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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
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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
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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.”
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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
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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.