# HOCHTIEF GAMMON v. STATE OF ORISSA & ORS

- **Citation:** [1976] 1 S.C.R. 667
- **Court:** Supreme Court of India
- **Decided:** 1975-09-04
- **Case number:** Civil Appeal No. 1827 of 1969
- **Bench:** A. Alag!Riswami, P. K. Goswami, N. L. Untwal!A
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/hochtief-gammon-v-state-of-orissa-ors-6657
- **Pages:** 14

## Headnote

Industrial Dtsputes Act~Sec. 10 -
Discretion of Govt. to refuse to nlake
a reference-Necessary and proper
parties to a referenae-Powers
of the
Court to scrutinise executive drder~lf tl1e executive refusd.s to consider re[e ..
vant 111auers or takes 11nto
considen:•tion
irrelevant or extraneous mattersWhether Court's scrutiny can be avoided by failing to give reasons.
In 1957, the Hindustan Steel Limited (Company) and the appellant (contractor) entered into a contract for execution of the· foundation and civil engineering work of the hot and cold rolling mills at Rourkela,
The Company was
to pay to the Contractor all costs of construction and in addition pay fixed
overhead charges for the head office and general office of the contractor plus
.a fixed fee. All payments in respect Qf wages and salaries and connected payments made to persons engaged upon the work as might be approved
by
the Company comprising wages of all ,operatives
as well as
all
other
payments connected with wages were to be paid by the Company. Emoluments of Site Supervisory staff as well as all other payments connected therewith were also to be paid by the Company. The payments made to statutory
schemes, in connection with sickness, or accident, or Provident Fund, or Pension
or other like schemes to the above categories, payments of overtime and additional renumeration for" Sunday, holiday or night work etc., and payments for
leave and travelling cost were all. to be made by the Company.
In 1960, the Labour Union of workmen employed by the Contractor raised
a dispute for adjudication about the bonus payable to the workmen f'or doing
the aforesaid job. The stand of' the contractor was that they would pay the
bonus if it were' given by the Company. The Government referred the question
Whether the workers of the contractor were entitled to any bonus and if so
what should be the quantum. The qU'estion whether the Company or the Contractor was liable to pay the bonus was not refefred. A notice was served on the
Company and the Company contended that since the contractor did not complete the work according to the agreement, no bonus was due to the contractor
and that the Company was not a necessary party to the reference. The contractor in the written statement contended that under the terms of the Contract
the Company had to bear all costs with reference to labour, all payments in
respect of wages, salaries and other connected payments made to persons engaged in the works and that the contractors were, paid a stated fee for professional
services rendered by them and that. therefore, the demand against the contractor was not sustainable in law. The contractor made an application to the Tribunal that for the proper adjudication of the issues referred to the Tribunal
it WaSJ necessary to bring on record the Company as a party to the proceedings.
The said application was rejected by the Tribunal.
The contractor thereupon filed a Writ Petition in the High Court of Orissa
against the said order of the Tribunal. The, High O:>urt dismissed the said
writ Petition. The contractor filed an appeal by Special Leave to this Court.
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This Court in that appeal held :
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''That it would have been open to the· State Government to
ask
the
Tribunal to consider as to who was the en1ployer of the workn1en and
in that case the· terms of reference might have been suitably framed. In
the present case such a course has not been adc>pted.
Tbe dispute· bet·,
ween the Company and the contractor would be a substantial dispute and
cannot be regarded as incidental to the industrial dispute which was referred. The Company was therefore, a necessary party.''
668
SUPREME COURT REPORTS
[1976] I s.c.R.
A
The Contractor, thereafter, filed an application before the State Governn1ent
asking them to modify tlle earlier reference by adding whether the bonus \va:i;
payable· by the Company or the contractor and. by adding the Company a::; a
party to the reference. It "\\'as pointed out in that application

## Text

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667
HOCHTIEF GAMMON
v.
STATE OF ORISSA & ORS.
September 4, 1975
[A. ALAG!RISWAMI, P. K. GOSWAMI AND N. L. UNTWAL!A, JJ.]
Industrial Dtsputes Act~Sec. 10 -
Discretion of Govt. to refuse to nlake
a reference-Necessary and proper
parties to a referenae-Powers
of the
Court to scrutinise executive drder~lf tl1e executive refusd.s to consider re[e ..
vant 111auers or takes 11nto
considen:•tion
irrelevant or extraneous mattersWhether Court's scrutiny can be avoided by failing to give reasons.
