# NEW STANDARD ENGINEERING CO. LTD v. N. L. ABHYANKAR AND ORS

- **Citation:** [1978] 2 S.C.R. 798
- **Court:** Supreme Court of India
- **Decided:** 1978-02-02
- **Bench:** P. N. Bhagwati, P. N. Shingi-Ial, Jaswant Singh
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/new-standard-engineering-co-ltd-v-n-l-abhyankar-and-ors-7429
- **Pages:** 7

## Headnote

lnd11strial Disp11Jes Act 1947~Sec. 2(p) S. l8-Settl!!111t·11t arrived at after
tlie award and during pe11de11cy of Writ Peririon oj company
in
the High
Court-Tests for determining reasonableness and fairness of settlement.
The Government of Maharashtra referred to the Industrial Tribunal the
dispute betwern the New Standard Engineering Co. Ltd. and its workmen for
adjudication under section 10( 1 )(d) of the Industrial Disputes Act 1947. The
C
Tribunal gave ·its award in November, 1972, and it directed that the revised wage
scales and the scheme of denrness allowance shall come into force
with
retrospective effect from 1st of January, 1968. The Co11tpany challenged the
award in the High Court by a petition under Articles 226 and 227 of the Constitution which was fixed for hearing on 30-7-1973.
A settlement was arrived
at between the company and the Bhartiya Kamgar Sena (respondent No.
3 )
on 31-7-1973 but the application for adj'ournment was refused.
The dicl'ation
of the judgment commenced on 31-7-1973 and was concluded 0.1 1st August,
1973.
E
F
G
II
/
One of the poin!s urged in the High Court W ;)S th:1t th:.: Comp<.>.1y had arrived at the settlement and award may be made in terms of that settlement or a
direction may be given to the Tribunal to consider whether the settlement was
fair and reasonable. The High Court held that the alleged settlement was not
"' settlement under section 2(p) of the Act it was not open to it to take
notice of it in proceedings u'nder Articles 226 and 227 of the Constit1nion.
It
therefore thought it proper to dispose of the petition on merits rather than
leave it to uncertainty and inter-union rivalry which may lead to industrial
unrest,
The Company filed an appeal in this Court by Special Leave. This Court
sent the matter to the Tribunal for finding whether the settlement arrived at
by the Company and responden~ No. 3 wasl under section 2(p) of the Act,
whether the settlement was entered into voh.:~ltarily and whethi.!r it was just
and fair. The Tribunal found that out of 1328 workmen who were in service
on 31-7-1973, 995 workmen had signed the settlement and had al~o accepted,
their dues thereunder. and 242 workmen. had only accepted their dues under
the settlement by sif,\ling receipts though they did not sign the settlemen~.
The Counsel for respondent No. 2 contended that the settlement dated
31-7-1973 was not just r.nd fair. The Counsel further argued that while under
the n.ward the increased rates were admissible from January, 1968, the settlement put that off to January. 1973 and was, therefore. unjust and unfair. It
was also cc•.1tended that by the settlement the amount of arrears payable was
reduced from Rs 4(} lakhs to Rs. 11.5 -lakhs.
On the other hand Counsel for
the Compi:>•ny pointed out with reference to the bala'flce sheets that the Company had paid all its tax and other liabilities which were beyond recall ~ind that
during the period from 1968 to 1972 i.t.had only a net surplus of Rs. 5.11 lakhs,
and that the Company had agreed to pay about Rs. 11.56 lakhs in addition to
the difference in dearness allowance amounting to Rs. 3.64 lakhs which had
already been paid to the workmen.
It was stated that the
Company had
exceeded its borrowing limit and it was not possible to pay more than what it
had agreed to pay under the settlement.
Allowing the appeal,
HELD : 1. Settlement of labour disptites by direct negotiation or settlement
through collective bargaining is always to be referred .for it is the be't ~aran
tce of industrial peaee which is the aim of all legislation for settlement of
\
,.)
'\
)
·~
T
NEW STANDARD ENGG. co. v. N. L. AB.HYANKAR (Shinghal, J.) 799
labour disputes.
