Monthly-Rated Workmen at The
Wadalafactory of the Indian Hu Vs. Indian Hume Pipe Company Ltd., Bombay 
INSC 72 (11 April 1986)
KHALID, V. (J) KHALID, V. (J) REDDY, O.
CHINNAPPA (J) NATRAJAN, S. (J)
CITATION: 1986 AIR 1794 1986 SCR (2) 484 1986
SCC Supl. 0 1986 SCALE (1)1217
RF 1992 SC 504 (29)
Service Conditions of employees - Change from
the slab system of Dearness Allowance in vogue for eighteen years to the
textile scale of D.A. affording 115 per cent neutralisation in respect of the
head office staff and the monthly rated factory staff - Validity of the notice
of change dated 15.7.75 given by the company under section 9A of the Industrial
Disputes Act, 1947 - Advisability of Tribunals and Courts to revise the wage
structure of workmen to their prejudice when a dispute arises - Burden of proof
as to necessity of change, upon whom lies in a reference arising out of section
9A notice of change.
The respondent is an Engineering concern
owning sixty factories spread throughout India. In Bombay, it has a factory at
Wadala and head office at Ballard Estate. There were four Industrial Disputes
Awards in this company pertaining to the pay-scales and dearness allowance of
the workmen. By the Award passed in reference No. IT 82 of 1950 pay-scales and
fixed dearness allowance were introduced with effect from 1.7.50 with the
consumer price index in Bombay at 312 points in 1950. In 1957 the index rose by
55 points and stood at 367 points as a consequence of which by an Award passed
in reference IT No. 77 of 1958 dated 21st May, 1959 the slab system of dearness
allowance was introduced with effect from 1.2.58. This Award was not challenged
by the company at any time. By Award published on 30.12.65 in reference IT
No.47 of 1964 at the instance of the labour marginal increase in the basic pay
scales was provided mainly on the ground that the slab system was working
satisfactorily. By an Award published on 7.7.77 in reference No. IT 42 of 1973
the clerical and subordinate staff in the head office were also given the slab
system of D.A. It was categorically observed in this Award that there should
not 485 be any disparity in the D.A. between the monthly rated factory staff
and the head office staff.
While the wage structure stood thus, the
company gave notice of change for doing away with the slab system on 15.7.75 of
D.A. in respect of head office staff and the monthly rated factory staff. The
notice of change in respect of head office staff was not pressed since a
Settlement was reached between the parties, in July 1976 whereunder the D.A. at
consumer price index 1380 points was merged in the revised consolidated pay
scale of different categories with effect from 1.9.75. Although in September,
1975, the consumer price index figure was 1270 points, it was taken notionally
as 1380 for the purpose of merger, providing for review of consolidated pay
scales if the consumer price index moved high. The notice of change in respect
of monthly rated factory staff was, however, referred to adjudication.
The Industrial Tribunal gave its Award on
27th October, 1980, holding that the employer was justified in seeking
abolition of the slab system of D.A. and substituting it with the textile scale
of D.A. affording 115 per cent neutralisation. The Tribunal held that the
workmen should be paid D.A. at 115% of the revised textile rate in the same
manner in which the daily rated workmen are paid their D.A.
at the prevalent cost of living index in the
month of November, 1980 or if such index number is not available at that time
then at the index No. 1771-1780. While making this Award the Tribunal was
conscious of the fact that the workmen were likely to lose quite a substantial
amount of the D.A. but it was stated that it was inevitable when attempt was
made to bring about uniformity and parity among the workmen of the same company
working at the same place doing similar work. The Tribunal felt that if the
parity scheme was to come into force either from the date of the demand or from
the date of reference, another unfortunate happening would take place in that
the workmen would be liable to refund a lot of amount excessively recovered by
them as and by way of D.A. on account of slab system. The Tribunal therefore
felt that it would be too harsh and unkind to such workmen and held that the
Award would come into force prospectively with effect from 1.11.80 and observed
that the reduction in the monthly emoluments of the workmen should be a gradual
process so that they are able to bear the burden and can learn to adjust
themselves with little less income month to month. It therefore, directed the
reduction to be spread 486 over equally for a period of six months from
1.11.80. Hence the appeal by special leave.
Allowing the appeal, the Court, ^
HELD : 1. In a reference arising out of the
notice of change given by a company under section 9A of the Industrial Disputes
Act, 1947 the company should make available all evidence necessary to justify
its stand for a change from the existing system. In the instant case,
overlooking the circumstances under which reference was made such a burden was
wrongly cast on the workmen to prove that a change in the system was not
necessary. [496 B-C]
2.1 Normally it would be inadvisable for
Tribunals and Courts to revise the wage structure of workmen to their prejudice
when a dispute arises. However, Tribunals and Courts can take judicial notice
of one fact; and that is that the wages of workmen, except in exceptionally
rare cases, fall within the category of mere "subsisting wages", and
as such tinkering with the wage structure of workmen cannot be permitted except
under compelling circumstances.
Employers have seldom displayed a cooperative
attitude where wage structures of workmen are devised. They have never showed a
willingness for the involvement of the labour with the capital so as to
engender a participative labour capital relationship. Reckoning with this
reality, the Courts and Tribunals have necessarily to keep their hands off from
upsetting a wage structure that has satisfactorily worked for a long time. The
sweat of the labour is never reflected in any balance sheet, although the
latent force behind every successful industry is this sweat. With their present
wage structure, the labour just exist. No one should try to deny them even this
bare source of existence. [503 G-H; 504 A-C] Crown Aluminimum Works v. Their
Workmen,  S.C.R.
