Full Judgment Text
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PETITIONER:
MONTHLY-RATED WORKMEN AT THE WADALAFACTORY OF THE INDIAN HUM
Vs.
RESPONDENT:
INDIAN HUME PIPE COMPANY LTD., BOMBAY
DATE OF JUDGMENT11/04/1986
BENCH:
KHALID, V. (J)
BENCH:
KHALID, V. (J)
REDDY, O. CHINNAPPA (J)
NATRAJAN, S. (J)
CITATION:
1986 AIR 1794 1986 SCR (2) 484
1986 SCC Supl. 0 1986 SCALE (1)1217
CITATOR INFO :
RF 1992 SC 504 (29)
ACT:
Service Conditions of employees - Change from the slab
system of Dearness Allowance in vogue for eighteen years to
the textile scale of D.A. affording 115 per cent
neutralisation in respect of the head office staff and the
monthly rated factory staff - Validity of the notice of
change dated 15.7.75 given by the company under section 9A
of the Industrial Disputes Act, 1947 - Advisability of
Tribunals and Courts to revise the wage structure of workmen
to their prejudice when a dispute arises - Burden of proof
as to necessity of change, upon whom lies in a reference
arising out of section 9A notice of change.
HEADNOTE:
The respondent is an Engineering concern owning sixty
factories spread throughout India. In Bombay, it has a
factory at Wadala and head office at Ballard Estate. There
were four Industrial Disputes Awards in this company
pertaining to the pay-scales and dearness allowance of the
workmen. By the Award passed in reference No. IT 82 of 1950
pay-scales and fixed dearness allowance were introduced with
effect from 1.7.50 with the consumer price index in Bombay
at 312 points in 1950. In 1957 the index rose by 55 points
and stood at 367 points as a consequence of which by an
Award passed in reference IT No. 77 of 1958 dated 21st May,
1959 the slab system of dearness allowance was introduced
with effect from 1.2.58. This Award was not challenged by
the company at any time. By Award published on 30.12.65 in
reference IT No.47 of 1964 at the instance of the labour
marginal increase in the basic pay scales was provided
mainly on the ground that the slab system was working
satisfactorily. By an Award published on 7.7.77 in reference
No. IT 42 of 1973 the clerical and subordinate staff in the
head office were also given the slab system of D.A. It was
categorically observed in this Award that there should not
485
be any disparity in the D.A. between the monthly rated
factory staff and the head office staff.
While the wage structure stood thus, the company gave
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notice of change for doing away with the slab system on
15.7.75 of D.A. in respect of head office staff and the
monthly rated factory staff. The notice of change in respect
of head office staff was not pressed since a Settlement was
reached between the parties, in July 1976 whereunder the
D.A. at consumer price index 1380 points was merged in the
revised consolidated pay scale of different categories with
effect from 1.9.75. Although in September, 1975, the
consumer price index figure was 1270 points, it was taken
notionally as 1380 for the purpose of merger, providing for
review of consolidated pay scales if the consumer price
index moved high. The notice of change in respect of monthly
rated factory staff was, however, referred to adjudication.
The Industrial Tribunal gave its Award on 27th October,
1980, holding that the employer was justified in seeking
abolition of the slab system of D.A. and substituting it
with the textile scale of D.A. affording 115 per cent
neutralisation. The Tribunal held that the workmen should be
paid D.A. at 115% of the revised textile rate in the same
manner in which the daily rated workmen are paid their D.A.
at the prevalent cost of living index in the month of
November, 1980 or if such index number is not available at
that time then at the index No. 1771-1780. While making this
Award the Tribunal was conscious of the fact that the
workmen were likely to lose quite a substantial amount of
the D.A. but it was stated that it was inevitable when
attempt was made to bring about uniformity and parity among
the workmen of the same company working at the same place
doing similar work. The Tribunal felt that if the parity
scheme was to come into force either from the date of the
demand or from the date of reference, another unfortunate
happening would take place in that the workmen would be
liable to refund a lot of amount excessively recovered by
them as and by way of D.A. on account of slab system. The
Tribunal therefore felt that it would be too harsh and
unkind to such workmen and held that the Award would come
into force prospectively with effect from 1.11.80 and
observed that the reduction in the monthly emoluments of the
workmen should be a gradual process so that they are able to
bear the burden and can learn to adjust themselves with
little less income month to month. It therefore, directed
the reduction to be spread
486
over equally for a period of six months from 1.11.80. Hence
the appeal by special leave.
Allowing the appeal, the Court,
^
HELD : 1. In a reference arising out of the notice of
change given by a company under section 9A of the Industrial
Disputes Act, 1947 the company should make available all
evidence necessary to justify its stand for a change from
the existing system. In the instant case, overlooking the
circumstances under which reference was made such a burden
was wrongly cast on the workmen to prove that a change in
the system was not necessary. [496 B-C]
2.1 Normally it would be inadvisable for Tribunals and
Courts to revise the wage structure of workmen to their
prejudice when a dispute arises. However, Tribunals and
Courts can take judicial notice of one fact; and that is
that the wages of workmen, except in exceptionally rare
cases, fall within the category of mere "subsisting wages",
and as such tinkering with the wage structure of workmen
cannot be permitted except under compelling circumstances.
