V.S. Deshpande, C.J.
1. These two appeals by the management and the workmen are directed against an order of a Single Judge of this Court dated 15th July, 1981. This order is passed in miscellaneous petition No. 583 of 1972 in which an award of the Industrial Tribunal dated 30th November, 1971 is challenged. The case has a very unfortunate and chequered career. Ahmedabad Manufacturing and Calico Printing Company Limited owns a textile mills at Ahmedabad. The Company has in all six units in Bombay manufacturing chemicals. The workmen of the three of its Bombay units presented a charter of demands on 6th April, 1964. On the basis of the joint application of the Company and the workmen of the units concerned, the dispute was referred to the Industrial Tribunal on 12th April, 1965. The Tribunal passed the impugned award on 30th November, 1971 in this reference. The Company sought to challenge the validity of this award directly in the Supreme Court initially by a Special Leave petition dated 19th January, 1972. The attack was concentrated on four points including the formula as to the dearness allowance. When the petition came up for hearing on 1st February, 1972, the Supreme Court directed notice to the respondents workmen. Interim stay of the impugned award under certain terms also was granted. The petition came up for hearing in the presence of both sides on 5th may, 1972, but had to be adjourned. The stay order passed on 1st February, 1972, however, was modified. The petition was finally taken up for admission on 21st August, 1972. The petition was allowed to be withdrawn after the case was heard for some time.
2. The Company thereupon challenged the award in a petition under Art. 226 of the Constitution of India in this Court being the Miscellaneous Petition No. 583 of 1972 on 25th August, 1972. Rule nisi was granted on 29th August, 1972. The Miscellaneous Petition was, however, dismissed on 9th November, 1972. Thee learned single Judge thought that the remedy under Art. 226 of the Constitution of India was not open after the disposal of the appellants' Special Leave Petition in the Supreme Court. The Company's appeal also was dismissed by a Division Bench 4th July, 1973. The Division Bench granted a certificate to appeal to the Supreme Court on 21st August, 1973 on two points viz. (1) whether the High Court would be competent to entertain the writ petition under Art. 226 of the Constitution of India when the application for special leave under Art. 136 thereof on the same contentions was summarily disposed of and (2) whether unconditional withdrawal of the Special Leave Petition would tantamount to its summary rejection.
3. This appeal remained pending with the Supreme Court till 12th March, 1981 when it allowed it, holding that withdrawal of the Special Leave Petition could not prevent the High Court from entertaining the writ petition. The case was accordingly remanded to this Court for disposal of the petition under Art. 226 of the Constitution on merits.
4. The learned Single Judge thereafter heard the parties on merits of the impugned award dated 30th November, 1971. Arguments were restricted to the question of the dearness allowance formula introduced in the award. The petition was dismissed virtually under the impugned order though the award is slightly modified by imposing a ceiling on the dearness allowance in the third and fourth slabs. The validity of this order is challenged in these two appeals by the Company and the workmen.
5. During the pendency of the Company's appeal in the Supreme Court, the workmen of the appellants' three concerned units as also its three other units went on strike in respect of their demands for bonus for the year 1978-79 and some demands other than those covered by the dispute under the impugned award. As a result of the intervention by the Chief Minister, an 'overall' settlement was reached between workmen of all the six units and the Company under an agreement in writing on 6th September, 1980. The terms of the said settlement are admittedly worked out and are being acted upon till this date. It provides for dearness allowance also covered by the award. The effect and impact on the award is also a relevant factor.
6. While dismissing the petition the learned Single Judge firstly held that under the settlement dated 6th September, 1980, the Company has given up its basic objection to the dearness allowance on slab basis to the extent of two slabs and the agreement was based on 'give and take' would be binding for two years. Secondly, he thought it necessary to modify the award in its operation after the expiry of the settlement period on 30th September, 1982 by imposing a ceiling on the dearness allowance payable to the workmen falling under the third and fourth slabs holding that the Company was financially strong enough to bear such burden. The learned Judge thirdly held the delay of about nine months from 30th November, 1971 to 25th August, 1972 to be fatal to thee consideration of the writ petition on merits.
7. Mr. Nariman the learned advocate for the Company, contends that he petition filed within four days of withdrawal of the special leave petition form the Supreme Court cannot be said to have been unduly delayed and could not have been dismissed for any such delay when remanded by the Supreme Court for disposal on merits. He secondly contends that the settlement reached without prejudice to the rights and contentions in the pending appeal cannot preclude the Company from claiming adjudication on merits. Thirdly, he made a grievance against the findings as to the Company's capacity to bear the burden of dearness allowance in post-September, 1982 period when the same was not in issue at the trial before the Tribunal and not put in issue in the writ.