2.2 The Supreme Court often times emphasised
the need for a living wage to workmen instead of a subsisting wage.
It is indeed a matter of concern and
mortification that even today the aspirations of a living wage for workmen
remain a mirage and a distant dream. Nothing short of a living wage can 487 be
a fair wage. It should be the combined effort of all concerned including the
Courts to extend to workmen a helping hand so that they get a living wage which
would keep them to some extent at least free from want. Viewed against this
background no case has been made out by the respondent in the instant case, for
a change of the slab system of dearness allowance to the revised Textile rate
of dearness allowance. [503 D-F] The slab system which has been approved by
Tribunals and by Courts was available at the head office and for the daily
rated workmen at Wadala upto the year 1976 and worked satisfactorily for over
17 years. In the absense of any demand from any region for the slab system, the
applicability of well-settled principle of industry-cum- region, and the sound
financial position of the company it cannot be said that if the slab system was
introduced in all the factories it would result in the closing of the whole
company itself. The question that it would work against the principle of parity
and uniformity and that there would be a change of the subordinate staff
getting more emoluments than their officers who might be recently employed does
not arise. [496 C-E]
2.3 The theory of ceiling on the quantum of
dearness allowance cannot be accepted since under the prevailing conditions
there is no control over the prices of essential commodities and as such a
ceiling would not give sufficient cushion when prices of essential commodities
continuously rise. [506 F-G] Killick Nixon Ltd. v. Killick & Allied
Companies Employees Union,  Supp. S.C.R. 453, distinguished.
Unichem Laboratories Ltd. v. The Workmen,
 3 S.C.R. 567; Greeves Cotton and Co. and Ors. v. Their Workmen,  5
S.C.R. 362; Bengal Chemical Pharmaceutical Works Ltd. v. Its Workmen,  2
S.C.R. 113 and Kamini Metals and Alloys Ltd. v. Their Workmen,  2 S.C.R.
463, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 3040 of 1986.
From the Award dated 27.10.1980 of the
Industrial Tribunal Maharashtra in Reference (IT) No. 531 of 1975.
488 N.B. Shetye, Dr. Y.S. Chitale, Mukul
Mudgal and Atul Chitale for the Appellants.
G.B. Pai, P. Ramaswami, H.S. Parihar and
Vipin Chandra for the Respondent.
J.P. Cama and Mukul Mudgal for the
The Judgment of the Court was delivered by
KHALID, J. This appeal, by special leave, is directed against the award of the
Industrial Tribunal in IT No. 531 of 1975, dated 27th October, 1980. The
appellants are the monthly-rated workmen at Wadala Factory of the Indian Hume
Pipe Company Ltd., Bombay and the respondent the Company mentioned above.
We will briefly refer to the history of the
demands of the workmen in this Company to appreciate how the dispute involved
in this appeal originated. The respondent (hereinafter referred to as the
Company) is an Engineering concern owning sixty factories spread throughout
India. In Bombay, it has a factory at Wadala and head office at Ballard Estate.
In this appeal, we are concerned with the monthly rated workmen at the Wadala
Factory. In this factory there are about 375 daily rated workers and 80 monthly
rated clerical and subordinate staff. The total labour strength all over India
is about 3000 daily rated workers and 1000 monthly rated clerical and
In the year 1950, there was an industrial
dispute pertaining to the pay scales and dearness allowance of the workmen in
this factory. An award was passed in this dispute by the concerned Industrial
Tribunal in reference No. IT 82 of 1950. By this award pay scales and fixed
dearness allowance were introduced w.e.f. 1-7-1950, with the consumer price
index in Bombay at 312 points in 1950. In 1957, the index rose by 55 points and
stood at 367 points. There was another industrial dispute in 1958 in reference
IT No. 77 of 1958 resulting in the award published on the 21st May, 1959,
introducing the slab system of D.A. w.e.f. 1-2-1958. This award was not
challenged by the Company at any time.
In 1964, the labour sought revision in the
pay scales 489 for the monthly rated clerical and subordinate staff, as a
consequence of which reference IT No. 47 of 1964 was made resulting in an award
published on 30-12-1965, which provided marginal increase in the basic pay
scales, mainly on the ground that the slab system was working satisfactorily.
2. In this Company the daily rated operatives
were getting the old textile scale since the year 1942 which was raised to the
revised textile scale as D.A. by an award.
Thus, the daily rated operatives and the
monthly rated clerical and subordinate staff were paid D.A. on different basis
and at different rates in this Company. As there was no revision in the pay
scales from 1950, for about 22 years a demand was made for revision in pay
scales for monthly rated clerical and subordinate staff in the year 1972. This
demand was referred to adjudication in reference IT No. 42 of 1973 as a
consequence of which an award was published on 7-7-1977. The clerical and
subordinate staff in the head office of this Company were also being given the
slab system of D.A. This award observed that there should not be any disparity
in the D.A. between the monthly rated factory staff and the head office staff.
3. While the wage structure stood thus, the
Company gave notice of change for doing away with slab system of D.A. by notice
dated 15-7-1975, in respect of the head office staff and the monthly rated
factory staff. The notice of change in respect of the head office staff was not
pressed since a settlement was reached between the parties.
