Full Judgment Text
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PETITIONER:
WORKMEN EMPLOYED BY INDIAN OXYGEN LTD
Vs.
RESPONDENT:
INDIAN OXYGEN LTD.
DATE OF JUDGMENT02/05/1985
BENCH:
DESAI, D.A.
BENCH:
DESAI, D.A.
ERADI, V. BALAKRISHNA (J)
KHALID, V. (J)
CITATION:
1986 AIR 125 1985 SCR Supl. (1) 111
1985 SCC (3) 177 1985 SCALE (1)910
CITATOR INFO :
RF 1986 SC1794 (7)
ACT:
Labour and Services-U.P. Industrial Disputes Act 1947-
Industrial Undertaking an all-India concern-Unit of a multi-
national Company-Dearness allowance-Uniformity in dearness
allowances for workmen of various units based on all-India
average consumer price index-Whether destructive concept of
‘equality’.
‘Dearness allowance-Formula for a fair and just
dearness allowance Principles of-Revision of dearness
allowance-When arises-Industry-cum-region principle-
Application of-Adjudication and linking of conversion
factor-emphasised.
Settlement between management and one of the Unions-
Whether could be starting point of revision of dearness
formula-Dearness allowance-Linked to cost of living index in
the centre where the workman is employed-Neutralisation
Application of industry-cum-region principle.
HEADNOTE:
In the respondent-Company there were two rival Unions
of workmen, namely, Karamchari Union and Sharmik Sangh. The
Karamchari Union espoused the demand of the workmen employed
by the Company in its Kanpur unit for upward revision of
dearness allowance following an award of the Industrial
Tribunal Delhi by which the dearness allowance of the
workmen employed in the Delhi unit was linked to the
consumer price index for Delhi prepared by Labour Bureau,
Simla, which substantially increased the dearness allowance
of workmen posted at Delhi. The Company in its attempt to
thwart the demand being pursued by the Karamchari Union,
entered into a settlement with the Shramik Sangh in respect
of dearness allowance and then approached the Labour
Commissioner for registering the settlement Failing to
obtain the registration, the Company utilaterally enforced
the new scheme of dearness allowance linked to all-India
average consumer price index prepared by Labour Bureau,
Simla. The Karamchari Union did not accept the revised
formula and pressed its demand. The dispute was referred for
adjudication.
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Before the Tribunal the Company contended: (1) that the
settlement would be binding on the members of the Karamchari
Union and the dispute does not require adjudication on
merits, and (2) that the Company is desirous of linking
dearness allowance to all-India average consumer price index
for
112
working class with base 1960-100 and the Tribunal should
avoid accepting the demand of a few workmen.
The tribunal directed that the workmen of the Kanpur
unit of the Company should be paid dearness allowance linked
to the all-India consumer price index (1960-100) for Kanpur
Centre compiled by the Labour Bureau, Simla. On the question
of neutralisation, no change was allowed.
Partly allowing the appeal of the workmen,
^
HELD: 1. The workmen of the Kanpur unit of the Company
should be paid the dearness allowance according to all-India
consumer price index number for Kanpur (1960-100) compiled
by Labour Bureau Simla after applying conversion factor also
called the linking factor of 4.83. Their dearness allowance
cannot be linked to all-India average consumer price index.
[125 B-C]
2. The Tribunal Committed a grave error in accepting
collusive settlement as the starting point of the revision.
[122 H]
3, Uniformity, to an uninformed mind, appears to be
attractive. But, sometimes uniformity amongst dissimilar
persons becomes counter-productive. Uniformity and equality
have to be amongst equals measured by a common denominator.
The implementation of the Constitutional aspiration of
‘equal pay for equal work’ can be appreciated. In the matter
of basic wages it is a consummation devotedly to be wished.