In 1957, the Hindustan Steel Limited (Company) and the appellant (contractor) entered into a contract for execution of the· foundation and civil engineering work of the hot and cold rolling mills at Rourkela,
The Company was
to pay to the Contractor all costs of construction and in addition pay fixed
overhead charges for the head office and general office of the contractor plus
.a fixed fee. All payments in respect Qf wages and salaries and connected payments made to persons engaged upon the work as might be approved
by
the Company comprising wages of all ,operatives
as well as
all
other
payments connected with wages were to be paid by the Company. Emoluments of Site Supervisory staff as well as all other payments connected therewith were also to be paid by the Company. The payments made to statutory
schemes, in connection with sickness, or accident, or Provident Fund, or Pension
or other like schemes to the above categories, payments of overtime and additional renumeration for" Sunday, holiday or night work etc., and payments for
leave and travelling cost were all. to be made by the Company.
In 1960, the Labour Union of workmen employed by the Contractor raised
a dispute for adjudication about the bonus payable to the workmen f'or doing
the aforesaid job. The stand of' the contractor was that they would pay the
bonus if it were' given by the Company. The Government referred the question
Whether the workers of the contractor were entitled to any bonus and if so
what should be the quantum. The qU'estion whether the Company or the Contractor was liable to pay the bonus was not refefred. A notice was served on the
Company and the Company contended that since the contractor did not complete the work according to the agreement, no bonus was due to the contractor
and that the Company was not a necessary party to the reference. The contractor in the written statement contended that under the terms of the Contract
the Company had to bear all costs with reference to labour, all payments in
respect of wages, salaries and other connected payments made to persons engaged in the works and that the contractors were, paid a stated fee for professional
services rendered by them and that. therefore, the demand against the contractor was not sustainable in law. The contractor made an application to the Tribunal that for the proper adjudication of the issues referred to the Tribunal
it WaSJ necessary to bring on record the Company as a party to the proceedings.
The said application was rejected by the Tribunal.
The contractor thereupon filed a Writ Petition in the High Court of Orissa
against the said order of the Tribunal. The, High O:>urt dismissed the said
writ Petition. The contractor filed an appeal by Special Leave to this Court.
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This Court in that appeal held :
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''That it would have been open to the· State Government to
ask
the
Tribunal to consider as to who was the en1ployer of the workn1en and
in that case the· terms of reference might have been suitably framed. In
the present case such a course has not been adc>pted.
Tbe dispute· bet·,
ween the Company and the contractor would be a substantial dispute and
cannot be regarded as incidental to the industrial dispute which was referred. The Company was therefore, a necessary party.''
668
SUPREME COURT REPORTS
[1976] I s.c.R.
A
The Contractor, thereafter, filed an application before the State Governn1ent
asking them to modify tlle earlier reference by adding whether the bonus \va:i;
payable· by the Company or the contractor and. by adding the Company a::; a
party to the reference. It "\\'as pointed out in that application that it was the
Company which would be liable to pay the bonus if at all it was payable. The
contractor also asked for a personal hearing. The Government dispoS\!d of
that application by observing
"Government do not find any materials on the basis of the petition to
include Hindustan Steel Lin1ited, RourkeJa, as a party' in
the
above
case.''
The. Government did not apply its mind to the other prayer, nan1eiy, adding
one more issue to the reference.
The Contractor filed a writ Petition against the said order of the State
Government. The High Court dismissed the Writ Petition.
Against the judgment of the High Court the appellants appealed to this
Court.
1'\ltowing: the appeal,
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HELD : 1. It is apparent frorn the Gov~rnment's reply that the Govefn_
ment did not apply its mind to the facts placed before them. There was. at
least an arguable case on the point as to \Vho Wa"i liable to pay the bonus and
in that case the Company \vould have be1::n a necessary and appropriate party.
Even it the Government thought that the Company W<lS not a necessary party,
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the question as to who was liable to pay the bonus was a veiy relevant question
and that made th'e Company a necessary or at least a proper party. The
attitude of the contractor throughout had been that their contract was a cost
contracf; that the Company had to pay labour and the Co-mpany was the real
employer,
That contentiqn may or may not be upheld by the Tribunal.
This
was. however, an appropr1ato qu\:stion to be referred to the Tribunal. [674 C-FJ
2. The· power of the courts in relation to the orders or the appropriate
Government in the matter of referring industrial disputes for adjudication is
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no longer in doubt. [674 G]
State of IJ01nbay v. K. P. Krishnan & Ors. [1961] ( 1) S.C.R. 227] and Bo111bay Gnivn of Journalists v. The State of Bombay [1964(6) S.C.R. 22@
241.
followed.
The powers of the Court mentioned in the above two cases in relation to
the orders of the Government under any statute are not the only powers of
the courts.
