Precision Bearings India Ltd. Vs.
Baroda Mazdoor Sabha & ANR  INSC 239 (16 December 1977)
CITATION: 1978 AIR 419 1978 SCR (2) 400 1978
SCC (1) 235
Industrial Dispute-Award not covered by the
reference must be quashed--Revision of dearness allowance-Additional financial
burden which revision of dearness allowance would impose upon the employer and
his ability to bear such burden are relevant considerations.
One of the five principles laid down by this
Court, in Bengal Chemical & Pharmaceutical Works Ltd. v. Its workmen 
2 S.C.R. 113, for considering a revision of dearness allowance, is the
additional financial burden which dearness allowance would impose upon the
employer and his ability to bear such burden.
In its charter of demands, the respondent
workmen Union made specific demands viz.; (i) that the existing minimum
dearness allowance of RS. 146/be modified and that all the workers including
workers known as staff should be paid minimum dearness allowance at the rate of
full dearness allowance that is being paid to textile workers at Ahmadabad i.e.
100% of Ahmadabad Textile, rate and (ii) with the above minimum dearness
allowance, they should be further continued the higher dearness allowance of
40% plus Ahmadabad Textile D.A. for those in the pay range of Rs. 100-200 and
20% plus Ahmadabad Textile D.A. for those in the pay range of above Rs. 200/-.
The dispute was referred by the Government in the form viz. "All workmen
should be paid dearness allowance at the rate of 100% dearness-allowance paid
to the workers of the Cotton Textile Mills, at Ahmadabad". The Tribunal,
however, ranted over and above the 100% Ahmadabad Textile D.A., varying
percentages from 80% to 89% phased in a particular way.
Allowing in part, the appeal by special leave
HELD : It is true that in considering the
question of dearness allowance the capacity of the Company to pay is one of the
most important considerations.
In the instant case (a) in view of the fact
that although a substantial sum was kept as reserve towards the replacement
costs only a fraction of it was utilised, the company therefore cannot make any
grievance about the award that this could be done in a phased manner. The
Tribunal has exhaustively gone into the matter with care and kept in view the
five principles in Bengal Chemical & Pharmaceutical Works Ltd. v. ItsWorkmen
 2 S.C.R. 113; (b) The Tribunal in view of the content of the dispute
referred to it had no jurisdiction in this reference to grant anything more
than 100% of the Ahmadabad Textiles D.A. on the outside. Since the Tribunal,
after having given appropriate consideration to all aspects of the matter
granted varying percentages from 80% to 89% phased in a particular way, it bad
virtually rejected the Union's claim for 100% of the Textile D.A. Having done
so,. the was no scope for allowing to the higher brackets of wage earners in
addition 40% and 20% of basic wages as dearness allowance. [468C, G-H, 469GH]
Obiter Social justice perspectives being integral to industrial jurisprudence
the high cost allowance as a component of D.A.
is not impermissible in principle. It is a
Indeed in the instant case, the lowest
bracket upto Rs. 100/needed full neutralisation of the rise in the cost of
living. Such a dispute may well be referred by Government, if it considers fit,
and the decision in this case will not bar such a cause. [470C-D] Killick Nixon
Ltd. v. Killick & Allied Companies Employees Union  Supp. S.C.R. 453
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 9 of 1977.
Appeal by Special Leave from the Award of the
Industrial Tribunal, Gujarat dated 8th October, 1976 in Reference No. 11 of
1975., published in the Gazette Part I-L dated November 11, 1976.
H. R. Gokhale, A. P. Hathi and Ashok Grover
for the Appellant.
R. K. Garg, P. H. Parekh, Miss Manju Jetley
and K. Vasudev for Respondent No. 1.
The Judgment of the Court was delivered by
GOWSAMI, J.-This appeal by special leave is directed against the award of the
Industrial Tribunal, Gujarat, of October 8, 1976. Although it is a composite
award disposing of two references by the :State Government, we are concerned in
this appeal with Reference (IT) No. 11 of 1975 as per the State Government
notification of January 21, 1975 and even out of the two questions referred to
therein only with regard to one of these regarding dearness allowance.