But when it comes to dearness allowance any attempt at
uniformity between workmen in metropolitan areas and in
smaller centres would be destructive of the concept of
dearness allowance. [116 G-H]
Dearness allowance is directly related to the erosion
of real wages by constant upward spiraling of the prices of
basic necessities and as a sequal to the inflationary input,
the fall in the purchasing power of the rupee. It is a
notorious phenomenon hitherto unquestioned that price rise
variee from centre to centre, [117 A]
Dearness allowance is inextricably intertwined with
price rise, it being an attempt to compensate loss in real
wages on account of price rise considered as a passing
phenomenon by compensation. That is why it is called
variable dearness allowance. Any uniformity in the matter of
dearness allowance may confer a boon on persons employed in
smaller centres and those in bigger metropolitan areas would
be hard hit. Dearness allowance by its very form and name
has an intimate relation to the prevailing price structure
of basic necessities at the centre in which the workman is
employed. [117 B-C]
Dearness allowance to workmen at a particular place
should therefore depend upon the place where the workman is
working irrespective of the fact that the industrial
undertaking in which the workman is employed is a unit of an
industrial enterprises having an all-India or inter-State
operations. [117 E]
113
4. In the matter of dearness allowance the Court should
lean in favour of adjudication of dispute on the principle
of industry-cum-region because dearness allowance is linked
to cost of living index of a particular centre which has a
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local flavour. A workman is exposed to the vagaries of the
market where he resides and works, even though he may be an
employee of a national, multi-national or transnational
industrial empire. Therefore. the region-cum-industry
principle must inform industrial adjudication in the matter
of dearness allowance. In the instant case the Tribunal has
overlooked this important principle of industrial
adjudication. [117 G; 120 H; 121 A; 121 C]
Dunlop Rubber Co. (India) Ltd. v. Workmen & Ors.,
[1960] 2 S.C.R. 51, referred to.
Remington Rand of India Ltd. v. The Workmen [1968] 1
S.C.R. 164, woolcombers of India Ltd. v. Woolcombers Workers
Union & Anr. [1974] S C.R. 504 and Greaves Cotton & Co. and
Ors. 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, followed.
5. Any attempt of a company introducing uniformity in
the matter of dearness allowance linked to the all-India
average consumer price index prepared by Labour Bureau,
Simla would be destructive of the concept of dearness
allowance. Not only unequals will be treated as equals but
the former would suffer irreparable harm. Such an approach
would deal a fatal blow to the well-recognised principle of
industrial adjudication based on region-cum-industry because
there cannot be any uniformity in the dearness allowance of
the workmen working in metropolitan areas and the workmen
working in smaller areas. [118 A-C]
6. Where for a certain industrial centre a dearness
allowance formula is in vogue and it is linked to some
consumer price index number, whenever the base year for
consumer price index number is changed, a fresh linkage
requires a conversion ratio. In the absence of a conversion
ratio, the whole scheme falls out of gear and becomes
unworkable, ineffective and in fact unjust. In the instant
case the conversion ratio of 4.83 in valid and correct and
the Tribunal ought to have accepted the same. [123 D; 124 F]
Ahmedabad Mill Owners’ Association etc. v. The Textile
Labour Association, [1966) 1 S.C.R. 382, followed.
7. In the matter of dearness allowance usually the
paying capacity of the employer is examined. In the instant
case, it has not at all been contended that the respondent
company cannot bear the additional burden. [124 G]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 806 of
1982.
From the Judgment and order dated 27-7-1981 of the
Industrial Tribunal (III) U.P. in Adjudication Case No. 15
of 1977.
114
M. K. Ramamurthy, Jitendra Sharma and P. Gaur for the
Appellants-
G.B. Pai, H. K. Puri and J. K. Mehra for the
Respondent.
The Judgment of the Court was delivered by
DESAI, J. In exercise of the power conferred by Sec. 4
(K) of the U.P Industrial Disputes Act, 1947 (‘Act’ for
short) the Government of Uttar Pradesh by its order dated
May 23, 1975 referred the following dispute to the
Industrial Tribunal for adjudication. The reference is in
Hindi. Agreed translation of the industrial dispute referred
for adjudication reads as under:
"Whether the variable dearness allowance payable
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by the employers to their workmen should be revised and
it should be linked with the consumer price index for
industrial workers at Kanpur computed by Labour Bureau
Simla ? If yes, then from what rate (sic) and with what
other details."
