006-SLLR-SLLR-2010-V-1-SINGER-INDUSTRIES-CEYLON-LTD.-vs.-CEYLON-MERCANTILE-INDUSTRIAL-AND-GENE.pdf
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SINGER INDUSTRIES (CEYLON) LTD., VS.CEYLON MERCANTILE INDUSTRIAL AND GENERALWORKERS UNION AND OTHERS
SUPREME COURTJ. A. N. DE SILVA, C. J.
TILAKAWARDENA, J.
EKANAYAKE, J.
SC 78/08SC SPLLA 121/08CA (WRIT) 1192/2005JULY 17, 2009SEPTEMBER 1, 3, 2009
Payment of gratuity – in excess of that provided in the payment ofGratuity Act 12 of 1983 – Referred for arbitration – Award – No finalagreement between Company and Union? Reference valid? Contract ofIndustrial Employment – General Principles of Law of Contract applies?Offer – counter offer – acceptance – principles applicable? Approach byan arbitrator?
The petitioner sought to quash the arbitral award which ordered thepetitioner to pay 3A of monthly salary as gratuity for each years ofservice to its employees with more than 20 years of service. It wascontended that, the 1st respondent Union made a proposal for thepayment of gratuity in excess of that provided by the payment ofGratuity Act. The Appellant Company then made an offer to pay 3A ofmonthly salary as gratuity to employees with more than 20 years foreach completed year of service beyond the 20th year. This was rejectedby the lsl respondent Union, who made a counter proposal that employ-ees with more than 20 years be paid one month’s salary for each yearof service. This was rejected by the appellant Company. The Arbitratorordered the appellant company to pay 3A as gratuity for each year ofservice to its employees with more than 20 years of service – on thebasis that the employer had shown its willingness to pay, the amountordered by the 4th respondent.
The employer company sought to quash the order on the basis thatthere was no agreement reached.
Singer Industries (Ceylon) Ltd., vs. Ceylon Mercantile Industrial and General
SCWorkers Union and others (Chandra Ekanayake, J.)67 ■
The Court of Appeal upheld the arbitral award.
Special leave was granted by the Supreme Court
Held
There is overwhelming evidence before the arbitrator to concludethat no agreement existed at any time with regard to enhancedgratuity.
In industrial relations the principles of offef and the acceptanceshould not be strictly followed is not the correct proposition of thelaw. For a contract to be concluded there should be an offer andacceptance – only then a conscience will exist in the minds of suchcontracting parties.
Ordinary Principles of Law of Contract such as ‘offer’ and‘acceptance’ and ‘consideration’ apply to the formation of a validindustrial contract.
Per Chandra Ekanayake, J.
“However with the objective of ‘adjusting’ and ‘declaring’ the rightsof parties consistent with the need to ensure fairness and equity,the State has brought in legislative regulations to restore thebalance of power between the parties. Therefore industrialcontracts unlike normal contracts are partly contractual betweenthe employer and employee and also partly non contractual in thatthe State by means of legislature or through industrial adjudi-cation may prescribe many of the obligations that an employermay owe its employees.”
Agreements arising from collective bargaining between employerand trade unions on behalf of employees also can have an impacton industrial contracts. However such agreements do not ipsofactor become part of individual contract of employment, unlessterms agreed and acted upon by the parties and incorporated asterms in such contract of employment or specifically included in acollective agreement.
A counter offer is an alternative proposal made by the offeree insubstitution for the original offer when the purported acceptanceof an offer contains a counter offer it is not accepted at all, and isequivalent to a rejection by the original offer, such a counter offermay however in its turn be accepted by the original offeror, and
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this result in a contract. In the case at hand there was no evidencethat the counter offer by the l8t respondent was accepted by theofferor.
Per Chandra Ekanayake, J.
