HOCHTIEF GAMMON versus STATE OF ORISSA & ORS.

HOCHTIEF GAMMON

STATE OF ORISSA & ORS. September 4, 1975

[A. ALAG!RISWAMI, P. K. GOSWAMI AND N. L. UNTWAL!A, JJ.]

Industrial Dtsputes Act~Sec. 10 -Discretion of Govt. to refuse to nlake reference-Necessary and proper parties to referenae-Powers of the Court to scrutinise executive drder~lf tl1e executive refusd.s to consider re[e .. vant 111auers or takes 1[1]nto considen:•tion irrelevant or extraneous matters-Whether Court's scrutiny can be avoided by failing to give reasons.

In 1957, the Hindustan Steel Limited (Company) and the appellant (contrac-tor) entered into contract for execution of the· foundation and civil engineer-ing work of the hot and cold rolling mills at Rourkela, The Company was to pay to the Contractor all costs of construction and in addition pay fixed overhead charges for the head office and general office of the contractor plus .a fixed fee. All payments in respect Qf wages and salaries and connected pay-ments made to persons engaged upon the work as might be approved by the Company comprising wages of all ,operatives as well as all other payments connected with wages were to be paid by the Company. Emolu-ments of Site Supervisory staff as well as all other payments connected there-with were also to be paid by the Company. The payments made to statutory schemes, in connection with sickness, or accident, or Provident Fund, or Pension or other like schemes to the above categories, payments of overtime and addi-tional renumeration for" Sunday, holiday or night work etc., and payments for leave and travelling cost were all. to be made by the Company.

In 1960, the Labour Union of workmen employed by the Contractor raised dispute for adjudication about the bonus payable to the workmen f'or doing the aforesaid job. The stand of' the contractor was that they would pay the bonus if it were' given by the Company. The Government referred the question Whether the workers of the contractor were entitled to any bonus and if so what should be the quantum. The qU'estion whether the Company or the Con-tractor was liable to pay the bonus was not refefred. notice was served on the Company and the Company contended that since the contractor did not com-plete the work according to the agreement, no bonus was due to the contractor and that the Company was not necessary party to the reference. The con-tractor in the written statement contended that under the terms of the Contract the Company had to bear all costs with reference to labour, all payments in respect of wages, salaries and other connected payments made to persons engag-ed in the works and that the contractors were, paid stated fee for professional services rendered by them and that. therefore, the demand against the contrac-tor was not sustainable in law. The contractor made an application to the Tri-bunal that for the proper adjudication of the issues referred to the Tribunal it WaSJ necessary to bring on record the Company as party to the proceedings. The said application was rejected by the Tribunal.

The contractor thereupon filed Writ Petition in the High Court of Orissa against the said order of the Tribunal. The, High O:>urt dismissed the said writ Petition. The contractor filed an appeal by Special Leave to this Court. This Court in that appeal held :

''That it would have been open to the· State Government to ask the Tribunal to consider as to who was the en1ployer of the workn1en and in that case the· terms of reference might have been suitably framed. In the present case such course has not been adc>pted. Tbe dispute· bet·, ween the Company and the contractor would be substantial dispute and cannot be regarded as incidental to the industrial dispute which was referr-ed. The Company was therefore, necessary party.''

The Contractor, thereafter, filed an application before the State Governn1ent asking them to modify tlle earlier reference by adding whether the bonus \va:i; payable· by the Company or the contractor and. by adding the Company a::; party to the reference. It "\\'as pointed out in that application that it was the Company which would be liable to pay the bonus if at all it was payable. The contractor also asked for personal hearing. The Government dispoS\!d of that application by observing

"Government do not find any materials on the basis of the petition to include Hindustan Steel Lin1ited, RourkeJa, as party' in the above case.''

The. Government did not apply its mind to the other prayer, nan1eiy, adding one more issue to the reference.

The Contractor filed writ Petition against the said order of the State Government. The High Court dismissed the Writ Petition.

Against the judgment of the High Court the appellants appealed to this Court.