As per this settlement arrived at in July
1976, the D.A. at consumer price index 1380 points was merged in the revised
consolidated pay scale of different categories w.e.f. 1-9- 1975. Although in
September, 1975, the consumer price index figure was 1270 points, it was taken
notionally as 1380 for the purpose of merger, indicated above, providing for
review of consolidated pay scales if the consumer price index moved high. The
notice of change in respect of monthly rated factory staff was, however,
referred to adjudication. The Company's claim was to do away with the slab
system of D.A.
and to substitute it by revised textile
scale. The Union filed a written statement justifying continuity of the slab
system which was in vogue for 17 years. The Industrial Tribunal gave the award,
impuged in this appeal, on 27th October, 1980. The Tribunal came to 490 the
conclusion that the employer was justified in seeking abolition of the slab
system of D.A. and substituting it with the textile scale of D.A. affording 115
per cent neutralisation.
4. The Tribunal said that the workmen should
be paid D.A. at 115 per cent of the revised textile rate in the same manner in
which "the daily rated workmen are paid their D.A.
at the prevalent cost of living index in the
month of November, 1980 or if such index number is not available at that time
then at the index No. 1771-1780." While making this award the Tribunal was
conscious of the fact that the workmen were likely to lose quite a substantial
amount of their D.A. However, the Tribunal got over this concern stating that
it was inevitable, when attempt was made to bring about uniformity and parity
among the workmen of the same company working at the same place doing similar
The Tribunal felt conscious of another
distressing result of the award. The Tribunal felt that if the parity scheme
was to come into force "either from the date of the demand or from the
date of reference, another unfortunate happening would take place in that the
workmen would be liable to refund a lot of amount excessively recovered by them
as and by way of D.A. on account of slab system." The Tribunal felt that
"it would be too harsh and unkind to such workmen" and therefore held
that the award would come into force prospectively w.e.f. 1-11-1980. The
Tribunal, not rest content with the expression of concern for workmen, gave
another palliative to them lest the reduction in their D.A.
should cause them dislocation financially all
of a sudden and therefore observed that the reduction in the monthly emoluments
of the workmen should be a gradual process "so that they are able to bear
the burden and can learn to adjust themselves with little less income month to
month." The reduction was, therefore, directed to be spread over equally
for a period of six months from 1-11-1980.
5. When the matter came up before this Court
on 15-12- 1980, special leave was granted and the following interim relief was
given to the appellants.
"Special leave granted. By way of
interim relief it is hereby directed that the difference in the D.A. awarded by
the Industrial Tribunal and the 491 D.A. being paid on slab system which is
directed to be reduced phasewise on monthly basis of 1/6th, reduction will be
implemented in payments to be made in the months of December, 1980 and January,
February, March, April and May, 1981, but shall be based on monthly wages
thereafter from payments in the subsequent months and this will be subject to
the further direction of this Court. Appeal be expedited..............."
This interim order was modified by the Vacation Judge on 14- 3-1981, as follows
"The order passed by this Court on
15.12.80 to continue till the end of August, 1981 on the appellants agreeing to
reimburse the management in case they fail in the appeal which reimbursement
will be by way of deduction from their dues."
6. We will now proceed to consider the rival
contentions put forward by the parties in support of and against the award. The
Company, in justification of their change of notice and defending the award
passed, put forward their case as follows:
The Company manufactures various pipes,
cement concrete pipes as well as steel pipes for Hydro Electric Projects.
These products are manufactured as per
definite orders and specifications by governmental bodies and other local
authorities, unlike other industrial units which are at liberty to manufacture
their products and market them. Their products are usually bulky in nature,
making transport difficult and costly. For easy transport of these bulky
products, the Company decided to establish as many as sixty factories all over
India to cater to the needs of the local markets and to make them easily
accessible to avoid damage to their products and heavy transporting charges.
The products of the Company have only a limited market and therefore, has to
face keen competition unlike cement, steel, sugar, chemicals etc. which have an
expanding market and which can be programmed in anticipation of sale.
The Company has three thousand daily paid
workmen and thousand monthly paid workmen all over India. Out of these, 492 the
appellants form only 80 monthly paid workmen, employed in Wadala manufacturing
factory. The slab system of dearness allowance, according to the Company, has
been universally condemned by successive Tribunals. The appellant - Union
enjoys a privileged position out of this four thousand workmen of the Company
all over India. While conceding that the appellant - Union had been enjoying
the slab system of dearness allowance till the reference was made, it is stated
that at the time the slab system was introduced it was never conceived by the
Tribunals that the cost of living index would spiral upto such great heights as
to make payments difficult. The dearness allowance enjoyed by the appellant -
Union is so high in certain cases that neutralisation is at rates much higher
than 100 per cent which is discouraged and is disapproved consistently by this
Court and other Industrial Tribunals. It is further stated that the Company
does not have the capacity to pay the slab system of dearness allowance and in
case the remaining monthly rated workmen put forward such a claim, the
respondents will be forced to close down their factories.
The appellant - Union pleaded that the award
of the Tribunal was defective both in law and on facts. The Tribunal did not
have any material before it compelling it to change a system that had
satisfactorily worked for 18 years and in effect had become part and parcel of
the service conditions of the workmen. The findings of the Tribunal that the
slab system had become unscientific and improper, that continuance of the
system was not in national interest or in public interest, that ever since slab
system was introduced neutralisation had become more than 100 per cent and that
the slab system confined to the appellant alone would create disparity and
discontent among workmen are according to the appellants not based on evidence.