The relevant, issue which arises for
consideration in this appeal may be quoted below:
"All workmen should be paid dearness
allowance at the rate of 100% dearness allowance paid to the workers of the
Cotton Textile Mills at Ahmadabad".
Before we advert to the submission of Mr.
H.R. Gokhale, appearing on behalf of the appellant, it will be appropriate to
indicate that there is no dispute about granting of dearness allowance of the
pattern ,of what is known as the Ahmadabad Textile D.A. The question to 'be
determined by the Tribunal was only with regard to the percentage ,of the
Textile D.A. to be paid to the employees of the company.
The Tribunal has noticed that"the recent
trend in the several industriestextile, engineering and others, in Ahmadabad,
Baroda and in some other parts of the State of Gujarat, is to make a demand for
dearness allowance on the lines of the dearness allowance paid to the workers
of the cotton textile mills at Ahmadabad, with a varying percentage".
The Tribunal describes this as what in
ordinary parlance is called 'the "Textile D.A." and reckons it
"as before the revision of the basic wage in the mills prior to
The company is manufacturing high precision
ball and roller bearings in collaboration with a West German company. It has
its plant in the district of Baroda with a manufacturing capacity of 24 lakh
pieces of bearings per annum upto 1973 and 28.82 lakh pieces per annum from
1974. The company was incorporated in April, 1962 and went into commercial
production from June 1965. Its registered office is in Bombay and has its sales
offices in Bombay, Calcutta, Delhi.
,and Madras. The plant is being operated
almost to full capacity from June 1965 onwards. The production has also
468 The number of workers on 31-8-1974 was
about 630. The company' is said to be the third largest unit in the ball
bearing industry in the-country-the other two concerns being Antifriction
Bearings and the Associated Bearings, the next one to the company being Shriram
Two questions are raised before us by Mr.
Gokhale. Counsel is, conscious of his limitations in an appeal by special leave
under Article 136 of the Constitution and has, therefore, fairly enough
confined his, submissions within narrow bounds and we fully appreciate this
stand. The first submission of Mr. Gokhale in the forefront of his argument is
that the Industrial Tribunal has failed to consider the impact of the rise in
dearness allowance granted by it on the financial capacity of the appellant to
bear the burden.
It is true that in considering the question
of dearness allowance, the capacity to pay of the company is one of the most
important considerations. Mr. Gokhale has pointed out that the additional
liability as a result of the award would be Rs. 8,29,312 in 1975, Rs. 7,42,563'
in 1976, and Rs.
12,42,395 in 1977 and the percentage increase
over the annual wage bill will respectively be 3 6.76 %, 32.91 % and 5 5.07 %
for the said three years. He has also pointed out that the company was able to
declare 8% dividend for the first time in the year 1970-71 and had been incurring
loss for the earlier years from 1962-63. He: also points out that although
dividends have been progressively increasing from 8% to 12%, from 1970-71 to
1974-75, only 8% dividend was declared in the year 1975-76. Besides, the,
company has to, spend huge sums for replacement costs which, according to
counsel, the Tribunal has not properly taken into account. It is true that the
Tribunal has mentioned in the award that this could be done in a; phased
manner. Mr. Gokhale submits with some justification that this was purely a
management function and the Tribunal should have taken the figures as furnished
by the management in making reserve& for replacement costs. We have,
however, seen that although a substantial sum was kept as reserve towards the
replacement costs, only a fraction of it was actually utilised. The company,
therefore, can-not make any grievance about the manner in which the Tribunal
has, dealt with this aspect. Mr. Garg, on behalf of the respondents, also drew
our attention to paragraph 4 of the company's written statement (page 62,
Volume 1) where after having referred to certain offers made by it the company
was prepared to the "increase of about Rs. 15 lacs in the employee cost in
the very first year. . . . . .
We find that the Tribunal has exhaustively
gone into the wholes matter with care and kept in view the five principles laid
down by this Court in the Bengal Chemical & Pharmaceutical Works Ltd. v.
Its Workmen(l), the 5th one being additional financial burden which dearness
allowance would impose upon the employer and his ability for bear such burden.
We are unable to find any infirmity in the Tribunal dealing with the point of
the financial capacity of the employer to bear the burden. The Tribunal finally
observed as follows (1)  2 S.C.R. 113.
