Full Judgment Text
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PETITIONER:
MANAGEMENT OF THE KIRLAMPUDI SUGAR MILLS LTD.
Vs.
RESPONDENT:
INDUSTRIAL TRIBUNAL, A.P. & ANR.
DATE OF JUDGMENT26/08/1971
BENCH:
ACT:
Industrial Dispute-Recommendations of Central Wage Board for
sugar whether vitiated by fact that it had fixed uniform
wages region wise without further classification within each
region-Tribunal’s jurisdiction to go into question of
financial capacity of company to implement recommendations
of Wage Board--Company whether had financial capacity.
HEADNOTE:
The Kirlampudi Sugar Mills Ltd. was started in 1951 as a
small unit and later was increased to a larger crushing
capacity of 1000 tons. By 1963 the factory got into
financial embarrassment. in the middle of that year the-
present management took over the factory on the specific
assurance of the Government that they would provide for and
give all facilities to enable them to run the factory.
After the management was taken over there were disputes
between the management and workers with the result that they
referred various matters for adjudication including the
claim for implementation of the recommendations of the
Central Wage Board for sugar. The disputed items related to
categorisation of workers their fitments, fixation of work
load, the demand for increase of Rs. 10 to be given to every
worker over the basic wage implementation of weight age,
dearness allowance. the demand for giving grades and for
giving retrospective effect etc. On issue No. IA the
Tribunal held that categorisation of workers and their
fitments and work load should be in accordance with the
recommendations of the Wage Board; it decided in favour of
the management in respect of certain categories of workers
but in respect of some others it gave relief to the workers.
The Tribunal further held in respect of issue. 2 and 5
before it that the financial capacity of the Appellant was
not such as to justify an increase of Rs. IO to all the
workers over the basic wage and dearness allowance or the
payment of Rs. 5 to workmen for implementation of the
weightage recommended by the Wage Board. Appeal No., 1602
of 1966 was filed in this Court by special leave by the
management against the Award of the Tribunal in respect of
issue IA in so far as it went against them. Appeal No. 1603
of 1966 was filed by the workers against the Tribunal’s
decision on issues 2 and 5 and that part of issue IA which
went against them. The questions that fell for considera-
tion were : (i) whether the recommendations of the Wage
Board were vitiated by the fact that they had fixed the
wages uniformly region-wise without further classification
within each region; (ii) If they were valid, whether the
Tribunal could go into the question of the financial
capacity of the company to implement them; (iii) whether the
company had the financial capacity to implement the
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recommendations.
HELD : The Wage Board following the principles laid down by
this Court has considered the capacity of the industry
region-wise and has also fixed wages different from region
to region having regard to the difference in the capacity of
the Industry region wise. Further it has given good reason
for not furnishing a criteria for further classification of
the industry within the region. In these circumstances
prescribing the same wage for all units of industry in the
same region was justified and the fact that the
429
industry in the region had not been divided into classes
could not vitiate he recommendation of the Wage Board. [441
F-G]
Workmen of Shri Bajrang Jute Mills Ltd. v. Employers of
Shri Bajrang lute Mills Lid., [1969] 2 S.C.R. 593, explained
and distinguished.
Express Newspaper (P) Ltd. v. Union of India & Ors., [1959]
S.C.R. 12 and French Motor Car Co. Ltd. v. Workmen, [1963]
Supp. 2 S.C.R. 16, referred to
However, notwithstanding the fact that a fair wage has been
fixed by the Board which would be applicable to all the
units in the region for which wage has been fixed, it may be
open to any particular unit to plead that in fact its
financial position is not such that it can bear the burden
of implementing the recommendations. The justification of
the plea of want of financial capacity will depend upon the
evidence of its financial position over a period of years,
to show that it cannot bear the burden or that it is only a
temporary or fortuitous situation with every possibility of
financial improvement in the immediate future [442 E; 443 C]
Ahmedabad Mill Owners’ Association etc. v. Textile Labour
Association, [1966] 1 S.C.R. 382, relied on.
The Appellant’s balance sheets for the years 1960 to 1970
for a period of 10 years showed that except for the year
ending 30-6-69 the company was not in a position to declare
any dividends. Though the factory appeared to have been
expanded after 1964 to 300 tons capacity it did not show
uniform net profits; on the other hand losses continued.
The profits that it made in any year seemed to be consumed
by losses of the previous years. Various factors
contributed to financial unsteadiness. [448 G-H]
This being the position the Tribunal was justified in
holding that the Appellant did not have the financial
capacity to bear the burden of payment of Rs. 10 increase
and Rs. 5 as weightage in accordance with the re-
commendations of the Wage Board. On this conclusion and
also on an examination of the relevant material it was
evident that the company was not in a financial position to
meet the burden of implementing the recommendations of the
Wage Board. Despite this the company had implemented the
award in respect of a large number of workers both as to
categorisation and fitment except in regard to four
categories. The claim, of the Respondent workmen for
categorisation and fitment in accordance with the Award in
regard to these could not, in the circumstances, be
accepted.
[448 H-449 G]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1602 and
1603 of 1966.
Appeals by special leave from the Award dated November 19,
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1965 of the Industrial Tribunal, Andhra Pradesh, Hyderabad
in I.D. No. 23 of 1965.
K. Srinivasamurthy, Naunit Lal and Swaranjit Sodhi for the
appellant (in C.A. No. 1602 of 1966) and ’the respondent in
C.A. No. 1603 of 1966).
M. K. Ramamurthi and Vineet Kumar, for respondent No. 2
(In C.A. No. 1602 of 1966) and the appellant (in C.A. No.
1603, of 1966).