The observation in the award that the Union did not bring on record any
evidence to show that wages paid to them were far below the living wage or to
show that the modification sought would cause them hardship which they would
not be able to stand is incorrect and is made without being faithful to the
facts and evidence in the case. With these rival contentions in view, we will
now proceed to consider the award.
7. The dispute arose when the
respondent-Company served a 493 notice under Section 9-A of the Industrial
Disputes Act. The dispute referred to arbitration reads as follows :
"The rate of payment of Dearness
Allowance payable to monthly rated clerical and subordinate staff working at
the Wadala factory will be changed and will be worked out as per revised
Textile scale calculated on the basis of working days in the month with a
ceiling on dearness allowance payment at consumer price index number for
working class of Bombay at 800 (base 1933-34 : 100) with effect from
1975." It was the Tribunal presided over by Shri Sawarkar, in I.T.
No. 77/58 by its award dated 21.5.1959 that
introduced the slab system of dearness allowance first. Before making the
award, the Tribunal considered the various contentions put forward by the
company. The Tribunal considered the nature of this industry and held that it
was an Engineering concern, and a member of the Engineering Association of
India. The Tribunal examined the scales of dearness allowance in eight
different units of the Engineering Industry and concluded that the total
emoluments of the monthly rated staff of the Indian Hume Pipe Company Ltd., at
its Wadala factory (i.e. Rs. 125 to Rs. 385) were far lower than those of the
other concerns with which they were compared. This Tribunal repelled the plea
that an increase in dearness allowance would cause disparity between the
workmen at the head office and at the factory and passed the award introducing
the slab system as follows :
Slab D.A. at cost of living VARIATION index
311-320. per 10 pts.
1 - 100 65% of the basic salary or 5% Textile
scale calculated on the basis of the number of days in the month whichever is
101 - 200 30% -do- 2% 202 - 300 15% -do- 1%
301 & above 10% -do- 1% 494 Dearness allowance was being paid to the
appellants at this rate without any objection by the Company till the notice of
change was given. It has to be borne in mind even at the outset that the
reference was occasioned because of the notice of change given by the Company.
It was therefore necessary for the Company to make available before the
Tribunal all evidence necessary to justify its stand for a change from the
existing system. We were taken through the award in full by the learned Counsel
for the appellants. All that we find in the award, by way of justification for
this change, is that the Company would be confronted with similar demands by
the workers in its other factories, that it has no capacity to pay the dearness
allowance at this rate, that it would result in more than 100 per cent
neucralisation and that this system had not found favour with many of the
Tribunals who considered the question of the dearness allowance in Maharashtra.
We will presently refer to some portions of
the award to see whether the Tribunal was justified in doing away with the
existing scheme and thus denying to the workmen what they were getting till the
award was made. But before we do so, we would like to show the effect of the
award on the emoluments of the workmen involved in this case if the award were
to be implemented.
TABLE -I Monthly Pay at Monthly Pay at Index
Reduction in Index 1771-1780 1771-1780 that would the monthly available prior
be available as per emoluments.
to the award the award.
Basic D.A. Total Basic D.A. Total Rs. Rs. Rs.
Rs. Rs. Rs. Rs.
500 1,590 2,090 500 542 1,042 1,048 400 1,434
1,834 400 542 942 892 300 1,278 1,578 300 542 842 736 200 1,117 1,317 200 542
742 575 100 795 895 100 542 642 253 40 544 584 40 542 582 2 The table below
shows the total monthly pay of the above workmen and the consolidated pay that
similarly placed workmen get at the head office.
495 TABLE II
____________________________________________________________ Basic Dearness
Total Total Monthly Difference pay allowance monthly monthly consoli- between
as per pay pay dated total pay slab sys- packet pay packet of tem D.A. of
packet head applica- Wadala at head office ble at Factory office workmen Index
work- as per and total 1771-1780 men as state- paypacket prior to per the ment
of similar the award award submit- workmen at ted by Wadala the Factory company
awarded before the Tribunal
____________________________________________________________ Rs. Rs. Rs. Rs.
500 1,590 2,090 1,042 1,815 773 400 1,434
1,634 942 1,635 693 300 1,278 1,578 842 1,380 538 200 1,133 1,347 742 1,185 443
100 795 895 642 790 148
____________________________________________________________ The first table
glares one in the face. The reduction is substantial in most of the cases. Mr.
Pai, the learned counsel for the company had to agree that as per the award the
difference in the dearness allowance was substantial and the damage to the
workmen was not inconsequential. However, he tried to get over this
inconvenient position with the plea that continuance of the scheme would spiral
up the dearness allowance so much that it would render the working of the
Company difficult and create wide disparity between these workmen and others.
The second table which shows the difference between the pay packet of Wadala
Factory workmen and the head office was explained away by Mr. Pai with the plea
that the head office workmen had bigger responsibilities and did better work.
These justifications put forward by him, have been echoed by the Tribunal also.
