028-NLR-NLR-V-70-THE-SHELL-COMPANY-OF-CELYON-LTD.-Petitoner-and-H.D.-PERERA-and-5-others-Respo.pdf
108
The Shell Company of Ceylon Ltd. v. H. D. Pevera
1967 Present: T. S. Fernando, J., and Tennekoon, J.
THE SHELL COMPANY OE CEYLON LTD., Petitioner,and H. D. PERERA and 5 others, RespondentsS.C. 527 of 1966—Application for the issue of a Mandate in the
nature of a Writ of Certiorari
Industrial dispute—Intended retrenchment of a workman—Reference to an IndustrialCourt for settlement of proposed retrenchment—Time within which such referenceshould be made—Misdirection on this point—Effect—Award wrongly invalidatingretrenchment of workman—Liability of award to be set aside in certiorariproceedings—“ Error of law on the face of the record ”—Retrenchment of workmanpending inquiry—Award of compensation on that basis-—Invalidity—Timewithin which an award should be made—Court acting in excess of jurisdiction—Effect—Industrial Disputes Act (Cap. 131), 83. 4 (2), 16, 23, 24, 31 F, 31 O, 31 H,33 (1) (b), 33 (1) (d), 36 (5), 36 (6).
(i) Section 31 H of the Industrial Disputes Act enacts that where, beforethe expiry of two months after the date of notice given by an employer to aworkman as required by section 31 F, an industrial dispute arising out of theintended retrenchment of the workman is referred for settlement, the employershall not effect the retrenchment within a period of two months after the dateof reference of Buch dispute for settlement. Therefore, if the reference forsettlement is made after and not before the expiry of the two months after thedate of notice given to the workman under section 31 F, section 31 H does notoperate so as to prohibit the employer effecting retrenchment of the workman
JUDGMENT OF THE COURT—The Shell Company of Ceylon Ltd. 109
v. H. D. Perera
within two months after the reference for settlement. If, on account ofmisdirection on this point by an Industrial Court to which the reference forsettlement is made in terms of section 4 (2) of the Industrial Disputes Act, theretrenchment of the workman is wrongly held in the award of the court tohave been invalid, the award is liable to be quashed by way of certiorari onthe ground of error of law on the face of the record, if such error goes to thevery root of the determination of the court .
(ii) Where the Minister, acting under sections 31 H and 4 (2) of the IndustrialDisputes Act, refers to an industrial court for settlement an intended retrench-ment of a workman by his employer, and the only question for determination iswhether the proposed retrenchment is justified and to what relief the workmanis entitled, the court would be acting in excess of its jurisdiction if it awardsrelief by way of compensation to the workman on the basis of his actualretrenchment, if such retrenchment is effected during the pendency of theinquiry. In such a case, the award is not one in respect of any “ other matter ”as contemplated in section 24. The actual retrenchment of the workman afterthe commencement of the inquiry is an entirely new industrial dispute and isnot a matter relating to the original dispute over the proposed retrenchment.The actual retrenchment is not a “ fresh matter relating to the dispute ” withinthe meaning of that expression in section 36 (5) of the Industrial Disputes Act.
Obiter : “ The inference is somewhat strong that, where a reference of anindustrial dispute for settlement as contemplated in section 31 H of the Act hasbeen made, the award must itself be made before the expiry of the two monthsspecified in the said section which is the period of time during which theemployer’s common law right to retrench is suspended.”
Application for a writ of certiorari to quash the award made byan Industrial Court.
E. F. N. Gratiaen, Q.G., with G. Ranganathan, Q.G., L. Kadirgamar,D. G. Amarasinghe and A. Paranavitane, for the petitioner.
N. Satyendra, with R. L. Jayasuriya, for the 4th and 5th respondents.
Cur. adv. vult.
September 13, 1967.