1'\ltowing: the appeal,

HELD : 1. It is apparent frorn the Gov~rnment's reply that the Govefn_ ment did not apply its mind to the facts placed before them. There was. at least an arguable case on the point as to \Vho Wa"i liable to pay the bonus and in that case the Company \vould have be1::n necessary and appropriate party. Even it the Government thought that the Company W<lS not necessary party, the question as to who was liable to pay the bonus was veiy relevant question and that made th'e Company necessary or at least proper party. The attitude of the contractor throughout had been that their contract was cost contracf; that the Company had to pay labour and the Co-mpany was the real employer, That contentiqn may or may not be upheld by the Tribunal. This was. however, an appropr1ato qu\:stion to be referred to the Tribunal. [674 C-FJ

2. The· power of the courts in relation to the orders or the appropriate Government in the matter of referring industrial disputes for adjudication is no longer in doubt. [674 G]

State of IJ01nbay v. K. P. Krishnan & Ors. [1961] ( 1) S.C.R. 227] and Bo111-bay Gnivn of Journalists v. The State of Bombay [1964(6) S.C.R. 22@ 241. followed.

The powers of the Court mentioned in the above two cases in relation to the orders of the Government under any statute are not the only powers of the courts. In England, in earlier days, the. courts usually refused to interfere where the Governm~nt or the concerned officer passed V.'hat was called non-speaking order. Where speaking order was passed the Courts proceeded to consider the reasons given to see whether the reasons given were relevant reason;;; or considerations. \Vherc there was non-speaking order they used to say it V.'as. like the face of the sphnix in. the sense that it was inscrutable and. therefore, held that they could not consider thC: question of the validity of the order. Even in England, the court5 have travelled V"e·ry fast since those davs. 1-hey no longer find the face of the sphinx in~rutable. Needless to saV that "thoe courts in rndia which function under written constitution which cOnfers fundamental rights on citizoens exercise, far greater powers than those exercised by the courts in England where there is no written constitution and there are no fundamental rights. The decision of H0use of Lords in Padfield v. Minister of Agriculture, Fisheries and Food (1'968 A.C. 997), followed. [675-F-H, 676-<A]

3. The Executive have to reach their decisions by taking into account rele-vant considerations. They should not refuse to consider relevant matter nor should they take into account wholly irrelevant or extraneous considerations. They should not misdirect themselves on point of law. Only such decision will be lawful. The Courts hav~ vower to see, that the Executive acts lawfully. Tt is no answer to the exercise of that power to say that the Executive acted

bona fide nor that they have bestowed painstaking consideration. They cannot avoid scrutiny by courts by failing to give reasons. If they give reasons and they are not good reasons, the court can direct them to reconsider the n1atter in the light of relevant matters, though the propriety, adequacy or ~atisfactory character of these reasons may not be open to judicial scrutiny. Even it' the Executive considets it inexpedient to exercise their powers they should state their reasons and there must be material to show that they have considered all the relevant facts. [679 D-F]

4. Judged by this test the order of th~ Sratc Government i!'> unsustainable. The Government docs not seem to have noticed that the contract in question is not one of the kind wher\!in contractor undertakes to do certain work for certain sum. In this contract, the Company had to pay for the rnate,rial as well as for Jabour. The Contractor got paid only for his professionaJ ser-vices. There' was in any case' no provision in the contract that the contractor was to incur any item, of expenditure or make any payment in relation tc the workmen. The· Government did not realise that the· dispute concerned not rnere1y two parties but three. The Goven1ment order in the present case· really amounts to an outright refusal to consider relevant matters and the Government also misdirected itself ia point of Jaw in wholly omitting to 1ale into· account the relevant c-onsiderations which as held by the House of Lords., is unlawful behaviour. The Government docs not appear to have nprlied their mind to any of the considerations set out in the contractor's applica:ion. /679-F-H, 680 D&F]

Allowing the appeal the Court directed the Government of Orissa to re~on­sider the matter and take decision in the matter of reference in the light of the relevant facts. [680-G]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1827 of 1969.

Appeal by Special Leave from the Judgment and Order dated the 28th November, 1968 of the Orissa High Court in O.J.C. No. 152 of 1964.

F. S. Narima11, A. G. Meneses, Sharad Manohar and J. B. Dada• chanji, for the Appellant.

S. T. Desai and M. N. Shroff and R. N. Sachthey for Respondents 1 and 5.

Santosh Chatterjee· and G. S. Chatterjee for Respondent No. 4.

The Judgment of the Court was delivered by J.-The

ALAGIRISWAMI, J.-The question of bonus for 16,000 worki_ncn for the years 1958-59 and 1959-60 is still being fought out on prel1m!-nary points and this is the second time the matter has come to this Court. The earlier deci~ion is. reported in 1964 (7) S.C:R. 596 (Ho~h­tief Gammon v. Industnal Tribunal, Bfwbaneshwar, Onssa & Ors.( J.

