Management of The Kirlampudi Sugar
Mills Ltd. Vs. Industrial Tribunal, A.P. & ANR [1971] Insc 218 (26 August
1971)
ACT:
Industrial Dispute-Recommendations of Central
Wage Board for sugar whether vitiated by fact that it had fixed uniform wages
region wise without further classification within each region-Tribunal's
jurisdiction to go into question of financial capacity of company to implement
recommendations of Wage Board--Company whether had financial capacity.
HEADNOTE:
The Kirlampudi Sugar Mills Ltd. was started
in 1951 as a small unit and later was increased to a larger crushing capacity
of 1000 tons. By 1963 the factory got into financial embarrassment. in the
middle of that year thepresent management took over the factory on the specific
assurance of the Government that they would provide for and give all facilities
to enable them to run the factory.
After the management was taken over there
were disputes between the management and workers with the result that they
referred various matters for adjudication including the claim for
implementation of the recommendations of the Central Wage Board for sugar. The
disputed items related to categorisation of workers their fitments, fixation of
work load, the demand for increase of Rs. 10 to be given to every worker over
the basic wage implementation of weight age, dearness allowance. the demand for
giving grades and for giving retrospective effect etc. On issue No. IA the
Tribunal held that categorisation of workers and their fitments and work load
should be in accordance with the recommendations of the Wage Board; it decided
in favour of the management in respect of certain categories of workers but in
respect of some others it gave relief to the workers.
The Tribunal further held in respect of
issue. 2 and 5 before it that the financial capacity of the Appellant was not
such as to justify an increase of Rs. IO to all the workers over the basic wage
and dearness allowance or the payment of Rs. 5 to workmen for implementation of
the weightage recommended by the Wage Board. Appeal No., 1602 of 1966 was filed
in this Court by special leave by the management against the Award of the
Tribunal in respect of issue IA in so far as it went against them. Appeal No.
1603 of 1966 was filed by the workers against the Tribunal's decision on issues
2 and 5 and that part of issue IA which went against them. The questions that
fell for consideration were : (i) whether the recommendations of the Wage Board
were vitiated by the fact that they had fixed the wages uniformly region-wise
without further classification within each region; (ii) If they were valid,
whether the Tribunal could go into the question of the financial capacity of
the company to implement them; (iii) whether the company had the financial
capacity to implement the recommendations.
HELD : The Wage Board following the
principles laid down by this Court has considered the capacity of the industry
region-wise and has also fixed wages different from region to region having
regard to the difference in the capacity of the Industry region wise. Further
it has given good reason for not furnishing a criteria for further
classification of the industry within the region. In these circumstances
prescribing the same wage for all units of industry in the same region was
justified and the fact that the 429 industry in the region had not been divided
into classes could not vitiate he recommendation of the Wage Board. [441 F-G]
Workmen of Shri Bajrang Jute Mills Ltd. v. Employers of Shri Bajrang lute Mills
Lid., [1969] 2 S.C.R. 593, explained and distinguished.
Express Newspaper (P) Ltd. v. Union of India
& Ors., [1959] S.C.R. 12 and French Motor Car Co. Ltd. v. Workmen, [1963]
Supp. 2 S.C.R. 16, referred to However, notwithstanding the fact that a fair
wage has been fixed by the Board which would be applicable to all the units in
the region for which wage has been fixed, it may be open to any particular unit
to plead that in fact its financial position is not such that it can bear the
burden of implementing the recommendations. The justification of the plea of
want of financial capacity will depend upon the evidence of its financial
position over a period of years, to show that it cannot bear the burden or that
it is only a temporary or fortuitous situation with every possibility of financial
improvement in the immediate future [442 E; 443 C] Ahmadabad Mill Owners'
Association etc. v. Textile Labour Association, [1966] 1 S.C.R. 382, relied on.
The Appellant's balance sheets for the years
1960 to 1970 for a period of 10 years showed that except for the year ending
30-6-69 the company was not in a position to declare any dividends. Though the
factory appeared to have been expanded after 1964 to 300 tons capacity it did
not show uniform net profits; on the other hand losses continued.
The profits that it made in any year seemed
to be consumed by losses of the previous years. Various factors contributed to
financial unsteadiness. [448 G-H] This being the position the Tribunal was
justified in holding that the Appellant did not have the financial capacity to
bear the burden of payment of Rs. 10 increase and Rs. 5 as weightage in
accordance with the recommendations of the Wage Board. On this conclusion and
also on an examination of the relevant material it was evident that the company
was not in a financial position to meet the burden of implementing the
recommendations of the Wage Board. Despite this the company had implemented the
award in respect of a large number of workers both as to categorisation and
fitment except in regard to four categories. The claim, of the Respondent
workmen for categorisation and fitment in accordance with the Award in regard
to these could not, in the circumstances, be accepted.
[448 H-449 G]
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 1602 and 1603 of 1966.
Appeals by special leave from the Award dated
November 19, 1965 of the Industrial Tribunal, Andhra Pradesh, Hyderabad in I.D.
No. 23 of 1965.
K. Srinivasamurthy, Naunit Lal and Swaranjit
Sodhi for the appellant (in C.A. No. 1602 of 1966) and 'the respondent in C.A.
No. 1603 of 1966).
M. K. Ramamurthi and Vineet Kumar, for
respondent No. 2 (In C.A. No. 1602 of 1966) and the appellant (in C.A. No. 1603,
of 1966).
