Full Judgment Text
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PETITIONER:
HYDRO (ENGINEERS) PVT. LTD.
Vs.
RESPONDENT:
THE WORKMEN
DATE OF JUDGMENT:
30/04/1968
BENCH:
SHELAT, J.M.
BENCH:
SHELAT, J.M.
SIKRI, S.M.
BHARGAVA, VISHISHTHA
CITATION:
1969 AIR 182 1969 SCR (1) 156
CITATOR INFO :
RF 1969 SC 360 (34)
R 1969 SC 976 (8)
E 1970 SC 919 (36)
R 1972 SC2215 (2)
RF 1974 SC 526 (13)
E&R 1977 SC 941 (19)
RF 1981 SC1685 (2)
ACT:
Industrial Dispute-Minimum Wage-Principle for fixation of-
Revision of scale of wages fixed by the previous award by
linking up with cost of living index-If double advantage to
workmen-Retrospective operation of award-Whether valid-What
is reasonable qualifying period for gratuity.
HEADNOTE:
There were industrial disputes between the. appellant and
its workmen, the respondents, which were the subject-matter
of awards. The last of such awards fixed revised wage
scales taking into consideration the cost of living index
then prevailing. It also provided for annual increments but
rejected the workmen’s demand to link up -the wage scales
with the index of cost of living. After the respondents had
received two annual increments under that award, they served
a notice on the appellant calling ,for revision of the scale
of wages and of the gratuity scheme. The dispute was
referred to the Industrial Tribunal and the Tribunal passed
an award. The award retained the scales fixed in, the
previous award and treating them as- based on the cost of
living index prevailing on the date ,of that award, directed
that the wages should be linked up with the cost of living
index. The award also directed that effect should be given
to it retrospectively from approximately the date of demand
by the respondents. As regards gratuity, the Tribunal
reduced the existing qualifying period ,of 10 years to 8
years in cases where a workman died, resigned or retired;
and deleted completely the existing qualifying period of 4
years in case \where the services of the workman were
terminated by the appellant.
In appeal to this Court, it was contended that : (1) The
award ’as regards wages should be set aside, because, (a)
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the Tribunal took a wrong view as to what would constitute
minimum wages, (b) it ignored the financial capacity of the
appellant, (c) the linking up of the wage scales with the
cost of living index was wrong, (d) the Tribunal failed to
take into consideration the principle of region-cum-
Industry, (e) the respondents would get double advantage
during the same period, namely, increments and a raise in
the wage scales, and (f) retrospective operation should not
have been given to the award; and (2) The changes made in
the gratuity scheme were illegal.
HELD : (1) There was no reason to interfere with the mini
wage rate fixed by the Tribunal. [163 A-B]
(a) The policy of the Minimum Wages Act, 1948, was to
prevent employment of sweated labour in the general interest
and so the minimum wages must ensure not merely the physical
needs of the worker but must ensure, in addition to his
sustenance and that of his family, the preservation of his
efficiency as ’a workman by providing for some measure of
education, medical requirements and amenities. In the
present case, (i) the Tribunal retained the scales fixed by
the previous award and only provided for automatic rise or
fall therein with the corresponding change in the index of
cost of living and (ii) the Tribunal observed that the
appellant had to pay the minimum wages irrespective of its
ability to
157
bear the additional burden . Therefore, what the Tribunal
fixed was consolidated minimum wages and not fair wages.
[161 G-H; 162 B-F]
(b) In prescribing such a minimum wage rate the capacity of
the employer need not be considered as the, State assumes
that every employer must pay the minimum wages before he
employs labour. [162 D-E]
Bijay Cotton Mills Ltd. v. State of Ajmer, [1955] 1 S.C.R.
752, Express Newspapers (Pvt.) Ltd. v. Union of India [1959]
S.C.R. 12 and Unichovi v. State of Kerala, [1962] 1 S.C.R.
946, followed.