In August 1957 the Hindustan Steel Ltd., the 4th respondent in the appeal, hereinafter called the company, and the appellant, '.1 partnership of West German company and an Indian comp~ny, heremafter ca))ed the contractor, entered into contract for execution ?f the. founda.10n and civil engineering work of the Hot and ~old !'lolli!Jg Mills at Rour-kela including the purification and other c1v1! engmeenng work connect-ed with the water supply to the Rolling Mills. The contract was. cost contract with target sum plus fixed overheads and fee, th~t is, tl!o company was to pay to the contractor all costs of construct10n and m addition pay fixed overhead for the head office general expenses of the

contractor plus fixed fee. The target sum for the work was Rs. 66,294,000. The overheads were D.M. 2,800,000/-plus Rs. 2, 120,000/- and the fee of Rs. 6,200,000/-. The work was to be carried out as detailed in the drawings, bills of quantities, specifications and other written orders~ issued or to be issued by the company. All payments in respect of wages and salaries and connected payments made to persons engaged upon the wo'rk as may be approved by the company, comprising wages of all operatives as well as all other payments con-nected with wages were to be paid hy t'he company. Any increase beyond the initial rates specified in Enclosure Ill to the contract was to be subject to the approval of the company and such approval was to be taken in respect of categories and not individuals. Emoluments of site supervisory staff as well as all other payments connected therewith were also to be paid by the company. Payments made to statutory schemes in connection with sickness or accident or provident fund or pension or other like schemes to the above categories, payments of over-time and additional remuneration for Sunday, holiday or night work etc., and payments for leave and travelling cost were all to be made by the company. It was also provided that the cost of any other expenditure was to be admitted only on satisfactory proof being given by the con-tractor that such expenditure was necessary in connection with the pre-paratton and execution of the work. The company was to open an imprest account of Rs. 30,00,000/- and the contractor was to draw on the account to cover his day-to-day requirements for the work. The imprest was to be increased or decreased from time to time depending on the amount required by the contractor to do the work. The contrac-tor was to submit fortnightly cash account covering the expenditure incurred from the imprest account and the company was to recoup the amounts covered by such account within seven working days. Once in three months the contractor was to be paid part of the fixed amount of overheads pro rata to the target cost of work done during the preceding three months. Once in six months he was to be paid three-fourths of the fee proportionate to the target cost of the work done in the preceding half year. Enclosure III also set out the rate of wages for unskilled labourers, khalasi, mason, fitter or carpenter. If the contractor com-pleted the work prior to the 30th September, 1960 he was to be paid, exclusive of such sums as may be due to, or from, him bonus equi-valent to Rs. 2,00,000 /-for every complete month by which the actual completion of the work precedes the 30th September, 1960. The terms of the contract have been set out at some length as they have relevance to the question of bonus payable to the workers because the question now agitated before this Court is that the Industrial Tribunal should be asked to decide who is to pay the 9onus, if bonus is payable to the workmen, the contractor or the company.

It would be noticed from the provisions of the contract set out above that all payments to labour were to be made by the company. The contract contemplates payment of travelling allowance, payment in respect of sickness, accident, provident fund, pension, overtime, additional remuneration for Sunday, holiday or night work etc. It has even mentioned the rate of wages arid is thus fairly comprel1ensivc. There is, of course, no mention about bonus. Now if the contractor

has to pay higher rate of wages than that found in Enclosure UI be-cause of the conditions in the labour market naturally the contractor cannot be expected to pay it from out of his funds or the payments he was to receive in pursuance of the contract. This being contract in which the company is to pay for labour as well as for materials any increase in the cost of those items cannot be borne by the contractor, who was to be paid only fixed sum towards its remuneration. As the question of bonus is not mentioned in the contract the question arises as to who is to pay the bonus in case bonus is found payable to the workmen. We express no opinion on that point. But it appears to us that the company is adopting an ostrich like policy in trying to avoid being made party to the reference before the Industrial Tribunal. If it should ultimately be held that bonus is payable and the company is liable to pay it, it should do its best even from this stage to fight the question of liability to pay bonus as well as the quantum.

What is called tripartite agreement seems to have been entered into between the workmen and the appellant in the presence of the Labour Commissioner on 12th June, 1960. That was natural as tbe appellant it was that employed labour. But that by itself does not decide the question who is to pay the bonus. Under that agreement the appellant agreed to the payment of bonus in principle subject to the condition that they get the bonus from the company. The quantum of bonus and exact date from which the bonus was payable was not, however, indicated. It was also stated that when bonus was received by the management it shall notify the fact to the workers and that the union may raise this as point of dispute when it would deem it appropriate.