In England, in earlier days, the. courts usually refused to interfere
where the Governm~nt or the concerned officer passed V.'hat was called a nonspeaking order. Where a speaking order was passed the Courts proceeded to
consider the reasons given to see whether the reasons given were relevant
reason;;; or considerations. \Vherc there was a non-speaking order they used
to say it V.'as. like the face of the sphnix in. the sense that it was inscrutable
and. therefore, held that they could not consider thC: question of the validity
of the order.
Even in England, the court5 have travelled V"e·ry fast since those
davs.
1-hey no longer find the face of the sphinx in~rutable. Needless to
saV that "thoe courts in rndia which function under a written constitution which
cOnfers fundamental rights on citizoens exercise, far greater powers than those
exercised by the courts in England where there is no written constitution and
there are no fundamental rights.
The decision of H0use of Lords in Padfield
v. Minister of Agriculture, Fisheries and Food (1'968 A.C. 997),
followed.
[675-F-H, 676-<A]
3. The Executive have to reach their decisions by taking into account relevant considerations. They should not refuse to consider relevant matter nor
should they take into account wholly irrelevant or extraneous considerations.
They should not misdirect themselves on a point of law. Only such a decision
will be lawful. The Courts hav~ vower to see, that the Executive acts lawfully.
Tt is no answer to the exercise of that power to say that the Executive acted
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HOCH'DEF GAMMON v. ORISSA (Alagiriswami, J.)
6 6 9
bona fide nor that they have bestowed painstaking consideration. They cannot
avoid scrutiny by courts by failing to give reasons. If they give reasons and
they are not good reasons, the court can direct them to reconsider the n1atter
in the light of relevant matters, though the propriety, adequacy or ~atisfactory
character of these reasons may not be open to judicial scrutiny. Even it' the
Executive considets it inexpedient to exercise their powers they should state
their reasons and there must be material to show that they have considered
all the relevant facts. [679 D-F]
4. Judged by this test the order of th~ Sratc Government i!'> unsustainable.
The Government docs not seem to have noticed that the contract in question
is not one of the kind wher\!in a contractor undertakes to do a certain work
for a certain sum. In this contract, the Company had to pay for the rnate,rial
as well as for Jabour. The Contractor got paid only for his professionaJ services.
There' was in any case' no provision in the contract that the contractor
was to incur any item, of expenditure or make any payment in relation tc the
workmen.
The· Government did not realise that the· dispute concerned
not
rnere1y two parties but three. The Goven1ment order in the
present
case·
really amounts to an outright refusal to consider relevant matters and the
Government also misdirected itself ia point of Jaw in wholly omitting to 1ale
into· account the relevant c-onsiderations which as held by the House of Lords.,
is unlawful behaviour. The Government docs not appear to have nprlied
their mind to any of the considerations set out in the contractor's applica:ion.
/679-F-H, 680 D&F]
Allowing the appeal the Court directed the Government of Orissa to re~on
sider the matter and take a decision in the matter of reference in the light of
the relevant facts. [680-G]
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1827 of 1969.
Appeal by Special Leave from the Judgment and Order dated the
28th November, 1968 of the Orissa High Court in O.J.C. No. 152 of
1964.
F. S. Narima11, A. G. Meneses, Sharad Manohar and J. B. Dada•
chanji, for the Appellant.
S. T. Desai and M. N. Shroff and R. N. Sachthey for Respondents
1 and 5.
Santosh Chatterjee· and G. S. Chatterjee for Respondent No. 4.
The Judgment of the Court was delivered by
ALAGIRISWAMI, J.-The question of bonus for 16,000 worki_ncn
for the years 1958-59 and 1959-60 is still being fought out on prel1m!-
nary points and this is the second time the matter has come to this
Court. The earlier deci~ion is. reported in 1964 (7) S.C:R. 596 (Ho~h
tief Gammon v. Industnal Tribunal, Bfwbaneshwar, Onssa & Ors.( J.
In August 1957 the Hindustan Steel Ltd., the 4th respondent in the
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appeal, hereinafter called the company, and the appellant, '.1 partnership
of a West German company and an Indian comp~ny, heremafter ca))ed
the contractor, entered into a contract for execution ?f the. founda.10n
and civil engineering work of the Hot and ~old !'lolli!Jg Mills at Rourkela including the purification and other c1v1! engmeenng work connected with the water supply to the Rolling Mills. The contract was. a cost
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contract with a target sum plus fixed overheads and fee, th~t is, tl!o
company was to pay to the contractor all costs of construct10n and m
addition pay fixed overhead for the head office general expenses of the
670
SUPREME COURT REPORTS
[1976] 1 S.C.R.
contractor plus a fixed fee.
The target sum for the work was
Rs.
66,294,000.