“Payment of gratuity is regularized by the provisions of theGratuity Act. Thus unless there is an existing scheme or collectiveagreement or award of an Industrial Court Providing more favorableterms of gratuity, he would not be entitled to claim such benefits.The burden of proving the existence or a valid collective agreementwith regard to gratuity in excess of what is mandated by law fairlyand squarely rests on the employee who assets same.”
In the assessment of evidence, an arbitrator appointed under theIndustrial Disputes Act must act judicially. Where his finding iscompletely contrary to the weight of evidence, his award is liableto be quashed by way of certiorari.
Per Chandra Ekanayake, J.
“It is a cardinal principle of law that in making an award by anarbitrator there must be a judicial and objective approach andmore importantly the perspectives of both employer as well asthe employee should be considered in a balanced manner andundoubtedly just and equity must apply to both these parties.”
APPEAL from the judgment of the Court of Appeal.
Cases referred to
Muthukuda vs. Sumanawathie – 1964 65 NLR 205 at 208-209
Municipal Council of Colombo vs. Marasinghe- 71 NLR 223 at 225
Health and Co (Ceylon) Ltd. vs. Kariyawasam – 71 NLR 382
All Ceylon Commercial and Industrial Workers Union vs. Nestle Ltd- 1999 – 1 Sri LR 343
Sanjeewa Jayawardena with Senani Dayaratne for petitioner-
appellant.
Stanley Fernando PC with D. V. Dias and Palitha Perera for 18<
respondent-respondent.
Mrs. M. N. B. Fernando DSG for 2nd and 3rd respondent-respondent.
Cur.adv. vult.
Singer Industries (Ceylon) Ltd., vs. Ceylon Mercantile Industrial and General
SCWorkers Union and others (Chandra Ekanayake, J.)'69
October 07th, 2010CHANDRA EKANAYAKE, J.
The Petitioner – Appellant (hereafter referred to as theappellant) by petition dated 05.06.2008 (filed together withan affidavit) has sought special leave to appeal from theJudgement of the Court of Appeal dated 29.04.2008pronounced in CA (Writ) Application No. 1192/2005 (annexedto the petition marked P9). By the aforesaid applicationthe Petitioner has sought the following other reliefs also inaddition to special leave:
to set aside the aforesaid judgement of the Court ofAppeal marked P9. and/or in the alternative thereto,
vary the same in such a manner and subject to suchterms as to this Court shall seem meet in the exerciseof the appellate1 jurisdiction of this Court and to issuea mandate in the nature of writ of. certiorari quashingthe impugned arbitral award dated 29.04.2005 annexedto the petition marked P2 – (X10 in PI) and the gazettenotification produced marked P2(a).
Further interim reliefs too had been sought as per subparagraphs (f) and/or (gj of the prayer to the petition.
The appellant had instituted C. A. (Writ) Application No.1192/2005 in the Court of Appeal, seeking inter alia, to quashthe purported arbitral award of the 4th respondent-respon-dent (hereinafter sometimes referred to as the 4th respondent)dated 29.04.2005, which ordered the petitioner to pay 3A thsof a month’s salary as gratuity for each year of service to itsemployees with more than 20 years service. It is the conten-tion of the appellant that, in the year 1991 during the courseof negotiations aimed at reaching a collective agreement
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between the petitioner and its manual workers and supervisingstaff, the 1st respondent union (CMU) made a proposal forthe payment of gratuity in excess of that provided for by thePayment of Gratuity Act, 12 of 1983 – i.e., in excess ofVi month’s salary for each completed year of service. Inresponse to the said proposal the appellant had made an offerto pay 3A * of a month’s salary as gratuity to employees withmore than 20 years service, for each completed year of servicebeyond the 20thyear of service (vide A18 in PI). The said of-fer made by the appellant was rejected by the 1st respondent,who made a counter proposal that employees with more than20 years service, be paid one month’s salary for each year ofservice – (vide A19 in PI). The appellant Company in turnhad rejected the said counter proposal and specifically statedthat the said initial offer made by the appellant could not bevaried (vide A20 in PI). The stance taken by the appellant inthe present petition is that no agreement or consensus wasreached in respect of enhanced gratuity payments, but a formalcollective agreement was executed in 1994 in pursuanceof a process of collective bargaining including a salaryincrease and other financial benefits and same did notspecifically provide for the payment of gratuity in excess ofthat is provided by the Payment of Gratuity Act No. 12 of1983 – i. e. half a month’s salary for each completed year ofservice – (PI).
