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Yesterday, a seven-judge bench of the Supreme Court agreed to refer the case of State of U.P. vs Jai Bir Singh to a nine-judge bench. This case had its genesis in 2005, when a five-judge bench had doubted the correctness of Bangalore Water Supply and Sewage Board vs Rajappa (“BWSSB”), the 1976 judgment that had laid down the definition of “industry” under the Industrial Disputes Act (for a background to this case and its importance, see Section B1 in the Labour Law Case Index, on this blog). As required by convention, after a referral by a five judge bench, the case had to be placed before a seven-judge bench. However, since BWSSB was also decided by a bench of seven judges, the present seven-judge bench in Jai Bir Singh had to decide whether or not to refer it further to a nine-judge bench, which would then be free to uphold, modify or overrule BWSSB.

In the first part of this two-part series, I will argue that Court should have declined to refer the case to a nine-judge bench. Both referral orders – the five-judge referral order in 2005, and today’s order, authored by Chief Justice Thakur – fail to demonstrate that the high legal threshold for making a reference to a higher bench was satisfied in the present case. Particularly glaringly, this threshold was reiterated most recently by Justices Goel and Lokur in the NJAC Judgment,  who were also parties in today’s order in Jai Bir Singh, but concurred in the unanimous referral authored by the Chief Justice. In the second part, I will argue that BWSSB was correctly decided, and that therefore, when the nine-judge bench is eventually constituted, it should uphold it.

Let us first examine the standard for referral, which has been consistently endorsed by the Court since 1961. In Lt Col Khajoor Singh vs Union of India, the Supreme Court held that “unless there are clear and compelling reasons, which cannot be denied, we should not depart from the interpretation given in these two [previous] cases and indeed from any interpretation given in an earlier judgment of this Court, unless there is a fair amount of unanimity that the earlier decisions are manifestly wrong. This Court should not, except when it is demonstrated beyond all reasonable doubt that its previous ruling, given after due deliberation and full hearing, was erroneous…” Four years later, in Keshav Mills Co Ltd vs Commissioner of Income Tax, the Court noted that “It must be conceded that the view for which the learned Attorney-General contends is a reasonably possible view, though we must hasten to add that the view which has been taken by this Court in its earlier decisions is also reasonably possible.” In 1980, in Ganga Sugar Corporation vs State of Uttar Pradesh, the Court was clearer still, observing that:

“Enlightened litigative policy in the country must accept as final the pronouncements of this Court by a Constitution Bench unless the subject be of such fundamental importance to national life or the reasoning is so plainly erroneous in the light of later thought that it is wiser to be ultimately right rather than to be consistently wrong. Stare decisis is not a ritual of convenience but a rule with limited exceptions, Pronouncements by Constitution Benches should not be treated so cavalierly as to be revised frequently.”

All these cases were cited in the NJAC Judgment. Notice that in NJAC, there was a strong case for reference: what was at issue was The Second Judges Case,  which had invented the Collegium for the appointment of judges by interpreting the word “consultation” in Article 124 of the Constitution as “concurrence”. There was no precedent to support this reading, and there was certainly no precedent to support the existence of the collegium. Furthermore, the issue involved a question of core constitutional interpretation, where the bar for reference – according to the Supreme Court – is lower than where the question only involves statutory interpretation (BWSSB). To justify the non-referral, the Court cited the judgments mentioned above, the upshot of which was that there must exist a “manifest error” or a “plain error” or a mistake “beyond all reasonable doubt”, and that there must be “unanimity” about this. As long as it can be shown that the judgment under consideration is defensible, a mere disagreement – even a strong disagreement with its reasoning – is not a ground for a referral.

Was this case made out by the five judge bench and then the seven judge bench in Jai Bir Singh? Let us first examine the seven-judge bench order. It is a brief – almost laconic – two paragraph order, which only says:

“Having given our anxious consideration to the contentions urged at the bar and the serious and wide ranging implications of the issue that fall for determination as also the fact that serious doubts have been expressed in the reference order about the correctness of the view taken in Bangalore Water Supply’s case (supra), we are of the opinion that these appeals need to be placed before a Bench comprising Nine-Judges to be constituted by the Chief Justice.”

