Hydro (Engineers) Pvt. Ltd. Vs. The
Workmen  INSC 130 (30 April 1968)
30/04/1968 SHELAT, J.M.
CITATION: 1969 AIR 182 1969 SCR (1) 156
RF 1969 SC 360 (34) R 1969 SC 976 (8) E 1970
SC 919 (36) R 1972 SC2215 (2) RF 1974 SC 526 (13) E&R 1977 SC 941 (19) RF
1981 SC1685 (2)
Industrial Dispute-Minimum Wage-Principle for
fixation of Revision of scale of wages fixed by the previous award by linking
up with cost of living index-If double advantage to workmen-Retrospective
operation of award-Whether valid-What is reasonable qualifying period for
There were industrial disputes between the
appellant and its workmen, the respondents, which were the subject-matter of
awards. The last of such awards fixed revised wage scales taking into
consideration the cost of living index then prevailing. It also provided for
annual increments but rejected the workmen's demand to link up -the wage scales
with the index of cost of living. After the respondents had received two annual
increments under that award, they served a notice on the appellant calling ,for
revision of the scale of wages and of the gratuity scheme. The dispute was
referred to the Industrial Tribunal and the Tribunal passed an award. The award
retained the scales fixed in, the previous award and treating them asbased on
the cost of living index prevailing on the date of that award, directed that
the wages should be linked up with the cost of living index. The award also
directed that effect should be given to it retrospectively from approximately
the date of demand by the respondents. As regards gratuity, the Tribunal
reduced the existing qualifying period of 10 years to 8 years in cases where a
workman died, resigned or retired;
and deleted completely the existing
qualifying period of 4 years in case \where the services of the workman were
terminated by the appellant.
In appeal to this Court, it was contended
that : (1) The award 'as regards wages should be set aside, because, (a) the
Tribunal took a wrong view as to what would constitute minimum wages, (b) it
ignored the financial capacity of the appellant, (c) the linking up of the wage
scales with the cost of living index was wrong, (d) the Tribunal failed to take
into consideration the principle of region-cumIndustry, (e) the respondents
would get double advantage during the same period, namely, increments and a
raise in the wage scales, and (f) retrospective operation should not have been
given to the award; and (2) The changes made in the gratuity scheme were
HELD : (1) There was no reason to interfere
with the mini wage rate fixed by the Tribunal. [163 A-B] (a) The policy of the Minimum
Wages Act, 1948, was to prevent employment of sweated labour in the general
interest and so the minimum wages must ensure not merely the physical needs of
the worker but must ensure, in addition to his sustenance and that of his
family, the preservation of his efficiency as 'a workman by providing for some
measure of education, medical requirements and amenities. In the present case,
(i) the Tribunal retained the scales fixed by the previous award and only
provided for automatic rise or fall therein with the corresponding change in
the index of cost of living and (ii) the Tribunal observed that the appellant
had to pay the minimum wages irrespective of its ability to 157 bear the
additional burden . Therefore, what the Tribunal fixed was consolidated minimum
wages and not fair wages.
[161 G-H; 162 B-F] (b) In prescribing such a
minimum wage rate the capacity of the employer need not be considered as the,
State assumes that every employer must pay the minimum wages before he employs
labour. [162 D-E] Bijay Cotton Mills Ltd. v. State of Ajmer,  1 S.C.R.
752, Express Newspapers (Pvt.) Ltd. v. Union
of India  S.C.R. 12 and Unichovi v. State of Kerala,  1 S.C.R.
(c) The idea of fixing minimum wages in the
light of the cost of living at a particular juncture of time and of
neutralising the prevailing high prices of essential commodities by linking up
scales of minimum wages with the cost of living index is not alien to the
concept of minimum wages. It could not be contended that the Tribunal erred in
linking up the wage scales with the living cost, because, had it not been done,
the wage scales would have become unrealistic, as the cost of living index had
gone very much higher up since the Tribunal give its last award and was
threatening to go up further. [161 D-F; 162 H; 163 A-B] (d) The capacity of the
employer and the wage scales prevailing in comparable industries in the region,
are relevant factors while, fixing fair wages, but not when fixing minimum
wages. [162 F-H] Novex Dry Cleaners v. Workmen,  1 L.L.J. 271 and
Airlines Hotel v. Workmen,  1 L.L.J. 415, explained.