840Sup.CI/71 430 The Judgment of the Court
was delivered by P. Jaganmohan Reddy, J. These are two appeals by Special
Leave. Civil Appeal No. 1602 of 1966 is by the Management against the Award
passed by the Industrial Tribunal on a reference made by the Government for
categorisation of workers, ,their fitments, fixation of work load, the demand
for increase of Rs. 10/to be given to every worker over the basic wage,
implementation of weightage, dearness allowance, the demand for giving grades
and for giving retrospective effect etc. Civil Appeal' No. 1603 of 1966 by the
Workmen is against the same Award for disallowing. the increase of Rs. 10/and
the weightage of Rs. 5/and also against the fitment of certain categories of
workers. The Tribunal held that the financial capacity of the Appellant was not
such as to justify an increase of Rs. 10/to all the workers over the basic wage
and dearness allowance. On the same grounds it also disallowed the payment of
Rs. 5/to workmen for implementation of the weightage recommended by the Wage
Board for Sugar Industry. These were the subject matter of issue 2 and 5 of the
reference made to the Tribunal. So far as issue IA is concerned, it held that
categorisation of workers and their fitments and work load should be in
accordance with the recommendations of the Wage Board for Sugar and even as to
these it decided in favour of the management in respect of certain categories
of workers but in respect of some others, it gave relief to the workers. The
employers appealed against that part of issue 1A which was decided against
them, while the Workmen's Appeal is against the finding of issues 2, 5 and part
of IA which was against them. We will first take up the appeal of the
Management.
It appears that the Kirlampudi Sugar factory
was started in 1951 as a small unit and later was increased to a larger
crushing capacity of 1,000 tons which according to the Tariff Commission would
not be considered economically profitable, though according to the Sugar Wage
Board it would be. By 1963 the factory got into, financial embarrassment as it
had to pay heavy debts to the Government on account of Sugar cess, cane prices
payable to the growers and Income-tax. These demands it is alleged practically
brought the factory to a stop, when in the middle of 1963 the present
management took over the factory on the specific assurance from the Government
that they will provide for and give all facilities to enable them to run the
factory.
After the management was taken over there
were disputes between the Management and workers with the result that they
referred various matters for adjudication including the claim for
implementation of the wage Board's recommendation which was alleged to have
been implemented by the former management as early as 1961-62. It was the case
of the workers that implementation was not satisfactory and it was their demand
that the sugar wage board's recommendations should be implemented.
The management raised a specific objection
before the Industrial Tribunal that the reference relates to a wholesale
promotion of workers from one grade to the other under the guise of fitment
under the Wage Board's recommendations which is illegal and without
jurisdiction;
and in any case the question of promotion,
categorisation and fitment is a managerial function in which the Tribunal
cannot interfere unless it can be established that the management acted mala
fide or it resorted to unfair practices. It was further pleaded that the
factory had not the financial capacity to implement the demand. One of the
grievance of the Appellant was that though the Tribunal found that it had not
the financial capacity to meet the additional burden of the demands made by the
workmen it granted large scale promotions which it had no jurisdiction to
grant. Despite this the management states that it had implemented the Award in
most of the cases and challenged it in respect of some only.
It may be mentioned that the Central Wage
Board for Sugar was appointed in terms of paragraph 25 of Chapter XXVII of the
Second Five Year Plan. This Wage Board for Sugar Industry divided India into 4
regions and each region included every State containing even a single unit
unlike that adopted by the Tariff Commission which in its Report on the cost
structure left out some of the States from the 4 divisions. It then considered
the wage structure, categorisation etc. for each of the said regions, in
relation to a fair cross-section of the Industry in each of the regions. In
comparison with this method, the Jute Wage Board had taken India as a whole and
fixed a uniform rate for the Jute industry. The first contention which has been
urged is that the recommendations of the Wage Board were not binding in view of
the fact that it was not a statutory board but was only a recommendatory one
and the Tribunal could not implement them as a whole because it had recommended
that fitments and categorisation should be affected by recourse to Tripartite
machinery. The case of Workmen of Shri Bajrang Jute Mills Ltd., v. Employees of
Shri Bajrang Jute Mills Ltd.(1), is cited as an authority for the proposition
that as the procedure prescribed therein was not valid, the recommendations of
the Wage Board were declared to be invalid and inapplicable to the Jute
Industry. The learned Advocate on behalf of the Respondents raised a
preliminary objection to the maintainability of this contention as this issue
had neither been referred to the Tribunal, nor has it been urged before it nor
had a ground been taken in the Special Leave Petition. He seeks to distinguish
the case of the Bajrang (1) [1969] 2 S.C.R. 593.
432 Mills, as in that case there was a
specific issue while there is none in this case. In answer it is pointed out
that the contention raised on behalf of the Respondents is implicit in issue 1
(a) which is as follows :
1(a) "Whether the demand for
categorisation of workers and their fitment and work load should be in
accordance with the recommendations of the Wage Board for Sugar industry is
justified".
The Appellant had in its statement before the
Tribunal in para 9 categorically challenged the recommendations of the Wage
Board in these words : "It may be noticed even though the Wage Board
recommendations are not binding, in spite of huge losses the management went
out of the way and implemented the same". In the Special Leave Petition
also in paragraph 2 the Appellant had challenged the jurisdiction of the
Tribunal "to go into the question of the capacity to pay of an individual
unit in respect of one of the recommendations of the Wage Board for Sugar
industry when such recommendations had been made for the industry as a whole
and agreed to by the Management itself".
It is therefore contended that if the
financial capacity is taken into account for placing fitments on the basis of
Bajrang Jute Mills, no other question arises. In the Bajrang Mills case(1) it
was held that fixation of fair wage depends on the financial capacity but once
when the Tribunal had held that the Appellant did not have the financial
capacity the categorisation and fitments directed by it in its Award are
invalid. The Tribunal is concerned with the implementation of the Wage Board
recommendation forgetting that it cannot do so when the implementation of those
recommendations relating to categorisation and fitment cannot be effected
without recourse to the Tripartite machinery. It is also contended that categorisation
and fitment is a managerial function and requires technical knowledge of the
various duties ,and functions which each of the category of workmen have to
discharge. The following contentions have been urged, namely :
(1) The Wage Board recommendations having
regard to the case of Bajrang Jute Mills are invalid and cannot be enforced,
inasmuch as it has fixed a uniform wage for the entire region without further
dividing the industry in the region into classes of units according to their
capacity namely region-cumindustry for fixation of the wage structure for those
classes of units. At any rate since what is prescribed in the report is ,only
recommendatory, unless there is a capacity to pay, no one can claim its
implementation as of right.
