Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 12
PETITIONER:
THE SILK AND ART SILK MILLS’ ASSOCIATION, LTD.
Vs.
RESPONDENT:
MILL MAZDOOR SABHA
DATE OF JUDGMENT19/04/1972
BENCH:
MATHEW, KUTTYIL KURIEN
BENCH:
MATHEW, KUTTYIL KURIEN
VAIDYIALINGAM, C.A.
REDDY, P. JAGANMOHAN
CITATION:
1972 AIR 2273 1973 SCR (1) 277
1972 SCC (2) 253
CITATOR INFO :
R 1978 SC1113 (15)
R 1980 SC 31 (8)
ACT:
Industrial Dispute-Dearness allowance-Neutralization of rise
in cost of living-Financial capacity, determination of-
Relevant materials for-Principle of region-cum-industry,
application of.
HEADNOTE:
The appellant Association was recognised under section 27
read with section 3(23) of the Bombay Industrial Relations
Act, 1946 as the Association of employers in Silk and Art
Silk Textile Industry within the local area of Greater
Bombay. The respondent Sabha represented the workmen in the
Industry. By a supplementary award dated October 15, 1971
the Industrial Court modified an existing award of the
Industrial Court of Maharashtra, Bombay, dated April 25,
1962 by directing with retrospective effect from January 1,
1971 that the employees in Silk and Art Silk Industry who
were concerned in the dispute shall be granted dearness,
allowance at the rate of 99 per cent neutralization of the
rise in the Bombay Consumer Price Index 106 (old series) on
the basis of the minimum wage of Rs. 30/-4 per month of 26
working days. The appellant Association and one of the Silk
Mills appealed.
HELD : The award did not suffer from any infirmity.
(i) The Association represented 55 units of employers and
out of these only 28 produced their balance-sheets and
profit and loss accounts. The other 27 units did not supply
any materials with respect to their financial capacity but
agreed to abide by the decision of the Industrial’ Court on
the basis of the materials furnished by the 28 units. The
award in so far as it concerned these 28 units proceeded on
the basis of their financial capacity as judged from
accounts produced by them and the materials in the case.
There is no substance in the complaint that any adverse
inference had been drawn against that 28 units on account of
non-production of materials by others. [283-H]
(ii) The contention that the position of the industry was
not stable and that its prospects were bleak could not be
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 12
accepted. A broad and’ overall view of the financial
position of the employer units was taken into account by the
Industrial Court and it had tried to reconcile the natural
and just claims of the employees for a higher rate of
dearness allowance with the capacity of the employer to pay
it and in that process it hadmade allowance for the
legitimate desire of the employer to make reasonable
profits. What is really material in assessing the financial
capacity of the employer units in this context is the extent
of gross profits made by them. On the basis of exhibit U.9,
which was an analysis of the balance sheet, and profit and
loss accounts of the 28 units, the Court found ’that the 28
mills had been making good profits and that, on an average,
the profit would work out at 40 and odd per cent of the
capital. There was some decline in the profits made during
the years 1966, 1967 and 1968 but, the Court found that the
industry was rallying round in 1970. [286-C]
278
Ahmedabad Mill Owners’ Association, etc. v. The Textile
Labour Association, [1966] 1 S.C.R. 382 at p. 426 and
Unichem Laboratories Ltd. v. Their Workmen, Civil Appeals
No. 1091-93 of 1971, decided on 24-2-1971, referred to.
(iii) No evidence had been adduced to show what exactly
had been the ,effect on the industry of the enhancement in
excise duty. Without further evidence it was not possible
to draw an inference that the sale of the products had been
adversely affected. Moreover the economic incidence on the
excise duty had been passed on to the consumer and the em-
ployer-unit did not have to bear any additional burden on
account of the levy. [286-H]
(iv) Exhibit U.8 is a comparative Table showing the minimum
basic wages and dearness allowance paid in other industries
in the region like the engineering, pharmaceuticals, etc.