(e) What the present award directs is to pay
the workmen from approximately the date of demand, the wage scales calculated
in accordance with the rise in the index of living cost which had taken place
since the last award. The increments earned were on the footing of the index
figure taken into consideration while passing the previous award.
Therefore, there is no question of the
workmen getting any double advantage. [163 C-D] (f) It was within the
Tribunal's discretion to decide, from which date its award should come into
operation. Therefore, when no ground was made out to show that the discretion
was unreasonably exercised, the mere fact that it has retrospectively enforced
its award from about the ,date of demand by the workmen, is not a ground for
interference with the award.. [163 E-F, H] Hindustan Times v. Their Workmen,
 1 S.C.R. 234, Jhagrakhand Collieries (Pvt) Ltd. v. C.G.I.T. Dhanbad,
 2 L.L.J. 71 and United Collieries v. Workmen,  2 L.L.J. 75
(2) (a) Since the justification for gratuity
is a long and meritorious .service, -schemes of gratuity framed by the Tribunal
and approved by .this Court have always provided some qualifying period. Though
there is no hard and fast rule, the general trend as seen from a long series of
decisions is in favour of 10 years of qualifying service.
The Tribunal was therefore, not right in
reducing the period from 10 years to 8 years without and substantial reason.
[164 C-D, F-G] Indian Oxygen and Acetylene
Co. Ltd. Employees Union v. Indian Oxygen and Acetylene Co.  1 L.L.J.
435, Express Newspapers (P) Ltd. v. Union of India,  S.C.R. 12.
Garment Cleaning Works v. Its Workmen, 
1 L.L.J. 513, British Paints v. Workmen,  2 S.C.R. 523 and Calcutta
Insurance Co. v. Their Workmen,  2 L.L.J. 1, referred to.
158 (b) Also, as regards the deletion of the
4 years minimum qualifying period when the appellant terminates a workman's
service, the Tribunal had no legitimate grounds for making the alteration in
the existing scheme. [164 H]
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 1934 of 1967.
Appeal by special leave from the Award dated
September 15, 1967 of the Industrial Tribunal, Maharashtra, Bombay in reference
(IT) No. 54 of 1967.
I. N. Shroff, for the appellant.
Narayan B. Shetya and K. Rajendra Chaudhury,
for the respondents.
The Judgment of the Court was delivered by
Shelat, J.-The appellant company is a private limited company of which the
authorised capital is Rs. 1 lac and the subscribed capital Rs. 50,000. Its
business is to manufacture milk cans. According to the Company, it has not been
able to maintain, much less, increase, its production owing to the control
orders restricting the import of raw materials required for its manufacturing
process. The Company was started in 1942 but except for a few years when it
made some profits, it has had to suffer losses during the rest of the years,
the total loss suffered up to 1964-65 being Rs. 1,66,912. The Company is a
small unit having on its roll 53 workmen.
In 1958, a reference was made under s.
10(1)(d) of the Industrial Disputes Act, 1947 in respect of the demands made by
its employees for increase in the wage scales. The reference ended in a
settlement dated May 27, 1959 where under a slight increase in the wage scales
It also provided for an ad hoc increase in
the wages of those getting Rs. 2.44 or more per day. The revised wages were to
come into force retrospectively from October 1, 1958. In 1961, another
reference was made which also resulted in a settlement dated September 11,
Under that settlement, the workmen were classified into four categories and
consolidated wage scales for each of the categories with a provision for
increments were agreed upon.
