Unichem Laboratories Ltd. Vs. The
Workmen  INSC 62 (24 February 1972)
CITATION: 1972 AIR 2332 1972 SCR (3) 567 1972
SCC (3) 552
R 1974 SC 526 (15) RF 1975 SC1778 (20) R 1978
SC1113 (15,24) E 1980 SC 31 (13,20) RF 1981 SC 599 (4) RF 1981 SC1088 (4) RF
1986 SC1794 (7)
Allowance--Depreciation reserves whether to be deducted from profits--Concerns,
with foreign collaboration whether can be compared with purely Indian
Companies--Slab system--Classification of grades and fixation of
wages--Gratuity--Incentive Bonus Scheme.
The appellant carried on the business of
manufacturing and selling pharmaceutical products in Greater Bombay. In disputes
arising bet the appellant and the respondents the Industrial Tribunal had to
deal with questions relating to dearness allowance, classification of grades
and fixation of wages and the incentive bonus scheme as modified 'by the
company. In appeal against the award of the Tribunal,
HELD : (i) The decisions of this Court in
Gramophone Company Ltd. v. its Workmen and The Indian Link Chain Manufacturers
Ltd. v. Their Workmen show that the Tribunal was justified in computing gross
profits without deducting taxation, depreciation and development rebate. The
latter decision is directly in point to the effect that provision for depreciation
cannot be deducted. [582E., 585B-C] Gramophone Company Ltd. v. Its Workmen,
 11 L.L.J. 131 and The Indian Link Chain Manufacturers Ltd. v. Their
Workmen,  2 S.C.R. 759, applied.
Ahmedabad Millowners' Association Etc. v. The
Textile Labour Association,  1 S.C.R. 382, referred to.
(ii)So long and to the extent that concerns
having foreign collaboration are doing business in India and in a particular
concerned region there is no reason why they should not be taken into account
for purposes of being teated as comparable units, provided that the tests for
such purposes as laid down by this Court are satisfied. The object of
industrial adjudication is to secure as far as possible uniformity of service
conditions among industrial units in the same region,. if a concern having
foreign collaboration properly satisfies the tests of comparability it would be
improper to regard such unit as uncomparable merely on the ground that it is a
concern with foreign collaboration or interest and that the unit with which it
is sought to be compared is entirely of Indian origin and resources.
[591A-C] Chemical Industries and Pharmaceutical
Laboratories Limited (Cipla) Bombay v. Their Workmen,  I.C.R. Bombay 1206
and Alembic Chemical Works Ltd. Baroda v. Its, Workmen  1 S.C.R. 652,
Hindustan Antibiotics Ltd. v. The Workmen and Ors.,  1 S.C.R. 652, relied
(iii)On the materials before it the Tribunal
was justified in treating M/S. Burroughk Wellcome & Co. as a unit
comparable with the appellant.
568 The fact that Burroughs Wellcome employed
a lesser labour force did not deserve much importance because the business
performance of the two companies was equal. Once Burroughs Wellcome Co. was
treated as a comparable unit the wage scales awarded by the Tribunal could not
be considered to be unjustified. [598G-599A-D] Workmen of New Egerton Woollen
Mills v. New Egerton Woollen Mills and Ors.,  11 L.L.J. 782, applied.
(iv)On the facts of the case it was not
possible to disagree with the view of the Tribunal that the impact of the Drugs
(Price Control ) Order will not be such as to affect materially the business
prospects of the appellant company. If the Order materially affects the
prosperity of the appellant's trade it would be open to it to raise a dispute
for the reduction in the wage structure and in case they are able to show that
in view of the Drugs (Price Control) Order their financial position has
weakened to such an extent that they cannot bear the burden of the wage
structure fixed by the present award, the matter may have to be examined on its
merits. [598B-C] Williamsons (India) Private, Ltd. v. Its Workmen,  1
L.L.J. 302, referred to.
(v)The Tribunal had acted within its
jurisdiction in classifying the workmen and fixing the scales of pay after
fitting them in particular categories. The objection based on s. 10(4) of the Industrial
Disputes Act. 1947 must be rejected. [599E-600B] (vi)When the Tribunal raised
in the gratuity scheme the ceiling limit from 15 months to 17 1/2 months
according to the pattern obtaining in Buroughs Welcome Company there was no
question of principle involved justifying an objection by the appellant
company. [60OC-D] (vii)There were different systems of dearness allowance for
the operators and the clerical and subordinate staff in the appellant company.
That such a different system of dearness allowance for employees working under
the same employer is not warranted is clear from the decisions of this Court in
the cases of Greaves Cotton & Co. and Bengal Chemical & Pharmaceutical
Works Ltd. Therefore the Tribunal was justified in devising a uniform scale of
dearness allowance applicable to all the employees of the appellant.
[600E-F] Greaves Cotton and Co. and Ors. v.
Their Workmen,  5 S.C.R. 362 and Bengal Chemical & Pharmaceutical
v. Its Workmen,  2 S.C.R. 113, relied
(viii)From the date of the settlement in 1966
the cost of living index had very rapidly gone up by 220 points. At the time
when the demand for revision of wages scales and dearness allowance was made by
the Unions and when the reference order was made by the Government, the cost of
living index had gone up very high. That clearly showed that the workmen bad
made out a case for revision of wage scales and dearness allowance. The
contention of the appellant that because a system of dearness allowance already
existed there should be no revision of the same, could not be accepted. [6O2C;
601A] Co.  5 S.C.R. 344 and Remington and of India v. Its Workmen, 
1 L.L.J. 287, followed.
569 (ix)When the slab, system of dearness
allowance was prevailing in the industry in the region the Tribunal committed
no error in introducing a similar pattern in the case of the appellant.
[603C-D] Kamani Metals & Alloys Ltd. v. Their Workmen,  2 S.C.R. 463,
(x)In regard to the incentive Bonus Scheme
the Tribunal had stated that the necessary material for that purpose had not
been made available and as such it had not been possible to devise a scheme
calculated to afford protection to the incentive earning of a workman at the
raised base performance index. This Court could do nothing further,in this
'regard and the result would be that observations made by the Tribunal will
have full, effect. [604G-H]
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 1091 to 1093 of 1971.
Appeals by special leave from the award dated
April 15, 1971 of the Industrial Tribunal, Maharashtra, Bombay in References
(IT) Nos. 20 of 1969, 70 of 1970 and 105 of 1969.
V.M. Tarkunde, R. A. Jahagirdar and I.N.
Shroff, for the appellant (in all the appeals).
K.T. Sule. Janardan Sharma and Indira
Jaisingh, for respondent No. 1 (in all the appeals).
Urmila Kapoor and Kamlesh Bansal, for
respondent No. 2 (in all the appeals).
The Judgment of the Court was delivered by
Vaidialingam, J.-These three appeals, by special leave, arise out of the Award,
dated April 15, 1971 of the Industrial Tribunal, Maharashtra, Bombay in
Reference (I.T. Nos. 20 and 105 of 1969 and 70 of 1970).
The main questions that arise for
consideration in these appeals relate to the award of Dearness Allowance,
Classification of Grades and Fixation of Wages and a direction given by the
Industrial Tribunal regarding the Incentive Bonus Scheme, as modified by the
Company. There is also a minor point regarding a particular clause in the Gratuity
Scheme as framed by the Tribunal in Reference (I.T.
No. 20 of 1969). Though there are certain
other matters dealt with in the Award in Reference (I.T. No. 20 of 1969) they
are not the subject of controversy in these appeals.
We will now state the circumstances under
Which the References came to be made to the Tribunal.
570 The appellant was started as a
proprietary concern in the year 1944 and was later transformed to a public
limited Company and registered as such under the Indian Companies Act, 1962.
From its inception, the Company has been dealing in the business of
manufacturing and selling pharmaceutical products. It had its factory in
Jogeshwari in Greater Bombay. At the time of the Reference, the Company was
employing about 714 workmen of whom 558 were operatives and 156 were members of
the clerical and subordinate staff. All these employees were covered by the
demands comprised in all the References. The wage scales of the workmen had
been determined originally in Reference (I.T.No. 23 of 1959). The wage scales
of the operatives were as follows "Unskilled A Rs. 1 .52-0 .09.2 .23-0 .122
.93 Unskilled B 1.25-0.96 1.85-0.09.-2.30 Semi-skilled A 2 .00 0 .12 2 .72-0
.18-3 .80 Semi-skilled B 1 .76 0 .11--2 .64-0 .153 .39 Skilled 2 59 0 .132 .85-0
-22---3 .950 .30--4 .25".
The wage-scales of the clerical and
subordinate staff were as follows .200 -260 "Junior Chemist Rs. 120-10 -12
Manufacturing Assistant140-10-220-15-310 Store-keepers Store-Assistants
180-10-260-15-350 Stenographers Junior Clerk 60-8--90-10-146-E.B.-15-215.
Senior Clerks 115-10-255-15-315-E.B.-20395."
In addition to the basic wages, referred to above, the employees were getting
dearness allowance, which in the case of operatives was equal to 80% of the
revised textile scale of dearness allowance and in the case of clerical and
subordinate staff 100% of the revised textile scale of dearness allowance.
The nomenclature of the grades of the
operatives was changed by a consent award in Reference (I.T. No. 170 of 1961).
The grades and wages as per this award were as follows "Unskilled Rs. 1
-25-0 -06-1 -85-0 -09-2 -30 Semi-skilled A, 1 -52-0 -02-2 -33 -0 -12-2 -93
Semi-skilled B' 1 -76-0 -11-2 -64-0 -15-3 -39 Skilled 2 -00-0 -12-2 -72-0 -18-3
-39 Highly Skilled 2 -59-0 -13--2 -85--.O -22-.-3 -95.-.-O -30-4 -25." The
dearness allowance of the operatives and clerical and subordinate staff
underwent a change by the award in Reference (I.T. No.402. of 1963). Under that
award the dearness allowance 571 of the operatives was increased to 90% of the
revised textile scale of dearness allowance from January 1, 1964 and to 95% of
the revised textile scale of dearness allowance from July 1, 1964. The dearness
allowance of the clerical and subordinate staff was supplemented at different
slabs with effect from January 1, 1964 as follows :
"Basic salary upto Rs. 100 Basic salary
of Rs. 101 to 200 Basic salary of Rs. 201 to 300 Basic salary of over Rs. 300 .
Operatives' dearness allowance plus Rs. 7 .50
Operative-,' dearness allowanceplus Rs. 15.