The Court relied upon it only to show the trend in the
region. The Court also relied upon the report of the Norms
Committee which stated that the trend for the last decade in
industrial adjudication as well as in settlements and
awards, was to allow 100 per cent neutralization in the case
of lowest-paid employees. The Court was of the view that if
80 per cent neutralization could be allowed in the industry
under the settlement arrived at in 1957, there was no reason
why 100 per cent neutralization should not be granted in
view of the steep rise in the cost of living from 1957, to
the lowest paid employees. It is not possible to agree with
the contention of the appellant that the Industrial Court
went wrong in relying upon exhibit U.8 or the report of the
Norms Committee to find out the trend in the region as to
the extent of neutralization to be allowed to the employees
concerned.
[287-F]
Bengal Chemical and Pharmaceutical Works Ltd. v. Its
Workmen, [1968] 2 S.C.R. 113 referred to.
(v) The Association never wanted the Court to make any
comparison with any other units in the same industry in the
region. In the written statement of the Association there
was no averment that there were other comparable units in
the same industry in the region. No did the Association, at
the time of argument before the Industrial Court, put
forward the contention that there were comparable concerns
in the same industry in the region and that the Court should
make a comparison of the employer-units in question with
those concerns to find out the extent of neutralization
which could be granted. The Association was certainly in a
position to tell the Court whether there were any other
comparable units in the same industry in the region and the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 12
only inference from its conduct was that there were no
comparable units in the industry in the region. [290-A]
French Motor Car Co. Limited v. Workmen, [1963] Supp. 2
S.C.R. 16. at pp. 20-21. Williamsons (India) Private Ltd.,
v. The Workmen, [1962] I L.L.J. 302 and Greaves Cotton and
Co. and others v. Their Workmen, [1964] 5 S.C.R. 362 at pp.
367-369, referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 276 277 of
1972.
Appeals by Special Leave from the Supplementary Award dated
the 15th October, 1971 of the Industrial Court, Maharashtra,
Bombay in Misc. Applications (IC) Nos. 1 and 2 of 1970.
S. T. Desai and I. N. Shroff, for the appellant (In C.A.
No. 276 of 1972).
279
(Mathew, J.)
M. C. Setalvad and I. N. Shroff, for the appellant (In
C.A. No. 277 of 1972).
S. V. Gupte, M. C. Bhandare, Sunanda Bhandare, and P. H.
Parekh and Advocates of M/s. Bhandare Parekh and Co., for
the respondent (in both the Appeals).
The Judgment of the Court was delivered by
Mathew, J. These two appeals by special leave are directed
against a supplementary award dated October 15, 1971, passed
by the Industrial Court, Maharashtra, Bombay, in
Miscellaneous applications (IC) Nos. 1, 2 and 3 of 1970,
filed by the respondent, the Mill Mazdoor Sabha, hereinafter
called the ’Sabha’. By the supplementary award, the
Industrial Court has modified an existing award of the
Industrial Court, Maharashtra, Bombay, dated April 25, 1962,
passed in reference (IC) Nos. 131, 138, 139 and 155 of
1961, and published in the Maharashtra Government Gazette
dated June 14, 1962, by directing with retrospective effect
from January 1, 1971, that the employees in Silk and Art
Silk Industry who were concerned in the dispute shall be
granted dearness allowance at the rate of 99 percent
neutralization of the rise in the Bombay Consumer Price
Index 106 (old series) on the basis of the minimum wage of
Rs. 30/- per month of 26 working days.
We will deal with appeal No. 276 of 1972 first. The
Appellant is the Silk and Art Silk Mills’ Association, Ltd.,
a public company having its registered office in Bombay,
hereinafter called ’the Association’. For the purpose, of
Bombay Industrial Relation Act, 1946, the Association was
recognised under section 27 read with section 3(23) of that
Act as the Association of employers in Silk and Art Silk
Textile Industry within the local area of Greater Bombay.
Silk Textile Industry was started in India sometime in 1933
and the Association came into being in 1939 with 16 members
having 2,000 looms. Till 1965, the Association was regis-
tering as members only mills having 25 or more looms.
Thereafter, it began to register smaller units also as its
members. Such smaller units numbered 308 with 2,326 looms
in March, 1969. The total number of mills within and
outside the State of Maharashtra which were members of the
Association on March 31, 1969, was 512 with a total of
20,200 looms. According to the Association, out of the 512
units which were its members, a large number of units
numbering about 444 were grey units, which means, that none
of these units has its own raw materials and that they have
not got any equipment for dyeing, bleaching or otherwise
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 12
finishing their products.
