S. B. PERERA
STANDARD CHARTERED BANK AND OTHERS
WADUGODAPITIYA, J. ANDWIJETUNGA. J.
S.C. APPEAL NO. 106/94S.C. SPL. LA. APPN. NO. 165/94C.A. APPN. NO. 456/92ARBITRATION NO. A/2184DECEMBER 05, 1994.
Industrial Dispute – Retirement on pension before reaching age limit – Resignation- Reference to arbitration by Minister under S. 4(1) of the Industrial Disputes Act -Effect of resignation on reference to arbitration – Industrial Disputes Act, Sections48, 19, 17(2), 18(2) – Meaning of industrial dispute.
After a service of 32 years where he rose from the position of clerk to OperationsManager the appellant applied for premature retirement with pension benefits. Onthis being refused he resigned and the Minister of Labour reciting that anindustrial dispute existed referred the matter to arbitration. The arbitrator found infavour of the appellant but the Court of Appeal dismissed the award as owing tothe resignation there was no dispute capable of reference for arbitration. Thereference was there without jurisdiction and the award was a nullity. On appeal tothe Supreme Court –
In respect of an industrial dispute referred under Section 4(1) for settlementby arbitration, Section 17(1) of the Industrial Disputes Act requires an arbitrator tomake such award as may appear to him just and equitable. The matter forsettlement was whether having regard to the length and quality of the service hehad rendered, especially in the light of the fact that two other employees who hadretired prematurely had nevertheless been granted retirement benefits, it was fairthat the appellant was denied the retirement benefits he claimed.
An industrial dispute is defined in Section 48 of the Industrial Disputes Act tobe, among other things, any dispute or difference between an employer and aworkman … connected with the employment…. or the terms of employment…. or the termination of services …. of any person . . .“ The award was made bythe arbitrator under Section 19 of the Act. The section is in two parts separated bya semi-colon. The two parts relate to two different matters and serve differentpurposes. The first part makes the award binding on the parties, trade unions,employers and workmen referred to in the award, whereas the second partrelates to the employers and workmen bound by the award. The first part dealswith the prime object of the legislation. The second part deals with an incidentalmatter. The inability, in the circumstances of a case, to deal with the incidentalmatter is not a reason for supposing that the mechanism for achieving the primeobject of the legislation is frustrated. The first part (a) declares the award of anarbitrator made in an industrial dispute and for the time being in force to bebinding for the purposes of the Industrial Disputes Act; and (b) states that theaward is binding on the parties and trade unions to which, and the employers andworkmen to whom, the arbitrator, acting in compliance with the terms of Section17(2) makes reference. The words after the semi-colon make the term of theaward implied terms in the contract of employment between the employers andworkmen bound by the award. What the words after the semi-colon do are tocreate new rights and duties between the employers and employees bound bythe award that will be operative from the date of the award or such date, if any, asmay be specified in the award, provided that, if the operation is retrospective,then the terms of the award will be implied terms from a date not earlier than thedate on which the dispute to which the award relates first arose, (Section 18(2)).The operation of the second part of Section 19 is conditional upon the existenceof a contact of which the terms of the award could become implied terms,l-jpwever it does not mean that the award of the arbitrator is not binding if there isno contract of employment. The binding effect of an arbitrator's award is createdby the first part of Section 19 and is quite independent of the additionalconsequence of the award sent out in the second part. The binding effect of anarbitrator's award does not depend on the existence of a contract ofemployment.
From the time the appellant’s request for retirement benefits was rejected, thequestion whether the appellant ought to have been granted retirement benefitswas a matter in dispute. A dispute exists where there is a difference, and this maybe long before there is a combat between the sides. The dispute which hadarisen when the appellant was an employee of the bank was not resolved whenthe Minister referred it for settlement by arbitration.
By using the expression "any person" instead of the term “workman" (in partof the definition of “Industrial dispute" in Section 48) the legislature used anexpression wide enough to include a person who is not a de facto or de jureworkman in its primary sense and into this class would fall both a person who hasnever had employment before and also a person who having been in service hasbeen discharged (though it would not mean anybody and everybody in this wideworld).
The expression “where services have been terminated" means not only aninvoluntary termination such as dismissal but also a voluntary termination such asresignation from service.
A dispute that had arisen while the contract of employment existed could bereferred for settlement even though the contract had been later terminated andwhether such termination had been initiated or brought about by the employer orby the workman himself.
Cases referred to:
Walker Sons & Co., Ltd. v. Fry(1965) 68 NLR 73, PP 90-91.
Workmen of Dimakuchi Tea Estate v. Management of Dimakuchi Tea EstateA.I.R. 1958 S.C. 353.
R. v. Industrial Disputes Tribunal (1953) 1 All ER 593.
Thirunavakarasu v. Siriwardena and Others (1981) 1 Sri L.R. 185, 193.
Colombo Apothecaries Co. Ltd. v. Wijesooriya (1968) 70 NLR 481, 487, 496,503,508.
George Hudson Ltd. v. Australian Timber Workers' Union (1932) 32 C.L.R.434.
R. v. National Arbitration Tribunal, Ex parte Horatio Crowther & Co. Ltd.(1947) 2 All E.R. 693.
State Bank of India v. Sundaralingam et al (1970) 73 NLR 514, 516.