Operatives dearness allowance plus Rs. 22
Operatives' dearness allowance plus Rs.
25." Though the award prescribed to the clerical and subordinate staff the
same rate of dearness allowance of the operatives plus a fixed amount, as
referred to above, the Company continued to give them dearness allowance equal
to 100% of the revised textile scale of dearness allowance. This was also
supplemented with the fixed amount depending upon the slab of the salary.
There was a settlement on June 24, 1966
between the Company and its employees, in and by which the wages of the operatives
and the clerical and subordinate staff underwent a final revision. The wages of
the operatives were fixed as follows "Unskilled Rs. 1 .25-0 .10-2 .75
Semi-skilled B 1 -60-0 .12-2 -32-0 .153 .67 Semiskilled A 1 .80-0 .15-2-85-0
.204 . 45 Skilled 2 .,10-0 -20.3 .10-0 .255 .10 Highly skilled 2 .750 -20-3
-75-0 .255 -000 .306 .50." Similarly, the wages of the clerical and subordinate
staff were as follows :
"Junior Clerk Rs.
Intermediate Clerk 90-8-130-12-190-15-295-E.B.18--349.
Senior Clerk 125 -10 -195.-15-270-20-390-E.B25-440.
Steno and Storekeeper180-10-260-15-380--E.B.---20-4460."
The above basic scales in respect of all the categories were again supplemented
by dearness allowance as provided for in the award passed in Reference (I.T.
No. 402 of 1963). The Company had also an Incentive Bonus Scheme, by virtue of
which a large number of operatives were getting, on an average an additional
sum of Rs. 28/per month. The Company further revised 572 from about November 1,
1969 the wage scales of Drivers and Watchmen as follows :
"Drivers Rs. 70-6-100-9-145-12-205-E.
Watchmen 45-4-65-6-95-E. B.-8.-135".
The above was the pattern of the wage
structure and dearness allowance for the operatives and the clerical and
The Unions concerned made a demand for
-introducing the following scheme of dearness allowance in respect of all the
workmen with immediate effect :
Wage slab . When the working classVariation
in the cost of living in-dearness allowdex figure is inance for every 10 the
group of 401-points rise or 410. fall.
upto 100 100 per cent 5 per cent From Rs. 101
to 200 50 per cent2 1/2 per cent From Rs. 201 and above 25 per centII percent
Minimum dearness allowance Rs. 100. Minimum variation Rs.
5." They also demanded that the above
scheme of dearness allowance was to have retrospective effect from August 1,
In the same demand the Unions required that
the workmen should be granted one month's wages for every year of service as
gratuity in case of resignation, dismissal, discharge, death or termination of
service for any reason.
By this demand the Unions required
modification of the then existing pattern of payment of dearness allowance at
95% of revised textile scale of dearness allowance to operatives and 100% of
revised textile scale of dearness allowance plus Rs. 7.50 to Rs. 25/paid to the
clerical and other staff.
The Company did -not agree to the demand and
in consequence by order dated January 14, 1969 the Government of Maharashtra
referred for adjudication to the Industrial Tribunal the demands. This
Reference was registered as Reference (I.T. No. 20 of 1969).
The Unions again made a demand for revision
of scales of pay as well as the classification of employees, their grades and
their fitment in the revised scales of pay. As against the then existing six
categories of workmen and their wage scales of the operatives the Unions
demanded new classification and gradation into eight grades with new wage
scales. Similarly, as against the then existing five grades of the clerical and
subordinate staff, the Unions demanded the creation of six categories with
enhanced wage scales.
These demands again were not accepted by the
Company which led to the State Government making a reference Oil January 9,
1970, which reference was registered as Reference (I.T.
No. 70 of 1970).
573 The Company sometime in the year 1959 had
introduced an Incentive Bonus Scheme. This was introduced, according to the
appellant, because of the fact that the workmen were not giving a substantial
production. The basis of the scheme, introduced by the appellant, was that if
the workmen gave only 30% of the 100% production expected of them, their
performance would be considered zero. On the other hand, if they gave
production above 30% and up to 100%, they would be eligible for payment of
Incentive Bonus which would be from 31 to 100 points. In other words, for the
70 points above the first 30 points, the workmen would get Rs. 501as Incentive
Bonus which would work out approximately to about Rs. 71.43 per point. The
appellant desired that the then existing floor limit of 30% ought to be raised
to 75% without varying the quantum of Rs. 501that was originally payable on
achievement of 100% production. What was intended was that the 25 points
between 75 and 100 points Were to be made eligible for payment of Incentive
Bonus of Rs. 2/-for each point.
The 'Company served a notice of change on the
workmen under s. 9A of the Industrial Disputes Act, 1947. As the workmen
protested against this change, this led the Government to make a Reference to
the Industrial Tribnual for adjudication. This was numbered as Reference, (I.T.
No. 105 of 1969).
The appellant resisted the claims made for
revision of dearness allowance and wage scales as well as the modification
sought for in the gratuity scheme. The appellant also wanted the Tribunal to
uphold the notice of change given by it under s. 9A of the Industrial Disputes Act
in respect of the Incentive Bonus Scheme. In particular the appellant contended
that it was not a comparable concern with the units referred to by the Unions
and that any modification in the scale of dearness allowance and wages would be
beyond its financial capacity. The appellant also relied oil the coming into
force of the Drugs (Price Control) Order, 1970 with effect from May 16, 1970.
According to the appellant the wages and
dearness allowance paid by it to the workmen were far higher than what were
paid by other units in the region. The Company also referred to the various
awards wherein it had been held that it could not be compared with an
International Company having branches in Bombay or with foreign concern though
incorporated in India. The wage scales had been fixed by Settlement dated June,
24, 1966 and that nothing has happened since the date of Settlement to justify
a revision of wage scales 'and dearness allowance. The appellant further urged
before the Tribunal that the double linking of dearness allowance, as required
by the Unions had never been adopted for the Pharmaceutical units in the Bombay
According to the appellant, the revision 574
effected regarding the Incentive Bonus Scheme was justified and the amount of
2/offered per point was much more than the prevailing rate of Rs. 71.43p. per
point. It also opposed the revision of the then existing gratuity scheme as
demanded by the Unions. According to the appellant the gratuity scheme which
was in force had been introduced by a consent award in 1963.
The appellant filed copies of balance sheets
and profit and loss accounts from 1962-63 to 1969-70 and various other charts
in support of its plea that it will not be able to bear the additional
financial burden that would result if the wage scales and dearness allowance
are revised as per the demands made by the Unions.
It will be seen from the facts mentioned
above that the main controversy between the parties related to the revision of
wage structure and dearness allowance. As the demands of the workmen related to
regrouping, in different grades, the operatives and the clerical and
subordinate staff and as this involved a very radical change in the existing
pattern of grades, the Tribunal felt that the opinion of an expert should be
obtained on the advisibility of the reclassification. In this regard both the
Unions and the against filed a joint application on December 22, 1970
requesting the Tribunal to appoint Sri N. L. Gadkari, retired Chief Inspector
of Factories, Maharashtra State as an assessor. They also prayed that the
points mentioned in the application be referred for the opinion of the
The Assessor submitted his report on February
22, 1971, in which he recommended the continuance of the then existing grades.
The Unions, while demurring to the report of
the Assessor, requested the Tribunal, by their application dated March 25, 1971
to fix for the then existing five grades the following wage scales
"Unskilled....... Rs. 85-8-125-10-225 Semi-skilled B... 100-10-150-12-210-15--285.
Semi-skilled A 120-12-180-15-255-18-345.
225-25-350--30-500-35-675." The appellant, when the Reference came up for
hearing, raised an objection to the selection of wage scale by the Unions for
the existing grades of the operatives on the ground that such a selection was
not permissible, being contrary to the provisions of s.10(4) of the Industrial Disputes
Act. The Unions, ultimately, made it clear to the Tribunal that their demand
for revision of wage scales of the existing five grades of operatives is to be
as follows :
"Unskilled Rs. 60-5-85-7-155.
Semi-skilled B 70-6-100-8-180.
Semi-skilled A 85-8 -125-10-225.
Highly skilled 120 --12-180-15-255--18-345."
575 It is on the basis of this claim that the question of revision has been
dealt with by the Tribunal.
Regarding the financial incapacity pleaded by
the appellant, the Tribunal after an analysis of the balance sheets and profit
and loss accounts, held that the average net profit of the Company duringthe
years 1965-66 to 1969-70 works out to about Rs. 1384691/-. It is also of the,
view that the apprehensions of the appellant/regarding the possible impact of
the Drugs (Price Control) Order, 1970 are not justified. It is the view of the
Tribunal that in spite of the price freeze effected in 1963, the appellant has
been doing very good business from 1962-63 to 1969-70.
Ultimately, the Tribunal found that the
financial condition of the appellant is quite sound.
Regarding the comparable concerns in the
region, the Unions referred to as many as twenty units. One of the units relied
on as comparable with the appellant was M/s.
Burroughs Wellcome & Co. (India) Private
The appellant opposed its being compared with
the concerns relied on by the Unions on the ground that those units were either
foreign concerns doing business in India or Indian units working, in
collaboration with foreign concerns. The appellant in turn relied on several
other concerns as being comparable with it. The appellant very strongly relied
on certain previous awards in support of its contention that it has been held
in those awards that the appellant cannot be compared with foreign concerns or
with the concerns working in collaboration with foreign concerns.
The Tribunal, after a consideration of the
materials placed' before it, in this regard, ultimately, held that M/s.
Burroughs Welcome & Co. (India) Private
Ltd., was a unit which could be considered as a comparable concern with the
appellant. The Tribunal having regard to the grades and scales of pay obtaining
in M/s. Burroughs Welcome & Co.
(India) Private Ltd., held that the wage
scales for the five grades for the operatives of the appellant should be as
"Unskilled . . . . Rs. 42-3-71-4-112
Semi-skilled B 47-3-50-82-4-122 Semi-skilled A 50--4-90-5 -50-134 Skilled 55-5
-50-110-6 -50-155 -50 High skilled 72-7--142-8-182-9 -5C-220." The
Tribunal fixed the following grades and scales of pay for the clerical and
subordinate staff "Junior Clerks and Laboratory Assistants Rs. 85-7
-50-145-10-195-12259-17 323 Intermediate Clerks 120-10-200-12-260-15-335-18 353
Senior Clerks 185-15-305-20-365-25465" 576 The Tribunal did not accept the
large demand made by the Unions for a general adjustment in increments of the
employees. Nevertheless, in view of the revision of the scales of wages, it
gave certain directions so that the employees may be fitted in the appropriate
revised wage scales.