840Sup.CI/71
430
The Judgment of the Court was delivered by
P. Jaganmohan Reddy, J. These are two appeals by Special
Leave. Civil Appeal No. 1602 of 1966 is by the Management
against the Award passed by the Industrial Tribunal on a
reference made by the Government for categorisation of
workers, ,their fitments, fixation of work load, the demand
for increase of Rs. 10/- to be given to every worker over
the basic wage, implementation of weightage, dearness
allowance, the demand for giving grades and for giving
retrospective effect etc. Civil Appeal’ No. 1603 of 1966 by
the Workmen is against the same Award for disallowing. the
increase of Rs. 10/- and the weightage of Rs. 5/and also
against the fitment of certain categories of workers. The
Tribunal held that the financial capacity of the Appellant
was not such as to justify an increase of Rs. 10/- to all
the workers over the basic wage and dearness allowance. On
the same grounds it also disallowed the payment of Rs. 5/-
to workmen for implementation of the weightage recommended
by the Wage Board for Sugar Industry. These were the
subject matter of issue 2 and 5 of the reference made to the
Tribunal. So far as issue IA is concerned, it held that
categorisation of workers and their fitments and work load
should be in accordance with the recommendations of the Wage
Board for Sugar and even as to these it decided in favour of
the management in respect of certain categories of workers
but in respect of some others, it gave relief to the
workers. The employers appealed against that part of issue
1A which was decided against them, while the Workmen’s
Appeal is against the finding of issues 2, 5 and part of IA
which was against them. We will first take up the appeal of
the Management.
It appears that the Kirlampudi Sugar factory was started in
1951 as a small unit and later was increased to a larger
crushing capacity of 1,000 tons which according to the
Tariff Commission would not be considered economically
profitable, though according to the Sugar Wage Board it
would be. By 1963 the factory got into, financial
embarrassment as it had to pay heavy debts to the Government
on account of Sugar cess, cane prices payable to the growers
and Income-tax. These demands it is alleged practically
brought the factory to a stop, when in the middle of 1963
the present management took over the factory on the specific
assurance from the Government that they will provide for and
give all facilities to enable them to run the factory.
After the management was taken over there were disputes
between the Management and workers with the result that they
referred various matters for adjudication including the
claim for implementation of the wage Board’s recommendation
which was alleged to have been implemented by the former
management as early as 1961-62. It was the case of the
workers that implementa-
431
tion was not satisfactory and it was their demand that the
sugar wage board’s recommendations should be implemented.
The management raised a specific objection before the
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Industrial Tribunal that the reference relates to a
wholesale promotion of workers from one grade to the other
under the guise of fitment under the Wage Board’s
recommendations which is illegal and without jurisdiction;
and in any case the question of promotion, categorisation
and fitment is a managerial function in which the Tribunal
cannot interfere unless it can be established that the
management acted mala fide or it resorted to unfair
practices. It was further pleaded that the factory had not
the financial capacity to implement the demand. One of the
grievance of the Appellant was that though the Tribunal
found that it had not the financial capacity to meet the
additional burden of the demands made by the workmen it
granted large scale promotions which it had no jurisdiction
to grant. Despite this the management states that it had
implemented the Award in most of the cases and challenged it
in respect of some only.
It may be mentioned that the Central Wage Board for Sugar
was appointed in terms of paragraph 25 of Chapter XXVII of
the Second Five Year Plan. This Wage Board for Sugar Indus-
try divided India into 4 regions and each region included
every State containing even a single unit unlike that
adopted by the Tariff Commission which in its Report on the
cost structure left out some of the States from the 4
divisions. It then considered the wage structure,
categorisation etc. for each of the said regions, in
relation to a fair cross-section of the Industry in each of
the regions. In comparison with this method, the Jute Wage
Board had taken India as a whole and fixed a uniform rate
for the Jute industry. The first contention which has been
urged is that the recommendations of the Wage Board were not
binding in view of the fact that it was not a statutory
board but was only a recommendatory one and the Tribunal
could not implement them as a whole because it had
recommended that fitments and categorisation should be
affected by recourse to Tripartite machinery. The case of
Workmen of Shri Bajrang Jute Mills Ltd., v. Employees of
Shri Bajrang Jute Mills Ltd.(1), is cited as an authority
for the proposition that as the procedure prescribed therein
was not valid, the recommendations of the Wage Board were
declared to be invalid and inapplicable to the Jute
Industry. The learned Advocate on behalf of the Respondents
raised a preliminary objection to the maintainability of
this contention as this issue had neither been referred to
the Tribunal, nor has it been urged before it nor had a
ground been taken in the Special Leave Petition. He seeks
to distinguish the case of the Bajrang
(1) [1969] 2 S.C.R. 593.
432
Mills, as in that case there was a specific issue while
there is none in this case. In answer it is pointed out
that the contention raised on behalf of the Respondents is
implicit in issue 1 (a) which is as follows :
1(a) "Whether the demand for categorisation of
workers and their fitment and work load should
be in accordance with the recommendations of
the Wage Board for Sugar industry is
justified".
The Appellant had in its statement before the Tribunal in
para 9 categorically challenged the recommendations of the
Wage Board in these words : "It may be noticed even though
the Wage Board recommendations are not binding, in spite of
huge losses the management went out of the way and
implemented the same". In the Special Leave Petition also
in paragraph 2 the Appellant had challenged the jurisdiction
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of the Tribunal "to go into the question of the capacity to
pay of an individual unit in respect of one of the
recommendations of the Wage Board for Sugar industry when
such recommendations had been made for the industry as a
whole and agreed to by the Management itself".
It is therefore contended that if the financial capacity is
taken into account for placing fitments on the basis of
Bajrang Jute Mills, no other question arises. In the
Bajrang Mills case(1) it was held that fixation of fair wage
depends on the financial capacity but once when the Tribunal
had held that the Appellant did not have the financial
capacity the categorisation and fitments directed by it in
its Award are invalid. The Tribunal is concerned with the
implementation of the Wage Board recommendation forgetting
that it cannot do so when the implementation of those
recommendations relating to categorisation and fitment
cannot be effected without recourse to the Tripartite
machinery. It is also contended that categorisation and
fitment is a managerial function and requires technical
knowledge of the various duties ,and functions which each of
the category of workmen have to discharge. The following
contentions have been urged, namely :
(1) The Wage Board recommendations having regard to the case
of Bajrang Jute Mills are invalid and cannot be enforced,
inasmuch as it has fixed a uniform wage for the entire
region without further dividing the industry in the region
into classes of units according to their capacity namely
region-cumindustry for fixation of the wage structure for
those classes of units. At any rate since what is
prescribed in the report is ,only recommendatory, unless
there is a capacity to pay, no one can claim its
implementation as of right.