On 15th June, 1960 the labour union appears to have written letter to the Labour Commissioner of Orissa raising dispute for ad-judication regarding bonus. The union mentioned that they had also written number of letters to the appellant as well as the company but neither of them had decided the issue. They, therefore, served notice of strike. The Labour Commissioner wrote to the Government on 17-10-60 about the dispute and mentioned that the appellant had agreed to pay bonus if the company paid it. He also mentioned the fact that the appellant in reply to the letters from the workmen had stated that they had not come to any final decision in the matter. On the ground that unless something was done there will be strike causing complete di~location of work of the company he suggested that the following issue may be considered for reference to the Industrial Tribunal :

"Whether the workers of Hochtief Gammon are entitled to any bonus ? If so, what should be the quantum ?"

He proceeded to say that if this question was finally decided it would also serve as guiding principle for other contractors as similar demands for payment of bonus from workers were being received. It would be noticed that though the appellant's stand was that they would pay the bonus if it were given by the company the Labour Commis-sioner did not suggest that the question as to the party liable to pay the bonus, whether it was the appellant or the company, be referred for

adjudication. His anxiety was that the work of the company shou'.d not be dislocated. He did not applv his mind to the question of the party liable to pay the bonus. Naturally the Government also did not. The Government therefore referred the following issue for adjudication :

"Whether the workers of M/s. Hochtief Gammon. Civil Engineer& and Contractors, Rourkela are entitled to any bonus and if so, what should be the quantum?"

On this notice seems to have been served on the company and curiom-ly enough the company said that the appellant did not complete the work as set out in the Memorandum of Agreement and hence no bonus was due to the contractors aJ!d that therefore they were not necessary party. This bonus, as the terms of the contract set out earlier would show. has nothing to do with the bonus payable to the workmen. The appellant in their written statement pointed out that under the terms of the contract the company had to bear all expenditure with reforencc to labour, all payments in respect of wages, salaries and other conrn:cted payments made to persons engaged in the works, that it was also· res-ponsible to make payments to statutory schemes in respect of ali work-men and that they themselves were only paid stated fee for profes-sional services rendered to them and therefore no demand c:;n be raised by the workmen who are engaged by the contractor agaircst the contractor and such demand is unsustainable in law. They then gave reasons why the workmen were not entitled to any bonus from them. It is not necessary to set out those reasons at Ieni:th. We !lave already referred to the stand of the company. As would be apparer.t from the decision of this Court on the earlier occasion, which we shall set out later, the Tribunal could not have decided this question iJ. view of the terms of reference made to it.

Thereafter the appellant filed an application under s. 18(3) (o) of the Industrial Disputes Act praying that for proper adjudication of the issue referred to the Tribunal it was necessary to bring on record the company as party to the proceedings. They pointed out thU any amount payable to the labourers engaged by the contractors for what-soever reason was contract expenditure within the meaning of the term contract and payable by the company as it was entirely responsible for payment of all remuneration to the workmen and all expenditure in-curred by reason of any demand put forward by the workmen in con-nection with the works, was debitable to the contract and payable by the company. This application was rejected. Thus the stand of the appellant as to the party liable to pay the bonus was never in doi:bt. I

The appellant thereupon filed petition before the High Couct ot Orissa praying that the order of the Tribunal should be set aside. That petition also having been dismissed an appeal was filed before this Court by special leave. The relevant portion of the judgment of this Court is found at page 605, 1964(7) S.C.R.:

"The next contention raised by Mr. Chatterjee is that M/s. Hindustan Steel Ltd. is necessary party because it is the said concern which is the employer of the respondents and not the appellant. In other words, this contention is that