The parties very hotly contested the question
of dearness allowance as well as the pattern to be adopted. As there were
different systems of dearness allowance for the operatives and the clerical and
subordinate staff, the Unions desired that a common scheme of dearness
allowance on a slab system should be adopted. The Tribunal having regard to the
decisions of this Court in Greaves Cotton and Co. and others v. Their
Workmen(1) and Bengal Chemical & Pharmaceutical Works Ltd. v. Its
Workmen(2) held that there was no justification for having two systems of
dearness allowance-one for the operatives and the other for the members of the
clerical and subordinate staff. Accordingly, the Tribunal held that all the
employees should get the same dearness allowance irrespective of the fact
whether they were operatives ,or members of the clerical and subordinate staff.
As the dearness allowance has to be fixed on
industry-cum region basis, the Tribunal examined the system of dearness
allowance followed in the region by the industries belonging to the
pharmaceutical units. The Unions had submitted statements Exs. DU-1and MU.-1
containing a list of pharmaceutical units, in support of their contention that
such units were adopting a slab system of dearness allowance. The Company, on
the other hand, referred to certain awards of the Industrial Tribunals in
support of its stand that slab system of dearness allowance is not considered
as an appropriate mode of providing neutralization. The Unions also relied on
certain awards wherein the slab system of dearness allowance had been
introduced by the Industrial Tribunals. Though the Tribunal had held that most
of the units referred to in Exs. DU-1 and MU-1, cannot be, considered for the
purpose of being treated as units comparable with the appellant, nevertheless
it held that the practice adopted by those units regarding the grant of
dearness allowance can be taken into account as providing a guide regarding the
system of dearness allowance adopted in the region. On this basis the Tribunal
accepted the statements in Exs. DU-1 and MU-1 and held that the slab system of
dearness allowance was prevalent in a large number of units belonging to
pharmaceutical industry. In this view, the Tribunal further held that slab
system of dearness allowance can be adopted, if the financial burden consequent
on the adoption of the said system, can be safely borne by the Company.
(1)  5 S.C.R. 352.
(2)  3 S.C.R. 113.
577 The Tribunal then proceeded to consider
the system obtaining in Burrough Welcome Company regarding the payment of dearness
allowance. The system in the said Company, which was common for operatives as
well as the clerical and subordinate staff, was as follows Basic Salary
Dearness allowance per Variation for month at the Bompoints.
bay working class cost of living index
Rs. 1-100. 150 percent 5 Per cent Rs.
101--200 1 50 Per cent on the 1st 21 Per cent Rs. 100.
71 Per cent on the balance.
Rs. 201-300 150 per cent on the 1st 11/4 per
721 Per cent on the 2nd Rs. 100, and 36 1/4
per cent on the balance.
Minimum Dearness allowance Rs. 4 Rs. 101.
In the said Company the above scale of
dearness allowance was however limited only to employees drawing a basic salary
upto Rs. 360/per month. The appellant accepted before the Tribunal that the
scheme of dearness allowance obtaining, in Burroughs wellcome Company would
cast a lesser financial burden than the scale of dearness allowance as demanded
by the Unions. In fact, the Company had filed two charts Exs. C-12 and C-13,
showing the burden which it will have to bear if the scheme of dearness
allowance as demanded by the Unions was introduced., The Company had worked out
the demands in different ways and that is why it filed two statements.
According to the appellant the additional financial burden will be about Rs.
878125.00 as per Ex. C12 and Rs. 1252693.00 as per Ex. C-13. The Tribunal is of
the view that under Ex. C-13, the Company had taken into account a sum of Rs.
186293.00 payable to some members of the staff drawing a salary of over Rs.
200/per month and amongst whom were also included 52 chemists. According to the
Tribunal the 52 chemists are not covered by the Reference and therefore the
burden will have to be calculated only in respect of the workmen covered by the
Reference and to, whom dearness allowance is being fixed.
On calculation the Tribunal found that about
a lakh of rupees payable to 52 chemists and included in Ex. C-13 by the
appellant will have to be deducted from Rs. 1252693.00 Accordingly, it held
that as per the calculation of the appellant under Ex. C-13, leaving out the 52
chemists, the total burden will only be Rs. 1152693-.00. Taking 578 into
account the tax relief that the Company will get, the Tribunal ultimately held
that the additional financial burden that the appellant will have to bear will
only be Rs.
555000.00. As it had already held that the
average annual gross-profits of the Company are over Rs. 40,00,000.00, the
Tribunal held that the Company can easily bear this additional burden. The
Tribunal is further of the view that though the financial impact of the Drugs
(Price Control) Order, on the business activities of the Company has had to be
seen, the impact will not be such as to make the appellant's financial position
difficult. For all these reasons, the Tribunal fixed for the operatives and the
clerical and subordinate staff of the appellant dearness allowance on a system
prevalent in Burroughs Welcome Company. The system of dearness allowance fixed
by the Tribunal is as follows :
Basic salary Dearness allowance per Variation
month at the Bombay working class cost of living index 521 -530.
Rs. 1-100 150 per cent Rs. 101-200 150 per
cent on the 1st Rs. 100.
72 1/2 per cent on the balance.
Rs. 201-300 150 Per cent on the 1st 100 Rs.72
1/2 Percenton the 2. Rs. 100.
36 1/4 per cent. on the balance.
Minimum dearness allowance Rs. 101 _ percent
_ 1/2 per cent Rs. 4.
The Tribunal has further directed that
dearness allowance in accordance with the above scheme will be payable only to
employees drawing a basic salary upto Rs. 300/per month.
It will be seen that the Tribunal while
adopting the scale of dearness allowance obtaining in Burroughs Wellcome
Company, has made a departure in fixing the scale of dearness allowance on the
basis of the Bombay Working Class Cost of Living Index 521 to, 530. The
dearness allowance scheme obtaining in Burroughs Welcome Company was on the
Bombay Working Class Cost of Living Index 491 to 500. The dis-rent cost of
living index was adopted by the Tribunal in view of the fact that the appellant
was Paying incentive wages to its operatives and with a view to lessen the
financial burden on the Company.
Another feature of the scheme adopted by the
Tribunal is that it puts a ceiling on the employees drawing basic wages upto
579 Rs. 300/per month alone being eligible for dearness allowance, whereas
under the practice originally obtaining in the Company there was no such limit.
The Tribunal held that the revised wage scales and dearness allowance would be
effective from October 1, 1969 and directed the Company to pay the arrears
within three months from the date of the Award becoming enforceable. At this
stage it may be mentioned that the appellant is not challenging this direction
regarding the date from which the wage scales and dearness allowance are to
take effect, though it very vehemently attacks the fixation of the scale of
revised wage scales and dearness allowance by the Tribunal.
Regarding gratuity, the Company had already a
scheme which had been introduced under the Settlement Award in Reference (IT)
No. 141 of 1962. It is not necessary to set out the scheme that was prevalent
in the Company because the only.
objection of the appellant to the revised
scheme evolved by the Tribunal is in respect of raising the ceiling from 15
months to 17 1/2 months. The demand in this regard by the Unions was that the
ceiling should be raised from 15 months basic wages to 20 months basic wages.
However, the Tribunal did not accept the claim of the Unions in too. On the
other hand, it adopted the practice obtaining in the Burroughs Wellcome Company
and accordingly fixed the ceiling at 17 1/2 months basic wages.
Regarding the notice of change issued to the
workmen by the appellant under s.9A of the Industrial Disputes Act proposing to
alter the existing floor limit of 30% to 75% in the Incentive Bonus Scheme, the
Tribunal on the joint application of the parties dated April 10 , 1970
appointed on April 28, 1970 Sri B. Tulpule, as Assessor to examine the question
of revising the existing scheme of Incentive Bonus.
The Assessor submitted his report on August
27, 1970 making the following recommendations :
"(1) The base performance index for all
sections /in the Company's factory should be revised and raised to 60 per cent.
(2) Consequent upon the revision of the base
index as above, an amount of Rs. 100 per day should be added to the basic wages
of the workers, this addition being independent of any other revision of
the-wage structure that the Tribunal may decide upon.
(3) The revised rates of incentive should
continue beyond 100 pet cent performance." Though the Unions generally
accepted the recommendations, the appellant was opposed, particularly to the
second and third 580 recommendations. The Tribunal, after a consideration of
the objection, is, of the view that recommendations Nos. 2 and 3 were beyond
the scope of the terms of reference made to him.
Therefore, those two recommendations were
Regarding the first recommendation, it is
stated by the Tribunal that the Unions accepted the same and that the Company
also was not opposed to that suggestion made by the Assessor regarding the
raising of the base performance index to 60%. In dealing with this aspect the
Assessor in his report had stated as follows "If the base index of any
incentive scheme is raised from X to Y, the workers will stop getting the
incentive earnings which they used to get for the performance range from X to
This is also the main anxiety expressed by
both the Unions in the present case. At the outset I asked the management
whether the implication of their proposed change was such a reduction in the
workers' total pay packet, at any given level of performance. The management
categorically assured me that that is not their intention. Their purpose in
proposing the change is stated by them to induce workers to raise their
performance above the prevailing level." The Tribunal in its Award had
stated that the matters mentioned in the above paragraph including the
assurance stated to have been given by the appellant were not denied.
Therefore, the Tribunal, in view of the
common measure of agreement between both the parties regarding the first
recommendation is of the view that if the pay packet of the workman is to be
protected at the wage raise base index performance of 60%, some scheme may have
to be worked out.
But as the necessary materials for the
purpose of evolving a scheme were not available, the Tribunal has thrown out a
suggestion that the said question should be dealt with by the appellant in
consultation with the Unions and frame a scheme by common consent, if possible.
Accordingly, the Tribunal left the matter to the parties to deal with the
matter with the observation that if it is found that no scheme could be framed
by consent, the Unions will be free to raise any dispute that may be available
to them in that regard.
We have. exhaustively referred to the
questions referred to the Tribunal as well as the decision of the, Tribunal on
those points. In these appeals, as mentioned earlier, the controversy relate to
(1) Scale of Dearness Allowance; (2) Fixation of Wage Scales, Classification
and Grades; (3) Raising of the ceiling to 17'2 months basic wages in..the
gratuity scheme.; and (4) the direction given by the Tribunal. regarding the
Incentive Bonus Scheme.