(c) The idea of fixing minimum wages in the light of the
cost of living at a particular juncture of time and of
neutralising the prevailing high prices of essential
commodities by linking up scales of minimum wages with the
cost of living index is not alien to the concept of minimum
wages. It could not be contended that the Tribunal erred in
linking up the wage scales with the living cost, because,
had it not been done, the wage scales would have become
unrealistic, as the cost of living index had gone very much
higher up since the Tribunal give its last award and was
threatening to go up further. [161 D-F; 162 H; 163 A-B]
(d) The capacity of the employer and the wage scales
prevailing in comparable industries in the region, are
relevant factors while, fixing fair wages, but not when
fixing minimum wages. [162 F-H]
Novex Dry Cleaners v. Workmen, [1962] 1 L.L.J. 271 and
Airlines Hotel v. Workmen, [1964] 1 L.L.J. 415, explained.
(e) What the present award directs is to pay the workmen
from approximately the date of demand, the wage scales
calculated in accordance with the rise in the index of
living cost which had taken place since the last award. The
increments earned were on the footing of the index figure
taken into consideration while passing the previous award.
Therefore, there is no question of the workmen getting any
double advantage. [163 C-D]
(f) It was within the Tribunal’s discretion to decide, from
which date its award should come into operation. Therefore,
when no ground was made out to show that the discretion was
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unreasonably exercised, the mere fact that it has
retrospectively enforced its award from about the ,date of
demand by the workmen, is not a ground for interference with
the award.. [163 E-F, H]
Hindustan Times v. Their Workmen, [1964] 1 S.C.R. 234,
Jhagrakhand Collieries (Pvt) Ltd. v. C.G.I.T. Dhanbad,
[1960] 2 L.L.J. 71 and United Collieries v. Workmen, [1961]
2 L.L.J. 75 referred to.
(2) (a) Since the justification for gratuity is a long and
meritorious .service, -schemes of gratuity framed by the
Tribunal and approved by .this Court have always provided
some qualifying period. Though there is no hard and fast
rule, the general trend as seen from a long series of
decisions is in favour of 10 years of qualifying service.
The Tribunal was therefore, not right in reducing the period
from 10 years to 8 years without and substantial reason.
[164 C-D, F-G]
Indian Oxygen and Acetylene Co. Ltd. Employees Union v.
Indian Oxygen and Acetylene Co. [1956] 1 L.L.J. 435, Express
Newspapers (P) Ltd. v. Union of India, [1959] S.C.R. 12.
Garment Cleaning Works v. Its Workmen, [1961] 1 L.L.J. 513,
British Paints v. Workmen, [1966] 2 S.C.R. 523 and Calcutta
Insurance Co. v. Their Workmen, [1967] 2 L.L.J. 1, referred
to.
158
(b) Also, as regards the deletion of the 4 years minimum
qualifying period when the appellant terminates a workman’s
service, the Tribunal had no legitimate grounds for making
the alteration in the existing scheme. [164 H]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1934 of
1967.
Appeal by special leave from the Award dated September 15,
1967 of the Industrial Tribunal, Maharashtra, Bombay in
reference (IT) No. 54 of 1967.
I. N. Shroff, for the appellant.
Narayan B. Shetya and K. Rajendra Chaudhury, for the res-
pondents.
The Judgment of the Court was delivered by
Shelat, J.-The appellant company is a private limited com-
pany of which the authorised capital is Rs. 1 lac and the
subs, cribed capital Rs. 50,000. Its business is to
manufacture milk cans. According to the Company, it has not
been able to maintain, much less, increase, its production
owing to the control orders restricting the import of raw
materials required for its manufacturing process. The
Company was started in 1942 but except for a few years when
it made some profits, it has had to suffer losses during the
rest of the years, the total loss suffered up to 1964-65
being Rs. 1,66,912. The Company is a small unit having on
its roll 53 workmen.
In 1958, a reference was made under s. 10(1)(d) of the
Industrial Disputes Act, 1947 in respect of the demands made
by its employees for increase in the wage scales. The
reference ended in a settlement dated May 27, 1959
whereunder a slight increase in the wage scales was made.
It also provided for an ad hoc increase in the wages of
those getting Rs. 2.44 or more per day. The revised wages
were to come into force retrospectively from October 1,
1958. In 1961, another reference was made which also
resulted in a settlement dated September 11,
Under that settlement, the workmen were classified into four
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categories and consolidated wage scales for each of the
categories with a provision for increments were agreed upon.