The overheads were D.M. 2,800,000/-
plus
Rs. 2, 120,000/- and the fee of Rs. 6,200,000/-. The work was to be
carried out as detailed in the drawings, bills of quantities, specifications
and other written orders~ issued or to be issued by the company. All
payments in respect of wages and salaries and connected payments made
to persons engaged upon the wo'rk as may be approved by the company,
comprising wages of all operatives as well as all other payments connected with wages were to be paid hy t'he company. Any increase
beyond the initial rates specified in Enclosure Ill to the contract was to
be subject to the approval of the company and such approval was to
be taken in respect of categories and not individuals. Emoluments of
site supervisory staff as well as all other payments connected therewith
were also to be paid by the company. Payments made to statutory
schemes in connection with sickness or accident or provident fund or
pension or other like schemes to the above categories, payments of overtime and additional remuneration for Sunday, holiday or night work
etc., and payments for leave and travelling cost were all to be made by the
company. It was also provided that the cost of any other expenditure
was to be admitted only on satisfactory proof being given by the contractor that such expenditure was necessary in connection with the preparatton and execution of the work. The company was to open an
imprest account of Rs. 30,00,000/- and the contractor was to draw on
the account to cover his day-to-day requirements for the work.
The
imprest was to be increased or decreased from time to time depending
on the amount required by the contractor to do the work. The contractor was to submit fortnightly cash account covering the expenditure
incurred from the imprest account and the company was to recoup the
amounts covered by such account within seven working days. Once in
three months the contractor was to be paid a part of the fixed amount of
overheads pro rata to the target cost of work done during the preceding
three months.
Once in six months he was to be paid three-fourths of
the fee proportionate to the target cost of the work done in the preceding
half year. Enclosure III also set out the rate of wages for unskilled
labourers, khalasi, mason, fitter or carpenter. If the contractor completed the work prior to the 30th September, 1960 he was to be paid,
exclusive of such sums as may be due to, or from, him a bonus equivalent to Rs. 2,00,000 /-for every complete month by which the actual
completion of the work precedes the 30th September, 1960. The terms
of the contract have been set out at some length as they have a relevance
to the question of bonus payable to the workers because the question
now agitated before this Court is that the Industrial Tribunal should
be asked to decide who is to pay the 9onus, if bonus is payable to the
workmen, the contractor or the company.
It would be noticed from the provisions of the contract set out
above that all payments to labour were to be made by the company.
The contract contemplates payment of travelling allowance, payment
in respect of sickness, accident, provident fund, pension, overtime,
additional remuneration for Sunday, holiday or night work etc. It has
even mentioned the rate of wages arid is thus fairly comprel1ensivc.
There is, of course, no mention about bonus.
Now if the contractor
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HOCHT!FF GAMMON v. ORISSA (Alagiriswami, !.)
671
has to pay a higher rate of wages than that found in Enclosure UI because of the conditions in the labour market naturally the contractor
cannot be expected to pay it from out of his funds or the payments he
was to receive in pursuance of the contract. This being a contract in
which the company is to pay for labour as well as for materials any
increase in the cost of those items cannot be borne by the contractor,
who was to be paid only a fixed sum towards its remuneration. As the
question of bonus is not mentioned in the contract the question arises
as to who is to pay the bonus in case bonus is found payable to the
workmen. We express no opinion on that point. But it appears to us
that the company is adopting an ostrich like policy in trying to avoid
being made a party to the reference before the Industrial Tribunal. If
it should ultimately be held that bonus is payable and the company is
liable to pay it, it should do its best even from this stage to fight the
question of liability to pay bonus as well as the quantum.
What is called a tripartite agreement seems to have been entered
into between the workmen and the appellant in the presence of the
Labour Commissioner on 12th June, 1960. That was natural as tbe
appellant it was that employed labour.
But that by itself does not
decide the question who is to pay the bonus. Under that agreement
the appellant agreed to the payment of bonus in principle subject to
the condition that they get the bonus from the company. The quantum
of bonus and exact date from which the bonus was payable was not,
however, indicated. It was also stated that when bonus was received by
the management it shall notify the fact to the workers and that the
union may raise this as a point of dispute when it would deem it
appropriate.
On 15th June, 1960 the labour union appears to have written a
letter to the Labour Commissioner of Orissa raising a dispute for adjudication regarding bonus. The union mentioned that they had also
written a number of letters to the appellant as well as the company but
neither of them had decided the issue. They, therefore, served a notice
of strike.