Employers have seldom displayed a cooperative attitude where
wage structures of workmen are devised. They have never
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showed a willingness for the involvement of the labour with
the capital so as to engender a participative labour capital
relationship. Reckoning with this reality, the Courts and
Tribunals have necessarily to keep their hands off from
upsetting a wage structure that has satisfactorily worked
for a long time. The sweat of the labour is never reflected
in any balance sheet, although the latent force behind every
successful industry is this sweat. With their present wage
structure, the labour just exist. No one should try to deny
them even this bare source of existence. [503 G-H; 504 A-C]
Crown Aluminimum Works v. Their Workmen, [1958] S.C.R.
651, followed.
2.2 The Supreme Court often times emphasised the need
for a living wage to workmen instead of a subsisting wage.
It is indeed a matter of concern and mortification that even
today the aspirations of a living wage for workmen remain a
mirage and a distant dream. Nothing short of a living wage
can
487
be a fair wage. It should be the combined effort of all
concerned including the Courts to extend to workmen a
helping hand so that they get a living wage which would keep
them to some extent at least free from want. Viewed against
this background no case has been made out by the respondent
in the instant case, for a change of the slab system of
dearness allowance to the revised Textile rate of dearness
allowance. [503 D-F]
The slab system which has been approved by Tribunals
and by Courts was available at the head office and for the
daily rated workmen at Wadala upto the year 1976 and worked
satisfactorily for over 17 years. In the absense of any
demand from any region for the slab system, the
applicability of well-settled principle of industry-cum-
region, and the sound financial position of the company it
cannot be said that if the slab system was introduced in all
the factories it would result in the closing of the whole
company itself. The question that it would work against the
principle of parity and uniformity and that there would be a
change of the subordinate staff getting more emoluments than
their officers who might be recently employed does not
arise. [496 C-E]
2.3 The theory of ceiling on the quantum of dearness
allowance cannot be accepted since under the prevailing
conditions there is no control over the prices of essential
commodities and as such a ceiling would not give sufficient
cushion when prices of essential commodities continuously
rise. [506 F-G]
Killick Nixon Ltd. v. Killick & Allied Companies
Employees Union, [1975] Supp. S.C.R. 453, distinguished.
Unichem Laboratories Ltd. v. The Workmen, [1972] 3
S.C.R. 567; Greeves Cotton and Co. and Ors. v. Their
Workmen, [1964] 5 S.C.R. 362; Bengal Chemical Pharmaceutical
Works Ltd. v. Its Workmen, [1969] 2 S.C.R. 113 and Kamini
Metals and Alloys Ltd. v. Their Workmen, [1967] 2 S.C.R.
463, referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3040 of
1986.
From the Award dated 27.10.1980 of the Industrial
Tribunal Maharashtra in Reference (IT) No. 531 of 1975.
488
N.B. Shetye, Dr. Y.S. Chitale, Mukul Mudgal and Atul
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Chitale for the Appellants.
G.B. Pai, P. Ramaswami, H.S. Parihar and Vipin Chandra
for the Respondent.
J.P. Cama and Mukul Mudgal for the Intervener.
The Judgment of the Court was delivered by
KHALID, J. This appeal, by special leave, is directed
against the award of the Industrial Tribunal in IT No. 531
of 1975, dated 27th October, 1980. The appellants are the
monthly-rated workmen at Wadala Factory of the Indian Hume
Pipe Company Ltd., Bombay and the respondent the Company
mentioned above.
We will briefly refer to the history of the demands of
the workmen in this Company to appreciate how the dispute
involved in this appeal originated. The respondent
(hereinafter referred to as the Company) is an Engineering
concern owning sixty factories spread throughout India. In
Bombay, it has a factory at Wadala and head office at
Ballard Estate. In this appeal, we are concerned with the
monthly rated workmen at the Wadala Factory. In this factory
there are about 375 daily rated workers and 80 monthly rated
clerical and subordinate staff. The total labour strength
all over India is about 3000 daily rated workers and 1000
monthly rated clerical and subordinate staff.
In the year 1950, there was an industrial dispute
pertaining to the pay scales and dearness allowance of the
workmen in this factory. An award was passed in this dispute
by the concerned Industrial Tribunal in reference No. IT 82
of 1950. By this award pay scales and fixed dearness
allowance were introduced w.e.f. 1-7-1950, with the consumer
price index in Bombay at 312 points in 1950. In 1957, the
index rose by 55 points and stood at 367 points. There was
another industrial dispute in 1958 in reference IT No. 77 of
1958 resulting in the award published on the 21st May, 1959,
introducing the slab system of D.A. w.e.f. 1-2-1958. This
award was not challenged by the Company at any time.
In 1964, the labour sought revision in the pay scales
489
for the monthly rated clerical and subordinate staff, as a
consequence of which reference IT No. 47 of 1964 was made
resulting in an award published on 30-12-1965, which
provided marginal increase in the basic pay scales, mainly
on the ground that the slab system was working
satisfactorily.
2. In this Company the daily rated operatives were
getting the old textile scale since the year 1942 which was
raised to the revised textile scale as D.A. by an award.
Thus, the daily rated operatives and the monthly rated
clerical and subordinate staff were paid D.A. on different
basis and at different rates in this Company. As there was
no revision in the pay scales from 1950, for about 22 years
a demand was made for revision in pay scales for monthly
rated clerical and subordinate staff in the year 1972. This
demand was referred to adjudication in reference IT No. 42
of 1973 as a consequence of which an award was published on
7-7-1977. The clerical and subordinate staff in the head
office of this Company were also being given the slab system
of D.A. This award observed that there should not be any
disparity in the D.A. between the monthly rated factory
staff and the head office staff.
3. While the wage structure stood thus, the Company
gave notice of change for doing away with slab system of
D.A. by notice dated 15-7-1975, in respect of the head
office staff and the monthly rated factory staff. The notice
of change in respect of the head office staff was not
pressed since a settlement was reached between the parties.