Since these were consolidated wage scales, the demand for
dearness allowance was not pressed. An award was made in
terms of the said settlement with retrospective effect from
April 1, 1961. In 1964, the Union once again demanded
revision of wage scales. The dispute was referred to the
Industrial Tribunal which made what has been referred to as
the Bilgrami award. The Tribunal retained the same
categories and the only modification it made was to increase
the wage scales previously fixed, taking into consideration
the rise in the index of cost of living in the meantime
159
from 450 to 538. The said award fixed the wage scales as
follows
Unskilled -Rs. 4.15-0.10-Rs.5.15.
Semi Skilled -Rs. 4.75-0.15-Rs.6.25.
Skilled II -Rs. 5.50-0.25-Rs.8.00.
Skilled I -Rs. 6.50-0.30-Rs.9.50.
Apprentices -Rs. 3.25-3.75-Rs.4.25.
The award provided that the increments in the revised scales
were to be annual and were to start from April 1, 1965. The
award was made effective from November 9, 1964 which was the
date of the reference. It however, rejected the Union’s
demand to up the wage scales with the index of cost of
living. By April 1, 1967, therefore, the workmen had
received two annual increments and consequently the wages
paid to the first four categories were Rs. 4.35, 5.05, 6.00
and 7.10 per day respectively. It is thus clear that the
Bilgrami award took the scales previously fixed as its basis
when the cost of living index stood at 450 and increased
them taking into consideration the fact that the said figure
had gone up by about 94, that is, by raising it by 1 n.p.
for every point.
On June 17, 1967, the Union served a notice of demand which
called for (a) revised scale of wages with effect from July
1, 1966; (b) for certain adjustments; (c) for linking up the
scales with the cost of living index; (d) revision in the
existing gratuity scheme; and (e) for bonus for the year
1964-65. We are not concerned in this appeal with the last
demand as the impugned award does not deal with that demand.
The demand for revision of wage scales was based on the fact
that the Bilgrami award had fixed the wage scales on the
footing of the cost of living index being then 538 while
that figure had shot up since then to 675 and that if the
rise were to be neutralised as it was done by the Bilgrami
award, the scale of unskilled workmen would come to Rs. 5.30
per day. So far as the gratuity scheme was concerned, the
demand required that the qualifying period for the retrial
gratuity should be reduced from ten to eight years and the
qualifying period in case of termination of service by the
employer should be done away with. The Company resisted the
demand and the conciliation proceeding having failed, the
State Government referred the dispute to the Tribunal.
The Tribunal took note while considering the demand for
revision of scales and their linking up with the index of
cost of living of the fact (a) that the Bilgrami award
itself had sought to neutralise the rise in the living cost
by raising the scales in proportion to the rise in the cost
of living by then; and (b) that though that award was made
in 1964, the wage scales thereunder
160
fixed had already become unreal in the sense that the index
had gone up to 675 by the time the Union filed its statement
of claim, that is, March 25, 1967 and had reached the figure
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of 710 in July 1967 when the award was made. In these
circumstances, the Tribunal thought that the- Union had made
out a case for revision, that it was necessary to make the
wage scales realistic and therefore to link them up with
cost of living index though the Bilgrami award had declined
to do so. What the Tribunal did, therefore, was to retain
the scales fixed by Mr. Bilgrami and treating them on the
basis of 538 index of living cost, directed that they should
be linked up with the index so that the scales would
automatically go up as the index rose or fell. The award
also directed that effect should be given to it as from July
1, 1966, the notice of demand having been served on June 17,
1966. The gratuity scheme framed in 1961 provided that ten
days’ wages for every year of service should be paid as
gratuity in case of death, retirement or resignation,
provided the workmen had put in the minimum period of ten
years of service. For the workmen whose services would be
terminated by the employer the qualifying period was four
years of service. The Tribunal revised the scheme in two
particulars; (a) it reduced the period from ten to eight
years in case where the workmen has’ died or resigned or
retired; and (b) it deleted the qualifying period of four
years altogether where his service has been terminated by
the employer. The Tribunal considered the financial
position of the Company and came to the conclusion that
though it had been making losses, it was of a fairly long
standing, that the losses incurred in the past years were a
temporary phase, that the Company’s future was not bleak
and, though not prosperous, it was in a satisfactory
financial position. This appeal by special leave disputes
the correctness of the award made by the Tribunal.