Beetham v. Trinidad Cement Ltd. (1960) 1 All ER 274.
Narendra Kumar Sen and Others v. All India Industrial Disputes (Labour
Appellate) Tribunal quoted in (2).•
Cawnpore Tannery Ltd. Kanpur v. Guha and Others AIR 1967 S.C. 667.
APPEAL from judgment of the Court of Appeal.
S. L. Gunasekera for petitioner.
H. L. de Silva, P.C. with S. Mahenthiran for 1st respondent.
A. Gnanathasan, S.S.C. for 3rd and 4th respondents.
Cur. adv. vult.
The appellant had been employed by the Standard Chartered Bankin 1957 as a clerk promoted from time to time until he was appointedManager Operations in 1986. By his letter dated 19th October 1989,the appellant applied for permission to retire from the Bank’s service‘as early as possible, preferably within one month’, and requested theBank to grant him a pension commensurate with the thirty-two years ofservice which he had rendered with 'utmost dedication’.
In terms of the Pension Fund Rules of the Bank set out in a TrustDeed to which the appellant was a party, an employee who had
completed not less than ten years of service was entitled to apension computed on the basis set out in the Rules either uponreaching his 'normal retirement age of 55 years’ or upon prematureretirement on account of infirmity or disability.
The appellant was fifty years of age at the time of his applicationfor retirement. He was not seeking to retire prematurely on account ofinfirmity or disability. In the circumstances, in his letter dated 19thOctober 1989, the Manager Administration of the Bank wrote to theappellant pointing out that no provision existed in 'the terms andconditions of service' for the payment of the requested pension andthat 'we will therefore require to consider [the] application andthereafter refer it to our 'Head Office’ in London. On 3rd November1989, the Bank wrote to the appellant informing him that his 'requestfor premature retirement on pension terms has not receivedapproval’. On 10th November 1989, the appellant wrote to the Banktendering his resignation with effect from 13th November 1989. Onthe same day he wrote another letter explaining that he had decidedto retire and seek employment with another Bank, inter alia, becausetwo other senior employees of the Bank had been permitted to retireprematurely in order to take up employment in the Bank's office inOman. He referred to the fact that he had served the Bank well for 32years and appealed to the Manager of the Sri Lanka Branch to usehis 'good offices with the Head Office to obtain for [him] reasonableterminal benefits commensurate with [his] long and loyal service tothe Bank'. On 5th December 1989, the Bank acknowledged receiptof the appellant's letter of resignation and accepted his resignation.There was no acknowledgement or response to the other letterwritten on the same date as his letter of resignation relating to hisappeal for ‘reasonable terminal benefits’. On 8th December 1989, theappellant wrote to the Bank stating, inter alia, as follows:
“When I. by my letter of the 19th October 1989 requested you topermit me to retire prematurely and to pay me a pensioncommensurate with my services to the Bank, you replied me byyour letter of the 19th October 1989 stating inter alia that"… noprovision exists for this request in your terms and conditions ofservice . . This is presumably the basis on which the Bankhas refused to grant me the said terminal benefits. However,you permitted Mr. A. Mallawaarachchi to retire prematurely atthe age of 49 years after 29 years of service and Mr. S.Gulasingham to do so at the age of 54 after 34 years of serviceand granted them pensions even though they were leaving theBank prematurely for re-employment in the Bank in Oman.
There was no difference between my terms and conditions ofservice and those of Messrs Mallawaarachchi andGulasingham. Thus, if there was no provision in my terms andconditions of service for the grant of the aforesaid terminalbenefits, how is it that terminal benefits were granted to the saidtwo gentlemen? What is the reason for my being singled out fordiscriminatory and unequal treatment to my detriment?
Even assuming without conceding that your contention thatthere is no provision in my terms and conditions of service forthe payment of the aforesaid terminal benefits to me is correct,you are well aware that the guiding principle on which q^rIndustrial Law is based is justice and equity and not the strictobservance of the terms of a contract of employment…
In the aforesaid circumstances I appeal to the Bank toreconsider its earlier decision and to grant me the sameterminal benefits it would have granted me had I been 55 yearsof age on 13.11.1989”.
On 7th February 1990, the appellant wrote to the Regional GeneralManager of the Bank in London setting out his case and requestingthat the terminal benefits be granted having regard to considerationsof ‘equity and justice’. There was no response from the Bank withregard to the appeals dated the 10th of November, 8th of December1989 and 7th February 1990, despite attention being invited to themin other letters written by the appellant.
On 23rd April 1990, the appellant wrote to the Minister of Laboursetting out his complaint and requesting him to refer 'this industrialdispute’ to settlement by arbitration or by an Industrial Court in termsof Section 4 of the Industrial Disputes Act’.
On 22nd December 1990, the Minister of Labour, reciting that ‘anindustrial dispute in respect of the matter specified in the statementof the Commissioner of Labour’ existed between Mr. S. B. Perera andStandard Chartered Bank, stated that, by virtue of the powers vestedin him by Section 4(1) of the Industrial Disputes Act, he made orderappointing C. Carthegasan to be the Arbitrator and referred 'theaforesaid dispute to him for settlement by arbitration’.
