Uvais v. Punyawathie (Fernando, J.)
FREWIN & COMPANY LTD.,
v.DR. RANJiTH ATAPATTU AND OTHERS
COURT OF APPEAL
S.N. SILVA, J.
C.A. APPLICATION NO. 293/89
DECEMBER 5 AND 12 1991, JANUARY 24 AND 28 AND FEBRUARY 05 1992.
Certiorari – Industrial Dispute – Reference to arbitration under section 4 (1) ofthe Industrial Disputes Act – Payment of Non-recurring cost of living gratuity(NRCLG) – Collective Agreement – Partial extension under s. 10 (2) of IndustrialDisputes Act – Implied term of contract – Ultra vires.
A non-recurring cost of living gratuity (NRCLG) was paid by the petitioner(employer) to the workmen employed in its establishment on the assumption thatthere was a legal liability to pay under a partial extension of a Collective Agreementof 1971 to every employer in the printing industry by an order of the Ministerunder section 10 (2) of the Industrial Disputes Act. The payment of a NRCLGwas the subject of clause 17 of the said Collective Agreement which waspurported to be extended to the petitioner's industry. The extension of theCollective Agreement done by the Minister was subsequently held to be invalid.The petitioner was later advised that there was no liability to pay a NRCLG andthe petitioner decided to pay a reduced amount The contention for the employees(Eksath Kamkaru Samithiya 3rd respondent) was that after the extension was
Sri Lanka Law Reports
 2 Sri LR.
declared invalid by the Supreme Court in 1982, the petitioner continued topay a NRCLG up to 1988 and this payment constituted an implied term ofthe contract of employment. The Minister of Labour by order under section 4(1) of the Industrial Disputes Act referred to arbitration the industrial disputein respect of the matter specified in the statement of the Commissioner ofLabour. According to the statement, the matter in dispute is whether the non-payment of the balance NRCLG for the period 01.09.1987 to 31.07.1988 to thenamed employees, being members of the 3rd Respondent union, is justified andthe relief each of them is entitled to.
It was common ground that the payment of a NTCLG by the Petitionercommenced upon the purported extension of clause 17 of the CollectiveAgreement by the order of the Minister. The concept of an NRCLG, thequalifing period of its payment and the formula of its computation are referableto clause 17 according to the petitioner. It was contended that a NRCLG waspaid due to a mistake of law but the reference to arbitration proceeds on theassumption was valid on the basis that the payment of a NRCLG had becomean implied term of the contract. It was contended on behalf of the Minister thatthe order of reference to arbitration is severable from the statement of the matterin dispute.
An implied term may be derived in one of three ways : custom, statutelaw or inferences drawn by judges to reinforce the words of the contract in orderto realise the mainfest intention of the parties.
A term of contract cannot be implied on a mere assertion of one of the partiesto the contract or on the conduct of die other. In the absence of custom or statutean implied term cannot be added merely on the ground of reasonableness butits existence must be a necessary implication from the circumstances of the caseand the language of the contract.
The Minister is not clothed with any judicial power to enable him to assume thata term of contract is implied.
The claim for payment of the NRCLG is referable not to an implied termbut to clause 17 of the Collective Agreement.
The Company (petitioner) had paid the NRCLG by a mistake of law thatclause 17 was binding on it by viture of the purported extension of that clauseto the Industry of the petitioner by the order of the Minister.
By the reference the Minister is seeking to do indirectly what he cannotdo directly in extending Clause 17 to the Industry of petitioner.
Frewin & Company Ltd., v. Dr. Ranjith Atapattu and Others
(S. N. Silva, J.)
The petitioner is seriously affected by the reference to arbitration because itprecludes him from urging before the arbitrator that quite apart from the balanceNRCLG, no amount whatever is due as NRCLG since the extension of clause17 to the industry of the petitioner as purported to be done by the order of theMinister is invalid and that payments were made on a mistake of law.
Therefore the reference to arbitration is bad and ultra vires.