(1) [1969] 2 S.C.R. 593.
433
(2) The Appellant has not the financial capacity to imple-
ment the Award which has been held by the Tribunal to be a
fact. On this score itself it cannot implement the Award.
(3) In para 263 of the Wage Board recommendation of 1960
that when there is a difference between management and
labour regarding fitment the Tripartite machinery should be
brought into existence. The Tribunal was wrong in thinking
that the Wage Board was giving an example of border-lines
cases where there may be a difference of opinion and it is
only in those cases that the Tripartite machinery in the
case of fitment is to be resorted to.
(4) Fitment is a managerial function and unless the
Tribunal finds that the Act of the management is mala fide
or it has resorted to unfair practices it is not justified
in interfering with the fitments effected by the management.
(5) In any case in respect of certain specific fitments the
Tribunal was in error and acted without evidence.
Before dealing with these contentions it is necessary to
consider the preliminary objection raised on behalf of the
Respondents that before the Tribunal the Appellant did not
object to the implementation of the Wage Board on the ground
that its recommendations were not industry-cum-region wise
or that it had not divided the industry into various classes
and fixed a wage for those classes in that region, and in
any case no such issue was referred to the Tribunal unlike
in the Bajrang Jute Mills case(1). In that case what was
referred to the Tribunal was whether the demand of the
workmen in Shree Bajrang Mills Ltd., for implementation of
the recommendations of the Central Wage Board for Jute
Industry is justified, and if so, to what extent. In this
case issue IA did not specifically raise an objection to the
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implementation of the Sugar Wage Board’s recommendations in
general terms but issues 1, 2, 4, 5 & 6 did raise the
question whether the Board was justified in its
recommendations regarding categorisation of workers,
fitment, increase of Rs. 10/- to every worker over the basic
wage, dearness allowance, the minimum wage, the demand for
fixation of work-load and the demand for implementation of
weightage. Apart from this a question seems to have been
raised that the Tribunal could not implement the Wage Board
recommendations because it had envisaged the implementation
of the categorisation etc. through the Tripartite machinery,
as such as Tribunal had no jurisdiction to implement it. It
would appear from the Award that the learned Advocate for
the Appellant had challenged the jurisdiction of the
Tribunal to fix the workload or undertake the fitments in
view of the recommendations in paragraph 263 of the Wage
Board’s report
(1) [1969] 2 S.C.R. 593.
434
that fitments have to be effected by the Tripartite
machinery to be appointed by the Government. Even in the
statement of claim filed on behalf of the management it was
said that though the Wage Board’s recommendations are not
binding in spite of the huge losses the management went out
of the way and implemented the same. The fact that it was
said that the Wage Board recommendations are not binding is
pressed into service to- support the contentions that the
validity of the recommendations of the Wage Board was
challenged. While we are inclined to agree with the
submission of the learned Advocate for the Respondents that
no where except in the statement of the case before this
Court has a specific plea that the recommendations of the
Wage Board not being in accordance with the well accepted
principles laid down by this Court in the several cases to
which reference has been made cannot be implemented and on
that account the Tribunal has no jurisdiction to implement
those recommendations it may nonetheless be pointed out that
issue 1A and other issues in terms challenge the
implementation of the recommendations. Even if we permit
the learned Advocate for the Appellant-and we think there is
justification for it-to challenge the Wage Board’s
recommendations generally, for reasons which we will
presently give, those recommendations do not suffer from any
vice but on the other hand the Board has fixed a fair wage
for the industry in accordance with the principles laid down
by this Court.
Since a good deal of argument is based on the recommenda-
tions of the Wage Board it may be profitable to examine
generally the factors which were taken into consideration in
fixing the wage structure for the industry. The Wage Board
as has already been noticed adopted the method employed by
the Tariff Commission by dividing the country into four
zones or regions but unlike it included every State in each
region which had even one unit. It further took these
regions which were considered for fixation of price
structure of sugar also for wage structure in this industry.
In adopting this course the Wage Board took into
consideration the seasonal nature and the duration, the
sucrose content of sugar cane and its yield which varies
from region to region. It was noticed that the duration of
seasons vary somewhat widely from area to area depending on
the availability of cane and the year to year variation. As
a consequence of some of the factories in the South owning
their own sugar-cane farms while this is not so in the
North, the Southern factories do not suffer from the
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handicap of Northern factories which have to get sugar cane
from nearby growers depending on the conditions of the crop
in the vicinity which is not destroyed by pest or is
unsuitable for any other reason, for otherwise to get the
sugar-cane from growers from long distance would involve
transport
435
costs. This disadvantage the Southern factories do not
have. The quality of cane as determined by the sucrose
content varies from area to area depending on climatic
conditions, irrigation facilities and cane development
activities. Factories in Maharashtra and to some extent
those in the North enjoy these advantages. Their recovery
percentage is higher than in the North. Thus the average
percentage of recovery of sugar in Maharashtra was noted to
be the highest as against those in U.P. and Bihar and also
as compared with the All India average. The variation in
the yield of cane per acre was also taken into
consideration; for instance in Bombay it is much higher than
in the North. The Board indicated the main factors
responsible for variation in the yield of sugar cane in
different regions due to : (1) Improved variety of cane; (2)
irrigation facilities; (3) ecological factors; and (4)
improved methods of cultivation. The difference in the case
of yield in ,the various areas has been one of the factors
which the Board said had persuaded it to divide the country
into four regions.
Though the industry is rural based, it was stated the price
of essential commodities in townships where sugar factories
are located, did not vary appreciably from the urban areas.
In spite of the urban amenities not being available in these
factory areas, the Board noted that while the impact of the
wages it worked out, on the economy of the country has been
taken into account, it was not proper to take agricultural
wages as the prevailing rate of wages for comparison.
Further it appeared to the Board that the Sugar industry was
a highly regulated industry where the minimum cane price is
fixed by the State and higher price depending upon the
quality of the cane is to be paid according to the price
linking formula laid down by the State and that even the
ex-factory price for the finished product is fixed by the
State in the North and some other States have fixed prices
at least for one of its by-products and molasses. The price
’fixation in the North it is observed has its effect on the
price of sugar in the South where normally sugar cannot be
sold for a price higher than fixed in the North plus the
freight.