In order ·to bring about such a settlement n1ore c2,')ily and
to inake it more workable and effective, it is no longer necessary under the law
that rhe settlemen~ should be confined t<l that arrived at in the course of a
conciliation proceeding, but now includes by virtue of the definition In Section
2(p) of

## Text

A
B
798
NEW STANDARD ENGINEERING CO. LTD.
v.
N. L. ABHYANKAR AND ORS.
February 2, 1978
(P. N. BHAGWATI, P. N. SHINGI-IAL AND JASWANT SINGH, JJ.J
lnd11strial Disp11Jes Act 1947~Sec. 2(p) S. l8-Settl!!111t·11t arrived at after
tlie award and during pe11de11cy of Writ Peririon oj company
in
the High
Court-Tests for determining reasonableness and fairness of settlement.
The Government of Maharashtra referred to the Industrial Tribunal the
dispute betwern the New Standard Engineering Co. Ltd. and its workmen for
adjudication under section 10( 1 )(d) of the Industrial Disputes Act 1947. The
C
Tribunal gave ·its award in November, 1972, and it directed that the revised wage
scales and the scheme of denrness allowance shall come into force
with
retrospective effect from 1st of January, 1968. The Co11tpany challenged the
award in the High Court by a petition under Articles 226 and 227 of the Constitution which was fixed for hearing on 30-7-1973.
A settlement was arrived
at between the company and the Bhartiya Kamgar Sena (respondent No.
3 )
on 31-7-1973 but the application for adj'ournment was refused.
The dicl'ation
of the judgment commenced on 31-7-1973 and was concluded 0.1 1st August,
1973.
E
F
G
II
/
One of the poin!s urged in the High Court W ;)S th:1t th:.: Comp<.>.1y had arrived at the settlement and award may be made in terms of that settlement or a
direction may be given to the Tribunal to consider whether the settlement was
fair and reasonable. The High Court held that the alleged settlement was not
"' settlement under section 2(p) of the Act it was not open to it to take
notice of it in proceedings u'nder Articles 226 and 227 of the Constit1nion.
It
therefore thought it proper to dispose of the petition on merits rather than
leave it to uncertainty and inter-union rivalry which may lead to industrial
unrest,
The Company filed an appeal in this Court by Special Leave. This Court
sent the matter to the Tribunal for finding whether the settlement arrived at
by the Company and responden~ No. 3 wasl under section 2(p) of the Act,
whether the settlement was entered into voh.:~ltarily and whethi.!r it was just
and fair. The Tribunal found that out of 1328 workmen who were in service
on 31-7-1973, 995 workmen had signed the settlement and had al~o accepted,
their dues thereunder. and 242 workmen. had only accepted their dues under
the settlement by sif,\ling receipts though they did not sign the settlemen~.
The Counsel for respondent No. 2 contended that the settlement dated
31-7-1973 was not just r.nd fair. The Counsel further argued that while under
the n.ward the increased rates were admissible from January, 1968, the settlement put that off to January. 1973 and was, therefore. unjust and unfair. It
was also cc•.1tended that by the settlement the amount of arrears payable was
reduced from Rs 4(} lakhs to Rs. 11.5 -lakhs.
On the other hand Counsel for
the Compi:>•ny pointed out with reference to the bala'flce sheets that the Company had paid all its tax and other liabilities which were beyond recall ~ind that
during the period from 1968 to 1972 i.t.had only a net surplus of Rs. 5.11 lakhs,
and that the Company had agreed to pay about Rs. 11.56 lakhs in addition to
the difference in dearness allowance amounting to Rs. 3.64 lakhs which had
already been paid to the workmen.
It was stated that the
Company had
exceeded its borrowing limit and it was not possible to pay more than what it
had agreed to pay under the settlement.
Allowing the appeal,
HELD : 1. Settlement of labour disptites by direct negotiation or settlement
through collective bargaining is always to be referred .for it is the be't ~aran
tce of industrial peaee which is the aim of all legislation for settlement of
\
,.)
'\
)
·~
T
NEW STANDARD ENGG. co. v. N. L. AB.HYANKAR (Shinghal, J.) 799
labour disputes.