Counsel for the Company objected to the aforesaid observa-
tion regarding the Company’s financial position and pointed
out that its position cannot at all be said to be
satisfactory in view of the fact that, barring only a few
years, it had made substantial losses all throughout.
Taking a cue from this fact, he contended that (1) the
reason which impelled the Bilgrami Tribunal to refuse to
link up the wage scales with the cost of living index still
held good; (2) the Tribunal took a wrong view as to what
would constitute a minimum wage; (3) it ignored the
financial capacity of the Company; (4) it failed to take
into consideration the principle of region-cum-industry; and
(5) there was no justification in reducing the qualifying
period for the retiral benefit of gratuity from ten to eight
years and for deleting the qualifying period in the case of
termination of service by the employer. We propose to deal
with contentions 1 to 4 first and consider separately the
changes made by the Tribunal in the existing gratuity
scheme.
161
The Minimum Wages Act, XI of 1948 does not define ’minimum
wages’ presumably because it would not be possible to lay
down a uniform minimum wage for all industries throughout
the country on account of different and varying conditions
prevailing from industry to industry and from one part of
the country to another. The legislature also throught it
inexpedient to apply the Act to all industries at a time
and, therefore, it applied the Act to certain employments
only specified in the Schedule thereto leaving it to the
appropriate government to add by notification to that effect
industries in the said Schedule at suitable times and in
appropriate conditions. But s. 4 of the Act provides that
*.he minimum rates of wages may consist of a basic rate of
wages and a special allowance at a rate to be adjusted or a
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basic rate of wages with or without the cost of living
allowance and cash value of concessions in respect of
supplies of essential commodities at concession rates where
so authorised or an all inclusive rate allowing for the
basic rate, the cost of living allowance and the cash value
of the concessions if any. Sub-section (2) of s. 4 provides
that the cost of living allowance and the value of the
concessions in respect of supplies of essential commodities
at concession rates shall be computed by the competent
authority at such intervals and in accordance with such
directions as may be specified or given by, the appropriate
government. It is thus clear that the concept of minimum
wage does take in the factor of the prevailing cost of
essential commodities whenever such minimum wage is to be
fixed. The idea of fixing such wage in the light of cost of
living at a particular juncture of time and of neutralising
the rising prices of essential commodities by linking up
scales of minimum wages with the cost of living index
cannot, therefore, be said to be alien to the concept of a
minimum wage. Furthermore, in the light of spiralling of
prices in recent years, if the wage scales are to be,
realistic, it may become necessary to fix them so as to
neutralise at least partly the price rise in essential
commodities. Indeed, when the Bilgrami award revised the
wage scales, it took, as aforesaid, into account the rise in
the cost of living index and neutralised that rise by
approximately raising them by 1 n.p. for every point in the
rise though it declined to .join up the scales with the
index of cost of living.
What the present award does is to fix the minimum wage
scales and not to fix fair wages. That is clear from the
fact that it retains the scales fixed by the earlier award
and taking them on the basis of the index figure at 538 it
provides for automatic rise or fall therein with the
corresponding change in the index of living cost.
Presumably the Tribunal thought it necessary to do so
because by the time it came to make the award, the index
figure had already gone up to 710. If the Tribunal were to
refuse to link up the scales with the index of cost of
living. the neutralisation it sought to do would again go
out of gear making
162
Once again the scales unreal and reduce them even below the
floor-level. That the Tribunal fixed the consolidated
minimum wages and not fair wages is clear from the facts (1)
that it retained the scales fixed by the previous award
which had increased them from Rs 3.20 per day for an
unskilled workman to Rs. 4.15 per day as by that time the
index had gone up from 450 to 538; and (2) by its
observation that the Company has to pay the minimum wages
irrespective of its ability to bear the additional burden.