It was further argued that thereafter in 1996 during thenegotiations aimed at revising the 1994 collective agreement(A3 in PI) the 1st respondent had made the following proposalswith regard to payment of gratuity in excess of that providedfor by the Payment of Gratuity Act No. 12 of 1983;
employees with 10 to 20 years’ service be given 3/4ths of
a month’s salary as gratuity for each year of service;
Singer Industries (Ceylon) Ltd., vs. Ceylon Mercantile Industrial and General
SCWorkers Union and others (Chandra Ekanayake, J.)71
employee with 20 to 25 years’ service be given one month’ssalary as gratuity for each year of service;
employees with 25 to 30 years’ service be given 1 and1/4* of a month’s salary as gratuity for each year ofservice; and,
employees with more than 30 years’ service be givenone and half months’ salary as gratuity for each year ofservice, (vide A4 in PI)
When the appellant company rejected the said proposalby A5 the 1st respondent had submitted an amended proposal(vide A6 in PI) to the following effect;
employees with less than 20 years’ service be given 3A *of a month’s salary as gratuity for each year of serviceand
employees with more than 20 years’ service be given onemonth’s salary as gratuity for each year of service.
The aforesaid amended proposal too being rejected by theappellant (vide A7 in PI) the 1st respondent ordered its mem-bers to strike work with effect from 20.05.1997 and after 6weeks the members of the 1st respondent resumed work on28/06/1997, upon referral of the said dispute with regardto enhanced gratuity, to arbitration by the 4th respondent-arbitrator.
The statement of the matter as referred to arbitration wasas follows: “Whether the demand of the Ceylon MarcantileIndustrial & General Workers’ Union (C M U) for a gratuityon the basis of 3A of a month’s salary for each year ofservice to the employees who have more than 20 yearsof service at M/s. Singer Industries (Ceylon) Ltd. is
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justified and if not, to what relief the said employees areentitled.”
At the conclusion of the arbitral proceedings the 4threspondent proceeded to make the impugned award P2 dated
purporting to hold as follows:
“Going through the proceedings the statements and thedocuments marked by both parties, I hold the view thatthe respondent had shown its willingness as far back as1991 to give a maximum of % * salary as gratuity forthose who serve for more than 20 years in the company.For the last 14 years ir seems that the members of theCMU had been living with that expectation.”
Thereafter the appellant sought to quash the saidarbitrator’s award in CA (WR) Application No. 1192/2005and the Court of Appeal by its judgment dated 29.04.2008dismissed the application for a writ of certiorari and upheldthe arbitrator’s award. Being aggrieved with the aforesaidCourt of Appeal judgment the appellant sought special leaveto appeal upon the questions of law set out in paragraph 14of the aforementioned Petition dated 05.06.2008.
When the application was supported on 11.09.2008 thisCourt had proceeded to grant special leave to appeal onlyupon the questions set out in paragraph 14(a), (b), (c), (d), (e),
and (o) of the said petition which read as follows:
Did the Court of Appeal err by failing to appreciate that noagreement had ever been finally reached between the CMUand the Petitioner in respect of any enhanced gratuitypayments in excess of that mandated by the GratuityAct No. 12 of 1983?
Singer Industries (Ceylon) Ltd., vs. Ceylon Mercantile Industrial and General
SCWorkers Union and others (Chandra Bkanayake, J.)73
Accordingly, did the Court of Appeal err by failing toappreciate that the learned arbitrator had erred in law byholding that the petitioner company could be compelledto make gratuity payments to its employees in excess ofthat mandated by the Payment of Gratuity Act No. 12 of1983?