8. On the merits of the award, introducing the slab basis dearness allowance, linked with the fluctuation in the cost of living index, Mr. Nariman's contentions can be summarised this : Firstly, it substitutes the 'Textile dearness allowance formula,' which aims at neutralising the effects of rising costs also by linking it with the cost of living index and followed (1) by the Company's head office and its employees at different units, (2) in all the similar industries in the Bombay region as indicated in Exhs. C-40 and C-43 and (3) by almost all other industries in the region employing about 80% of the workmen. Secondly, more than 100% neutralisation of the effect of the rise in the cost of living involved in the slab basis dearness allowance, is pro motive of the inflator forces defeating the very purpose sough to be achieved and, therefore, considered to be impolitic as indicated in the Supreme Court judgments reported in Shivraj Fine Arts Litho Words v. State Industrial Court, Nagpur : (1978)ILLJ532SC and Chalthan vibhag Khand Udyog Sahakari Mandli v. G. S. Barot : (1981)ILLJ450SC . Thirdly actual working out of the slab basis formula with the abnormal rise in the cost of living index from 540 in 1971 to 2161 in December, 1981, almost uncontemplated and unforeseen by the Tribunal, has just made the formula unscientific, inequitable and unworkable at any rate in higher slabs. Fourthly, while introducing the slab basis dearness allowance, the Tribunal has just violated the industry-cum-region wage fixation basis by refusing to follow the system adopted in similar industries and following the system followed in commercial or other dissimilar units in which slab system introduced years earlier could not be changed. Fifthly, the basis of fixation of dearness allowance at 130% of the wages in addition and the figure of multiplier also is arbitrary and without any basis. Mr. Nariman relied on the judgments of the Supreme Court in Greaves Cotton and Co. v. Their Workmen : (1964)ILLJ342SC , Kamani Metals and Alloys Ltd. v. Workmen 1967 I L.L.J. 55, Unichem Laoratories v. Workman : (1972)ILLJ576SC and Woolcombers of India v. Their Workers Union : (1974)ILLJ138SC . He also drew our attention to the extract from Bhoothalingam Report of the Study Group, 1978, in Chapter VII on pages 69 to 76 and also the extracts on page 242 and 243 of the Report of the National Commission on Labour headed by Dr. P. B. Gajendragadkar in support of his contentions.
9. Dr. Kulkarni, the learned advocate for the appellants (in Appeal No. 505 of 1981), in reply contends that the slab system formula is not an innovation and has been followed in some industries and upheld even by the Supreme Court as being just and proper. He relied on the judgments of the Supreme Court in French Motor Co. v. The Workmen : (1962)IILLJ744SC , Hindustan Antibiotics Ltd v. Their Workmen : (1976)ILLJ114Ker , Bengal Chemicals and Pharmaceutical Works Ltd. v. Its Workmen : (1969)ILLJ751SC , Unichem Laoratories v. Workmen (supra) and Killick Nixon v. Killick and Allied companies Employees' Union : (1975)IILLJ53SC . His contention that the Tribunal was justified in introducing it on its finding that the Company could bear the financial burden involved. The mere circumstances that it is not followed in similar industries cannot be conclusive. He also contends that though the settlement dated 6th September, 1980 binds the company, Cl. 11 thereof gives liberty to the workmen to get the dearness allowance system validated in the pending proceedings.
10. Coming first to the question of delay, we find it difficult to agree with the learned Single Judge. Now, the Industrial Disputes Act, 1947 does not provide for any right of appeal against the award of the Tribunal. The litigants are free to invoke the discretionary jurisdiction either of the High Court or the Supreme Court under Art. 226 or 136 of the Constitution, the scope of the appellate powers of the Supreme Court being somewhat wider. It is not suggested that the Company is guilty of any delay in approaching the Supreme Court on 19th January, 1972. That notice before admission was issued and interim relief was granted and later varied demonstrates how the Supreme Court itself did not consider the leave petition to be frivolous and unsubstantial. That the Company was required to withdraw the leave petition ultimately does rise an inference of the Supreme Court not being inclined to exercise its appellate powers. The affidavit of R. J. Mehta filed on behalf of the workmen in this Court in regard to what transpired at the stage of hearing on 21st August, 1972 in the Supreme court only can prove this and nothing more. It cannot show that the Supreme Court thought the case to be without any merit. Grant of leave to withdraw rather implies an anxiety not to adjudicate the point raised and to leave it open for the litigant to avail of other remedies, if any. It can never mean outright condemnation of the case on merits. The Company must be held, in the circumstances of this case, to have been diligent in prosecuting its claim by availing one of the two remedies. The occasion to abandon the same could be said to have arise only on 21st August, 1972. This is a relevant and cogent factor in considering whether the delay as occasioned should be condoned or not. It is difficult to see why such a delay should be held to be fatal. Issuance of notice before admission and grant of interim relief could have reasonably created a belief and hope in the Company's mind about the possibility of the appeal being admitted by the Supreme Court itself. This important factor has obviously escaped the notice of the learned trial Judge.