though in form the appellant engaged the workmen whom the respondent union represents, the appellant was acting as the agent of its principal and for adjudicating upon the indm-trial dispute referred to the Tribunal by the State of Orissa. it i.s necessary that the principal, viz:, M/s. Hindustan SteeI Ltd. ought to be added as party. In dealing with thi.s argu-ment, it is necessary to bear in mind the fact that the appel-lant does not dispute the respondent Union's case that the workmen were employed by the appellant. It would have been open to the State Government to ask the Tribunal to consider who was the employer of these workmen and in that case, the terms of reference might have been suitably framed. Where the appropriate Government desires that the question as to who the employer is should be determined, i: generally makes reference in wide enough terms and in-cludes as parties to the reference different persons who are alleged to be the employers. Such course has not been adopted in the present proceedings, and so, it would not ho possible to hold that the question as to who is the employer as between the appellant and M/s. Hindustan Steel Ltd. is question incidental to the industrial dispute which has been referred under s. lO(l)(d). This dispute is substantial dispute between the appellant and M/s Hindustan Steel Ltd. and cannot be regarded as incidental in any sense, and so, we think that even this ground is not sufficient to justify the contention that M/s. Hindustan Steel Ltd. is necessary party which can be added and summoned under the implied powc·s of the Tribunal under s. 18(3) (b) ."

It would be noticed that before this Court what was admitted was that the appellant h.ad employed the workmen but the question as ta who was the employer in relation to those workmen was the main question at issue. That was why this Court pointed out that it would have been open to the State Government to ask the Tribunal to consider who was the employer of these workmen and in that case the terms of reference might have been suitably framed. As that had not been done this Court pointed out that it would not be possible to hold that the question as to who was the employer as' between the appellant and the company was question incidental to the industrial dispute which had been referred under s. 10(1) (d), as it was substantial dispute C,,,t-ween the appellant and the company.

Apparently taking the 'cue from the observations of this Court the appellant filed writ petition out of which this appeal arises. But before doing so the appellant had filed an application before the State Government asking them to modify the earlier reference to the Iodus-trial Tribunal by adding the company as party to the referenc-~ and an additional clause as under :

"If bonus is payable, who is the employer and who le responsible for payment of the bonus to the workmen ?"

They J'.Ointed out in that application that the company was entirely responsible for payment of wages and connected payments anc' all

other remuneration of any kind to the workmen, that for enabling the appellant to make payments to the labourers engaged for such work on behalf of the company an imprest of Rs. 3,000,000/- was given to them out of which the payments were made, that the appellant got only fee, that if any bonus becomes payable it was the person who pays wages that has to pay the bonus. Thereafter they also asked for personal hearing. To this the reply of the Government was as fol· lows: ·

"With reference to their petition dated 20-5-64 on the above subject, the undersigned is directed to say that after due consideration of the matter the Goveurment do not find any materials on the basrs of the petition to include Hindustan Steel Ltd., Rourkela as party in the above case."

It would be noticed that in the petition the appellant wanted not only that the company should be made party but also that another issue mun be referred to the Tribunal for adjudication. They had given reasons as to why the company should be inclnded as party. They had in their petition included the paragraph which we have extracted above from this Court's judgment. It is apparent from their reply that the Government had not applied their mind to the facts placed before them. There was at least an arguable case on the point as to who was liab;c to pay the bonus and in that case the company would have been necessary and appropriate party. Even if the Government thought that the company was not necessary party the question as to who wa' :iable to pay the bonus was a. very relevant question and that made the company necessary or at least proper party. The attitude of the appellant had throughout been that their contract was cost con-tract, that the company had to pay labour and while they had employed the workmen the employer was really the company. That contention may or may not be upheld by the Tribunal. Ultimately if the Tribunal should hold that the appellant is the party responsible for payment of bonus the question as between the company on the one hand and appel-lant on the other may have to be decided by arbitration as provided in the contract between them or otherwise. It appears to us, therefore, that not only was this an appropriate question to be referred to the Industrial Tribunal for ad judicati6n but even the company should be interested in getting itself impleaded as party so as to put forward any contention which it may decide to put forward as regards the question whether bonus was payable and if so the quantum. thereof, as also the question as to who would be liable to pay the bonus instead of adopting, as we have said earlier, an ostr;ich like policy.

The power of the Courts in relation to the orders of the appro-priate Government in the matter of referring industrial disputes for adjudication is no longer in l:loubt. In State of Bombay v. K. P. Krish-nan & Ors. ( [1]) it was held :

"It is common ground that writ of mandanms would lie against the Government if the order pass~d. by it under s.10(1) is for instance contrary to the prov1S1ons of s. 10(1) (a) to (d) in the matter of selecting the appropriate authority;

(1) ;196ij1 SC.R.227.

it is also common ground that in refusing to make reference under s. 12(5) if Government does not record and com-municate to the parties concerned its reasons therefor writ of mandamus would lie. Similarly it is not disputed that if party can show that the refusal to refer dispute is not bona fide or is based on consideration of wholly irrelevant facts and circumstances writ of mandamus would lie. The order passed by the Government under s. 12 ( 5) may be an administrative order and the reasons recorded by it may not be justiciable in the sense that their propriety, adequacy or satisfactory character may not be open to judicial scrutiny; in that sense it would be correct to say that the court ~acing petition for mandamus is not sitting in appeal over the deci-sion of the Government; nevertheless if the court is satisfied that the reasons given by the Government for refusing to make reference are extraneous and not germane then the court can Issue, and would be justified in issuing, writ of manda-mus even in respect of such an administrative order."