On February 6, 1970, when Miscellaneous Application (IC) No.
1 was filed, the Association had, as its members, about 325
280
units of employers in the art silk textile industry within
the local area of Greater Bombay. Out of these 325
employer-units, 90 employer-units alone were concerned with
the Miscellaneous Application (IC) No. 1 of 1970, as that
application sought modification of the award dated April 25,
1962, in reference Nos. (IC) 131, 138, 139 and 155 of 1961
which governed only the 90 units of the Art Silk Industry.
In this case, we are directly concerned worth 55 member-
units only, as the remaining 35 units had one out of
business between April 25, 1962 and February 5, 1970.
There were two previous decisions binding on these units
regarding dearness allowance. One was the award passed in
reference No. 97 of 1951 which granted neutralization to the
extent of 75 per cent rise in the Bombay Consumer Price
Index 106 (old series). The other was a settlement arrived
at during the pendency of Miscellaneous Application (IC) No.
3 of 1957 which modified the award in reference No. 97 of
1951 by raising the percentage of neutralization to 80 per
cent with effect from June 1, 1957.
The Sabha is recognised under section 30 read with section 3
(32) of the Bombay Industrial Relation Act as the
representative Union of employees in the Silk and Art Silk
Industry within the local area of Greater Bombay.
The demand of the Sabha in Miscellaneous Application (IC)
No. 1 of 1970 was, that "the employees shall be granted with
effect from May 1, 1970, dearness allowance at the rate of
100 per cent neutralization of the rise in the Bombay
Consumer Price Index 106 (old series) on the basis of the
minimum wage in force, at present, namely Rs. 36.50 per
month of 26 working days". As already stated, the
application was, in effect, to modify the award passed on
April 25, 1962, in reference (IC) Nos. 131, 138, 139 and 155
of 1961; that award provided that the employees covered by
the references should be given an adhoc increase of Rs. 5.20
per month of 26 working days over their wages at that time,
that the increase should be in force for two years from
February 1, 1962, that thereafter, the increase should be
Rs. 6.50 per month of 26 working days instead of Rs 5.20 and
that this will continue for a further period of 2 years.
The award rejected the prayer for increase rate of dearness
allowance.
The grounds on which the Sabha claimed 100 per cent
neutralization were, that the total pay packet of the
employees in the industry was far lower than the minimum
need of the workmen and also less than that of the employees
in other industries in the region., that there has been a
steep rise in the cost of living since the last revision of
basic wages and a greater rise in the cost of living since
the decision fixing neutralization at 80 per cent of the
basic wage of Rs. 30/- per month for 26 working days, that
the employer-units
281
(Mathew, J.)
have the capacity to bear the additional burden as the art-
silk’ industry in the region has prospered and established
itself as a stable one with good prospects.
The main contentions of the Association were that the total
pay’ packet of the workmen in Rayon and Artificial Silk
industry in the, local area of Greater Bombay was Rs. 190.12
per month of 26, working days, that dearness allowance to
the extent of 80 per cent neutralization was automatically
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 12
responsive to the rise in the cost of living and, therefore,
there was no real fall in the pay packet consequent on the
rise in the cost of living, that the workmen had received an
ad hoc increase of Rs. 5.20 per month of 26 working days
from February 1, 1962, and that this has been further raised
to Rs. 6.50 from February 1, 1964, that the base for
neutralization which was Rs. 30/- should not and ought not
to be changed to Rs. 36.50 as demanded by the Sabha, that
the demand was beyond the capacity of most of the 55 units
concerned, that the dearness allowance paid in the other
industries in the region cannot furnish any relevant
criterion as the financial position of these units was quite
different, that over the years, the position of the industry
has steadily deteriorated, that on account of the paucity of
foreign exchange, restrictions on import of the required
machinery, the non-availability of the necessary types of
raw materials, the high cost of yam, the heavy excise duty
on indigenous yarn, the industry has been declining, that
the import on nylon yarn was canalised through the State
Trading Corporation of India and it kept for itself a very
high profit margin, that the price of raw materials in the
industry has gone up, that prior to March, 1970, the excise
duty on processed yarn and artificial silk fabric varied
from 9 paise to 30 paise per square metre whereas from
March, 1970, onwards, the was a steep rise in the excise,
duty per square metre and therefore the industry cannot bear
any further burden and that in any event, the demand for 100
per cent neutralization is
unwarranted
As already stated, the Industrial Court, after evaluating
the materials produced by parties, came to the conclusion
that the employees in the Silk and Art Silk Industry should
be granted dearness allowance at the rate of 99 per cent
neutralization of the rise in the Bombay Consumer Price
Index 106 (old series) on the basis of the minimum basic
wage of Rs. 30/- per month of 26 working days with effect
from January 1, 1971.