581 As the main points in great controversy
between the parties before us relate to the pattern of dearness allowance and
the classification and grades of employees and the fixation of the revised wage
scales, we will take up for consideration those matters.
The very _first objection of Mr. Tarkunde,
learned counsel for the appellant is regarding the manner of ascertaining
grosser of its when revising the wage scales and awarding dearness allowance.
We have already pointed out that theTribunal has proceeded on the basis that
the average annual gross-profits of the Company are over Rs. 40,00,000.00. The
appellant had submitted balance sheets and profit and loss accounts for the
year 1962-63 to 1969-70. It is enough to refer to the particulars that could be
gathered for the five preceding years, namely, 1965-00 to 1969-70. For those
years the figures are as follows -Particulars 1965-66 1966-67 1967-68 1968-69
1969-70 Paid-up capital 4500000 4-50-000-0 4500000 54-00-00-0 Reserves and
Surplus 2152186 2925376442151547856975714988 Sales 21997640 23866647
303593803299445637152031 Depreciation 5449195 55035784 8241111775916719
Development rebate 972426 8266105840110858144511 Provision for taxation 1915000
1590300185050016985001639000 Net Block 4601566 4905509 545821257459977375386
Net Profit 954591 1443489 159709416045011323779 From the above statement it
will be seen that the average net profits work out to Rs. 1384691.00 The net
profits have been arrived at, by the Company after deducting taxation,
depreciation and development rebate. It is on the basis of the net profits, so
arrived at that the appellant appears to have urged before the Tribunal that
the wage scales and dearness allowance are to (1),fixed. The Tribunal rejected
this contentions. On the, other hand, the Tribunal has held that when
considering a revision of wage structure what is to betaken into account is not
the net profit.-; but gross profits without any deductions having been made for
taxation, depreciation and development rebate. It is on that basis. that the
Tribunal held that the average grossprofits' of the Company exceed Rs.
The gross-profits without deducting taxation,
depreciation and development rebate for the years 1965-66 to 1969-70 will be.
proximately as follows -----------------------------------------------------------Year
"1965-66. 35,11,752 1966-6736 ' 57,000
1961-6843, 37,698 1968-6945, 25,134 1969-7040, 24,009"
582 From the above it will be seen that the figure of Rs.
40,00,000.00 arrived at by the Tribunal as
average annual grossprofits appears to be prima facie correct.
Mr. Tarkunde, learned counsel for the
appellant found considerable difficulty in challenging the view of the Tribunal
that gross-profits are to be arrived at without decucting taxation and
development rebate. He rather strenuously urged that there is absolutely no
warrant for arriving at gross-profits without deducting depreciation.
On the other hand, Mr. K. T. Sule, learned
counsel for the respondent No. 1, whose, contentions have been adopted by Mrs.
Urmila Kapoor, learned counsel for the second respondent, pointed out that the
approach made by the, Tribunal is correct and is also supported by the
decisions of this Court.
Mr. Tarkunde referred us to sections 205 and
211 of the Companies Act, 1956, as well as Part 1, Schedule VI therein.
We do not think it necessary to% refer to
those provisions as, in ouropinion, they have no relevance or bearing when
considering a revision of wages and award of dearness allowance under
industrial adjudication. Those provisions are intended for' a totally different
We will presently show, by reference to the
decisions of this Court that the Tribunal was justified in computing
gross-profits without deducting taxation, depreciation and development rebate.
In view of the decisions, to which we will immediately refer to, Mr. Tarkunde
was prepared to accept the position that, at any rate, taxation and development
rebate cannot be deducted, but he still maintained that depreciation has to be
In Gramophone Company Ltd. v. Its Workmen(1),
this Court, in dealing with a gratuity scheme, had to consider the principles
applicable for ascertaining the financial capacity of an employer. In that
decision the employer contended that before the real profit for each year can
be4 arrived at, the provisions made for taxation and for development reserves
should be deducted. On this basis, it was further contended that if these
deductions are made, there will not be any profit left which will enable the
Company concerned to frame a gratuity scheme. This claim for deducting taxation
and development rebate reserves was negatived by this Court as follows :
"When an industrial tribunal is
considering the question of wage structure and gratuity which in our opinion
stands more or less on the same footing as wage-structure (1) 2 L.L.J.
583, it has to look at the profits made
without considering provision for taxation in the shape of income-tax and for
reserves. The provision for income-tax and for reserves must in our opinion
take second place as compared to provision for wage structure and gratuity,
which stands on the same footing as provident fund which is also a retrial
benefit." It was further observed that if an industry is in a stable
condition and the burden of provident fund and gratuity does not result in loss
to the employer, that burden will have to be borne by the employer, like the
burden of wage-structure in the interest of social justice. It was finally held
that the contention on behalf of the Company therein that provision for
taxation and provision for reserves should take precedence over provision for
gratuity cannot be accented.
From the above decision it is clear that
Fixation of wage structure stands more or less on the same footing as framing
of a gratuity scheme and the principles applicable for ascertaining the profits
are the same : (2) Provision for taxation and provision for reserves cannot
take precedence over for gratuity and fixation of wages; and (3) The provision
for income-tax and for reserves must take second place as compared to provision
for wage-structure and gratuity.
The above decision categorically rules out
any deduction of taxation. It also excludes from deduction all provision for reserves
which will take in depreciation reserve also.
But, Mr. Tarkunde contended that the above
decision is an authority for the proposition that the only two items that could
be deducted are provision for taxation and provision for development rebate reserve.
If so, the counsel urges that the deduction of depreciation reserve as claimed
by the appellant is justified and, that the Tribunal erred in declining that
item to be deducted.
We are not inclined to accept this contention
of Mr.Tarkunde. The above decision is, in our opinion, an authority for the
proposition that the provision for taxation and provision for reserves, which
expression will take in depreciation reserve also, cannot be deducted for the
purpose of computing the profits. At 'any rate the, said decision had no
occasion to consider whether depreciation reserve can be deducted or not. We
have already pointed out that the only claim made by the appellant therein was
for deducting provision for taxation and for development rebate reserve and that
claim was rejected. Therefore, looked at from any point of view, the above
decision is certainly not in favour of the contention of Mr.584 Tarkunde that
depreciation reserve has to be deducted before arriving at profits.
In The Indian Link Chain Manufacturers Ltd.
v. Their Work-men(1), this Court had occasion to consider the principles
applicable to ascertain the financial capacity of a company in fixing wage
scales and dearness allowance and framing of a gratuity scheme. The Principle
applicable was stated as follows "It is pertinent to notice that gratuity
and wages in industrial adjudication are placed on the same footing and have
priority over Income-tax and other reserves, as such in considering the
financial soundness of an undertaking for the purposes of introduction of a
gratuity scheme the profits )that must be taken into account are those computed
prior to the deduction of depreciation and other reserves." The decision
in Gramophone Company v. Its Workmen 2 was quoted with approval in this decision.
The Company in that case had calculated profits after deducting depreciation.
This method was deprecated by this Court as follows :
"All these profits it may be mentioned
are computed after deducting depreciation and this should betoken into account
in considering the desirability of formulating a gratuity scheme forthe
Appellant." In the end the provision made for depreciation and which had
been deducted by the Company for calculation of profits was added back.
From the above decision it is clear that
profits are to be computed prior to the 'deduction of depreciation and other
reserves. The said decision directly holds that provision for depreciation and
other reserves cannot be deducted in computing profits be ascertained for
framing a gratuity scheme. This decision again reiterates the legal position
that gratuity and wages in industrial adjudication and placed on the same
footing and have priority over Income-tax and other reserves. In fact, as
pointed out by us earlier, provision made for depreciation and which had been
deducted by the Company for arriving at profits was added back. by this Court.
Mr. Tarkunde urged that this Court in The
Indian Link Chain Manufacturers Ltd. v. Their Workmen(1) has misunderstood and
misinterpreted the earlier decision in Gramophone Company Ltd. v. Its Workmen
(2 ) . According to the counsel the error committed by this Court was on
proceeding on the basis that the decision in (1)  2 S.C.C. 759.
(2) 2 L.L.J. 131.
585 Gramophone Company Ltd. v. Its Workmen(1)
has laid down that depreciation reserve should not be deducted in computing the
profits available for framing a gratuity scheme or when fixing a wage scale, We
have no hesitation in rejecting this contention of Mr.Tarkunde. We have already
expressed our views regarding the scope of the decision in Gramophone Company
Ltd. v. Its Workmen(1) and no error has been committed by this Court in The
Indian Link Chain Manufactures Ltd. v. Their Workmen(2).
On the other hand, the latter decision is
directly in point to the effect that provision for depreciation cannot be
We may also refer to the observation of this
Court in Ahmedabad Millowners' Association Etc. v. The Textile Labour
Association(3) that.......... it is the figure of gross profit which is more
important, because it is not disputed that wages payable to the employees are a
first charge,, and. all other liabilities take their place after the
wages." Mr. Tarkunde referred us to, the statements contained in certain
leading text books on principles of Accounting, Book Keeping and Accounts and
Accountancy regarding the nature of depreciation reserve. In "Principles
of Auditing by F. R.
M. De Paula, 8th Edition," it is stated
that the main object of providing for depreciation of wasting assets is to keep
the original capital intact. In "Balance Sheets, how to read and
understand them, by Philip Tovey,3rd Edition" the distinction between a
"Reserve" and "Depreciation" has been stated. The author
says that depreciation should be written of before arriving at the year's
profit and that reserve is built up, by setting aside portions of the profits
The author proceeds to state that
depreciation represents the estimated wear and tear which will ultimately
reduce the property and plant to scrap value. In "Book-Keeping and
Accounts" 'by Cropper, Morr's and Fison, 19th Edition, when dealing with
the Trial Balance, Trading and Profit and Loss Accounts, it is mentioned that
depreciation is the term employed by the Accountants to indicate the gradual
deterioration both in the value and the usefulness of those assets which, by
reason of their nature and uses, steadily decline in value.
Again in "Accountancy" by William
Pickles, 3rd Edition the author has defined "Depreciation" as the
permanent and continuing diminution in the. quality, quantity or value of an
asset. it Is further stated that the provision for depreciation does not depend
upon what the business can afford, as the debit therefore is an (1)  2
L.L.J.131, (2)  2 S.C.C. 759.
(3)  1 S.C.R. 382.
586 essential one, constituting not an
appropriation of, but a charge against, profits for the period in question.