Did the Court of Appeal err by failing to appreciate thatthe arbitrator had erred by holding that the petitionerhad made a binding and enforceable offer to makeenhanced gratuity payments to its employees in excessof that mandated by the Payment of Gratuity Act No. 12of 1983?
Did the Court of Appeal fail to take cognizance of thesignificant fact that neither the collective agreementsigned in 1991, nor the collective agreement signed in1994, provided for any enhanced gratuity payments?
Did the Court of Appeal err by not appreciating the factthat the CMU had in fact rejected the offer made by thePetitioner in 1991 to pay 3A ths of a month’s salary asgratuity to employees with more than 20 years’ service,for each competed year of service beyond the 20th years ofservice?
(h) Without prejudice to the foregoing, in any event, didthe Court of Appeal err by failing to appreciate that thepetitioner’s proposal made in 1991 (which was firmly inthe realm of an offer), was in any event, to pay only 3A*hs of month’s salary as gratuity to employees with morethan 20 years service, for each completed year of servicebevond the 20th year of service, and not for eachcompleted year of service?
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(o)Did the Court of Appeal fail to consider the effect of thesubstantial passage of time between 1991 and the strikein 1997?
Counsel for the appellant is seeking to assail the judge-ment of the Court of Appeal amongst other grounds inter alia,mainly on the basis that the Court of Appeal was in errorwhen it failed to appreciate that in the absence of a finallyreached agreement between the 1st respondent (CMU) andthe petitioner Company in respect of any enhanced gratuitypayments in excess of that is mandated by the Gratuity ActNo. 12 of 1983 holding that the petitioner Company couldbe compelled to make gratuity payments in excess of that ismandated by the said Act.
It is common ground that the terms of reference toarbitration were the terms enunciated in paragraph 5 above.The pivotal question that had to be determined by thearbitrator was whether an agreement was finally reachedbetween the 1st respondent (CMU) and the appellant companyin respect of enhanced gratuity payments meaning:- in excessof what has been awarded by the Gratuity Act No. 12 of1983.
In view of the above necessity has now arisen to examinethe arbitrator’s (4th respondent’s) award dated 29.04.2005.The arbitrator had made order to be effective from 10.06.1997,(which being the date on which the industrial dispute wasreferred to arbitration by the Minister), that the first respondentcompany to pay 3/4th8 of a month’s salary as gratuity for eachyear of service to the employees who have more than 20 yearsservice at the appellant company. It appears further that thearbitrator had acted on a wrong premise namely that theappellant company had shown its willingness as far back
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SCWorkers Union and others (Chandra Bkanayake, J.)75
as 1991 to give such enhanced gratuity. Thus this leads toexamination of evidence on record had in this regard. Onbehalf of the present 1st respondent namely the CMU, oneSenadheera Pathirage Leelaratne had testified. His uncon-tradicted position had been that discussions between thecompany and the 1st respondent-CMU for enhancement ofgratuity commenced from 08.10.1996, and several proposalsand amendments were suggested but no agreement wasarrived upon with regard to the same. It is observed that thearbitrator had based the above finding heavily relying on thepremise that the appellant company had shown its willing-ness as far back as 1991 to give 3/4** of a month’s salaryas gratuity for those who had served for more than 20 yearsin the company and the expectations the employees had forthe same. What becomes clear from A7 – more particularlyunder sub head ‘Gratuity’ – is that the company is unableto consider a deviation of the formula stipulated by law forthis purpose. The above witness’s position had been thatsince the discussions failed the 1st respondent (CMU) directedthe employees to launch a strike by letter dated 16.04.1997(A 12) after the expiry of 2 weeks from the date of A12 andaccordingly the workers of the appellant company launched astrike. The said strike had been concluded on the agreementto refer the dispute for arbitration and same had given rise tothe making of the arbitral award P2.