As indicated earlier, we will now refer to
the award 496 under challenge. The company had a case that out of its sixty
factories, each factory should be treated as an independent unit. This
contention did not find favour with the Tribunal. According to us, the Tribunal
rightly held that since there was no functional integrality, the units had to
be taken as one. The Tribunal also found that the Company's financial position
taken as a whole was not only satisfactory but quite sound till 1979.
The Tribunal committed an error by
overlooking the circumstances under which reference was made and casting the
burden wrongly on the workmen to prove that a change in the system was not
necessary. The Tribunal assumed that so far as the Bombay Region was concerned,
it was an admitted fact that the daily rated workmen at Wadala factory and the
staff at the head office were not paid wages as per the slab system. This
assumption is wrong because the slab system was available at the head office
and for the daily rated workmen at Wadala upto the year 1976. The Tribunal
apprehends that if the slab system was introduced in all the factories the net
result would be that the whole company will have to be closed down. This
apprehension is without any foundation because at the time the Tribunal considered
the dispute there was no demand from any region for the slab system. The
Tribunal admits that the slab system had been in vogue for 18 years and that it
had worked satisfactorily and had become part of the service conditions of the
monthly rated workmen. However, the Tribunal observes that the system could be
revised if it was shown that the system had out- lived its utility. The
justification for this observation is that at the time the slab system was
introduced no one fore- saw the spiralling rise in the cost of living index and
that it would work against the principle of parity and uniformity and the
danger of the subordinate staff getting more emoluments than their officers who
might be recently employed. These are all assumptions without necessary
materials and this is the second error committed by Tribunals. It is not
uncommon that even in prestigious institutions recently employed officers get
emoluments less than the subordinate staff. On this plea, the benefits that the
workmen were enjoying till then should not be denied to them. To say that the
system had become 'unscientific' and 'improper' because the workmen were
getting fantastic amount of dearness allowance was again without necessary
The Tribunal 497 then proceeded to say that
change in the slab system was necessary in the "larger interest of the
country", "in the interest of social justice", "in the
interest of justice and fair play", "to avoid industrial
unrest", "general interest of the company and in the larger interest
of the nation." These are empty verbiage without any basis on the facts of
the case. The discussion in the award that continuation of the dearness
allowance would bring about neutralisation above 100 per cent is also not
supported by sufficient materials. The Tribunal has devoted some discussion in
support of the highly placed officers and went to their rescue with the plea
that they were subject to taxation rendering their salaries modest. We wish to
state that all these statements could have been avoided in a matter where the
Tribunal had only to consider whether the management was justified in trying to
upset a scheme that had worked satisfactorily for a period of 18 years. We do
not propose to make further comments upon the award of the Tribunal.
Suffice it to say that the whole approach is
erroneous and the conclusions were arrived at on assumptions without acceptable
evidence. The management had not produced before the Tribunal sufficient
evidence to persuade it to change the existing system. It may be that the slab
system did not find favour with some other Tribunals. But that is no reason why
a system that had existed for a long period of time should be stopped to the
detriment of the workmen without compelling reasons.
Notice of change was given by the company to
bring about parity or uniformity of D.A. in respect of its workmen. The
Tribunal accepted this case of the company in passing the award. A close
scrutiny of the facts of the case, however, would indicate that such a parity
was not possible and that the company also knew that parity was impossible of
achievement. This is evident from the fact that notice of change did not relate
to all the workmen in the company. It will be seen that the company had three
systems for payment of dearness allowance i.e., dearness allowance based on
revised textile for daily rated factory workers; dearness allowance without
ceiling for monthly rated factory staff and consolidated wages and dearness
allowance for monthly rated Head Office staff. The Company has not shown that
it had adopted a uniform dearness allowance system for all its workmen even in
the Bombay region. Therefore, the Tribunal's 498 conclusion based on the object
of achieving uniformity in dearness allowance does not appear to be correct.
Mr. Pai learned counsel for the
respondent-company took us through the various awards passed by different
Tribunals in his attempt to impress upon us the fact that such Tribunal had not
only discouraged the slab system of dearness allowance but had even condemned
In the case of Hind Cycles Ltd., an award was
given by Mr. M.R. Mehar, Industrial Tribunal, Bombay, wherein it was observed
as follows :
".....The slab system was devised when
it was not expected that the consumer price index would shoot up to the extent
that it has with the result that where the slab system is followed (as in the
concerns listed in Exhibit U-3) the dearness allowance of monthly paid staff
have shot up completely out of proportion to basic wages with the result that
in industries and occupations in which that system is not followed but some
other system is followed the dearness allowances, even though linked with the
index, are much lower than the dearness allowance in the concerns listed in
Exhibit U-3............" In the case of Shaw Wallace & Co. Ltd., the
Industrial Tribunal, presided over by Mr. M.R. Mehar, observed as follows :
".......I have made reference to the
dearness allowance in Banks, Mill companies and in Government offices not
because these are concerns comparable with Hind Cycle but to show the varying
systems of dearness allowance and to illustrate how the total emoluments of
employees in industrial employments in which the slab system referred to above
prevails have shot up so as to be completely out of proportion with those
employees doing similar work in employments in which there is either fixed
dearness allowance or the dearness allowance though linked with the index, is
not on 499 the slab system. Thus, by the slab system a certain class of
fortunate employees have been absolutely protected against rise in cost of
living and have not to bear hardships which other larger sections of employees
have to suffer on account of inflation...." The same Tribunal has this to
say in the case of the Wadala factory, with which we are concerned, in its
award dated 6th December, 1965 :
"This dispute concerns only the monthly
rated staff of the factory. The demands concerning daily rated staff is pending
before a Board of Conciliation.......... I have therefore to make the award
having in mind the total emoluments i.e.
wage scales and dearness allowance prevailing
in factories of this size in the region belonging to other prosperous concerns
in the engineering industry.
