BADRI PRASAD

STATE OF MADHYA PRADESH AND ANOTHER

March 16, 1965

[P. B. GAJENDRAGADKAR, C. J., RAGHUBAR DAYAL AND V. RAMA-

SWAMI, JJ.J

Sale of Goods Act (3 of 1930), s. 20-Auction of cut timber of forest-Delivery-Destruction by fire before removal-Formal contract signed by competent authority later-If property in timbe1"

passed.

The 2nd respondent purchased on 24th December 1956, at a public auction sale held by the Divisional Forest Officer, the cut timber of a couP€ and paid the first instalment of the purchase price

immediately. The appellant stood surety for the payment of the remaining three instalments. The coupe was divided into 4 sections

according to the r11les which were deemed to be part of the contract and the boundary certificates was furnished to the 2nd respondent on 5th February 1957. He began operations in the 1st section on the last week of February, but defaulted in the payment of the 2nd instalment which was due on 1st March 1957, and so, on 25th April the apP€llant and 2nd respondent were informed by the forest authorities, that no further removal of the timber would be allowed, as the value of timber already removed exceeded the a-mount paid.

On 28th April, a fire broke out and the timber sold to the 2nd respondent ceased to exist. On 3rd May 1957, the formal deed of contract, which was signed by the 2nd respondent and the Divisional Forest Officer on 24th December, was signed by the Chief Conservator of Forests, as required by the rules. Since the 2nd respondent had not paid the later instalments proceedings were commenced by the 1st respondent against the appellant, whereupon he filed a suit for restraining the 1st respondent from continuing the proce.edings. The

suit was decreed by the trial court, but dismissed on appeal, by the High Court.

In his appeal to this Court, the apP€llant contended that the 2nd respondent had not been put in possernion of the timber sold, except the portion on the 1st section of the coupe, that there was no transfer of property in the timber and therefore he was not liable to pay

the amounts due on the other 3 instalments, the transfer of property in the timber being a condition precedent to his lfability.

HELD: There was an unconditional contract for the sale of specific goods in a deliverable state, the property in the timber

passed to the 2nd respondent when the contract was made on 24th December 1956 under s 20 of the Sale of Goods Act, 1930, and possession was also given on 5th February 1957. Therefore, the appellant's suit was rightly dismissed by the High Court (391 HJ

The timber was sufficiently identifiable and was therefore specified goods and there was nothing in the contract postponing possession till the other instalments have been paid.

The fact that the contract was signed by the Chi€f Conservator, after fire had broken

out has no effect on the validity of the contract, or on the question of delivery of possession or on the passing of property in the timber.

The instructions in the Forest Manual about execution of contra<ts plainly take h1to the lar:se of time br;. ... ,,,,. .. ,, ·:>

SUPREME COURT REPORTS

[1965] 3 S.C.11.

tion by the lessee and by the competent forest authority, and A therefore, the date on which the Chief Conservator signed had not any real effect on the actual date on which the sale of the timber took place. It was also with'n the realm c.f possibility that the timber might be lost on account of fire or other risk, before the contract was formally signed. The sale of the timber to the 2nd respondent was therefore final on 24th December, the date of sale, subject to the acceptance of his b'.d by the competent authority. [387 E-H; B

388 F; 393 A-BJ

Williams v. North China Instlrance Co., L.R. (1876)! C.1".D. 757, applied.

Rule 8 of the Forest Contract Rules empowers the Divisional Forest Officer to stop the removal of the timber en his finding that the value of the timber already removed exceeded the amount of instalments pa'd, But, that would not amount to reserving a right of disposal in the State, because, the rules provide that though ordinarily the timber should be sold for cash payment in full, payment in instalments could be cons'dered as payment in full, if a right in accordance with r. 8 is reserved. When a contractor is deemed to have paid in full the price, there could be no occas'on fer the Government to reserve a right of d'sposal. The proviscon in r. 8 is only in pursuance of the statutory provision in s. 83 of the Forest Act. 1927, which provides that when any mcney is payable for or in respect of any forest produce, the amount thereof shall be a first charge. on such produce, and that such produce may be taken possession of by a Forest Officer, until such amount has been paid. [390 H-391 DJ

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 672 of 1964.

Appeal by special leave from the judgement and decree dated October 1962 of the Madhya Pradesh High Court in First Appeal No. 8 of 1960.

C. B. Agarwa/a, W. S. Bar/ingay and A. G. Ratnaparkhi, for

the appellant.

M. Adhikari, Advocate General f!•r the State of Madhya Pradesh, B. Sen, M. S. K. Sastri, M. N. Shroff, R. P. Kapur for I. N. Shroff, for the respondent No. 1.

The judgment of the Court was delivered by Raghubar Dayal, J. This appeal, by special leave, arises out of a suit instituted by the appellant for a declaration that he was not liable to pay a certain amount originally due from defendant-respondent No. 2 and for the issue of a permanent injuction restraining the State Government, Madhya Pradesh, defendantrespondent No. 1 from continuing the proceedings for the recovery of the amount or for starting any fresh proceedings. The suit was decreed by the Trial Court but, on appeal, the High Court reversed the decree and dismissed the appellant's suit.

The admitted facts of the case are that on December 24, 1956, respondent No. 2 purchased at the public auction sale held by the Divisional F.orest Officer, Harda, the cut timber and arkat trees of coupe No. 9 Easterri. East Kalibhit Range, in Harda Forest

llADRI PRASAD v. STATE OF MADHYA PRADESH (Raghubar !Jay1d, J.) 383

Division, for Rs. 70,200. The appellant stood surety for the purchaser, viz., respondent No. 2. The purchase price was to be paid in four instalments, according to para 4 of the deed of contract.

Rs. 17 ,600 were to be paid at once and were so paid. The other instalments were due on March 1, May 15 and December 15, 1957.

These instalments were not paid by respondent No. 2 and hence respondent No. 1 took proceedings against the appellant for the recovery of the amount.

According to the terms of the contract, the contractor, respondent No. 2, was to commence his work of collecting and removing the cut timber within 1 month after furnishing a copy of the boundary certificate. This certificate, Exhibit D-1, was furnished on February 5, 1957 and stated that the respondent No. 2 had clearly understood the boundaries of the areas covered by the lease and that he had taken possession of the standing I felled I collected material in the aforesaid coupe as announced at the auction and described. in the said lease and that he was satisfied that the quantity delivered to him agreed substantially with that announced at the auction.

The appellant Badri Prasad signed this certificate as a witness.

The work could continue upto June 30, 1958.

Interest was to be charged at 6;!: per cent per annum in respect of the instalments not paid on the due dates. The removal of the forest produce purchased from the contract areas was to be according to specified routes and, after they had been examined

at the depots specified in clause 5 of the contract dee!. Clauses 5A and 5B of the contract made it incumbent on the forest contractor respondent No. 2 to set apart certain timber for certain purposes to the agriculturists and the residents of the villages till three months before the expiry of the contract. The Forest Contract Rules were deemed to be part of the contract entered into between respondent No. 2 and the State, by clause 6 of the contract.

The formal deed of contract was signed by the Chief Conservator of Forests on May 3, 1957 and the preamble of the deed gives the date of the making of the contract to be May 3, 1957.

The First Schedule to the Contract states :

"The forest produce sold and purchased consists of: All standing trees bearing hammer mark of marginally shown device at base and breast height. All felled trees marked at the butt end and stumps with the device shown in the margin''.

This is signed by the contractor, respondent No. 2 and by the Divisional Forest Officer, Harda Division, dated December 24,

1956. The trace of the coupe sold was signed by respondent No. 2 and the Divisional Forest Officer on November 29, 1956, prior to the actual auction sale. The Third Schedule relating to the out-

384 SuPREME COURT REPORTS tl965) :i S.C.llo

turn register was also signed by respondent No. 2 and by the appellant who stood surety and the Divisional Forest Officer, on December 24, 1956.

The security bond was signed by the appellant on December 29, 1956 and by the Divisional Forest Officer on March 30, 1957 and.was countersigned by the Chief Conservator on May 3, 1957.

The entire coupe whose cut timber was sold to the respondent was divided into four sections A, B, C and D. This was done in accordance with r. 18 of the Forest Contract Rules. This rule provides that the operations carried out in the contract area under a forest contract for the sale of standing trees are divided into two stages (a) cutting and (b) carting. Cutting operations include felling and all processes of conversion etc. without removing it further from the place where it was felled than may be necessary to carry out such processes. Carting operations include all operations for the removal of a felled tree, or its converted products from the place where the tree was felled, whether such removal be to a depot or to a saw mill or other destination. Sub-r. (2) of r. 18 authorizes the Divisional Forest Officer to divide the contract area, shortly termed a coupe, into such number of sections, not exceeding eight, as he may think fit. The Divisional Forest Officer can regulate and confine the operations of the forest contract in accordance with the provisions mentioned in clauses (a) to (c) of that sub-rule. Clause (b) provides that a forest contractor can be allowed to carry out cutting operations first in sections I and 2 of the coupe only and as soon as he begins cutting operations in section 3 he shall be deemed to have surrendered all his rights to the standing trees in section 1 and similar would be the result on his beginning cutting operations in section 4 and so on, till all the sections of the coupe are completed. Clause (c) authorises the forest contractor to begin carting operations from the sections whose trees he has begun to cut and provides that his rights to the forest produce in section 1 cease when he starts cutting operations in section 4, and so on.