The following is the judgment of the Court :—
The petitioner company (hereinafter referred to as the company)seeks in this proceeding an order from this Court quashing an awarddated September 25, 1966 made by an Industrial Court composed of the1st to the 3rd respondents awarding to the 4th and 5th respondents,employees of the company, the sums of Us. 87,337/50 and Rs. 74,906/25respectively to be paid by the company by way of compensation undersection 33 (1) (d) of the Industrial Disputes Act (Cap. 131), together witha further sum of Rs. 5,000 to each of them as costs of the inquiry beforethe court. The award is one purporting to have been made in respectof an industrial dispute which had arisen between the company and thesaid 4th and 5th respondents, two of its employees, and which was referred
110 JUDGMENT OF THE COURT—The Shell Company of Ceylon Ltd.
v. H. D. Perera
to the court for settlement by an order dated November 5, 1962 madeby the Minister in terms of section 4 (2) of the said Industrial DisputesAct. The matter in dispute was described in the statement that accom-panied the Minister’s order as being “ whether the proposed retrenchmentof the 4th and 5 th respondents is justified and to what relief each of them,is entitled —Documents A 22 and A 23.
An Industrial Court is required by section 24 of the Act to makeafter inquiry, such award as may appear to it just and equitable.Although this dispute was referred to the Court, as indicated above, onNovember 5, 1962, the award was made nearly four years later, onSeptember 25, 1966. We were surprised to learn from counsel whoappeared before us that there were as many as ISO days of inquiry, anexpenditure of time and presumably also of money which appears tobe out of all proportion to the demands of the actual dispute. Theaward eventually made is now attacked in this proceeding on severalgrounds specified in the petition, but learned counsel for the companyconfined himself to two of these grounds, viz. (1) error of law on theface of the award and (2) want or excess of jurisdiction.
It does not appear necessary to set down in any detail the facts asfound by the industrial court. The 4th and 5th respondents were seniorexecutives in the employment of the company and at the time of thedispute were holding high executive positions in it. The enactmentby Parliament in May 1961 of the Ceylon Petroleum Corporation Act,No. 28 of 1961, resulted in the compulsory acquisition of some of the assetsof the company, and the establishment of the Petroleum Corporationentailed a considerable reduction in the volume of business handledby the company. This reduction of business necessitated a reduction ofthe company’s staff. That some reduction of staff became inevitablewas not disputed by the 4th and 5th respondents, the dispute raised bythem being that the company’s proposal to retrench their services wasnot in conformity with accepted principles of industrial law and practiceand constituted an unfair labour practice.
The industrial court found that the proposed retrenchment of the4th and 5th respondents is not justified and amounts to an unfair labourpractice and set down in its award three reasons for that finding. Thesewere :
(a) that the principle of " last come, first go ” and the criterion ofseniority in service implicit in that principle have not beenfollowed by the company in choosing which of the executivesto retain in the re-organised set up and which of them toretrench ; that the company has failed to satisfy the court that itsdeparture from the said principle is justified, and that thisfailure has resulted in the 4th and 5th respondents, two seniorexecutives, being retrenched, while many who were junior tothem were retained ;
Ill
JUDGMENT OF THE COURT— The Shell Company of Ceylon Lid.
v. H. D. Perera
(6) that the company, in deciding whom to retrench and whom toretain, did not take the cases of all the executives, whetherregionals or expatriates, together, but first decided on theselection and reduction of the expatriate executives ;
(c) that the company by effecting the retrenchment of the 4th and5th respondents within two months of the date of reference ofthe dispute to the industrial court acted in contravention ofsection 31 H of the Act ; that this contravention constitutes apunishable offence and establishes the company’s lack of goodfaith ; and that the purported retrenchment, being one prohibitedby statute, is illegal and void.