Since these were consolidated wage scales,
the demand for dearness allowance was not pressed. An award was made in terms
of the said settlement with retrospective effect from April 1, 1961. In 1964,
the Union once again demanded revision of wage scales. The dispute was referred
to the Industrial Tribunal which made what has been referred to as the Bilgrami
award. The Tribunal retained the same categories and the only modification it
made was to increase the wage scales previously fixed, taking into
consideration the rise in the index of cost of living in the meantime 159 from
450 to 538. The said award fixed the wage scales as follows Unskilled -Rs.
Semi Skilled -Rs. 4.75-0.15-Rs.6.25.
Skilled II -Rs. 5.50-0.25-Rs.8.00.
Skilled I -Rs. 6.50-0.30-Rs.9.50.
Apprentices -Rs. 3.25-3.75-Rs.4.25.
The award provided that the increments in the
revised scales were to be annual and were to start from April 1, 1965. The
award was made effective from November 9, 1964 which was the date of the
reference. It however, rejected the Union's demand to up the wage scales with
the index of cost of living. By April 1, 1967, therefore, the workmen had
received two annual increments and consequently the wages paid to the first
four categories were Rs. 4.35, 5.05, 6.00 and 7.10 per day respectively. It is
thus clear that the Bilgrami award took the scales previously fixed as its
basis when the cost of living index stood at 450 and increased them taking into
consideration the fact that the said figure had gone up by about 94, that is,
by raising it by 1 n.p.
for every point.
On June 17, 1967, the Union served a notice
of demand which called for (a) revised scale of wages with effect from July 1,
1966; (b) for certain adjustments; (c) for linking up the scales with the cost
of living index; (d) revision in the existing gratuity scheme; and (e) for
bonus for the year 1964-65. We are not concerned in this appeal with the last
demand as the impugned award does not deal with that demand.
The demand for revision of wage scales was
based on the fact that the Bilgrami award had fixed the wage scales on the
footing of the cost of living index being then 538 while that figure had shot
up since then to 675 and that if the rise were to be neutralised as it was done
by the Bilgrami award, the scale of unskilled workmen would come to Rs. 5.30
per day. So far as the gratuity scheme was concerned, the demand required that
the qualifying period for the retrial gratuity should be reduced from ten to
eight years and the qualifying period in case of termination of service by the
employer should be done away with. The Company resisted the demand and the
conciliation proceeding having failed, the State Government referred the
dispute to the Tribunal.
The Tribunal took note while considering the
demand for revision of scales and their linking up with the index of cost of
living of the fact (a) that the Bilgrami award itself had sought to neutralise
the rise in the living cost by raising the scales in proportion to the rise in
the cost of living by then; and (b) that though that award was made in 1964,
the wage scales thereunder 160 fixed had already become unreal in the sense
that the index had gone up to 675 by the time the Union filed its statement of
claim, that is, March 25, 1967 and had reached the figure of 710 in July 1967
when the award was made. In these circumstances, the Tribunal thought that theUnion
had made out a case for revision, that it was necessary to make the wage scales
realistic and therefore to link them up with cost of living index though the
Bilgrami award had declined to do so. What the Tribunal did, therefore, was to
retain the scales fixed by Mr. Bilgrami and treating them on the basis of 538
index of living cost, directed that they should be linked up with the index so
that the scales would automatically go up as the index rose or fell. The award
also directed that effect should be given to it as from July 1, 1966, the
notice of demand having been served on June 17, 1966. The gratuity scheme
framed in 1961 provided that ten days' wages for every year of service should
be paid as gratuity in case of death, retirement or resignation, provided the
workmen had put in the minimum period of ten years of service. For the workmen
whose services would be terminated by the employer the qualifying period was
four years of service. The Tribunal revised the scheme in two particulars; (a)
it reduced the period from ten to eight years in case where the workmen has'
died or resigned or retired; and (b) it deleted the qualifying period of four
years altogether where his service has been terminated by the employer. The
Tribunal considered the financial position of the Company and came to the
conclusion that though it had been making losses, it was of a fairly long
standing, that the losses incurred in the past years were a temporary phase,
that the Company's future was not bleak and, though not prosperous, it was in a
satisfactory financial position. This appeal by special leave disputes the
correctness of the award made by the Tribunal.