The provisions of r. 20 apply to contracts where the trees have been felled by the Forest Department and the felled trees

only were sold to the forest contractor. Sub-r. (3) makes rules 18 and 19 applicable to such contracts in so far as they be applicable.

Sub-r. (2) of r. 20 provides that a forest contractor who has purchased felled trees shall remove all the trees purchased by him under his contract. ·

Respondent No. 2, the contractor, began his operations in section A. of the coupe in the last week of February, 1957. He defaulted m the payment of the second instalment which was due on March 1, 1957 and did not pay that amount ; u, April 25, 1957,

llADRI v.

OF MADlt YA PRADESH (Raglwbar Dayal, J.) 385

though it was demanded several times from him. On March 23,

1957 a notice, Exhibit P4, was issued to him. It stated:

"You are being informed through this notice that the removal of goods from the coupe by you is already in excess of the amount deposited by you in the treasury.

So please send the challan of lhe second instalment as soon as possible by the return load carrier, otherwise your removal of goods would be stopped and a report would be made to the higher authority within two days".

This was duly served on respondent No . 2.

On April 25, 1957 the appellant was told by the forest auth0; rities t\lat no further removal of the forest produce would be allowed 'in view of the default of payment of the second instalment.

The licence book and the transit pass were taken back by the Government Forester, Madanlal Pagare.

Fire broke out in the forest and the cut timber sold to respondent No. 2 was burnt. The report about the loss from fire is Exhibit D2 dated April 29, 1957 and is signed by the contractor and Sheoprasad Parashar, the Forest Guard. As a result of the fire the goods purchased by respondent No. 2 and not removed by then, ceased to exist. He did not pay the amounts due for the 2nd, 3rd and 4th instalments.

The appellant sought to avoid his liability as surety for the non-payment of the amount inter-alia on the ground that the contractor respondent No. 2 had not been put in possession of the cut timber sold to him except of such timber which had been in section A of coupe No. 9, that therefore there had been no transfer of property in the timber sold to him and that he was therefore not liable for paying the amounts due on the 2nd, 3rd and 4th instalments. It was averred by the appellant in paragraph 5(A) of the plaint:

"Thus it was clearly understood on both sides and also explained by the Forest Department officials of defendant No. 1 and which has been all along implicit in the contract as per usual practices of the forest department that the possession of the goods of each respective section will be delivered to the Contractor on payment of each instalment as stated above. It was only on due payment of each instalment that the contractor was to become entitled to remove the goods in pursuance of the licence book supplied to him by the forest department of defendant No.

1 ".

In paragraph 5(B) it was stated:

"That the contractor or his licensee had no right to remove the goods until the same was duly hammer marked by the representative of the said forest department

386 SUl>REME COURT REPORTS [1965] 3 s.c.R.

and until the licence and the transit pass were dulychecked and signed by the Coupe Guard or such other representative as may be present on the spot", Para 5(C) mentioned:

"That the contractor or his men were further liable to carry the forest produce for check and examination of forest Depot-officers of Ziri, Rahetgaon and Timarni established for that purpose and after the cut wood was checked by the Depot Officers, the same. used to be marked with a special hammer mark, and unless that was done it was not lawful for any person to remove timber

brought to the depot". / Respondent No. I admitted what was stated in paras 5(B) & (C) of the plaint. It denied the understanding as averred in para 5(A) and what was alleged in para 5(D) to the effect that it was after the processes mentioned earlier that delivery of the goods was deemed to be given to the forest contractor and was to be at his . disposal.

The main question urged before us is that the property in the cut timber sold and existing in sections B, C and D of the coupe had not passed to the contractor before the fire broke out in the last week of April 1957 and this contention is based on the facts that the goods sold were not specific goods as they had not been hammer-marked, that the goods in sections B, C and D could not be delivered till the 2nd, 3rd and 4th instalments had been paid and that the deed of contract was signed after the fire had taken place. • We may now consider the points urged in support of the contention that the property in the timber of sections B, C and D had not passed to respondent No. 2. The first schedule to the contract describes the property, forest produce sold and purchased, thus:

"All standing trees bearing hammer mark of marginally shown device at base and breast height. All felled trees marked at the butt end and stumps with the device shown in the margin".

It is the case of the plaintiff-appellant that cut trees timber or cut trees were sold. Para 2(A) of the plaint describes the property purchased as 'the cut timber and arkat trees of coupe No. 9'.

Clause (i) of para 2 of the statement of the case filed on behalf of the appellant makes this further clear as it is stated therein that the contract was for the purchase of 'the cut-timber and cutarkat trees'. It appears therefore that the expression about 'all standing trees bearing hammer mark' in the description of forest produce sold was inadvertently omitted to be struck out from the deed of contract though there was no sale of standing trees to respondent No. , 2.

BADRI PRASADV. STATE OF MADHYA PRADESH (R;, ghubar

J.)

Chapter XX of Part IV of Vol. I of the Central Provinces &, Berar Forest Manual (hereinafter shortly termed Forest Manual) gives the rules for the disposal of forest produce. Rule 5 states that before forest produce is disposed of it shall be properly marked.

The standing trees are marked with hammer at two places, at the

butt end and at the lower part, a little above the stem. The trees are to be felled so as to leave the lower hammer mark in the

un-cut portion. The felled tree sold is subject to further processes

of cutting etc. The portions so cut have to be hammer marked as only one such portion will have the hammer mark which W.ts first put at the butt end of the tree. A second special hammer mark is placed on these cut portions at the time of checking at the depot.

The two hammer marks necessary to be put on the cut portions of the felled tree before they could be actually taken away from the forest area were not made on the cut timber existing in sections

B, C and D and sold to respondent No. 2, as the felled trees in those areas had not been cut further by the contractor. The omission to put such marks does not make the goods sold unascertained.

The felled trees sold to the respondent No. 2 had a butt mark at the butt end. A similar hammer mark existed on the stem near which the felled tree rhust have Jain, it being presumed that the rules for the felling of trees were properly complied with by the forest authorities, mentioned above. The goods sold therefore were specified goods.

There is nothing in the contract that possession would not be delivered over the cut timber in 'Sections B, C and D till the 2nd, 3rd and 4th instalments have been paid. The relevant provisions of r. 18 of the Contract Rules, extracted earlier, do not contain any such restriction. It only provides that the operations

necessary to be conducted by the contractor had to start with section A or the first section and that the rights of the contractor to the material purchased would be deemed to be surrendered in certain circumstances. This has nothing to do with the payment of the instalments by the contractor. He can proceed to operate on the entire property purchased, according to his inclination in accordance with the procedure, as regulated by the rules. There is therefore no force in the submission that there could have been no delivery of possession over the produce sold and existing in liection B, C and D till the various instalments had been paid.

The fact that the contract was signed by the Chief Conservator of Forests on May 3, 1957, after fire had broken out has no effect on the question of delivery of possession of the produce sold and consequently on the passing of property in the goods to

the contractor respondent No .. 2. The Chief Conservator who was the proper authority for entering into. the contract of sale of property worth over Rs. 70,000 /- had necessarily to sign the deed of contract subsequent to the actual auction sale and in view of the L/E(NJ3Scl-12

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(1965) 3 S.C.B.

exigencies of the procedure to be followed may have to sign after A a substantial period of time.

The bid of respondent No. 2 at the auction sale had been provisionally accepted by the Divisional Forest Officer who ls

authorized under the rules to conduct the auction sale. The Divi visional Forest Officer and respondent No. 2 thereafter signed the B deed of contract on December 24, 1956 the date on which the auction sale took place. The appellant, as surety, also signed the third schedule on December 24, and the security bond on Decem ber 24. Practically all the formalities necessary for the execution of the deed except for the signatures of the Chief Conservator, authorised to enter into a contract of this magnitude, had been 0 completed. His formal signature on the deed of contract relates back the contract to the date of auction when the bid of respon dent No. 2 was provisionally accepted and he and the Divisional Forest Officer signed the contract.

In this connection, reference may be made to certain rules D and the instructions issued by Government to the various officers for complying with those rules. Executive instructions on the preparation of forest contract agreements are printed at p. 125 of

Vol. II of the Forest Manual. Instruction No. 9 provides that if the parties have signed the deed on the same date, that date should be entered in the preamble, but ifthey had signed on two different E dates, then the later of those two dates should be entered in the preamble. It was in accordance with this instruction that May 3,

1957, the date on which the Chief Conservator signed the contract was mentioned in the preamble of the contract deed. That date therefore had not any real effect on the actual date on which the sale of the forest produce took place in favour of respondent F No. 2.

Instruction IO directs that the dates in clause 2 of the prescribed deed of contract should be very carefully entered as they have an important bearing on the deed and show the period during which the contract will remain in force. Such a period in the deed G of contract Exhibit D is the period 'from the date the forest contractor furnishes the necessary coupe boundary certificate after inspection of the contract area to the 30th day of June 1958, both days inclusive'. The coupe boundary certificate was furnished on February 5. 1957. It follows that the period for the operation of the contract was from February 5, 1957 to June 30, 1958. This is B a clear indication that the date in the preamble has no real effect and that the contract, after its being duly signed by the competent authority, relates back to the date of sale.

Instruction 16 deals with the execution of the deed of contract.

Clause (i) provides for the drawing up of the contract in triplicate.

Clause (iii) requires the Divisional Forest Officer to initial the

BADBi P1WW> 11. STA.TE Of lolAI>llY.l l.'JW>llllH (Ragilubar Dayal, J,) ll8ll

contract after checking it before the lessee is asked to sign it.