Counsel tor the company based his contention that there is here errorof law on the face of the record mainly on the existence of reason (c) setout above. Section 31 F of the Act requires an employer who intendsto effect retrenchment in respect of any workman to give (except incertain specified cases) to that workman at least one month’s notice inwriting of such intention. By two letters (A 17 and A 18), each datedAugust 28, 1962, the company gave to the 4th and 5th respondents noticeunder the said section 31 F of intention to terminate their respectiveservices, the notice to expire on September 30, 1962. Each noticecontained a statement that at the end of September, 1962 three months’notice (in accordance with the contract of service) will be given terminatingthe respective respondent’s employment, this latter notice to expire onDecember 31, 1962. Section 31 G enacts that, subject to the provisionsof section 31 H, no employer shall effect retrenchment in respect of anyworkman to whom he has given notice (under section 31 F) of intentionto do so until after the expiry of two months after the date of such notice.In the case of the 4th and 5th respondents retrenchment was effectedonly after December 31, 1962, and it is apparent that there has beenno contravention of the provisions of section 31 G.
Section 31 H enacts that where, before the expiry of two months afterthe date of the notice referred to in section 31 F, any industrial disputewhich exists or is apprehended in consequence of the retrenchmentintended in that notice is referred by the Commissioner or Minister forsettlement (including a settlement by an industrial court), the employergiving such notice is prohibited from effecting the intended retrenchmentwithin a period of two months after the date of reference of such disputefor settlement. The reference under section 4 (2) in this case was madeby the Minister only on November 5, 1962 which is after and not beforethe expiry of the two months after the date of notice (August 28, 1962)stipulated in section 31 H. This section therefore did not operate so asto prohibit the company effecting retrenchment of the services of the 4thand 5th respondents on December 31, 1962. The award itself (see para-graph 5) recites that the company gave by letters dated August 28, 1962one month’s notice of intention to terminate the services of the 4th and5th respondents. Counsel for the latter sought to argue that there is no
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v. H. D. Per era
finding that the notice was received by the respondents on that day or atany rate before September 5, 1962, but this argument overlooked thestatements A 25 and A 26 dated November 26, 1962 made by therespondents to the Industrial Court to which statements they attachedcopies of their letters of September 4, 1962 addressed to the companyaccepting the position that they had duly received the company’s noticesdated August 28, 1962. It follows, therefore, that reason (c) given bythe industrial court {in support of its finding that the proposed retrench-ment is not justified) that the company effected retrenchment in violationof section 31 H is clearly erroneous. The error appears to have arisen outof the court misdirecting itself as to the nature of the prohibitioncontemplated by that section. For the prohibition to attach the referencefor settlement should itself have been made within the time specified mthat very section. The industrial court has wrongly assumed thatfor the prohibition to attach the industrial dispute must have come intoexistence or have been apprehended within the time specified in thatsection.
Error of law on the face of the award itself being thus established, isthe award liable to be quashed by way of certiorari ? There can be littledoubt that the error of law was on a point deemed material by theindustrial court itself. To quote the award “ the purported retrenchmentis illegal and void, since it is made an offence and thus prohibited by thestatute ” ; and again, “ we can hold that since the purported retrench-ment is no retrenchment in law, the two employees are to be treated asbeing still in service ” ; Counsel for the 4th and 5th respondents contendedthat, even if reason (c) constitutes an error on the face, two other reasonshave been given by the court for its finding that the proposed retrench-ment is not justified and that these reasons are valid and not open tocriticism on the ground of error. Reason (b) was not the subject of anyserious criticism by learned counsel for the company, and he statedexpressly that the company had nothing to allege against the 4th and5th respondents. Reason (a) was questioned by counsel as embodying analleged rule or principle of industrial law which is not valid at any rate inthe case of higher executive staff. Learned counsel for the 4th and 5threspondents, relying on a decision of the Supreme Court of India, however,argued that there is an ordinary industrial rule of retrenchment embodiedin the principle “ last come, first go ” to be observed by the employer inthe normal case. In this situation, had the court made an award of reliefin respect of its finding that the proposed retrenchment is not justified,we would have felt compelled to consider whether the error (c) on the faceof the record went to the very root of the determination of the industrialcourt or whether, this error notwithstanding, the award made by thecourt remained unaffected. Even where a retrenchment is effected orproposed to be effected in a perfectly lawful way, it is legally competentfor the Minister to refer an industrial dispute arising from such a lawfulretrenchment or proposed retrenchment to an industrial court for settle-ment. The court, however, refrained from making an award of relief in
JUDGMEMT OF THE COURT—The Shell Company of Ceylon Ltd.