The Order of the Minister, in accordance with the requirements ofSection 16 of the Industrial Disputes Act, was accompanied by aformal statement prepared by the Commissioner of Labour, dated30th November 1989, under the caption 'In the matter of an industrialdispute between Mr. S. B. Perera, “Prasanna”, 48/11, MinuwangodaRoad, Ja-Ela and Standard Chartered Bank, 17, JanadhipathiMawatha, Colombo 01’, setting out the matter which to his knowledgewas in dispute between the parties, in the following terms:
"The matter in dispute between the aforesaid parties is whetherthe non-granting of permission to Mr. S. B. Perera for prematureretirement by the management of Standard Chartered Bank andthereby depriving the right to retiring benefits is justified and ifnot, to what relief he is entitled."
The Bank, inter alia, advanced the view that by his resignation theappellant had brought about a ‘cessation of his employer-employeerelationship’. The continuation of the employer-employee relationshipand a subsisting contract of employment is necessary for the Ministerto refer a matter for settlement by arbitration, since, in terms ofSection 19 of the industrial Disputes Act, the terms of an award madeby an arbitrator could become binding and effective only bybecoming implied terms of the contract of employment. With hisresignation, the appellant ceased to be a ’workman’ and there was,therefore, no dispute between a ’workman’ and ’employer’ that couldbe regarded as an ‘industrial dispute’. The Minister had referred thematter to arbitration ‘after cessation of employment’ when there wasno subsisting contract of employment, and after the workman-employer relationship had ceased. Therefore, as at the date of theOrder made by the Minister there was no dispute ‘capable in factand/or in law' of being referred for settlement by arbitration under
Section 4(1) of the Industrial Disputes Act. In the circumstances, thematter was not one which could have been properly referred by theMinister for settlement by Arbitration in terms of Section 4(1) of theIndustrial Disputes Act and consequently the Arbitrator had nojurisdiction.
On 10th April 1992, the Arbitrator made his Order holding, interalia, that, although the appellant had ceased to be an employee ofthe Bank, there was ‘a live industrial dispute to be settled’; there wasan ‘industrial dispute’ within the meaning of the Act in so far as it wasraised when the employee was in the service of the Bank and itremained unresolved at the time he ceased to be in the employ of theBank and therefore continued to be an industrial dispute even afterhe ceased to be in service so long as he pressed his case thereafter,which he has done by his appeal to the Minister of Labour…’. Thesubmission of the Bank that the binding effect of an award dependedon the existence of a contract of employment by becoming impliedterms of such contract was rejected. In the circumstances, trteobjection of the Bank on the grounds of jurisdiction was overruled.
However, on 27th April 1994 the Court of Appeal gave judgmentissuing writs of certiorari quashing the Order of the Arbitrator and theOrder of reference for settlement by arbitration made by the Ministerof Labour.
The Court of Appeal was of the view that, because the appellantwas not within the terms of the Rules of the Bank pertaining toretirement benefits, 'He cannot have a grouse .. .[and] cannot have agrievance or dispute with the petitioner'. The Court of Appeal, was, inmy opinion, mistaken. In respect of an industrial dispute referredunder Section 4(1) for settlement by arbitration, Section 17(1) of theIndustrial Disputes Act requires an arbitrator to ‘make such award asmay appear to him just and equitable'. The matter for settlement wasnot whether, having regard to the terms of the Rules set out in theTrust Deed, the appellant was entitled to retirement benefits, butwhether, having regard to the length and quality of the service he hadrendered, especially in the light of the fact that two other employeeswho had retired prematurely had nevertheless been granted
retirement benefits, it was fair that the appellant was denied theretirement benefits he claimed. In his view, the appellant ought tohave been granted retirement benefits. His employer, however, didnot agree. There was a difference of opinion. Obviously, it is not everycontroversy that qualifies for reference as an 'industrial dispute’, but itneed not be one that is based on the enforcement of the terms andconditions of employment. An 'industrial dispute’ is defined inSection 48 of the Industrial Disputes Act to be, among other things,'any dispute or difference between an employer and a workman . . .connected with the employment…. or the terms of employment. ..or the termination of services …. of any person . . .’ and, I entertainno doubt that the controversy in the matter before me was of a naturethat was capable of being referred for settlement by arbitration as anindustrial dispute. The learned Judge of the Court of Appeal himselfsaid: “I am of the view that the dispute regarding terms ofemployment (premature retirement comes within the terms ofemployment) . . .”, although he added that, in his view, the disputeh§d ceased on account of the resignation. The question of whetherthe dispute was extinguished is a matter that will be considered later.
The Court of Appeal was of the view that the “plain reading andmeaning of Section 19 of the Industrial Disputes Act amplydemonstrates that ‘every’ [the emphasis is that of the Court ofAppeal] award of an Arbitrator made in an industrial dispute(whatever the nature of the award, provided it is made in respect ofan industrial dispute) shall be binding on the parties, and the terms ofsuch award shall be implied terms in the contract of employment. Itfollows that the terms of every award made in an industrial awardmust be capable of being incorporated in the contract ofemployment. There is no option, but to incorporate the terms of theaward in the contract of employment.” The Court of Appeal went onto state as follows:
“According to .. . Section 19, every award of an Arbitrator shallbe binding on parties, employers and workmen referred to inthe award. The binding effect is incorporated in the sectionitself, and in the context of the relationship between anemployer and workman (employee) there should be a contractof employment existing between the two of them. The bindingeffect of the award gathers strength with such contract ofemployment in the case of employer and employee.