In order ·to bring about such a settlement n1ore c2,')ily and
to inake it more workable and effective, it is no longer necessary under the law
that rhe settlemen~ should be confined t<l that arrived at in the course of a
conciliation proceeding, but now includes by virtue of the definition In Section
2(p) of the Act, a written agreement between t•he emoloyer and the workman arrived at otherwise than in the course of conciliation proceedings i,.vhere
such <1greement has been signed by the parties in the prescribed n1r.•.1ner aond a
copy thereof has been sent to the authorised officer.
Rule 58(2) of the Industrial Disputes (Central) Rules. 1957. prescribes the manner of signing the
settlcn1ent.
Section 18(1) specifically states that a settlement arrived at by
llgreement between the employer and the workman otherwise than in the
course· of conciliation proceedings shall be binding on the parties to the flgreement.
[802 D-G]
Sirsilk Ltd. and Anr. v. Government of Andhra Pradesh and Anr., [1963]
II LL.I. 647; followed,
B:
lfrrbemoos Limited v. Workmen of Herbert.wns Ltd.
and
Ors.,
[1977]
C'
2 S.C.R. 15. relied on.
Rajkanzal Kala Mandir (P) Ltd. v. Indian Motion Pictures Employees'
Union and Ors., {1963] 1 L.l .. .J. 318 referred to.
2. Under the present settlement, the \VOrkmen have
received
the
same
wages and dearness allowance which were awarded to then1 by the Tribunal.
They, therefore, lost nothing on: that account.
The stipulation about increased
production had nothing to do with the period prior to January, 1973. •.1or \v<.'5
D•
there any condition i•n the settlement according to which the benefits of the
settlement were to be forefeited in case the \vorkrhen did· not carry out the
stipulation.
[803 A-B. DJ
.
3. The question of justness and fairness of a settlement should be exa1nined
with reference to trhe situati.on as it stood on the date· on which it was arrived
at i.e .. on 31-7-1973.
One of the ground of challenge to the award before
tfie Hi~h Court was the contention that the Tribunal had not made u proper
E
cn1npanson of wages and the dearness al!owa~1ce on industry-cum-region basis.
1'he possibility of an adverse decision by the court could therefore operate as
a positive force in favour of deliberate and careful effort by both the parties
to seltle their dispute through direct negotiation. It is that force \Vhich has
brought about settlement under consideration.
In the event of the success of
the Company in the High Court the workmen ¥.'ere liable to refund the amoL•.1ts
which hrd already been paid to
them.
995 \VOrkmen had signed the settrlernent <ind 242 ,vorkmen have accepted their dues under settle1nent.
Bonafide of
respondent No. 2 Union had not been challenged.
[803 F, H. 804 A, B-E]
F'
4. The Court directed that the award of the Tribunal be substoituted by the
settlement.
[804 Fl
CIVIL APPELLATE JUR!SDIGTION : Civil Appeal No. 1177 /7:1".
Appeal by Special Leave from the Judgment and Order dated
31st July, !st August 1973 of the High Court, Bombay in Civil Application No. 335 of 1973.
F. N. Kaka, D. C. Shroff, I. N. Shroff and H. S. Parihar for the
Appellant.
Y. S. Chitaley, P.H. Parekh, K. Vasudev, C. B. Singh and (Mrs.)
Manju Sharma, for Respondents 2, 4 and 5.
ll
S. J. Desmukh, K. L. Hathi and P. C. Kapur for Respondent
No. 3.
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800
SUPREME
COURT
REPORTS
[1978] 2 S·C·R·
The Judgment of the Court was delivered by
SJIINGHAL, J .-The Government of Maharashtra referred to the
Industrial Tribunal, Bombay, the dispute between the New Standard
Engineering Company Ltd. Bombay (referred to as the Company)
and its workmen, for adjudication under section 10(1) (d) of the
Industrial Disputes Act, 1947, hereinafter referred to as
the Act.
The order of reference was made on August 9, 1966, and it stated
all the demands of the workmen.
The Tribunal give its award oo
November 29, 1972. It held, inter alia, that the revised wage S('ales
and the scheme of dearness allowence shall come into force and the
workmen shall be entitled to wages
at the revised
rates
from
January 1, 1968.
The Company challenged the award in the High Court by a petition under articles 226 and 227 of the Constitution which was fixed
for hearing on July 30, 1973.