In considering the demands for improved wage
scales the total emoluments have to be borne in mind. While the daily rated
staff get the textile rate of dearness allowance the monthly rated staff get
dearness allowance according to the slab system at the same rate as for the
Head Office, and which dearness allowance is very satisfactory.........."
The Tribunal did not interfere with the slab system prevalent in the Company.
In the case of Central Tin Works, a demand
was made for the intorduction of the slab system. But the Industrial Tribunal,
Bombay, presided over by K.R. Pawar, raised the rate of dearness allowance to
100 per cent of the cotton textile rate.
In the case of Voltas Limited, in an award
given on the 30th September, 1965, the Industrial Tribunal presided over by Mr.
V.A. Naik raised ceiling of maximum dearness allowance from Rs. 400 to Rs. 450.
Fixation of the ceiling, according to Mr. Pai, is to contain the rigours of the
500 In Forbes Forbes Compbell & Co. Ltd.,
an award was passed by the Industrial Tribunal presided over by Mr. V.A.
Naik on 23-12-1969, on the claim for raising
the dearness allowance declining the demand.
Mr. R.D. Tulpule, Industrial Tribunal Bombay,
passed an award in the case of Polychem Ltd., on 9th June, 1970. In this case,
the Tribunal noticed the criticism of the slab system of dearness allowance and
sought to rectify it by granting 110 per cent of the revised textile dearness
allowance along with fixed ad-hoc payment tapering with increase of the slab of
Considerable stress was made by Mr. Pai on the
following observation of the Tribunal at page 246 of Volume VII paper book :
"I have not come across a case where
slab rate of dearness allowance was introduced for the first time." The
answer to this observation is that in the case of the Company with which we are
concerned it was introduced for the first time in 1958. We may also state that
we have not come across any award wherein the slab system once introduced was
abolished except in one case.
In the case of Mazagaon Docks, an award was
passed by the Industrial Tribunal presided over by Shri S.A. Patel on 13th
December, 1984, substituting the existing scheme of dearness allowance based on
the slab system by a revised textile scale of dearness allowance. This was done
following the decision of this Court in Killick Nixon Ltd. v. Killick &
Allied Companies Employees Union,  Supp. S.C.R. 453 rendered on May 2,
1975. It can be argued, perhaps justifiably, that in this case this Court
introduced a ceiling on dearness allowance in place of slab system available in
the Mazagaon Docks. This decision was pressed into service in support of the
submission that the situation obtaining in the company with which we are
dealing is the same as in the above case and to contend that the slab system
should yield place to at least a ceiling on dearness allowance.
501 We have no quarrel with the conclusion
arrived at in the above case on the facts of that case. However, the conclusion
arrived at in that decision cannot be applied in a general manner in all cases.
In that case, the employer's grievance was this: The post of junior executives
is a promotional post for supervisors. Still the former were drawing less
emoluments than the latter. This is because there was no ceiling on dearness
allowance in respect of workmen and supervisors. The employer produced a chart
in support of his case and contended that this would result in indiscipline and
unrest in this industry. It was in this context that this Court laid down
fourteen different aspects, not exhaustive in their scope, which had to be
taken into account before tinkering with the dearness allowance. The Mazagaon
Docks case has taken support from Killick Nixon Ltd. case without sufficient
material to sustain its conclusion that slab system should be abolished to avoid
huge distortion of wage differences among the persons employed in that concern.
A close study of Killick Nixon Ltd. case will bear out that this Court did not
lay down that in all cases slab system of dearness allowance should be
abolished or done away with to the detriment of the workers. All that this
Court held in that case was that the employer having made out a case for
putting a ceiling on dearness allowance, it was for the Tribunal to decide at
what particular amount there should be a ceiling on dearness allowance. An
attempt was made by the employer in that case to press into service the view of
the National Commissioner of Labour to ascertain the minimum wage in the
Company at which a worker would require complete neutralisation of the cost of living
and then find the amount necessary as a protection against his real wages. This
was not accepted by this Court. The Court observed :
"....We do not wish to lay down as an
invariable rule that in all cases there should be ceiling on D.A. Whenever a case
of this nature comes for industrial adjudication, it will always be a delicate
task for the Tribunal to strike a balance keeping in view the above principles,
weightage of each one of which being variable according to conditions
obtaining. Whether or not there should be a ceiling on dearness allowance in a
given case must depend on the facts and circumstances of that 502 case. There
can be no inexorable rule in that respect. We have formulated the various
principles which must be taken into account by the Tribunal in determining this
question, but the most dominant of these must always be that of social justice,
for that is the ideal which we have resolved to achieve when we framed our
Constitution........." Thus, the ratio of that case cannot be extended to
every case to interfere with the existing D.A. Scheme, which is beneficial to
Mr. P.S. Mavalenkar, Industrial Tribunal,
Bombay, in an award dated 30-11-1976, imposed a ceiling of Rs. 700 on the slab
system of dearness allowance.
We thought it necessary to refer to the
various awards read by Mr. Pai only for the completeness of the Judgment.