There are two rival unions of the workmen employed by
the Indian Oxygen Ltd. (‘Company’ for short) in its
Industrial under taking at Kanpur. They are the Indian
Oxygen Karamchari Union (Karamchari Union’ for short) and
the Indian Oxygen Sharamik Sangh (‘Sharamik Sangh’ for
short). There is a federation of trade-unions formed at
various centres where the Company has its industrial
undertaking. Sharamik Sangh is affiliated to the federation.
Karamachari Union claims to represent the workmen employed
by the Company at Kanpur. The demand and the consequent
industrial dispute which led to the reference was espoused
by Karamchari Union.
The Karamchari Union in its statement of claim stated
that the Company is a unit of the multi-national British
Oxygen Company. The Indian Unit of the multi-national
corporation operates under the name and style of M/s Indian
Oxygen Ltd. The industrial activities of the Company
comprises manufacture and sale of industrial and medical
gases etc. It was stated that while the wage structure is
uniform in respect of workmen employed by the Company all
over the country the dearness allowance formula varies from
centre to centre. Briefly it was stated that the workmen of
the Company employed at Bombay, Madras, Hyderabad, Bangalore
and
115
Delhi are in receipt of higher dearness allowance compared
to the workmen employed in Kanpur Unit. The immediate
provocation for raising the demand was an award by the
Industrial Tribunal Delhi by which the dearness allowance of
the workmen employed in Delhi unit was linked to consumer
price index for Delhi prepared by the Labour Bureau Simla
which resulted in a substantial increase in the dearness
allowance available to the workmen posted at Delhi. Soon
after the award was published, the Karamahcari Union
submitted a demand on January 7, 1975 for revising the rate
of dearness allowance for workmen employed in Kanpur unit
and as there was no adequate response from the employer, the
matter was taken into conciliation. The Company in its
attempt to thwart the demand being pursued entered into a
settlement with the Sharamik Sangh in respect of the
dearness allowance and then approached the Labour
Commissioner Kanpur for registering the settlement. Failing
to obtain the registration, the Company unilaterally
enforced the new scheme of dearness allowance linked to the
all-India average consumer price index prepared by Labour
Bureau Simla. The Karamchari Union did not accept the
revised formula, and pressed its demand that the dearness
allowance should be linked to all-India consumer price index
number prepared by Labour Bureau, Simla for Kanpur centre,
after adopting the linking factor as has been done in the
award by the Industrial Tribunal at Delhi. The conversion
ratio was suggested at 4.83 linked to January 1970 index
number.
The Company consistent with the employer culture put
forth number of preliminary objections so as to delay the
adjudication of the demand. All the preliminary objections
failed as per the decision of this Court in Indian Oxygen
Ltd. v. The Workmen as represented by Indian Oxygen
Karamachari Union.(1) After the matter went back for
adjudication on merits it was contended on behalf of the
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Company that the settlement arrived at between the Sharamik
Sangh and the Company would be binding on the members of the
Karamachari Union and the Tribunal should not adjudicate the
dispute on merits. This settlement has been stigmatized by
this Court to be a collusive one. (See page 920). It was
further contended that the Company is desirous of linking
dearness allowance to all-India average consumer price index
for working class with base 1960=100 and that the Tribunal
should avoid accepting a demand of a few workmen where a
majority of the workmen have accepted and are satisfied with
the revised formula introduced by the Company.
116
The Company employs 5,400 workmen in all its
establishments all over the country. Out of total strength
of 5,400 workmen, 3030 are employed in gas manufacturing
unit. The employment strength in Kanpur unit is roughly
about 200. It is not in dispute that the basic wages of all
workmen employed all over the country by this Company are
occupation wise uniform but the dearness allowance paid to
workmen differs or varies from place to place. This ought to
be so as will be presently pointed out.
Prior to 1975 dearness allowance to the workmen
employed in the units of the Company in North-Eastern Zone
i.e. in the States of West Bengal, Bihar, Orissa, U.P.,
Delhi and Punjab was linked to the consumer price index
number (middle-class) prepared by the Bengal Chamber of
Commerce for Calcutta. It may be mentioned that the Bengal
index has been discontinued since 1975. It is important to
note that by the two awards of the Industrial Tribunal, the
office staff and the workmen employed the Company at Delhi
are being paid dearness allowance linked to consumer price
index compiled by Labour Bureau Simla for Delhi.