Based upon the above statements contained in
the text books, referred to above, Mr. Tarkunde urged that the principle in
Accountancy is that depreciation must be deducted before ascertaining the
In our opinion, the above statements may have
considerable bearing in the preparation of profit and loss accounts having due
regard to the provisions of the Companies Act and Mercantile usage; but they
have no bearing on the question of fixation of wage structure and dearness
allowance in an industrial adjudication. From what is stated above, it follows
that the Tribunal was justified in arriving at gross-profits without deducting
the provision for Depreciation. As already mentioned by us, Mr. Tarkunde has
accepted that the Tribunal was justified in not deducting the Provision made
for taxation and development rebate. The result is that the average grossprofits
of the appellant being about Rs. 40,00,000,00, as held by the Tribunal, is
In the fixation of wages and dearness
allowance the legal position is well-established that it has to be done on an
industry-cumregion basis having due regard to the financial capacity of the
unit under consideration-vide Express Newspapers (Private) Ltd., and Another v.
The Union of India and others(1), Greaves Cotton and Co. and others v. Their
Workmen (2) , and Bengal Chemical & Pharmaceutical Works Ltd. v. Its
It has been further stated in Greaves Cotton
add Co. and others v. Their Workmen (2 ) as follows :
"The principle therefore which emerges
from these two decisions is that in applying the industry-cum-region formula
for fixing wage scales the Tribunal should lay stress on the industry part of
the formula if there are a large number of concerns in the same region carrying
on the same industry; in such a case in order that production cost may not be unequal
and there may be equal competition, wages should generally be fixed on the
basis of the comparable industries, namely, industries of the same kind. But
where the number of industries of the same kind in a particular region is small
it is the region part of the industry-cum-region formula which assumes
(1)  S.C.R. 12. (2)  5 S.C.R.
(3)  2 S.C.R. 113.
587 It has been further emphasized in
Ahmedabad Millowners' Association etc. v. The Textile Labour Association(1)
that industrial adjudication should always take into account, when revising the
wage structure and granting dearness allowance, the problem of the additional
burden to be imposed on the employer and ascertain whether the employer can
reasonably be called upon to bear such burden. The principles to be borne in
mind have been stated in the said decision 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..........
As pointed out in Greaves Cotton and Co. and
others v. Their Workmen (2) , one of the principles to be adopted in fixing
wages and dearness allowance is that the Tribunal should take into account the,
wage scale and dearness allowance prevailing in' comparable concerns carrying
on the same industry in the region., The factors which have to be taken into
account for ascertaining comparable concerns have also been laid down by this
In Workmen of Balmer Lawrie and Co. v. Balmer
Lawrie and those principles have been stated as follows "Besides, it is
necessary to emphasise that in dealing with the comparable character of
industrial undertakings, industrial adjudication does not usually rely on oral
evidence alone. This question is considered in the light of material fact and
circumstances which are generally proved by documentary evidence. What is the
total capital invested by the concern, what is the extent of its business, what
is the order of the profits made by the concern, what are the, dividends paid,
how many employees are employed by the concern, what is its standing in the
industry to which it belongs, these and other matters have to be examined by
industrial adjudication in determining the question as to whether one concern
is comparable with another in the matter of fixing wages. Now, (1)  1
(2)  5 S.C.R. 362.
(3)  5 S.C.R. 344.
588 it is obvious that these questions cannot
be decided merely on the interested testimony either of the workmen, or of the
employer and his witnesses'" In Workmen of New Egerton Woollen Mills v.
New Egerton Woollen Mills and others(1) , the above principles have again been
From the decisions, referred to above, it
follows that two principal factors which must weigh while fixing or revising
wage scales and grades are: (1) How the wages prevailing in the establishment
in question compare with those given to the workmen of similar grade and scale
by similar establishments in the same industry or in their absence in similar
establishments in other industries in the region;
and (2) What wage scales the establishment in
question can pay without any undue strain on its financial resources.
The same principles substantially apply when
fixing or revising the dearness allowance.
The question is whether the Tribunal has
adopted the above principles when revising the wage scales and dearness
allowance in the case of the appellant.
The Unions had relied on as many as twenty
one concerns located in the region of Greater Bombay and belonging to the same
pharmaceutical units of industry as, units comparable with the appellant.
The appellant opposed its being compared with
those concern,, on the ground that the units relied on by the Unions were
companies haying foreign collaborations or connections, and as such possessing
several advantages. The appellant in turn relied on several concerns in the
region as comparable units.
Before we refer to the concerns relied on by
the Unions and the appellant as comparable concerns, it is necessary to deal with
an objection raised by Mr. Tarkunde that no foreign unit doing business in
India or no unit in India doing business in collaboration with a foreign
concern, can ever be considered for purposes of comparison. According to the
appellant such concerns have distinct advantages of international research
facilities, reputation in business which enables such concerns to market their
products more easily and thus enable them to pay higher wages to their
employees. In view of the special technical facilities, that may be available
to them, their output will be far higher though the number of employees will be
much less, and as such they will be able to pay to their lesser number of
employees higher wages. In this connection Mr. Tarkunde relied on certain
awards of the Industrial Tribunal (1) 2 L.L. J. 782.
589 wherein it is held that the companies
having foreign collaboration though in the same region and in the same
industry, cannot be considered for the purposes of comparison with purely localOn
the other hand Mr. Sule, has opposed the above position and urged that the
question as to who is the employers is absolutely immaterial so long as the
tests for the purposes of comparability as laid down 'by this Court, are
satisfied and the capacity to bear the financial burden is established. We will
deal with aspects in the first instance.
It must be stated at the outset that the
Unions placed reliance on certain information contained in the prospectus of
the Company and certain statements contained in the book "Indian,
Pharmaceutical Industry" published in 1963 and 1969, to show that the
appellant concern is also one which has foreign collaboration and as such it is
to be ranked as a concern with foreign attachment. has recorded a finding in
favour of the appellant that it is not a unit having foreign collaboration.
Therefore, this finding is III favour of the appellant.
The question that now arises for
consideration is whether in law there is any objection or prohibition in an
industrial tribunal, when dealing with comparable units in a region from taking
into account concerns having foreign collaboration. It is no doubt true that
some of the concerns relied on by the Unions are concerns working in
collaboration with foreign firms.
In Chemical Industries and Pharmaceutical
Laboratories Limited (Cipla) Bombay v. Their Workmen(1), it was held by the
Industrial Tribunal that the Cipla cannot be compared to Glaxo Laboratories,
Raptakos Brett and other pharmaceutical concerns which are either subsidiaries
of foreign concerns or are closely linked with them. It was further held that
if any comparis on could be made,in can only be with concerns like Kemp &
Company. Sandu Pharmaceutical, Fair Deal Corporation, Edison Continental
Laboratories, Bengal 'Chemicals and such other indigenous concerns.
Again in Alembic Chemical Works Ltd. Baroda
v. Its Workmen (2) , the Tribunal held that Alembic cannot be compared to
concerns like the Glaxo Laboratories and others who have associations in
different degrees and forms with certain foreign concern, of international
On this reasoning the Tribunal relied more on
the scales wages prevailing in concerns like the Jhandu Pharmaceutical, Cipla.
Kemp & Co., and such similar concerns although it held that (2) 
I.C.R. Bombay, 1305.
(1)  I.C.R Bombay, 1206.
590 Alembic is a much bigger concern, than
the said units. It must be stated that in-both these awards concerns with
foreign collaboration have been eliminated from consideration on the ground
that they cannot be regarded as comparable concerns and to that extent they
In Reference (IT) No. 223 of 1959, which
related to the appellant Company, the workmen placed reliance on Indian units
of foreign concerns for being treated as comparable units. ,The appellant,
however, pointed out that those units which have international fame and repute
in world market were in a position to sell their products more easily and
profitably and hence they cannot be treated as comparable units. The Tribunal,
no doubt, accepted the contention of the appellant that the Unions had selected
some of the bigger concerns for comparison and held that it would be more
appropriate if the appellant is placed somewhere in between the bigger and
smaller concerns. In this view the Tribunal took to the financial capacity of
Again in Reference, (IT) No. 402 of 1963,
relating to the appellant, wherein the dearness allowance was revised, the
appellant had contended that it should not be compared with the units like
Ciba, Dumex, Glaxo, Sandoz and the like. The Tribunal held that the appellant
cannot be compared with international pharmaceutical units having branches in
Bombay or with foreign concerns like Glaxo, Ciba, Sandoz etc., which though
incorporated in India are subsidiaries of foreign companies having all the
advantages of connection with respect of home companies in Europe and America.
The Tribunal referred to the award in Reference (IT) No. 223 of 1,959 and held
'that a fair cross-section of the industry has to be taken into account for
fixing a scale of dearness allowance, which will be within the financial
capacity of the appellant. But, how-ever, the Tribunal held that the appellant
is a firm of good reputeand standing and that it has very fair prospects. Though
in Reference (IT) No. 223 of 1959, the Tribunal did not specifically eliminate
from consideration units having foreign collaboration as such, nevertheless, in
Reference (IT) No. 402 of 1963, the Tribunal has held that the appellant cannot
be compared with international pharmaceutical companies having branches in
Bombay or with concerns, though, incorporated in India, are subsidiaries of
From what is stated above, it is no doubt
true that in the three awards, one of which specifically relates to the
appellant, concerns having foreign collaboration have been eliminated for
purposes of comparison. But no legal principle on the basis of which such a
decision has been arrived at has been stated in any of these awards.
591 In our opinion, so long and to the extent
that concerns having-foreign collaboration are doing business in India and in a
particular concerned region, we do not see any reason why they should not be
taken into account for purposes of being treated as comparable units, provided
the tests for such purposes as laid down by this,, Court are satisfied.
No doubt some of those concerns may be having
an advantage in various matters. But merely because that they possess such
advantage in the field of business is not a circumstance for eliminating such
concerns for purposes of comparability. The object of industrial adjudication
is, as far as possible, to secure uniformity of service conditions amongst the
industrial units in the same region. If a concern having foreign collaboration
properly satisfies the tests of comparability, it would be improper to regard'
such unit as incomparable merely on the ground that it is a concern with
foreign collaboration or interest and that 'the unit with which it is sought to
be compared is entirely of Indian origin and resources.
