' The Pakistan Tobacco Company Ltd., the employer, is aggrieved by the interpretation of clause 9 of the settlement arrived at between it and the employees on 5th day of September 1967, which was to remain in force for a period of two years. On an application under section 31 of the Industrial Disputes Ordinance, 1969, the Chairman, West Pakistan Industrial Court, Central Zone, Lahore, held that third shift introduced by the employer could not be discontinued during the period of Settlement to render a section of workers jobless, entailing retrenchment in the establishment. The appeal preferred by the petitioner to the Industrial Appellate Tribunal, Karachi Camp, Lahore, failed on 8-4-1969. Hence the petitioner has invoked Articles 3 and 6 (2) of the Provisional Constitution Order, 1969 read with Article 98 of the late Constitution of 1962 for challenging the aforesaid decisions.
2. The clause which came up for interpretation and is the subject-matter of this Constitutional petition is reproduced in extenso hereunder :- "General.-As a result of the appreciable financial benefits provided to the employees under this Agreement involving additional production costs, and in order to maintain its competitive position, it is incumbent on the Company to review continually the composition of its work force so as to effect economies by readjustment of its labour strength and by the introduction of improvements in methods of production :
(a) In view of the foregoing, the Union on its part agrees to extend its full co-operation in the implementations of the redistribution of labour force and modernisation, mechanisation of the present production processes. The Management on its part undettakes that the affected workers, if any, will on this particular occasion, neither be compulsorily retrenched nor will the promotion prospects of these employees lessen in view of the impending introduction of the Third Shift.
(b) From experience gained since the introduction of fixed 'tea-breaks' involving the shutting down of machines, instead of staggered periods, it is accepted that in the interest of increased production it is no more feasible to shut down machines even for a short interval. It is therefore, agreed that henceforth the machines will not be shut down and the workers will be allowed to go to the Canteen for tea in small batches without affecting the running of the machines or the interruption of normal work.
' In consideration of the employees' willingness to the above-mentioned changes, the company is pleased to enhance the earnings of the employees by allowing Rs. 10 per month in their included scales of pay which has already been included in the improvements shown in clause 1 (c) (iii) hereof."
' Before the Settlement was arrived at there were two industrial disputes pending. Tile first was Dispute No. 11 of 1967 which finds its mention in 1969 PLC 510, wherein on a strike notice served by the employees conciliation proceedings had failed on 27-3-1967 and the matter had been taken to the Industrial Court involving the transfer of 35 employees. The other was Dispute No. 5 of 1967, the facts of which find mention in 1960 PLC 610, which was initiated by one Siraj Din who is not a part to these proceedings wherein he had challenged his removal and which proceedings had been dismissed on 29-6-1968.
3. As a result of the settlement arrived at between the parties on 5-9-1967 the process of modernisation/mechanisation of the production process of the petitioner-company were undertaken and Third Shift was started in October 1967 and peak production under such re- organisation was reached in December 1967. However, in March/April it was found that there was over production and the Third Shift was discontinued from 10th May 1968 which resulted in retrenchment of 293 employees of the exchequer and general workers category and the principle of last come first go and the principle of absorption on future vacancies was observed. A few of the retrenched employees invoked the provisions of section 37 of the Industrial Disputes Ordinance, 1968, for challenging such retrenchment. It was contended that such a retrenchment altered during the pendency of the industrial dispute the conditions of service to the prejudice of the workmen concerned. The Industrial Labour Court while interpreting clause 9 of the Settlement observed as follows:- "It was on account of this guarantee that the workmen agreed to the re-organisation. If the workmen had known that the 3rd shift would be discontinued after sometime or surplus staff would be rendered jobless by the introduction of new method, it is certain that they would not have agreed to such settlement and consequent reduction in the staff. It is indeed true that the re- organisation of the industry in order to increase the efficient production at a reduced cost is within the sole discretion of the management and the pendency of the Industrial Dispute cannot operate as a bar against retrenchment as has been held by the Supreme Court in the reported decision sought in aid by the respondent but the re-organisation in the present case was result of the settlement reached between the parties and was not independent of it so as to attract the principle laid down by the Supreme Court. It is the duty of the respondent to honour commitment which has been made. The Settlement having become part of the terms and conditions of service could not be violated during the pendency of the Industrial Dispute in view of the provisions of section 37 of the Ordinance as thereby the Management proceeded to effect the change in those terms and conditions of service. Consequently the protection cannot be taken under the power of retrenchment necessitated by the re-organisation. On appeal the Tribunal held that 'if the position is accepted that there was a breach of the settlement arrived at between the workmen and the Management, I am of the view that it would amount to an alteration in the terms and conditions of the service of the workmen. The Management under the terms of the settlement had guaranteed, that they would not be discharged from service as a result of re-organization. The re-organisation contemplated the 3rd Shift also. The services of the respondents could not be terminated as a result of this term of the settlement arrived at between the parties that the respondents had been retained in service only because the 3rd Shift was in contemplation. The services of the respondents could not be terminated during the period that the settlement was binding on the parties;
4. The following questions arise for decision in this case:-
(I) Whether the power to re-organise, mechanise or improve upon the industrial processes of an Establishment is the exclusive discretion of the employer or is dependent and in any manner, controlled by the workmen.