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As per this settlement arrived at in July 1976, the D.A. at
consumer price index 1380 points was merged in the revised
consolidated pay scale of different categories w.e.f. 1-9-
1975. Although in September, 1975, the consumer price index
figure was 1270 points, it was taken notionally as 1380 for
the purpose of merger, indicated above, providing for review
of consolidated pay scales if the consumer price index moved
high. The notice of change in respect of monthly rated
factory staff was, however, referred to adjudication. The
Company’s claim was to do away with the slab system of D.A.
and to substitute it by revised textile scale. The Union
filed a written statement justifying continuity of the slab
system which was in vogue for 17 years. The Industrial
Tribunal gave the award, impuged in this appeal, on 27th
October, 1980. The Tribunal came to
490
the conclusion that the employer was justified in seeking
abolition of the slab system of D.A. and substituting it
with the textile scale of D.A. affording 115 per cent
neutralisation.
4. The Tribunal said that the workmen should be paid
D.A. at 115 per cent of the revised textile rate in the same
manner in which "the daily rated workmen are paid their D.A.
at the prevalent cost of living index in the month of
November, 1980 or if such index number is not available at
that time then at the index No. 1771-1780." While making
this award the Tribunal was conscious of the fact that the
workmen were likely to lose quite a substantial amount of
their D.A. However, the Tribunal got over this concern
stating that it was inevitable, when attempt was made to
bring about uniformity and parity among the workmen of the
same company working at the same place doing similar work.
The Tribunal felt conscious of another distressing result of
the award. The Tribunal felt that if the parity scheme was
to come into force "either from the date of the demand or
from the date of reference, another unfortunate happening
would take place in that the workmen would be liable to
refund a lot of amount excessively recovered by them as and
by way of D.A. on account of slab system." The Tribunal felt
that "it would be too harsh and unkind to such workmen" and
therefore held that the award would come into force
prospectively w.e.f. 1-11-1980. The Tribunal, not rest
content with the expression of concern for workmen, gave
another palliative to them lest the reduction in their D.A.
should cause them dislocation financially all of a sudden
and therefore observed that the reduction in the monthly
emoluments of the workmen should be a gradual process "so
that they are able to bear the burden and can learn to
adjust themselves with little less income month to month."
The reduction was, therefore, directed to be spread over
equally for a period of six months from 1-11-1980.
5. When the matter came up before this Court on 15-12-
1980, special leave was granted and the following interim
relief was given to the appellants.
"Special leave granted. By way of interim relief
it is hereby directed that the difference in the
D.A. awarded by the Industrial Tribunal and the
491
D.A. being paid on slab system which is directed
to be reduced phasewise on monthly basis of 1/6th,
reduction will be implemented in payments to be
made in the months of December, 1980 and January,
February, March, April and May, 1981, but shall be
based on monthly wages thereafter from payments in
the subsequent months and this will be subject to
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the further direction of this Court. Appeal be
expedited..............."
This interim order was modified by the Vacation Judge on 14-
3-1981, as follows :
"The order passed by this Court on 15.12.80 to
continue till the end of August, 1981 on the
appellants agreeing to reimburse the management in
case they fail in the appeal which reimbursement
will be by way of deduction from their dues."
6. We will now proceed to consider the rival
contentions put forward by the parties in support of and
against the award. The Company, in justification of their
change of notice and defending the award passed, put forward
their case as follows:
The Company manufactures various pipes, cement concrete
pipes as well as steel pipes for Hydro Electric Projects.
These products are manufactured as per definite orders and
specifications by governmental bodies and other local
authorities, unlike other industrial units which are at
liberty to manufacture their products and market them. Their
products are usually bulky in nature, making transport
difficult and costly. For easy transport of these bulky
products, the Company decided to establish as many as sixty
factories all over India to cater to the needs of the local
markets and to make them easily accessible to avoid damage
to their products and heavy transporting charges. The
products of the Company have only a limited market and
therefore, has to face keen competition unlike cement,
steel, sugar, chemicals etc. which have an expanding market
and which can be programmed in anticipation of sale.
The Company has three thousand daily paid workmen and
thousand monthly paid workmen all over India. Out of these,
492
the appellants form only 80 monthly paid workmen, employed
in Wadala manufacturing factory. The slab system of dearness
allowance, according to the Company, has been universally
condemned by successive Tribunals. The appellant - Union
enjoys a privileged position out of this four thousand
workmen of the Company all over India. While conceding that
the appellant - Union had been enjoying the slab system of
dearness allowance till the reference was made, it is stated
that at the time the slab system was introduced it was never
conceived by the Tribunals that the cost of living index
would spiral upto such great heights as to make payments
difficult. The dearness allowance enjoyed by the appellant -
Union is so high in certain cases that neutralisation is at
rates much higher than 100 per cent which is discouraged and
is disapproved consistently by this Court and other
Industrial Tribunals. It is further stated that the Company
does not have the capacity to pay the slab system of
dearness allowance and in case the remaining monthly rated
workmen put forward such a claim, the respondents will be
forced to close down their factories.