11. Secondly, the petition does not seem to have been ever resisted on the ground of nay such delay. Kenia J. has enumerated the three preliminary points raised by Mr. Bhabha, the learned Advocate appearing for the workmen, before him when he dismissed the petition on 9th November, 1972. The delay is not one of these points. In its order dated 12th March, 1981 the Supreme Court also has taken notice of these three points in paragraph 7 of its judgment and indicated how one of the three points raised by Mr. Bhabha and on the basis of which alone the petition was disposed of could not be held against the company. This is indicative of how even the workmen did not consider the delay from 30th November, 1971 to 25th August, 1972 as fatal. It is true that the condoning or not condoning the delay is a matter of discretion with the Court in which the delay is alleged. It is also equally settled that such a discretion has to be exercised judicially, by reference to the known principles and relevant facts. The order of the learned Single Judge does not take notice of any of the above factors. We are clearly of the opinion that in the facts and circumstances of the case, the petition cannot be rejected on the ground of such delay.
12 Under the assumption that the award would revive after the expiry of the settlement period on 30th September, 1982, the learned Judge has proceeded to consider the question of financial burden for post-1982 era and recorded a finding against the Company. On this basis he has fixed ceiling on the dearness allowance in the third and fourth slabs. The order shows that the Company was asked to show some papers in the course of hearing and its failure to produce the same and supply the information is adversely commented on. Mr. Nariman appears to be right in contending that the issue of financial burden could not have been tried and adjudicated in such a casual manner when the parties themselves could never have thought of post-1982 financial position ever becoming relevant at the trial. None could have imagined during the pendency of the proceedings in the Industrial Court from 1965 to 1971 that the prices would go up to such an extent and the award would continue to be operative even beyond 1982. It is also doubtful if this Court could decide such an issue afresh for such a period.
13. This takes us to the contention of Mr. Nariman as to the validity of the slab basis dearness allowance introduced in the award in violation of 'industry cum region' basis of the wage and lesser than 100% neutralisation of rising cost of living. Two authorities relied on support this contention. The relevant paragraphs 31 to 33 of the award contain very little discussion on this vital question. The reason for preferring the slab basis to the existing Textile dearness allowance formula is too cursory and casual to brush aside the detailed consideration of the point raised. It would require close examination even if the contentions of Dr. Kulkarni are held to be plausible and the case law relied on by him is held to be relevant. In the absence of reference to the relevant consideration and indication why the system of dearness allowances followed in similar industries should be ignored, the impugned award cannot but be held to be defective.
14. Dr. Kulkarni, however, contends that all the three disputed points and contentions must be deemed to have been given up or concluded by the settlement dated 6th September, 1980 which must operate as the substitute for the award, leaving it open to the parties to choose to continue the operation of the said settlement after the expiry of the two year period or seek remedies for discontinuance thereof. Dr. Kulkarni made this submission without prejudice to his contentions raised in the workmen's appeal and the rights accrued to them under the award.
15. We find much substance in the contention of Dr. Kulkarni. Mr. Nariman in reply strongly relied on Cl. 11 of the settlement and contended that the settlement dated 6th September, 1980 was intended to be a stop-gap arrangement pending the final decision on the Company's writ petition and the appeal arising out of it and then pending in the Supreme Court. The present appeal being the continuation of the said writ petition, so contends Mr. Nariman, the final decision in the writ petition and not the settlement that would govern the dispute from the date of its reference in 1965.
16. Now, Cl. 11 reads as follows :
'11. This agreement is without prejudice to the rights and contentions of either of the parties in any pending legal proceedings.'
The question is whether the words 'without prejudice' of this Cl. 11 are intended to save (1) 'the rights and contentions' then raised in pending litigation, for the benefit in any future litigation or (2) their pending litigation itself to make the terms of the settlement subject to the result thereof.