It would be important to stress here that the abovewitness of the 1st respondent had commenced cross-exami-nation by admitting that the appellant company was alreadypaying the gratuity as required by law and their claim is for ahigher amount than that is mandated by law. This is amplyclear by evidence given by him in cross-examination (asappearing at pages 86 and 87 of the brief:-
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However, it appears that he had taken up the positionthat the company agreed to pay a higher gratuity than what ismandated by the said Act. He has attempted to substantiatehis above position by relying on a letter dated 21.10.1991marked as A18 addressed to the 1st respondent by theEmployers’ Federation of Ceylon. Perusal of A18 makes itclear that the appellant company had firmly stated that itcannot better the offer it had already made on this point ofgratuity, i.e. – to pay a maximum of % 1,18 of a month’s salaryfor those who served for more than 20 years i. e. from the21st year, and further this offer, as mentioned at the discus-sion is tied down to agreement being reached on the followingmatters:
Guarantors for hire purchase contracts,
Housing loans,
Singer Industries (Ceylon) Ltd., vs. Ceylon Mercantile Industrial and General
SCWorkers Union and others (Chandra Ekanayake, J.)77
Designations in electronic department,
Presence of foremen during overtime.
Further it goes on to say that these are the matters onwhich the 1 “respondent wanted finality with the management.Thus what has to be inferred from A18 is – it was noth-ing more than an offer made by the appellant company. Byletter dated 31.10.1991 (A 19) the aforesaid offer in A18 wasrejected by the 1st Respondent (CMU) who made a counter pro-posal as per clause 3 of the same under sub head ‘gratuity’ -to the following effect:
“We propose that the demand for one month’s salaryfor each year of service be limited to those who servefor a minimum period of 20 years, having regard to theCompany’s proposal.”
This is well established by the testimony of the 1stRespondent’s witness’s cross-examination. As appearing atPage 90 of the brief, his evidence was that what was embodiedin A 18 was a suggestion subject to other conditions and itwas not a promise. Further his evidence was that there wasno agreement in A 18 and even with regard to A19 (whichbeing the reply to A18) his specific position had been thatthere was nothing to indicate that they had agreed to theabove conditions. The item 3 ‘Re-gratuity’ appearing in A19clearly indicates that it was only a proposal.
The only witness who testified on behalf of the appellantcompany was Wasantha Wijemanna. His uncontradictedposition in evidence was that the stance taken in the letterof Employers’ Federation of Ceylon sent on behalf of theappellant – [A20] was a proposal of this member (meaning theappellant) was already conveyed by their letter of 21.10.1991
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(A 18) and same cannot be varied. Further it is clear fromhis evidence that there was no agreement to pay any gratu-ity in excess of what is mandated by the law in any of theexisting Collective Agreements marked by the 1st respondentas A2 – one in 1991, A3 -one in 1994, A 23 – one in 1997and A24 – one in 2000. On the other hand it has to be notedthat the Collective Agreements signed by this same Union (1strespondent) and several other companies which were markedin evidence as A15, A16 and A21 in fact have made specif-ic provision for the payment of enhanced gratuity. Havingconsidered the above evidence I am inclined to hold theview that there had been overwhelming evidence before thearbitrator to conclude that no agreement existed at anytime with regard to enhanced gratuity as claimed by the 18<respondent.
At this point it becomes relevant to examine the reasonsgiven by the arbitrator for his award. As appearing at page 9of his award under item 11 he goes no to state that:
“In the field of industrial relations the principles ofoffer and acceptance should not be strictly adhered to.In the law of contracts a counter offer can destroy anoffer but in labour relations I hold the view that a counteroffer or a counter proposal can keep the original offeralive. I therefore reject the contention of the respondentcompany, that there was no understanding betweenthe parties to pay an enhanced gratuity although anenhanced gratuity was not embodied in the CollectiveAgreement A2 and A3.”