The appellant - Union pleaded that the award of the
Tribunal was defective both in law and on facts. The
Tribunal did not have any material before it compelling it
to change a system that had satisfactorily worked for 18
years and in effect had become part and parcel of the
service conditions of the workmen. The findings of the
Tribunal that the slab system had become unscientific and
improper, that continuance of the system was not in national
interest or in public interest, that ever since slab system
was introduced neutralisation had become more than 100 per
cent and that the slab system confined to the appellant
alone would create disparity and discontent among workmen
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are according to the appellants not based on evidence. The
observation in the award that the Union did not bring on
record any evidence to show that wages paid to them were far
below the living wage or to show that the modification
sought would cause them hardship which they would not be
able to stand is incorrect and is made without being
faithful to the facts and evidence in the case. With these
rival contentions in view, we will now proceed to consider
the award.
7. The dispute arose when the respondent-Company served
a
493
notice under Section 9-A of the Industrial Disputes Act. The
dispute referred to arbitration reads as follows :
"The rate of payment of Dearness Allowance payable
to monthly rated clerical and subordinate staff
working at the Wadala factory will be changed and
will be worked out as per revised Textile scale
calculated on the basis of working days in the
month with a ceiling on dearness allowance payment
at consumer price index number for working class
of Bombay at 800 (base 1933-34 : 100) with effect
from 1975."
It was the Tribunal presided over by Shri Sawarkar, in I.T.
No. 77/58 by its award dated 21.5.1959 that introduced the
slab system of dearness allowance first. Before making the
award, the Tribunal considered the various contentions put
forward by the company. The Tribunal considered the nature
of this industry and held that it was an Engineering
concern, and a member of the Engineering Association of
India. The Tribunal examined the scales of dearness
allowance in eight different units of the Engineering
Industry and concluded that the total emoluments of the
monthly rated staff of the Indian Hume Pipe Company Ltd., at
its Wadala factory (i.e. Rs. 125 to Rs. 385) were far lower
than those of the other concerns with which they were
compared. This Tribunal repelled the plea that an increase
in dearness allowance would cause disparity between the
workmen at the head office and at the factory and passed the
award introducing the slab system as follows :
Slab D.A. at cost of living VARIATION
index 311-320. per 10 pts.
1 - 100 65% of the basic salary or 5%
Textile scale calculated on the
basis of the number of days in
the month whichever is higher.
101 - 200 30% -do- 2%
202 - 300 15% -do- 1%
301 & above 10% -do- 1%
494
Dearness allowance was being paid to the appellants at
this rate without any objection by the Company till the
notice of change was given. It has to be borne in mind even
at the outset that the reference was occasioned because of
the notice of change given by the Company. It was therefore
necessary for the Company to make available before the
Tribunal all evidence necessary to justify its stand for a
change from the existing system. We were taken through the
award in full by the learned Counsel for the appellants. All
that we find in the award, by way of justification for this
change, is that the Company would be confronted with similar
demands by the workers in its other factories, that it has
no capacity to pay the dearness allowance at this rate, that
it would result in more than 100 per cent neucralisation and
that this system had not found favour with many of the
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Tribunals who considered the question of the dearness
allowance in Maharashtra.
We will presently refer to some portions of the award
to see whether the Tribunal was justified in doing away with
the existing scheme and thus denying to the workmen what
they were getting till the award was made. But before we do
so, we would like to show the effect of the award on the
emoluments of the workmen involved in this case if the award
were to be implemented.
TABLE -I
Monthly Pay at Monthly Pay at Index Reduction in
Index 1771-1780 1771-1780 that would the monthly
available prior be available as per emoluments.
to the award the award.
under challenge.
Basic D.A. Total Basic D.A. Total
Rs. Rs. Rs. Rs. Rs. Rs. Rs.
500 1,590 2,090 500 542 1,042 1,048
400 1,434 1,834 400 542 942 892
300 1,278 1,578 300 542 842 736
200 1,117 1,317 200 542 742 575
100 795 895 100 542 642 253
40 544 584 40 542 582 2
The table below shows the total monthly pay of the
above workmen and the consolidated pay that similarly placed
workmen get at the head office.
495
TABLE II
____________________________________________________________
Basic Dearness Total Total Monthly Difference
pay allowance monthly monthly consoli- between
as per pay pay dated total pay
slab sys- packet pay packet of
tem D.A. of packet head
applica- Wadala at head office
ble at Factory office workmen
Index work- as per and total
1771-1780 men as state- paypacket
prior to per the ment of similar
the award award submit- workmen at
ted by Wadala
the Factory
company awarded
before the
Tribunal
____________________________________________________________
Rs. Rs. Rs. Rs. Rs. Rs.
500 1,590 2,090 1,042 1,815 773
400 1,434 1,634 942 1,635 693
300 1,278 1,578 842 1,380 538
200 1,133 1,347 742 1,185 443
100 795 895 642 790 148
____________________________________________________________
The first table glares one in the face. The reduction
is substantial in most of the cases. Mr. Pai, the learned
counsel for the company had to agree that as per the award
the difference in the dearness allowance was substantial and
the damage to the workmen was not inconsequential. However,
he tried to get over this inconvenient position with the
plea that continuance of the scheme would spiral up the
dearness allowance so much that it would render the working
of the Company difficult and create wide disparity between
these workmen and others. The second table which shows the
difference between the pay packet of Wadala Factory workmen
and the head office was explained away by Mr. Pai with the
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plea that the head office workmen had bigger
responsibilities and did better work. These justifications
put forward by him, have been echoed by the Tribunal also.
As indicated earlier, we will now refer to the award
496
under challenge. The company had a case that out of its
sixty factories, each factory should be treated as an
independent unit. This contention did not find favour with
the Tribunal. According to us, the Tribunal rightly held
that since there was no functional integrality, the units
had to be taken as one. The Tribunal also found that the
Company’s financial position taken as a whole was not only
satisfactory but quite sound till 1979.