17. On careful consideration of the terms of he agreement, we are inclined to hold that the words 'in any pending legal proceedings' in Cl. 11 are merely descriptive of the 'rights and contentions and are not themselves governed by the words 'without prejudice'. The pending litigation thus not being intended to be saved, the settlement cannot be held to be merely some stop-gap arrangement to be operative till and subject to, the result of any such litigation. The rights and contentions thus were intended to be given up till the expiry of the settlement period and for such time thereafter as the parties choose to acquiesce therein. The rights and contentions were obviously intended to be saved for reliance on the settlement ceasing to be operative. The parties must be presumed to be aware of the legal position that such settlement continues to be operative even after the expiry of the period mentioned therein till the parties proceed to take necessary steps to discontinue its operation and it is then that the parties get on opportunity to press their claims and contentions either at the negotiating table or before the Conciliation Officer or before the Tribunal. Clause 11 was intended to ensure the revival of the rights and contentions at that stage.
18. The very absence of specific reference to the then pending Supreme court appeal in writ matter is also suggestive of the same intention. The vague reference to pending litigation demonstrates that not the litigation but the rights and contentions raised therein were intended to be saved for reliance in future disputes and reference to the pending litigation is meant to pinpoint and indicates the rights claimed and contentions raised in the said litigation. It is pertinent to note in this context that the writ and the Supreme Court appeal arising out of it, and the pending, covered the workmen of the other three units. The workmen of the other three units were not concerned in the said appeal. Admittedly, they were not involved in any litigation at that time. The settlement was yet to operate as an effective and final adjudication of their disputes 'with them at least'. In the absence of any clear indication in the same, the settlement cannot operate as effective and final settlement in regard to few of the workmen, and ineffective and conditional settlement in regard tot he others. It is impossible to conceive of any such situation. Clause 11 could not have been intended to spell out any such incongruous, incompatible and irreconcilable results.
19. The subject-matter of the agreement also fortifies this conclusion. The execution of the agreement was preceded by a strike by all the workmen in six units for the demands unconnected with issues covered by the impugned award. Nonetheless, the agreement does touch those issues which were the subject-matter of the charter of demands dated 6th April, 1964. Secondly, the terms of the agreement are made retrospectively effective from the year 1965 in regard to the workmen of the three units covered by the award. Such retrospective application of the agreement cannot but have the decisive effect on the questions as to whether it was a substitute settlement for the impugned award. Thirdly, the said agreement covers not only the workmen of the three units who were parties to the reference, but also covers the workmen of the other three units of the Company. Their claim for wages and dearness allowance was governed by the terms of the settlement with them reached on different occasions. The agreement with these workmen along with the workmen of the other three units also point to its being an 'overall' settlement of all the disputes then pending between all the Bombay workmen of the Company, on the one hand, and the Company, on the other. Clause 7 of the agreement expressly refers to it and an 'overall' settlement. The terms of the agreement also expressly contemplates on its being 'binding' on all the workmen and the Company, which could be binding otherwise also. The emphasis on the word 'binding' is suggestive of the final settlement of all the disputes then subsisting including the one covered by the pending appeal before the Supreme Court in this writ petition. It is difficult to escape from the conclusion that the agreement was intended to cover all the pending disputes between the workmen of all the six units and the Company and was intended to operate as a substitute for the 'award' that was then under challenge in appeal in the Supreme Court.
20. Fixing the period of two years in the agreement also militates against its being an interim arrangement. The agreement would not have so fixed any period, if the intention was to have it only as an interim measure. Its operation would have been expressly limited to the date of disposal of the litigation pending in the appeal before the Supreme Court. It is, however, not so made as nobody could imagine when the litigation would come to an end and in what shape. There is nothing in the language of the terms to suggest any intention to unsettle the terms in the light of the result of the litigation.
21. Clause 10 of the agreement then contemplates giving up of such demands by the workmen as would be inconsistent with the terms thereof. Such a virtual surrender also is irreconcilable with the agreement being merely an interim arrangement. Such a question to be an overall settlement covering all the disputes and also to be final. (1) Giving retrospective effect to the agreement from 1st May, 1965, (2) Treating it expressly as an 'overall' settlement, (3) Covering the workmen on the three other units thereunder, who are not parties to the reference, (4) Fixing two years period and (5) surrender of the inconsistent demands, all go to suggest that the settlement reflected by the agreement was intended to cover all the pending disputes including the one covered by the then pending litigation in the writ, in the Supreme court appeal and the intention was to substitute the same for the award by putting an end to all the pending litigation. The long pendency of litigation from 1965 and the hanging uncertainty appears to have driven both parties to purchase peace in a spirit of give and take as observed by the learned trial judge. The State having stake in peace and in production appears to have leant its hand in this behalf.