No doubt an abrogation of a contract of employment unilaterallymade does not in law terminate the contract. With regard to acontract which has been abrogated unilaterally an award madeby an Arbitrator under Section 19 of the Act has binding effect,because the contract has not been lawfully terminated andtherefore it still exists. But in the instant case the contract ofemployment was not unilaterally terminated. The [employee] onhis own resigned after the [employer] refused to grant himpermission to retire prematurely. His resignation was dulyaccepted, and the contract of employment came to an end. Itfollows that there was no live contract at the time reference ofthe alleged dispute was made to the Arbitrator. Under suchcircumstances, could it be held that there was a live disputewhich can culminate in an award affecting the terms of
employment contained in a dead contract. It cannot be held so.
Insofar as the scope of Section 19 of the Industrial Disputes Actis concerned, the learned Arbitrator says: "This part ofSection 19 appears to cover only arbitration awards dealingwith terms of employment which would retrospectively or infuture form part of a contract of employment, i.e. awardscomparable to Collective Agreements between Employers andTrade Unions”.
I cannot agree with his conclusion with regard to the provisionsof Section 19 of the Act (i.e. the later part of this section) asinterpreted by him. I am of the view he has attempted to re-draftSection 19 in order to make way for his conclusions. But theintention of the Legislature was not what the learned Arbitratorexpressed in his order with regard to the said section. Theintention of the Legislature with regard to the provisions of thissection [is] unequivocal, and the interpretation given by thelearned Arbitrator is not what is conveyed in this section. In thecircumstances, I am of the view that the learned Arbitrator haserred in interpreting this section and as a result his conclusionswhich he arrived at regarding this section are also incorrect.”
Section 19 of the Industrial Disputes Act states as follows:
Every award of an arbitrator made in an industrial dispute andfor the time being in force shall, for the purposes of this Act, bebinding on the parties, trade unions, employers and workmenreferred to in the award in accordance with the provisions ofSection 17(2); and the terms of the award shall be implied termsin the contract of employment between the employers andworkmen bound by the award.
A ‘plain reading’ of that section leads me to the conclusion thatSection 19 of the Industrial Disputes Act, is, as the Arbitrator correctlysupposed, in two parts. The two parts are separated by the semi-colon.
In my opinion, they relate to two different matters and servedifferent purposes. The first part makes the award binding on theparties, trade unions, employers and workmen referred to in thee^/vard, whereas the second part relates to the employers andworkmen bound by the award. The first part deals with the primeobject of the legislation. The second part deals with an incidentalmatter. The inability, in the circumstances of a case, to deal with theincidental matter is not a reason for supposing that the mechanismfor achieving the prime object of the legislation is frustrated.
The first part (a) declares an award of an arbitrator made in anindustrial dispute and for the time being in force to be binding for thepurposes of the Industrial Disputes Act; and (b) states that the awardis binding on the parties and trade unions to which, and theemployers and workmen to whom, the arbitrator, acting incompliance with the terms of Section 17(2), makes reference.
The words after the semi-colon make the terms of the awardimplied terms in the contract of employment between the employersand workmen bound by the award. What the words after the semi-colon do are to create new rights and duties between the employersand employees bound by the award that will be operative from thedate of the award or such date, if any, as may be specified in theaward, provided that, if the operation is to be retrospective, then theterms of the award will be implied terms from a date not earlier thanthe date on which the dispute to which the award relates first arose.(See Section 18(2)). See also the observations of H. N. G. Fernando,S.P.J. in Walker Sons & Co. Ltd. v. Frym.
It there is a contract of employment, then the terms of the awardwould become implied terms of that contract. If there is no contract ofemployment, obviously, the terms of the award cannot becomeimplied terms. The operation of the second part of Section 19 isconditional upon the existence of a contract of which the terms of theaward could become implied terms. However, it does not mean thatthe award of an arbitrator is not binding if there is no contract ofemployment. The binding effect of an arbitrator’s award is created bythe first part of Section 19 and is quite independent of the additionalconsequence of the award set out in the second part. The bindingeffect of an arbitrator's award does not depend on the existence of acontract of employment.
The meaning of the legislature is clear. However, it would be Stinterest, perhaps, to remind ourselves of the background, for thewords of a statute, if there is any doubt as to their meaning, shouldbe understood in the sense in which they best harmonise with thesubject of the enactment and the object which the legislature has inview. (See per Das, J. in Workmen of Dimakuchi Tea Estate v.Management of Dimakuchi Tea Estate (2’ quoting with approvalMaxwell, Interpretation of Statutes, 9th Ed. p.55)
In England, in the post-war era, when the sense of emergency hadceased, and with it the need for compulsory arbitration through Stateintervention to prevent interruptions of work, collective bargainingonce again became the usual method of establishing the terms andconditions of employment. However, since the right to strike wasrestored, employers insisted that the obligation to observerecognized terms and conditions should be repealed. Although thegeneral obligation disappeared, if it was reported to the Minister thatan employer in a district or trade in which agreed terms andconditions operated was not observing such terms and conditions,the Minister was empowered to refer the matter to the IndustrialDisputes Tribunal which could have required the employer to observe
such terms and conditions as might be defined. When the Tribunalmade its award, then, in terms of Article 10 of the Industrial DisputesOrder of 1951, as from the date of such award or from such otherdate, not being earlier than the date on which the dispute or issue towhich the award relates first arose, [Cf. R v. Industrial DisputesTribunal®] as the tribunal may direct, it became an implied term ofthe contract between the employer and the workers to whom theaward applied that the terms and conditions to be observed underthe contract should be in accordance with the award until variedeither by agreement between the parties or by a subsequent awardof the Tribunal. (For a fuller account of the history of the settlement ofindustrial disputes by arbitration in England, see Outlines ofIndustrial Law by W. Mansfield Cooper and John C. Wood, 1966 5thEd. at pp. 439-444).