The Board also set out the procedure followed by it in as-
certaining the financial capacity and profitability of the
industry region-wise by calling for the balance-sheets of
all the factories for a period of 10 years and undertook
detailed studies for 8 years beginning from 1951 which
corresponds to the beginning of the First Five Year Plan.
However, out of the balance-sheets of 118 Companies,
balance-sheets for 8 years were available in respect of 87,
8 Companies supplied balance-sheets for 7 out of 8 years and
among the rest balance-sheets were available for one or more
years. The Board thought that this data is fairly
436
well, if not absolutely, comparable from year to year.
Where a Company owned two or more factories in the same
State or region it was decided to consider only the combined
balance sheets for the number of factories covered, because
splitting the combined balance-sheets over the number of
factories did not serve the end in view. However, where a
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Company had under its management two or more factories in
different States but in ,the same region, it was decided to
exclude it from State-wise study and include it in the
regional total. It also took into consideration some of the
Companies which along with the sugar manufacture carried
other manufacturing activities. Then it also applied ’the
dividend tests, examined the main profitable ratio,
considered the total dividend as coverage by paid up
capital, compared gross profits and total capital employed
and profits and profitability in relation to per day
crushing capacity from 1955-58. A region-wise analysis of
financial data was made and the same was also distributed in
different ranges of daily crushing capacity. In so far as
South region is concerned in which the Appellant’s unit is
located it was observed that "the factories seem to have
been more or less evenly distributed among all the regions".
Analysis of financial data region-wise was also made
according to different crushing capacity ranges for each of
the years 1955 to 1958 under different heads namely, gross
profits, sales, total capital employed, profits after tax,
ordinary dividend, ordinary paid up capital total dividends,
total paid up capital, profits before tax, taxation
provision, retained profits and net worth.
After taking into consideration the several factors in
detail the conclusions of the Tribunal are summed up as
under :
(a) "the profit margin whether on sales or
on total capital employed, or on the net
worth does not appear to bear any set
relationship increase or decrease
consistently-with the size of the Company.
The trends are mixed and irregular. This
observation is equally applicable ’to other
ratios and also to the allocation of profits.
It does not seem possible from these studies
to locate any optimum size of the factory in
respect of any region. The reason probably is
that profits depend not only on the size of
the factory but on various other factors e.g.
efficiency of management, condit
ion of
machinery, availability of raw materials and
efficiency of workers;
(b) However, considering the overall position
it is evident that with no outside competitor
in the field, with a consuming public
increasing and with national income which is
rising, the industry has a good future.,
437
In spite_of high taxation, high Government
imposts ’by way of cess rise in price of raw
material rise in freight charges and in some
regions higher labour charges owing to recent
revision of wages the demand for white sugar
has been increasing and most of the existing
sugar mills have been fairing well. Many of
them have expanded their capacity and new
units are fast coming into operation.
Progress of the industry has been rapid....
but the increase in taxes has hit the retained
earnings particularly in the case of North and
Central region companies.
(c) Taken region-wise, the’ financial
position of Maharashtra is the best. It has
natural advantages. The yield of cane per
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acre is higher. Its quality is better. A
large number of the factories have their own
farms. The cooperative have also assured
supply of cane. The cane growers are the
share-holders. Then comes the South region.
North region occupies the third position and
Central region the last. In cess: Punjab,
West Bengal, Madhya Pradesh, Rajasthan, Madras
and Kerala enjoy some advantage with no or
lower rates per maund of cane.... It may be
added here that recovery in some of these
States is lower than the average of the
country’.
It would appear therefore that the Board took into
consideration the special features of the sugar industry and
all the relevant factors with great care and perspicuity and
fixed a fair wage for the industry in each of the regions.
What is was called on to, assess is the fair wage which as
it may be noticed according to the Report of the fair wage
Committee was that which whiledetermining the capacity of an
industry to pay, it considered it to be wrong to take the
capacity of a particular unit or the capacity of all
industries in the country, into account. The relative-
criterion should be the capacity of a particular industry in
a specified region and as far as possible same wages should
be prescribed for all units in that region. It will
obviously not be possible for the wage fixation Board to
measure the capacity of each of the units of an industry in
a region, as such the only practical method is to take into
consideration a fair cross section of that industry. This
is what in fact the Board has don,--. The minimum wage that
has to be paid is as interpreted by this Court in Express
Newspapers (Pvt.) Ltd. v. the Union of India & Ors.(1)
different from the subsistence wage "which has got to be
paid to the workers irrespective of the capacity of the
industry to pay while the minimum wage is something more
than the bare mini-
(1) [1959] S.C.R. 12.
438
mum or subsistence wage. It further observed "The minimum
wage thus contemplated postulates the capacity of the
industry to pay and no fixation of wages which ignores this
essential factor of the capacity of the industry to pay
could ever be supported". In that case the Court also
observed at page 90 : "that the capacity of an industry to
pay should be gauged on an industry-cum-region basis after
taking a fair cross section of that industry. In a given
case it may be even permissible to divide the industry into
appropriate classes-and then deal with the capacity of the
industry to pay class-wise" the classification into classes,
it will be seen is not an obligatory one but is required
only in cases where otherwise a fair wage cannot be
determined. Any injunction that the industry in a region
should in all cases be divided into classes in determining a
fair wage for that industry would on the other hand likely
to introduce greater disparity.
A reference has been made to the case of French Motor CarCo.
Ltd. v. Workmen(1) for the proposition that large units
ought not be compared with small units even where the Board
is considering the wage structure on industry-cum-region
basis. No doubt in that case the Tribunal had gone into the
history of the wage revision in the undertaking and having
regard to- a large increase in the cost of living found that
a case for further revision was made out notwithstanding the
fact that wage scales were the highest in the industry. In
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Appeal this Court held that it was settled law that in
fixation of wage scales, dearness allowance and similar
conditions of servic an industrial Court has to proceed on
industry-cum-region basis and compare similar concerns in
the region which would be those in the same line of business
as the concern in dispute. But such comparison must not be
between a small struggling concern and a large flourishing
one.