Clause (iv) provides that where the Divisional Forest Officer himself

is empowered to execute the agreement he and the lessee should execute it together and clause (v) provides that where the .Divisional Forest Officer is not empowered to. execute the agreement,

it should be executed by the lessee and his signature .should be attested and that the agreement should then. be sent as soon as possible to the Forest Officer empowered to execute it, for his signature and attestation.

These instructions about the execution of the deed of contract plainly take into consideration the lapse of time between the execution by the lessee and by the competent forest authority.

Instructions Nos .. 38 to 48 are with regard to the auction of forest contracts. It is the Divisional Forest Officer who is directed to take certain steps. Instruction No. 45 provides that Divisional Forest Officers should ordinarily allow themselves more than one day for the conduct of' the auction sales. Instruction No. 47 provides that where the agreements are to be signed by the Conservator or higher authority, the first instalments must still be paid and the duplicate agreements signed by the contractor and his surety, if any, and sent to the Conservator immediately. The Conservators should sign the duplicate agreements in token of acceptance and return them to the Divisional Forest Officers as soon as possible. The reason for this is that it is obviously only fair to a forest contractor that he should be in possession of his signed agreement before he starts work on his contract, i.e., before July I.

In case the Conservators are not competent to sign the contract deeds such deeds will have to be sent by them to the Chief Conservator who is competent in view of r. 102A of Vol. I of the Forest Manual (under Chapter XIX) and the relevant orders of the Government to execute contracts for the sale of forest produce upto an amount of Rs. J,00,000 when payment is received in full at the time of delivery and upto Rs. 10,000 or upto Rs. 50,000 with the previous sanction of the Provincial 'Government when payment is not received in full at the time of delivery.

The exercise of this power by the Chief Conservator and other officers is subject to the rules given in the Government Notification and rule !(a) of these rules relating to contracts for forest produce reads: JI "No timber or other forest produce may be ordinarily sold except on cash payment in full at the time of delivery. Payment in instalments may, however, be considered

as payment in full at the tifi1e of delivery provided that there is a clause in the agreement to the effect that when Divisional .Forest Officer considers that the value of any forest produce removed by the purchaser equals or exceeds the amount of purchase money paid by him upto

(1965] 3 S.C.11.

that time, the Divisional Forest Officer may stop further removaf until the purchaser has paid such further sum, as in the opinion of the Forest Officer, may be sufficient

to cover the excess value of the forest produce removed , or to be removed"

In view of this rule it would be deemed that the payment of the purchase price had been made in full at the time of delivery, though the actual payment was to be made in four instalments.

We are therefore of opinion that the sale of the forest produce to respondent No. 2 was finalised on the date of sale subject of course to the acceptance of his bid by the competent authority, the Chief Conservator of Forests and that the fact that the Chief Conservator signed the deed on May 3, 1957, does not make the sale effective from the date of his signature. His signatures do not ratify any action of the Divisional Forest Officer which he took beyond his competence, but simply completes the execution of the deed of contract and relate back its execution to the. date on which the sale took place and the contractor and the Forest Officer had signed the document.

We may now refer to the approach of the High. Court to this question of the deed of contract operating from the date of its execution by respondent No. 2. It was of opinion that respondent No. 2, and the Divisional Forest Officer, had made the contract in December 1956 long before April 28, 1957 and even if the Divisional Forest Officer was not competent to enter into the contract, his act had been subsequently ratified by the competent authority and that therefore the ratification related back to the date of the contract and had the same effect as if the Divisional Forest Officer had performed the act by the authority of the Chief ' Conservator of Forests. With respect, we do not consider this

approach to be correct. The Divisional Forest Officer had authority under the statutory rules for holding the auction and for provisionally accepting the bid. All that he did was within his authority. He did not actually enter into the contract with respondent No. 2. He simply signed the standard form of the contract for the satisfaction of the competent authority to the effect that its accepting the bid and entering into the contract would be correct as is the usual official procedure where subordinates have to put up or forward papers to the superior officers for approval, sanction or orders. The right view of the entire procedure adopted in the case has been already stated by us above.

The other point urged by Mr. Agarwala, for the appellant, is that in view of r. 8 of the Forest Contract Rules which empowered the Divisional Forest Officer to stop the removal of forest produce sold on his finding that the value of the forest produce already removed by the contractor exceeded the amount of the instalments already paid by him, the seller in this case had reserved the right

c I

BADRI PRASAD v. STATE Oii' llUDHYA PRADESH (Raghubar Dayal, J.)

39J

of disposal of the forest produce until certain conditions were

fulfilled and that therefore s. 25(1) of the Indian Sale of Goods Act, 1930 (Act III of 193'0) applies to the facts of the case andi that therefore, notwithstanding delivery of the forest produce to respondent No. 2 in February 1957, the property in it did not pass to respondent No. 2 until the conditions imposed by the seller were fulfilled. There is nothing in the deed of contract or in the Forest. Contract Rules which reserved such a right of disposal in the State. Right given to the Government under r. 8 is the right to stop the removal of forest produce when the value of the forest produce already removed exceeded the amount of the instalments paid. This is to regulate the. compliance with the conditions of the auction one of which was that ordinary forest

produce was to be sold on payment in full at the time of delivery.

The contractor had therefore to pay full price he had bid at the date of the sale or any day prior to the delivery of the goods to

him in February 1957. The provision for allowing payment by instalments is a concession for the convenience of the contractor and it is provided in the rule that payment in instalments may however be considered as payment in full at the time of delivery provided there be a clause in the agreement in accordance with the provisions of r. 8 of the Forest Contract Rules.

Reference may here be made to the provisions of s. 83 of the Indian Forest Act, 1927 (Act XVI of 1927). Subsection (I) provides that when any money is payable for or in respect of any forest produce, the amount thereof shall be deemed to be a first charge

on such produce, and such. produce may be taken possession of by a Forest Officer until such amount has been paid. Rule 8 of

the Forest Contract Rules is therefore in pursuance of the statutory provisions of s. 83 of the Forest Act which creates a lien on forest produce for the money payable to Government. Action

which the Divisional Forest Officer can take for stopping the removal of the forest produce sold is in pursuance of the statutory authority conferred on him and not in pursuance of any terms of the contract between respondent No. 2 and the Government.

When a contractor is deemed to have paid in full the price there could be no occasion for the Government to reserve a right of disposal of the property even when its delivery had been made

to the purchaser. As already stated, it is s. 20 of the Sale of Goods Act which will apply to this case. This section provides that whrre there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made and it is immaterial whether the time

of payment of price or the time of delivery of the goods or both is postponed. The contract was unconditional, the goods sold were specific. They were in a deliverable state and therefore the property in the goods did pass at the time when the contract was made. This section would have applied even if the time of payment

SUPBEJCE OOUIIT REPORTS [1965] 3 s.o.a.

of price had been postponed. In the present case, as already stated, the payment allowed by instalments is to be deemed payment in full at the time of the delivery of the goods sold.

The last contention raised for the appellant is that as the contract was signed by the Chief Conservator about a week after

the goods lying in sections B, C and D had been burnt by fire, the contract must be deemed to have been not made at al! by the Chief Conservator who could not have contracted to sell goods which .did not exist. The contention really is that there could be no ratification of the act of the Divisional Forest Officer, who had no authority to enter into the contract, after the goods had ceased to exist and reliance is placed in support of this contention on what is stated at para 415 at p. 177 of Halsbury's Laws of England, Vol. I, III Edn. It is stated there:

"As to the time within which ratification may take place, the rule is that it must be either within a period fixed by the nature of the particular case, or within a reasonable time, after which an act cannot be ratified to the prejudice of a third .person".

This is the general proposition and will not be applicable to this case as no third person is being prejudiced on account of the signing of the contract by the Chief Conservator on May 3, 1957, a week after the fire had destroyed certain goods purchased. Further, it is stated in the same paragraph:

"But by an anomalous rule limited to marine insurance a contract of marine insurance made by an agent on the

principal's property may be ratified by the principal after notice of Joss".

This proposition is well-settled in England. In Williams v. North China Insurance Co.(') this proposition was sought to be reviewed.

Cockburn C.J. said at p. 764:

"The existing authorities certainly show that when an insurance is effected without authority by one person on another's behalf, the principal may ratify the insurance even after the loss is known. Mr. Benjamin asked us, as a Court of Appeal, to review those authorities ...... Where an agent effected an insurance subject to ratification, the loss insured against is very likely to happen before ratification, and it must be taken that the insurance so effected involves that possibility as the basis of the contract. It seems to me that, both according to authority and the principles of justice, a ratification may be made in such a case".

These observations would fully apply to the facts of the present case, even if we were of the view that the Chief Conservator ratified the unauthorised act of the Divisional Forest Officer on May

(1) L.R. [1876] I C.P.D. 757.

BADlll PRASAD v. STATE OF MADHYA PRADF.SH (Raghubar Dayal, J.) 395

3; 1957, after the fire had taken place. The provisional acceptance of the bid and the signing of the deed by the Divisional Forest Officer must, in the circumstances, be held to be subject to ratifi cation. It was within the realm of possibility that the forest produce might be lost on account of fire or any other risk men tioned in r. 32 of the Forest Contract Rules before the deed of contract was formally signed by the Chief Conservator. The tract entered into therefore involved the possibility of the loss of goods by fire as the basis of the contract.