22. Strong reliance was placed by Mr. Nariman also on the language of the notice dated 22nd December, 1980 and the receipts signed by the workmen for the amounts received by them pursuant to the said notice in terms of the agreement. This notice expressly refers to the appeal then pending in the Supreme Court and intention to make payments being without prejudice to result thereof. The amount being disbursed was expressly indicated to be by way of advances adjustable from the dues that will be found payable in terms of the final result of the said dispute. The express language of this notice, considered in isolation, does suggest the settlement to be just, provisional and subject to the result of the litigation then pending in the Supreme Court. The notice, however, was issued on 22nd December, 1980 three months after the settlement was reached on 6th September, 1980. Such a document cannot be of assistance to construe cl. 11 of the agreement. The wording of the clause itself must be treated as the best guide. Any ambiguity therein shall have to be resolved by reference to the governing object of the agreement and other terms thereof. Any extraneous evidence such as the notice and the receipts cannot be looked for guidance unless the ambiguity is incapable of being resolved by the intrinsic evidence of the agreement. We have so construed the agreement. The absence of the signature of the Commissioner of Labour or any of his representative on this notice against his signature on the agreement dated 6th September, 1980 remains unexplained. In the absence of something more, such acceptance of the amount itself by the workmen is not ordinarily accepted as evidence of their acquiescence in anything against their claims then pending in the Court.
23. Mr. Mehta, for the Company, argued that the question of any settlement being a substitute for the award cannot arise in this case as (1) the same is never filed in this Court or in the Supreme Court when the appeal was then pending nor the Court was called upon to pass a decree in terms thereof. In fact, says, Mr. Mehta, the agreement was referred to cursorily in the course of the arguments before Desai J. and placed on record at that stage, (2) the requirements of even S. 2(P) of the Industrial Disputes Act also are not complied with tot attract the legal effect contemplated under the said Act and (3) not steps top formalise the same were taken as required under cl. 12 of the agreement. None of these factors, to our mind, can affect the legal validity of the settlement and its operation as a substitute for the award. The agreement was placed on the record by Desai J. without any objection from any party. The factum of the settlement is not in dispute nor the fact that it is being still acted upon. In fact, all arrears from 1965 have been paid to the workmen in terms thereof. Non-compliance with S. 2(P) of the Industrial Disputes Act in these circumstances, is of no significance nor the fact that the Court has not passed any decree in terms thereof. The settlement would continue to be binding for two years and afterwards till it is terminated and fresh arrangements are arrived at. Even otherwise the reference and the award had become irrelevant in the swiftly changing situation after 1971.
24. Desai J. also accepted this agreement to be binding and conclusive of the contentions in all respects for two years ending on 30th September, 1982, as being based on 'give and take'. He, however, thought it necessary to provide for dearness allowance in the third and fourth slabs for the subsequent period under the impression that the award would become operative thereafter. The points discussed above do not appeal to have been brought to his notice. The true effect of the agreement appears to us to substitute the same for the award. To that extent, his judgment requires modification.
25. This disposes of the appeal filed by the Union also. A feeble attempt was made by Dr. Kulkarni to suggest that cl. 11 cannot preclude the workmen from claiming continuance of dearness allowance for the employees ins the third and fourth slabs even for the two year period of the agreement and pending litigation must be deemed to have been saved to that extent, though it is not so saved for the Company. The contention is devoid of any substance. Cl. 11 cannot be interpreted differently for the workmen. Cl. 11 prevents both the sides from relying on the award, the settlement covered by the agreement being indicated to be a substitute for the points covered thereby. The truth is that the settlement reflects the realisation by both sides how the passage of time and compulsions of the events had rendered their original contentions irrelevant and out of tune with the requirements of their interests and how it had become necessary to adjust themselves to the same by suspending the fight till the operation of the settlement ceases to serve their interests.
26. In the result, both appeals are liable to be dismissed. The order of the learned single Judge dismissing the writ petition is liable to be confirmed with slight modification. The award is declared to have been substituted by the settlement dated 6th September, 1980 in regard to the points covered thereby including the disputes as to the dearness allowance. There will be no order as to costs in both the appeals.