These cases were considered in Worknen v. Bajrang Jute
Mills(2) to which one of us was a party (Vaidialingam, J.).
That case was considering the Report of the Jute Wage Board
which in making recommendations for the industry adopted a
different approach. The Wage Board took the whole of India.
as one unit while in fact almost all the Jute Mills were
situated in West Bengal and a few in Bihar and still fewer
in Andhra Pradesh. What the Wage Board did was to compare
20 Mills from West Bengal and 9 mills from the rest of India
as representing a fair cross section of the industry. The
Respondents have a fairly small unit in Andhra Pradesh which
was considered as a comparable unit with two larger mills in
the State and with some of the prosperous Mills in West
Bengal. The management of the Mill refused to accede to the
demand of the workman
(1) [1963] Supp. 2 S.C.R. 16.
(2) [1969] 2 S.C.R. 593.
439
to pay the wages in accordance with the recommendations of
the Wage Board, fixing uniform wage scale for the industry
on the plea that the Mill had no financial capacity to bear
the burden of the wage scale’ On the dispute being referred
to the Tribunal it upheld the claim of the management. This
Court in Appeal sustained the Award of the Tribunal that the
payment of the workmen for implementation of the,
recommendation of the Wage Board is not justified. In this
connection at page 609-610 it was observed by reference to
the manner in which the Wage Board had laid down uniform
scales for the entire industry irrespective of where its
several units were situate and of the different conditions
prevailing in various areas, that it would have been better
if it had "considered the units in each area separately and
deter-’ mined the wage-scales for each such area by taking
from that area a representative cross.-section of the
industry where possible or where that was not possible by
taking comparable units from mother industries within that
area, thus following the principle. of industry-cum-region".
It was further observed :
"It is true that in doing so uniformity of
wage scales for the entire industry would not
have been attained. But in a vast country
like ours, where conditions differ often
radically from region to region and even the
index of living differs within a fairly wide
range, such a target cannot always be just or
equitable. If the wage scales had been
determined by the Board in the manner
aforesaid, even though the Board is not a
statutory body and consequently its decision
are of a recommendatory character, it would be
possible for industrial tribunals to give due
weight to its recommendations as such
recommendations would have been in conformity
with the principle of industry-cum-region, a
principle binding on the tribunals. It would
be difficult in that event for any unit in the
industry in that region to propound a
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grievance that its capacity to pay was not
taken into account as the scales so framed
would have been determined after taking into
consideration scales prevailing in comparable
units, whether in that industry or other
industries in that region depending on whether
in a particular area the accent was on the in-
dustry part or the region part of the
principle of industry-cum-region".
The learned Advocate for the Appellant lays stress upon the
observation contained at page 607 where while dealing with
the Express Newspapers case, this Court had observed :
the requirement of considering the capacity of
each individual unit to pay may not become
neces-
440
sary if the industry is divided into different
classes. Even if the industry is divided into
different classes it will AM be necessary to
consider the capacity of the respective,
classes to bear the burden imposed on them.
For this purpose a cross-section of these
respective classes may have to be taken for
careful consideration for deciding what burden
the class considered as a whole can bear".
These observations must be read in the light of what was
earlier stated namely "as the Wage Board was fixing a fair
wage for the entire jute industry it may not have been
strictly necessary to consider the financial capacity of
each individual unit". There is nothing in the Bajrang Jute
Mills case(1) which makes it obligatory on a Wage Board to
divide the industry into regions as well as classes or to
examine the financial capacity of every unit in that
industry in the region, irrespective of the conditions
prevailing in the different regions of that industry. As
long as all relevant factors appertaining to that ’industry,
industry-wise and region-wise have been considered and the
capacity of a fair cross section of that industry to pay in
that region has been ascertained, ,the recommendations of
the Wage Board cannot be held to be invalid. It is not in
every case that a division into classes in the same region,
on a unit-wise capacity should be made before re-
commendations of the Wage structure, dearness allowance or
other conditions of service in that industry could be held
to be fair and within the financial capacity of the industry
in that region. The criteria on which the recommendations
of the Jute Wage Board were held not to be in accordance
with the principle laid down by this Court in Bajrang Mills
case do not form the basis of the recommendations of the
Sugar Wage Board. The Sugar Wage Board not only divided the
industry into regions as already pointed out but on the
other hand found that there was no great disparity in the
region nor did the size of the unit make any difference. It
standardised the wage structure, it adopted a
standardisation of nomenclature by taking note of the
various nomenclatures used in the industry and defined the
qualification for each of the categories. The predominant
conditions for wage structure which weighed with the Board
were that firstly in view of the great unemployment nothing
should be done to reduce the existing employment but on the
other hand efforts should be made to increase it. Secondly
the need for increase in production was paramount and any
action likely to reduce it should be studiously avoided as
far as possible. Thirdly the capital should not be idle for
if a wage structure is evolved which leads to the closure of
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any unit or units, a number of persons will be thrown out of
employment, production will be
(1) [1960] 2 S.C.R.595
441
reduced and capital invested in them will become idle.
Keeping these considerations in view the Board determined
the wage Structure which it recognised may be lower than
norms laid down by the Fifteenth Labour Conference but the
fact that there is a tremendous rush for employment in
factories is proof that the wages recommended by it are
higher than the rates fixed under the minimum Wages Act in
industries to which that Act applies or those prevailing in
the open market. It also took into consideration the
economic units in the regions which as accepted by it is a
unit having a crushing capacity of atleast 800 to 1000 tons
thought it has noted that the majority of sugar factories
have a crushing capacity higher than this and several of
those having uneconomic size have already applied for
expansion. According to the Board there were only 38
factories which were below 800 tons crushing capacity but a
good many of them were making profits. However, there are
some which are running at loss and for them the Board
recommended that some consideration should be given to
adjust themselves which should be the same as these given to
new factories. This is what the Board stated in Chapter
XIII at page 111 :
"The conclusion is that except some cases
other units below 800 tons are making profits.
The examination is set out in the Annexure to
this Chapter. The Board is of the view that
relaxation in wages is not the real remedy for
those uneconomic units. They will have to
fall in line with the scheme of wages recom-
mended by the Board. The real remedy for them
is to expand themselves into economic units".