v. H. D. Per era
113
respect of the proposed retrenchment which it had found was not justified.On the finding reached by it, the court rightly apprehended that the onlyaward it could make was to declare that the company was not entitled toretrench the services of the 4th and 5th respondents. It did not,however, make that award because at the time it reached the finding fouryears had passed after the date of the making of the reference andretrenchment had already been effected. It could not at that stage, whileholding that the intended retrenchment was unjustified, make any deter-mination as to the terms subject to which the employer may retrenchbecause, the retrenchment having already been effected, it was no longerpossible to give the employer the choice between changing his mind aboutretrenching and of retrenching subject to terms. The inference is some-what strong that, where a reference of an industrial dispute for settlementas contemplated in section 31 H of the Act has been made, the award mustitself be made before the expiry of the two months specified in the saidsection which is the period of time during which the employer’s commonlaw right to retrench is suspended. Instead, the court went on toconsider a fresh matter which, by an order made on February 8, 1964, itpermitted the 4th and 5th respondents to raise. Notwithstanding objec-tion on behalf of the company, this permission was granted in purportedexercise of the discretion vested in an industrial court by section 36 (5) ofthe Industrial Disputes Act. The fresh matter so raised was “ whetherthe termination of the services of the 4th and 5th respondents by thecompany is lawful and/or justified and to what relief, if any, they areentitled ”.
On the strength of its finding that the proposed retrenchment was notjustified, the court went on to hold that the actual retrenchment was alsonot justified and has stated in the course of its written award that on thislatter finding it could have either (a) held that the 4th and 5th respondentsshould be treated as being still in service, given their arrears of salary andcontinued in employment or (b) made an order for their re-instatementunder section 33 (1) (b) of the Act. It, however, expressly refrained frommaking an award giving either of these two reliefs. Taking note of thesituation created by the enactment of the amendment to the CeylonPetroleum Corporation Act by Act No. 5 of 1963 and decisions of theGovernment in respect of the distribution of petroleum and petroleumproducts, it considered that an order for re-instatement or an order treat-ing the 4th and 5th respondents as being still in service would not be justand equitable. Holding that the actual retrenchment was not justified,it awarded compensation to the two respondents in the sums alreadyspecified at the beginning of this judgment. Assuming, vithout deciding(since the matter was not argued) that compensation under section 33(1) (d) can be awarded otherwise than as an alternative to reinstatement,it would be correct to assume that the court awarded compensationbecause it found the company guilty of wrongdoing and that its quantifi-cation of the compensation has some relation to the nature of the wrong-doing. Having found the company guilty of wrongdoing on three
114 JUDGMENT OF THE COURT—The Shell Company of Ceylon Ltd.
v. H. D. Perera
grounds—two in the field of labour practices and one in the field of law—it is difficult to exclude the probability that the findings of wrongdoing inall these three respects did affect the quantification of the compensation.In that event the error of law made by the court would appear to be of afundamental nature.
The company has contended before us that in permitting this freshmatter to be raised, and thereafter in making an award thereon, the indus-trial court acted without jurisdiction or in excess of its jurisdiction. Inrespect of this contention, after oral argument had been concluded onthis application and we had taken time for consideration of our judgment,we received from counsel for the contending parties certain additionalarguments in writing. It is true that the company did not initiate anyproceedings to have the order of February 8, 1964 quashed when it wasmade, but this omission does not have the effect of an acquiescence inthat order which, we have already noted, was made despite the company’sobjection to the application on behalf of the 4th and 5th respondents.