(1) [1969] 2 S.C.R. 593.
433 (2) The Appellant has not the financial
capacity to implement the Award which has been held by the Tribunal to be a
fact. On this score itself it cannot implement the Award.
(3) In para 263 of the Wage Board
recommendation of 1960 that when there is a difference between management and
labour regarding fitment the Tripartite machinery should be brought into
existence. The Tribunal was wrong in thinking that the Wage Board was giving an
example of border-lines cases where there may be a difference of opinion and it
is only in those cases that the Tripartite machinery in the case of fitment is
to be resorted to.
(4) Fitment is a managerial function and
unless the Tribunal finds that the Act of the management is mala fide or it has
resorted to unfair practices it is not justified in interfering with the
fitments effected by the management.
(5) In any case in respect of certain
specific fitments the Tribunal was in error and acted without evidence.
Before dealing with these contentions it is
necessary to consider the preliminary objection raised on behalf of the
Respondents that before the Tribunal the Appellant did not object to the
implementation of the Wage Board on the ground that its recommendations were
not industry-cum-region wise or that it had not divided the industry into
various classes and fixed a wage for those classes in that region, and in any
case no such issue was referred to the Tribunal unlike in the Bajrang Jute
Mills case(1). In that case what was referred to the Tribunal was whether the
demand of the workmen in Shree Bajrang Mills Ltd., for implementation of the
recommendations of the Central Wage Board for Jute Industry is justified, and
if so, to what extent. In this case issue IA did not specifically raise an
objection to the implementation of the Sugar Wage Board's recommendations in
general terms but issues 1, 2, 4, 5 & 6 did raise the question whether the
Board was justified in its recommendations regarding categorisation of workers,
fitment, increase of Rs. 10/to every worker over the basic wage, dearness
allowance, the minimum wage, the demand for fixation of work-load and the
demand for implementation of weightage. Apart from this a question seems to
have been raised that the Tribunal could not implement the Wage Board recommendations
because it had envisaged the implementation of the categorisation etc. through
the Tripartite machinery, as such as Tribunal had no jurisdiction to implement
it. It would appear from the Award that the learned Advocate for the Appellant
had challenged the jurisdiction of the Tribunal to fix the workload or
undertake the fitments in view of the recommendations in paragraph 263 of the
Wage Board's report (1) [1969] 2 S.C.R. 593.
434 that fitments have to be effected by the
Tripartite machinery to be appointed by the Government. Even in the statement
of claim filed on behalf of the management it was said that though the Wage
Board's recommendations are not binding in spite of the huge losses the
management went out of the way and implemented the same. The fact that it was
said that the Wage Board recommendations are not binding is pressed into
service to support the contentions that the validity of the recommendations of
the Wage Board was challenged. While we are inclined to agree with the submission
of the learned Advocate for the Respondents that no where except in the
statement of the case before this Court has a specific plea that the
recommendations of the Wage Board not being in accordance with the well
accepted principles laid down by this Court in the several cases to which
reference has been made cannot be implemented and on that account the Tribunal
has no jurisdiction to implement those recommendations it may nonetheless be
pointed out that issue 1A and other issues in terms challenge the
implementation of the recommendations. Even if we permit the learned Advocate
for the Appellant-and we think there is justification for it-to challenge the
Wage Board's recommendations generally, for reasons which we will presently
give, those recommendations do not suffer from any vice but on the other hand
the Board has fixed a fair wage for the industry in accordance with the
principles laid down by this Court.
Since a good deal of argument is based on the
recommendations of the Wage Board it may be profitable to examine generally the
factors which were taken into consideration in fixing the wage structure for
the industry. The Wage Board as has already been noticed adopted the method
employed by the Tariff Commission by dividing the country into four zones or
regions but unlike it included every State in each region which had even one
unit. It further took these regions which were considered for fixation of price
structure of sugar also for wage structure in this industry.
In adopting this course the Wage Board took
into consideration the seasonal nature and the duration, the sucrose content of
sugar cane and its yield which varies from region to region. It was noticed
that the duration of seasons vary somewhat widely from area to area depending
on the availability of cane and the year to year variation. As a consequence of
some of the factories in the South owning their own sugar-cane farms while this
is not so in the North, the Southern factories do not suffer from the handicap
of Northern factories which have to get sugar cane from nearby growers
depending on the conditions of the crop in the vicinity which is not destroyed
by pest or is unsuitable for any other reason, for otherwise to get the
sugar-cane from growers from long distance would involve transport 435 costs.
This disadvantage the Southern factories do not have. The quality of cane as
determined by the sucrose content varies from area to area depending on
climatic conditions, irrigation facilities and cane development activities.
Factories in Maharashtra and to some extent those in the North enjoy these
advantages. Their recovery percentage is higher than in the North. Thus the
average percentage of recovery of sugar in Maharashtra was noted to be the
highest as against those in U.P. and Bihar and also as compared with the All
India average. The variation in the yield of cane per acre was also taken into
consideration; for instance in Bombay it is much higher than in the North. The
Board indicated the main factors responsible for variation in the yield of
sugar cane in different regions due to : (1) Improved variety of cane; (2)
irrigation facilities; (3) ecological factors; and (4) improved methods of
cultivation. The difference in the case of yield in the various areas has been
one of the factors which the Board said had persuaded it to divide the country
into four regions.
Though the industry is rural based, it was
stated the price of essential commodities in townships where sugar factories
are located, did not vary appreciably from the urban areas.
In spite of the urban amenities not being
available in these factory areas, the Board noted that while the impact of the
wages it worked out, on the economy of the country has been taken into account,
it was not proper to take agricultural wages as the prevailing rate of wages
for comparison.
Further it appeared to the Board that the
Sugar industry was a highly regulated industry where the minimum cane price is
fixed by the State and higher price depending upon the quality of the cane is
to be paid according to the price linking formula laid down by the State and
that even the ex-factory price for the finished product is fixed by the State
in the North and some other States have fixed prices at least for one of its
by-products and molasses. The price 'fixation in the North it is observed has
its effect on the price of sugar in the South where normally sugar cannot be
sold for a price higher than fixed in the North plus the freight.