It would therefore appear that the Wage Board following the
principles laid down by this Court has considered the
capacity of the industry region-wise and has also fixed
wages different from region to region having regard to the
difference in the capacity of the industry region-wise.
Further it has given good reason for not furnishing a
criteria for further classification of the industry within
the region. In these circumstances prescribing the same
wage for all units of industry in the same region is in our
view justified and the fact that the industry in the region
has not been divided into classes cannot vitiate the
recommendations of the Wage Board.
It is contended on behalf of the Appellant that while this
is so and the wage fixed is a fair wage for the industry in
that region and cannot be challenged nonetheless the
Tribunal is not precluded from considering a plea by any
particular unit that in fact its financial position is such
that it cannot bear the burden of implementing the
recommendations of the Wage Board. The learned Advocate for
the Respondents however, counters this on
442
the ground that once a wage has been fixed by the Board as a
fair wage on industry-cum-region basis, whether those recom-
mendations are statutory or otherwise, no plea by any
individual unit that it has not the capacity to implement
the recommendations, can be entertained. He asks whether an
Industrial Tribunal to which a dispute regarding the
fixation of wage is referred fixes a wage structure, is it
open to any particular unit to say that it is unable to pay
? If this is not so, on the same parity of reasoning it is
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contended that no unit in a region can be permitted to plead
that it has not the financial capacity to implement the Wage
Board’s recommendations. It appears to us that if in law
it, is open to the unit to plead financial inability to
implement the recommendations of the Wage Board the
hypothesis on which the question has been posed will not be
relevant because in such a contingency as is envisaged there
would be a specific issue and a determination of the wage
structure by the Tribunal will be on the evidence produced
before it according to the financial capacity of the unit.
Once this is finally determined, the unit cannot continue
to assert that it has no financial capacity to implement the
Award.
In our view there is warrant for the submission of the
learned Advocate for the Appellant that notwithstanding the
fact that a fair wage has been fixed by the Board which
would be applicable to all the units in the region for which
wage has been fixed, it may be open to any particular unit
to plead that in fact its financial position is not such
that it can bear the burden of implementing the
recommendations. In Ahmedabad Mill Owners’ Association etc.
v. The Textile Labour Association(1), the observations of
this Court at page 421 lend support to our conclusions.
Gajendragadkar J, delivering the Judgment of this Court
observed at page 421
"The other aspect of the matter which cannot
be ignored is that if a fair wage structure is
constructed by industrial adjudication, and in
course of time, experience shows that the
employer cannot bear the burden of such wage
structure, industrial adjudication can, and in
a proper case should, revise the wage
structure, though such revision may result in
the reduction of the wages paid to the
employees. It is true that normally, once a
wage structure is fixed, employees are
reluctant to face a reduction in the content
of their wage packet but like all major
problems associated with industrial
adjudication, the decision of this problem
must also be- based on the major consideration
that
(1) [1966] 1 S.C.R. 392
443
the conflicting claims of labour and capital
must be harmonised on a reasonable basis; and
so, if appears that the employer cannot really
bear the burden of the increasing wag.-, bill,
industrial adjudication, on principle, cannot
refuse to examine the employer’s case and
should not hesitate to give him relief, if it
is satisfied that if such relief is not given
the employer may have to close down his
business. It is unlikely that such situation
would frequently arise but, on principle, if
such situations arise, a claim by the
employer
for the reduction of the wage structure cannot
be rejected summarily".
Of course the justification of the plea of want of financial
capacity will depend upon the evidence of its financial
position over a period of years, to show that it cannot bear
the burden or that it is only a temporary or fortuitous
situation with every possibility of financial improvement in
the immediate future. It is accordingly contended that an
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examination of the financial position would show that the
Appellant is not in a position to implement the
recommendations and that even the Tribunal had recognised
this position when it refused to implement an increase of
Rs. 10/- to all the workers over the basic wage and’
dearness allowance, and Rs. 5/- as weightage to certain
categories of workers. It would appear from the statement
of the, Company as evidenced by Ex. M. 51 that it had
secured and unsecured debts for each of the four years as
follows
----------------------------------------------------------
Debts Debts
secured unsecured
-----------------------------------------------------------
Rs. Rs.
1960-61 73,59,3448,13,263
1961-62 67,78,2702,64,982
1962-63 32,31,43828,06,000’
1963-64 32,99,59918,71,522
---------------------------------------------------------
207,68,651 57,55,767
-----------------------------------------------------------
The details of debts would show that they are far in excess
of the paid up share capital and even taking the profit and
development rebate reserves and other reserves into account
the financial position of the Company is certainly bad. A
reference has also been made to the notices issued by the
Revenue Divisional Officer, Ex. M. 53 for showing that on
30th December 1962, a sum of Rs. 15,91,777-11 ps. was due
towards Sugar cane cess for 1958-62 and a sum of Rs. 11.66,
718.37 ps. towards cane price in accordance with the details
given thereunder. Subsequently it would appear from Ex. M.
53/1 that notices under Sec. 53 of
444
the Revenue Recovery Act were also issued by the Revenue
Divisional Officer, Kakinada for the recovery of these
amounts. There were also other notices and a press note
published in the Indian Express showing that the Government
was going to auction the Sugar Mills for recovering its
dues. The Minister concerned is reported to have said that
its Department was taking action to collect its dues as
arrears of land revenue.
It is on the other hand contended that the Appellant’s unit
is an economic unit and has been expanded into a 1000 ton
unit in 1956 and there is nothing to show thereafter what
its financial ,position was. In any case the profit and
loss figures for the four years starting with 1960 would
indicate that there was loss only in one year whereas in all
the other three years there was profit and from this we are
asked to conclude that the Appellant company was in a sound
financial position. No doubt any unusual profits or losses
in any year due to advantageous circumstances should not be
allowed to cloud the decision one way or the other. In
Ahmedabad Mill Owners Association case it was observed at
,page 420-421 as follows
"It is a long-range plan; and so, in dealing
with this problem, the financial position of
the employer must be carefully examined. What
has been the progress of the industry in
question; what are the prospects of the
industry in future; has the industry been
making profits; and if yes, what is the extent
of profits; what is the nature of demand which
the industry expects to secure; what would be
the extent of the burden and its gradual
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increase which the employer may have to face ?