In Sri Lanka too, industrial peace has been deemed, as a matter ofpolicy, to be of national importance, and although voluntary, ratherthan compulsory, settlement has been the preferred form of dispute^solution. Yet, circumstances have made it necessary for Stateintervention and the making of the terms of awards implied terms ofcontracts of employment.
'Compulsory arbitration’ was introduced by the Essential Services(Avoidance of Strikes and Lockouts) Order of 1942 which waspromulgated under the Defence Regulations to ensure thatproduction and essential services were not hampered by industrialstrife during the war. Under this Order, all services essential to thewar effort and the life of the community were declared 'essentialservices' in which strikes and lock-outs were prohibited. At the sametime provision was made for compulsory arbitration in regard todisputes in essential services by Special Tribunals. Awards made bythese Tribunals were binding not only on the parties concerned butalso on all employers in the same or similar industries.
With the cessation of hostilities, the- mechanism for settlement bySpecial Tribunals ceased and the country was left with only theessential voluntary machinery for settlement provided for by theIndustrial Disputes (Conciliation) Ordinance No. 3 of 1931. Thegrowing tendency to reject recommendations made by the Boards
appointed under the Industrial Disputes (Conciliation) Ordinance,and the circumstances of the post-war period, especially the political,social and economic changes brought about by Independence,made it necessary to review the relevance of the prevailingprovisions, and a Bill was introduced in the House of Representativeson 20th June 1950 ‘to provide for the prevention, investigation andsettlement of industrial disputes and for matters connected therewithor incidental thereto’. The Minister of Labour, Mr. M. D. Banda, saidthat it was the view of the Government, that, since the Unions on bothsides were fairly well organized, it was incumbent on the Governmentto provide the machinery that would enable them to come together, oftheir own volition or with the assistance of a mediator, to settle theirdisputes. In certain cases, where the work was regarded as essentialto the life of the community, it was necessary to provide for the Stateto step in and attempt to bring about a satisfactory settlement. TheBill was passed and became the Industrial Disputes Act, No. 43 of1950. The Act, as amended, among other things, provides variousmethods for the settlement of disputes.
The prime object of the provisions relating to the settlement ofindustrial disputes, and in particular those relating to compulsorysettlement, (howsoever the provisions have been alleged to havebeen used – e.g. see the observations in the Report of theCommission on Industrial Disputes Ceylon 1966-1969, Sessional •Paper IV – 1970, page 119, paragraph 412) was, and has'continuedto be, the encouragement and maintenance of industrial peace bythe elimination of stoppage in industries that serve the people as awhole. On 5th May 1957, when the second reading of the Bill whichbecame Act No. 62 of 1957, amending the Industrial Disputes Act of1950 “designed to provide adequate machinery for the speedysettlement of industrial disputes both collective and individual”,especially by the establishment of Labour Tribunals, was taken up bythe House of Representatives, Mr. T. B. Ilangaratne, Minister ofLabour, Housing and Social Services, in explaining the need forcompulsory arbitration, said:
“It is the Government's policy that disputes should be settled byvoluntary conciliation or arbitration as that is the way to lastingsettlement. This country has not made any appreciable
advance in this direction primarily because of certain inherentdefects in the trade union structure. Hence, till conditionsimprove, it is necessary to have the power to refer disputes forcompulsory arbitration although I can give the assurance thatsuch power will be used sparingly. The procedure outlined byme for the settlement of disputes lays clear emphasis onvoluntary conciliation and arbitration …"
The Minister also said:
“Where neither party wants to accept arbitration or wants areference of the matter to the Industrial Court or LabourTribunal, they should be allowed to fight it out, except whenGovernment considers the industry to be a public utility serviceand on its own motion and not because of the pressure of aunion refers the matter to an Industrial Court or to a LabourTribunal.”
Iti Thirunavakarasu v. Siriwardena and Others(4), Wanasundera, J.observed as follows:
“The Industrial Disputes Act provides for State intervention inthe resolution of disputes between management and workmen.The procedures that are devised therein for the settlement ofindustrial disputes reach beyond the interests of the contestingparties and are matters of real concern to the community atlarge.”