The Board also set out the procedure followed
by it in ascertaining the financial capacity and profitability of the industry
region-wise by calling for the balance-sheets of all the factories for a period
of 10 years and undertook detailed studies for 8 years beginning from 1951
which corresponds to the beginning of the First Five Year Plan.
However, out of the balance-sheets of 118
Companies, balance-sheets for 8 years were available in respect of 87, 8
Companies supplied balance-sheets for 7 out of 8 years and among the rest
balance-sheets were available for one or more years. The Board thought that
this data is fairly 436 well, if not absolutely, comparable from year to year.
Where a Company owned two or more factories
in the same State or region it was decided to consider only the combined
balance sheets for the number of factories covered, because splitting the
combined balance-sheets over the number of factories did not serve the end in
view. However, where a Company had under its management two or more factories
in different States but in ,the same region, it was decided to exclude it from
State-wise study and include it in the regional total. It also took into
consideration some of the Companies which along with the sugar manufacture
carried other manufacturing activities. Then it also applied 'the dividend
tests, examined the main profitable ratio, considered the total dividend as
coverage by paid up capital, compared gross profits and total capital employed
and profits and profitability in relation to per day crushing capacity from
1955-58. A region-wise analysis of financial data was made and the same was
also distributed in different ranges of daily crushing capacity. In so far as
South region is concerned in which the Appellant's unit is located it was
observed that "the factories seem to have been more or less evenly
distributed among all the regions".
Analysis of financial data region-wise was
also made according to different crushing capacity ranges for each of the years
1955 to 1958 under different heads namely, gross profits, sales, total capital
employed, profits after tax, ordinary dividend, ordinary paid up capital total
dividends, total paid up capital, profits before tax, taxation provision,
retained profits and net worth.
After taking into consideration the several
factors in detail the conclusions of the Tribunal are summed up as under :
(a) "the profit margin whether on sales
or on total capital employed, or on the net worth does not appear to bear any
set relationship increase or decrease consistently-with the size of the
Company.
The trends are mixed and irregular. This
observation is equally applicable 'to other ratios and also to the allocation
of profits.
It does not seem possible from these studies
to locate any optimum size of the factory in respect of any region. The reason
probably is that profits depend not only on the size of the factory but on
various other factors e.g.
efficiency of management, Condit ion of
machinery, availability of raw materials and efficiency of workers;
(b) However, considering the overall position
it is evident that with no outside competitor in the field, with a consuming
public increasing and with national income which is rising, the industry has a
good future., 437 In spite of high taxation, high Government imposts 'by way of
cess rise in price of raw material rise in freight charges and in some regions
higher labour charges owing to recent revision of wages the demand for white
sugar has been increasing and most of the existing sugar mills have been
fairing well. Many of them have expanded their capacity and new units are fast
coming into operation.
Progress of the industry has been rapid....
but the increase in taxes has hit the
retained earnings particularly in the case of North and Central region
companies.
(c) Taken region-wise, the' financial
position of Maharashtra is the best. It has natural advantages. The yield of
cane per acre is higher. Its quality is better. A large number of the factories
have their own farms. The cooperative have also assured supply of cane. The
cane growers are the share-holders. Then comes the South region.
North region occupies the third position and
Central region the last. In cess: Punjab, West Bengal, Madhya Pradesh,
Rajasthan, Madras and Kerala enjoy some advantage with no or lower rates per
maund of cane.... It may be added here that recovery in some of these States is
lower than the average of the country'.
It would appear therefore that the Board took
into consideration the special features of the sugar industry and all the
relevant factors with great care and perspicuity and fixed a fair wage for the
industry in each of the regions.
What is was called on to, assess is the fair
wage which as it may be noticed according to the Report of the fair wage
Committee was that which while determining the capacity of an industry to pay,
it considered it to be wrong to take the capacity of a particular unit or the
capacity of all industries in the country, into account. The relative criterion
should be the capacity of a particular industry in a specified region and as
far as possible same wages should be prescribed for all units in that region.
It will obviously not be possible for the wage fixation Board to measure the
capacity of each of the units of an industry in a region, as such the only
practical method is to take into consideration a fair cross section of that
industry. This is what in fact the Board has don,--. The minimum wage that has
to be paid is as interpreted by this Court in Express Newspapers (Pvt.) Ltd. v.
the Union of India & Ors.(1) different from the subsistence wage "which
has got to be paid to the workers irrespective of the capacity of the industry
to pay while the minimum wage is something more than the bare mini(1) [1959]
S.C.R. 12.
438 mum or subsistence wage. It further
observed "The minimum wage thus contemplated postulates the capacity of
the industry to pay and no fixation of wages which ignores this essential
factor of the capacity of the industry to pay could ever be supported". In
that case the Court also observed at page 90 : "that the capacity of an
industry to pay should be gauged on an industry-cum-region basis after taking a
fair cross section of that industry. In a given case it may be even permissible
to divide the industry into appropriate classes-and then deal with the capacity
of the industry to pay class-wise" the classification into classes, it
will be seen is not an obligatory one but is required only in cases where
otherwise a fair wage cannot be determined. Any injunction that the industry in
a region should in all cases be divided into classes in determining a fair wage
for that industry would on the other hand likely to introduce greater
disparity.
A reference has been made to the case of
French Motor Car Co. Ltd. v. Workmen(1) for the proposition that large units
ought not be compared with small units even where the Board is considering the
wage structure on industry-cum-region basis. No doubt in that case the Tribunal
had gone into the history of the wage revision in the undertaking and having
regard to a large increase in the cost of living found that a case for further
revision was made out notwithstanding the fact that wage scales were the
highest in the industry. In Appeal this Court held that it was settled law that
in fixation of wage scales, dearness allowance and similar conditions of service
an industrial Court has to proceed on industry-cum-region basis and compare
similar concerns in the region which would be those in the same line of
business as the concern in dispute. But such comparison must not be between a
small struggling concern and a large flourishing one.