Counsel for the Company objected to the
aforesaid observation regarding the Company's financial position and pointed
out that its position cannot at all be said to be satisfactory in view of the
fact that, barring only a few years, it had made substantial losses all
Taking a cue from this fact, he contended
that (1) the reason which impelled the Bilgrami Tribunal to refuse to link up
the wage scales with the cost of living index still held good; (2) the Tribunal
took a wrong view as to what would constitute a minimum wage; (3) it ignored
the financial capacity of the Company; (4) it failed to take into consideration
the principle of region-cum-industry; and (5) there was no justification in
reducing the qualifying period for the retiral benefit of gratuity from ten to
eight years and for deleting the qualifying period in the case of termination
of service by the employer. We propose to deal with contentions 1 to 4 first
and consider separately the changes made by the Tribunal in the existing
161 The Minimum Wages Act, XI of 1948 does
not define 'minimum wages' presumably because it would not be possible to lay
down a uniform minimum wage for all industries throughout the country on
account of different and varying conditions prevailing from industry to
industry and from one part of the country to another. The legislature also
throught it inexpedient to apply the Act to all industries at a time and,
therefore, it applied the Act to certain employments only specified in the
Schedule thereto leaving it to the appropriate government to add by
notification to that effect industries in the said Schedule at suitable times
and in appropriate conditions. But s. 4 of the Act provides that *.he minimum
rates of wages may consist of a basic rate of wages and a special allowance at
a rate to be adjusted or a basic rate of wages with or without the cost of
living allowance and cash value of concessions in respect of supplies of
essential commodities at concession rates were so authorised or an all
inclusive rate allowing for the basic rate, the cost of living allowance and
the cash value of the concessions if any. Sub-section (2) of s. 4 provides that
the cost of living allowance and the value of the concessions in respect of
supplies of essential commodities at concession rates shall be computed by the
competent authority at such intervals and in accordance with such directions as
may be specified or given by, the appropriate government. It is thus clear that
the concept of minimum wage does take in the factor of the prevailing cost of
essential commodities whenever such minimum wage is to be fixed. The idea of
fixing such wage in the light of cost of living at a particular juncture of
time and of neutralising the rising prices of essential commodities by linking
up scales of minimum wages with the cost of living index cannot, therefore, be
said to be alien to the concept of a minimum wage. Furthermore, in the light of
spiralling of prices in recent years, if the wage scales are to be, realistic,
it may become necessary to fix them so as to neutralise at least partly the
price rise in essential commodities. Indeed, when the Bilgrami award revised
the wage scales, it took, as aforesaid, into account the rise in the cost of
living index and neutralised that rise by approximately raising them by 1 n.p.
for every point in the rise though it declined to .join up the scales with the
index of cost of living.
What the present award does is to fix the
minimum wage scales and not to fix fair wages. That is clear from the fact that
it retains the scales fixed by the earlier award and taking them on the basis
of the index figure at 538 it provides for automatic rise or fall therein with
the corresponding change in the index of living cost.
Presumably the Tribunal thought it necessary
to do so because by the time it came to make the award, the index figure had
already gone up to 710. If the Tribunal were to refuse to link up the scales
with the index of cost of living. the neutralisation it sought to do would
again go out of gear making 162 Once again the scales unreal and reduce them
even below the floor-level. That the Tribunal fixed the consolidated minimum
wages and not fair wages is clear from the facts (1) that it retained the
scales fixed by the previous award which had increased them from Rs 3.20 per
day for an unskilled workman to Rs. 4.15 per day as by that time the index had
gone up from 450 to 538; and (2) by its observation that the Company has to pay
the minimum wages irrespective of its ability to bear the additional burden.