In Colombo Apothecaries Co. Ltd. v. Wijesooriya<5), Tennekoon, J.(as he then was) said:
“It has been said frequently, arid quite recently reiterated bytheir Lordships of the Privy Council that the purpose and objectof the Act is the maintenance and promotion of industrial peace;and it may be added that the preservation of industrial peace isdirected not to the redress of private and personal grievancesbut to the securing of the uninterrupted supply of goods andservices to the public by employers engaged in suchenterprises. The Act takes as the prime danger to industrial
peace that kind of situation which is capable of endangeringindustrial peace and gives it the name ‘industrial dispute’. In thedefinition of industrial dispute the emphasis is thus not on thedenial or infringement of a right of a workman by his employerbut on the existence of a dispute or difference between givenparties connected with the rights not merely of a party to thedispute but also of third parties. I use the word 'right' and'wrong' in this context not in the sense of legal rights andwrongs but in the larger sense in which right and wrong may bedetermined by reference to equitable standards of employmentand labour. The reliefs contemplated are not mere redress ofindividual wrongs. The purport and direction of the proceedingsin relation to an industrial dispute is settlement of the disputeand the avoidance of a disturbance of industrial peace; relief orredress to individual workmen is only incidental to the moreimportant function of restoring peace."
The prime object of the maintenance and promotion of indu^rialpeace by the elimination of stoppage in industries that serve thepeople of the country as a whole, is achieved by making theprovisions of a settlement (Section 14) or the terms of an award(Section 19) binding on the parties, trade unions, employers andworkmen referred to in the settlement or award, as the case may be,'in accordance with the provisions of section 17(2)’. An arbitrator isrequired by Section 17(2) to refer in his award to ‘the parties andtrade unions to which, and the employers and employees to whom,such award relates.' Understandably a settlement or award, in orderto achieve industrial peace may, in the circumstances of a case,need to bind, not only persons who are bound to each other bycontracts of employment, but also others.
Provision is also made by the legislature for the terms of asettlement by conciliation (see Section 14) or the terms of the awardof an arbitrator (see Section 19) or Industrial Court (Section 26) tobecome 'implied terms in the contract of employment betweenemployers and workmen bound by' the settlement or award, as thecase may be. However, the modification of legal relations and thealteration of rights and obligations is incidental in the process ofresolving industrial disputes. As Justice Issacs observed in the
Australian case of George Hudson Ltd. v. Australian TimberWorkers' Union (6).
“The interests of the disputants are great; but it is becausestruggles over their individual interests are detrimental to thegreat general interests of the [country], that the incidentalalteration of legal relations of those engaged in industry isundertaken."
Those observations are quoted at page 112, paragraph 388, of theReport of the Commission on Industrial Disputes Ceylon 1966*1969, Sessional Paper IV 1970.
The achievement of the principal and wider purpose, in thecircumstances of a case, (e.g., see per Wanasundera, J. inThirunavakarasu v. Siriwardena and Others, (supra) ), may well bethrough the formulation of a new set of terms and conditions ofemployment. It may, in the circumstances of a case be the obvious,or even the only practical means to the end. However, it need notalways be so, and the terms of an award may be effective with regardto those who are not bound to each other by contractual obligations.The prime object should not be confused with an important, but,nevertheless, incidental, effect of altering the rights and duties of theemployers and workmen bound by the award. The decision of theCourt of Appeal leads one to the unacceptable view that if theincidental effect cannot be achieved, the prime object of theprovisions must be frustrated.
The Industrial Disputes Commission, after referring to theprevailing circumstances of the country, concluded that it was ‘stilltoo early in the day for the excision of compulsory arbitrationproceedings from our statute-book’. (See paragraph 407 of theReport of the Commission on Industrial Disputes Ceylon1966-69, Sessional Paper IV of 1970). In Section 42(1) of itsproposed legislation, the Commission set out the 'Effect of an awardof an arbitrator or body of arbitrators’. (See page 335 of the Report ofthe Commission). As in the case of Section 19 of the present Act,there are also in the proposed legislation, two parts divided by asemi-colon. The first part is in terms identical to the pre-semi-colonpart of Section 19, except for the addition of the words ‘or a body ofarbitrators’ after the word ‘arbitrator’. The post-semi-colon parts readsas follows: 'and the terms of the award shall be implied terms in thecontract of employment, if any, between the employers and workersbound by the award.’ It is in terms identical to the corresponding partof Section 19, except for the addition of the phrase, ‘if any’. Theproposed amendment did not seek to alter the existing law, but it didanticipate the argument adduced in the matter before us.
There had, it seems, been no difficulty about the matter inSri Lanka when the Commission made its recommendations orthereafter. The Arbitrator in his Order observed that ‘There arecountless cases of, say, dismissed workers dealt with by Arbitratorsappointed under Section 3(1 )(d) or 4(1) of the Industrial Disputes Act,culminating in awards granting relief of various kinds to employeeswho were not in the service from which they were dismissed whentheir cases were referred for arbitration." Such references andawards had proceeded on, what H. N. G. Fernando, C.J. in ColomboApothecaries Co. Ltd. v. Wijesooriya <5) described as “the commonsense principle that once a dispute has arisen, an employer cannotavoid the operation of the machinery for settlement by terminating theemployment of his workmen."