These cases were considered in Worknen v.
Bajrang Jute Mills(2) to which one of us was a party (Vaidialingam, J.).
That case was considering the Report of the
Jute Wage Board which in making recommendations for the industry adopted a
different approach. The Wage Board took the whole of India.
as one unit while in fact almost all the Jute
Mills were situated in West Bengal and a few in Bihar and still fewer in Andhra
Pradesh. What the Wage Board did was to compare 20 Mills from West Bengal and 9
mills from the rest of India as representing a fair cross section of the
industry. The Respondents have a fairly small unit in Andhra Pradesh which was
considered as a comparable unit with two larger mills in the State and with
some of the prosperous Mills in West Bengal. The management of the Mill refused
to accede to the demand of the workman (1) [1963] Supp. 2 S.C.R. 16.
(2) [1969] 2 S.C.R. 593.
439 to pay the wages in accordance with the
recommendations of the Wage Board, fixing uniform wage scale for the industry
on the plea that the Mill had no financial capacity to bear the burden of the
wage scale' On the dispute being referred to the Tribunal it upheld the claim
of the management. This Court in Appeal sustained the Award of the Tribunal
that the payment of the workmen for implementation of the, recommendation of
the Wage Board is not justified. In this connection at page 609-610 it was
observed by reference to the manner in which the Wage Board had laid down
uniform scales for the entire industry irrespective of where its several units
were situate and of the different conditions prevailing in various areas, that
it would have been better if it had "considered the units in each area
separately and deter-' mined the wage-scales for each such area by taking from
that area a representative cross.-section of the industry where possible or
where that was not possible by taking comparable units from mother industries
within that area, thus following the principle. of industry-cum-region".
It was further observed :
"It is true that in doing so uniformity
of wage scales for the entire industry would not have been attained. But in a
vast country like ours, where conditions differ often radically from region to
region and even the index of living differs within a fairly wide range, such a
target cannot always be just or equitable. If the wage scales had been
determined by the Board in the manner aforesaid, even though the Board is not a
statutory body and consequently its decision are of a recommendatory character,
it would be possible for industrial tribunals to give due weight to its
recommendations as such recommendations would have been in conformity with the
principle of industry-cum-region, a principle binding on the tribunals. It
would be difficult in that event for any unit in the industry in that region to
propound a grievance that its capacity to pay was not taken into account as the
scales so framed would have been determined after taking into consideration
scales prevailing in comparable units, whether in that industry or other
industries in that region depending on whether in a particular area the accent
was on the industry part or the region part of the principle of
industry-cum-region".
The learned Advocate for the Appellant lays
stress upon the observation contained at page 607 where while dealing with the
Express Newspapers case, this Court had observed :
the requirement of considering the capacity
of each individual unit to pay may not become neces440 sary if the industry is
divided into different classes. Even if the industry is divided into different
classes it will AM be necessary to consider the capacity of the respective,
classes to bear the burden imposed on them.
For this purpose a cross-section of these
respective classes may have to be taken for careful consideration for deciding
what burden the class considered as a whole can bear".
These observations must be read in the light
of what was earlier stated namely "as the Wage Board was fixing a fair
wage for the entire jute industry it may not have been strictly necessary to
consider the financial capacity of each individual unit". There is nothing
in the Bajrang Jute Mills case(1) which makes it obligatory on a Wage Board to
divide the industry into regions as well as classes or to examine the financial
capacity of every unit in that industry in the region, irrespective of the
conditions prevailing in the different regions of that industry. As long as all
relevant factors appertaining to that 'industry, industry-wise and region-wise
have been considered and the capacity of a fair cross section of that industry
to pay in that region has been ascertained, ,the recommendations of the Wage
Board cannot be held to be invalid. It is not in every case that a division
into classes in the same region, on a unit-wise capacity should be made before
recommendations of the Wage structure, dearness allowance or other conditions
of service in that industry could be held to be fair and within the financial
capacity of the industry in that region. The criteria on which the
recommendations of the Jute Wage Board were held not to be in accordance with
the principle laid down by this Court in Bajrang Mills case do not form the
basis of the recommendations of the Sugar Wage Board. The Sugar Wage Board not
only divided the industry into regions as already pointed out but on the other
hand found that there was no great disparity in the region nor did the size of
the unit make any difference. It standardised the wage structure, it adopted a
standardisation of nomenclature by taking note of the various nomenclatures
used in the industry and defined the qualification for each of the categories.
The predominant conditions for wage structure which weighed with the Board were
that firstly in view of the great unemployment nothing should be done to reduce
the existing employment but on the other hand efforts should be made to
increase it. Secondly the need for increase in production was paramount and any
action likely to reduce it should be studiously avoided as far as possible.
Thirdly the capital should not be idle for if a wage structure is evolved which
leads to the closure of any unit or units, a number of persons will be thrown
out of employment, production will be (1) [1960] 2 S.C.R.595 441 reduced and capital
invested in them will become idle.
Keeping these considerations in view the
Board determined the wage Structure which it recognised may be lower than norms
laid down by the Fifteenth Labour Conference but the fact that there is a
tremendous rush for employment in factories is proof that the wages recommended
by it are higher than the rates fixed under the minimum Wages Act in industries
to which that Act applies or those prevailing in the open market. It also took
into consideration the economic units in the regions which as accepted by it is
a unit having a crushing capacity of at least 800 to 1000 tons thought it has
noted that the majority of sugar factories have a crushing capacity higher than
this and several of those having uneconomic size have already applied for
expansion. According to the Board there were only 38 factories which were below
800 tons crushing capacity but a good many of them were making profits.
However, there are some which are running at loss and for them the Board
recommended that some consideration should be given to adjust themselves which
should be the same as these given to new factories. This is what the Board
stated in Chapter XIII at page 111 :
"The conclusion is that except some
cases other units below 800 tons are making profits.
The examination is set out in the Annexure to
this Chapter. The Board is of the view that relaxation in wages is not the real
remedy for those uneconomic units. They will have to fall in line with the
scheme of wages recommended by the Board. The real remedy for them is to expand
themselves into economic units".