The Labour Commissioner wrote to the Government on
17-10-60 about the dispute and mentioned that the appellant had agreed
to pay bonus if the company paid it. He also mentioned the fact that
the appellant in reply to the letters from the workmen had stated that
they had not come to any final decision in the matter. On the ground
that unless something was done there will be a strike causing complete
di~location of work of the company he suggested that the following
issue may be considered for reference to the Industrial Tribunal :
"Whether the workers of Hochtief Gammon are entitled
to any bonus ? If so, what should be the quantum ?"
He proceeded to say that if this question was finally decided it would
also serve as a guiding principle for other contractors as similar
demands for payment of bonus from workers were being received. It
would be noticed that though the appellant's stand was that they would
pay the bonus if it were given by the company the Labour Commissioner did not suggest that the question as to the party liable to pay the
bonus, whether it was the appellant or the company, be referred for
672
SUPREME COUil T REPO!l TS
[1976] 1 S.C.R.
adjudication. His anxiety was that the work of the company shou'.d not
be dislocated. He did not applv his mind to the question of the party
liable to pay the bonus. Naturally the Government also did not. The
Government therefore referred the following issue for adjudication :
"Whether the workers of M/s. Hochtief Gammon. Civil
Engineer& and Contractors, Rourkela are entitled to any
bonus and if so, what should be the quantum?"
On this a notice seems to have been served on the company and curiomly enough the company said that the appellant did not complete the
work as set out in the Memorandum of Agreement and hence no bonus
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was due to the contractors aJ!d that therefore they were not a necessary
party. This bonus, as the terms of the contract set out earlier would
show. has nothing to do with the bonus payable to the workmen. The
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appellant in their written statement pointed out that under the terms
of the contract the company had to bear all expenditure with reforencc
to labour, all payments in respect of wages, salaries and other conrn:cted
payments made to persons engaged in the works, that it was also· responsible to make payments to statutory schemes in respect of ali workmen and that they themselves were only paid a stated fee for professional services rendered to them and therefore no demand c:;n be
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raised by the workmen who are engaged by the contractor agaircst the
contractor and such a demand is unsustainable in law. They then
gave reasons why the workmen were not entitled to any bonus from
them. It is not necessary to set out those reasons at Ieni:th. We !lave
already referred to the stand of the company. As would be apparer.t
from the decision of this Court on the earlier occasion, which we shall
set out later, the Tribunal could not have decided this question iJ. view
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of the terms of reference made to it.
Thereafter the appellant filed an application under s. 18(3) (o) of
the Industrial Disputes Act praying that for a proper adjudication of the
issue referred to the Tribunal it was necessary to bring on record the
company as a party to the proceedings.
They pointed out thU any
amount payable to the labourers engaged by the contractors for whatF
soever reason was a contract expenditure within the meaning of the
term contract and payable by the company as it was entirely responsible
for payment of all remuneration to the workmen and all expenditure incurred by reason of any demand put forward by the workmen in connection with the works, was debitable to the contract and payable by
the company.
This application was rejected. Thus the stand of the
appellant as to the party liable to pay the bonus was never in doi:bt.
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The appellant thereupon filed a petition before the High Couct ot
Orissa praying that the order of the Tribunal should be set aside. That
petition also having been dismissed an appeal was filed before this Court
by special leave.
The relevant portion of the judgment of this Court
is found at page 605, 1964(7) S.C.R.:
"The next contention raised by Mr. Chatterjee is that
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M/s. Hindustan Steel Ltd. is a necessary party because it is
the said concern which is the employer of the respondents
and not the appellant. In other words, this contention is that
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HOCHTIEF GAMMON v. ORJSSA (Alagiri~ami, J.)
673
though in form the appellant engaged the workmen
whom
the respondent union represents, the appellant was acting as
the agent of its principal and for adjudicating upon the indmtrial dispute referred to the Tribunal by the State of Orissa.
it i.s necessary that the principal, viz:, M/s. Hindustan SteeI
Ltd. ought to be added as a party. In dealing with thi.s argument, it is necessary to bear in mind the fact that the appellant does not dispute the respondent Union's case that the
workmen were employed by the appellant.
It would have
been open to the State Government to ask the Tribunal to
consider who was the employer of these workmen and in
that case, the terms of reference might have been suitably
framed.
Where the appropriate Government desires that the
question as to who the employer is should be determined, i:
generally makes a reference in wide enough terms and includes as parties to the reference different persons who are
alleged to be the employers.
Such a course has not been
adopted in the present proceedings, and so, it would not ho
possible to hold that the question as to who is the employer
as between the appellant and M/s. Hindustan Steel Ltd. is a
question incidental to the industrial dispute which has been
referred under s. lO(l)(d). This dispute is a substantial
dispute between the appellant and M/s Hindustan Steel Ltd.
and cannot be regarded as incidental in any sense, and so,
we think that even this ground is not sufficient to justify the
contention that M/s. Hindustan Steel Ltd. is a necessary party
which can be added and summoned under the implied powc·s
of the Tribunal under s. 18(3) (b) ."