Subsequently by a decision of this Court in Govardhan Prasad
and others v. The Management of M/s Indian Oxygen Ltd.(1) 10
workmen employed by the Company stationed at Ghaziabad were
required to be paid dearness allowance to the same extent
and in the same manner as was being paid under the awards of
the Industrial Tribunal to the workmen of the Company at
Delhi.
Before we delve into the narrow contentions raised in
this behalf we would remove the gloss over the submission
that the attempt of the company, having all-India operation,
is to introduce uniformity in the matter of dearness
allowance payable to its workmen all over the country.
Uniformity, to an uninformed mind, appears to be very
attractive. But let it not be forgotten that sometimes this
uniformity amongst dissimilar persons becomes counter-
productive. Uniformity and equality have to be amongst
equals measured by a common denominator. One can appreciate
the implementation of the constitutional aspiration of
‘equal pay for equal work.’ In the matter of basic wages it
is a consummation devotedly to be wished. But when it comes
to dearness allowance any attempt at uniformity between
workmen in such metropolitan areas like Delhi, Bombay,
Madras, Calcutta and in smaller centres
117
would be destructive of the concept of dearness allowance.
Dearness allowance is directly related to the erosion of
real wages by constant upward spiraling of the prices of
basic necessities and as a sequel to the inflationary input,
the fall in purchasing power of the rupee. It is a notorious
phenomenon hitherto unquestioned that price rise varies from
centre to centre. Dearness allowance is inextricably
intertwined with price rise, it being an attempt to
compensate loss in real wages on account of price rise
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considered as a passing phenomenon by compensation. That is
why it is called variable dearness allowance. Any uniformity
in the matter of dearness allowance may confer a boon on
persons employed in smaller centres and those in big
metropolitan areas would be hard hit. Dearness allowance by
its very form and name has an intimate relation to the
prevailing price structure of basic necessities at the
centre in which the workman is employed. Therefore, the
claim in the written statement on behalf of the company that
imbued with the equitable principle of introducing
uniformity in the matter of dearness allowance, the Company
with the easy availability of consent of its protege union
Sharamik Sangh introduced a new scheme of dearness allowance
linked to the all-India average consumer price index
prepared by Labour Bureau, Simla is misleading. The Tribunal
rightly observed that it is by now well-settled that
dearness allowance to workmen at a particular place should
depend upon the place where the workman is working
irrespective of the fact that the industrial undertaking in
which the workman is employed is a unit of an industrial
enterprise having an all-India or inter-State operations. In
Dunlop Rubber Co. (India) Ltd v. Workmen & Ors.,(1) a
contention on behalf of the employer that in the case of an
all-India concern, it would be advisable to have uniform
conditions of service throughout India was repelled
observing that ‘however desirable uniformity may be in the
case of all-India concerns, the tribunal cannot abstain from
seeing that fair conditions of service prevail in the
industry with which it is concerned.’ This view to some
extent was affirmed in the Remington Rand of India Ltd v.
The Workmen(2). Leaving aside basic wages in the matter of
dearness allowance specially the Court should lean in favour
of adjudication of dispute on the principle of industry cum-
region because dearness allowance is linked to cost of
living index of a particular centre which has a local
flavour. If the concept of uniformity on an all-India basis
is introduced in the matter of dearness allowance, it would
work havoc, because the price structure
118
in a market economy at places like Bombay, Madras, Calcutta,
Delhi, Ahmedabad has little or no relation to smaller
centres like Kanpur, Varanasi etc. If workmen working in
such disparate centres are put on par in the matter of
dearness allowance in the name of proclaimed all-India
uniformity, not only unequals will be treated as equals but
the former would suffer irreparable harm. Such an approach
would deal a fatal blow to the well-recognised principle of
industrial adjudication based on region-cum-industry
developed by courts by a catena of decisions. Realising this
situation courts have learned in favour of determination of
dearness allowance linked to cost of living index, if
available for the centre where the workman employed and in
the matter of neutralisation on the industry-cum-region
principle. The Tribunal having rejected this approach
committed an error apparent on the record.
