FITHALY FERNANDO Vs. M V KINSHIP PROSPERITY

JUDGEMENT

(1.) These Writ Petitions are filed by two Captains, Chief Engineer and Chief Officer respectively employed in the ship owned by the first respondent challenging separate but identical orders issued by the Judicial Magistrate of the First Class, Kochi, allowing petition filed by the first respondent under S.8 of the Arbitration and Conciliation Act, 1996, referring the dispute on wages between the petitioners and the first respondent for arbitration. We have heard counsel appearing for the petitioners and also for the first respondent and have also gone through the impugned orders of the Magistrate. The Writ Petitions were posted before Division Bench along with connected Writ Appeal filed by first respondent, W.A. No. 2086/2010, Kinship Services (P) Ltd. v. Fithaly Fernando,2012 1 KerLT 579 which was disposed of by us through separate judgment on 22.6.2012. While the petitioners allege that the first respondent owes them substantial amount towards salary and allowances for the services rendered by them in the ship owned and managed by the first respondent and cheques issued towards discharge of such liability got dishonoured, the case of the first respondent is that claim of wages by the petitioners is in dispute and the same has to be settled between the first respondent and the petitioners in arbitration proceedings in terms of clause (8) of the standard contract of employment between the petitioners and the first respondent. The sequence of events that led to the filing of applications by the petitioners before the Magistrate Court at Kochi is as follows. Since one of the ships of the first respondent was registered in Kochi, the petitioners approached this court invoking admirality jurisdiction for arrest and detention of ship for recovery of arrears of wages claimed by them. In the Writ Petition so filed the first respondent raised the contention that wage dispute has to be settled in arbitration proceedings in terms of the contract. However, this court without going into the merit of the said contention suggested the petitioners to file application before the Magistrate Court under S.145 of the Merchant Shipping Act, 1958 (hereinafter called "the MS Act"). Accordingly the petitioners filed separate applications under S.145 of the MS Act before the Magistrate Court which issued notice to the first respondent. The first respondent appeared before the Magistrate Court and filed application under S.8 of the Arbitration and Conciliation Act for referring the claim for settlement of wage dispute in arbitration in terms of clause (8) of the employment contract between the petitioners and the first respondent. Even though petitioners raised objection about maintainability of the application filed by the first respondent under S.8 of the Arbitration Act and contended that the Magistrate Court has got powers under S.145(1) of the MS Act to settle dispute on wages through summary proceedings, the learned Magistrate overruled the objections and allowed the application filed by the first respondent under the Arbitration Act and disposed of the matter referring the claim for settlement in arbitration. It is against these orders of the Magistrate the petitioners have filed these Writ Petitions. In W.A. No. 2086/2010 the dispute raised by the first respondent was that the Magistrate Court does not have powers under S.445 of the MS Act to pass interim orders either to restrain or arrest the ship or to demand security for recovery of arrears of wages claimed by the seamen like petitioners. However, we rejected the said contention raised by the first respondent by dismissing the Writ Appeal vide judgment dated 22.6.2012 and by simultaneously declaring that the Magistrate Court has the powers to pass interim orders either by way of attachment or arrest of ship or other movables or by demanding security for realising arrears of wages determined by the Magistrate and even during pendency of application filed by the seamen like the petitioners claiming wages in the Magistrate Court. In these O.Ps. the question raised is whether the Magistrate Court can proceed to settle the claim of wages including determination of wages payable to the seamen namely, the petitioners, without referring the matter for arbitration in terms of clause (8) of the employment contract which provides for settlement of dispute between the first respondent and the employees in arbitration proceedings. Counsel for the petitioners relied on two decisions of the Supreme Court, one in O. Konavalov v. Commander, Coast Guard Region, 2006 4 SCC 620 and the other in Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd, 2011 5 SCC 532. The second decision above referred is relied on for the proposition that the petitioners' claim of wages against the shipping company is a right in rem available to petitioners and so much so, arbitration is not the remedy for recovery of arrears. Another decision relied on by the petitioners is that of the District Court of the United States in the case of Jack Palmer, Jr. v. Infosys Technologies Ltd. Incorporated rendered in Civil Action No. 2:11-cv-00217-MHT-CSC decided on 9.11.2011. However, on going through these judgments we do not find the judgments deal with any claim of wages of seamen against the shipping company. In our view, the right claimed by the employees against the employer namely, the first respondent-shipping company, is a right in personam where dispute has to be settled inter-party before the appropriate forum. So far as maintainability of arbitration proceedings is concerned, for settlement of wage dispute between seamen and shipping company, we notice that arbitration is excluded under S.132(a) of the MS Act only in respect of claims below Rs. 3,000/- which has to be settled by the Master of the ship. Even though counsel for the petitioners contended that the summary proceedings contemplated under S.145 is a special power conferred on Magistrate Court and it's objective is fast determination and recovery of arrears of wages to seamen is correct, we are of the view that so long as MS Act does not prohibit settlement of wage dispute through arbitration, we feel the agreement between shipping company and employees cannot be declared void or unenforceable. It is to be noticed that arbitration as a method of settlement of dispute between seamen and the shipping company is visualised in the statute and that is why a limited exclusion is provided in petty claims upto Rs. 3000 provided in S.132(a) of the MS Act. So much so, wherever the dispute is not covered by S.132 of the MS Act, the provision contained in sub-s.(4) thereof does not hit the arbitration proceedings. We are, therefore, of the view that arbitration as a method of settlement is not prohibited under the provisions of MS Act. So much so, the powers of the Magistrate under S.145 in regard to settlement of wages is subject to arbitration proceeding, if any, agreed between shipping companies and their employees and, therefore, in an application for wages filed under S.145 of the MS Act, the Magistrate is absolutely free to refer the matter for arbitration in exercise of authority conferred under S.8 of the Arbitration Act. However, this is subject to the extraordinary powers conferred on the Magistrate under S.149 of the MS Act, which is as follows:

(2.) Counsel for the petitioners submitted that this is a fit case for the court to exercise it's extraordinary powers under S. 149 above extracted and rescind the contract because there is no referable dispute for settlement in arbitration by virtue of the acknowledgement of arrears payable by the first respondent by issuing cheques to all the petitioners. We find force in this contention because if the employer has issued cheques towards settlement of wage arrears and if the employees namely, petitioners, have no other claim in excess of the cheque amount, probably it is a matter for the court to consider whether there is any dispute that survives to be referred for arbitration. S.8 proceedings under the Arbitration Act is only for reference of a referable dispute for settlement in arbitration proceedings. This presupposes that there is a dispute between parties and the same under the agreement between parties has to be settled in arbitration. If first respondent has accepted the arrears of wages payable to the petitioners and has issued cheques towards payment of such arrears and if petitioners have no other claim, then there is nothing for the Magistrate Court to adjudicate under S.145(1) of the MS Act. Therefore, what is required for the court is only to exercise powers of recovery under S.445(1) of the MS Act. At the maximum the court may have to pass formal orders under S.145 after hearing both sides a warding arrears of wages equal to amounts covered by cheques issued by first respondent as arrears of wages, allowances etc., payable to petitioners and thereafter to proceed for recovery of the arrears through orders of restraint, arrest, attachment of movables and immovables of the defaulter etc. As already stated, S.149 confers power to rescind a contract between the owner of the shipping company and the seamen, if the court is of the view that in the interest of justice it is just and proper to do it. We notice from the impugned orders issued by the Magistrate that the Court has considered this issue and held that in the absence of any evidence or circumstance established by the petitioners affecting the validity of the agreement, the court cannot rescind the contract or ignore the provisions in the contract of employment providing for arbitration. There can be no dispute that while exercising powers under S.149 the court need not always consider rescinding of contract as a whole. On the other hand, court can cancel any unjust clause in the contract, if it is so satisfied in exercise of powers under the said Section. However, we agree with the view taken by the Magistrate that any clause or contract as a whole sought to be rescinded by the court, should be brought to the notice of the court and it is for the petitioners to plead and prove how the contract as such or any term therein is unjust for the court to declare the same invalid and proceed to grant relief to the parties. In this case the basic evidence relied on by the petitioners in opposing the arbitration claim made by the first respondent is that wage dispute is settled when cheques are issued by the first respondent to the petitioners acknowledging liability towards wages. We find force in this contention because if petitioners do not have claim above the cheque amount towards arrears of wages and allowance payable by first respondent and if the court is satisfied that the cheques issued are towards arrears of wages payable by the first respondent, then there is no dispute to be referred for settlement in arbitration based on clause (8) of the employment contract. However, since the issue is not raised or decided in detail with reference to cheques and other evidence available with the petitioners, we feel one more opportunity can be granted to the petitioners to substantiate before the Magistrate court that reference for arbitration in terms of S.8 of the Arbitration Act is not required because of settlement of wages through issuance of cheques. We, therefore, allow the O.Ps. by setting aside the impugned orders of the Magistrate Court and remand the matter for reconsideration on the specific issue whether there is any referable dispute for arbitration, if the first respondent has agreed upon the arrears on wages and allowances and has issued cheques to the petitioners which could be reckoned for passing formal orders on wages under S.149 of the MS Act and to proceed for recovery in exercise of powers under S.445. As a consequence of the relief granted above, first respondent's application filed under S.8 is restored to the Magistrate for fresh consideration. The Magistrate is directed to give opportunity to both sides to adduce evidence and also to argue the matter before Issuing fresh orders on first respondent's application. Since already there is appearance for parties before the Magistrate Court, we direct the Magistrate to dispose of the matter afresh within a period of two months from date of receipt of copy of this judgment. The petitioners and respondents are directed to appear through counsel or otherwise on the posting dates given by the Magistrate to ensure compliance of this judgment within the time frame. The parties shall appear before the Magistrate Court on 8.8.2012.