An application was
made for an
adjournment, but to no avail.
The dictation of the judgment commenced on July 31, 1973 and was concluded on August 1, 1973.
One of the points which was urged in the High Court was that the
Company had arrived at a settlement with the Union known as the
Bhartiya Kamagar Sena (respondent No. 3) and an award may be
made in terms of that settlement, or a direction may be giveli. to the
Tribunal to consider whether the settlement was fair and reasonable.
It was brought to the notice of the High Court that some workers had
already accepted the settlement and some more may accept it.
The
request for adjournment on that account, as well as the settlement,
were opposed on behalf of the
General Engineering Employees
Union (respondent No. 2) and some others.
The High Court took
notice of the fact that respondent No. 3 which claimed to represent
"a substantial number of workmen" supported the settlement, but it
held that the alleged settlement was "not a settlement under section
2 ( p)" of the Act and it was not open to it to "take notice of the
said settlement in proceedings under Articles 226 and 227 of the
Constitution." It therefore thought it proper to dispose of the petition on the merits, rather than leave it to uncertainty and inter-union
rivalry, which might lead to industrial unrest.
In that view of the
matter, the High Court dismissed the petition on merits by its judgment dated 31-7-73/1-8-73.
In the meantime, the memorandum
of settleme'nt was signed by and on behalf of the Company and reS!'ondent No. 3 (Bharti ya Kamgar Sena).
The Company felt aggrieved against the judgment of the High
Court and applied for special leave to appeal to this Court.
Leave
was granted on August 10, 1973 along with an order for stay of enforcemeli.t of the award on condition that the appellant paid
the
workers in accordance with the terms of the settlement of
which
copies were to be filed by counsel.
Thereafter the "consent terms'',
duly signed, were filed by counsel for the patties and an order was
made on September 28, 1973, after notice to
all concerned,
that
the matter would go back to the Industrial Tribunal "for findings and
transmission thereof to this Court" along with a copy of the following
consent terms,-
NEW STANDARD ENGG. co. v. N. L. ABHYANKAR (Shinghal, J.) 80 I
"The appellants and respondents 2 to 5 agree that the
matter be sent down to Industrial Tribunal, Maharashtra,
Bombay, for recording findings on the following issues :
(a) Whether the
settlement
dated 31st July
1973
between the appellant
company
and
respondent
No. 3 is a settlement under Section 2(p) of the
Industrial Disputes Act, 1947.
(b) Whether the settlement was entered into voluntarily.
(c)
(d)
How many workmen covered by the reforence have
signed and/or accepted the settlement.
Whether the individual workmen who have signed
and/ or accepted the settlement have done so voluntarily.
( e) Whether the settlement is just and fair."
The Tribunal found issues Nos. (a), (b), (d} and (e} in the affirmative.
As regards issue No. (c) it found that out of 1328 workmen who were in service on July 31, 1973, 995 workmen had signed
tlhe settlement and had also accepted their dues thereunder, and 242
workmen had only accepted their dues under the settlement by signing
receipts though they had not signed the settlement.
As regards the
workmen who had left the Company between January 1, 1968 and
July 31, 1973, the Tribunal! found that 910 workmen had accepted
their dues under the settlement by passing receipts for the same.
On receipt of the Tribunal's findings, an order was made by this
<Court on October 4, 1977 allowing the respondent to file a counteraffidavit and permitting the appellant to file its affidavit in reply. This
is how the case has come up for disposal of the Company's appeal.
Counsel for respondent No. 2 has not challenged the findings of
the Tribunal on; issues Nos. (a}, (b), ( c) and (ct).
There is in
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fact no room for any controversy about these. findings, which appear
F'
to be fully justified, and it is therefore not necessary to examine them
here.
The question remains whether the settlement dated July 31,
1973 was just and fair, for that was the subject matter of the remaining
is'sue ( e) on which, as has been stated, the Tribunal bas returned
a
finding in the affirmative.
In reaching that conclusion, the Tribunal
has taken note of the facts that even under the settlement the workmen would receive 22 per cent additional emoluments, the award of
G
the Tribunal would cast a burden of Rs. 40.06 lakhs on account of
arrears which was not only unreasonable but also unbearable, the
Company had all the same agreed to incur a recurring liability of Rs.