It would therefore appear that the Wage Board
following the principles laid down by this Court has considered the capacity of
the industry region-wise and has also fixed wages different from region to
region having regard to the difference in the capacity of the industry
region-wise.
Further it has given good reason for not
furnishing a criteria for further classification of the industry within the
region. In these circumstances prescribing the same wage for all units of
industry in the same region is in our view justified and the fact that the
industry in the region has not been divided into classes cannot vitiate the
recommendations of the Wage Board.
It is contended on behalf of the Appellant
that while this is so and the wage fixed is a fair wage for the industry in
that region and cannot be challenged nonetheless the Tribunal is not precluded
from considering a plea by any particular unit that in fact its financial
position is such that it cannot bear the burden of implementing the
recommendations of the Wage Board. The learned Advocate for the Respondents
however, counters this on 442 the ground that once a wage has been fixed by the
Board as a fair wage on industry-cum-region basis, whether those recommendations
are statutory or otherwise, no plea by any individual unit that it has not the
capacity to implement the recommendations, can be entertained. He asks whether
an Industrial Tribunal to which a dispute regarding the fixation of wage is
referred fixes a wage structure, is it open to any particular unit to say that
it is unable to pay ? If this is not so, on the same parity of reasoning it is
contended that no unit in a region can be permitted to plead that it has not
the financial capacity to implement the Wage Board's recommendations. It
appears to us that if in law it, is open to the unit to plead financial
inability to implement the recommendations of the Wage Board the hypothesis on
which the question has been posed will not be relevant because in such a
contingency as is envisaged there would be a specific issue and a determination
of the wage structure by the Tribunal will be on the evidence produced before
it according to the financial capacity of the unit.
Once this is finally determined, the unit
cannot continue to assert that it has no financial capacity to implement the
Award.
In our view there is warrant for the
submission of the learned Advocate for the Appellant that notwithstanding the
fact that a fair wage has been fixed by the Board which would be applicable to
all the units in the region for which wage has been fixed, it may be open to
any particular unit to plead that in fact its financial position is not such
that it can bear the burden of implementing the recommendations. In Ahmedabad
Mill Owners' Association etc.
v. The Textile Labour Association(1), the
observations of this Court at page 421 lend support to our conclusions.
Gajendragadkar J, delivering the Judgment of
this Court observed at page 421 "The other aspect of the matter which
cannot be ignored is that if a fair wage structure is constructed by industrial
adjudication, and in course of time, experience shows that the employer cannot
bear the burden of such wage structure, industrial adjudication can, and in a
proper case should, revise the wage structure, though such revision may result
in the reduction of the wages paid to the employees. It is true that normally,
once a wage structure is fixed, employees are reluctant to face a reduction in
the content of their wage packet but like all major problems associated with
industrial adjudication, the decision of this problem must also bebased on the
major consideration that (1) [1966] 1 S.C.R. 392 443 the conflicting claims of
labour and capital must be harmonised on a reasonable basis; and so, if appears
that the employer cannot really bear the burden of the increasing wag.-, bill,
industrial adjudication, on principle, cannot refuse to examine the employer's
case and should not hesitate to give him relief, if it is satisfied that if
such relief is not given the employer may have to close down his business. It
is unlikely that such situation would frequently arise but, on principle, if
such situations arise, a claim by the employer for the reduction of the wage
structure cannot be rejected summarily".
Of course the justification of the plea of
want of financial capacity will depend upon the evidence of its financial
position over a period of years, to show that it cannot bear the burden or that
it is only a temporary or fortuitous situation with every possibility of
financial improvement in the immediate future. It is accordingly contended that
an examination of the financial position would show that the Appellant is not
in a position to implement the recommendations and that even the Tribunal had
recognised this position when it refused to implement an increase of Rs. 10/to
all the workers over the basic wage and' dearness allowance, and Rs. 5/as
weightage to certain categories of workers. It would appear from the statement
of the, Company as evidenced by Ex. M. 51 that it had secured and unsecured
debts for each of the four years as follows
---------------------------------------------------------Debts Debts secured
unsecured ----------------------------------------------------------Rs. Rs.
1960-61 73,59,3448,13,263 1961-62
67,78,2702,64,982 1962-63 32,31,43828,06,000' 1963-64 32,99,59918,71,522
--------------------------------------------------------207,68,651 57,55,767
----------------------------------------------------------The details of debts
would show that they are far in excess of the paid up share capital and even
taking the profit and development rebate reserves and other reserves into
account the financial position of the Company is certainly bad. A reference has
also been made to the notices issued by the Revenue Divisional Officer, Ex. M.
53 for showing that on 30th December 1962, a sum of Rs. 15,91,777-11 ps. was
due towards Sugar cane cess for 1958-62 and a sum of Rs. 11.66, 718.37 ps. towards
cane price in accordance with the details given there under. Subsequently it
would appear from Ex. M. 53/1 that notices under Sec. 53 of 444 the Revenue
Recovery Act were also issued by the Revenue Divisional Officer, Kakinada for
the recovery of these amounts. There were also other notices and a press note
published in the Indian Express showing that the Government was going to
auction the Sugar Mills for recovering its dues. The Minister concerned is
reported to have said that its Department was taking action to collect its dues
as arrears of land revenue.