The fact that an employer might find it difficult to carry
on his business on the basis of minimum wages is an
irrelevant consideration is now a well-settled principle:
(cf. Bijay Cotton Mills Ltd. v. State of Ajmer(1), Unichovi
v. State of Kerala(2) and Express Newspapers (Pvt.) Ltd. v.
Union of India(3). While considering the distinction
between minimum and fair wages this Court in the case of
Unichovi v. State of Kerala(2) Observed at P.967 that the
Policy of the Minimum Wages Act, 1948 was to Prevent
employment of sweated labour in the general interest and so
in prescribing the minimum wage rates, the capacity the em-
ployer need not be considered as the State assumes that
every employer must pay the minimum wage before he employs
labour. It also observed that the Act contemplates that
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minimum wage rates must ensure not merely the mere physical
need of the worker which would keep him just above
starvation but must ensure for him not only his subsistence
and that of his family but also preserve his efficiency as a
workman. It should, therefore, provide as the Fair Wages
Committee appointed by the Government recommended, not
merely for the bare subsistence of his life but for the
preservation of the worker and so must provide for some
measure of education, medical requirements and amenities.
This concept of the Committee has been accepted by
industrial adjudication in the country and was expressly
approved of in Express Newspaper (Pvt.) Limited(3). Counsel
for the Company however, cited before us the decisions in
Airlines Hotel v. Workmen(4) and Novex Dry Cleaners v.
Workmen(5) where the question of capacity and the wage
scales prevailing in comparable in dustries in the region
were considered relevant factors. But those were not cases
where minimum wage rates were fixed but were Cases of fair
wages where those two factors had to be taken into account.
The Company’s contention that the Tribunal failed to take
into consideration the financial capacity, the fact of the
Company having made losses during the past years, its
difficulties in importing raw materials and had also failed
to apply the region-cum-industry principle and therefore the
award was vitiated, has -no merit. We cannot also accept
the contention that the Tribu-
(1) [1955] 1 S.C.R. 752
(3) [1959] S.C.R. 12.
(5) [1962] 1 L.L.J. 271.
(2) [1962] 1 S.C.R. 946.
(4) [1964] 1 L.L.J. 415.
163
nal erred in linking up the wage scales with the living cost
be cause had it not been done, the wage scales would have
again gone unreal once the index had gone up as it then
threatened to do. We find, therefore, no reason to interfere
with the minimum. wage rates fixed by the Tribunal.
A subsidiary contention raised by the Company that by reason
of the Bilgrami award having provided for incremental
scales, the workmen under the present award will get double
advantage, namely, increment and the raise in the wage
scales during the same period, has also no substance. The
incremental scale was fixed in that award on the basis of
the index figure being, 538. Those scales have been
retained. The two increments that the workmen have earned
in 1965 and 1966 were on the footing of those scales which,
as aforesaid, were fixed on the basis of the index figure of
538. What the present award directs is to pay the workmen
as from July 1, 1967 the wage scales calculated in
accordance with the rise in the index of living cost which
had taken place since the last award. The increments earned
having been on the footing of the index figure of 538, there
is no question of the workmen getting a double advantage.
The next objection to the award was that the Tribunal erred
in giving effect to the award retrospectively as from July
1, 1966, that is, approximately from the date of the demand
and that if at all it wanted to give such retrospective
effect, the utmost that it could do was to enforce it from
the date of the reference. In some cases retrospective
effect, no doubt, has been given from the date of the
reference. But it is a matter of discretion for the
Tribunal to decide from the circumstances of each case from
which date its award should come into operation. No general
rule can be laid down as to the date from which a Tribunal
should bring its award in force : (see Hindusthan Times v.
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Their Workmen(3). Presumably, the Tribunal gave effect to
its award from July 1966 as by that time the cost of living
index had already gone up considerably and not to have done
so would have been to deprive the workmen of the minimum
wages ’commensurate with that rise. In Jhagrakhand
Collieries (Private) Ltd. v. C.G.I.T. Dhanbad(2) and United
Collieries v. Workmen(3) the awards were made operative from
the respective dates of demands ’and this Court did not
interfere with those awards on the ground that there was
thereby any breach of any recognised principle. If the
Tribunal has exercised its discretion and no substantial
ground is made out to show that it was unreasonably
exercised, the mere fact that it was retrospectively
enforced its award from the date of the demand is hardly a
ground for interference with the award.