12 lllkhs in the first year, Rs. 14 lakhs in the ·second year and
Rs.
16 Jakhs in the third year. and had -already paid Rs. 15 lakhs.
In
arriving a_t its finding the Tribunal has drawn heavily on this Court's
iudP:ment in Herbertsons Limited v. Workmen of Herhertsons Limited
H
and others(1). It has, in this connection, taken into consideration the
fl) [1977]2 S.C.R. 15.
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'80 2
SUPREME
COURT
REPORTS
[1978] 2 S·C·R·
factors which were likely to prevail with the workmen in accepting the
terms of the settlement dated July 31, 1973, including the prospects
of a protracted litigation, the risk of an adverse decision in the Company's pending appeal, the possibility of having to refund a part of
what they had obtained during the intervening period, the distribution
of Rs. 8,00,000/> instead of Rs. 5,00,000/- by way of ad hoc payment etc.
Mr. Chitaley has argued that the Tribunal erred in taking
the
view that the award was likely to cast an unbearable burden of Rs.
40 lakhs on account of arrears, which the company had no capacity
to pay.
Our attention has, in this connection, been invited to some
of the Annual Reports of the Company and the statements of
the
C
Chairman of the Board of Directors.
It has therefore been pointed
out that a settlement under which the sum which was payable
as
·arrears was reduced from Rs. 40 lakhs and odd to about Rs. 11.50
lakhs cannot be ·said to be fair and reasonable as the workmen iost
heavily because while the award revised the wage scales and the dearness allowance from January 1, 1968, the settlement put that off to
January 1, 1973, and thereby unduly interfered with a matter which
D
was within the Tribunal's discretion.
Reference in this connection
has been made to Rajkamal Kalamandir (Private) Ltd. v. Indian
lfotion Pictures v. Employees' Union and others.(') It has also been
pointed out that the workmen were required, under the settlement, to
work harder and give increased production to the extent of ten per cent.
Settlement of labour disputes by direct negotiation or settlement
.E
through collective bargaining is always to be preferred for,
as
is
obvious, it is the best guarantee of industrial peace which is the aim
of all legislation for the ·settlement of labour disputes.
In order to
bring about such a settlement more eai;ily, and to make it more workable aud effective, it is no longer necessary, under the law, that the
settlement should be confined to that arrived at in the course
of
a conciliation proceeding, but now includes, by virtue of the definition
·F
in section 2 ( p) of the Act,
a written agreement between the employer and the workmen arrived at otherwise than in the course of a
coi1ciliation proceeding where such agreement has been signed by the
pa1ties in the prescribed manner and a copy thereof has been ·sent
to the authorised officers.
Rule 58(2) of the Industrial
D:sputes
(Central) Rules, 1957, prescribes the manner of signing the settlement
anti it is not in dispute before us that this requirement has been com-
,G
plied with.
The other relevant provision is that contained
in
section 18 ( 1) of the Act which specifically states that a settlement arrived at by agreement between the employer and the workmen otherwise
than in th course of concilation proceedings shall be
binding
on
the parties to the agreement.
In fact it has clearly been held by this
Court in Sirsilk, Ltd., and another v. Government of Andhra Pradesh
and o'nother(') that as soon as an agreement is siglled in the pres1I cribed manner and a copy of it is sent to the officers concerned,
it
(I) [1963] l L.L.J. 318.
(2) [1963] ll L.L.J. 647.
l
J
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NEW STANDARD ENGG. co. v. N. L. ABHYANKAR (Shinghal, J.) 803
becomes binding on the parties and comes into operation on the date
it is signed, or on the date mentioned in it for its coming into operation.'
We have therefore to examine the arguments of counsel for
the parties with due regard to these provisions of the law.
It i's not in dispute before us that under the settlement the workmen have received the same wages and dearness allowance which were
awarded to them by the Tribunal.
They therefore lost nothing on
that account.
Mr. Chitaley has however argued that while under
the award the increased rates were admissible from January 1, 1968,
the settlement put that off to January 1, 1973 and was therefore. unjust
and unfair.
It is in this connection that the Tribunal's finding about
the incapacity of the Company to shoulder the financial burden
of
paying all the arrears has beep challenged before us.