It is on the other hand contended that the
Appellant's unit is an economic unit and has been expanded into a 1000 ton unit
in 1956 and there is nothing to show thereafter what its financial ,position
was. In any case the profit and loss figures for the four years starting with
1960 would indicate that there was loss only in one year whereas in all the
other three years there was profit and from this we are asked to conclude that
the Appellant company was in a sound financial position. No doubt any unusual
profits or losses in any year due to advantageous circumstances should not be
allowed to cloud the decision one way or the other. In Ahmadabad Mill Owners
Association case it was observed at ,page 420-421 as follows "It is a
long-range plan; and so, in dealing with this problem, the financial position
of the employer must be carefully examined. What has been the progress of the
industry in question; what are the prospects of the industry in future; has the
industry been making profits; and if yes, what is the extent of profits; what
is the nature of demand which the industry expects to secure; what would be the
extent of the burden and its gradual increase which the employer may have to
face ? These and similar other considerations have to be carefully weighed
before a proper wage structure can be reasonably constructed by industrial
adjudication, vide Express Newspapers (Private) Ltd., and Another v.Union of
India & Others. Unusual profit made by the industry for a single year as a
result of adventitious circumstances, or unusual loss incurred by it for
similar reasons, should not be allowed to play a major role in the calculations
which industrial adjudication would make in regard to the construction of a
wage structure. A broad and overall view of the financial position of the
employer must be taken into account and attempt should always be made to
reconcile the natural and just claims of the employees for a fair and higher
wage with the capacity of the employer to pay it; and in determining such
capacity, allowance must be made ,for a legitimate desire of the employer to
make a reasonable profit".
445 Bearing these observations in mind, it is
necessary to determine what the position of the Appellant is ? The conclusion
of the Tribunal in respect of the claim for increase of Rs. 10/is that having
regard to the balance sheets ",the profits made in the 4 years are about
Rs. 4 lakhs and the loss sustained in 1962-63 is of Rs. 16 lakhs and after
wiping it off to some extent by sale of debentures it is about Rs. 9 lakhs.
This will show that the financial position of the concern is not
satisfactory". After noting that except for this one year the concern has
always been making profits, it went on to observe : "Still, to judge the
financial position of a concern, it is always relevant to see what are its
reserves. It appears from the balance sheet that the reserves have never risen
beyond Rs. 8 lakhs or so. In the circumstances, it appears to me that it will
be difficult to hold that the financial position of the Company is sound. 1,
therefore, agree with learned Advocate, that it has not the financial capacity
to implement this increase of Rs. 10/over and above the fitment in the grade
recommended by the Board. I hold accordingly". The comment of the learned
Advocate for the Respondent is that these losses did not preclude the
management from accepting the recommendations of the Wage Board and willingly
agreeing to its implementation. In a letter dated the 18th December '61 to the
President of the Workers Union, the Management stated that as per their talks
on 10th December '61, it accepts the implementation of the Wage Board
recommendations and will pay from December '61 onwards salary as per fitments made
by it. Final figures and fitments will be made after the Government Tripartite
Committee comes and discusses with it and the Union and arrives at a decision.
It also promised to pay the difference in the wage as per wages paid till the
month of November 1961 and the Wage Board fitments as made by them will be paid
to the workers before the end of March 1962. Again in the agreement between the
Management and the employees under see. 18(1) of the Industrial Disputes Act
dated 19-9-63 it was Specifically stated that "the question of fitments
will be taken up as per the Sugar Board's recommendations in the month of
January 1964 and finalise before the end of the 1963-64". Even at that
stage it was never the case of the Management that the Wage Board's recommendations
could not be implemented. Even the new management in its letter of September 5,
1964 addressed to the Union (Ex. W. 36) stated:
"With a view to arrive at an amicable
settlement with regard to fitments a discussion had taken place between the
members of the Tripartite Committee constituted by the Commissioner of Labour
and it was agreed during the discussions among other matters, that 10-LI340
Sup. CI/71 446 (1)Wherever there is a standard nomenclature in the Wage Board
Report corresponding to the previous designation held by an individual before
November 1960, he will be given that designation provided the duties and
responsibilities of the individual are similar to the duties assigned by the
Wage Board.
(2)In other cases, where no standard
nomenclature can be applied to the existing cadre, the cadre will be fixed with
reference to duties and responsibilities and the time scale of pay attached to
the cadre in factory before November 1960".
From the several exhibits it would appear
that both old and the new management were anxious to implement the Wage Board's
recommendation but according to the fitments made by it. But the employees as
represented by the Workers Union were not prepared to accept those fitments and
wanted fitments in a higher cadre and other advantages according to their
reading of the Wage Board's recommendations which the management felt, it is
not able to accommodate not only because those recommendations did not justify
it but on the ground of financial incapacity.
No doubt it is for the management to show
what its financial position is and how it is going to place undue or impossible
burden upon it to implement the recommendations. That burden it seeks to
discharge by production of the balancesheets which have not been challenged and
the contents of which are, therefore deemed to have been accepted. We find from
the balance sheet and the Directors Report for the period ending 30-6-60 that a
sum of Rs. 6,15,254/had to be written off against the old losses leaving a
balance of Rs.
40,774/in the profit and loss account. The
Directors thought that the Company's financial position has now been stabilised
and all the old losses have been wiped off but that hope was only short lived
as the subsequent balancesheets for the period ending 30th June '61 would show.
According to the report for 1961 though there
was a net profit of Rs. 1,08,005/which together with the carry forward profit
of the previous year of Rs. 40,774/amounted to Rs. 1,48,779/and after making
provision for reserve for development rebate of Rs. 38,788/a balance of Rs.
1,09,991/was ,carried forward to next year's
account. For that year no dividends were declared and the Managing Agents also
waived their remuneration. For the year ending 30th June 1962, the position is
more or less the same-the net profit for the year amounted to Rs30,616/which
together with the profits of the previous year of Rs. 1,09,991/amounted to Rs.
1,40,607/-. This 447 amount was again recommended by the Directors to be
carried forward for the next year. No dividend was declared and the Managing
Agents also waived their remuneration. In 1963 the position had become critical
the loss incurred was Rs. 16,12,196 which wiped out the previous year's
profits.
There was no question of declaration of any
dividends but Managing Agent's remuneration of Rs. 30,000/(minimum) was drawn.
These losses would have the effect of eating into the capital of the Company,
unless it could borrow and tide over them. In the year ending 30th June '64 a
loss of Rs. 6,61,386/was carried forward to next year. It may be noted that in
that year in June 1964 the Government of India had approved the change in the
Constitution of the Managing Agency of the Company and it is stated that
because of the efforts of the new Management who borrowed large sums on their
personal security for putting the Appellant in better shape, large sums were in
fact advanced to the Appellant.