These and similar other considerations have to
be carefully weighed before a proper wage
structure can be reasonably constructed by
industrial adjudication, vide Express
Newspapers (Private) Ltd., and Another v.
Union of India & Others. Unusual profit made
by the industry for a single year as a result
of adventitious circumstances, or unusual loss
incurred by it for similar reasons, should not
be allowed to play a major role in the
calculations which industrial adjudication
would make in regard to the construction of a
wage structure. A broad and overall view of
the financial position of the employer must be
taken into account and attempt should always
be made to reconcile the natural and just
claims of the employees for a fair and higher
wage with the capacity of the employer to pay
it; and in determining such capacity,
allowance must be made ,for a legitimate
desire of the employer to make a reasonable
profit".
445
Bearing these observations in mind, it is necessary to
determine what the position of the Appellant is ? The
conclusion of the Tribunal in respect of the claim for
increase of Rs. 10/- is that having regard to the balance-
sheets ",the profits made in the 4 years are about Rs. 4
lakhs and the loss sustained in 1962-63 is of Rs. 16 lakhs
and after wiping it off to some extent by sale of debentures
it is about Rs. 9 lakhs. This will show that the financial
position of the concern is not satisfactory". After noting
that except for this one year the concern has always been
making profits, it went on to observe : "Still, to judge the
financial position of a concern, it is always relevant to
see what are its reserves. It appears from the balance-
sheet that the reserves have never risen beyond Rs. 8 lakhs
or so. In the circumstances, it appears to me that it will
be difficult to hold that the financial position of the
Company is sound. 1, therefore, agree with learned Advocate,
that it has not the financial capacity to implement this
increase of Rs. 10/- over and above the fitment in the grade
recommended by the Board. I hold accordingly". The comment
of the learned Advocate for the Respondent is that these
losses did not preclude the management from accepting the
recommendations of the Wage Board and willingly agreeing to
its implementation. In a letter dated the 18th December ’61
to the President of the Workers Union, the Management stated
that as per their talks on 10th December ’61, it accepts the
implementation of the Wage Board recommendations and will
pay from December ’61 onwards salary as per fitments made by
it. Final figures and fitments will be made after the
Government Tripartite Committee comes and discusses with it
and the Union and arrives at a decision. It also promised
to pay the difference in the wage as per wages paid till the
month of November 1961 and the Wage Board fitments as made
by them will be paid to the workers before the end of March
1962. Again in the agreement between the Management and the
employees under see. 18(1) of the Industrial Disputes Act
dated 19-9-63 it was Specifically stated that "the question
of fitments will be taken up as per the Sugar Board’s
recommendations in the month of January 1964 and finalise
before the end of the 1963-64". Even at that stage it was
never the case of the Management that the Wage Board’s
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recommendations could not be implemented. Even the new
management in its letter of September 5, 1964 addressed to
the Union (Ex. W. 36) stated:
"With a view to arrive at an amicable
settlement with regard to fitments a
discussion had taken place between the members
of the Tripartite Committee constituted by the
Commissioner of Labour and it was agreed
during the discussions among other matters,
that
10-LI340 Sup. CI/71
446
(1)Wherever there is a standard
nomenclature in the Wage Board Report
corresponding to the previous designation held
by an individual before November 1960, he will
be given that designation provided the duties
and responsibilities of the individual are
similar to the duties assigned by the Wage
Board.
(2)In other cases, where no standard
nomenclature can be applied to the existing
cadre, the cadre will be fixed with reference
to duties and responsibilities and the time
scale of pay attached to the cadre in factory
before November 1960".
From the several exhibits it would appear that both old and
the new management were anxious to implement the Wage
Board’s recommendation but according to the fitments made by
it. But the employees as represented by the Workers Union
were not prepared to accept those fitments and wanted
fitments in a higher cadre and other advantages according to
their reading of the Wage Board’s recommendations which the
management felt, it is not able to accommodate not only
because those recommendations did not justify it but on the
ground of financial incapacity.
No doubt it is for the management to show what its financial
position is and how it is going to place undue or impossible
burden upon it to implement the recommendations. That
burden it seeks to discharge by production of the balance-
sheets which have not been challenged and the contents of
which are, therefore deemed to have been accepted. We find
from the balance sheet and the Directors Report for the
period ending 30-6-60 that a sum of Rs. 6,15,254/- had to be
written off against the old losses leaving a balance of Rs.
40,774/- in the profit and loss account. The Directors
thought that the Company’s financial position has now been
stabilised and all the old losses have been wiped off but
that hope was only short lived as the subsequent balance-
sheets for the period ending 30th June ’61 would show.
According to the report for 1961 though there was a net
profit of Rs. 1,08,005/- which together with the carry
forward profit of the previous year of Rs. 40,774/- amounted
to Rs. 1,48,779/- and after making provision for reserve for
development rebate of Rs. 38,788/- a balance of Rs.
1,09,991/- was ,carried forward to next year’s account. For
that year no dividends were declared and the Managing Agents
also waived their remuneration. For the year ending 30th
June 1962, the position is more or less the same-the net
profit for the year amounted to Rs- 30,616/- which together
with the profits of the previous year of Rs. 1,09,991/-
amounted to Rs. 1,40,607/-. This
447
amount was again recommended by the Directors to be carried
forward for the next year. No dividend was declared and the
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Managing Agents also waived their remuneration. In 1963 the
position had become critical the loss incurred was Rs.
16,12,196 which wiped out the previous year’s profits.
There was no question of declaration of any dividends but
Managing Agent’s remuneration of Rs. 30,000/- (minimum) was
drawn. These losses would have the effect of eating into
the capital of the Company, unless it could borrow and tide
over them. In the year ending 30th June ’64 a loss of Rs.
6,61,386/- was carried forward to next year. It may be
noted that in that year in June 1964 the Government of India
had approved the change in the Constitution of the Managing
Agency of the Company and it is stated that because of the
efforts of the new Management who borrowed large sums on
their personal security for putting the Appellant in better
shape, large sums were in fact advanced to the Appellant.