Ir. Bombay Union of Journalists v. The State of Bombay( I) it was ob5:crvcd :

"The breach of section 25F is no doubt serious matter and normally the appropriate Government would refer dis-pute of this kind for industrial adjudication; but the provi-sion contained ins. 10(1) read withs. 12(5) clearly shows that even where breach of s. 25F is alleged, the appropriate Government may have to consider the expediency of making reference and if after considering all the relevant facts the appropriate Government comes to the conclusion that it would he inexpedient to make the reference, it would be competent to it to refuse to make such reference ....... If the appro-priate Government refuses to make reference for irrele-vant considerations, or on extraneous grounds, or acts mala fide, that, of course, would be another matter: in such case party would be entitled to move the High Court for writ of mandamus."

The above are not the only powers of the Courts in relation to the orders of the Government or an officer of the Government who has been conferred any power under any statute, which apparently confer on them absolute discretionary powers, in this country as well as in England. In England in earlier days the Courts usually refused to inter-fere where the Government or the concerned officer passed what was called non-speaking_ order, that is, an order which on the face of it did not specify the reasons for the Order. Where speaking ordoc was passed the Courts proceeded to consider whether the reasons given for the order or decision were relevant reasons or considerations. Where there was non-speaking order they used to say that it was like the face of the Sphinx in the sense that it was inscrutable and therefore hold that they could not consider the question of the validity of the order. Even in England the Courts have travelled very far since those days. --·--------

0) [1964] 6 S.C.R. 22, 34.

"They no longer find the face of the Sphinx inscrutable. Needless to csay that Courts in India, which funct;~n under written Constitution ,which confers fundamental rights on r, izens, have exercised far greater powers than those exercised by Couus in England, where there is no written Constitution and there are no fundamental rights. Therefore , the decisions of Courts in England as regards powers of the Courts, 'surveillance', as Lord Pearce calls it, or the control which the Judi-ciary have over the Executive, as Lord Upjohn put it, indicate at least the minimum limit to which Courts in this country would be prepared ,to go in considering the validity of orders of the Government or its officers. In that sense the decision of the House of Lords in Padfield v. Minister of Agriculture, Fisheries and Food(il) is landmark in the history of the exercise by Courts of their power of surveillance.

That decision is well worth close study but we will resist the temptation to quote more than is absolutely necessary. That was case where under the provisions of the Agricultural Marketing Act, 1958 the Minister had the power to appoint committee to go into certain questions under s. 19 of that Act but when requested to appoint committee he refused. In refusing to appoint the committee he had given elaborate reasons for his refusal. , It was admitted that the ques-tion of referring the complaints to committee was matter within the 1.1inister~s discretion. It \Vas also argued that he was not bound to give any reasons for refusing to refer complaint to committee and that if he gives no reason his refusal cannot be questioned and his giving reasons could not put him in worse position. It W<JS held by the House of Lords that an order directing the Minister to consider the complaint according to law should be made. It was also held that "Parliament conferred discretion on the Minister so that it could be used to promote the policy and objects of the Act which were to be determined by the construction of the Act and that that was matter of law for the court. It was further held that though there might be reasons which would justify the Minister in refusing to refer comp· Jaint, his discretion was not unlimited and, if it appeared that the effect of his refusal to appoint committee of investigation was to frustrate the policy of the Act, the court was entitled to interfere. The extracts given below of certain portions of the speeches of the learned Lords i:an be appreciated in that background.

Lord Reid:

"The respondent contends that his only duty is to con-sider complaint fairly and that he is given an unfettered dis-cretion with regard to every complaint either to refer it or not to refer it to the committee as he may think fit. The appel-lant contends that it is his duty to refer every genuine and substantial complaint, or alternatively that his discretion is not unfettered and that in this case he failed to exercise his discretion according to law because his refusal was caused or influenced by his having misdirected himse!f in law or by_ his having taken into account extraneous or irrelevant conside-rations.