The Court found that at the time when the wages were raised
in 1962, the consumer price index stood at 429, that there
has been a steep rise in the cost of living as reflected in
the Bombay Consumer Price Index-in May 1970 it stood at 799-
and on the date of the award it stood at 839, and so, there
was a fall in real wages by 39 paise per day of the lowest
class of workers. The Court,
19-1208 Sup CI/72
282
therefore, came to the conclusion that the demand for
neutralization of the rise in the cost of living was
reasonable. It further found that exhibit U. 8, which is a
comparative Table showing the minimum basic wages and
dearness allowance paid in other industries in the region
was a relevant document as it indicated the trend in other
industries in the region to allow full neutralization on
account of the rise in the cost of living. The Court then
proceeded to assess the financial capacity of the employer-
units with particular reference to their volume of business,
the capital invested, tile profits earned, the standing of
the industry, the strength of the labour force employed, the
position of reserves, the dividend declared and the future
prospect of the industry. The Association, although it
represented 55 employer-units, produced no data as regards,
the financial capacity of 27 units in spite of the clear
direction of the Court, and so, the Court, on the basis of
the in materials placed before it by the other units, came
to the conclusion that the art and art-silk industry has
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 12
prospered and has established itself, that the prospect of
the industry was bright and that the financial position of
the 28 units which produced their balance sheets and profit
and loss accounts or other documents to show their gross
profits was such that they could afford to bear the
additional burden.
For reaching the conclusion that the industry is prosperous
and has a bright future, the Court relied on the speech made
by the Chairman of the Silk and Art Silk Mills Association
at the 30th Annual General Meeting in 1969, in which he said
that the manmade, fibre industry had made remarkable
progress during the, last decade, that the production during
the year 1969 exceeded the Third Plan target by over 25 per
cent, that there was a rise in the, per-capita consumption
of fabrics, that rapid progress was expected in the
production of non-cellulosic yarn and that the, total demand
in relation to the, year 1969 was likely to increase by 41
per cent by the year 1973-74 and by 110 per cent by the year
1978-79, The Court also relied upon the fact that actual
export in 1970 exceeded the export in the previous three
years, the fact that production has substantially increased
in the first six months of 1970, that it was as much as
525.77 million metres compared to the total production of
892.67 million metres in 1969 and the fact that the, total
production of art-silk yam had reached the figure 1 4.680
thousand kilograms compared to 106.480 thousand kilograms in
1969. The Court estimated that export of Rayon fabrics and
synthetic textiles will reach Rs. 26.50 crores a year by
1973-74, Although excise duty has been increased, the Court
found that it had not adversely affected the industry in any
substantial degree its the economic incidence of the burden
of the excise duty was passed on to the consumer. As
regards the financial capacity of the units, the Court
relied on exhibit U. 9 which is an analysis of ,he profit
and loss accounts of the 28 mills and exhibit U. 10, which
is a consolidated statement showing the financial condition
of these
283
(Mathew, J.)
mills and exhibit U. 11. the statement regarding the bonus
paid by the mills which. did not file their balance sheets
and profit and loss accounts and Exhibit U. 12, a statement
showing the interest paid by some of the units which had
filed their balance sheets and Exhibit U. 13, a statement
showing the profitability ratio for art-silk industry in
Bombay and exhibit U. 14, a comparative statement of the
profitability ratio in cotton textiles, engineering and
chemical industry. The Court found from exhibit U. 9 that
there was an increase in the paid-up capital of 44.07 lakhs
from 1965, an increase in the reserve amounting to 32.96
lakhs and increase in the gross block amounting to Rs.