It would be noticed that before this Court what was admitted was that
the appellant h.ad employed the workmen but the question as ta who
was the employer in relation to those workmen was the main question
at issue.
That was why this Court pointed out that it would have
been open to the State Government to ask the Tribunal to consider who
was the employer of these workmen and in that case the terms of
reference might have been suitably framed. As that had not been done
this Court pointed out that it would not be possible to hold that the
question as to who was the employer as' between the appellant and the
company was a question incidental to the industrial dispute which had
been referred under s. 10(1) (d), as it was a substantial dispute C,,,tween the appellant and the company.
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Apparently taking the 'cue from the observations of this Court the
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appellant filed a writ petition out of which this
appeal arises.
But
before doing so the appellant had filed an application before the State
Government asking them to modify the earlier reference to the Iodustrial Tribunal by adding the company as a party to the referenc-~ and
an additional clause as under :
"If bonus is payable, who is the employer and who le
responsible for payment of the bonus to the workmen ?"
They J'.Ointed out in that application that the company was entirely
responsible for payment of wages and connected payments anc'
all
674
SUPREME COURT REPORTS
[1976] 1 S.C.R.
other remuneration of any kind to the workmen, that for enabling the
appellant to make payments to the labourers engaged for such work
on behalf of the company an imprest of Rs. 3,000,000/- was given to
them out of which the payments were made, that the appellant got only
a fee, that if any bonus becomes payable it was the person who pays
wages that has to pay the bonus.
Thereafter they also asked for a
personal hearing.
To this the reply of the Government was as fol·
lows:
·
"With reference to their petition dated 20-5-64 on the
above subject, the undersigned is directed to say that after
due consideration of the matter the Goveurment do not find
any materials on the basrs of the petition to include Hindustan
Steel Ltd., Rourkela as a party in the above case."
It would be noticed that in the petition the appellant wanted not only
that the company should be made a party but also that another issue
mun be referred to the Tribunal for adjudication.
They had given
reasons as to why the company should be inclnded as a party. They
had in their petition included the paragraph which we have extracted
above from this Court's judgment. It is apparent from their reply that
the Government had not applied their mind to the facts placed before
them. There was at least an arguable case on the point as to who was
liab;c to pay the bonus and in that case the company would have been
a necessary and appropriate party. Even if the Government thought
that the company was not a necessary party the question as to who
wa' :iable to pay the bonus was a. very relevant question and that
made the company a necessary or at least a proper party. The attitude
of the appellant had throughout been that their contract was a cost contract, that the company had to pay labour and while they had employed
the workmen the employer was really the company. That contention
may or may not be upheld by the Tribunal. Ultimately if the Tribunal
should hold that the appellant is the party responsible for payment of
bonus the question as between the company on the one hand and appellant on the other may have to be decided by arbitration as provided in
the contract between them or otherwise. It appears to us, therefore,
that not only was this an appropriate question to be referred to the
Industrial Tribunal for ad judicati6n but even the company should be
interested in getting itself impleaded as a party so as to put forward
any contention which it may decide to put forward as
regards the
question whether bonus was payable and if so the quantum. thereof, as
also the question as to who would be liable to pay the bonus instead
of adopting, as we have said earlier, an ostr;ich like policy.
The power of the Courts in relation to the orders of the appropriate Government in the matter of referring industrial disputes for
adjudication is no longer in l:loubt. In State of Bombay v. K. P. Krishnan & Ors. ( 1) it was held :
"It is common ground that a writ of mandanms would lie
against the Government if the order
pass~d. by it under
s.10(1) is for instance contrary to the prov1S1ons of s. 10(1)
(a) to (d) in the matter of selecting the appropriate authority;
(1) ;196ij1 SC.R.227.
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HOCHTIEF GAMMON v. OR!SSA (Alagiriswami, !.)
6 75
it is also common ground that in refusing to make a reference
under s. 12(5) if Government does not record and communicate to the parties concerned its reasons therefor a writ
of mandamus would lie. Similarly it is not disputed that if a
party can show that the refusal to refer a dispute is not bona
fide or is based on a consideration of wholly irrelevant facts
and circumstances a writ of mandamus
would lie.
The
order passed by the Government under s. 12 ( 5) may be an
administrative order and the reasons recorded by it may not
be justiciable in the sense that their propriety, adequacy or
satisfactory character may not be open to judicial scrutiny; in
that sense it would be correct to say that the court ~acing a
petition for mandamus is not sitting in appeal over the decision of the Government; nevertheless if the court is satisfied
that the reasons given by the Government for refusing to make
a reference are extraneous and not germane then the court
can Issue, and would be justified in issuing, a writ of mandamus even in respect of such an administrative order."