At this stage, it is necessary to have some idea of
what is consumer price index number, how it is being
complied and what is its relevance in the matter of dearness
allowance ? Pursuant to the recommendations of the Planning
Commission for the Second Five Year Plan the Labour Bureau,
Simla and the Industrial Statistical Organisation of the
Government of India took steps to conduct fresh family
living surveys among working class and middle class
population respectively with a view to constructing the new
series of consumer price index numbers. The working class
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surveys were conducted at 50 selected centres and the middle
class surveys at 45 centres, 18 centres being common to
both. The work of this survey was commenced in the second
half of 1958 and was concluded by September, 1959. One of
the centres selected for survey was Kanpur (See Ahmedabad
Mill Owners’ Association etc. v. The Textile Labour
Association(1)
What materials and statistical information enter into
the compilation of consumer price index number may be
briefly noticed.
The consumer price index number for industrial workers
(base 1960=100) are being compiled and published by the
Labour Bureau, Simla every month in respect of 50 industrial
centres scattered all over the country. Amongst them is
Kanpur. The material collected is through the family surveys
of working class families. There are six main groups for
which indices for each centre are being compiled besides the
general index. They are:
119
(i) Food
(ii) Pan, Supari, Tobacco and intoxicants
(iii) Fuel and light
(iv) Housing
(v) Clothing, bedding and footwear, and
(vi) Miscellaneous
Consumer price index numbers are intended to measure
relative temporal (overtime) changes in the price of a fixed
basket of goods and services consumed by the index
population in a current period in relation to the base
period. The index numbers are compiled by using Laspeyers’
Formula. The Broadly stated this formula takes note of base
and current prices for a particular item, quantity consumed
of that item during the base period. It would appear that
for the compilation of an index, there are three essential
requirements namely: (1) weighting diagram which is the
relative percentage share of the total consumption
expenditure as revealed by the basic family budget enquiry
in respect of different items, (2) Base prices of the
different items which go into the index basket and (3)
current prices in respect of each one of the items featuring
in the index basket. The weighting diagram for a centre is
derived on the basis of the data collected through family
budget enquiries which were conducted in the 1958-59 at each
one of the 50 centres. The survey was conducted by taking
all samples of working class families in each of the 50
centres and the data was collected by interviewing these
families. Based on the results of the family budget
enquiries, the average expenditure of a family per month on
different items of consumption was arrived at. All-India
average consumer price index number is a weighted average of
the 50 centres’ indices. This is compiled and published
alongwith the index number for each centre (Source: Consumer
Price Index: An anatomy published by Labour Bureau, Simla).
It would appear at a glance that there would be a
noticeable difference between the consumer price index
number for a centre and its weighted average for 50 centres
which would be the all-India average consumer price index
number, the latter would generally be lower than the former
in some cases.
120
Reverting to the demand in this case, the Karamchari
Union raised a demand that the variable dearness allowance
payable to the workmen should not only be revised but it
should be linked with the consumer price index for
industrial workers at Kanpur. The Tribunal by its award
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directed the employer to pay dearness allowance linked to
the all-India consumer price index (1960= 100) for the
Kanpur Centre compiled by Labour Bureau, Simla. On the
question of neuturalisation, the Tribunal directed that the
calculation in the rate of dearness allowance will remain
the same as presently operative and no change is required
therein. In reaching this conclusion, the Tribunal committed
two manifest errors apparent on the record.
The company introduced as stated in its written
statement, a new scheme of dearness allowance linked to the
all-India consumer price index prepared by Labour Bureau,
Simla. That was a very recent innovation introduced by way
of a counter blast to the demand raised by the Karamchari
Union. Prior thereto, it is an admitted position that the
workmen at Kanpur were being paid dearness allowance linked
to Bengal Chamber of Commerce Index Number. That was
unilaterally given up by the Company. There appeared to be
at least two valid reasons for scrapping that scheme: one is
that since 1975 Bengal Chamber of Commerce Index which was
compiled for middle class families and was being
artificially applied to industrial workers has been
scrapped. In other words, the index is no more being
compiled. Secondly, the constituent members of the Bengal
Chamber of Commerce had started their business in India long
before the present century and most of them were
incorporated in England or other Western countries while the
Company in the present case has been started a few decades
back and therefore, re-induction of the Bengal Chamber Index
Number would not be relevant.