Lastly, reference may be made to r. 32 of the Forest Contract Rules which provides that a forest contractor shall not be entitled to any compensation whatever for any loss that may be sustained by reason of fire etc. This is not a suit for compensation by the

contractor respondent No. 2, but iii essence the basis of tlie suit is that the forest contractor did not get possession of the forest produce in sections B, C and D, that such produce was lost by fire and that therefore he was not to pay the second, third and

fourth instalments and cannot be said to be iii default iii payment of those instalments. The loss of such goods by reason of fire therefore does not in any way give support to the claim of the appellant.

We are therefore of opinion that the appellant's suit has been rightly dismissed by the High Court. We accordingly dismiss the

appeal. There will be no order as to costs.

Appeal dismissed.

BADRI PRASAD

STATE OF MADHYA PRADESH AND ANOTHER

March 16, 1965

P. B. GAJENDRAGADKAR

RAGHUBAR DAYAL

Sale of Goods Act

s. 20

3rd May 1957

24th December 1956

s 20

Sale of Goods Act, 1930

5th February 1957

s. 83

C. B. Agarwa

W. S. Bar

A. G. Ratnaparkhi

M. Adhikari

State of Madhya Pradesh

B. Sen

M. S. K. Sastri

M. N. Shroff

R. P. Kapur

I. N. Shroff

Raghubar Dayal

December 24, 1956

Harda

March 1, May 15 and December 15, 1957

February 5, 1957

Badri Prasad

June 30, 1958

clause 5

clause 6

May 3, 1957

First Schedule

December 24,

1956

November 29, 1956

Third Schedule

December 29, 1956

March 30, 1957

section 3

section 1

section 4

section 1

section 4

April 25, 1957

Madanlal Pagare

April 29, 1957

Sheoprasad Parashar

Ziri

Rahetgaon

Timarni

BADRI PRASADV. STATE OF MADHYA PRADESH

May 3,

1957

clause 2

30th day of June 1958

February 5. 1957

Ragilubar Dayal

April 28, 1957

Agarwala

s. 25(1)

Indian Sale of Goods Act, 1930

s. 83

Indian Forest Act, 1927

s. 83

s. 20

Sale of Goods Act

SUPBEJCE OOUIIT REPORTS [1965

England

Cockburn

Benjamin


WORKMEN OF MIS DHARAMPAL PREMCHAND A

(SAUGHANDID)

MIS. DHARAMPAL PREMCHAND (SAUGHANDfil)

March 16, 1965

[P. B. GAJENDRAGADKAR, C.J., K. N. WANCHOO, M. HIDAYATULLAH

AND V. RAMASWAMI, JJ.] fodustria! Disputes Act 1947 (14 of 1947), ss." 2(k), 10 and 36- "lndustrial dispute"-Meaning-D'smissed Employees only members of Union-Union raises dispute-Maintainability.

Out of 45 employees of the respondent, 18 had become members of a Trade Union. Later, these 18 employees were dismissed by an order passed on the same day. The Union took up the cause and ultimately the dispute was referred to the Tll'.bunal, where the respondent raised the preliminary objection that the reference was invalid inasmuch as the dispute referred to the Tribunal was not an industrial dispute but was merely an individua:l dispute, and besides these d'smissed employees no other employees of the respondent was a member of the Union, and so the Union could not raise the dispute. This was upheld by the Tribunal. In appeal by speCial lea:ve;

HELD: The appeal must be allowed.

The definition of "industrial dispute" in s. 2(k) shows that before rny d; spute raised by any person can be said to be an industrial dispute, it must be shown that it 's connected with the employment or non-employment of that person. This condition is satisfied in the present case. [396 DJ

Having regard to the broad policy underlying the Act, th's Court and indeed a majcrity of Industrial Tribunals are inclined to take the view that notwithstand''ng the width of the words used by the Act in. defining an "industrial dispute" it would be expedient to require that a dispute raised by a dism'ssed employee cannot becolne an industrial dispute, uµless it is supported either by his Union -or, in the absence of a Union by a number of workmen. [397 B-CJ

Considerations which would be relevant in dealing with a dispute relating to an individual employee's dism'ssal, would not be

material in dealing with a case where a largie number of employees have been dismissed on the same day. c399 G-HJ A Union of workmen may validly ra'se a dispute as to dismissal even though it may be a union of minority of the workmen empl-Oy- ed in rny establishment. Similarly if there 's no union of workmen in any establishment, a group of employees can raise the dispute and the dispute then hecomes an industr'al dispute. though it may relate to the dismissal of an individual employee. [399 HJ

In a given case it is conceivable that the wcrkmen of an establishment have no union of their own and some or all of them jo:in the unin. of another establishment belong'ng to the same industry.

In sue'. a case, if the said union take up the cause of the workmen working in an establ'shment which hrn no union of its cwn, it would

be unreasonable to bold that the dispute does not become an industrial dispute because the Union which has sponsored it is n<ib the union exclus'vely of the workmen working in the establ:shment concerned. In every case where industrial adjudication has to decide

:a:

c I

WORKMEN v. Mjs DHARAMPAL (Gajendragadkar, C.J.) 395

whether a reference in regard to the dismissal of an industrial employee ls validly made or not it would be necessary to inquire whether the Union which has sponsored the case can fa'.rly claim a representative character, in such a way that its support to the case would make the dispute an industrial dispute. [400 F-H]

Bes'.des, 18 workmen, dismissed by an order passed on the same day, themselves form a group of workmen which would be just'.fied in supporting the cause of one another. [ 401 C]

Central Provinces Transport Service v. Raghunath Gopal Patwardhan, [1956] S.C.R. 956 and The Newspapers Ltd. v. The State Industrial Tribunal, U.P., [1957] S.C.R. 754, relied on.

Bombay Union of Journalists v. The H:ndu, Bombay, [1961] II L.L.J. 436, explained and a:stinguished.

0.VIL APPELLATE JURISDICTION: Civil Appeal No. 532 of 1963.

Appeal by special leave from the Award dated February 9, 1962, of the Industrial Tribunal, Delhi in l.D. No. 294 of 1961.

Sukumar Ghose, for the appellant.

S. V. Gupte, Solicitor-General, S. Murthy and B. P. Maheshwari, for the respondent.

The Judgment of the Court was delivered by Gajendragadkar, C. J. The short question of law which arises for our decision in this appeal is whether the order passed by the Delhi A-dministration referring the dispute between the appellants, the workmen of Mis Dharampal Premchand, Saughandhi and the respondent, the employer, M/s Dharampal Premchand Saughandhi, Delhi was valid. The brder of reference has been passed by the Delhi Administration under ss. lO(l)(d) and

12(5) of the Industrial Disputes Act, 1947 (No. 14 of 1947) (hereinafter called the Act). When the Industrial Tribunal, Delhi took

up this matter for hearing, the respondent raised a preliminary objection that the reference was invalid inasmuch as the dispute referred to the Tribunal by the impugned order of reference is not an industrial dispute, but is merely an individual dispute which cannot be the subject-matter of a valid reference under s. 10(1) of the Act. This contention has been upheld by the Tribunal, with

the result that the Tribunal has held that it has no jurisdiction to adjudicate upon the merits of the dispute referred to it. It is against

this order that the appellants have. come to this Court by special leave. On behalf of the appellants, Mr. Sukumar Ghose contends

that the view taken by the Tribunal is not sound, and that raises the question as to whether the dispute referred to the Tribunal for its adjudication in the present case can be said to be an industrial dispute within the meaning of s. 2(k) of the Act.

The facts which it is necessary to state for the purpose of dealing with this point are very few and they are not in dispute.

The respondent is a firm which carries on business as perfumers and tobacconists in Chandni Chowk, Delhi. On the 28th July,

1961, the respondent passed the impugned order dismissing the services of its 18 employees. On that date, the respondent had in its employment 45 employees. It appears that on the 16th July,

SUPREME COUBT REPORTS

[19611) 3 8,0, R.

1961, the 18 employees who were dismissed by the respondent had become members of the Mercantile Employees' Association which is a registered Trade Union in Delhi. On the 29th July, 1961, the said Association took up the cause of the dismissed employees and carried the dispute before the Conciliation Officer, Delhi. The conciliation proceedings, .however, failed, and at the instance of the Association the present reference was made on the 6th September, 1961. It is in the light of these facts that .we have to decide whether the dispute referred to the Tribunal for its adjudication is an industrial dispute within the meaning of s. 2(k) of the

Act or not.

Section 2(k) defines an "industrial dispute" as meaning any dispute or difference between employers and employees, or between employers and workmen, or between workmen and workmen, which is connected with the employment or non-employment or the terms of employment or with the condition of labour, of any person. This definition shows that before any dispute raised by any person can be said to be an industrial dispute, it must be shown that it is connected with the employment or non-employment of that person. This condition is satisfied in the present case, because the dispute is in relation to the dismissal of 18 workmen, and in that sense, it does .relate either to their employment or none.mployment. The question, however, still remains whether it is a dispute be.tween employers and workmen.

Literally construed, this definition may take within its sweep a dispute between a single workman and his employer, because the plural, in the context. will include the singular.

