Full Judgment Text
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PETITIONER:
KILLICK NIXON LIMITED
Vs.
RESPONDENT:
KILLICK & ALLIED COMPANIES EMPLOYEES UNION
DATE OF JUDGMENT02/05/1975
BENCH:
GOSWAMI, P.K.
BENCH:
GOSWAMI, P.K.
BEG, M. HAMEEDULLAH
BEG, M. HAMEEDULLAH
ALAGIRISWAMI, A.
UNTWALIA, N.L.
KHANNA, HANS RAJ
BHAGWATI, P.N.
CITATION:
1975 AIR 1778 1975 SCR 453
1975 SCC (2) 260
CITATOR INFO :
RF 1976 SC2439 (6,7,9,10)
RF 1977 SC 322 (26)
D 1978 SC 419 (12)
R 1980 SC 31 (8)
D 1986 SC1794 (7)
E&D 1992 SC 504 (31)
ACT:
Industrial Dispute--Fixation of ceiling on D.
A.--Principles.
HEADNOTE:
The appellant-company wanted to introduce the following
scheme of D.A for its clerical staff and drivers.
-----------------------------------------------------------
Basic Pay slabs. Percentage of Variation for
basic salary every 10 points
(C.P.I. 441-450) of C.P.I.
------------------------------------------------------------
1st Rs. 100 120 5%
2nd Rs. 100 40 2%
Rs. 201 to Rs. 500 30 1%
Over Rs. 500 25
--------------------------------------------------------------
Maximum D.A. Rs. 325
==============================================================
Placing the ceiling of Rs. 325 on the D.A. was not
acceptable to the employees and a reference was made to the
Industrial Tribunal and the Tribunal removed the ceiling.
In appeal to this Court,
HELD:
While the question of the desirability of ceiling on D.A.
was not in issue in any references to Tribunals of appeals
therefrom, referred to by the parties, the question of
imposing a ceiling on D. A. is not an absolutely alien
phenomenon. Although it might not have been the general
practice, ceiling was not rejected out of hand as irrational
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or unjust by unions in the course .of collective bargaining
in the Bombay region, in which the head-office of the
appellant is situated. In the case of the employees under
the Central Government also a kind of ceiling has been in
vogue. [461F.G., 462A]
(1) The problem of imposing or removing a ceiling on D. A.
has to be viewed from the following among other important
aspects :
(1) Condition of the wage scale prevalent in
the company.
(2) Condition of the wage level prevalent in
the industry and the region.
(3) The wage packet as a whole of each
earner in the company with all ameni
ties and
benefits and his ability and potency to cope
with the economic requirements of daily
existence consistent with his status in
society, responsibilities, efficiency at work
and industrial peace.
(4) The position of the company viewed in
relation to other comparable concerns in the
industry and the region.
(5) Peremptive necessity for full
neutralisation of the cost of living at the
rock-bottom of wages scale if at, or just
above, the subsistence level.
454
(6) The rate of neutralisation which is
being given to the employees in each salary
slab.
(7) Avoidance of huge distortion of wage
differentials taking into reckoning all
persons employed in the concern.
(8) Degree of sacrifice necessary even on
the part of workers in general interest.
(9) The compulsive necessity of securing
social and distributive justice to the
workmen.
(10) Capacity of the company to bear the
additional burden.
(11) Interest of national economy.
(12) Repercussions on other industries and
society as a whole.
(13) The state of the consumer price Index at
the time of the decision.
(14) Forebodings and possibilities in the
foreseeable future as far as can be envisaged.
(15) Price indices have now assumed menacing
figures.Any problem regarding wage or D.A. has
to be considered in that background and at
the same time not losing sight of the national
economy. [466E-H, 467A-C]
II. The removal of ceiling in the instant case is not
justified even though, on the. appellant company is a
prosperous company with capacity to bear the additional
financial burden if the ceiling is removed, and (ii) the
consumer ,rice index has been soaring higher and higher;
because : [465A-B, 467D]
(a) The unprecedented rise in the consumer
price index produces steep rise in D.A.[458H]
(b) The absence of ceiling on D.A. can thus
result in curious anomalous situations wherein
the pay packet of the clerical staff would
exceed the pay packet of junior executives
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which would hardly be conducive to discipline,
efficiency and effective exercise of control.