(1) [1964] 1 S.C.R. 234. (2) [1960] 2 L.L.J. 71.
(3) [1961] 2 L.L.J. 75.
164
We now turn to the changes made by the Tribunal in the
existing gratuity scheme framed by the Savarkar Tribunal.
In our view, there is force in the Company’s contention that
the, changes, namely, reduction of the qualifying period
from ten to eight years in the case of termination of
service by death, retirement or resignation and deletion of
the qualifying period of four years in the case of
termination of service by the, employer, were not justified.
The Tribunal in fact has not given any specific reason which
necessitated the two changes.
It is now well settled that gratuity is a reward for good,
efficient and faithful service rendered for a fairly
substantial period and that it is not paid to the employee
gratuitously or merely as a matter of boon but for long and
meritorious service; (cf. Garment Cleaning Works v. Its
Workmen(1) and Express Newspapers (Private) Limited. v.
Union of India(2). Since the justification for gratuity is
a long and meritorious service, schemes of gratuity framed
by the tribunals and approved of by this Court have always
provided some qualifying period. In Indian Oxygen and
3Acetylene Company Ltd. Employees Union v. Indian Oxygen
and Acetylene Company(3) and Express Newspapers (Private)-
Ltd. v. Union of India (2) the qualifying period for
gratuity on termination of service by resignation or
retirement was fixed at 15 years. In Garment Cleaning Works
v. Its Workmen(1), though the Company objected to the period
of ten years and contended on the analogy of the aforesaid
two decisions that it should be fifteen years, this Court
gave its approval to the period of ten years in case of
retirement or resignation. On the other hand, in British
Paints v. Workmen (4) the period of five years provided by
the award was changed into ten years on the ground that a
fairly long minimum period for qualifying for gratuity in
the case of resignation or retirement was necessary to
prevent the workmen leaving one concern after another after
putting in the short minimum service for qualifying for
gratuity. Similarly, modification from five to ten years
was made in a recent decision of this Court in Calcutta
Insurance Co. Ltd., v. Their Workmen(5). Though no hard and
fast rule can be laid down and each case must be decided on
its own circumstances, the general trend as seen from a long
series of decisions is in favour of ten years of qualifying
service. The Tribunal in the absence of any substantial
reason, was, therefore,- not right in reducing the period
from ten to eight years. As regards the deletion of four
years minimum period in cases where the employer terminates
the service also we do not find any legitimate ground for
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the alteration of the scheme. It was, however, said that if
such a period is provided for in a scheme, it was possible
that an em-
(1) [1961] 1 L.L.J. 513. (2) [1959] S.C.R. 12.
(3) [1956] 1 L.L.J. 435. (4) [1966] 2 S.C.R. 523.
(5) [1967] 2 L.L.J. 1.
165
ployer would terminate the services of a workmen even though
the, employee wants to render continuous service to enable
him to cam the gratuity. This does not appear to be a
legitimate apprehension for unless the employer is in a
position to establish misconduct justifying termination of
service under a standing order, he cannot put an end- to the
service only to deprive the workman of gratuity. On the
other hand, there is the danger that whereas in the case of
retirement or resignation the workman would have to put in
ten years of service, if no minimum period is provided for
in the case of termination by the employer it would be
possible for a workmen to commit some misconduct and cam
gratuity within a shorter time than the one who after a long
period of meritorious service retires or resigns. Since
doing away with the qualifying period is likely to result in
such an anomaly, it is necessary to have some qualifying
minimum period. As the period of four years provided in the
scheme is not under challenge before us, there is no reason
to interfere with it. We, therefore, set aside the two
changes made by the Tribunal in the gratuity scheme. The
scheme for gratuity will, therefore remain the same as
framed by the Savarkar award.
In the result, except for the aforesaid modifications in the
award, we find no reason to interfere with the award. The
appeal, except to the extent aforesaid, fails and is
dismissed. There will be no order as to costs.
V.P.S. Appeal partly allowed.
166