Besides, in the present case, the dispute is in fact between 18 workmen on the one hand, and their employer on the other, and that satisfies the requirement imposed by the fact that the word "workmen" in the context is used in the plural. But the decisions of this Court have consistently taken the view that in order that dispute between a single employee and his employer should be validly referred under s. 10 of the Act, it is necessary that it should have been taken up by the Union to

which the employee belongs or by a number of employees. On this view, a dispute between an employer and a single employee cannot, by itself, be treated as an industrial dispute, unless it is sponsored or espoused by the Union of workmen or by a number of workmen. In other words, if a workman is dismissed by his employer and the dismissed workman's case is that his dismissal is wrongful, he can legitimately have the said dispute referred for adjudication before an Industrial Tribunal under s. 10(1) of the

Act, provided a claim for such a reference is supported either by the Union to which he belongs or by a number of workmen, vide Central Provinces -Transport Services v. Raghunath Gopal Patwardhan(') and The Newspapers Ltd. v. The State Industrial Tribunal,

U.P.(').

[Jfl.56] N.C.R.

{!.) s.e.R. 7G4.

WO]IKMEN lJ. M/s DHARAMPAL (Gajendra.gadkar, O.J.) 397

This view is based on a consideration of the general policy underlying the provisions of the Act. As is well-known, the Act has been passed for the investigation and settlement of industrial disputes, and its material provisions have been enacted, because it was thought expedient to make provision for such investigation and settlement of disputes. keeping in min.d the importance of the development of Trade Union Movement on proper lines in this country. Having regard to this broad policy underlying the Act, this Court and indeed a majority of Industrial Tribunals are inclined to take the view that notwithstanding the width of the words

used by the Act in defining an "industrial dispute", it would be expedient to require that a dispute raised by a dismissed employee cannot become an industrial dispute, unless it is supported either by his Un.ion or, in the absence of a Union, by a number of workmen. Unless such a limitation was introduced, claims for reference may be made frivolously and unreasonably by dismissed employees, and that would be undesirable.

Besides, in order to safeguard the interests of the working class in this country, it was thought that the development of Trade Union movement on healthy Trade Union lines was essential and that requires that disputes between employers and employees should be settled on a collective basis. A complaint against a wrongful dismissal should, therefore, be the subject-matter of reference, provided the workmen acting collectively take up the case of the dismissed employee and contend that the dismissal is unjustified or wrongful. It is on these grounds that this Court has held that an individual dispute arising from an alleged wrongful dismissal of an employee can be validly referred under s. 10 only if it is supported by the Union of the workmen to which the dismissed employee belongs or by a group of his co-employees. There is no dispute that the l\Iercantile Employees' Association has taken up the dispute on behalf of the 18 dismissed employees. In fact, as we .have already indicated. the said Association took up this dispute before the Conciliation Officer and when the conciliation proceedings failed, it successful!v moved the Delhi Administration to make a reference under s. 10(1) of the Act.

It was, however, urged before the Tribunal that besides the 18 dismissed employees, no other employee of the respondent is a member of the said Association, and so. it was contended that H !he said Association was not authorised to raise the dispute, and m the absence of proof of the fact that the dispute had been sponsored or espoused by the Union of the employees of the respondent, the reference should be held to be invalid. This contention

has been upheld by the Tribunal; and so, the questie>n which we have to decide is whether the Tribunal was right in holding that the Mercantile Employees' Association had no authority to raise and support the present dispute.

SUPREME COURT BEPOBTS [1965] 3 s.c.n.

In support of its conclusion, the Tribunal has relied upon the A decision of this Court in Bombay Union of Journalists and others

v. The "Hindu", [Jombay & Anr.('). In that case, the services of one Salivateeswaran, who claimed that he was a full-time employee of the "Hindu", a daily newspaper published in Madras, were terminated and an industrial dispute was raised in respect of the said termination by the Bombay Union of Journalists. The contention B raised by the employer was that the reference was invalid inasmuch as the dispute referred for adjudication was an individual dispute and not an industrial dispute. This. contention was accepted by the Tribµnal; and that brought the dispute before this Court.

In dealing with the effect of the decision pronounced by this o Court in that case and particularly of certain observations maae in the course of the judgment, it is necessary to bear in mind one finding of facfwhich had been recorded by the Tribunal and confirmed by this Court. It appears that in that case, the appellants strongly relied upon a resolution passed on April 17, 1948, by which it .was alleged that the Bombay Union of Journalists had D taken up the dispute of Salivateeswaran against the "Hindu" and had decided to demand reliefs for the "retrenched Journalist".

Evidence was led to prove that such.a resolution had been passed,

but that evidence was discarded both by the Tribunal and this Court. and this Court definitely found that "the evidence tends to establish the plea raised by respondent No. 1 that the record of B the alleged resolution was fabricated with a view to support the case of Salivateeswaran". In other words, in point of faOt, there was no reliable evidence to show that the Bombay Union of Journalists had taken up the case of the .retrenched employee Salivateeswaran. In view of this finding, it follows that the observations made by this Court in regard to the requirements of a valid referr ence under s. 10(1) of the Act are in the nature of obiter observa< tions.

It does appear that in dealing with the point of law as to the requirements of a valid reference, this Court observed that "the dispute, in the present case, being prima facie an individual dis- G pute, in order that it may become an industrial dispute, it had to be established that it had been taken up by the Uni6n of employees

of the "Hindu", Bombay, or by appreciable number of employees of the "Hindu", Bombay. Similarly; it was also observed that the "principle that the persons who seek to support the cause of a workman must themselves be directly and substantially inter- B ested in the dispute, applied to the case before the Col!rt"; and so, one of the tests which this Court applied was whether the persons who supported the cause, were employees of the same employer;

if they were not, it was thought that they could not be regarded as interested in the dispute and as such, their support may not

(') [I962J 3 s.c.R. 893.

""' '11•

WORKMEN v. Mjs DHARAMPAL (Gajerulraga, dkar, C.J.) 399

convert an individual dispute into an industrial dispute. That is why the support lent to the cause of Salivateeswaran by the Bombay Union of Journalists was found to be insufficient to convert the cause into an industrial dispute.

These observations, no doubt, prima facie lend support to the view which the Tribunal has accepted. It appears that the. Bombay Union of Journalists had on its roll several working Journalists

in other journals; but out of the three working journalists working with the "Hindu" at its Bombay office, two had become the members of the Bombay Union of Journalists, viz., Salivateeswaran and Venkateswaran. Tiwari, the third working journalist working in the office of the "Hindu", Bombay, had not become a member of the said Union. In the Office of the "Hindu", there were seven other workmen, but they were working on the administrative side.

In other words, out of the ten employees in the office of the "Hindu", seven were on the administrative side, and three on the

journalism side; and out of these three, two were members of the Union. It is in the light of these facts that this Court expressed the opinion that the Bombay Union of Journalists was not competent to raise the dispute, and even if it had raised it, the dispute could not have become an industrial dispute.

In our opinion, the observations on which the Tribunal has relied in support of its conclusion in the present case, should not be read as laying down any hard and fast rule in the matter. Take, for instance, the case of an employer who employs 20 workmen,

and assume that these workmen have not formed any Union. If the employer illegally dismisses all the workmen employed by him, it cannot be suggested that the dispute about the dismissal of these employees would not become an industrial dispute because there is no Union to support them and the dismissed employees themselves Cinnot convert their individual dispute into an industrial

dispute. fn the present case, out of 45 employees 18 have been dismissed, and there is no evidence to show that these employees have a Union of their own. In such a case, it would be difficult

to hold that though the number of employees dismissed is 18, they cannot raise a dispute by themselves in a formal manner. Considerations which would be relevant in dealing with a dispute relating to an individual employee's dismissal, would not be material in dealing with a case where a large number of employees have been dismissed on the same day. It is not disputed that a union of workmen may validly raise a dispute as to dismissal even though it may be a union of the minority of the workmen employed in any establishment. The majority union, of course, can raise a dispute, and if a reference is made under s. 10(1) of the Act at its instance, the

reference, is valid. Similarly, if there is no union of workmen in any establishment, a group of employees can raise the dispute and the dispute then becomes an industrial dispute, though it may

SUPREME COURT REPORTS [1965] 3 s.o.n.

relate to the dismissal of an individual employee. This position is not disputed. If that is so, it is difficult, we think, to apply or extend the observations made in the case of the Bombay Union of Journalists(') to the present case. In the present case, we are

dealing with a reference made by the Delhi Administration in relation to the appellants' contention that the dismissal of 18 employees

is invalid, and not with a case of the dismissal of a single employee. B Therefore, we do not think that the Tribunal was right in relying upon the decision in the case of the Bombay Union of Journalists(')

in support of its conclusion that the present reference was invalid.

It is well-known that in dealing. with industrial disputes, industrial adjudication is generally reluctant to lay down any hard and fast rule or adopt any test of general or universal application. The approach of industrial adjudication in dealing with industrial disputes has necessarily to be pragmatic, and the tests which it

applies and the considerations on which it relies would vary from case to case and would not admit of any rigid or inflexible formula. There is no doubt that the limitations introduced by the decisions of this Court in interpreting the effect of the definition prescribed by s. 2(k) of the Act were based on such pragmatic considerations. It may also be conceded that if

the dismissal of an individual employee working in an establishment in Delhi is taken up by the union of workmen in a place away from Delhi, that would clearly not make the dispute an industrial dispute.