[463-GA]
(c) Although the appellant employs a total
of 1142 workmen in its various factories and
branches, the dispute relates to only 265
workers in the head-office. A general problem
like imposition of ceiling on D.A. in a
company cannot be treated on the statistical
burden relevant only to a section of the
employees. [463C-E]
111. D.A. being intimately connected with the cost of
living, the matter cannot be judged by the test submitted by
the workmen, namely, that there cannot be a ceiling on D.A.
unless there is a ceiling on profits. [467-F]
IV. Also, in dealing ’,with the problem of ceiling on D.A.,
the Tribunal’s view that there should not be a ceiling on
D.A. unless the company would be required to close down if
the ceiling is removed, is not correct. [465-H]
V. At what particular amount there should be a ceiling on
D.A. is a matter which will have to be gone into by the
Tribunal. But so far as the lowest paid employees at or
just above subsistence level are concerned, they are
entitled to 100 per cent or at any rate 95 per cent
neutralisation of the rise in cost of living, and hence,
there should be no ceiling on D.A. payable to employees
within the slab of first Rs. 100/- unless it can be shown by
the management that the rate of neutrailsation in their case
is more than 100per cent. The manner in which the ceiling
may be imposed, that is, at a certain amount as the outside
limit of the D.A. or by reference to the quantum of D.A.
payable at a certain wage level, or in any other manner,
would also
455
have to be decided by the Tribunal in the exercise of its
judicial discretion The Tribunal will have to perform this
delicate task by striking a balance the weightage to be
given to any principle being variable according to the
conditions-and keeping in view the dominant principle of
doing social justice. [467DE, CH, 468A-C]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 734 & 735
of 1973.
Appeal by special leave from the Award dated the 24th
January, 1973 of the Industrial Tribunal, Bombay in Ref.
Nos. (IT) 149 of 1966 & (IT) No. 257 of 1966.
A. K. Sen, I. N. Shroff, D. G. Shroff, M. S. Gagrat’ & F.
D. Dalmania, for the appellant.
R. J. Mehta, for the respondent
A. K. Gupta, for the, applicant/intervener (Killick Nixon
Employees’ Union)
D. C. Shroff, O. P. Mathur, K. J. John, F. K. Kaka and
J. .B. Dadachanji, for the applicant/intervener (Cynamid
India Ltd.)
G. B. Pai, S. V. Gupte, O. C. Mathur, K. J. John, A. G.
Meneses and J. B. Dadachanji, for the applicant/intervener
(Voltas Ltd.).
Janardan Sharma and Jitendra Sharma, and K. T. Sule, for the
applicant/intervener (Cynamid Employees’ Union)
Janardan Sharma and Jitendra Sharma, for the
applicant/inter-vener
The Judgment of the Voltas & Vol Kart Employees Union court
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was delivered by
Goswami, J.-The only question with which we are concerned in
these appeals by special leave is: Should there be a ceiling
on dearness allowance in this case ?
On May 11, 1966, the employers gave a notice of change for
placing a ceiling on dearness allowance (for brevity D.A.)
already in vogue at the figure of Rs. 325/-. Since this was
not acceptable to the union, both sides agreed for a
reference to the Industrial Tribunal, Maharashtra. By the
impugned order of January 24, 1973, the Tribunal removed the
ceiling and hence this appeal.
’Mere was also another demand with regard to the D.A. for
drivers on the same basis as that for clerical staff. The
Tribunal following this Court’s decisions in Bengal Chemical
& Pharmaceuticals Works v. Its Workmen(1) and Greaves Cotton
and Co. and Others v. Their Workmen (2) allowed the union’s
claim for the two categories to be treated on equal footing.
This Court held in the above decisions that employees
getting the same wages should get the same D.A. irrespective
of whether they are working as clerks or as members of
subordinate staff or as factory workmen. This part of the
award is, therefore, rightly not challenged before us.
(1) [1969] 2 S. C. R. 113.
(2) [1964] 5 S.C. R. 362.
10 SC/75-30
456
The reference was made in June 1966. There was an earlier
award in the reference. At the instance of the management,
the High Court set it aside and remanded the above two items
of dispute alone for disposal. The Tribunal had in the
earlier award rejected all other claims of the union
including that of revision of wage scale.
The only point that survives, therefore, is with regard to
the ceiling on D.A. When the reference was made in June 1966
the cost of living index for Bombay city was 626. At the
time of the impugned award in January 1973 it rose to 906
and in December 1974 it reached 1336 mark.