285.54 lakhs and an increase in the net block of Rs. 140-63
lakhs from 1965 to 1968. From the figures given in exhibits
in U. 9 and U. 10, the Court found that, after providing for
depreciation to the total paid up capital, the profit would
work out at 40.02 per cent and that after providing for
depreciation to the total paid up capital and reserve, it
would work out at 21.10 per cent. From the large amount of
interest paid by some of the units as disclosed in exhibit
U. 12, the Court inferred that these units are under-
capitalised but that, at the same time, they preferred to
borrow money at the current rate of interest. The Court
also found from exhibit U. II that 17 mills which did not
file their balance sheets or profit and loss accounts were
in a position to pay bonus in excess of the 4 per cent which
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 12
is the statutory minimum under the Payment of Bonus Act and
therefore, these units must have been making profits and, as
their present financial position was not shown to have
become worse, they had the financial capacity to bear the
additional burden.
Mr. S. T. Desai for the appellant submitted that the
Industrial Court drew an adverse inference against the 28
units although they had produced their balance sheets and
profit and loss accounts on the ground that the 27 mills did
not produce any data to show their financial capacity to
bear the additional burden and that that was unjustified.
He argued that so far as the 28 mills which had produced
their balance sheets and profits and loss accounts, there
should have been an appreciation of the materials placed
before the Court on their merit and no adverse inference
should have been drawn against them because the other units
did not place any relevant materials as regards their
financial capacity. In other words, his argument was that
as the 28 mills had produced relevant documents to show
their financial capacity, the Court should not have drawn
any adverse inference as against them merely from the non-
production of the relevant documents by the other units. We
lo not think that there is any substance in this argument.
As already stated, the Association represented 55 units of
employers and out of the 55 units, only 28 units produced
their balance sheet,-, and profit and loss accounts.
Statements were filed by
284
17 units (exhibits C. 1 8 5 to 201 ) undertaking that they
would abide by the information and the balance sheets and
profit and loss accounts supplied by the 28 mills and
praying for decision of the dispute on the basis of the
information and statement of accounts so supplied. The
remaining 10 mills orally agreed that they would also abide
by the statement and balance sheets supplied by the 28 mills
and for deciding the dispute on that basis. Therefore, an
adjudication by the Industrial Court as regards the rate of
neutralization to be allowed on the basis of the financial
capacity of the 28 units as guaged from the balance sheets
and profit and loss accounts produced by the 28 mills was
quite proper. To put it differently, the award in so far as
it concerned the 28 units, proceeded on the basis of their
financial capacity as guaged from the balance sheets and
profit and loss accounts produced by them and from the
materials in the case. They can, therefore, have no reason
for any complaint, that the Court drew any adverse inference
as regards them from the non-production of relevant
materials in the possession of the other employer units.
And, as regards the 27 employer-units which did not supply
any materials with respect to their financial capacity, they
cannot also have any reason for complaint in view of their
undertaking to abide by the decision of the Industrial Court
on the basis of materials furnished by the 28 units The only
reason why they did not furnish the basic information as
regards their financial capacity in spite of the direction
of the Court, is that the information, if furnished, would.
go, against them. We are satisfied that the award was based
on the materials produced in the case so far as the 28
units are concerned and not on any adverse inference drawn
from the non-production of the relevant materials by the 27
units.
Mr. Desai contended that the, position of the industry is
not stable and that its prospects are bleak. He said that
the Court did not give due weight to exhibits C. 1 to C. 4
and C. 15 in reaching-the conclusion that the position of
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 12
the industry was stable. Exhibit C.1 is a statement showing
the number of mills and the looms owned by them as on April
1, 1970. Exhibit C. 2 is a statement showing the number of
members of the Association and their looms. Exhibit C. 3 is
a statement showing the looms run by member-mills of the
Association as on April 1, 1970. Exhibit C-. 4 is a
statement showing the number of grey and composite units in-
the industry and their looms. Exhibit C. 15 is a statement
concerning 25 mills. It shows the number of looms
installed, average number of loom-shifts worked per month,
average production and average export per month during the 4
years namely 1966 to 1969. Exhibits C. 1 to C. 4 do not
throw much light upon the question in controversy as they
only show the all-India figures. Exhibit C. 15 was taken
into consideration by the Industrial Court But the Court did
not place much reliance upon it as it was of
285
(Mathew, J.)
opinion that the data furnished by the balance sheets and
profit and loss accounts was more relevant.