Section 36 of the Act which deals with the representation of parties, incidently suggests that the union which can raise an individual dispute as to a dismissal validly, should be a union of the same industry. Generally, it is the union of workmen working in the same establishment which has passed the impugned order of dismissal. But in a given case, it is conceivable that the workmen of an establishment have no union of their own, and some or all of them join the union of another establishment belonging to the same industry. In such a case, if the said union takes up the cause of the workmen working in an establishment which has no union of its own, it would be unreasonable to hold

G that the dispute does not become an industrial dispute because the union which has sponsored it is not the union exclusively of the workmen working in the establishment concerned. In every case where industrial adjudication has to decide whether a reference in regard to the dismissal of an industrial employee is validly made or not, it would always be necessary to enquire whether the union which has sponsored the case can fairly claim a representative J! character in such a way that its support to the cause would make . the an industr!al dispute. "lndust; y'' Iias been defined by s. 2(J) of the Act and 1t seems to us that m some cases, the union of workmen working in one industry may be competent to raise a dispute about the wrongful dismissal of an employee engaged in an establishment belonging to the same industry where workmen

(') [1962) 3 S.C.R. 893.

WOllKMENV. M/S DllARAMPAL (Gajendragadlu1r, C.J.) .[01

A in such an establishment have no union of their own, and an appreciable number of such workmen had joined such other union before their dismissal. In fact, the object of trade union movement is to encourage the formation of larger and bigger unions on healthy and proper trade union lines, and this object would be frustrated if industrial adjudication were to adopt the rigid rule that B before any dispute about wrongful dismissal can be validly refer red under s. 10(1) of the Act, it should the support of the union consisting exclusively of the workmen working in the estab lishment concerned.

Besides, there is another way in which this question can be o considered. If 18 workmen are dismissed by an order passed on the same day, it would be unreasonable to hold that they them selves do not form a group of workmen which would be justified in supporting the cause of one another. In dealing with this question, we ought not to forget the basic theory on which limita

tion has been introduced by this Court on the denotation of the D words "industrial dispute" as defined by s. 2(k) of the Act. Therefore, we are satisfied that the Tribunal was in error in rejecting the reference on the preliminary ground that the dispute referred to it was an individual dispute and not an industrial dispute within the meaning of s. 2(k:).

E The result is, the appeal is allowed, the finding of the Tribu nal on the preliminary issue is reversed, and the matter is sent back to the Tribnnal for disposal in accordance with law. There

would be no order as to costs.

Appeal allowed.

WORKMEN OF M/S DHARAMPAL PREMCHAND (SAUGHANDHI)

MIS. DHARAMPAL PREMCHAND (SAUGHANDfil

March 16, 1965

P. B. GAJENDRAGADKAR, C.J.

K. N. WANCHOO

M. HIDAYATULLAH

V. RAMASWAMI, JJ.

Disputes Act 1947

s. 2(k)

Gajendragadkar

0.VIL APPELLATE JURISDICTION

Sukumar Ghose

S. V. Gupte

S. Murthy

B. P. Maheshwari

Industrial Disputes Act, 1947

Industrial Tribunal, Delhi

s. 10(1)

Sukumar Ghose

s. 2(k)

Delhi

28th July,

1961

Mercantile Employees' Association

29th July, 1961

6th September, 1961

s. 2(k)

Section 2(k)

s. 10

s. 10(1)

WO]IKMEN

DHARAMPAL

Gajendra.gadkar,

used by the Act

s. 10

l\Iercantile Employees' Association

Delhi Administration

s. 10(1)

SUPREME COURT BEPOBTS [1965] 3 s.c.n

Salivateeswaran

Madras

Bombay Union of Journalists

April 17, 1948

s. 10(1)

Bombay

Salivateeswaran

Venkateswaran

Tiwari

s. 10(1)

SUPREME COURT REPORTS [1965] 3 s.o.n

s. 2(k)

Section 36

s. 2(J)

[1962) 3 S.C.R. 893

WOllKMENV

DllARAMPAL

s. 10(1)

s. 2(k)

s. 2(k:)


TATA moN AND STEEL co. LTD.

S. N. MODAK March 19, 1965

JP. B. GAJENDRAGADKAR, C.J., K. N. WANCHOO AND V. RAMASWAMI,

JJ.J Industrial Disputes Act 1947 (14 of 1947\, s. 33-Application pending industrial dispute-Industrial dispute finalty decided-If appiicaLion survives.

The appel'ant applied under s. 33(2)(b) of the Ind.ustrial Disputes Act, 1947 to the Industrial Tribunal for the Tribunal's approval of the order passed by the appellant discharging its employee -the respondent. This ai:plication was made because certain industrial disputes were prnding hetween the appellant and its employees, but when the matter came to be argued before the Tribunal. the pending disputes had been disposed of. HYence, the

a; ipel!ant contended that the application made by it no longer survived, which the Tribunal rejected. In appeal by Special Leave.

HELD: The Tribunal was right in overruling the appellant's contention. [419 E].

A proceeding validly commenced under s. 33(2)(bl would not automatically come to an end merely because the main industrial

c!:spute had in the meanwhile been finally determined. [417 D-E].

The application of the appellant can 1in a sense, be treated as an incidental proceeding; but it is a separate proceeding all the

same, and in that sense it will be governed by the provi:::ions of s. 33(2)(b) as an independent' proceeding. It is not an interlocutory proceeding properly so called in its full sense and significance; it is a proceeding between the employer and his employee who was no doubt concuned with the main industrial dispute along with other employees; but it is nevertheless a proceeding between two

parties in res; o2ct of a matter not covered by the main dispute. [417

B-D].

The order being incomplete and inchoate until tile approval is obtained, cannot effectively terminate the relationship of the employer and the employee between the appellant and the respondent; and so even if the main industrial dispute was finally dcc'dcc1. the qucs'.ion abcut the validity of the order would still have to be tried and if the approval is not accorded by the Tribunal, the employer would be bound to treat the respQndent: as its employee and pay him full wages for the period even though the appellant may subsequently proceed to terminate th<;- respondent's

service. [ 418 C-El.

Besides, if it were held that with the final determination of the main industrial dispute such application would autcmatically come to an end, it would mean that s. 33-A under which a complaint by the employee is treated as an independent proceedin!\,

would be rendered nugatory. [419 A].

Alkali and Chemical Corporation of India Ltd. v. Seventh Industrial Tribunal. West Bengal and Ors. (1964) II L.L.J. 568, Mettur Industries Ltd. v. Sundara Naidu and Anr. (1963) II L.L.J. 303 and Shah (A.T.) v. State of Mysore and Ors

(1964) I L.L.J. 237, disapproved

Kannan Devan Hill Produce Company Ltd. Munnar v. Miss Aleyamma Varughesa and Anr. (1962) II LL.J. 158, Om Prakash Sharma v. Industrial Tribunal, Punjab and Anr. (1962\ II L.LJ. 272 and Amrit Bazar Patrika (Private) Ltd. v. Uttar Pradesh State

Industrial Tribunal and Ors. (1964) II L.L.J. 53, approved.

CrvrL APPELLATE JURISDICTION: Civil Appeal No. 422 of A 1964.

Appeal by special leave from the order dated September 29, 1962, of the Central Government Industrial Tribunal at Dhanbact in Application No. 45 of 1960 in Reference Nos. 40 and 34 of 1960.

S. V. Gupte, Solicitor-Genera/ and /. N. Shroff, for the appel- B !ant.

Jitendra Sharma and Janardan Sharma, for the respondent.

The Judgment of the Court was delivered by

Gajendragadkar, C.J. The short question of law which u arises in this appeal relates to the scope and effect of the provisions contained ins. 33(2) of the Industrial Disputes Act, 1947 (No. 14 o[ 1947) (hereinafter called 'the Act'). The appellant, the Tata Iron & Steel Co. Ltd., Jamadoba, applied before the Chairmun, Central Government Industrial Tribunal, Dhanbad, (hereafter called "the Tribunal") under s. 33(2)(b) of the Act for approval of the order D passed by it discharging the respondent, its employee S. N. Modak.

from its service. In its application, the appellant alleged that the respondent had been appointed as a Grade II Clerk in the Chief Mining Engineer's Office at Jamadoba. One of the duties assigned to the respondent was to check arithmatical calculations ''cconling

ro sanctioned rate of the bills coming from the Heads of Department.

E He was required to bring to the notice of the Deputy Chief Mining Engineer cases of discrepancies or irregularities, and also cases where additions or alterations in the bills had been made, but not initialled.

On re-checking of the bills which had been passed by the respondent. it was discovered that several additions and alterations made in the bills were not noticed by him and were not reported. This F failure constituted misconduct under the Standing Orders of the appeliant. For this misconduct, the respondent was charge-sheeted (No. 51 dated I /5-10-1960); that led to a departmental enquiry; and as a result of the report made by the Enquiry Officer, the appellant passed an order on December 17, 1960, terminating the services of the respondent as from December 24, 19o0. The present applica- G ticn was drafted on the 17th December and it reached the Tribunal on the 23rd December 1960. It appears that this applicction was made by the appellant under s. 33(2)!b), because four industrial disputes were pending between the aPpellant and its employees at

that time in References Nos. 27, 34, 40 & 49 of 1960.

After this application was filed, the challenged the propriety of the order passed by the appelknt for which <:pproval was sought by it, and several contentions were raised by him in

support of his case that the enquiry held against him was invalid and improper and the order of dism!ssal passed against him was the result of ma/a fide.'. Evidence was led by the parties in support of \heir respective plea'

TATA IRON v. s. N. '10DAK (Gajendragadkar' C.J.)