Various expert committees and commissions have dealt with
the question of wages and D.A. from time to time. Dearness
’allowance as such is not known in foreign countries with
the exception of Ceylon and Pakistan. Whenever there is any
significant rise in the cost of living in foreign countries
there is a revision of wage rather than payment of any D.A.
as such. D.A. in India is a relic of the First World War to
cope with the rise of cost of living although then in the
shape of ad hoc payments not linked to any consumer price
index. During the Second World War it was introduced in the
form of a Grain Compensation Allowance to compensate the
hardship of the employees for the rise in prices of
foodgrains. So far as the Central Government employees were
concerned, the Government constituted the First Pay
Commission in 1947 to examine the wage structure. The
Government of India also set up a Committee on Fair Wages
and the report was submitted in June 1949. A Second Pay
Commission was also constituted by the Government in 1959.
The Government of India in August 1964 constituted a One-man
Independent Body to enquire into the question of D.A.
payable to the Central Government employees and the report
was submitted in January 1965 by Shri S. K. Das. In July
1966, the Government of India appointed a Dearness Allowance
Commission presided over by Shri P. B. Gajendragadkar. The
Commission examined the principles which should govern the
grant of D. A. to Central Government employees in future and
was also required to review the formula for the grant of
D.A. as recommended by the Second Pay Commission and to
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recommend, changes. if any. In December 1966, the
Government of India set up a National Commission on Labour
presided over by Shri P. B. Gajendragadkar with exhaustive
terms of reference and the Commission submitted its report
on August 28, 1969. Then in sequence came the report of the
Third Pay Commission in 1973. The parties have extensively
quoted from the above reports during arguments.
Historically and by the industrial texts and also
observations of various commissions and committees, D.A. was
regarded as "applicable to those employees whose salaries
are at the subsistence level or little above it............
in order to enable them to face the increasing dearness of
essential commodities". .(See Gajendragadkar Commission on
Dearness Allowance, May, 1967).
Like all changes in life and in continuous march in progress
of society the concept of D.A. also may change to take in a
wider range
457
of commodities and services to make life worth living as far
as practicable subject to compelling limitations of general
interest. We recognise that the old definition of D.A. may
not even serve the climate of new aspirations of various
classes of employees of this vast country. Luxuries of
Yesterdav may be the comforts of to-day and necessities of
tomorrow. Economic solutions must reckon the turnabouts in
social urges. Because even the worm turns. Industrial
adjudication which has not the limitations of the ordinary,
courts has to respond to the needs of changing society and
it may be possible to widen the scope of D.A. if that serves
the cause of general welfare. There may be no inexorable
rule tying down economic existence to definitions of bygone
days, if unsuitable or irrelevant in the context of the
times.
The National Commission on Labour (1969) while dealing with
D.A. observed :
"We consider that payment of D.A. has to be
viewed in broader context of wage poli
cy, many
elements of which have been discussed in the
previous chapter. In a developing economy
where price stabilisation has proved ineffec-
tive, or the inflationary potential cannot be
controlled, any arrangement for compensating
for price rise will have its raisin d’etre.
At the same time, a direct linkage between a
rise in the index and the D.A. may create
problems for price stabilisation. It can
hardly be disputed that the index is the best
available indicator of changes of price level.
The reason for a disproportionately high D.A.
is the fixation of basic wage on a date far
remote from the present". (Para, 16,39, page
240).
The Commission further observed
"It is obvious that unless money wages rise as
fast as the consumer prices, it would result
in an erosion of real wages. But the extent
of its impact will depend on the margin of
cushion available at different levels of
income......... We accordingly recommend that
95 per cent neutralisation should be granted
against rise in cost of living to those
drawing minimum wage in non-scheduled
employments". (para 16.47, page 242).
The Third Pay Commission in its Interim Report made some
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significant observations :
"We need hardly emphasise that it would be an
exercise in futility to keep on increasing the
emoluments of Central Government employees, if
these increases are largely wiped out soon
afterwards by increases in prices of goods and
services. There is, therefore, paramount need
to maintain price stability and we are
confident that the Government will take all
necessary fiscal, monetary and other measures,
including control over production and
distribution, to maintain the price line".
458
D.A. was primarily intended to be a temporary expedient
and .,as sought to be made available as a protection to
those who have of cushion at all in their wage packet in the
face of any appreciable rise in prices. Some relief was
given to others also. The hope of ’he two Pay Commissions
that prices will decline and stablise, never same true.
D.A. has, therefore, come to stay. The price indices have
now assumed menacing figures. This is the stark reality of
the situation and any problem regarding wage or D.A. has to
be considered in that background at the same time not losing
sight of the national economy.
In considering the question of D.A. the total wage packet of
the employee must be kept in view. The first and foremost
consideration is the case of the employees at the minimum
wage level. it must, however, be remembered that minimum
wage should enable an employee not merely for the bare
sustenance of life but for the preservation of his
efficiency by providing for some measure of education,
medical requirements and amenities. The concept of minimum
wage as also of fair wage cannot be static. It will change
with the progress of time and development.