Further goes on to say:
“It appears that the respondent had indicated its willing-ness to consider the gratuity question favourably which
Singer Industries (Ceylon) Ltd., vs. Ceylon Mercantile Industrial and General
SCWorkers Union and others (Chandra Ekanayake, J.)79
gave the employees of the company an expectation in thatregard but when the respondent repeatedly delayed thematter the membership of the union had become restlessand finally gone on strike.”
It is needless to say that as held by the arbitrator viz: – “inindustrial relations the principles of offer and the acceptanceshould not be strictly adhered to’ – is not the.correct proposi-tion of law. For a contract to be concluded there should bean offer and acceptance – only then a consensus will exist inthe minds of such contracting parties. In this context it is aptto quote the following observations of Weerasooriya, SPJ, inMuthukuda vs Sumanawathiew at 208 and 209 with regard tothe requirement of offer and acceptance in a contract:
“It is an elementaiy rule that every contract requiresan offer and acceptance. An offer or promise which is notaccepted is not actionable, for no offer or promise is bindingon the person making the same unless it has beenaccepted.”
Further per C. G. Weeramantiy in his treatise on – ‘TheLaw of Contracts’ Vol. I at page 109, (paragraph 105):
“Most agreements are reducible to an offer by one partyand its acceptance by other. The search for offer andacceptance is convenient and adequate as an aid to deter-mining with precision the moment at which agreement isreached, and perhaps the exact terms of the contract.”
At page 123 (paragraph 124) author further goes on tosay that:
“A counter offer is an alternative proposal made by theofferee in substitution for the original offer. When the
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purported acceptance of an offer contains a counteroffer, it is no acceptance at all, and is equivalent to arejection of the original offer. Such a counter-offer may,however, in its turn be accepted by the original offeror,and thus result in a contract.”
In the case at hand there was no evidence that the counteroffer by the 1st respondent was accepted by the offeror. It hasto be borne in mind that ‘Industrial Contract’ or ‘Contract ofEmployment’ is not defined in the Industrial Disputes Actand/or any other labour law in Sri Lanka unlike in Unit-ed Kingdom where there is Contract of Employment Act. Inthe absence of such laws, the general principles of law ofcontract apply to the creation of a contract of industrialemployment. Thus the ordinary principles of law of contractsuch as ‘offer’ and ‘acceptance’ and ‘consideration’ thereforeapply to the formation of a valid industrial contract. A contractof service in industrial relations therefore can be entered intoby the parties having capacity to do so and for a consideration.Then what is it that makes an industrial contract differentfrom an ordinary contract?
The general presumption is that parties to a contracthave equal bargaining power thus the terms of the contractare mutually negotiated. However in the industrial con-tracts, it is regarded that the employer has superior bar-gaining power over the employee. Thus such a contract isreferred to as a contract between unequal partners where theemployer is considered the economically stronger partyand the employee the weaker partner. With the objective ofadjusting and declaring the rights of parties consistent withthe need to ensure fairness and equity, the state has broughtin legislative regulations to restore the balance of powerbetween the parties. Therefore industrial contracts unlike thenormal contracts, are partly contractual between the employer
Singer Industries (Ceylon) Ltd., vs. Ceylon Mercantile Industrial and General
SCWorkers Union and others (Chandra Ekanayake, J.)81
and employee, and also partly non contractual, in that theState by means of legislature or through industrial adjudica-tion, may prescribe many of the obligations that an employermay owe to his employees. In Sri Lanka, Industrial DisputesAct, Payment of Gratuity Act, EPF & ETF Acts are some of thelegislation introduced in this regard. Per O. P. Malhotra inhis book titled “The Law of Industrial Disputes” – 5th Edition- Vol. I at page 188:
“One of the recurring problems in the industrial law is,how far the relationship between an industrial employerand his employees is explicable in terms of contract.The relation is partly contractual in that mutual obliga-tion may be created by an agreement made between theemployer and workman. For instance the agreement maycreate an obligation on the part of the employer to pay acertain wage and corresponding obligation on theworkman to render services. The relation of industrialemployment is also partly non-contractual, in that theState, by means of legislation or through industrialadjudication, may prescribe many of the obligations thatan employer may owe to his employees.”