When the matter came to be ai"gued before the Tribunal, it was urged by the appellant that the application made by it no longer

because all the industrial disputes which were pending between the appellant and its employees and as a result of the pcndency of which it had made the application under s. 33(2)(b) of the Act, had been decided by the Tribunal; Awards had been made in all the said References and they had been published in the Gazette. It does appear that the four References wl]ich we have

mentioned, ended in Awards made on 31-10-1960, 8 11-1960, 14-4-1961, anj 22-9-1961 respectively. The award on the present apo:; cation was made on 29-9-1962, and it is common grnund that at the time when the appellant urged its contention that the 2pplication made by it did not survive any longer, all the four References hal}, in fact, been disposed of. The plea thus raised by the naturally raised the questicn as to what would be the effect of the awards pronounced by the Tribunal on industrial disputes pending

before it at the time when the appellant moved the Tribunal under s. 33(2)(b)? If, as a result. of the pendency of an industrial dispute between an employer and his emplpyees, the employer is required to apply for approval of the dismissal of his employee under s. 33 (2)(b), does such an application survive if the main industrial dispute is me:mwhile finally decided and an award pronounced on it? That is the question which this appeal raises for our decision, and the answer to this question would depend upon a fair determination of the true scope and effect of the provisions of s. 33(2)\b) of the Act.

This question has been answered by the Tribunal against the appellant. Having held that the application made by the appellant survived the decision of the main industrial disputes, the Tribunaf has considered the merits of the controversy between the parties.

After examining the evidence, the Tribunal has found that the enquiry made by the appellant before passing the impugned order of discharge against the respondent. was invalid. It has pointed out that the Enquiry Officer, Mr. Watcha, did not in fact record the statement of any witnesses who gave evidence before him. and the on! y record of the enquiry is the report made by Mr. Watcha. It has also noticed that the enquiry in question suffered from the serious infirmity that Mr. Watcha who acted as the Enauiry Officer himself gave evidence against the respondent, and the evidence which was actually recorded in the case was taken not by Mr. Watcha, but by Paravatiyar. In the result, the conclusion of the Tribunal on the merits was that the enquiry "was a farce, a mere eve-wash,

biased with pre-determined result, and entirely mq!a fide and not at all fair". As a result of this conclusion, the Tribunal refused to accord approval to the order of discharge passed by the appellant agaimt the respondent. It is against this crder that the appellant has corr'.e 1,1 this Court by special leave.

Rc•.erfo1g then to the question of construing s. 33 of the Act,. we may refer to some genernl considerations at the outset. Broadly

411 SUPREME COUlt'l' REPORTS [1965] 3 s.c.R.

Wtted, s. 33 provides that the conditioi; is of service, etc. should n:main unchanged under certain circumstances during the pendency of industrial adjudication proceedings. It is unnecessa; y to refer to

the previous history of this !; ection. It has undergone many changes; but for the purpose of the present appeal, we need not refer to the said changes. We are concerned withs. 33 as it stands after its final

amendment in 1956. Section 33 consists of five sub-sections. For the

purpose of this appeal, it is necessary to read sub-sectio:;; s (I) &

(2) of s. 33 :-

. ' "(!) During the pendency of any conciliation proceeding before a conciliation officer or a Board or of any proceeding before a Labour Court or Tribunal or National Tribunal:.in n:spect of an industrial dispute, no employer shall--

(a) in regard to any matter C;}nnected with the dispute, alter, to the prejudice of the workmen concerned in such dispute, the conditions of service applicable to them immdiately before the comme11cement of such proceedings; or

(b) for any misconduct connected with the dispute,

discharge or punish, whether by dismissal or otherwise, any workmen concerned in such dispute save with the express permission ir1 writing of the authority before which the proceeding is pending.

(2) During the pendency of any such proceeding in respect of an industrial dispute, the employer may, in accordance with the standing orders applicable to a workman concerned in such dispute,-

(a) alter, in regard to any matter not connected with

the dispute, the c6nditions of service applicable to that workman immediately before the commencement of such prcceeding; or

(b) for any misconduct not connected with the dispute, discharge or punish, whether by dismissal or otherwise, that worktm n: Provided that no such workman shall be discharged

or dismissed, unless he has been paid wages one month and an application has been made by the employer to the authority befcre which the proceeding is pending for approval of the <>ction taken by the employer".

A reading of the above two sub-sections of s. 33 makes it clear that 'its provisions are intended to be applied during the pendency of any i•roceeding either in the nature of ccnciliation proceeding or in the

. TATA IRON"· 8. N. MODAK (Gajendra.qadkar, C.J.) 415.

nature of proceeding by way of reference made under s. 10. The pendency of the. relevant proceeding is thus one of the conditions prescribed for the application ofs. 33. Section 33(1) also shows that the provisions of the said sub-secticn protect workmen concerned in the main dispute which is pending, conciliation or acljudication.

effect of sub-s. (I) is that where the conditions precedent prescribed by it are satisfied, the employer is prohibited from taking any action in regard to matters specified by clauses (a) & (b) against employees concerned in such dispute without the preyious expfess permission in writing of the authority before whjch the proceedmg

is pen:ling. In other words, in cases falling under sub-s. (!), before any action can be taken by the employer to which reference is made by clauses (a) & (b), he must obtain the express permission of the specified authority. Section 33(2) proceeds to hy dowr. a similar p;-ovision and the conditions precedent prescribed by it are the same as those ccntained in s. 33(1). The proviso to s. 33(2) is important for our purpose. This proviso shows that where action is intended to be taken by an employer against any of his employees which falls within the scope of cl. (b), he can do so, subject to the requirements of the proviso. If the employee is il)tended to be discharged or dismissed, an order can be passed by the employer against him, provided he has paid such employee the wages for one month, a!'d he has made an application to the authority before which the pro

is pending for approval of the action taken by him. The requirements o, f the pmviso have been frequently considered by Industrial Tribunals and have been the subject-matter of• decisions of this Court as well. It is now well-settled that the requirements of the proviso have to be satisfied by the employer on the basis that they form part of the same transaction; and stated generally, the employer must either pay or offer the salary for one mcnth to the empioyee before passing an order of his discharge or dismissal, and must apply to the specified authority for approval of his action at the same time, or within such reasonably short time thereafter as to fcrm part of the same transaction. It is also settled that if approval is granted, it takes effect from the date of the order passed by the employer for which approval was sought. If approval is not granted, the order of dismissal or discharge passed by the employer is wholly invalid or inoperative, and the employee can legitimately claim to ccntinue to be in the employment of the employer notwithstandmg the order passed by him dismissing or discharging him. In other words, approval by the prescribed authority makes the order of discharge or dismissal effective; in the absence of SUl'h all order is invalid and inoperative in law.

Sub-sections (3) & (4) of s. 33 deal with cases of protected workmen, but with the provisions contained in these two sub-sectiom . . we are not concerned m the present appeal. That leaves s. 33(3) to be ccmsidrred. This sub-section requires th"! where an application is made under the proviso to sub-s. (2), the specified authority has to

dispose of lhe application without delay; and indeed, it expressly

ptescribes that the said proceedings must be dealt with as expeditiously as possible. This sub-section is naturally limited to' cases falling under sub-s. (2). In regard to cases falling under sub-s. (!),

the employer can act only with the previous express sanction of the prescribed authority, and, therefore, there is no need to make any provision in regard to an applicat_ion which the employer may make under sub-s. (I) requiring that the said application should be dealt with expediticusly. That is the general scheme of s. 33.

It is quite clear that s. 33 imposes a ban on the employer exercising his common-law, statutory, or contractual right to terminate the services of his employee3 according to the contract or the provisions of .law governing such service. In all cases where industrial disputes' are pending between the employers and their employees, it was thought necessary that such disputes should be adjudicated upon by the Tribunal in a peaceful atmosphere, undisturbed by any subsequent cause for bitterness or unpleasantness. It was, however, realized that if the adjudication of such disputes takes long the employers cannot be prevented absolutely from taking action which is the subject matter of s. 33(1) and (2). The Legislature, therefore, devised a formula for reconciling the need of the employer tc have liberty to take action against his employees, and the necessity for keeping the atmosphere calm and peaceful pending adjudication of industrial disputes. In regard to actions covered by s. 33(1), previous permission has to be _obtained by the employer, while in regard to actions falling under s. 33(2), he has to obtain subsequent approval, subject to the conditions which we have already considered. In that sense, it would be correct to say that the pendency of an industrial dispute is in the nature bf a condition precedent for the applicability of s. 33(1) & {2). It would, prima facie,

seem to follow that as soon as the said condition precedent ceases to exist, s. 33(1) and (2) should also cease to apply; and the learned Solicitor-General for the appellant has naturally laid considerable emphasis on this basic aspect of the matter.

It is also true that having regard to the conditions precedent prescribed by s. 33(1) and (2), it may be possible to describe the application made by the .employer either under s. 33(1) or under s. 33(2) as incidental to the main industrial dispute pendin!! between the parties. We have noticed that such applications have t;;- be made before the specified authority which is dealing with the main industrial dispute; and so, the argument is that an incidental or an inter- !ocutory application which arises from the pendency of the main

cannot survive the decision of the main dispute itself: That is another aspect of the matter on which the learned Sohc1to.r-c:; eneral. relit; s. He urges that it is during the pendency of

mam mdustnal distmte that s. 33 apphes; that it applies in relation to workmen concerned with such main dispute; and that the

'l'ATA IRON v. s. N. MO!lAK (liu:ie11dragadkar, c. J.) 417

p iwer conferred by it has to be exercised by the authority before \\ hich the main dispute is pending. These broad features of s. 33 impress upon the applications made under s. 33(1) and (2) the character of interlocutory proceedings, and thus considered, interlocutory proceedings must be deemed to come to an end as soon as the main dispute has been finally determined.