In a recent decision of this Court in Bengal Chemical
(supra) ,the principles for fixing of D.A. came up for
consideration. After reviewing the earlier decisions, this
Court held as follows :-
"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.
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".
It is submitted on behalf of the employers that in a scheme
of D.A. linked not only to the cost of living index but also
to basic wages by way of slabs, there must be a ceiling as
otherwise it will not be a compensation for increased cost
of living but additional remuneration unconnected with the
increasing cost of living at the lowest level. It is
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emphasised that where there is a dual link, a ceiling
removes the incongruity in the D.A. rising with the basic
wages out of proportion to the cost of living compensation
at the
459
lowest level. It is fairly admitted that the ceiling fixed
act any given time on the basis of a possible rise in the
cost of living index in the foreseeable future may be
altered if the rise in the cost of living index later makes
the ceiling unreflective of the requisite neutralisation of
the increase in the cost of living at the lowest level. It
is submitted that without a ceiling it will be impossible
for any management to plan the business of the employers
including production, expansion, etc. without any certainty
of wage bill being estimated at any definite figure for the
foreseeable future.
On the other hand it is submitted on behalf of the workers
that there should be no ceiling on D.A. till the workers
reach the level of living wage. It is also submitted that
in the interest of social justice there should be no ceiling
on wages without first putting a ,ceiling on profits and
controlling and stablising prices.
The award pertains to the clerical staff and drivers working
in the Head Office of the appellant numbering about 265 out
of about 743 workmen in its various establishments (page 120
of the record). Out of that also only two classes of
workers are involved, namely, the clerks and the drivers.
Amongst the clerical staff. there are three grades, Grade A,
Grade B and Grade C as under ,Grade A: Rs.
165-15-240-20-400-E.B.-25-500.
Grade B: Rs. 110-10-150-12-1/2-200-15-260-E.B.-20-360.
Grade C: Rs. 70-5-90-8-130-10-200-E.B.-12-1/2-250.
The wage scale for drivers is as follows:
Rs. 75-5-100-7-135-7-50-150.
The scheme of D.A. which is sought to be introduced with the
ceiling is as under
-----------------------------------------------------------
Percentage Variations
Basic Pay slabs of Basic Salary for every
(C.P.I. 44 1-450) 10 points
of C.P.I.
===========================================================
1st Rs. 100 120 5 %.
2nd W. 100 40 2%
Rs. 201 to Rs. 500 30 1%
Over Rs. 500 25
============================================================
Maximum D.A. Rs. 325/-
============================================================
Mr. Mehta, representing the union, has drawn our attention
to. a few awards in the Bombay region prescribing slab
system of D.A. without ceiling. The first is that of the
Ahmedabad Manufacturing & Calico Printing Company Limited.
It is true that on 4th slab of Rs. 100/- and balance, 9.75%
D.A. was allowed without imposition of any ceiling. D.A.
was awarded by the Industrial Tribunal in this case on a
slab system at the consumer price index 841-850. The second
is the case of Indian Vegetables Products Limited, Bombay,
460
where there was no introduction of any ceiling and 10% D.A.
at the 3rd slab of Rs. 100/- and above was granted. In that
case the consumer price index was at 311-320. The third
case is that of Godrej Soap Private Limited where again
although no ceiling on D.A. was imposed, the Tribunal was
dealing with a case when the consumer price index was at
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396-405. It is pointed out that in all the three above
cases special leave was refused by this Court. That,
however, cannot be a ground for holding that this Court
endorsed non-imposition of ceiling on D.A. as a principle.
The question as such was neither raised before the Tribunal
nor before this Court in any of the above cases.
Mr. Mehta also filed a list of 25 awards during the period
between 1st January, 1970 and December, 1974 in the Bombay
region. This was with the object of establishing case for a
slab system of D.A. linked to the consumer price index with
point variation without ceiling, Mr. A. K. Sen has commented
that some of these awards were as a result of settlement and
the question of ceiling on D.A. was not even raised for a
decision. In the case of Dorr-Oliver (India) Limited, the
scale of pay was fixed on the basis of the consumer price
index 700 and D.A. was fixed, if the index rose beyond 700,.
on a slab system. It is to be noted that a flat sum of Rs.