469 .lm15 "On a careful consideration of
all the relevant factors, in my opinion, the dearness allowance paid to the PBI
(Precision Bearings India) workmen at the minimum level of basic pay from Rs.
26-upto Rs. 100-should be from 80 per cent, of the textile D.A. to 89 per cent,
of the textile D.A. phased over a period of three years, The dearness allowance
in the higher pay scale of Rs. 101-to Rs. 200should be 40 per cent and. in the
still higher slab of Rs. 201 and above, should be 20 per cent, the percentage
for the higher two slabs remaining the same".
The 40 per cent and 20 per cent of the basic
wages in the higher slabs were in addition to the Ahmadabad Textile Dearness
Allowance granted in the award. This takes us to the second objection of Mr.
It is submitted that in the charter of
demands of the union there were two specific demands with regard to dearness
allowance. These were as follows :1 : 1. It is demanded that the existing
minimum dearness allowance of Rs. 146/should be modified and that all the
workers including workers known as staff should be paid minimum dearness
allowance at the rate of full dearness allowance that is being paid to Textile
workers at Ahmadabad, i.e. 100% of Ahmadabad Textile rate.
1 : 2 With the above minimum dearness
allowance the workers and workers known as staff should be further continued
the higher dearness allowance as under Below Rs. 100 pay-100% Ahmadabad Textile
Pay range between Rs. 100 to Rs. 200-100% Ahmadabad
Textile DA+40% of basic Pay above Rs. 200/-100% Ahmadabad Textile DA+ 20% + of
basic." Even though the demand for dearness allowance was as above, the
State Government referred the dispute only in the form set out at the outset.
The Government did not entertain the claim of dearness allowance in addition to
the 100% D.A.
paid to the workers of the cotton textile
mills at Ahmadabad. In other words, while the claim of the union was Ahmadabad
Textile D.A. plus, the Government did not entertain the dispute between the
parties in that form. We find great force in the above submission of Mr.
The Tribunal in view of the content of the
dispute referred to it had no jurisdiction in this reference to grant anything
more than 100% of the Ahmadabad Textile D.A. on the outside. Since, the
Tribunal after having given appropriate consideration to all aspects of the
matter granted varying percentage from 80% to 89% phased in a particular way,
it had virtually rejected the union's claim for 100% of the Textile D.A. Having
done so, there was no scope for allowing to the higher brackets of wage earners
in addition 40% and 20% of basic wages as dearness 470 allowance. This part of
the award is, therefore, beyond the scope, of the reference and must be quashed
which we hereby do. If the Government at a future time intends to entertain a
dispute of this nature with regard to higher brackets of wage earners that will
be a different dispute but such a claim could not be entertained by the
Tribunal in the present reference.
We may observe that during the course of the
proceedings before the Tribunal the clerical and the supervisory staff seem to
have withdrawn from the reference and even an application was filed by some of
them before the Tribunal to confine the dispute as pertaining to the, manual
and technical workers. The Tribunal however, did not accede to this request and
proceeded on the footing that all the members of the-staff were included in the
We should not be taken to suggest that the
40% and 20% plus is either wrong or excessive by way of high cost allowance.
Indeed, we even felt that the lowest bracket
upto Rs. 100/needed full neutralisation of the rise in the cost of living as
has been held in Killick Nixon Limited v. Killick & Allied Companies
Employees Union.(1) Nor do we fail to see the force of Shri Garg's submission
that social justice perspectives being integral to industrial jurisprudence.
the high cost allowance as a component of D.A. is not impermissible in
principle. It is a legitimate item. But we disallow because there is I
deliberate omission to make a reference, of that item and so, falls outside the
jurisdiction of the tribunal. That is why we have expressly observed that such
a dispute may well be referred by Government, if it considers fit, and this
decision will not bar such a course.
In the result the appeal is partly allowed.
The award of the Tribunal with regard to the 40% and 20% for the higher two
slabs is set aside In all other aspects the award of the Tribunal stands. The
appellant will pay the costs (one set) of the respondents as ordered at the
time of granting the special leave and will also pay interest as ordered
The arrears calculated in terms of the Award
now upheld will be paid to the respondents in two equal installments, the first
installment within three months from today and final installment within three
Appeal partly allowed.