Counsel submitted that the number of looms has gone down,
that the cost of production has gone up, that export of
manufactured silk has dwindled, that Sales have declined and
therefore, the profits of the units have gone down from 1965
to 1968. Counsel in this connection referred to exhibit U.
13, a document produced by the’ Sabha to show the
profitability ratio and argued that that document would
itself indicate that there was decline in profits from 1965
to 1968 . Exhibit U. 13 is a statement of the gross profits
for the years from 1965 to 1968 of these units from the
point of view of total sales, of total capital and of total
net Worth. In Ahmedabad Mill Owners,’ Association, etc. v.
The Textile Labour Association(1) the Court observed
"We do not think in considering the financial
position of the appellants in the context of
the dispute before us, it Would be appropriate
to rely unduly on the profitability ratio
which has been adopted by the said Bulletin.
Indeed, in appreciating the effect of the
several statements produced before the
Industrial Court by the, parties in the.
present,proceedings, it would be relevant to
remember that some of these single-purpose
statements are likely to create confusion and
should not ordinarily be regarded as decisive.
As Paton has observed : "Different groups for
whom financial statements are prepared are
interested in varying, degree in particular
types of information; and so, it has been held
in some quarters that no one form of statement
will satisfactorily serve all these purposes,
that separate single-purpose statements should
be prepared for each need or that the
statements usually prepared for general.
distribution should be expanded so as’ to
include all the detail desired" (Accountant’s
Handbook Edited by Paton, p. 13). Paton cites
the comment of Wilcox against these single-
purpose statements. Said Wilcox : "The danger
in undertaking to furnish singlepurpose
financial statements lies in increasing
confusion and misunderstanding, and in the
possible misuse of such statements for
unintended purposes". Paton has then’
referred to certain methods for determining
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 12
the financial position of a commercial and
industrial concern. In this ’connection, he
refers to the proprietary ratio rate of
earnings ’on total capital employed, rate of
dividends on- common stockholders’ equity and
others. Our purpose In referring to these
comments made by
(1) [1966] 1 S.C.R.382 at p. 426,
286
Paton is to emphasise the fact that
industrial- adjudication cannot lean too
heavily on such single-purpose statements or
adopt any one of the tests evolved from such
statements, whilst it is attempting the task
of deciding the financial capacity of the
employer in the context of the wage problem.
While we must no doubt examine the position in
detail, ultimately we must base our decision
on, a broad view which emerges from a
consideration of all the relevant factors".
We think that the Industrial Court hag carefully examined
the financial position of the employer-units as also the
position of the industry and its future prospects. The
Court was fully aware of the- nature of the demand and the
extent of the burden which the employer units. will have to
bear. A broad and overall view of the financial position of
the employer units was taken into account by the Court and
it has tried to reconcile the natural and just claims of the
employees for a higher rate of dearness allowance with the
capacity of the employer to pay it and in that process it
has made allowance for the legitimate desire of the employer
to make reasonable profit. What is really material in
assessing the financial capacity of the employer-units in
this context is the extent of gross profits made by them
(see Unichem Laboratories Ltd. v. Their Workmen(1). On the
basis of exhibit U. 9 which is an analysis of the balance
sheets and profit and loss accounts of the 28 units, the
Court found that the 28 mills have been making good profits
and that, on an average, the profit would work out at 40
and odd per cent of the capital. There was some decline in
the profits made during the years 1966, 1967 and 1968 but,
the Court found that the industry was rallying round in
1970.
Mr. Desai contended that the Industrial Court did not
appreciate the impact on the industry of the enhancement of
excise duty upon the manufacture of silk products. Counsel
contended that there has been considerable increase in
excise duty on all varieties of silk and that has affected
the consumption of manufactured silk products. No evidence
his been adduced to show what exactly has been the effect on
the industry of the enhancement in excise duty. Although
the Managers of two units were examined as witnesses No. 2
and 3 in March and April, 1971, they did not give any
evidence as regards the adverse effect on the sale of silk
products on account of the imposition of enhanced excise
duty during the financial year 1970. We do not think that
without further evidence as regards the effect of the
enhancement in the excise duty, it is’ possible to draw an
inference that the sale of the products has been"adversely
affected. Quite apart from this, we do not
(1) Civil Appeals No. 1091-93 of 1971, decided on 24-2-1971,
287
(Mathew, J.)
understand how when the-economic incidence of the excise
duty has been passed on to the consumer, the employer-units
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 12
have to bear any additional burden on account of the levy.