9/- as D.A. was allowed on the salary of Rs. 5001- and above
and for variation for rise of every ten points in slab above
700, Rs. 9/- was fixed for such slab. It is to be noted
that there is no percentage basis of D.A. on the salary and
it is any linked to the consumer price index. In the case
of Kanji Jadhavji,210 & Company, it is, however, seen that
for pay in excess of Rs. 210/- but upto Rs. 670/per month
1/2 paisa per rupee per point upto Rs. 180/- per month plus
1/3 paisa per rupee per point in excess of Rs. 180/- upto
Rs. 210/- plus 1/4th paisa per rupee per point in excess of
Rs. 210/- subject to a maximum of Rs. 1.65 per point per
month was allowed. There is a fixed salary of Rs. 670/-
beyond which D.A. was not made admissible. In the case of
Tata Press Limited which is an award said to be by
settlement, additional D.A. of 10 per cent has been given on
the basic wage of above Rs. 401, but there is no linkage to
the consumer price index. In Godavari Sugar Mills Mamli
Private Limited, D.A. stopped at the 4th Rs. 100/- of basic
salary. At this slab 36 per cent D. A. was awarded with
variation of 1 per cent for every ten points rise or fall in
the consumer price index 791-800. Identical is the case of
another award in the case of Somaiya Organo Chemicals
Limited. In Britannia Biscuit Company Limited’s case. no
D.A. has been awarded beyond the salary slab of Rs. 500/ D.
A. was considered in this case when the cost of living index
number was 301-310 (old series). In serveral awards in the
compilation given by Mr. Mehta, minimum D.A. has been fixed.
On the other hand Mr. Kaka intervening for Cynamid India
Limited has drawn our attention to a number of awards in the
Bombay region wherein there appears to he a ceiling on D. A.
These are :
1. National Machinery Manufacturers Ltd. Maharashtra
Gazette (M.G.G.) dated 30.6.1966.
2. Indian organic Chemicals Ltd. M.G.G. dated 21.11.1974.
461
3. The Millowners Association.M.G.G. dated 31.10.1974.
4. PhoeuLx Mills Ltd. M.G.G. PaRt I-L dated 22.6.1972.
5. Bayer (India) Ltd. M.G.G. dated 31.1.1974
6. West Coast Paper MillsM. G. G. dated 20.7.1972
7. voltas Limited 1. C. R. February 1970’ page 57
8. Murphy India LimitedM. G. G. dated 27. 7. 1972
9. Polychen Limited M. G. G. dated 6. 8. 1970
Mr. Mehta has, however, submitted that most of the
settlements in pursuance of which awards had been made have
expired and notices of termination have been served on the
employers and in some cases disputes have been raised.
The management also argued that this Court in M/s Unichem
Laboratories Ltd. v. The workmen (1) noticed in paragraph 33
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of the decision-
"Another feature of the scheme adopted by the
Tribunal is that it puts a ceiling on the
employees drawing basic wages up to Rs. 300
per month alone being eligible for dearness
allowance; whereas under the practice
originally obtaining in the company there was
no such limit."
and, therefore, must be held to have approved of imposition
of ceiling. We are unable to accept that this Court was
called upon to decide about the question of. ceiling in that
appeal which was at the instance of the employers and not of
the employees nor against the imposition of ceiling. The
management also drew our attention to a decision of this
Court in Remington Rand of India v. Its Workmen (2) when the
scheme of D.A. contained a maximum of Rs. 200 at the index
figure 351-360 and the maximum was not interfered with by
this Court. It is sufficient to point out that the question
of desirability of ceiling or otherwise was not at all in
issue in that appeal and therefore, this Court was not
called upon to pronounce upon the matter.
We, however, find that in the case of employees under the
Central Government a kind of ceiling has been in vogue. For
example one of the Second Pay Commission’s recommendations
was that the benefit of D.A. should in future adjustments be
extended to all employees drawing a basic pay below Rs. 400
per menses in such a way that the total of basic pay and
D.A. paid to an employee in the pay range of Rs. 300 to Rs.
400 does not exceed Rs. 400 (page 97, paragraph 16). The
Third Pay Commission also after fixing D.A. at a percentage
of 3.5 per cent of pay upto the pay range of Rs. 300 fixed a
maximum of Rs. 10 per month and a minimum of Rs. 7 per
month. Similarly for the pay range above 300 a percentage
of 2.5 per cent of pay was fixed subject to a maximum of Rs.
20 per month and a minimum of Rs. 10 per month. The
Commission further recommended that the pay plus D.A. should
in no case exceed Rs. 2,400 per month.