As could be seen from the statement M. 51
that for the years 1960-61, 1961-62, 1962-63 and 1963-64 the Secured and unsecured
debts were approximately Rs. 81 lakhs, Rs. 70 lakhs, Rs. 61 lakhs and Rs. 51
lakhs respectively. It is stated that the losses were coming down and therefore
the financial position is getting better but in our view this by itself does
not mean that ,the Company is in a sound financial position. What was happening
evidently is as suggested by the learned Advocate for the Appellant that the
Sugar stocks pledged were being sold and therefore the debts were getting less.
It is no doubt true that attachment orders which were made in 1962 must have
been paid off and the attachment withdrawn. That again is not an indication of
the soundness of its financial position because there is evidence to show that
the new management had to secure a large loan of about Rs. 30 lakhs on its
personal security to pay these demands and that is why Rs. 16 lakhs loss is
paid off and hence in the year 1962-63 the unsecured debt is shown as Rs. 28
lakhs. The Tribunal was therefore justified in coming to the conclusion that
the Company was not in a sound financial position to implement the
recommendations of the Wage Boardto increase Rs. 10/on the basic wage and the
dearness allowance or Rs. 51as weightage. Apart from these losses the general
reserves are very negligible. Each year about Rs. 3,000/is being provided for.
In all Rs. 8 lakhs reserves were accumulated from its inception which is not
very encouraging.
While this is so having regard to its working
we had called for the balance-sheets subsequent to 1964-65 to assess the
financial prospects of the Appellant during this period.
These reveal the following position 448 The
balance-sheet for the year ending 30-6-65 Showed a profit of Rs. 12,72,126/before
depreciation. After deducting Rs. 5,25,545/towards depreciation and Rs.
1,16,138/as reserve towards development
rebate and after adjusting the loss brought forward from last year, a loss of
Rs. 30,943/was carried forward to the next year.
The balance-sheet for the year ending 30-6-66
showed a profit of Rs. 3,23,789/-. After setting apart depreciation a sum of
Rs. 2 .27,942/was the loss carried forward and in the balance sheet for the
period ending 30-6-67 there was shown a loss of Rs. 5,10,771/and after
providing for depreciation there was a loss of Rs. 9,90,526/-. It may also be
noticed that in the year of account the Company had to provide a sum of Rs.
2,16,353/towards additional cane price payable to the cane growers for the
seasons 1958-59 and 1959-60. After allowing for this there was a total loss of
Rs. 14,23,505/which was carried forward ,to the next year. In the balance-sheet
for the year ending 30-6-68 there was a gross profit of Rs. 13,22,932/and after
providing for depreciation and adjustment of loss brought forward there was a
balance, of loss of Rs. 5,93,620/carried forward to the next year. The year
ending 30-6-69 was one year in which dividend of 7.15% was paid on the 51/2%
income-tax Free Cumulative Preference shares. The profits for the year after
adjusting all the losses and providing for depreciation, payment of bonus to
staff and taxation it showed a balance of Rs. 2,27,430/out of which dividend
was declared as aforesaid. For the year ending June '70 there was again a loss
of Rs. 5,96,913/after providing for depreciation. The Directors explained this
loss due mainly to high rates of interest charges, provision for depreciation
and the passing on of the entire realisable profit on 1968-69 season production
for the benefit of the cane growers in that year.
The balance-sheets for the years 1960 to
1970-for a period of 10 years show that except for the year ending 30-6-69 the
Company was not in a position to declare any dividends.
,Though the factory appears to have been
expanded after 1964 to 1300 tons capacity it did not show uniform net profits;
on the other hand losses continued. The
profits that it made in any year seem to be consumed by losses of the previous
years. In some years the yield of cane seem to be slightly over 100% the
average being a little over 9% which no doubt is encouraging but in spite of it
there are various factors which seem to contribute to its financial
unsteadiness.
This being the position we think that the
Tribunal was justified in holding that the Appellant did not have the financial
449 capacity to bear the burden of payment of Rs. 10/increase and Rs. 51as
weightage in accordance with the recommendations of the Sugar Wage Board. On
this conclusion and also on an examination of the relevant material it is
evident that the Company is not in a financial position to meet the burden of
implementing the recommendations of the Wage Board. The claim of the Respondent
for categorisation and fitment in accordance therewith cannot in the
circumstances be accepted. The Appeal of the Respondents which challenges the
Award of the Tribunal rejecting their claim, for an increase of Rs. 10/and a
weightage of Rs. 5/and for the categorisation and fitments in respect of the
heirarchy of supervising category namely Assistant Cane Organisers, Liaison Field
Supervisors and Field Supervisors as also in respect of Head Panman, and Panman
Incharge of shift, Panman, Asstt. Panman, Bench Chemists and Cane analysists
and Canteen Supervisor are all dependent upon the financial capacity of the
Respondent Company to implement the Wage Board's recommendations which we have
held it has not. As stated earlier the Company which is the Appellant in Civil
Appeal No. 1602 of 1966 has already implemented the Award of the Tribunal in
respect of a large number of workers both as to categorisation and fitment. It
is in respect of fitment of only four categories that it has not implemented,
namely Welders, Turbine Engine Drivers, Switch Board Attendants and Boiler
Mason's that the Appellant has objected to the award on the ground that the
Tribunal has acted without evidence and in some cases contrary to the
recommendations. The learned Advocate for the Respondents felt that he could
not really challenge the contention in respect of the Switch Board Attendants
and Turbine Engine Driver, as it would appear that the Tribunal has acted
without any evidence.
Why we have referred to these specific cases
objected to by the Company in their Appeal is to indicate that, notwithstanding
the finding that the Wage Board's recommendations in the circumstances, cannot
be implemented, the Company has given effect to the Tribunals Award, which will
remain in force till a revision takes place. In the view we have taken the
Appeal of the Appellant is allowed subject to the above directions and that of
the Respondents dismissed. We make no order as to costs.
G.C. Appeal No. 1602 of 1966 allowed, Appeal
No. 1603 of 1966 dismissed.
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