The object of Industrial. Law is to improve
the service conditions of industrial labour so as to provide for them the
ordinary amenities of life with a view to bring about industrial peace which
would in 'turn accelerate productivity of the country resulting in its
The prosperity of the country, in its turn
will help to improve the condition of labour. The principles regarding fixation
of wage scales and dearness allowance have been laid down in several decisions,
by this Court and they apply equally to all industries irrespective of the
character of the employer. The worker is interested in his pay packet and given
reasonable wages, he can be expected to be a satisfied worker. There is no
justification from the stand point of view of the employees for fixing
different wage scales merely because of the fact that some workmen are in the
employ of purely local concerns while some others are in the employ of units
though in the same region, working in collaboration with, foreign concerns. As
the paramount consideration is the interest of the worker, the character of the
employer is irrelevant, provided' the latter's financial capacity to bear the
burden is established. In the ultimate analysis then, character of the employer
or the destination of profits has no relevance in the fixation of wages and
We are fortified in the above view by The
decision of the Constitution Bench of this Court in Hindustan Antibiotics Ltd.
v. The, Workmen and others(1). In that case on behalf of the appellant it was
urged that as it was a government company in the public sector, the principles
governing the fixation of wages applicable to companies in the private sector
do not have any relevance. On (1)1.S.C.R.652.
592 the other hand, on behalf of the workmen
it was contended that in fixing the wage structure including dearness allowance
the question, who is the employer, is irrelevant and that only the needs of the
employee are of paramount importance. The contention on behalf of the workmen
was accepted by this Court and it was held that the same principles that have
been laid down by the industrial adjudication and the courts regarding the
fixation of wage scales and dearness allowance in respect of companies in the
private sector apply with equal force to companies in the public sector also.
It was further held that in the application of the industry-cum-region
principle to be adopted to distinction can be made between one unit and another
in the same industry in the fixation of wage scale,;
provided the test of financial capacity is
satisfied. It was further held that by and large the acceptance of the
principle-of industry-cum-region will be more conducive to industrial relations
and that the same principles evolved by the industrial adjudication in regard
to private sector undertakings will govern those in the public sector
undertakings having a distinct corporate existence.
Though the decision cited above had to deal
with a claim for ,differentiation being made on behalf of a company in the
public sector and which claim was rejected, in our opinion, the basic principle
underlying the said decision will apply even with respect 'to the question
whether the units, having collaboration with foreign concerns can be taken into
account for purposes of comparison, In our opinion, the above decision warrants
the conclusion that such units having foreign collaboration or foreign
companies doing 'business in India can be taken into account for purposes of
being considered whether they are comparable units. Of course, the test laid
down by this Court for treating one unit as a comparable one, will have to be
satisfied, and once that test is fulfilled, there can be no distinction made
between such units and purely local units. Therefore, in our view, the
Tribunal, in the case 'before us, was perfectly justified in taking into
account for purposes of comparison units having collaboration with foreign
concerns and foreign units doing business in India in the same region and being
in the same industry. It follows, therefore, that the principles laid down to
the contrary in the awards relied on by Mr. Tarkunde, are erroneous.
Coming to the units relied on by the parties
as comparable units. as mentioned earlier, the Unions relied on as many as 21
concerns as comparable with the appellant. No doubt some of the units relied on
by them were units having collaboration with foreign concerns. The appellant
also, in turn filed statement Ex. C-26. referring to six companies which could
be treated as comparable concerns..
593 The Tribunat rejected most of the units
relied on by the Unions on the ground that the information furnished regarding
such units. were not adequate and complete regarding various factors necessary
to constitute a comparable unit. We have also gone through the statements filed
by the Unions. In Ex. DU-2, one of the Unions furnished information regarding
the business performance of about nine concerns till the year 1964-65.
Similarly, in Ex. DU-3, another Union had given the average performance of
nearly ton units for the years 1962-63 to 1964-65. As it would be more
desirable to consider the financial capacity of the appellant in the light of
the trading results disclosed in the balance sheets and profit and loss
accounts from the years 1965-66 to 1969-70, it must he considered that the
information furnished in Exs. DU-2 and DU-3 cannot he considered to be upto
date and helpful. The Unions also did not make any further attempt to
supplement the information contained in these two exhibits by furnishing
information regarding the years subsequent to 1964-65. No doubt, the Unions
have furnished particulars regarding one unit, Burroughs Welcome India) Private
Ltd., which will be dealt with later. Therefore, the rejection by the Tribunal
of most of the units relied on by the Unions, was justified.
The appellant Company relied on six units
mentioned in Ex. C-26. Those units are Cipla, Chemo-Phama, Zandu, Opil, Sigma
and Bengal Chemicals. But the Company did not furnish information regarding the
business performance of these concerns for a period of years in the immediate
past. But it will be noted that the four units referred to in Ex. C
26. namely, Zandu, Cipla, Opil and Sigma, had
been considered by the Industrial Tribunal in its previous award Reference (IT)
No. 402 of 1963, when the scale of dearness allowance obtaining in the
appellant Company was revised.
On that occasion the Tribunal had held that
it was only Cipla which came nearest to the appellant Company and even there
the dearness allowance obtaining in Cipla cannot be taken for comparison. That
means that these four units were left out of account and were not treated as
units comparable with die appellant. No fresh materials were placed by the
appellant regarding these four units after the decision of the Tribunal in
Reference (IT) No. 402 of 1963. Therefore, the Tribunal in the present case,
was justified in rejecting the claim of the appellant that those four units are
comparable concerns. The elimination of the four units.
thus left for consideration only two
concerns, namely, Chemo-Phama and Bengal Chemicals. Even here the Unions had
furnished statements Exs. DU-8 and DU-9, regarding these two units in Ex' DU-8,
the business performance of ChemoPhama froth 1965 to 1969 was given and-in Ex.
DU-9, the business performance of Bengal Chemicals from 1965 to 1970 was given.
The 594 'Unions had also furnished Ex. DU-44 regarding the business performance
of the appellant. A comparison of the statements contained in Exs. DU-8 and
DU-9 with the material relating to the appellant in Ex. DU-44, regarding the
paid up capital, reserves and surplus sales, net block, net profits and
gross-profits, it is quite clear that the business performance of Chemo-Phama
and Bengal Chemicals do not come anywhere nor that of the appellant. The
appellant in all respects stands on a much higher footing. The average
gross-profits of the appellant work out to Rs. 40,11,176. while the average
gross-profits of Chemo-Phama works out to Rs. 5,31,511 and that of the Bengal
Chemicals to Rs. 11,39,553. Therefore, it is clear that these two units also
cannot be treated as concerns comparable with the appellant and hence the wage
structure prevailing in those concerns cannot provide any useful guidance.
We have already mentioned that the Tribunal
has ultimately held that M/s Burroughs Wellcome (India) Private Limited is a
concern comparable with that of the appellant. It is no doubt a foreign company
in the sense that its entire capital is held by foreign company as shown in the
statement Ex. C11, filed by the appellant. But we have already rejected the
contention that such a concern cannot be ruled out of consideration for purpose
A very severe attack has been levelled by Mr.
Tarkunde in the Tribunal's treating M/s Burroughs Wellcome Company as a
comparable unit. According to the learned counsel if the various factors
relevant for the purpose of comparison are considered, it will be clear that
the appellant cannot stand any comparison with this unit. Mr. Tarkunde further
pointed out that instead of taking ,only one unit for purposes of comparison,
the Tribunal should have taken fair crosssection of the industry in order to
find out where exactly the appellant can be fitted in. It is no doubt true that
a fair cross-section of the industry should be taken into account. But in this
case when all the other units have been held to be not ,comparable with the
appellant, this criticism levelled against the approach made by the Tribunal
cannot be accepted.
Regarding Burroughs Wellcome Company, the
Unions had submitted a statement Ex. DU-2A under a seal of confidential as it
was a private limited company. A comparison of the information ,contained in
the said statement Ex. DU-2A regarding the paid up ,capital', reserves and
surplus sales, depreciation, development rebate, provision for taxation,
net-profits, gross-profits, net block and dividend declared for the years 1967
to 1970 with the corresponding items in Ex. DU-4A with respect to the appellant
shows that both the units are substantially on a par. Normally, the 595
statements in Ex. DU-2A could have been extracted in this judgment but for the
fact that Burroughs Wellcome Company being a private limited company and the
statements having been furnished in a sealed cover, they could not be made
public. The paid up capital. is identical in both the concerns. The average
sales of Burroughs Wellcome Company and those of the appellant are
substantially the same. The difference between the, net-profits of the two is
significantly small. The gross-profits of the two units are also close to each
other. No doubt there are some small differences between the two in these
items, but they are of no significance. The various factors which have to be
taken into account for he purpose of a unit being treated as a comparable one
as laid down by this Court have already been referred to. If so, all those
factors taken into account clearly show that Burroughs Wellcome Company is a
unit comparable with the appellant.
No doubt the appellant has relied on the
ratio of employees to sales, as well as to debt equity ration and the
percentage of profit to sales in respect of the appellant and the Burroughs
Wellcome Company. Ex. C-22 contains the ratio of employees to sales in 1968-69.
Though there are certain other units referred to therein, we will only advert
to the particulars regarding the appellant and the Burroughs Wellcome Company,
which are as follows Ration of Employee to Sales No. of Per Name of the Company
Year Sales Employees employee sale Rs. Rs.Unichem 68-6932994456 752 43875
Burroughs. 69 25000000 425 58823
----------------------------------------------------------A reference to Ex.
C-22 will show that the sales of the appellant is higher than that of Burroughs
Welcome Co. No doubt the ratio per employee is slightly less in the case of the
appellant. It is also seen that the appellant employs nearly 752 workmen
whereas Burroughs Wellcome Co. employs only 425 workmen.
In Ex. C-18, particulars regarding Debt
Equity Ratio have been given. That statement contains particulars regarding the
various firms including the appellant. In 1969 the capital of the appellant was
Rs. 101.86 lakhs. It had borrowed Rs. 95.89 lakhs and the percentage on
borrowed funds to capital works out to 94.1 %. It is no doubt true that there
is no borrowed capital in Burroughs Wellcome Co.
In Ex. C-18 particulars regarding nine Units
have been given and it is seen that except two units, all the other seven
units, including the appellant, have borrowed. In fact it is interesting to
note that Glaxo, which has a capital of Rs. 1196.81 lakhs had also borrowed Rs.
26-80 lakhs. Similarly, 596 Chemo-Phama which had a capital of only Rs. 32.05
lakhs had borrowed Rs. 37.08 lakhs and the percentage works out to Rs.