As could be seen from the statement M. 51 that for the years
1960-61, 1961-62, 1962-63 and 1963-64 the Secured and un-
secured debts were approximately Rs. 81 lakhs, Rs. 70 lakhs,
Rs. 61 lakhs and Rs. 51 lakhs respectively. It is stated
that the losses were coming down and therefore the financial
position is getting better but in our view this by itself
does not mean that ,the Company is in a sound financial
position. What was happening evidently is as suggested by
the learned Advocate for the Appellant that the Sugar stocks
pledged were being sold and therefore the debts were getting
less. It is no doubt true that attachment orders which were
made in 1962 must have been paid off and the attachment
withdrawn. That again is not an indication of the soundness
of its financial position because there is evidence to show
that the new management had to secure a large loan of about
Rs. 30 lakhs on its personal security to pay these demands
and that is why Rs. 16 lakhs loss is paid off and hence in
the year 1962-63 the unsecured debt is shown as Rs. 28
lakhs. The Tribunal was therefore justified in coming to
the conclusion that the Company was not in a sound financial
position to implement the recommendations of the Wage Board-
to increase Rs. 10/- on the basic wage and the dearness
allowance or Rs. 51- as weightage. Apart from these losses
the general reserves are very negligible. Each year about
Rs. 3,000/- is being provided for. In all Rs. 8 lakhs
reserves were accumulated from its inception which is not
very encouraging.
While this is so having regard to its working we had called
for the balance-sheets subsequent to 1964-65 to assess the
financial prospects of the Appellant during this period.
These reveal the following position
448
The balance-sheet for the year ending 30-6-65 Showed a
profit of Rs. 12,72,126/- before depreciation. After
deducting Rs. 5,25,545/- towards depreciation and Rs.
1,16,138/- as reserve towards development rebate and after
adjusting the loss brought forward from last year, a loss of
Rs. 30,943/- was carried forward to the next year.
The balance-sheet for the year ending 30-6-66 showed a pro-
fit of Rs. 3,23,789/-. After setting apart depreciation a
sum of Rs. 2 .27,942/- was the loss carried forward and in
the balance sheet for the period ending 30-6-67 there was
shown a loss of Rs. 5,10,771/- and after providing for
depreciation there was a loss of Rs. 9,90,526/-. It may
also be noticed that in the year of account the Company had
to provide a sum of Rs. 2,16,353/towards additional cane
price payable to the cane growers for the seasons 1958-59
and 1959-60. After allowing for this there was a total loss
of Rs. 14,23,505/- which was carried forward ,to the next
year. In the balance-sheet for the year ending 30-6-68
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there was a gross profit of Rs. 13,22,932/- and after
providing for depreciation and adjustment of loss brought
forward there was a balance, of loss of Rs. 5,93,620/-
carried forward to the next year. The year ending 30-6-69
was one year in which dividend of 7.15% was paid on the 5-
1/2% income-tax Free Cumulative Preference shares. The
profits for the year after adjusting all the losses and
providing for depreciation, payment of bonus to staff and
taxation it showed a balance of Rs. 2,27,430/- out of which
dividend was declared as aforesaid. For the year ending
June ’70 there was again a loss of Rs. 5,96,913/- after
providing for depreciation. The Directors explained this
loss due mainly to high rates of interest charges, provision
for depreciation and the passing on of the entire realisable
profit on 1968-69 season production for the benefit of the
cane growers in that year.
The balance-sheets for the years 1960 to 1970-for a period
of 10 years show that except for the year ending 30-6-69 the
Company was not in a position to declare any dividends.
,Though the factory appears to have been expanded after 1964
to 1300 tons capacity it did not show uniform net profits;
on the other hand losses continued. The profits that it
made in any year seem to be consumed by losses of the
previous years. In some years the yield of cane seem to be
slightly over 100% the average being a little over 9% which
no doubt is encouraging but in spite of it there are various
factors which seem to contribute to its financial
unsteadiness.
This being the position we think that the Tribunal was
justified in holding that the Appellant did not have the
financial
449
capacity to bear the burden of payment of Rs. 10/- increase
and Rs. 51- as weightage in accordance with the recommenda-
tions of the Sugar Wage Board. On this conclusion and also
on an examination of the relevant material it is evident
that the Company is not in a financial position to meet the
burden of implementing the recommendations of the Wage
Board. The claim of the Respondent for categorisation and
fitment in accordance therewith cannot in the circumstances
be accepted. The Appeal of the Respondents which challenges
the Award of the Tribunal rejecting their claim, for an
increase of Rs. 10/and a weightage of Rs. 5/- and for the
categorisation and fitments in respect of the heirarchy of
supervising category namely Assistant Cane Organisers,
Liaison Field Supervisors and Field Supervisors as also in
respect of Head Panman, and Panman Incharge of shift,
Panman, Asstt. Panman, Bench Chemists and Cane analysists
and Canteen Supervisor are all dependent upon the financial
capacity of the Respondent Company to implement the Wage
Board’s recommendations which we have held it has not. As
stated earlier the Company which is the Appellant in Civil
Appeal No. 1602 of 1966 has already implemented the Award of
the Tribunal in respect of a large number of workers both as
to categorisation and fitment. It is in respect of fitment
of only four categories that it has not implemented, namely
Welders, Turbine Engine Drivers, Switch Board Attendants and
Boiler Mason’s that the Appellant has objected to the award
on the ground that the Tribunal has acted without evidence
and in some cases contrary to the recommendations. The
learned Advocate for the Respondents felt that he could not
really challenge the contention in respect of the Switch
Board Attendants and Turbine Engine Driver, as it would
appear that the Tribunal has acted without any evidence.
Why we have referred to these specific cases objected to by
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the Company in their Appeal is to indicate that,
notwithstanding the finding that the Wage Board’s
recommendations in the circumstances, cannot be implemented,
the Company has given effect to the Tribunals Award, which
will remain in force till a revision takes place. In the
view we have taken the Appeal of the Appellant is allowed
subiect to the above directions and that of the Respondents
dismissed. We make no order as to costs.
G.C. Appeal No. 1602 of 1966 allowed,
Appeal No. 1603 of 1966 dismissed.
450