Act before the Joint Commissioner and Labour and
State Conciliation officer, Government of Andhra Pradesh, Hyderabad was
placed on record. On the basis of the settlement, the Board's decision was G
taken. Paragraph 2 of the proceedings is very significance and read as follows:

"A Wage Negotiation Committee was therefore constituted by the
Board in the B.P. sixth read above. The committee held detailed
discussions with the representatives of the unions and finally reached
H
26 SUPREME COURT REPORTS [2006] SUPP. I S.C.R.

A a negotiated settlement with the recognized union under the code of
discipline on 29.1.1991 before the Joint Commissioner of Labour and
State Conciliation Officer under Section 12(3) of l.D. Act."

Above being the position the judgment of the learned Single judge and
that of the Division bench affirming the same cannot be maintained and are,
B therefore, set aside. The appeal is allowed but in the circumstances no order
as to costs.

B.S. Appeal allowed.