Mr. Kaka has, on the other hand, taken us through the balance
sheets of the Company for the purpose of showing that the Company
had, as a fact, paid all its tax and other liabilities, which were beyond
recall, and that during the period from 1968 to 1972 it had only a
net surplus of Rs. 5.11 lakhs.
It has been pointed out that, even
so, the Company has agreed to pay about R's. 11.56 lakhs, in addition to the difference in the dearness allowance amounting to Rs. 3.64
lakhs which has already been paid to the w0rkmen.
It has
also
been brought to notice that the Company has exceeded its borowing
limit and is not in a position to pay more than what it has agreed
lo pay under the settlement.
As regards the stipulation that the
!workmen will improve their efficiency and productivity so as to increase production at the rate of at least I 0 per cent per annum, nothing worthwhile has been urged before us against the Tribunal's view
that ground alone it is equally well settled that when once a prosecul, 1973 for which the arrears were claimed and were agreed to be
paid in part.
Moreover counsel for respondent No. 2 has not found
it possible to refer to any condition in the settlement according
to
which its benefits were to be forfeited in case the workmen did
not
carry out the 'stipulation.
The question of justness and fairness of a settlement should, in a
case like this, be examined with reference to the situation as it stood
on the date on which it was arrived at i.e. on July 31, 1973.
As has
been stated, the award was made on November 29, 1972 but it was
under challenge in the High Court on the Company's petition under
articles 226 and 227 of the Constitution.
It has been pointed out
bv Mr. Kaka, and has not been disputed by Mr. Chitaley. that one
of the /!rounds of challenge was the contention that the Tribunal had
not made a proper comparison of the wages. and the dearness allowcnce
on "industry-cum-region basis" even though it was enunciated
by
this Court in Greaves Cotton & Company .. Ltd. and others v. Their
Workmen.(1)
It cannot therefore be said that the award was not at
al' in jeopardy at the time of the settlement.
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It is well known that the possibilitv of an adverse decision by the
H
Court operates as a positive force in favour of deliberate and careful
---~
m
rt9641 s s.c.~. 362.
804
SUPREME
COURT
REPORTS
(1978] 2 S·C·R·
A effort by both parties to settle their dispute through direct negotiations.
And we have no doubt that it is that force which has brought 11bout
the settlement under consideration.
Then there is the further fact
c,_
that, as has been stated by the Tribunal, the workmen were liable, in
the event of the success of the Company, to a refund of the amounts
which had already been paid to them on that understanding.
B
Moreover, as has been found by the Tribunal, out of 1328 workmen who were in the Company's service on July 31, 1973, 995 workmen have signed the settlement and have also accepted their dues thereunder, and 242 workmen have accepted their dues under the settlement by actually signing the receipts though they have not signed the
settlement.
It will also be recalled that 910 workmen who left the
Company between January 1, 1968 and July 31, 1973 have also ace ;cepted their dues under the settlement.
As has been stated, the
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settlement was made with the Bhartiya Kamgar Sena (respondent
No. 3) which represented a very large majority of the workmen of the
Company.
It is a significant fact that the bona fides of that Union
have not been challenged before us.
There is therefore no reason
why the Tribunal's finding that the settlement is just and fair should
not be accepted.
It has to be remembered that the settlement was entered into on
the morning of July 31, 1973, while the High Court deliverod
its
judgment on August 1, 1973. It is therefore difficult to ignore the
argument of Mr. Deshmukh that it was only when the workmon came
to know that the award had been confirmed by the High Court, that
they thought they had nothing to lose by challenging the settlement as
unfair and unjust.
It is that feeling which appears to have been
exploited by respondent No. 2, because of inter-union rivalry.
As it
is, we are satisfied that the Tribunal's finding on issue No. ( e) is also
correct and does not call for interference.
The appeal is allowed, the impugned judgment of the High Court
dated 31-7-1973/1-8-1973 is set aside and it is ordered th,at the award
of the Tribunal shall be substituted by the settlement dated July 31,
1973, so that settement shall be the substituted award.
In the circumstances of the case, however, we leave the parties to bear their own
costs.
P.H.P.
Appeal allowed.
>--