(1) [1972] 1 L. L. J. 576,
(2) [1962] 1 L. L. J. 287,
462
From the above one thing, however, is clear that the
question of imposition of ceiling on D.A. is not an
absolutely alien phenomenon. Although it might not have
been the general practice, ceiling was not rejected out of
hand as irrational or unjust by unions in the course of
collective bargaining in the Bombay region.
So far as the workers involved in these appeals are
concerned the question whether D.A. should cease at a
certain level of salary does not arise for consideration.
The maximum basic of the highest grade in the case of these
employees is Rs. 500. It may, however, be noted that a
system has been in vogue in the case of Government employees
where D.A. ceases to be admissible on reaching a certain
level of salary. The question remains as to whether a
ceiling should be- placed on D.A. itself, when it exceeds
Rs. 325 as has been sought to be done by the employers. The
employers gave a notice of change for imposition of ceiling
on D.A. in May 1966 when the cost of living index has been
on the constant rise each year. While the for 1966 was 630
those for the subsequent years from 1967 to 1974 were 697,
740, 766, 797, 832, 876, 982 and 1198. In December 1974 it
was 1336. The cost of living index being on a constant rise
it is necessary to consider the totality of the wage packet
of the workers and other relevant factors in order to decide
if a ceiling on D.A. should be imposed. In this context our
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attention has been drawn by Mr. Sen to the statement of
objects and reasons to the Additional Emoluments (Compulsory
Deposit) Bill 1974 which is as follows :-
"Controlling inflation is today the single
most important task facing the country.
Periodical revision of wages and adjustments
in the rates of dearness allowance, which have
been adopted as remedies for moderating the
impact of rising prices, have been proving
ineffective. In view of the mounting pressure
of inflationary forces, payments of additional
wages or dearness allowance will give an
upward thrust to prices and will inevitably
aggravate the situation, and also neutralise
the effect of any increase in the wages or
dearness allowance. In the circumstances,
urgent steps aimed at breaking this vicious
circle of money incomes chasing prices be came
inescapable. These measures undoubtedly
involve some sacrifices by different sections
of the community. As a part of these anti-
inflationary measures, the Additional Emolu-
ments (Compulsory Deposit) Ordinance, 1974,
was promulgated by the President on the 6th
July, 1974...........
Reference to the above is made in order to highlight the
dreadful consequences of inflation and the inefficacy of
mere wage rise as a solution.
We may, however, in this connection usefully refer to what
the National Commission on Labour said on this subject:
"Firstly, the increased purchasing power in
the hands of the workers on account of
compensatory payments for rise in cost of
living forms a small part of the overall
increase
463
in purchasing power. Secondly, the elasticity of
compensatory payments to changes in cost of living is
generally less than unity so that the feed-back must taper
off. Money wage stability, though important for price
stability, is seldom a necessary, much less a sufficient
condition for it. On the other hand, holding of the price
line, particularly of the cost of living is an adequate
condition for preventing increases in money wage payments
that are not related to increases in productivity. This
alone can prevent a fall in real wages."
Before we proceed further we have to take note of certain
facts concerning the dispute. Although the company employs
a total of 1142 workmen in-its various factories and
branches the present dispute relates to 265 workers in the
Head Office (Bombay) out of them. It is not disputed that
the supervisory staff consisting of 86 members, although not
involved in this reference. have been in receipt of D.A.
under the same scheme. There is no ceiling on D.A. in the
Calcutta branch of the company where the workers are paid
according to the Bengal Chamber of Commerce’s rates. The
industry-cum-region aspect may at present take care of the
few employees working in Calcutta. It is, however, not
unlikely that all the employees of the company may claim to
be treated alike. There are also disputes pending in
respect of the subordinate staff at the Head Office.
Without adding further details it is sufficient to state
that a general problem like imposition of ceiling on D.A. in
a company cannot be treated on the statistical burden
relevant only to a section of the employees. Both the
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parties realise the importance of this aspect and produced
before us a large number of documents containing various
details including balance-sheets of the company upto 1973 to
enable us to have a complete picture of the entire matter.
The management has produced a statement showing the compar-
ison of total emoluments of clerical and supervisory staff
after implementation of the award and those of the junior
executive staff. We have quoted therefrom showing the
figures in April 1973 and July 1974 with the respective
index at 924 and 1194.
It will be seen that the minimum basic salary of a junior
executive is Rs. 400 and maximum is Rs. 1000’. With
allowances the junior executive at the minimum gets a total
of Rs. 700 and at intermediate stages, namely, of Rs. 530
and 800, he gets a total of Rs. 830 and Rs. 1150
respectively. When he reaches the maximum the total with
allowance is Rs. 1350. The clerical staff at the maximum
grade which is Rs. 500 gets a total amount of Rs. 1230
inclusive of D.A. of Rs. 730 after removal of the ceiling at
the C.P.I. 924. At the intermediate stage a clerk gets Rs.