It has been submitted on behalf of the respondents that it would havebeen competent to the industrial court on the original reference as to theproposed retrenchment to have awarded the very relief that has now beenawarded, and that the question of lack of jurisdiction in the court tomake an award on the basis of actual retrenchment cannot depend onthe point of time at which the award is made. Apart from observingthat the point of time at which the award is made does seem to us toaffect the question of the nature of the relief that can be awarded, we donot think it is a profitable exercise to go on to consider what hypotheticalawards an industrial court would have had jurisdiction to make on theoriginal matter in dispute, viz. the justifiability of the proposedretrenchment, where, as here, the court has expressly refrained frommaking an award thereon. The award in fact made was not in respect ofthe dispute as to the proposed retrenchment but on “ the fresh matter ”as to the actual retrenchment. The jurisdiction to grant relief in respectof the dispute referred to the court by the Minister was, as counsel forthe company submitted, manifestly not exercised for the reason thatthe court felt that the only relief it could award in September 1966 wasan order that the company was not entitled to retrench at the end ofDecember 1962. We were impressed also by the argument on behalf ofthe company that, at the stage when there is yet only a proposal toretrench, an award of compensation or of gratuity as a relief in respectof that proposal cannot be said to be a “ just and equitable ” award.Such an award anticipates an uncertain future event. Compensation asif an actual retrenchment had been effected does not appear to us to becapable of being construed as an award in terms of section 24 of the Actin respect of the dispute as to the proposed retrenchment which was theonly dispute referred to the court.
It remains for us to turn to a consideration of the question whether theaward was one that the court had jurisdiction to make in respect of any
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v. H. D. Perera
“ other mattermade under this Act ” as contemplated in section
24. This involves two other questions, (i) whether in terms of section36 (5) the fresh matter as to actual termination permitted to be raisedwas one “ relating to the dispute ”, and (ii) whether this fresh matterwas one that could not have been raised at the commencement of theproceedings.
We would here like to make some reference to the second of thesequestions before dealing with the first. In paragraph 11 of the court’saward there is a statement to the effect that “ on the 17th December 1962written notice of this (the fresh matter) was given to the company undersection 36 (6). We were also satisfied that this matter could not havebeen raised at the commencement of the proceedings by the two employeesbecause their services were terminated after commencement of the pro-ceedings It is difficult to understand how, if it was not possible forthe employees to raise this matter at the commencement of tbe proceed-ings for the reason that their services were terminated after commencementof proceedings, they could have given notice of this matter on the 17thDecember 1962, also at a time when their services had not yet been ter-minated. In paragraph 4 of the award there is a statement to the effectthat “ proceedings commenced on 27th November 1962 The noticesterminating the services of the employees with effect from 31st December1962 (documents A19 and A20) are dated 27th September 1962. Thesenotices had been given and were in existence prior to the Minister makinghis Order of reference on 5th November 1962, and also prior to the givingby the employees on 17th December 1962 of the written notice of the freshmatter they intended to raise under section 36 (5). It seems to us thatif the employees were in a position to give notice of the fresh matter on17th December 1962 there was nothing to prevent their having raised thatfresh matter on or about the 27th November 1962 at the commencementof the proceedings because all the facts necessary to raise that matterwere in existence on the 27th November 1962 just as much as theywere in existence on the 17th December 1962. The fresh matter waspermitted to be raised only on 8th February 1964. It seems to us thatthe industrial court has by a wrong decision on a collateral question givenitself a jurisdiction which it would not otherwise have had. While wehave made reference in this way to this matter, we must state that learnedcounsel for the company did not on this ground challenge the jurisdictionof the industrial court to decide this fresh matter, and, in deciding theapplication before us, we accordingly refrain from taking into considera-tion the industrial court’s lack of jurisdiction for the reason aboveindicated.