(ii) If the power to re-organise, modernise and improve upon the industrial processes involved in an industry is in the sole discretion of the employer, can the employees object to it and such objection form consideration for claiming more rights in the matter.
(iii) Whether on the words of clause 9 of settlement Third Shift could not be discontinued nor the labour force retrenched during the course of settlement.
5. So far as the first and purely legal question arising in the petition is concerned, an answer to it, in all respects complete and categorical is found in the decisions of the Supreme Court in Pakistan Petroleum Workers' Federation v. Burmah-Shell Oil Storage & Distribution Co. Of Pakistan Ltd. (1) and Zeal Pak Cement Factory Ltd.'s case (2). It was held in these cases that there was unconditional, more or less absolute power in the Management to undertake bona fide re-organization of its operations for better management, or to increase productivity. The Industrial Court while dealing with this aspect of the case observed 1- "It is indeed true that the re-organization of the industry in order to increase the efficient production at reduced cost is within the solo discretion of the Management and the pendency of the Industrial Dispute cannot operate as a bar against retrenchment such as has been held by the Supreme Court in the reported decision sought in aid by the respondent but the re-organization in the present case was result of the settlement reached between the parties and was not independent of it to attract the principle laid down by the Supreme Court."
6. The Industrial Appellate Tribunal while on this question and the next reasoned as follows :- "It appears, on a fair analysis of the settlement arrived at between the Management and the workmen that as a result of the introduction of modern machinery and methods of production, there was to be some reduction in labour strength. In order to avoid retrenchment in consequence of new processing it was agreed that the workmen will not be retrenched. The intention perhaps was to urge the workman to do their very best without fear of retrenchment. If the workmen had known that as a result of re-organization, the very fact that there was some settlement between the parties would be an evidence on the fact that there was to be a mutual gain. The settlement thus became part of the terms and conditions of service and could not be violated during the pendency of the industrial dispute without complying with the conditions laid down under section 37 of the Ordinance."
7. The right of the employer, to re-organise is conceded but against this right the terms of settlement are pleaded. It should be obvious that for curtailing or limiting such a fundamental and plenary right of the employer
(1) PLD 1961 SC 479 (2) PLD 1965 SC 420 very clear and unmistakable words would be necessary. The view of the Industrial Court that the workers could object to such re-organization would not appear to be correct. The view of the appellate Tribunal that the workmen could create difficulty for the employer may be somewhere nearer the truth.
8. The extent to which the employer went in giving an undertaking to meet all such objections and difficulties as were indicated by the workmen was as follows:- "The Management on its part undertakes that the affected workers, if any, will on this particular occasion, neither be compulsorily retrenched nor will the promotion prospects of these employees lessen in view of the impending introduction of the Third Shift."
9. The undertaking of the Management is in no manner vague. The subject-matter covered by it is the "redistribution of the labour force and modernisation/mechanisation of the present production processes." On behalf of the Management it was stated that :- "Third Shift was introduced in October 1967 to increase the production in order to meet the demand of the market which had increased. New recruitment was made for the Third Shift and then there was redistribution of labour i.e., to say that every shift consisted of some old employees and some new recruits. It was expected that there would be increase in the sale but in the month of December 1967, it was found that the demand was not to their expectation and it went on decreasing, with the result it fell below the normal-on account of fall in the demand the Third Shift was retrenched according to seniority basis."
' The undertaking, not to retrench employees as given by the employer, was confined to this period of modernisation which was completed in October 1967. If subsequently, due to an extraneous factor, viz., over-production, or reduced demand, or the fluctuation of market, or tight money supply, cutback on production was necessary, it fell well outside the prescribed period, and could not be said to be traceable to the modernization necessarily To achieve more production was admittedly the aim of the settlement and over-production could not be taken to be the reason, if other factors had not intervened. In this case, it appears extraneous factors did intervene. As the proposed retrenchment fell well outside the period of modernization, that is, the particular occasion for which the employer had given the undertaking, the settlement as such did not stand in the way. As no other ground has been found against the employer by the Labour Courts, this petition succeeds and is allowed declaring the impugned decisions to be without lawful authority and of no legal effect. In the circumstances, parties are left to bear their own costs.