Ir. Bombay Union of Journalists v. The State of Bombay( I) it was
ob5:crvcd :
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"The breach of section 25F is no doubt a serious matter
and normally the appropriate Government would refer a dispute of this kind for industrial adjudication; but the provision contained ins. 10(1) read withs. 12(5) clearly shows
that even where a breach of s. 25F is alleged, the appropriate
Government may have to consider the expediency of making
E
a reference and if after considering all the relevant facts the
appropriate Government comes to the conclusion that it would
he inexpedient to make the reference, it would be competent
to it to refuse to make such a reference ....... If the appropriate Government refuses to make a reference for irrelevant considerations, or on extraneous grounds, or acts mala
fide, that, of course, would be another matter: in such a
F
case a party would be entitled to move the High Court for a
writ of mandamus."
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The above are not the only powers of the Courts in relation to the
orders of the Government or an officer of the Government who has
been conferred any power under any statute, which apparently confer
on them absolute discretionary powers, in this country as well as in
England. In England in earlier days the Courts usually refused to interfere where the Government or the concerned officer passed what was
called a non-speaking_ order, that is, an order which on the face of
it did not specify the reasons for the Order. Where a speaking ordoc
was passed the Courts proceeded to consider whether the reasons given
for the order or decision were relevant reasons or considerations. Where
there was a non-speaking order they used to say that it was like the
face of the Sphinx in the sense that it was inscrutable and therefore hold
that they could not consider the question of the validity of the order.
Even in England the Courts have travelled very far since those days.
--·--------
0) [1964] 6 S.C.R. 22, 34.
'1i76
SUPREME COURT REPORTS
[1976] 1 S.C.R.
"They no longer find the face of the Sphinx inscrutable. Needless to
csay that Courts in India, which funct;~n under a written Constitution
,which confers fundamental rights on r, izens, have exercised far greater
powers than those exercised by Couus in England, where there is no
written Constitution and there are no fundamental rights.
Therefore
, the decisions of Courts in England as regards powers of the Courts,
'surveillance', as Lord Pearce calls it, or the control which the Judiciary have over the Executive, as Lord Upjohn put it, indicate at least
the minimum limit to which Courts in this country would be prepared
,to go in considering the validity of orders of the Government or its
officers. In that sense the decision of the House of Lords in Padfield
v. Minister of Agriculture, Fisheries and Food(il) is a landmark in the
history of the exercise by Courts of their power of surveillance.
That decision is well worth a close study but we will resist the
temptation to quote more than is absolutely necessary.
That was a
case where under the provisions of the Agricultural Marketing Act,
1958 the Minister had the power to appoint a committee to go into
certain questions under s. 19 of that Act but when requested to appoint
a committee he refused. In refusing to appoint the committee he had
given elaborate reasons for his refusal. , It was admitted that the question of referring the complaints to a committee was a matter within the
1.1inister~s discretion. It \Vas also argued that he was not bound to give
any reasons for refusing to refer a complaint to a committee and that if
he gives no reason his refusal cannot be questioned and his giving
reasons could not put him in a worse position. It W<JS held by the
House of Lords that an order directing the Minister to consider the
complaint according to law should be made. It was also held that
"Parliament conferred a discretion on the Minister so that it could be
used to promote the policy and objects of the Act which were to be
determined by the construction of the Act and that that was a matter
of law for the court. It was further held that though there might be
reasons which would justify the Minister in refusing to refer a comp·
Jaint, his discretion was not unlimited and, if it appeared that the effect
of his refusal to appoint a committee of investigation was to frustrate
the policy of the Act, the court was entitled to interfere. The extracts
given below of certain portions of the speeches of the learned Lords i:an
be appreciated in that background.
Lord Reid:
"The respondent contends that his only duty is to consider a complaint fairly and that he is given an unfettered discretion with regard to every complaint either to refer it or not
to refer it to the committee as he may think fit. The appellant contends that it is his duty to refer every genuine and
substantial complaint, or alternatively that his discretion is
not unfettered and that in this case he failed to exercise his
discretion according to law because his refusal was caused or
influenced by his having misdirected himse!f in law or by_ his
having taken into account extraneous or irrelevant considerations.
~·
(t) [t 9681 A.C. 9J7.
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HOCHTIEF GAMMON v. ORISSA (Alagirisw{lfni, J,)
677
In my view, the appellants' first contention goes too far.