It has to be borne in mind that in most of
these cases, awards were passed at the instance of the employees when demands
were made for raising the dearness allowance paid to them. Here, we have the
case of the employer trying to get over a system of dearness allowance which
had worked smoothly for 18 years, on the specious plea that at the time the
slab system was introduced, it was not in the expectation of anyone that the
cost of price index would spiral up so much as to make it impossible for the
Company to pay according to this scheme. From the materials available we do not
find that this plea can be accepted. The records produced show that despite
this system of dearness allowance the Company has been making profits and has
been improving its position year by year.
At page 103 of Volume I paper book, the
appellants have produced a table showing dearness allowance paid by seven
companies including the respondent company at the slab system to show that
other companies have been paying more dearness allowance to their workmen than
the respondent company with inconsequential differences in certain pay scales.
They have also given a comparative statement showing how the increase in total
wages including dearness allowance as per slab system, for pay scale of Rs. 100
to Rs. 500 is less than the percentage of increase in consumer price index. The
percentage of increase in consumer price index of 2642 over CPI 320 in 503 1958
is 826 while the percentage of increase in wages for the same CPI is only 806.
In reply to the Company's case of capacity to
pay, the appellants have produced at page 101, Volume V paper book, a table
showing the net profit and the gross profit of the Company from 1979 to 1984.
The net profit has increased from a sum of Rs. 19.65 lakhs in 1978 to a sum of
Rs. 176.38 lakhs in 1984 and the gorss profit from Rs. 115.60 lakhs to Rs.
439.11 lakhs, after paying the slab system of dearness allowance to the
appellants. They have also produced a table showing the financial position of
the Company from the year 1979 to 1984. Sales have increased from Rs. 1221.56
lakhs in the year 1979 to Rs. 2193.94 lakhs in the year 1984 and the dividend
on equity capital from 12.80 per cent in 1979 to 18 per cent in 1984.
We do not think it necessary to deal at
length about the evolution of the concept of dearness allowance. Suffice it to
say that this Court has, often times, emphasised the need for a living wage to
workmen instead of a subsisting wage. It is indeed a matter of concern and
mortification that even today the aspirations of a living wage for workmen
remain a mirage and a distant dream. Nothing short of a living wage can be a
fair wage. It should be the combined effort of all concerned including the
Courts to extend to workmen a helping hand so that they get a living wage which
would keep them to some extent at least free from want. It is against this
background that a claim by employers to change the conditions of service of
workmen to their detriment has to be considered and it is against this
background that we have considered the award review. We are not satisfied that
a case has been made out on the facts available, for a change.
The question is often asked as to whether it
would be advisable for Tribunals and Courts to revise the wage structure of
workmen to their prejudice when a dispute arises. Normally the answer would be
in the negative.
Tribunals and Courts can take judicial notice
of one fact;
and that is that the wages of workmen, except
in exceptionally rare cases, fall within the category of mere "subsisting
wages". That being so, it would be inadvisable to tinker with the wage
structure of workmen except under compelling circumstances. Employers have 504
seldom displayed a cooperative attitude where wage structure of workmen are
devised. They have never showed a willingness for the involvement of the labour
with the capital so as to engender a participative labour capital relationship.
This is a reality that Tribunals and Courts have to reckon with that being so,
Courts and Tribunals have necessarily to keep their hands off from upsetting a
wage structure that has satisfactorily worked for a long time. The sweat of the
labour is never reflected in any balance sheet, although the latent force
behind every successful industry is this sweat.
With their present wage structure, the labour
just exist. No one should try to deny them even this bare source of existence.
In re-inforcement of our conclusion, we will
refer to the following passage in the case of Crown Aluminium Works v. Their
Workmen,  S.C.R. 65] :
"The question posed before us by Mr. Sen
is : Can the wage structure fixed in a given industry be never revised to the
prejudice of its workmen ? Considered as a general question in the abstract it
must be answered in favour of Mr. Sen. We do not think it would be correct to
say that in no conceivable circumstances can the wage structure be revised to
the prejudice of workmen. When we make this observation, we must add that even
theoretically no wage structure can or should be revised to the prejudice of
workmen if the structure in question falls in the category of the bare
subsistence or the minimum wage. If the wage structure in question falls in a
higher category, then it would be open to the employer to claim its revision
even to the prejudice of the workmen provided a case for such revision is made
out on the merits to the satisfaction of the tribunal..........It would be interesting
to notice in this connection that all the tribunals that have dealt with the
present dispute have consistently directed that existing wages should not be
reduced to the prejudice of the workmen. In other words, though each tribunal
attempted to constitute a wage structure in the light of materials furnished to
it, a saving clause has been added every time 505 protecting the interests of
such workmen as were drawing higher wages before. Even so it would not be right
to hold that there is a rigid and inexorable convention that the wage structure
once fixed by industrial tribunals can never be changed to the prejudice of
workmen. In our opinion, therefore, the point raised by Mr. Sen must be
answered in his favour subject to such relevant considerations and limitations
as we have briefly indicated." We are not prepared to accept the
submission made by the learned counsel for the respondent that the slab system
has not been approved either by Tribunals or by Courts, not to say that they
have been condemned. In the case of Unichem Laboratories Ltd. v. The Workmen,
 3 S.C.R. 567 this Court has occasion to consider the slab system and
this Court gave its seal of approval to this system. This Court after
considering the various materials placed before it observed that in the Bombay
region there were several Pharmaceutical units adopting slab system of dearness
allowance. We read the following passage in support of our conclusion that the
slab system did find favour with this Court on more than one occasion :
"....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 an 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 Greeves Cotton and Co. and Others v. Their
workmen,  5 S.C.R. 362 and Bengal Chemical and Pharmaceutical Works Ltd.
v. Its workmen,  2 S.C.R. 113. Even in
Bombay that such a pattern of dearness allowance as the one introduced in the
case of the 506 appellant is existing, is seen by the decisions of this Court
in Greeves Cotton and Co. and others v.