Notably, the seven-judge bench did not provide any independent reasoning demonstrating that the high threshold for reference was satisfied. It only mentioned the “serious doubts” that were expressed by the five-judge bench. Let us therefore examine the 2005 five-judge referral order. That order provided six reasons for referral (paragraph numbers are from the SCC version):

  1. That Krishna Iyer J.’s majority opinion in BWSSB was incorrectly premised on the assumption that the Industrial Disputes Act was solely a worker-oriented legislation, whereas in fact, the Industrial Disputes Act was meant to take into account the interests of employers, employees, and the public at large (paragraph 33)
  2. That in the decades after the judgment in BWSSB, difficulties have arisen, such as a huge number of industrial and labour claims (paragraph 35)
  3. That the judgment of Krishna Iyer J. was incorrect in holding that the government’s “welfare functions” could fall within the scope of “industry”; rather, all functions directed towards securing the goals listed in Part IV of the Constitution qualified as “sovereign functions” (paragraph 38)
  4. That the Executive has been “inhibited” from notifying the amendment to the Industrial Disputes Act, that was passed by Parliament in 1982, because of the judgment in BWSSB (paragraphs 39 – 40)
  5. That the judgments of this Hon’ble Court in the Safdarjung Hospital and Madras Gymkhana cases were correct in their interpretation of the meaning of the word “industry”, and that therefore, BWSSB was wrong to overrule them (paragraph 41).
  6. That hospitals and educational institutions perform services to the community, and therefore cannot be subjected to “strikes” and “lock-outs” (paragraph 42).

None of these reasons, however, meet the legal threshold for reference – in fact, quite a few of the six are not legal reasons at all. The first, apart from being entirely vague (what, precisely, is a “worker-oriented approach”? The judgment did not explain) also omits to cite Krishna Iyer J.’s own words in BWSSB, in particular in paragraph 29, where he observed that “… a developing country is anxious to preserve the smooth flow of goods and services, and interdict undue exploitation and, towards those ends, labour legislation is enacted and must receive liberal construction to fulfil its role.” In other words, Krishna Iyer J. mentioned the precise interests that the referral order mentioned as well; and if the referral order was of the opinion that the actual reasoning of the judgment was one-sided towards workers, and so badly one-sided that it merited a referral, it made no effort to explain.

The second reason is purely in the domain of public policy. The referral order referred to “burdensome awards” that caused employers with “moderate assets” to “close down”, which in turn caused harm to the general public. It also referred to how the interpretation might be a “deterrent to private enterprise”, and might be taken to be a “hurdle” by professionals. To start with, the Court provided no evidence for these claims. More importantly, however, the question of which regulatory framework can suitably protect the interests of employees while keeping in mind the interests of employers are contested is a question of contested economic and social policy. It does not even remotely show that BWSSB’s legal interpretation of the definition of “industry” was incorrect. And furthermore, when these reasons were cited by a two-judge bench of the Supreme Court in its earlier referral order in Coir Board vs Indira Devai, the referral was refused by a three-judge bench of the Court.

The third reason is a particularly strange one, because it not only goes against BWSSB, but goes against every judgment on the meaning of “industry” ever decided by the Supreme Court, starting from 1954 (see Case Index for details). Right from the beginning, the Supreme Court had drawn a distinction between “regal or sovereign functions” (i.e., national defence) and “welfare functions”, and had consistently held that when the government was performing welfare functions, it was subjected to the constraints of industrial law. The referral order attempted to demonstrate a disagreement between the majority opinion of Krishna Iyer J and the concurring opinion of Beg CJI on this issue, but entirely misconstrued it: as a matter of fact, Beg CJI, in his brief concurrence, wanted to go even further than Krishna Iyer J., and abolish the sovereign/welfare functions altogether in favour of the expanded application of industrial law.