874 in the same index (Rs. 300 basic salary plus Rs. 574
D.A.). At the minimum he gets Rs. 70 basic pay plus Rs. 340
D.A. totaling Rs. 410 in the same index 924. The position
is worse when the consumer price index touches 1194 as, seen
above. The absence of ceiling on D.A. can result in curious
anomalous situations where in the pay packet of clerical
staff would exceed the pay packet of junior executive staff.
This is hardly conducive to discipline, efficiency and
effective exercise of control.
464
KILLIK NIXON LIMITED BOMBAY.
COMPARISON OF TOTAL EMOLUMENTS OF CLERICAL SUPERVISORY AND
JUNIOR EXECUTIVE STAFF.
CLERICAL
Basic
Salary D.A. Total
-----------------------------------------
Rs .Rs. Rs.
APRIL 1973 Minimum 70 340 410 Min
(Feb. CPI Middle 300 574 874 Mid
924) Maximum 500 730 1230 Mid
Max.
JULY 1974 Minimum 70 475 545 Min
(May CPI Middle 300 790 1090 Mid
1194). Maximum 500 1000 1500 Mid
Max
SUPERVISORY JUNIOR EXECUTIVE
Basic Basic House Travel-
Salary D.A. Total Salary Rent Al- ling Al- total
lowcante lowance
===============================================================
Rs. Rs. Rs. Rs. Rs. Rs. Rs.
275 555 830 400 150 150 700
520 730 1250 530 150 150 830
800 730 1530 800 200 150 1150
1200 730 1930 1000 200 150 1350
275 764 1039 400 150 150 700
520 1000 1520 530 150 150 830
800 1000 1800 800 200 1501 150
1200 1200 2200 1000 200 150 1350
465
Although the change in the D.A. scheme imposing the ceiling
was notified in May 1966, it could not have been then
contemplated that the index would touch such a high mark;
yet within these nearly nine years that the dispute
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unfortunately has dragged on, it has given the court an idea
of the effect of removal of the ceiling.
The management has submitted statements showing the actual
working of the D.A. formula without the ceiling and tried to
show that it would not be possible for it to bear the
financial burden. The Tribunal went into this aspect,
although at that time the figures of the actual working
could not be there, and refused to accept the plea of
incapacity to bear the burden. The main argument of the
management was about the loss of Managing Agency which,
according to it, resulted in shrinkage of income. The
Tribunal went into the matter and came to the conclusion
and, according to us, rightly, that the said plea had no
substance.
The company is one of the twenty big industrial houses in
the country. Originally there were two companies, one
Killick Industries Limited and another Killick Nixon & Co.
Private Limited. Killick Industries Limited was
incorporated as a Public Limited Company on November 14,
1947 and Killick Nixon & Co. Private Limited was
incorporated as a Private Company on January 23, 1948. Some
time in 1957 the Killick Industries Limited purchased all
the shares of Killick Nixon & Co. Private Limited with the
result that Killick Nixon & Co. Private Limited became a
wholly owned subsidiary of Killick Industries Limited.
Under section 43A of the Companies Act, 1956, Killick Nixon
& Co. Private Limited became a Public Limited Company with
effect from March 28, 1961 and by an order of the Bombay
High Court of March 24, 1970, was amalgamated with Killick
Industries Limited with effect from August 1, 1969.
Following the amalgamation and with the approval of the
Central Government the name of Killick Industries Limited
was changed to Killick Nixon Limited (the appellant). The
activities of the company are : manufacturing of engineering
products, namely, Jhonson Vibrators, dall Pressing
equipments and E.F.C.C. Furnaces; Selling agency of
engineering products such as Vibrators, drilling equipment,
electric meters and dredgers, general selling agency in
respect of snowcem cement print and allied products, carbon
papers; slotted angles, Hawkins pressure cookers; export of
piece goods; and agency of City Line and Hall Line of U.K.
and clearing and forwarding work.
The question, however, in this case may not be simply the
financial capacity of the company alone. Ordinarily the
capacity to bear the additional burden would certainly be a
relevant factor. We are, however, not considering the
matter from that aspect in the present case. We will assume
that the company will be able to bear the additional
financial burden if the ceiling is removed. We do not agree
with the Tribunal that it is only if the company would be
required to close down that such a demand should be
rejected. That is an incorrect view to take in dealing,
with the problem with which we are concerned.