The Tribunal committed an error by overlooking the
circumstances under which reference was made and casting the
burden wrongly on the workmen to prove that a change in the
system was not necessary. The Tribunal assumed that so far
as the Bombay Region was concerned, it was an admitted fact
that the daily rated workmen at Wadala factory and the staff
at the head office were not paid wages as per the slab
system. This assumption is wrong because the slab system was
available at the head office and for the daily rated workmen
at Wadala upto the year 1976. The Tribunal apprehends that
if the slab system was introduced in all the factories the
net result would be that the whole company will have to be
closed down. This apprehension is without any foundation
because at the time the Tribunal considered the dispute
there was no demand from any region for the slab system. The
Tribunal admits that the slab system had been in vogue for
18 years and that it had worked satisfactorily and had
become part of the service conditions of the monthly rated
workmen. However, the Tribunal observes that the system
could be revised if it was shown that the system had out-
lived its utility. The justification for this observation is
that at the time the slab system was introduced no one fore-
saw the spiralling rise in the cost of living index and that
it would work against the principle of parity and uniformity
and the danger of the subordinate staff getting more
emoluments than their officers who might be recently
employed. These are all assumptions without necessary
materials and this is the second error committed by
Tribunals. It is not uncommon that even in prestigious
institutions recently employed officers get emoluments less
than the subordinate staff. On this plea, the benefits that
the workmen were enjoying till then should not be denied to
them. To say that the system had become ’unscientific’ and
’improper’ because the workmen were getting fantastic amount
of dearness allowance was again without necessary material.
The Tribunal
497
then proceeded to say that change in the slab system was
necessary in the "larger interest of the country", "in the
interest of social justice", "in the interest of justice and
fair play", "to avoid industrial unrest", "general interest
of the company and in the larger interest of the nation."
These are empty verbiage without any basis on the facts of
the case. The discussion in the award that continuation of
the dearness allowance would bring about neutralisation
above 100 per cent is also not supported by sufficient
materials. The Tribunal has devoted some discussion in
support of the highly placed officers and went to their
rescue with the plea that they were subject to taxation
rendering their salaries modest. We wish to state that all
these statements could have been avoided in a matter where
the Tribunal had only to consider whether the management was
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justified in trying to upset a scheme that had worked
satisfactorily for a period of 18 years. We do not propose
to make further comments upon the award of the Tribunal.
Suffice it to say that the whole approach is erroneous and
the conclusions were arrived at on assumptions without
acceptable evidence. The management had not produced before
the Tribunal sufficient evidence to persuade it to change
the existing system. It may be that the slab system did not
find favour with some other Tribunals. But that is no reason
why a system that had existed for a long period of time
should be stopped to the detriment of the workmen without
compelling reasons.
Notice of change was given by the company to bring
about parity or uniformity of D.A. in respect of its
workmen. The Tribunal accepted this case of the company in
passing the award. A close scrutiny of the facts of the
case, however, would indicate that such a parity was not
possible and that the company also knew that parity was
impossible of achievement. This is evident from the fact
that notice of change did not relate to all the workmen in
the company. It will be seen that the company had three
systems for payment of dearness allowance i.e., dearness
allowance based on revised textile for daily rated factory
workers; dearness allowance without ceiling for monthly
rated factory staff and consolidated wages and dearness
allowance for monthly rated Head Office staff. The Company
has not shown that it had adopted a uniform dearness
allowance system for all its workmen even in the Bombay
region. Therefore, the Tribunal’s
498
conclusion based on the object of achieving uniformity in
dearness allowance does not appear to be correct.
Mr. Pai learned counsel for the respondent-company took
us through the various awards passed by different Tribunals
in his attempt to impress upon us the fact that such
Tribunal had not only discouraged the slab system of
dearness allowance but had even condemned it.
In the case of Hind Cycles Ltd., an award was given by
Mr. M.R. Mehar, Industrial Tribunal, Bombay, wherein it was
observed as follows :
".....The slab system was devised when it was not
expected that the consumer price index would shoot
up to the extent that it has with the result that
where the slab system is followed (as in the
concerns listed in Exhibit U-3) the dearness
allowance of monthly paid staff have shot up
completely out of proportion to basic wages with
the result that in industries and occupations in
which that system is not followed but some other
system is followed the dearness allowances, even
though linked with the index, are much lower than
the dearness allowance in the concerns listed in
Exhibit U-3............"
In the case of Shaw Wallace & Co. Ltd., the Industrial
Tribunal, presided over by Mr. M.R. Mehar, observed as
follows :
".......I have made reference to the dearness
allowance in Banks, Mill companies and in
Government offices not because these are concerns
comparable with Hind Cycle but to show the varying
systems of dearness allowance and to illustrate
how the total emoluments of employees in
industrial employments in which the slab system
referred to above prevails have shot up so as to
be completely out of proportion with those
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employees doing similar work in employments in
which there is either fixed dearness allowance or
the dearness allowance though linked with the
index, is not on
499
the slab system. Thus, by the slab system a
certain class of fortunate employees have been
absolutely protected against rise in cost of
living and have not to bear hardships which other
larger sections of employees have to suffer on
account of inflation...."
The same Tribunal has this to say in the case of the Wadala
factory, with which we are concerned, in its award dated 6th
December, 1965 :
"This dispute concerns only the monthly rated
staff of the factory. The demands concerning daily
rated staff is pending before a Board of
Conciliation.......... I have therefore to make
the award having in mind the total emoluments i.e.
wage scales and dearness allowance prevailing in
factories of this size in the region belonging to
other prosperous concerns in the engineering
industry.