In regard to the first question referred to in the above paragraph“ the dispute ” there contemplated is none other than the dispute referredto by the Minister in his order A22 of November 5, 1962. While it maybe correct to say that section 36 (5) permits an industrial court to decidefresh matters, the section itself limits them to such fresh matters as are
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related to the dispute already referred for settlement. It is useful tocontrast this with the power of an industrial court as indicated by theterms of the proviso to section 23. That proviso recognises the powerof such a court to admit and decide “ any other matter which is shown tothe satisfaction of the court to have been a matter in dispute between theparties prior to the date of the order of reference ”. Such other matteris not limited to a matter relating to the referred dispute. It may benoted in passing that the proviso to section 16 recognises a power evenin an arbitrator to admit and decide other matters in dispute between theparties prior to an order of reference, but, unlike the power of an industrialcourt indicated in section 23, this power is limited to deciding mattersarising out of or connected with the referred dispute. It will thus beseen that the power or jurisdiction of the arbitrator or of an industrialcourt recognised in the various sections of the Act is not a uniform one.Sections 16 and 23 do not themselves confer a power on the arbitrator andindustrial court respectively ; rather do they recognise the existence ofsuch a power. In regard to section 36 (5), we are inclined to agree withthe contention put forward on behalf of the company that this provisionis intended for the purpose of dealing with procedure rather than to conferjurisdiction for the admission and decision of fresh disputes that emergeand are raised after proceedings have commenced.
In any event, jurisdiction to decide the fresh matter raised must bederived by the industrial court from section 36(5) and from no otherprovision of the Act. We agree with the submission made by the learnedcounsel for the respondents that the fresh matter that can be permittedwould at least include a contentious matter between the parties and thatthe question whether it relates to the original dispute must be judgedobjectively. He submitted further that the fresh matter permitted inthis ease is connected with, arises from and is closely related to the disputeas to the proposed retrenchment and no relationship could indeed becloser. But there is much force in the contention on behalf of the com-pany that the fresh matters that can be permitted under section 36(5)must at least be involved in the original dispute. Counsel on its behalfhas pointed to the fact, as indicated already, that section 36 deals largelywith matters relating to evidence etc. that can be introduced at aninquiry, indicating that sub-section (5) is intended for the purpose ofdealing with a procedural matter rather than to confer jurisdiction forthe decision of all fresh matters that may be in dispute after the proceed-ings have commenced. He contended that the actual retrenchment isan entirely new industrial dispute and different to the proposed retrench-ment. While there may be a connection between the two disputes inthat the actual retrenchment may be a consequence of the proposedretrenchment, we agree that the two disputes, as contended for the com-pany, create different problems as to justifiability, relief and choice offorum. For the respondents it was suggested that section 36 (5) isintended, inter alia, to avoid the necessity of a multiplicity of references.It must, however, not be assumed that in so far as the Minister is
Katulara Totamune Multi-purpose Co-operative. Societies Union Ltd.
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concerned, a reference is a mere formality. The desirability of making aparticular reference, we venture to think, is carefully considered by aMinister having regard to such things like the demands of industrialpeace and the availability of other remedies. If the Minister’s concur-rence could have been obtained, we apprehend there would have beenno difficulty experienced in having this new dispute referred to the sameindustrial court before it considered the question of making an award onthe original reference. The “ fresh matter ” admitted being that of theactual retrenchment was not, in our opinion, a matter relating to theoriginal dispute which was over the proposal to retrench with effect fromthe end of December 1962, and therefore in making the award expresslyon this fresh matter the industrial court acted in excess of its jurisdictionunder the Industrial Disputes Act.
For the reasons we have set out above in this judgment, the award ofSeptember 25, 1966 is hereby quashed. Having regard to the mostunfortunate course taken on this dispute over long years, and bearingin mind the relative capacities of the contending parties to incur furtherexpenditure, we would make no order as to the costs of the applicationto this Court. Counsel for the company stated to us at the commence-ment of the argument that, whatever be the result of this proceeding, thecompany intends to abide by the offer originally made to the 4th and 5threspondents to pay a terminal benefit of twelve months’ gross salary,which is itself an offer of a kind that has the approval of the Commissionerof Labour. We trust it is not in vain that we hope the 4th and 5threspondents will even at this somewhat late stage avail themselves ofthis offer and thereby put an end to a singularly unfortunate dispute.
(Sgd.) T. S. Fernando,Puisne Justice.
(Sgd.) V. Tennekoon,Puisne Justice.
Application allowed.