However, notwithstanding the practical soundness of the way inwhich the matter had been approached in Sri Lanka, an argument onthe lines similar to the one under consideration had been raised inEngland and not surprisingly, rejected. In Ft. v. National ArbitrationTribunal, ex parte Horatio Crowther&Co. Ltd.™ Lord Goddard said:
“It was submitted by counsel for the company that as at thedate of the reference due notice had been given to the workmento terminate their employment and their employment hadthereby been terminated, there could be no trade dispute torefer, because there could not be a dispute or difference on anysubject between those employers and workmen as theworkmen were not in the service of the employers, and hereinforced this argument by reference to the definition of‘workman’ which he submitted contemplated an existingcontract so, as he put it, there must be some contract on whichthe reference could ‘bite’. I cannot agree with that submission. Ifeffect were given to it, it would mean that any employer, or,indeed any workman, could nullify the whole provision of theOrder and the object of the regulation under which it was madeby terminating the contract of service before a reference wasordered, or even after the matter was referred but before thetribunal considered it.”
The observations of Lord Goddard were quoted with approval bySiva Supramaniam, J. in Colombo Apothecaries Co. Ltd. v.Wijesooriya (supra) at page 496.
In the matter before us, the Court of Appeal was of the view thatthe reference by the Minister was bad and conferred no jurisdictionon the arbitrator, because, having regard to the manner in which thecontract of employment had come to an end, there was no ‘industrialdispute'. The Court of Appeal said:
“In the instance case, the [appellant] on his own resigned fromthe services of the Bank, and his resignation was accepted bythe latter. Then the position is, that from the day his resignationwas accepted by the [employer] Bank, he has ceased to be inthe [Bank's] employment. Once he ceases to be in theemployment of the Bank, it cannot be held that there is a livedispute between the parties which can culminate in an awardaffecting the terms of employment. Therefore it follows that [the]reference of a dead dispute to an Arbitrator by the Minister isnot an ‘industrial dispute' which is anticipated by section 4(1) ofthe Act, and also that such a dispute (one which is dead) is notone which comes within the definition of 'industrial dispute’under Section 48 of the Act. Thus it is clear that for a referenceof an industrial dispute to be valid there must be a live disputeat the time of reference..
The Court of Appeal was misled by the obiter dicta of Alles, J. inState Bank of India v. Sundaralingam et al.m in support of its view.After referring to the definition of ‘industrial dispute' in the Act, Alles,
"I cannot see how this definition can ever apply to ‘any disputeor difference’ between an employer and an ex-employee whohas retired from the services of his employer. Thuraisinghamceased to be the petitioner's employee on 10th April 1962. Thisis a case of cessation of employment and not one of terminationor reinstatement. When a person ceases to be in employment,there cannot be a live dispute between the parties which canever culminate in an award affecting the terms of employment."
In the matter before Alles, J., a Trade Union had applied on behalfof Sub-Accountants who had retired from the service of the Banksixteen months earlier for the benefits of a salary revision awarded inI.D. 306 and I.D. 306A. The dispute in I.D. 306 and I.D. 306A did notconcern Sub-Accountants and the awards made no reference tothem. There was, as Alles, J. held, no dispute to which they had beenparties before they retired. In the circumstances, admittedly, therewas no 'industrial dispute’ which could have been referred by theMinister for settlement by arbitration. Consequently, the objection tothe jurisdiction of the arbitrator was well founded in ^iecircumstances of the case, although, with great respect, thesuggestion that the definition of ‘industrial dispute' could never applyto a dispute between an employer and ex-employee, cannot besupported. In my opinion, the ratio decidendi of that case is that anarbitrator appointed by the Minister under Section 4(1) of theIndustrial Disputes Act has no jurisdiction to entertain a matter inwhich the dispute arose after the cessation of employment.
The case before the Court of Appeal was clearly distinguishableon the ground that the ex-employee before it was a party to a disputethat arose while he was in active service. In the matter before theCourt of Appeal, the dispute arose on the 19th of October 1989 whenthe Bank responded negatively to the appellant’s request. If theBank's response on that occasion was not of a firm and definitenature, the letter of the Bank dated 3rd November 1989 left nouncertainty or doubt that there was a difference. The appellant, by hisletter dated 10th November 1989, tendered his resignation with effectfrom 13th November 1989, and the Bank, in its letter dated 5thDecember 1989, accepted the resignation ‘with effect from that date’.Perhaps, if the appellant’s letters on and after the 10th of November
are anything to go by, the controversy, at least as far as the appellantwas concerned, became more heated as the appellant becameargumentative. The Bank, having rejected the appellant’s requestfinally on 3rd November, 1989, did not openly and formally express orstate its views reiterating and giving renewed expression of its views,but affirmed its negative position by remaining silent andunresponsive. And so, from the time the appellant’s request forretirement benefits was rejected, the question whether the appellantought to have been granted retirement benefits was a matter indispute. A dispute exists where there is a ’difference’, and this maybe long before there is a combat between the sides. (E.g. seeBeetham v. Trinidad Cement Ltd.<9).) The dispute which had arisenwhen the appellant was an employee of the Bank was not resolvedwhen the Minister referred it for settlement by arbitration.
The Court of Appeal was of the view that the dispute had been'extinguished'. It said that:
4 “With his resignation voluntarily, and that resignation has beenaccepted by his employer, the dispute, if at all, ceases tocontinue after the contract of employment is extinguished. I amof the view that the dispute regarding terms of employment(premature retirement comes within the terms of employment)does not continue after the contract of employment between thetwo parties ceased to be in force with the 2nd respondent’sresignation.”