In considering the demands for improved wage
scales the total emoluments have to be borne in
mind. While the daily rated staff get the textile
rate of dearness allowance the monthly rated staff
get dearness allowance according to the slab
system at the same rate as for the Head Office,
and which dearness allowance is very
satisfactory.........."
The Tribunal did not interfere with the slab system
prevalent in the Company.
In the case of Central Tin Works, a demand was made for
the intorduction of the slab system. But the Industrial
Tribunal, Bombay, presided over by K.R. Pawar, raised the
rate of dearness allowance to 100 per cent of the cotton
textile rate.
In the case of Voltas Limited, in an award given on the
30th September, 1965, the Industrial Tribunal presided over
by Mr. V.A. Naik raised ceiling of maximum dearness
allowance from Rs. 400 to Rs. 450. Fixation of the ceiling,
according to Mr. Pai, is to contain the rigours of the slab
system.
500
In Forbes Forbes Compbell & Co. Ltd., an award was
passed by the Industrial Tribunal presided over by Mr. V.A.
Naik on 23-12-1969, on the claim for raising the dearness
allowance declining the demand.
Mr. R.D. Tulpule, Industrial Tribunal Bombay, passed an
award in the case of Polychem Ltd., on 9th June, 1970. In
this case, the Tribunal noticed the criticism of the slab
system of dearness allowance and sought to rectify it by
granting 110 per cent of the revised textile dearness
allowance along with fixed ad-hoc payment tapering with
increase of the slab of the salary.
Considerable stress was made by Mr. Pai on the
following observation of the Tribunal at page 246 of Volume
VII paper book :
"I have not come across a case where slab rate of
dearness allowance was introduced for the first
time."
The answer to this observation is that in the case of the
Company with which we are concerned it was introduced for
the first time in 1958. We may also state that we have not
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come across any award wherein the slab system once
introduced was abolished except in one case.
In the case of Mazagaon Docks, an award was passed by
the Industrial Tribunal presided over by Shri S.A. Patel on
13th December, 1984, substituting the existing scheme of
dearness allowance based on the slab system by a revised
textile scale of dearness allowance. This was done following
the decision of this Court in Killick Nixon Ltd. v. Killick
& Allied Companies Employees Union, [1975] Supp. S.C.R. 453
rendered on May 2, 1975. It can be argued, perhaps
justifiably, that in this case this Court introduced a
ceiling on dearness allowance in place of slab system
available in the Mazagaon Docks. This decision was pressed
into service in support of the submission that the situation
obtaining in the company with which we are dealing is the
same as in the above case and to contend that the slab
system should yield place to at least a ceiling on dearness
allowance.
501
We have no quarrel with the conclusion arrived at in
the above case on the facts of that case. However, the
conclusion arrived at in that decision cannot be applied in
a general manner in all cases. In that case, the employer’s
grievance was this: The post of junior executives is a
promotional post for supervisors. Still the former were
drawing less emoluments than the latter. This is because
there was no ceiling on dearness allowance in respect of
workmen and supervisors. The employer produced a chart in
support of his case and contended that this would result in
indiscipline and unrest in this industry. It was in this
context that this Court laid down fourteen different
aspects, not exhaustive in their scope, which had to be
taken into account before tinkering with the dearness
allowance. The Mazagaon Docks case has taken support from
Killick Nixon Ltd. case without sufficient material to
sustain its conclusion that slab system should be abolished
to avoid huge distortion of wage differences among the
persons employed in that concern. A close study of Killick
Nixon Ltd. case will bear out that this Court did not lay
down that in all cases slab system of dearness allowance
should be abolished or done away with to the detriment of
the workers. All that this Court held in that case was that
the employer having made out a case for putting a ceiling on
dearness allowance, it was for the Tribunal to decide at
what particular amount there should be a ceiling on dearness
allowance. An attempt was made by the employer in that case
to press into service the view of the National Commissioner
of Labour to ascertain the minimum wage in the Company at
which a worker would require complete neutralisation of the
cost of living and then find the amount necessary as a
protection against his real wages. This was not accepted by
this Court. The Court observed :
"....We do not wish to lay down as an invariable
rule that in all cases there should be ceiling on
D.A. Whenever a case of this nature comes for
industrial adjudication, it will always be a
delicate task for the Tribunal to strike a balance
keeping in view the above principles, weightage of
each one of which being variable according to
conditions obtaining. Whether or not there should
be a ceiling on dearness allowance in a given case
must depend on the facts and circumstances of that
502
case. There can be no inexorable rule in that
respect. We have formulated the various principles
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which must be taken into account by the Tribunal
in determining this question, but the most
dominant of these must always be that of social
justice, for that is the ideal which we have
resolved to achieve when we framed our
Constitution........."
Thus, the ratio of that case cannot be extended to
every case to interfere with the existing D.A. Scheme, which
is beneficial to the workmen.
Mr. P.S. Mavalenkar, Industrial Tribunal, Bombay, in an
award dated 30-11-1976, imposed a ceiling of Rs. 700 on the
slab system of dearness allowance.
We thought it necessary to refer to the various awards
read by Mr. Pai only for the completeness of the Judgment.
It has to be borne in mind that in most of these cases,
awards were passed at the instance of the employees when
demands were made for raising the dearness allowance paid to
them. Here, we have the case of the employer trying to get
over a system of dearness allowance which had worked
smoothly for 18 years, on the specious plea that at the time
the slab system was introduced, it was not in the
expectation of anyone that the cost of price index would
spiral up so much as to make it impossible for the Company
to pay according to this scheme. From the materials
available we do not find that this plea can be accepted. The
records produced show that despite this system of dearness
allowance the Company has been making profits and has been
improving its position year by year.