Counsel next contended that the Industrial Court was not
justified in relying upon exhibit U. 8 for coming to the
conclusion that 99 per cent of neutralization on account of
rise in cost of living should be granted to the employees on
the basis of the percentage of neutralization in other
industries in the region. Counsel said that granting 99 per
cent neutralization has not been countenanced by this Court,
that the, basis of fixation of dearness allowance is
industry-cum-region and that the Industrial Court went wrong
in taking into account the percentage of neutralization in
other industries in the region for fixing the extent of
neutralization on account of the rise in cost of living to
the employees in question here and relied on the decision of
this Court in Bengal Chemical and Pharmaceutical Works Ltd.
v. Its Workmen(1). In that case, Vaidialingam. J.,
speaking for the Court, laid down among other things, the
following propositions : 1. Full neutralization is not
normally given , except to the very lowest class of
employees, 2. the purpose of dearness allowance being to
Tieutralize a portion of the increase in the. cost of
living, it should ordinarily be on a sliding scale and
provide for an increase in the rise in the cost of living
and decrease on a fall- in the cost of living, 3. the basis
of fixation of wages and dearness allowance. is
industry-cum-region.
We do not think that the Industrial Court went wrong in
relying upon exhibit U. 8, or, in granting 99 per cent
neutralization on account of the steep rise in the cost of
living. Exhibit U. 8, it may be recalled is a comparative
Table showing the minimum basic wages and dearness allowance
paid in order industries in the region like the engineering,
pharmaceuticals, etc. The Court relied upon it only to show
the trend in the region. The Court also relied upon the
report of the Norms Committee which stated that the trend
for the last decade in industrial adjudication as well as in
settlement,, and awards, was’ to allow 100 per cent
neutralization in the case of lowest-paid employees. The
Court was of the view that if go per cent neutralization
could be allowed in the industry under tile settlement
arrived at in 1957, there was no reason why 100 per cent
neutralization should not be granted in view of the steep
rise in the cost of living from 1957, to the lowest paid
employees. We can not agree with the contention of the
appellant that the Industrial Court went wrong in relying
upon exhibit U. 8 or the report of the Norms Committee to
find out the trend in the region as to the extent of
neutralization to be allowed to the employees concerned.
The question of the extent of neutralization to the workmen
in the units
(1) [1969] 2 S.C.R. 113.
288
does not depend solely upon the fact whether neutralization
to that extent has been allowed to the employees in
comparable concerns in the same industry in the same region.
Much distinction cannot be made in this respect among the
lowest paid employees in the region merely because some of
them are employed in other industries. In other words, for
finding the trend or the norm in the region as regards the
extent of neutralization for the lowest paid employees, the
Industrial Court cannot be said to have gone wrong in
relying upon either the Norms Committee Report or on-exhibit
U. 8.
Counsel for the appellant submitted that the Industrial
Court did not make any attempt to fix the dearness allowance
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 12
on the basis of the industry-cum-region formula, and that
that was a fatal blemish in the award. In French Motor Car
Co. Limited v. Workmen(1) this Court observed that the
principle of industry-cumregion has to be applied by an
industrial court, when it proceeds to consider questions
like wage structure, dearness allowance and similar
conditions-of service and in applying that principle indus-
trials courts have to compare the wage scale or the dearness
allowance prevailing in similar concerns in the region with
which it is dealing, and generally speaking similar concerns
would be those in the same line of business as the concern
with respect to which the dispute is under consideration and
further, even in the same line of business, it would not be
proper to compare a small struggling concern with a large
flourishing concern. In Williamsons (India) Private Ltd. v.