(t) [t 9681 A.C. 9J7.

In my view, the appellants' first contention goes too far. There arc number of reasons which would justify the .:vlinister in refusing to refer complaint. For example, he might consider it more suitable for arbitration, or he might rnnsider that in an earlier case the committee of investiga-tion had already rejected substantially similar complaint, or he might think the complaint to be frivolous or vexatious. So he must have at least some meas.ure of discretion. But is lt unfettered ? It is implicit in the argument for the Minister that there are only two possible interpretations of this provision-cither he must refer every complaint or he has an unfettered discretion to refuse to refer in anv case. I do not think that is right. "

It was argued that the Minister is not bound to give any reasons for refusing to refer complaint to the committee,, that if he gives no reasons his decision cannot be questioned,. and that it would be very unfortunate if giving reasons were to put him in worse position. But I do not agree that ·a decisio~ cannot be questioned if no reasons are given."

Lord Hodson :

"'The reasons disclosed are not, in nly opinion, good reasons for refusing to refer the complaint seeing that they leave out of account altogether the merits of the comp/uint itself. The complaint is, ai the Lord Chief Justice pointed out, made by persons affected by the scheme and is not one· for t,he consumer committee as opposed to the committee of investigation and it was eligible for reference to the latter. l t has never been suggested that the complaint" was not gen-uine one. It is no objection to the exercise of the discretion to refer that wide issues will be raised and the interests of other regions and the regional price structure as whole would be affected. It is likely that the removal of griev-ance will, in any event, have wide effect and the Minister cannot lawfully say in advance that he will not refer the matter to the committee to ascertain the facts because, as he says in effect, although not in so many words, "I would not regard it as right to give effect to the report if it were favour-able to the appellants."

Lord Pearce :

'·r do not regard Minister's failure or refusal to give any reasons as sufficient exclusion of the court's surveil-lance .

It was for the Minister to use his discretion to promote· Parliament's intention. If the court had doubt as to whether the appellants' complaint was frivolous or repeti-tive, or not genuine, or not substantial, or unsuitable for in-vestigation or more apt for arbitration, it would not inter-fere. But nothing which has been said in this case leads one·

[1976] 1 S.C.R.

to doubt that it is complaint of some substance which should properly be investigated by the independent committee with view to pronouncing on the weight of the complaint and the public interest involved.

The fact that the complaint raises wide issues and affects other rei.ions was not good ground for denying it an in-vestigation by the committee. It is matter which makes it very suitable for the committee of investigation, with its duty to report on the public interest, and its capacity to hear representatives of all the regions."

Lord Upjohn :

'The Minister in exercising his powers and duties, con-ferred upon him by statute, can only be controlled by pre-rogative writ which will only issue if he acts unlawfully .. Un-lawful behaviour by the Minister may be stated with sufli-cient accuracy for the purposes of the present appeal (and here I adopt the classificatioin of Lord Parker C.J., in the Divisional Court) : (a) by an outright refusal to consider the relevant matter, or (b) by misdirecting himself in point of law, or (c) by taking into account some wholly irrelevant or extraneous consideration, or ( d) by wholly omifting to take into account relevant consideration.

There is ample' authority for these propositions which were not challenged in argument. In practice they merge into one another and ultimately it becomes question whether for one reason or another the Minister has acted unlawfully in the sense of misdirecting himself in law, that is, not mere-ly in respect of some point of law but by failing to observe the other headings I have mentioned.

The Minister's main duty is not to consider its suitability for investigation; he is putting the cart before the horse. He might reach that conclusion after weighing all the facts but not until he has done so.

This introduces the idea, much pressed upon your Lordships in argument, that he had an "unfettered" discretion in this matter; it was argued, means that, provided the Minister con-sidered the complaint bona fide, that was an end of the matter. Here Jet it be said at once, he and his advisers have obviously given bona fide and painstaking consideration to the com-plaints addressed to him; the question is whether the consi-deration given was sufficient in law.

My Lords, I believe that the introduction of the adjective "unfettered" and its reliance thereon as an answer to the appel-lants' claim is one of the fundamental matters confounding the Minister's attitude, bona fide though it be .... even if the sec-tion did contain that adjective I doubt if it would make any difference in law to his powers ...... But the use of that ad-jective, even in an Act of Parliament, can do nothing to un-fetter the control which the judiciary have over the executive,

namely that in exercising their powers the latter must act law-fully and ihat is matter to be determined by looking at the Act and its scope and object in conferrring discretion upon the Minister rather than by the use of adjectives."