At page 103 of Volume I paper book, the appellants have
produced a table showing dearness allowance paid by seven
companies including the respondent company at the slab
system to show that other companies have been paying more
dearness allowance to their workmen than the respondent
company with inconsequential differences in certain pay
scales. They have also given a comparative statement showing
how the increase in total wages including dearness allowance
as per slab system, for pay scale of Rs. 100 to Rs. 500 is
less than the percentage of increase in consumer price
index. The percentage of increase in consumer price index of
2642 over CPI 320 in
503
1958 is 826 while the percentage of increase in wages for
the same CPI is only 806.
In reply to the Company’s case of capacity to pay, the
appellants have produced at page 101, Volume V paper book, a
table showing the net profit and the gross profit of the
Company from 1979 to 1984. The net profit has increased from
a sum of Rs. 19.65 lakhs in 1978 to a sum of Rs. 176.38
lakhs in 1984 and the gorss profit from Rs. 115.60 lakhs to
Rs. 439.11 lakhs, after paying the slab system of dearness
allowance to the appellants. They have also produced a table
showing the financial position of the Company from the year
1979 to 1984. Sales have increased from Rs. 1221.56 lakhs in
the year 1979 to Rs. 2193.94 lakhs in the year 1984 and the
dividend on equity capital from 12.80 per cent in 1979 to 18
per cent in 1984.
We do not think it necessary to deal at length about
the evolution of the concept of dearness allowance. Suffice
it to say that this Court has, often times, emphasised the
need for a living wage to workmen instead of a subsisting
wage. It is indeed a matter of concern and mortification
that even today the aspirations of a living wage for workmen
remain a mirage and a distant dream. Nothing short of a
living wage can be a fair wage. It should be the combined
effort of all concerned including the Courts to extend to
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workmen a helping hand so that they get a living wage which
would keep them to some extent at least free from want. It
is against this background that a claim by employers to
change the conditions of service of workmen to their
detriment has to be considered and it is against this
background that we have considered the award review. We are
not satisfied that a case has been made out on the facts
available, for a change.
The question is often asked as to whether it would be
advisable for Tribunals and Courts to revise the wage
structure of workmen to their prejudice when a dispute
arises. Normally the answer would be in the negative.
Tribunals and Courts can take judicial notice of one fact;
and that is that the wages of workmen, except in
exceptionally rare cases, fall within the category of mere
"subsisting wages". That being so, it would be inadvisable
to tinker with the wage structure of workmen except under
compelling circumstances. Employers have
504
seldom displayed a cooperative attitude where wage structure
of workmen are devised. They have never showed a willingness
for the involvement of the labour with the capital so as to
engender a participative labour capital relationship. This
is a reality that Tribunals and Courts have to reckon with
that being so, Courts and Tribunals have necessarily to keep
their hands off from upsetting a wage structure that has
satisfactorily worked for a long time. The sweat of the
labour is never reflected in any balance sheet, although the
latent force behind every successful industry is this sweat.
With their present wage structure, the labour just exist. No
one should try to deny them even this bare source of
existence.
In re-inforcement of our conclusion, we will refer to
the following passage in the case of Crown Aluminium Works
v. Their Workmen, [1958] S.C.R. 65] :
"The question posed before us by Mr. Sen is : Can
the wage structure fixed in a given industry be
never revised to the prejudice of its workmen ?
Considered as a general question in the abstract
it must be answered in favour of Mr. Sen. We do
not think it would be correct to say that in no
conceivable circumstances can the wage structure
be revised to the prejudice of workmen. When we
make this observation, we must add that even
theoretically no wage structure can or should be
revised to the prejudice of workmen if the
structure in question falls in the category of the
bare subsistence or the minimum wage. If the wage
structure in question falls in a higher category,
then it would be open to the employer to claim its
revision even to the prejudice of the workmen
provided a case for such revision is made out on
the merits to the satisfaction of the
tribunal..........It would be interesting to
notice in this connection that all the tribunals
that have dealt with the present dispute have
consistently directed that existing wages should
not be reduced to the prejudice of the workmen. In
other words, though each tribunal attempted to
constitute a wage structure in the light of
materials furnished to it, a saving clause has
been added every time
505
protecting the interests of such workmen as were
drawing higher wages before. Even so it would not
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be right to hold that there is a rigid and
inexorable convention that the wage structure once
fixed by industrial tribunals can never be changed
to the prejudice of workmen. In our opinion,
therefore, the point raised by Mr. Sen must be
answered in his favour subject to such relevant
considerations and limitations as we have briefly
indicated."
We are not prepared to accept the submission made by
the learned counsel for the respondent that the slab system
has not been approved either by Tribunals or by Courts, not
to say that they have been condemned. In the case of Unichem
Laboratories Ltd. v. The Workmen, [1972] 3 S.C.R. 567 this
Court has occasion to consider the slab system and this
Court gave its seal of approval to this system. This Court
after considering the various materials placed before it
observed that in the Bombay region there were several
Pharmaceutical units adopting slab system of dearness
allowance. We read the following passage in support of our
conclusion that the slab system did find favour with this
Court on more than one occasion :
"....When once such units can be taken into
account as comparable units, the pattern of
dearness allowance obtaining therein can very well
be considered to ascertain the system adopted by
the industry as that will show the trend in the
region. As pointed out above at least 11 units,
referred to in Ex. DU.1 have adopted the system
now introduced in the case of the appellant by the
Tribunal. Under those circumstances, when such
system is prevailing in the industry in the same
region, it cannot be held that the Tribunal has
committed an error, in introducing a similar
pattern in the case of the appellant. The slab
system has been approved by this Court as will be
seen by the decisions in Greeves Cotton and Co.
and Others v. Their workmen, [1964] 5 S.C.R. 362
and Bengal Chemical and Pharmaceutical Works Ltd.
v. Its workmen, [1969] 2 S.C.R. 113. Even in
Bombay that such a pattern of dearness allowance
as the one introduced in the case of the
506
appellant is existing, is seen by the decisions of
this Court in Greeves Cotton and Co. and others v.