The order of the Minister is not severable from the statement of the matterin dispute and is subject to judicial review on the ground that it is Ultra vires.
Cases referred to :
A. F. Jones (Exporters) Ceylon Ltd. v. Balasubramaniam (1982) 2 Sri LR293.
Ceylon Mercantile Union v. Aitken Spence Co. Ltd. C.A. 140/83 Minutesof 5.9.1989.
Ceylon Printers Ltd. v. Eksath Kamkaru Samithiya S.C. 34 of 1988 Minutesof 11.11.1988.
Kodakan Pillai v. Mudanayake 54 NLR 433.
Bandaranaike v. Weeraratne and others (1981) 1 Sri LR 10, 16.
Aislaby Estates Ltd. v. Weerasekera Tl NLR 241.
Nadaraja Ltd. v. Krishnadasan 78 NLR 255.
APPLICATION for writ of certiorari.
L Kadiragamer P.C. with A. Thillakawardena and Maitri Guneratne for thepetitioner.
K.Sripavan, S.S.O. for 1st and 2nd respondents.
V. P. Wettasinghe for 3rd respondent.
Cur. adv. vulL
February 21, 1992
S.N. Silva, J.
The petitioner has filed this application for writs of Certiorari to quashthe order dated 23-3-1989 (A) made by the 1st respondent and thestatement of the matter in dispute dated 10-3-1989 (fl) prepared bythe 2nd Respondent. By the said order the 1st Respondent beingthe Minister of Labour has referred to arbitration an industrial disputebetween the petitioner and the 3rd Respondent union, under section4 (1) of the Industrial Disputes Act. Document (b) is the statement
Sri Lanka Law Reports
 2 Sri LR.
of the matter in dispute, between the parties, prepared by the 2ndRespondent, the Commissioner of Labour under section 16 of theAct.
Learned President's Counsel for the petitioner challenged thevalidity of the reference and the statement on two grounds. Firstly,- that the Non-recurring Cost of Living Gratuity (N.R.C.LG.) referredto in the statement of the matter in dispute, was paid by the petitionerto the workmen employed in its establishment, on the assumptionthat there was a legal liability to pay, under a partial extension ofthe Collective Agreement 31 of 1971 (e) to every employer in theprinting industry, by an order (d) of the Minister under section10 (2) of the Act. The payment of a N.R.C.LG. is the subject ofclause 17 of the said Collective Agreement (e) which was purportedto be extended to the petitioner's industry. The extension of theCollective Agreement done by the Minister by order (dj wassubsequently held to be invalid by the Supreme Court in the caseof A. F. Jones (Exporters) Ceylon Ltd. vs. Balasubramaniam (,). Thepetitioner was later advised that there was no liability to pay aN.R.C.LG and the petitioner decided to pay a reduced amount from
It was submitted on the foregoing that by the reference toarbitration the Respondent was seeking to do indirectly what hecould not do directly, by extending the provisions of clause 17 ofthe Collective Agreement (cO to the industry of the petitioner. Thesecond ground urged by learned President's Counsel is that 17 ofthe workmen whose names appear in the statement of the matterin dispute (b) have ceased to be employees under the petitioner ontheir vacating post and that the termination of their employment isthe subject matter of an inquiry before the 2nd Respondent underthe Termination of Employment (Special Provisions) Act No. 45 of1971 upon a complaint of the workmen. It was submitted that sincethere is no contract of employment subsisting between the petitionerand these workmen, an award of the arbitrator, even if it is madein favour of these workmen, cannot be implied as terms of the contractof employment, as provided for in section 19 of the Industrial DisputesAct.
Learned Counsel for the 3rd Respondent conceded that theextension of certain clauses of the collective Agreement (includingclause 17) by the order (d) is invalid. However, learned Counselsubmitted that after the extension was declared invalid by the Supreme
FREWIN & COMPANY LTD., v. DR. RANJITH ATAPATTU AND OTHERS