Agreements arising from collective bargaining betweenemployers and trade unions on behalf of employees alsocan have an impact on industrial contracts. However suchagreements do not ipso facto become part of individualcontract of employment, unless terms agreed and actedupon by the parties and incorporated as terms in eachcontract of employment or specifically included in a collectiveagreement.
What has to be noted in this case is that there had beenno evidence to conclude that there was an agreement withregard to enhanced gratuity in excess of that is mandatedby law. But what appears to have taken place between the
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parties were negotiations to arrive at a satisfactory agreementwith regard to enhanced gratuity. This is what is popularlyknown as ‘Collective Bargaining’. S. R. de Silva in his famousbook on – ‘The Legal Framework of Industrial Relations inCeylon’ – has opted to define (at page 66) ‘collective bargain-ing’ as –
“negotiations about working conditions and terms ofemployment between an employer, a group of employersor one or more employers’ organizations, on the one hand,and one or more representative workers’ organizationson the other, with a view to reaching agreement.”
In other words collective bargaining is another term forsettling industrial disputes through mutual negotiationsbetween an employer on the one hand, and one or morerepresentative workers organizations on the other, with aview to arriving at an agreement.
However the question of payment of gratuity to a work-man is regulated by the provisions of the Gratuity Act. Thusunless there is an existing scheme or collective agreementor award of an Industrial Court providing more favourableterms of gratuity to a workman, he would not be entitled toclaim such benefits. Thus the burden of proving the exis-tence of a valid collective agreement with regard to gratuity inexcess of what is mandated by law fairly and squarely restson the employee who asserts the same. The general principlesof contract law would necessarily apply to the creation ofa collective agreement. For the above reasons I am inclined tohold the view that the arbitrator was in grave error when heconcluded that –
‘In the law of contracts a counter offer can destroy anoffer but in labour relations a counter offer or a counterproposal can keep the original offer alive.”
Singer Industries (Ceylon) Ltd,, vs. Ceylon Mercantile Industrial and General
SCWorkers Union and others (Chandra Bkanayake, J.)83
What has to be examined now is the impugned judge-ment of the Court of Appeal in CA/WR/1192/2005 dated29.04.2008 (P9). The learned Judge of the Court of Appeal bythe aforesaid judgement has proceeded to conclude as follows- (as appearing at page 8 of P9):-
“(a) The findings and the decision of the arbitrator is inaccordance with the evidence led in the inquiry.
(b) The petitioner had shown its willingness to give amaximum of 3/4th* of a month’s salary as gratuityfor those who served for more than 20 years in thecompany and in their expectation of the gratuityparticularly the 1st respondent has agreed and hasundertaken to abide by some conditions detrimentalto them.
•(c) Considering all the relevant facts the arbitrator hascorrectly concluded that the respondent company(the petitioner in this application) has to pay 3/4thsof a month’s salary as gratuity for each year of serviceto the employees who have more than 20 years atSinger Industries Limited.”
On the above footing the learned Court of Appeal Judgehad dismissed the application for writ of certiorari withoutcosts.
The arbitrator had concluded that the respondentcompany had shown its willingness as far back as 1991 togive a maximum of 3/4th of month’s salary as gratuity forthose who had served more than 20 years. Having consideredthe evidence that had been available before the arbitratorI am unable to agree with the above conclusion that therespondent had shown such willingness as far back as 1991.That appears to be a finding which was not supported by
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evidence led in die arbitration and in fact appellant’s onlywitness, Leelaratne’s evidence had been totally contraryto the above. In the light of the above the only legitimateconclusion one could arrive upon the evidence is that therehad been no final agreement between the 1st respondent,(CMU) and the appellant company in respect of enhancedgratuity payments. From the evidence available on recordthere is nothing to infer that the petitioner company hadshown its willingness to give 3/4th* of a month’s salary asgratuity for those who have more than 20 years service asconcluded by the learned Court of Appeal Judge.