The fact that an employer might find it
difficult to carry on his business on the basis of minimum wages is an
irrelevant consideration is now a well-settled principle:
(cf. Bijay Cotton Mills Ltd. v. State of
Ajmer(1), Unichovi v. State of Kerala(2) and Express Newspapers (Pvt.) Ltd. v. Union
of India(3). While considering the distinction between minimum and fair wages
this Court in the case of Unichovi v. State of Kerala(2) Observed at P.967 that
the Policy of the Minimum Wages Act, 1948 was to Prevent employment of sweated
labour in the general interest and so in prescribing the minimum wage rates,
the capacity the employer need not be considered as the State assumes that
every employer must pay the minimum wage before he employs labour. It also
observed that the Act contemplates that minimum wage rates must ensure not
merely the mere physical need of the worker which would keep him just above
starvation but must ensure for him not only his subsistence and that of his
family but also preserve his efficiency as a workman. It should, therefore,
provide as the Fair Wages Committee appointed by the Government recommended,
not merely for the bare subsistence of his life but for the preservation of the
worker and so must provide for some measure of education, medical requirements
This concept of the Committee has been
accepted by industrial adjudication in the country and was expressly approved
of in Express Newspaper (Pvt.) Limited(3). Counsel for the Company however,
cited before us the decisions in Airlines Hotel v. Workmen(4) and Novex Dry
Workmen(5) where the question of capacity and
the wage scales prevailing in comparable in dustries in the region were
considered relevant factors. But those were not cases where minimum wage rates
were fixed but were Cases of fair wages where those two factors had to be taken
The Company's contention that the Tribunal
failed to take into consideration the financial capacity, the fact of the
Company having made losses during the past years, its difficulties in importing
raw materials and had also failed to apply the region-cum-industry principle
and therefore the award was vitiated, has -no merit. We cannot also accept the
contention that the Tribu(1)  1 S.C.R. 752 (3)  S.C.R. 12.
(5)  1 L.L.J. 271.
(2)  1 S.C.R. 946.
(4)  1 L.L.J. 415.
163 nal erred in linking up the wage scales
with the living cost be cause had it not been done, the wage scales would have
again gone unreal once the index had gone up as it then threatened to do. We
find, therefore, no reason to interfere with the minimum. wage rates fixed by
A subsidiary contention raised by the Company
that by reason of the Bilgrami award having provided for incremental scales,
the workmen under the present award will get double advantage, namely,
increment and the raise in the wage scales during the same period, has also no
substance. The incremental scale was fixed in that award on the basis of the
index figure being, 538. Those scales have been retained. The two increments
that the workmen have earned in 1965 and 1966 were on the footing of those
scales which, as aforesaid, were fixed on the basis of the index figure of 538.
What the present award directs is to pay the workmen as from July 1, 1967 the
wage scales calculated in accordance with the rise in the index of living cost
which had taken place since the last award. The increments earned having been on
the footing of the index figure of 538, there is no question of the workmen
getting a double advantage.
The next objection to the award was that the
Tribunal erred in giving effect to the award retrospectively as from July 1,
1966, that is, approximately from the date of the demand and that if at all it
wanted to give such retrospective effect, the utmost that it could do was to
enforce it from the date of the reference. In some cases retrospective effect,
no doubt, has been given from the date of the reference. But it is a matter of
discretion for the Tribunal to decide from the circumstances of each case from
which date its award should come into operation. No general rule can be laid
down as to the date from which a Tribunal should bring its award in force :
(see Hindusthan Times v.
Their Workmen(3). Presumably, the Tribunal
gave effect to its award from July 1966 as by that time the cost of living
index had already gone up considerably and not to have done so would have been
to deprive the workmen of the minimum wages 'commensurate with that rise. In
Jhagrakhand Collieries (Private) Ltd. v. C.G.I.T. Dhanbad(2) and United
Collieries v. Workmen(3) the awards were made operative from the respective
dates of demands 'and this Court did not interfere with those awards on the
ground that there was thereby any breach of any recognised principle. If the
Tribunal has exercised its discretion and no substantial ground is made out to
show that it was unreasonably exercised, the mere fact that it was
retrospectively enforced its award from the date of the demand is hardly a
ground for interference with the award.