Their workmen and Kamini Metals and Alloys Ltd. v.
Their workmen, [1967] 2 S.C.R. 463. No doubt the
industries therein were not pharmaceutical units.
But that such a system exists in Bombay region is
clear from the above decisions."
This Court then noticed that in a number of awards rendered
during the year 1965 to 1968 the slab system of dearness
allowance was adopted and wound up by saying :
"These facts clearly show that the scheme of
dearness allowance provided in the award before us
in respect of the appellants is not anything new."
(at page
604)
The only grievance that the respondent’s counsel can have
against these observations is that the Court in those cases
were considering pharmaceutical units which were not
comparable with the unit in question. We do not agree that
this distinction can be pressed into service to deny the
workmen the slab system existing in this unit. The Tribunal
has found this unit to be an engineering unit which is not
in a far less disadvantageous position than pharmaceutical
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units.
The learned Counsel for the respondent made a strong
plea for substitution of the exising system of dearness
allowance with ceiling on the quantum of dearness allowance.
We have already indicated that in the absence of compelling
materials a system that gives benefit to the workmen cannot
lightly be interfered with to their detriment. The theory of
ceiling on the quantum of dearness allowance cannot be
accepted since under the prevailing conditions there is no
control over the prices of essential commodities and as such
a ceiling would not give sufficient cushion when prices of
essential commodities continuously rise.
Mr. Pai apprehended the possibility of similar demand
by the workers in other factories which would render the
working of the factory itself difficult and sometimes compel
it to close them down. He has made available to us a
statement
507
showing the amounts that the company will have to dole out
if the present system is to continue. In respect of 80
monthly rated workmen the difference payable will be Rs.
75,000 per month, which works out to Rs. 9,00,000 per year.
If this slab system is to be introduced for 4000 employees,
the liability will be about Rs. 4,50,00,000. Though at the
first flush one would be tempted to agree with Mr. Pai, the
temptation will disappear when we inform ourselves of the
fact that in a catena of decisions this Court has laid down
the industry-cum-region basis as the acceptable basis while
working out dearness allowance. This is the usual alarmist
cry of the employers. Uniformity of wage structure
throughout the country if accepted will be giving a go-by to
the well settled principle of industry-cum-region. This
Court has time and again laid down the industry-cum-region
principle whenever the question of wage structure arose.
As an answer to this plea of the respondent, we will
only read the following passage from the Judgment in the
case of Workmen v. Indian Oxygen Ltd., to which one of us
was a party. Desai J. while repelling the plea that in an
industrial undertaking which has an all India operation, the
unit as a whole should be considered, observed thus :
"14. On behalf of the Karmachari Union, it was
contended that in devising a dearness allowance
formula, the region-cum-industry principle should
ordinarily be accepted. As pointed out earlier
dearness allowance generally has a local flavour.
A man is exposed to the vagaries of the market
where he resides and works, even though he may be
an employee of a national, multinational or
transnational industrial empire. The workmen is
concerned with the vagaries of price fluctuation
in the area in which he resides and works for gain
and to which he is exposed. Therefore, the region-
cum-industry principle must inform industrial
adjudication in the matter of dearness allowance.
In Woolcombers of India Ltd. v. Woolcombers
Workers Union, [1974] 1 S.C.R. 504, this Court
following its earlier decision in Greeves Cotton
and Co. v. Workmen, [1964] 5 S.C.R. 362 held that
in devising basic wages and dearness
508
allowance structure, industrial adjudication
sometimes leans on the industry part of the
industry-cum-region formula and at other times, on
the region part of the formula as the situation
demands. This well recognised principle of
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industrial adjudication cannot be given a goby on
the specious plea that the workmen are employed by
an industrial undertaking which has an all India
operation. In this case, the Tribunal has
overlooked this important principle of industrial
adjudication..........."
We have extracted the above passage to repel the
argument that if the status quo is allowed to continue in
this case, there will be demands from other sectors and
other factories. This is only a theoretical apprehension
with which we are not concerned. We have repeatedly stated
that in this case reference to adjudication was made not at
the instance of the workmen, but at the instance of the
employer who wanted to bring about a change in the existing
system which had satisfactorily worked for 18 years, without
producing compelling materials, in support of their claim.
On a careful consideration of the various questions
involved in this case, we are of the view that the Tribunal
erred grossly in its approach to the questions raised and in
answering the reference in favour of the employer. We,
therefore, allow the appeal, set aside the award and direct
that the existing slab system will continue for the
appellant unit. The interim order passed on 14.3.1981 is
hereby vacated. The respondent is directed to pay the cost
of the appellant, quantified at Rs. 5,000.
The Construction Employees Union of the respondent-
company intervened in the case and filed their written
arguments as directed by this Court. In the written
arguments, the said Union supported the appellant’s case.
S.R. Appeal allowed.
509