It is a cardinal principle of law that in making an awardby an arbitrator there must be a judicial and objectiveapproach and more importantly the perspectives both ofemployer as well as the employee should be considered ina balanced manner and undoubtedly just and equity mustapply to both these parties. In the case of Municipal Councilof Colombo vs MunasingheP His Lordship the Chief JusticeH. N. G. Fernando, held that:
“When the Industrial Disputes Act confers on an Arbitra-tor the discretion to make an award which is ‘just andequitable’, the Legislature did not intend to confer on anArbitrator the freedom of a wild horse. An award must be‘just and equitable’ as between the parties to a dispute;and the fact that one party might have encountered Tiardtimes’ because of personal circumstances for which theother party is in no way responsible is not a ground onwhich justice or equity requires the other parly to makeundue concessions. In addition, it is time that this Courtshould correct what seems to be a prevalent misconcep-tion. The mandate which the Arbitrator in an industrialdispute holds under the law requires him to make anaward which is just and equitable, and not necessarily
Singer Industries (Ceylon) Ltd., vs. Ceylon Mercantile Industrial and General
SCWorkers Union and others (Chandra Ekanayake, J.)85
an award which favours an employee. An Arbitrator holdsno license from the Legislature to make any such awardas he may please, for nothing is just and equitable whichis decided by whim or caprice or by the toss of a double-headed coin.”
In this regard the pronouncement made by Sirimanne J.(H. N. G. Fernando C. J. agreeing) in the case of Heath & Co.(Ceylon) Ltd. vs Jariyawasami(3> – which too being a case whereapplication was made by the petitioner for a writ of certiorarito quash an award made by an arbitrator appointed underthe Industrial Disputes Act, would lend assistance here. Inthe said case it was held that:
“In the assessment of evidence, an arbitrator appointedunder the Industrial Disputes Act must act judicially.Where his finding is completely contrary to the weightof evidence, his award is liable to be quashed by way ofcertiorari.”
Further the pronouncement of F.N.D. Jayasuriya J, in AllCeylon Commercial and Industrial Workers’ Union vs NestleLanka Ltd(4) which too being a case dealing with an awardmade by an arbitrator having referred for arbitration underSection 4(1) of Industrial Disputes Act also would be relevanthere. It was held that:
“1. Although Arbitrator does not exercise judicial power inthe strict sense, it is his duty to act judicially, thoughultimately he makes an award as may appear to him tobe just and equitable.
There is no evidence or material which could support thefindings reached by the Arbitrator, findings and decisionsunsupported by evidence are capricious, unreasonable orarbitrary.
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A deciding authority which has made a finding of primaryfact wholly unsupported by evidence or which had drawnan inference wholly unsupported by any of the primaryfacts found by it will be held to have erred in point oflaw.
“No evidence rule” does not contemplate a total lack ofevidence it is equally applicable where the evidence takenas a whole, is not reasonably capable of supporting thefinding or decision.”
Having considered the evidence had before the arbitratorand the conclusions of the arbitrator in his award (P2) I amof the view that the arbitrator’s findings and decisions arenot supported by the evidence before him. Further, for thereasons stated above the learned Court of Appeal Judge toohad erred when he proceeded to state that:
The findings and the decision of the arbitrator is inaccordance with the evidence led in the inquiry’.
In view of the foregoing analysis I proceed to answer gillquestions of law on which special leave was granted by thisCourt in the affirmative. Accordingly I would allow the appealand set aside the judgement of the Court of Appeal dated29.04.2008 (P9) and direct that a mandate in the nature ofwrit of certiorari be issued quashing the impugned arbitralaward dated 29.04.2005. (P2) and the Gazette Notification,produced marked P2a. The appellant company is entitled tocosts of this appeal fixed at Rs. 25,000/- payable by the 1strespondent-respondent.
J. A. N. DE SILVA, C. J. – I agreeTHILAKAWARDENA, J. – I agreeAppeal allowed.