On the other band, there are several considerations which do not support the argument of the appellant that as soon as the main industrial dispute is decided, the application made by it for approval

under s. 33(2) should automatically come to an end. As we have already indicated, the application of the appellant can, in a sense,

be treated as an incidental proceeding; but it is a separate proceeding all the same, and in that sense, it will be governed by the provisions of s. 33(2)(b) as an independent proceeding. It is not an interlocutory proceeding properly so calle_d in its full sense and significance; it is a proceeding between the employer and his employee who was no doubt concerned with the main industrial dispute along with other employees; but it is nevertheless a proceeding between two parties in respect of a matter not covered by the said main dispute. It is. therefore, difficult to accept the argument that a proceeding which validly commences by way of an application made by the employer under s. 33(2)(b) should automatically come to an end because the main dispute has in the meanwhile been decided. What is the order that should be passed in such a proceeding, is a question which cannot be satisfactorily answered, unless it is held that the proceeding in question must proceed according to law and dealt with as such.

In .this connection it is significant that though the Legislature has specifically issued by s. 33(5) a directive to the specified auihorities to dispose of the applications without delay and_ act as expeditiously as possible, it has not made any provision indicating that if the decision on the applications made under s. 33(2) is not reached before the main dispute is decided no order should be passed on such applications. There is little doubt that the Legislature intends that applications made under s. 33(2) should be disposed of well before the main dispute is determined; but failure to provide for the automatic termination of such applications in case the main dispute is decided before such applications are disposed of, indicates that the Legislature intends that the proceedings which begin with an application properly made under s. 33(2) must run their own course and must be dealt with in accordance with law. The direction that the said proceeding should be disposed of as expeditiously as possible emphasises the fact that the legislature intended that proper orders .should be passed on such applications without delay, but according to law and on the merits of the applications

themselves.

It is, however, urged by the learned Solicitor-General that it would be futile to allow the present application to proceed any

further. because the appellant can proceed to dismiss the respondent notwithstanding the fact that the Tribunal does not accord its approval to its order in question. This argument, in our opinion, is misconceived. It cannot be denied that with final determination of the main dispute between the parties, the employer's right to

terminate the services of the respondent according to the terms of service revives and the ban imoosed on the exerCise of the said power i> lifted. But it cannot overlooked that for the period between the date on which the appellant passed its order in question ag2inst the respondent, and the date when the ban was lifted by the final determination of the main dispute, the order cannot be said to be valid unless it receives the approval of the Tribunal:.

In other words, the order being incomplete and inchoate until the approval is obtained, cannot effectively terminate the relationship of the employer and the employee between the appellant and the

respondent; and so, even if the main industrial dispute is finally decided, the question about the validity of the order would stiT! have to be tried and if the approval is not accorded by the Tribunal, the employer would be bound to treat the respondent as its employee and pay him his full wages for the period even though the appellant may subsequently proceed to terminate the respondent's services. Thereilore, the argument that the proceedings if continued beyond the date of the final decision cf the main industrial dispute would become futile and meaningless, cannot be accepted.

There is another aspect of this matter to which reference must be made. Section 33A makes a special provision for adjudication as to whether any employer has contravened the provisions of s. 33.

This section has conferred on industrial employees a very valuable right of seeking the protection of the Industrial Tribunal in case their' rights have'been violated contrary to the provisions of s. 33.

Section 33-A provides that wherever an employee has a grievance that he has been dismissed by his employer in contravention of s. 33(2), he may make a complaint to the specified authorities and such a complaint would" be tried as if it was an industrial dispute referred to the Tribunal under s. 10 of the Act. In other words, the complaint is treated as an independent industrial proceediHg and an award has to be pronounced on it by the Tribunal concerned.

Now. take the present case and how the acceptance of the appellant's argument would work. As we have already pointed out, in the present case the Tribunal has considered the merits of the appellant's prayer that it should accord approval to tl:e proposed dismissal of the respondent and it has come to the conclusion that having regard to the relevant circumstances, , the approval should not be accorded. If the appellant's argument is accepted and it is held that as soon as the main industrial disputes were finallv deter' mined, the application made by the appellant under s. 33(2l automatically came to an end, the respondent would not be able tc

TATA TRON v. s. N. MODAK (Gqjemlragadkar, C.J.)

get any relief against the appellant for the wrongful termination of his services between the date of the impugned order and the final disposal of the main industrial disputes; and this would mean

that in a case like the present, s: 33A would be rendered nugatory, because the employer having duly applied under s. 33(2)(b), the employee cannot complain that there has been a contravention of s. 33 by the employer, even though on the merits the dismissal of

the employee may not be justified. That, in our opinion, could not have been the intention of the Legislature. This aspect of the matter supports the conclusion that a proceeding validly commenced under s. 33(2)(b) would not automatically come to an end merely

because the main industrial dispute has in the meanwhile been finally determined.

It is of course true that under s. 33 the authority to grant permission or to accord approval in cases falling under s. 33(1)

and (2) respectively is vested in the. Tribunal, before which the main industrial dispute is pending, but that is not an unqualified or inflexible requirement, because s. 33B(2) seems to permit transfers of applications before one Tribunal to another, and in that sense. the argument urged by .the appellant that the condition that a specified Tribunal alone can deal with applications made to it is an inflexible condition, cannot be accepted. We are, therefore, satisfied that the Tribunal was right in over-ruling the contention raised by the appellant that the application made by it for approval under s. 33(2)(b) ceased to constitute a valid proceeding by reason

of the fact that the main industrial disputes, the pendency of which had !llade the application necessary, had been finally decided.

This questk .1 has been consi'1ered by several High Courts in this country. The High Courts of Calcutta, Madras and Mysore have taken the view for which the learned Solicitor-General has contended before us, vide Alkali and Chemical Corporation of India Ltd.

v. Seventh Industrial Tribunal, West Bengal and Ors.('); Mettur

Industries Ltd. v. Sundara Naidu and Anr.;(') and Shah (A.T.) v.

State of Mysore and Ors.(') respectively. On the other hand, the Kerala, the Punjab, and the Allahabad High Courts have taken the view which we are inclined to adopt, vide Kannan Devan Hill Produce Company Ltd., Munnar v. Miss Aleyamma Varughese and

Anr.;(') Om Parkash Sharma v. Industrial Tribunal, Punjab and Anr.;(') and Amrit Bazar Patrika (Private) Ltd. v. Uttar Pradesh State Industrial Tribunal and Ors.(') respectively. In our opinion, the former view does not, while the latter does, eorrectly represent

the true legal position under s. 3J(2)(b).

That takes us to the merits of the findings recorded by the Tribunal in support of its final decision not to accord approval to the

(') [1964) II L.L.J. 568.

(1) [1964) I L.L.J. 237.

(1) [1962)'II L.L.J. 272.

(') [1963] II L.L.J. 3()3.

(1) [1962] II L.L.J. 158.

(') [1964] II L.L.J. 53.

'LI B(N)SBCI-14

SUPREME COURT REPORTI: [1965] 3 s.c.R.

action proposed to be taken by the appellant against the respondent.

We have already indicated very briefly the nature and effect of the said findings. The learned Solicitor-General no doubt wanted to contend that the said findings were not justified on the evidence adduced before the Tribunal. We did not, however, allow the learned Solicitor-General to develop this point because, in our opinion, the findings in question are based on the appreciation of oral evidence, and it cannot be suggested that there is no legal evidence on the record to support them. Usually, this Court does not under Art. 136 of the Constitution entertain a plea that the findings of fact recorded by the Industrial Tribunal are erroneous on the ground that they are based on a misappreciation of evidence. The propriety or the correctness of the findings of fact is not ordinarily allowed to oe challenged in such appeals.

The result is the appeal fails and is dismissed with costs.

Appeal dismissed.

TATA moN AND STEEL co. LTD

S. N. MODAK

March 19, 1965

JP. B. GAJENDRAGADKAR, C.J.

K. N. WANCHOO

V. RAMASWAMI,

JJ

Industrial Disputes Act 1947

s. 33

s. 33(2)(b)

Disputes Act, 1947

s. 33

CrvrL APPELLATE JURISDICTION

S. V. Gupte

N. Shroff

Jitendra Sharma

Janardan Sharma

Gajendragadkar

Industrial Disputes Act, 1947

Tata Iron & Steel Co. Ltd.,

s. 33(2)(b)

S. N. Modak

Jamadoba

December 17, 1960

December 24, 19o0

23rd December 1960

s. 33(2)

s. 33(2)(b)

s. 33(2)(b)

s. 33

s. 33(2)

Watcha

Paravatiyar

s. 33

s. 33

Section 33

s. 33

s. 33

N. MODAK

Gajendra.qadkar,

s. 10

Section 33(1)

Section 33(2)

s. 33(1)

s. 33(2)

s. 33

s. 33(3)

s. 33

s. 33

s. 33(1)

s. 33(1)

s. 33(2)

s. 33(1)

s. 33(1)

s. 33(1)

s. 33(1)

s. 33(2)

s. 33

s. 33

s. 33(1)

s. 33(2)

s. 33(2)(b)

s. 33(2)(b)

s. 33(5)

s. 33(2)

s. 33(2)

s. 33(2)

Section 33A

s. 33

s. 33

Section 33

s. 33(2)

s. 10

s. 33(2)(b)

s. 33

s. 33(2)(b)

s. 33

s. 33(1)

s. 33B(2)

s. 33(2)(b)

State of Mysore

Allahabad High Courts

s. 3J(2)(b)

Art. 136