Furthermore, if the reasoning of the referral order was to be accepted, then it would basically mean that government workers would lose all their protections under industrial law, since no government enterprise could now be classified as an “industry”. This would be a particularly twisted reading of the Industrial Disputes Act!

The fourth reason is even more baffling. In 1982, the Parliament passed an amendment to the Industrial Disputes Act, narrowing the definition of “industry”. The Executive never notified the amendment, and so it has still not come into force. On being asked by the Court why it had not done so, its reason was that until an alternative forum for dispute redressal could be provided for employees who would lose protections under the narrower definition of “industry”, it would not notify the amendment. The Court, however, chose to ignore the express statement made by the Executive, and instead held that the BWSSB judgment was inhibiting the legislature from coming forward with a “more comprehensive legislation” to meet the demands of employers and employees in the public and private sectors. The reasoning behind this statement is impossible to understand, because at least since Indira Gandhi vs Raj Narain, it is beyond cavil that the Parliament can override any judicial decision by passing a law, subject to the constraints of the Constitution and the basic structure.

The fifth reason is precisely what has been held to not be a good enough reason to make a reference: mere disagreement with a previous judgment, and agreement with a different line of cases. As I shall demonstrate in my next post, there were two lines of judgments that the Court in BWSSB was called upon to decide between. What the Court effectively did was to reinstate an older line of cases, which had first laid down a three-part definition of industry, and overrule subsequent cases that had departed from this test in ways that were often inconsistent with each other.

And lastly, the sixth reason – again – is no legal reason at all. Not only is the question of “strikes” or “lock-outs” irrelevant for the interpretive question of what constitutes industry under the Industrial Disputes Act (and again, a primarily legislative question), but there are other laws that allow the State to prohibit strikes and lock-outs in certain spheres (such as the Essential Commodities Act).

One may agree or disagree with Justice Krishna Iyer’s interpretation of the word “industry” in BWSSB. However, in accordance with the Supreme Court’s own consistent precedent, disagreement with a previous judgment is no ground to refer a case to a higher bench for reconsideration. At no point did either the five-judge or the seven-judge benches, in Jai Bir Singh, demonstrate (or even come close to demonstrating) the existence of a manifest error in BWSSB. As I shall argue in the next post, they could not have done so, because BWSSB, at its core, merely restated existing law.

It remains to be noted, lastly, that a mere fifteen months before, in the NJAC judgment, Justices Lokur and Goel had, in ringing terms, refused a prayer for reference on the grounds of preserving interpretive stability, and had endorsed all the previous cases that laid down the high threshold of “manifest error”. Furthermore, on the same day of the seven-judge referral order – that is, 2nd January, 2017 – and as part of the same seven judge bench, Justices Chandrachud, Goel and Lalit had authored a dissenting opinion in Abhiram Singh vs C.D. Commachen (the “election judgment”). In paragraph 46 of their dissent, Justice Chandrachud noted:

“A change in a legal position which has held the field through judicial precedent over a length of time can be considered only in exceptional and compelling circumstances.”

In paragraphs 47 to 49, Justice Chandrachud then considered the NJAC Judgment, and went over the opinions of Justices Lokur, Goel and Kurien Joseph, all of which had restated the high threshold discussed above.

Consequently, four out of the seven judges in the Jai Bir Singh reference order – i.e., Justices Lokur, Chandrachud, Goel, and Lalit – had either authored or written judgments emphasising the sanctity of established precedent, and the “exceptional circumstances” required to overturn judgments that had stood the test of time. And yet, all four judges signed on to a two-paragraph referral order that made no independent argument, and only referred to a prior five-judge bench order that had utterly failed to demonstrate “exceptional circumstances.”

What explains this 180-degree volte face? And did not judicial responsibility and intellectual consistency require at least the learned judges to write concurring opinions explaining why BWSSB merited a referral, but NJAC didn’t?

(Disclaimer: The author was part of a team of lawyers representing the New Trade Union Initiative, interveners before the seven-judge bench, arguing against a referral).