115.7%. We are referring to these aspects
because it was stressed by Mr. Tarkunde that the Debt Equity Ratio in the
appellant is very high and that it has to pay a large amount by way of interest
on borrowed funds which is not the case with Burroughs Wellcome Company. But
the statements contained in Ex. C-18 themselves clearly show that borrowing for
the purpose of business seems to be a usual pattern followed by the companies
in the region.
Ex. C-15 is a statement relating to
percentage of profit to sales for the years 1965-66 to 1969-70. No doubt the
figures given therein show that the percentage of profits has been fluctuating.
but, in our opinion, the particulars contained in the above exhibits. relied on
by the appellant, do not affect the findings of the Tribunal that Burroughs
Wellcome Company is a unit comparable with the appellant.
Another criticism that has been levelled by
Mr. Tarkunde is that the Tribunal has not taken into account the prospects of
the future business of the appellant. In this connection the appellant relied
on the coming into force with effect from January 1, 1971 of' the Drugs (Price
Control) Order, 1970. According to Mr. Tarkunde whatever may have been the
financial. position of the appellant in the past, its future business is bound
to suffer in view of this price control order. He referred us to the decision
in Williamsons (India) Private, Ltd. v. Its Workinen(1) of this Court wherein
it has been held, amongst the various factors which have to be taken into
account for the purpose of fixation of wage scales and dearness allowance, the
prospect of future business is a very relevant circumstance. This factor,
according to the appellant, has not been taken into account by the Tribunal.
We have earlier referred to the decisions of
this Court regarding the principles governing the fixation of wages and
dearness allowance. It is no doubt a long, range plan and the Prospects of
future business amongst other factors have also to be taken into account. The
case of the appellant is that in 1963, there has been a price freeze and that
has affected its business and therefore the Drugs (Price, Control) Order, 1970
will affect its future business. We have, already, extracted in the earlier
part of the judgment the trading results, of the appellant from 1965-66 to 1969
70. If the price freeze which came into force
in 1963 had any affect, then it must have been reflected in the trading results
of the appellant. The (1)  1 L.L.J. 302.
597 trading results of the appellant during
the years 1962-63 to 1964-65 are as follows :
Particulars1962-63 1963-64 1964-65 Paid-up
capital 4491000 44992504499500 Reserves and Surplus 476569 1010753 1505353
Sales 10241405 1566588317388705 Net Block 3907400 4371113 4345467 Provision for
Taxation 934000 1065000 1515000 Depreciation297243379256390878 Development
rebate 33686 100617 22329 Net Profits 442881 703567 877271
--------------------------------------------------------------A glance of the
above statement clearly shows that though the paid-up capital remains the same,
there has been a steady rise in the reserve and surplus sales and net profits.
Similarly, the net block has also an increase.
There has been no set back in the sales. On
the other hand there has beena steady rise in the sales. No doubt for the year
1969-70 the profits did go down; but the drop is comparably small and the
appellant has not been able to, satisfy. us that it is due to the price freeze.
Then the question is regarding the impact of
the Drugs (Price Control) Order, 1970, which has come into effect from January
1,1971. In this connection it is necessary to refer to the speech made by the
Chairman of the Board of Directors of the appellant Company at the Annual
General Meeting held on January 9, 1971. At this stage it may be mentioned that
the Accounting year of the appellant Company is from October 1, to September
30, of the succeeding year.
On January 9, 1971, the Chairman was giving a
review of the working of the Company for the year ending September 30, 1970. He
had clearly stated that the impact of the Drugs (Price Control) Order, 1970,
which had come into force only recently will be felt by the Company only after
the year 1970-71. The appeal was heard by us from January 3, 1972 and concluded
only on January 10, 1972. As the Company, in the previous years had been having
its Annual, General Meetings in early January, of each year, we suggested to
the counsel for the appellant that as the approximate trading results for the
year commencing from October 1, 1970 to September 30, 1971 would have been
available by then, they may be furnished so that it may be possible to find out
the impact of the Drugs (Price Control) Order on the trading results of the
appellant. But it was represented that the figures are not available. It is not
necessary for us to cornment except to state that going by the fact that on
former occasions the figure had been ready by the first-week of January to
enable the Annual General Meeting of the Company to be held, it would not have
been difficult for the appellant to have furnished at least 1031 Sup.CI/72 598
the approximate figures, if really the trading results had shown a decline. The
appellant has missed an opportunity 'that was provided to it to establish that
the Drugs (Price Control) Order has adversely affected its business. Under
those circumstances, it is not possible for us to disagree with the view of the
Tribunal that the impact of the Drugs (Price Control) Order will 'not be such
as to affect materially the business prospects of the appellant Company.
We may state that if the Drugs (Price
Control) Order, materially affects the prosperity of the appellant's trade, it
would be open to it to raise a dispute for the reduction in the wage structure
and in case they are able to show that in view of the Drugs (Price Control)
Order, their financial position has been weakened to such an extent that they
cannot bear the burden of wage structure fixed by the present award, the matter
may have to be examined on its merits.
The question of fixation of wage scales need
not detain us very long. We have already extracted the wage scales prevailing
in the appellant company as well as the categories of workmen when the
reference was made. We have also referred to the fixation of wage scales by
the, Tribunal on a comparison with the wage scale obtaining in Burroughs
Wellcome Company. The wage structure. as well as the grades that were prevalent
in Burroughs Wellcome Co. in pursuance of the settlement dated June 13, 1966
regarding the ,operatives and clerical-and subordinate staff have been
incorporated ,by the Tribunal in its Award. We do not think it necessary to
reproduce the same. A comparison of the wage scales in Burrough Wellcome
Company and the wage scales fixed by the Tribunal in the Award for the Company
will show that the Tribunal has only made some slight variation in view of the
fact that it accepted the report of the assessor for the continuance of the
existing grades in the Company.
As some of those grades were, not existing in
BurToughs Wellcome Company, the Tribunal bad to make some slight changes.
Wherever it was possible the wage structure in Burroughs Wellcome Co. has been
retained but the maximum has been raised a little and some slight changes have
also been made in the incremental stage.
Once Burrough Wellcome Company is treated as
a comparable unit, we are satisfied that the wage scales awarded by the
Tribunal cannot be 'considered to be unjustified. The Tribunal's finding
regarding the financial capacity of the appellant has already been referred to
and we accept the same.
it was, however, pointed out by Mr. Tarkunde
that in considering the comparability of a unit; strength of the labour force
has also to be given due importance. Mr. Tarkunde pointed out that 599 while
the appellant employs 752 workmen, there are only 436 in Burroughs Wellcome Co.
as is seen from the Statement Ex.
C-22. No doubt to this extent, the two units
differ, but when one bears in mind the business performance of both the
units,there is not much of a substantial difference. It may be that because of
the fact that Burroughs Wellcome Co. adopts more modem methods of production,
it was employing a smaller complement of workers. Having due regard to all the
other tests that have been satisfied, this difference in the strength of labour
force alone, in our opinion, cannot be given undue importance. It is pertinent
to note that this Court in Workmen of New Egerton, Woollen Mills v. New Egerton
Woollen Mills and others(1) did not disagree with the view of the Industrial
Tribunal which had treated the respondent therein and another unit as a
comparable unit, notwithstanding the that the respondent was employing at the
material time about 3000 workmen whereas the unit which was treated as a
comparable unit was having the labour force of only about 1000 men, in view of
the fact that all other requirements for comparability Were satisfied. In fact,
in the case before us, the Tribunal has adverted to this difference of labour
force of the appellant and Burroughs Wellcome Company, but nevertheless it held
that, that by itself is not sufficient to eliminate Burroughs Wellcome Company
as a comparable unit. We agree with this approach made by the Tribunal.
An objection was taken on the basis of s.
10(4) of the Industrial Disputes Act, 1947 that the Tribunal has permitted the
Unions to revise their demand regarding classification and grades of workmen
and that the Tribunal has further committed an error in upholding the grades of
Stenographers, Assistants and Store-keepers and merging them with that of the
Senior Clerks. We are not inclined to accept this contention advanced on behalf
of the appellant.
We have already referred to the fact that as
the question of classification and fixing grades were matters cf a technical
nature, at the joint request of both the parties, the Tribunal appointed Sri
Gadkari, as an assessor. It was really in view of the stand taken by both the
parties before the assessor and the Tribunal, after the report was submitted by
the assessor that the Tribunal has accepted the report that the existing grades
should continue. But as the workmen had to be fitted in 'the appropriate
grades, the Tribunal was justified in fitting in the categories the workmen and
their grades as well as their scales of wages.
The above contention based upon s. 10(4) of
the Industrial Disputes Act, at the most can relate, if at all. only to the
operatives. The report of Sri Gadkari has already been referred to. He had
suggested the' retention of the existing categories. The workmen have
necessarily to, be classified for the purpose of being put in particular
categories (1) 2 L.L.J.782.
600 and the wages also have to be suitably
fixed depending upon the category in which they are so fitted. Having due
regard to the, nature of the reference, classification though jobwise and the
fixing of wages of pay and fitting the workmen in suitable categories were all
matters incidental and as such the Tribunal has acted within its jurisdiction
in classifying the workmen and fixing the scales of pay after fitting them in
particular categories. In the view above expressed, we do not think it
necessary to refer to the decisions referred either by Mr. Tarkunde, learned
counsel for the appellant or by Mrs. Urmila Kapoor, on behalf of the respondent
No. 2 as to when exactly the matter can be considered to be incidental to the
question referred for adjudication.
Before we take up the question of dearness
allowance, one other point that requires to be adverted to is the objection
taken on behalf of the appellant regarding the raising in the gratuity scheme
the ceiling limit from 15 months to 1721 months' basic wages. The Tribunal has
adopted the pattern obtaining in Burroughs Wellcome Company. We do not see any
question of principle involved in this matter and therefore we find no merit in
the objection raised by the Company.
The pattern of dearness allowance that was in
force in the appellant Company at the time of the reference has been indicated
already. We have also referred to the scale of dearness allowance fixed by the
Tribunal. There were different systems of dearness allowance for the operatives
and the clerical and subordinate staff. That such a different system of
dearness allowance for the employees working under the same employer is not
warranted, is clear from the decisions of this Court in Greaves Cotton &
Co. and others v. Their Workmen(1) and Bengal Chemical & Pharmaceutical
Works Ltd. v. Its Workmen(2). Therefore, the Tribunal was justified in devising
a uniform scale of dearness allowance applicable to all the employees of the
appellant. The Unions required a common scheme of dearness allowance of slab
system to be introduced for all employees.