'" .... decision of the Minister stands on quite different basis; he is public officer charged by Parliament with the discharge of public discretion affecting Her Majesty's sub-jects; if he does not give any reason for his decision it may be, if circumstances warrant it, that court may be at liberty to come to the conclusion that he had no good reason for reach-ing that conclusion and order prerogative writ to issue accordingly." That was case where the Minister had given elaborate reasons and it was, therefore, possible for their Lordships of the House of Lords to consider the reasons given by the Minister in elaborate detail and show how he had misdirected himself. They also pointed out that by merely keeping silent the Minister cannot avoid the Court considering the whole question.

The principles deducible from the decisions of this Court and the above decision of the House of Lords which, though not binding on us, appeals to us on principle may be set out as follows :

The Executive have to reach their decisions by taking into account relevant considerations. They should not refuse to consider relevant matter nor should they take into account wholly irrelevant or extra-neous consideration. They should not misdirect themselves on point of law. Only such decision will be lawful. The courts have power to see that the Executive acts lawfully. It is no answer to the exercise of that power to say that the Executive acted bona fide nor that they have bestowed painstaking consideration. They cannot avoid scrutiny by /courts by failing to give reasons. If they give reasons and they are not good reasons, the court can direct them to reconsider the matter in the light of relevant matters, though the propriety, adequacy or satisfactory character of those reasons may not be open to judicial scrutiny. Even if the Executive considers it inexpedient to exercise their powers they should state their reasons and there must be material to show that they have considered all the relevant facts.

Judged by these tests the order of the. State Government is unsus-tainable. Here the Government did not say that it considered it inex-G pedient to refer the question for adjudication or that the considerations put forward by the appellant before it were irrelevant. Neither the Labour Commissioner nor the Government seem to have noticed that this contract is not one of the usual kind wherein contractor undertakes to do certain work for certain sum. In that case the questiori of profit and loss or as between the contractor and the party for whom he is executing the work any question as to who was to pay labour would not arise whether it is· with regard to wages or bonus. The contractor will have to bear the full coot of material as well as the full liability for paying the workmen on any head whatsoever. In this contract the company had to pay for the material as well as labour. The appellant

got paid only for its professional services. There was in any case in the contract no provision that the appellant was to incur auy item of expenditure or make any payment in relation to the workmen. Ju such contract it would be unusual if it was to be considered that t!ie appel-lant ";0re expected to pay the bonus for the workmen. This however ncoo r.ot be taken as our ijnal view on this point. But it is relevant matter for consideration by 'the Government in deciding whether to refer the n:.<>tter to the Tribunal or not. Furthermore, when the question of bonus in this case arose what is known as the Full Bench formula was holding the field in the matter of paymen{ of bonus. If the bonus were to be pid by the appellant it could hardly be brought within that for-mula. As the company had certainly not begun production at that stage it would be difficult to calculate the bonus with reference to the businec<S of the company either. The mistake that the Labour Com-missioner committed was in not realising that the dispute concerned not merely two parties but three because from the beginning the appellant had made it clear that they would pay the bonus if the necessary amount was paid to them by the company.

There was in any case in

We have set out the facts of this case at considerable length and considered the whole question. We think that the Government's order in this case really amounts to an .outright refusal to consider relevant matters and the Government also misdirected itself in point of law in wholly omitting to take into account the relevant considerations which as held by the House of Lords is unlawful behaviour. It has failed to realise that in effect the contractor employed labour for the company who was the real paymaster. It had failed to take into account the fact that the workmen wanted the bonus from either the company or the appel!ant. Naturally the workmen were not interested who paid them as long as they were paid. It would bear repetition to say again that the original mistake arose out of the assumption by the Labour Commis-sioner that this was case of an ordinary contract which would apply to othc' contractors also. He had apparently not seen the contract bet-ween the company and the appellant and that mistake was adopted by the S:ate Government and they stuck to it in spite of the application made to them by the appellant after the disposal of the earlier appeal by this Court, giving all relevant facts. It does not appear from the com-munication of the Government to the appellant that they had applied . their mind to any of the considerations set out in the appellant's appli-cation.

In the circumstances this appeal must be allowed and the Govern-ment of Orissa must be directed to reconsider this matter and take decision in the matter of reference in the light ot the relevant facts. There will be no order as to costs.

Appeal allowed.