The Workmen(2) the Court observed that the extent of
business carried an by the concerns. the capital invested by
them, the profits made by them, the nature of the business
carried on by them,- their standing, the strength of their
labour force, the presence or absence and the extent. of
reserves, the dividends declared by them and the prospects
about the future of their business and other relevant
factors have to be borne in mind for the purpose of
comparison. These observations were made to show how
comparison should be made, even in the same line of business
and were intended to lay down that a small concern cannot be
compared even in the same line of business with a large
concern. In Greaves Cotton and Cc,. and others v. Their
Workmen (3), the main argument was that the Tribunal went
wrong in relving more on the region aspect of the industry-
cum-region formula and not on the industry aspect when deali
ng with clerical and subordinate staff. The Court
said that it was ordinarily desirable the have as much
uniformity as possible in the wage-scales of different
concerns of the same industry working in the game region, as
this puts similar industries more or less on an equal
footing in their production struggle. The Court then
referred to, the French
(1) [1963] Supp. 2, S.C.R. 16, at pi). 20-21. (2) [1962] 1
L.J. 302.
(3) [1964] 5 S.C.R 362,at pp. 367-369,
289
(Mathew, J.)
Motor Co.’s(1) case and observed that in that case this
Court held so far as clerical and subordinate staff ’are
concerned that it may be possible to take into account even
those concerns which are engaged in different, lines of
business for the work of clerical and subordinate staff is
more or less the same in all kinds of concerns. The Court
further observed that where there are a large number of
industrial concerns of the same kind in the same region it
would be proper to put greater emphasis on the industry part
of the industry-cum-region principle as that would put all
concerns on a more or less equal footing in the matter of
production costs and therefore in the matter of competition
in the market and this will equally apply to clerical and
subordinate staff whose wages and dearness allowance also go
into calculation of production costs : but where the number
of comparable concerns is small in a particular region and
therefore the competition aspect is not of the same
importance, the region part of the industry-cum-region
formula assumes greater importance particularly with
reference to clerical and subordinate staff and this was
what was emphasised in the French Motor Car Cos((1) case
where that company was already paying the highest wages in
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 12
the particular line of business and therefore comparison had
to be made with as similar concerns as possible in different
lines of business for the purpose of fixing wage scales and
dearness allowance. According to the Court, the principle,
therefore, which emerges from these two decisions is that in
applying the industry-cum-region formula for fixing wage
scales the Tribunal should lay stress on the industry part
of the formula if there are a large number of concerns in
the same region carrying on the same industry; in such a
case in order that production cost may not be unequal and
there may be equal competition, wages should generally be
fixed on the basis of the comparable industries, namely,
industries of the same kind. But where the number of
industries of the same kind in a particular region is small
it is the region part of the industry-cum-region formula
which assumes importance particularly in the case of
clerical and subordinate staff, for as pointed out in the
French Motor Car Cos case("), there is not much difference
in the work of this class of employees in different
industries.
If the employer has the financial capacity, would it be just
to reject the claim of the lowest paid workmen for an
enhancement in dearness allowance to neutralize the rise in
cost of living and thus to maintain their subsistence wage
at its real level in terms of the purchasing capacity,
merely because there is a comparable concern in the industry
in the region. In which workmen are paid dearness allowance
at a low rate ? We do not think it necessary to answer this
question for the purpose of deciding this case.
(1) [1963] Supp. 2 S.C.R. at 20-21.
290
The Association never wanted the Court to make any compari-
son with any other units in the same industry in the region.
In the written statement of the Association there was no
averment that there were other comparable unit,,,,.-., the
same industry in the region. Nor did the Association, It
the time of argument before the Industrial Court, put
forward the contention that there were comparable concerns
in the same industry in the region and that the Court should
make a comparison of the employer-units in question with
those concerns to find out the extent of neutralization
which could be granted. The Association had a membership of
325 units in Greater Bombay on February 6, 1970, when the
Miscellaneous Application (IC) No. 1 was filed. It was
certainly in a position to tell the Court whether there were any
other comparable units in the same industry in the
region and the only inference from its conduct is that there
were no comparable units in the industry in the region.
We do not think that the award suffers from any infirmity.
At the time of the admission of the Special Leave Petition
the Court has ordered that the appellant should pay the cost
of the respondent irrespective of the result of the appeal.
We dismiss the appeal and direct the appellant to pay the
cost of the respondent.
In Civil Appeal No. 277 (NL) of 1972, the contentions raised
on behalf of the appellant are much the same as those raised
in Civil Appeal No. 276(NL) of 1972 and for the reasons
given in the above judgment, we dismiss that appeal also and
direct the appellant to pay the cost of the respondent.
G.C. Appeals dismissed.
L1208SupCI/72-2500-30-8-73-GIPF.
291