The appellant resisted the claim on the
ground that there was already a scheme of dearness allowance existing in the
Company and that there is, no justification for revising the same. But,
nevertheless, the Tribunal has adopted, by and large, the scheme of dearness
allowance which was in vogue in 'Burroughs Wellcome Co. Normally, once
Burroughs Wellcome Co. is treated as a unit comparable with the appellant, the
Tribunal must be considered prima facie to be justified in introducing the
pattern obtaining in that unit. However, it is pointed out on behalf of the
appellant that the slab system of dearness allowance does not obtain in any of
the pharmaceutical industries in the region.
(1)  5 S.C.R. 362.
(2)  2 S.C.R. 113.
601 The contention that because there was a
system of dearness allowance in existence in the Company and therefore there
was no justification for revising the same, cannot be accepted. A similar
contention raised in Remington Rand of India v. Its Workmen(1) was rejected by
this Court. In that. case there was a system of dearness allowance providing
for payment of not only a rate of percentage on the basic salary but also a
variation in the percentage on the rise or fall of the cost of living index.
The workmen demanded revision of the scale of dearness allowance on the ground
that the cost of living index had increased. The claim was resisted by the
Company on the ground that the scheme of dearness allowance then existing in
the Company itself provided for an increase in the cost of living index and
therefore no revision is required. This contention was not accepted by this
Court. It was held that a claim made by the Workmen, if otherwise justified,
cannot be rejected on the sole ground that a provision is already made in an
existing scheme of dearness allowance for adjustment depending upon an increase
in the cost of living index.
This Court further held that if it is
established that the cost of living shows a tendency to rise very high, the
workmen would be entitled to claim and there may be a change in the rate of
dearness allowance originally fixed, so, as to provide for more neutralisation.
It was further held that a claim made by the workmen win have to be properly
considered and adjudicated upon by the Tribunal.
In fact, in that case, it is seen that there
was only a 50 point rise in the cost of living index and nevertheless the
revision of the scale of dearness allowance by the Tribunal was upheld.
We may also refer to the decision of this
Court in Workmen of Balmer Lawrie and Co. v. Balmer Lawrie and Co.(2) wherein
it has been held as follows :
"If the paying capacity of the employer
increases or the cost of living shows an upward trend, or there are other
anomalies, mistakes or errors', in the award fixing wage structure, or there
has been a rise in the wage structure in comparable industries in the region,
industrial employees would be justified in making a claim for the reexamination
of the wage structure and if such claim is referred for adjudication, the
Adjudicator would not normally be justified in rejecting it solely on the
ground that enough time has not passed after the making of the award, or that
material change in relevant circumstances had not been proved. It is of course,
not possible to lay down any hard and fast rule in the matter. The question as
to revision must be examined, on the merits in each (1)  1 L.L.J. 287.
(2)  5 S.C.R. 344.
602 individual case that is brought before an
adjudicator for his adjudication." On the date when the settlement was
entered into between the appellant and its workmen on April 20, 1966, the cost
of living-, index was 630. From Ex. C-1 it is seen that in August 1969, the
cost of living index had gone up to 7 90 and from Ex. DUIO dated December 8,
1970, it is seen that when the second settlement was entered into between
Burroughs Welcome, Co. and its workmen, the cost of living index had gone upto
800.1. It is also seen that at the time of the Award it had gone up further to
about 850 points.
Therefore, from the date of the settlement in
1966 the cost of living index had very rapidly gone up by 220 points. At the
time when the demand for revision of wage-scales and dearness allowance wag
made by the Unions and when the reference order was made by the Government, the
cost of living index had gone up very high. That clearly shows that the workmen
had made out a case for revision of wage-scales and dearness allowance.
We have earlier referred to the scheme of
dearness allowance fixed by the Tribunal in the Award. The scheme provides for
payment of a particular percentage on the basic salary and it also provides for
variation on 10 points. But the dearness allowance has been fixed on the Bombay
Working Class Cost of Living Index of 521-530. Though more or less the same
pattern of dearness allowance was obtaining in Burroughs Welcome Co.., the
dearness allowance in the latter was fixed at the Bombay Working Class Cost of
Living Index of 491-500. The scale of dearness allowance, as demanded by the
Unions, was on the basis of the cost of living index 401-410. It was accepted
by the appellant that the scheme obtaining in Burroughs Welcome Company is more
advantageous from the financial point of view than the scheme of dearness
allowance demanded by the Unions. In fact, the Tribunal itself has made a
further concession in favour of the appellant by adopting the cost of living
index of 521-530 instead of 491-500 as was obtaining in Burroughs Welcome Co.
The Tribunal had made this change in the cost
of living index in view of the fact that in the appellant Company, there was an
Incentive Wages Scheme in and by which operatives'were getting on an average,
about Rs. 28/per month. Therefore the financial burden cast on the appellant by
the dearness allowance scheme fixed by the Tribunal is such that the appellant
can bear the burden.
in order to show that in the Bombay region
the pharmaceutical units were adopting the slab system of dearness allowance,
the Unions had filed a chart Ex. DU-1.
It is evident from Ex. DU-1, that out of 19
pharmaceutical units, referred to therein, at least 1 1 of them adopt the slab
system of dearness allowance which. has been 603 introduced in the case of the
appellant in the Award. No doubt, it is pointed out by Mr. Tarkunde 'that in
the statement filed bay the appellant, Ex. C-25, it will be.
seen that none of the Indian owned units have
adopted the slab system. But whether those units have adopted or not, we have
already indicated, that no distinction can be made between a purely local unit
and a foreign unit doing business in India or an Indian unit doing business in
collaboration with foreign concern. When once such units can be taken into,
account as comparable units, the pattern of dearness allowance, obtaining
therein can very well be considered to ascertain the system adopted by the
industry as that will show the trend in the region. As pointed out above, at
least 11 units, referred to in Ex. DU-1 have adopted the. system now introduced
in the case of' the appellant by the Tribunal. Under those circumstances when
such system is prevailing in the industry in the same region, it cannot be held
that the Tribunal has committed any error, in introducing a similar pattern in
the case of the appellant. The slab system has been approved by this Court as
will be seen by the decisions in Greaves Cotton and Co. and others v. Their
Workmen(2) and Bengal Chemical and Pharmaceutical Works Ltd. v. Its Workmen (2)
. Even in Bombay that such a pattern of dearness allowance, as the one
introduced in the case of the appellant, is existing is seen by the decisions
of this Court in Greaves Cotton and Co. and others v. Their Workmen(2) and
Kamani Metals & Alloys Ltd.
v. Their Workmen (3). No doubt the industries
therein were not pharmaceutical units. But that such a system exists in Bombay
region is clear from the above decisions.
Mr. Tarkunde referred us to the Award of the
Industrial Tribunal in Reference (IT) No. 411 of 1966 in Voltas Limited, Bombay
v. The Workmen Employed under them dated September 30, 1969 wherein the
adoption of slab, system has not been approved. On the other hand, Mrs. Urmila
Kapoor, learned counsel for respondent No. 2 has drawn our attention to a
number of awards of the Industrial Tribunal rendered during the years 1965 to
1968 wherein the slab system of dearness allowance has been adopted in Bombay
region. It is only necessary to refer to the award in the case of May and Baker
Limited, Bombay v. Its Workmen, because that is a pharmaceutical unit. The
award was given in or about June 1967 and it is seen that the dearness
allowance on the pattern now given by the Tribunal in respect of the appellant
has been adopted.
We have already referred to the fact that in
Ex. DU71, it is seen that as many as 11 pharmaceutical unit s in Bombay region
have adopted the pattern of granting dearness allowance on the slab (1) 
5 S.C.R. 362.
(3)  2 S.C.R. 463.
(2)  2 S.C.R. 11 3.
604 system now incorporated in the present
award. Though most of the units referred to therein could not be treated as
units comparable with the appellant because of lack of full information
regarding material factors, yet those concerns can be taken into account
inasmuch as the system Obtaining in those concerns will show that the slab
system is not something new to the pharmaceutical units. We have already
referred to the award in May and Baker Limited, Bombay v.
Its Workmen. These facts clearly show that
the scheme of dearness allowance provided in the award before us in respect of
the appellant is not anything new. On the other hand, the Tribunal has only
adopted the system prevailing in the region in respect of pharmaceutical units.
So far as the financial burden is concerned
we have already referred to the findings recorded by the Tribunal. Even on the
basis that the Tribunal was not justified in proceeding on the assumption that
52 chemists are not covered by the reference, in our opinion, the additional
burden that will be cast on the appellant can be easily borne by if.
Therefore, we see no error in the scheme of
dearness allowance introduced, in the case of the appellant, by the Tribunal.
The only other point that requires to be
considered is in respect of the direction given by the Tribunal regarding the
Incentive Bonus scheme in respect of which the appellant had given notice of
change under S. 9A of the industrial Disputes Act, 1947. We have already
referred to the nature of the scheme that originally existed and the
modification sought to be made by the, appellant. We have also pointed out that
the Tribunal has not accepted most of the recommendations made by Sri Tulpule,
who was appointed as an a ssessor on the joint application of both the parties.
The Tribunal has stated that it is desirable
that a scheme is worked out, if possible, by consent of parties for the purpose
of protecting the interest of the workmen at the increased base performance
According to Mr. Tarkunde the Tribunal itself
should have gone into the matter and evolved a scheme. No doubt, it would have
been desirable if the Tribunal had actually evolved a scheme. But the Tribunal
has stated that the necessary material for that purpose has not been made
available and as such it has not been possible to devise a scheme calculated to
afford protection to the incentive earning of a workman at the raised base
In fact, we also suggested to, the counsel
that the parties may consider the matter and submit a scheme for that purpose.
But it was represented to us on February 9, 1972 by Mrs. Urmila Kapoor, learned
counsel for respondent No. 2, that it has not been possible for the parties to
arrive at an agreement in respect of that matter, at present.
Therefore, there is nothing further that
could 605 be done by this Court in this regard; and the result is that the
observations made by the Tribunal in this regard will have full effect.
In the result, all the conventions of the
appellant are rejected and the Award of the Industrial Tribunal in respect of the
matters ,in controversy in the appeals are confirmed.
All the appeals are dismissed. In Civil
Appeal No. 1091 of 1971, the appellant will pay the costs of respondents Nos. 1
and 2. In the other appeals, parties will near their own costs.
The appellant will have three months' time
from today for payment of the amounts due under the award.