Their workmen and Kamini Metals and Alloys
Ltd. v. Their workmen,  2 S.C.R. 463. No doubt the industries therein
were not pharmaceutical units.
But that such a system exists in Bombay
region is clear from the above decisions." This Court then noticed that in
a number of awards rendered during the year 1965 to 1968 the slab system of
dearness allowance was adopted and wound up by saying :
"These facts clearly show that the
scheme of dearness allowance provided in the award before us in respect of the
appellants is not anything new." (at page 604) The only grievance that the
respondent's counsel can have against these observations is that the Court in
those cases were considering pharmaceutical units which were not comparable
with the unit in question. We do not agree that this distinction can be pressed
into service to deny the workmen the slab system existing in this unit. The
Tribunal has found this unit to be an engineering unit which is not in a far
less disadvantageous position than pharmaceutical units.
The learned Counsel for the respondent made a
strong plea for substitution of the exising system of dearness allowance with
ceiling on the quantum of dearness allowance.
We have already indicated that in the absence
of compelling materials a system that gives benefit to the workmen cannot
lightly be interfered with to their detriment. The theory of ceiling on the
quantum of dearness allowance cannot be accepted since under the prevailing
conditions there is no control over the prices of essential commodities and as
such a ceiling would not give sufficient cushion when prices of essential
commodities continuously rise.
Mr. Pai apprehended the possibility of
similar demand by the workers in other factories which would render the working
of the factory itself difficult and sometimes compel it to close them down. He
has made available to us a statement 507 showing the amounts that the company
will have to dole out if the present system is to continue. In respect of 80
monthly rated workmen the difference payable will be Rs.
75,000 per month, which works out to Rs.
9,00,000 per year.
If this slab system is to be introduced for
4000 employees, the liability will be about Rs. 4,50,00,000. Though at the
first flush one would be tempted to agree with Mr. Pai, the temptation will
disappear when we inform ourselves of the fact that in a catena of decisions
this Court has laid down the industry-cum-region basis as the acceptable basis
while working out dearness allowance. This is the usual alarmist cry of the
employers. Uniformity of wage structure throughout the country if accepted will
be giving a go-by to the well settled principle of industry-cum-region. This
Court has time and again laid down the industry-cum-region principle whenever
the question of wage structure arose.
As an answer to this plea of the respondent,
we will only read the following passage from the Judgment in the case of
Workmen v. Indian Oxygen Ltd., to which one of us was a party. Desai J. while
repelling the plea that in an industrial undertaking which has an all India
operation, the unit as a whole should be considered, observed thus :
"14. On behalf of the Karmachari Union,
it was contended that in devising a dearness allowance formula, the region-cum-industry
principle should ordinarily be accepted. As pointed out earlier dearness
allowance generally has a local flavour.
A man is exposed to the vagaries of the
market where he resides and works, even though he may be an employee of a
national, multinational or transnational industrial empire. The workmen is
concerned with the vagaries of price fluctuation in the area in which he
resides and works for gain and to which he is exposed. Therefore, the region-
cum-industry principle must inform industrial adjudication in the matter of
In Woolcombers of India Ltd. v. Woolcombers
Workers Union,  1 S.C.R. 504, this Court following its earlier decision
in Greeves Cotton and Co. v. Workmen,  5 S.C.R. 362 held that in devising
basic wages and dearness 508 allowance structure, industrial adjudication
sometimes leans on the industry part of the industry-cum-region formula and at
other times, on the region part of the formula as the situation demands. This
well recognised principle of industrial adjudication cannot be given a goby on
the specious plea that the workmen are employed by an industrial undertaking
which has an all India operation. In this case, the Tribunal has overlooked
this important principle of industrial adjudication..........." We have
extracted the above passage to repel the argument that if the status quo is
allowed to continue in this case, there will be demands from other sectors and
other factories. This is only a theoretical apprehension with which we are not
concerned. We have repeatedly stated that in this case reference to
adjudication was made not at the instance of the workmen, but at the instance
of the employer who wanted to bring about a change in the existing system which
had satisfactorily worked for 18 years, without producing compelling materials,
in support of their claim.
On a careful consideration of the various
questions involved in this case, we are of the view that the Tribunal erred
grossly in its approach to the questions raised and in answering the reference
in favour of the employer. We, therefore, allow the appeal, set aside the award
and direct that the existing slab system will continue for the appellant unit.
The interim order passed on 14.3.1981 is hereby vacated. The respondent is directed
to pay the cost of the appellant, quantified at Rs. 5,000.
The Construction Employees Union of the
respondent- company intervened in the case and filed their written arguments as
directed by this Court. In the written arguments, the said Union supported the
S.R. Appeal allowed.