On behalf of the Karamchari 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 trans-national
industrial empire. The workman 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
121
cum-industry principle must inform industrial adjudication
in the matter of dearness allowance. In Woolcombers of India
Ltd. v. Woolcombers Workers Union & Anr. (1) this Court
following its earlier decision in Greaves Cotton & Co. and
Ors v. Their Workmen (2) held that in devising basic wages
and dearness 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 industrial adjudication cannot be given a go-by
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.
Before we examine the second manifest error committed
by the Tribunal in narrowly construing the terms of
reference, it would be advantageous to briefly recapitulate
what relevant considerations have to be kept in view in
devising dearness allowance formula. This aspect is no more
res integra. In Bengal Chemical and Pharmaceutical Works
Ltd. v. Its workmen (3), after reviewing all the earlier
decisions, the court restated the principles on which a fair
and just dearness allowance formula must be devised. They
are:
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"1. Full neutralisation is not normally given,
except to the very lowest class of employees.
2. The purpose of dearness allowance being to
neutralise a portion of the increase in the cost of
living, it should ordinarily be on a sliding scale and
provide for an increase on the rise in the cost of
living and a decrease on a fall in the cost of living.
3. The basis of fixation of wages and dearness
allowance is industry-cum-region.
4. Employees getting the same wages should get the same
dearness allowance, irrespective of whether they are
working as clerks or members of subordinate staff or
factory workmen.
122
5. The additional financial burden which a revision of
the wage structure or dearness allowance would impose
upon an employer, and his ability to bear such burden,
are very material and relevant factors to be taken into
account."
We need not examine whether the dearness allowance
formula as at present existing is valid according to the
principles herein extracted because we are not devising a
dearness formula for the workmen working in the industrial
undertaking of the company at Kanpur for the first time. The
demand is for upward revision of the dearness allowance
formula and its linkage.
The terms of reference extracted hereinbefore
unmistakable show that the workmen sought upward revision of
the variable dearness allowance by linking it to the
consumer price index number for industrial workers at Kanpur
computed by Labour Bureau, Simla. If the demand is to be
granted, the Tribunal was requested to specify the rate and
other details. Interpreting this reference the Tribunal
observed that the new dearness allowance formula which was
in vogue at the time of the reference as being related to
all-India average consumer price index number for industrial
workers in accordance with the settlement with the Shramik
Sangh which settlement was found to be collusive by this
Court yet the Tribunal must proceed on the basis that
dearness allowance was being paid to the workmen at Kanpur
as per the settlement and that cannot be wished away. This
approach overlooks a vital fact that the introduction of the
new formula under a collusive settlement led to the demand
for revision. The Tribunal rejected the submission that it
must examine and devise a new formula in relation to the
Bengal Chamber of Commerce Index Scheme which was in vogue
before the formula as per the collusive settlement was
introduced. If the settlement between the company which is
found to be collusive by this Court is to be the starting
point of revision of the dearness allowance formula as has
been done by the Tribunal, the conclusion is inescapable
that the Tribunal started from a wrong premise and landed
itself into an utterly unsustainable conclusion. This is the
second apparent error in the face of the record which would
impoll us to interfere. Mere so because the genesis of the
demand for a revision of the dearness allowance was the
collusive settlement. The Tribunal committed a grave error
in accepting the settlement as the starting point of the
revision.
123
The demand of the Karamchari Union was that the
Tribunal should first take into account, relevant to a
certain date, the all-India consumer price index number for
Kanpur centre (1960=100) and then the index figure should be
multiplied by the conversion factor of 4.83 and then
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dearness allowance should be linked to the figure so worked
out. The Tribunal rejected this demand on the ground that in
the statement of claim, the Karamchari Union demanded
payment of dearness allowance according to Simla Index
Number for Kanpur. The Tribunal took note of the fact of the
linking factor but observed that as the same has been
discontinued by the Labour Commissioner, U.P., the demand
has been essentially for dearness allowance according to the
Simla Index for Kanpur. This reasoning manifests an error in
approaching, appreciating and evaluating the demand for
revision of dearness allowance.