(1)  1 S.C.R. 234. (2)  2 L.L.J.
(3)  2 L.L.J. 75.
164 We now turn to the changes made by the
Tribunal in the existing gratuity scheme framed by the Savarkar Tribunal.
In our view, there is force in the Company's
contention that the, changes, namely, reduction of the qualifying period from
ten to eight years in the case of termination of service by death, retirement
or resignation and deletion of the qualifying period of four years in the case
of termination of service by the, employer, were not justified.
The Tribunal in fact has not given any
specific reason which necessitated the two changes.
It is now well settled that gratuity is a
reward for good, efficient and faithful service rendered for a fairly
substantial period and that it is not paid to the employee gratuitously or
merely as a matter of boon but for long and meritorious service; (cf. Garment
Cleaning Works v. Its Workmen(1) and Express Newspapers (Private) Limited. v. Union
of India(2). Since the justification for gratuity is a long and meritorious
service, schemes of gratuity framed by the tribunals and approved of by this
Court have always provided some qualifying period. In Indian Oxygen and
3Acetylene Company Ltd. Employees Union v. Indian Oxygen and Acetylene
Company(3) and Express Newspapers (Private)Ltd. v. Union of India (2) the
qualifying period for gratuity on termination of service by resignation or
retirement was fixed at 15 years. In Garment Cleaning Works v. Its Workmen(1),
though the Company objected to the period of ten years and contended on the
analogy of the aforesaid two decisions that it should be fifteen years, this
Court gave its approval to the period of ten years in case of retirement or
resignation. On the other hand, in British Paints v. Workmen (4) the period of
five years provided by the award was changed into ten years on the ground that
a fairly long minimum period for qualifying for gratuity in the case of
resignation or retirement was necessary to prevent the workmen leaving one
concern after another after putting in the short minimum service for qualifying
for gratuity. Similarly, modification from five to ten years was made in a
recent decision of this Court in Calcutta Insurance Co. Ltd., v. Their
Workmen(5). Though no hard and fast rule can be laid down and each case must be
decided on its own circumstances, the general trend as seen from a long series
of decisions is in favour of ten years of qualifying service. The Tribunal in
the absence of any substantial reason, was, therefore not right in reducing the
period from ten to eight years. As regards the deletion of four years minimum
period in cases where the employer terminates the service also we do not find
any legitimate ground for the alteration of the scheme. It was, however, said
that if such a period is provided for in a scheme, it was possible that an employer
(1)  1 L.L.J. 513. (2)  S.C.R. 12.
(3)  1 L.L.J. 435. (4)  2 S.C.R.
(5)  2 L.L.J. 1.
165 would terminate the services of a workmen
even though the, employee wants to render continuous service to enable him to
cam the gratuity. This does not appear to be a legitimate apprehension for unless
the employer is in a position to establish misconduct justifying termination of
service under a standing order, he cannot put an end to the service only to
deprive the workman of gratuity. On the other hand, there is the danger that
whereas in the case of retirement or resignation the workman would have to put
in ten years of service, if no minimum period is provided for in the case of
termination by the employer it would be possible for a workmen to commit some
misconduct and cam gratuity within a shorter time than the one who after a long
period of meritorious service retires or resigns. Since doing away with the
qualifying period is likely to result in such an anomaly, it is necessary to
have some qualifying minimum period. As the period of four years provided in
the scheme is not under challenge before us, there is no reason to interfere
with it. We, therefore, set aside the two changes made by the Tribunal in the
gratuity scheme. The scheme for gratuity will, therefore remain the same as
framed by the Savarkar award.
In the result, except for the aforesaid
modifications in the award, we find no reason to interfere with the award. The
appeal, except to the extent aforesaid, fails and is dismissed. There will be
no order as to costs.
V.P.S. Appeal partly allowed.