There arc a number of reasons which would justify
the
.:vlinister in refusing to refer a complaint. For example, he
might consider it more suitable for arbitration, or he might
rnnsider that in an earlier case the committee of investigation had already rejected a substantially similar complaint,
or he might think the complaint to be frivolous or vexatious.
So he must have at least some meas.ure of discretion. But is
lt unfettered ?
It is implicit in the argument for the Minister that there
are only two possible interpretations of this
provisioncither he must refer every complaint or he has an unfettered
discretion to refuse to refer in anv case. I do not think that
is right.
"
It was argued that the Minister is not bound to give any
reasons for refusing to refer a complaint to the committee,,
that if he gives no reasons his decision cannot be questioned,.
and that it would be very unfortunate if giving reasons were
to put him in a worse position. But I do not agree that ·a
decisio~ cannot be questioned if no reasons are given."
Lord Hodson :
"'The reasons disclosed are not, in nly opinion,
good
reasons for refusing to refer the complaint seeing that they
leave out of account altogether the merits of the comp/uint
itself.
The complaint is, ai the Lord Chief Justice pointed
out, made by persons affected by the scheme and is not one·
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for t,he consumer committee as opposed to the committee
of investigation and it was eligible for reference to the latter.
l t has never been suggested that the complaint" was not a genuine one. It is no objection to the exercise of the discretion
to refer that wide issues will be raised and the interests of
other regions and the regional price structure as
a
whole
would be affected. It is likely that the removal of a grievF
ance will, in any event, have a wide effect and the Minister
cannot lawfully say in advance that he will not refer the
matter to the committee to ascertain the facts because, as he
says in effect, although not in so many words, "I would not
regard it as right to give effect to the report if it were favourable to the appellants."
G
H
Lord Pearce :
'·r do not regard a Minister's failure or refusal to give
any reasons as a sufficient exclusion of the court's surveillance .
It was for the Minister to use his discretion to promote·
Parliament's intention. If the court had doubt as to
whether the appellants' complaint was frivolous or repetitive, or not genuine, or not substantial, or unsuitable for investigation or more apt for arbitration, it would not interfere. But nothing which has been said in this case leads one·
678
SUPREME COURT REPORTS
[1976] 1 S.C.R.
to doubt that it is a complaint of some substance which should
properly be investigated by the independent committee with
a view to pronouncing on the weight of the complaint and
the public interest involved.
The fact that the complaint raises wide issues and affects
other rei.ions was not a good ground for denying it an investigation by the committee. It is a matter which makes it
very suitable for the committee of investigation, with its
duty to report on the public interest, and its capacity to hear
representatives of all the regions."
Lord Upjohn :
'The Minister in exercising his powers and duties, conferred upon him by statute, can only be controlled by a prerogative writ which will only issue if he acts unlawfully .. Unlawful behaviour by the Minister may be stated with suflicient accuracy for the purposes of the present appeal (and
here I adopt the classificatioin of Lord Parker C.J., in the
Divisional Court) : (a) by an outright refusal to consider
the relevant matter, or (b) by misdirecting himself in point
of law, or (c) by taking into account some wholly irrelevant
or extraneous consideration, or ( d) by wholly omifting to
take into account a relevant consideration.
There is ample' authority for these propositions which
were not challenged in argument. In practice they merge into
one another and ultimately it becomes a question whether
for one reason or another the Minister has acted unlawfully
in the sense of misdirecting himself in law, that is, not merely in respect of some point of law but by failing to observe
the other headings I have mentioned.
The Minister's main duty is not to consider its suitability for
investigation; he is putting the cart before the horse. He
might reach that conclusion after weighing all the facts but not
until he has done so.
This introduces the idea, much pressed upon your Lordships
in argument, that he had an "unfettered" discretion in this
matter; it was argued, means that, provided the Minister considered the complaint bona fide, that was an end of the matter.
Here Jet it be said at once, he and his advisers have obviously
given a bona fide and painstaking consideration to the complaints addressed to him; the question is whether the consideration given was sufficient in law.
My Lords, I believe that the introduction of the adjective
"unfettered" and its reliance thereon as an answer to the appellants' claim is one of the fundamental matters confounding the
Minister's attitude, bona fide though it be .... even if the section did contain that adjective I doubt if it would make any
difference in law to his powers ...... But the use of that adjective, even in an Act of Parliament, can do nothing to unfetter the control which the judiciary have over the executive,
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HOCHTIEF GAMMON v. OR!SSA (Alagiriswami, J.)
679
namely that in exercising their powers the latter must act lawfully and ihat is a matter to be determined by looking at the
Act and its scope and object in conferrring a discretion upon
the Minister rather than by the use of adjectives."
'" ....