466
We have, therefore, a company which is prosperous. The
consumer price index has been soaring higher and higher.
The employees have to get protection of their real wages.
It is well settled that complete neutralisation of the rise
of cost of living cannot be allowed except to the lowest
category of employees. In the view of the National
Commission on Labour "the only purpose of dearness allowance
is to enable a worker in the event of a rise in cost of
living to purchase the same amount of goods of basic
necessity as before. This purpose would be served by an
equal amount of dearness allowance to all employees
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irrespective of differences in their emoluments" (page 243).
It was strenuously submitted that this view of the
Commission should be accepted by us. In other words we
should first ascertain what is the minimum wage in this
company at which a worker would require complete
neutralisation of the cost of living and whatever amount is
found to be necessary for him as a protection against his
real wages should only be available to all other employees.
We are not required to give our opinion about this sub-
mission for the simple reason that the management here has
already introduced a scheme in which there is percentage
system on salary slabs linked with the consumer price
index and there is no dispute about it.
All that the management wants in this case is that D.A. must
not go on rising with the scaring price index and a limit
should be imposed. We have already observed that in view of
the status of the company the capacity to pay will not alone
be of moment in favour of removal of the ceiling. The
problem will have to be viewed from the following important
aspects :-
(1) Condition of the wage scale prevalent in
the comnpany.
(2) Condition of the wage level prevalent in
the industry and the region.
(3) The wage packet as a whole of each
earner in the company with all amenities and
benefits and it-, ability and potency to cope
with the economic requirements of daily
existence consistent with his status in
society, responsibilities, efficiency at work
and industrial peace.
(4) The position of the company viewed in
relation to other comparable concerns in the
industry and the region.
(5) Peremptive necessity for full
neutralisation of the cost of living at the
rock-bottom of wage scale if at or just above
the subsistence level.
(6) The rate of neutralisation which is
being given to the employees in each salary
slab.
(7) Avoidance of huge distortion of wage
differentials taking into reckoning all
persons employed in the concern.
467
(8) Degree of sacrifice necessary even on
the part of workers in general interest.
(9) The compulsive necessity of securing
social and distributive justice to the
workmen.
(10) Capacity of the company to bear
the additional burden.
(11) Interest of national economy.
(12) Repercussions in other industries and
society as a whole.
(13) The state of the consumer price, index
at the time of decision.
(14) Forebodings and possibilities in the
foreseeable future as far as can be envisaged.
We should also Add that revision of D.A. is not the same
thing as revision of wages.
Having given our anxious thought to all the above aspects,
which are not exhaustive, we are unable to come to the
conclusion that removal of the ceiling in the present
context will be justified. The company has been able to
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make out a case for imposition of a ceiling. At what
particular amount there should be a ceiling on D.A. is a
matter which will have to be gone into by the Tribunal
keeping in view the above principles. The financial
capacity will have to be judged with regard to the
commitment of the company as a whole towards all its
employees.
We are unable to agree with the contention of the workers
that unless there is a ceiling on profits there cannot be a
ceiling on D.A. The question of D.A. being intimately
connected with the cost of living, the matter cannot be
judged by the test of the aforesaid submission of the
workmen.
There is, however, one thing which we must point out, lest
there should be some misconception about it and that is that
so far as the lowest paid employees at or just above the
subsistence level are concerned, they are entitled to 100
per cent or at any rate not less than 95 per cent
neutralisation of the rise in the cost of living and hence
there should be no ceiling on dearness allowance payable to
employees within the slab of first Rs. 100, unless it can be
shown by the management that the rate of neutralisation in
their case is more than 100 per cent. So far as the
employees in the higher slabs are concerned, it would be for
the Tribunal to consider, having regard to the aforesaid
principles, whether a ceiling should, be imposed at the
second slab of Rs. 100 or only at the last slab of Rs. 201
to Rs. 500. The manner in which the ceiling may be imposed
would also have to be decided by the Tribunal in the
exercise of its judicial discretion keeping in view the
aforesaid principles. The ceiling any be fixed either by
prescribing a certain amount as the outside
468
limit of the dearness allowance or by reference to the
quantum of dearness allowance payable at a certain wage
level. We do no’ 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 case. There can be no inexorable
rule in that respect. We have formulated the various
principles 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.
In the result the award is set aside with regard to demand
No. 2(a) relating to ceiling. The reference stands restored
with regard to that specific matter and will be disposed of
by the Tribunal as early as possible after giving
opportunity to the parties. The appeals are partly allowed
without costs.
Appeals partly allowed. V.P.S.
469