The Court of Appeal referred to the analysis of the definition of'industrial dispute’ in the Industrial Disputes Act by Tennekoon, J. inColombo Apothecaries Co. Ltd. v. Wijesooriya(5). The phrase, it mightbe observed in passing, had been already analysed in India in 1959by Justice Das in the Dimakuchi Case(2) (supra) in almost identicalterms, Tennekoon, J. said that the definition fell into three parts: Thefirst referred to the factum of a dispute or difference; the second partto the parties to the dispute; and the third, to the subject-matter of thedispute. With regard to the third part, Tennekoon, J., having said that“the dispute or difference must be connected with the employment ornon-employment or the terms of employment, or with the conditionsof labour or the termination of the services or the reinstatement in
service of any person”, drew attention to the fact that, “while in thesecond part the parties are described by reference to such words as‘employers' and ‘workmen’, the legislature in describing the subject-matter of the dispute did it by reference not to ‘any workman’ but byreference to ‘any person”’. After explaining why the phrase ‘anyperson’ was “not as wide as it at first sight appears", Tennekoon, J.deemed it “unnecessary, at least for the purposes of this case, inwhich the question does not directly arise for consideration, to givean unduly restricted meaning to the words 'any person’;”. HisLordship, however, added that:
“What is important to note, of course, is that the legislature, inusing the expression ‘any person’ instead of the term ‘workman’in that portion of the definition of 'industrial dispute’ which relatesto the subject-matter of the dispute, used an expression wideenough to include a person who is not a de facto or de jureworkman in its primary sense and into this class would fall both aperson who has never had employment before and also a perapnwho having been in service has been discharged.”*
It is not necessary for the purposes of the matter before me toconsider what the expression ‘any person’ means, although I mightsay that I have no difficulty in accepting the view of S. K. Das, J. withwhom S. R. Das, C.J. agreed (Sarkar, J. taking a somewhat differentview) in the Dimakuchi Case (supra), that the expression 'any person’“cannot mean anybody and everybody in this wide world", for asChagla, C.J. pointed out in Narendra Kumar Sen and Others v. AllIndia Industrial Disputes (Labour Appellate) Tribunal(10) (and quotedwith approval by S. K. Das, J. in the Dimakuchi Case), it would leadto absurd results. However, whether in England, (e.g. see R v.National Arbitration Tribunal, supra), India (e.g. see CawnporeTannery Ltd. Kanpur v. Guha and others(,1> or in Sri Lanka, there hasbeen no doubt for about half a century that the termination of acontract of employment does not per se extinguish a dispute whichcould be referred for settlement.
Indeed, the Court of Appeal in this case too seemed to beprepared to accept the view that the termination of a contract ofemployment did not necessarily extinguish a dispute. The Court of
Appeal, however, was of the view that 'discharge' meant 'dismissal'and that there was no ‘industrial dispute' in this case, since thecontract of employment had come to an end, not by reason of■‘dismissal’ but because the appellant had resigned.
The Court of Appeal also referred to the Act that 'industrial dispute’was defined in Section 48 of the Act as ‘any dispute or differencebetween an employer and workman’, and observed that ’workman’, interms of that section, included ‘any person whose services havebeen terminated’. The Court of Appeal was of the view that the words‘whose services have been terminated’ meant “an involuntarytermination such as dismissal from service and not a voluntarytermination such as resignation from service."
As we have seen, Alles, J. in State Bank of India v. Sundaralingamet al(B) had drawn a distinction between ‘cessation’ of employment,which he said occurred when a person retired, on the one hand, and'termination' on the other. The Court of Appeal seems to have taken thisto fnean that, where a dispute arose while the contract of employmentwas in force, the way in which the contract of employment came to anend is a decisive factor in the determination of the question whetherthe dispute was extinguished. According to the Court of Appeal, wherean employer-employee relationship comes to an end, initiated by thevoluntary act of the employee, the dispute ceases to exist, but not, ifthe contract is brought to an end on the initiative of the employer.
As we have seen, in R. v. National Arbitration Tribunal<7), LordGoddard, rejected the submission that there must be an existingcontract of employment because “if effect were given to it, it wouldmean that any employer, or indeed, any worker,” (The emphasis ismine) “could nullify the whole provision of the Order and the object ofthe regulation under which it was made by terminating the contract ofservice before a reference was ordered or even after the matter wasreferred but before the Tribunal considered it.” Lord Goddard made itvery clear that a dispute that had arisen while the contract ofemployment existed could be referred for settlement even though thecontract had been later terminated and whether such termination hadbeen initiated or brought about by the employer or by the workmanhimself. His Lordship said:
“It is, in my opinion, quite clear that there was here a tradedispute existing at any rate down to the date of the dismissal ofthe workmen … If there was a trade dispute it can, in myopinion, be referred to the tribunal whether or not the disputehas resulted in workmen being dismissed or in their havingdischarged themselves.”
The emphasis is mine.
The matter was not raised in the case of State Bank of India v.Edirisinghe and Others (,1). However, in that case the fact that theemployee had resigned was not considered to be an obstacle to thereference of the dispute for settlement by arbitration.
For the reasons set out in my judgment, I set aside the judgment ofthe Court of Appeal with costs.
WADUGODAPITIYA, J. -1 agree.
WIJETUNGA, J. -1 agree.
Judgment of Court of Appeal set aside.