Before we examine the error, let it be made clear that
where for a certain industrial centre, a dearness allowance
formula is in vogue and it is linked to some consumer price
index number, whenever the base year for consumer price
index number is changed, a fresh linkage requires a
conversion ratio. In the absence of a conversion ratio, the
whole scheme falls out of gear and becomes unworkable. To
illustrate, in the textile industry, the consumer price
index number was compiled on the basis of base year
1939=100. The year 1939 was chosen as the year in which the
second world was engulfed the world which completely
overhauled the consumer pattern and the prices of essential
articles. Over years the price spiral relentlessly moved
upward and that too so rapidly that in most of the
industries where even though 100% neutralisation was not
given by devising a dearness allowance yet the dearness
allowance for a given month was occasionally double or
triable of the basis wage. This was unjust, unfair and from
an economist’s point of view, imprudent. Therefore, as
pointed out earlier, a fresh survey was undertaken in 1958
with the base year 1960=100. A fresh index was compiled and
continues to be compiled with 1960=100 as base year. In fact
the 1960=100 base year is being replaced. We will however,
confine ourselves in this appeal to the base year of
1960=100. Now if those industrial undertakings in which
dearness allowance formula was linked to the base year
1939=100 are to be delinked and relinked to the index number
compiled on the base year 1960=100, before the fresh number
is adopted, a linking or a conversion ratio between 1939-100
and 1960=100 will have to be computed. Only then a fresh
linkage
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can be devised. This very obvious fact has been wholly
overlooked by the Tribunal when it merely awarded that the
workmen of the company at Kanpur should be paid dearness
allowance linked to the all-India consumer price index
number (1960=100) for Kanpur Centre compiled by Labour
Bureau, Simla. This approach overlooks the linking factor.
The rejection of the linking or conversion factor makes the
scheme devised by the award unworkable, ineffective and in
fact unjust. In this connection, we may refer to the
Ahmedabad Mill Owner’s Association case in which this Court
after noting the fact that the base year having changed,
pointed out that the question of linking factor loomed large
and assumed importance. The court had before it the admitted
position that there was only one index existing in Ahmedabad
which was based on the new series (1960=100) and the old
series (1939=100) has rightly gone out of existence since it
had become antiquated. Two alternatives were submitted to
the court for its consideration. It was submitted that an
entirely new scheme of basic wages based not on the pre-war
level of 1939, but based on the cost of living of 1960 as
the base year be devised and then award dearness allowance
in relation thereto. In the alternative, it was submitted
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that an arithmetical method of linking the old and the new
series be devised. The Tribunal had accepted the conversion
ratio at 3.17. This was attacked on diverse grounds. After
examining the whole gamut of arguments, this Court held that
the linking factor of 3.17 was valid and correct
Approaching the matter from the same angle, and
avoiding the arguments which have been rejected by this
Court in the aforementioned judgment, we are of the opinion
that the conversion ratio of 4.83 is valid and correct and
the Tribunal ought to have accepted the same.
It is usual in the matter of dearness allowance to
examine the paying capacity of the employer. Rightly Mr. Pai
did not at all contend that this employer can not bear the
additional burden. We therefore, need not stray into this
aspect at all.
On behalf of the Karamchari Union, it was seriously
contended that the award of the Industrial Tribunal at Delhi
between this very Company and its Workmen at Delhi be
accepted. We need not examine the same as the comparison
between Delhi and Kanpur is ill-conceived and untenable.
Delhi is the capital of the sub-continent and it is fast
growing. Kanpur is at best a district town though
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undoubtedly an important industrial centre in U.P. But the
comparison would be invidious.
Accordingly, this appeal partly succeeds and is
allowed. The award of the Industrial Tribunal that the
workmen of the Kanpur unit of the Indian Oxygen Ltd. should
be paid dearness allowance linked to all-India consumer
price index (1960=100) for Kanpur centre compiled by the
Labour Bureau, Simla is modified to read that ’the dearness
allowance should be paid according to all-India consumer
price index number for Kanpur (1960=100) compiled by Labour
Bureau, Simla after applying conversion factor also called
linking factor of 4.83.’ In all other respects i.e. the date
of enforceability etc. the award remains unaltered except
for the modification herein granted. The appeal is allowed
to this extent with costs quantified at Rs. 3,000.
A.P.J. Appeal partly allowed.
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