Appeal No 2431 of 1966
Appeal by special leave from the Award of the Industrial Tribunal Gujarat in Reference IT NO 88 of 1962
176 A section R Chari M K Ramamurthi Shyamala Pappu Vineet Kumar P section Khera and Bindra Thakur for the appellants
I N Shroff for the respondent
The Judgment of the Court was delivered by Bhargava J
This appeal by special leave is directed against an Award of the Industrial Tribunal Gujarat in an industrial dispute referred to it by the Government of Gujarat at the instance of the appellants who are 466 workmen of the Gujarat Electricity Board Baroda hereinafter referred to as the Board represented by the Saurashtra Vidyut Kamdar Sangh hereinafter referred to as the Sangh
The dispute referred to related to two matters
One was the demand made in respect of rates of dearness allowance to be paid to the workmen
The second demand was that those of the workmen to whom Contributory Provident Fund or Employees Provident Fund scheme was appli cable should be granted gratuity equal to 15 days wages for every year of service in addition to the provident fund benefits while those workmen who were entitled to pension according to the pensionary scheme in force should have their pension calculated after adding 50 per cent of the dearness allowance to the basic pay
The facts needed to explain the second demand may first be stated
The supply of electricity in the State of Saurashtra prior to the year 1954 was being carried out departmentally by the Government of Saurashtra and the workmen employed in the power houses were consequently Government servants
On 1st July 1954 a Saurashtra Electricity Board was constituted to run the power houses and the employees of the Electricity Department of the Government were sent to work with the Saurashtra Electricity Board on deputation
On 1st November 1956 Saurashtra became a part of the Bombay State hereafter the Saurashtra Electricity Board was dissolved with effect from 1st April 1957 and its assets liabilities and employees were taken over by the Bombay State Electricity Board
The employees who were originally in the service of the Saurashtra State Government were entitled to the pensionary scheme of the Saurashtra Government while the Bombay State Electricity Board had a Provident Fund Scheme
The Saurashtra State Government servants on being taken over by the Bombay State Electricity Board were given the option of either continuing in their pensionary scheme or of joining the Provident Fund Scheme of the Bombay State Electricity Board in which case the gratuity already accrued to them and the equivalent of pensionary benefits were credited to their accounts
Some of the employees opted for the Provident Fund Scheme while others continued under the pensionary 177 scheme
Thereafter on 1st May 1960 the State of Bombay was bifurcated and a separate State of Gujarat was constituted and with effect from the same date the Board came into existence
The Board took over all the electricity power houses and electricity schemes in the State of Gujarat from the Bombay State Electricity Board including the workmen who are the appellants in this appeal
The assets and liabilities of the Bombay State Electricity Board were divided between the Board and the Maharashtra Electricity Board which was constituted for the State of Maharashtra which came into existence on bifurcation of the Bombay State
The Board continued both the Pensionary Scheme as well as the Provident Fund Scheme for the employees in the manner they were in force when the employees were working under the Bombay State Electricity Board
The employees who were originally servants of the State Government had ceased to be government servants with effect from 1st April 1957 and later on 1st May 1960 became the employees of the Board so that they were no longer entitled to the rights which the State Government might subsequently grant in respect of pension under the rules applicable to the government servants
The result was that even improvements granted in the pensionary scheme by the State Government to its employees did not enure to the benefit of the appellants
In these circumstances the Sangh put forward the claim that the pension of employees who were governed by the pensionary scheme should be calculated not on the basis of basic salary but after adding 50 per cent of the dearness allowance to it
In respect of employees who were governed by the Provident Fund Scheme a second benefit of gratuity was claimed
The demand for dearness allowance was that it should be linked with the scale prescribed for the Ahmedabad Millowners  Association
The workmen demanded that employees drawing up to Rs 50 as basic pay should be given dearness allowance at the scale applicable to Ahmedabad Millowners  Association those drawing between Rs 50 to Rs 100 DA at that scale plus Rs 5 and those drawing above Rs 100 dearness allowance at that scale plus Rs 10
This demand was put forward before the Board originally on behalf of all the 9208 employees of Class III and Class TV and some employees of Class I and Class II whose salary was below Rs 300 per mensem who were working either in the Gujarat Region or the Saurashtra Region
These employees were represented by seven different Unions one of which was the Sangh who represented about 3000 employees working in the Saurashtra region
The six Unions representing the employees working in the Gujarat region amicably settled these disputes with the Board by entering into agreements
The 17 8 Board gave some increase in dearness allowance retrospectively with effect from 1st October 1961 while the second demand relating to gratuity and calculation of pension after adding 50 per cent of the dearness allowance was given up
The Sangh declined to accept this settlement whereupon the Board offered terms in accordance with the settlement to all the employees in the Saurashtra region individually
Out of the total of 3042 in the Saurashtra region 622 signed General Standing Order 56 under which the Board had made its offer to individual employees on the basis of the settlements arrived at before the reference to conciliation
1152 signed before the date of the failure report by the Conciliation Officer 2058 signed before the reference and 518 signed after the reference
Thus the dispute after the reference became confined to the remaining 466 employees who did not on individual basis accept the offer made by the Board
The Tribunal considered this dispute relating to the dearness allowance raised by these employees through the Sangh as also the other demand relating to gratuity and calculation of pension and by the impugned Award rejected these demands
Consequently the workmen have come up in this appeal through the Sangh
The main ground for rejecting these demands on which the Award is based is that the Board does not have the capacity to meet the additional expenditure that would have to be incurred if these demands are acceded to Before the Tribunal this aspect of the case was sought to be met by the Sangh by urging that the total wage packet including the dearness allowance claimed by them in the demand would only satisfy the requirement of a minimum wage so that the Board s capacity to pay was irrelevant but the award shows that the Sangh completely failed to provide any material to prove that the total wages including the dearness allowance as offered by the Board on the basis of the settlements are less than the minimum wage
This Court in Hindustan Antibiotics Ltd vs The Workmen  Others1 recognised the three concepts of minimum wage fair wage and living wage by quoting the following passage from the decision in The Hindustan Times Ltd vs Their Workmen2 and stating that it briefly and neatly defined the three concepts  In trying to keep true to the two points of social philosophy and economic necessities which vie for consideration industrial adjudication has set to itself certain standards in the matter of wage fixation
At the bottom of the ladder there is the minimum basic 1 2 1964 1 SCR 234 179 wage which the employer of any industrial labour must pay in order to be allowed to continue an industry
Above this is the fair wage which may roughly be said to approximate to the need based minimum in the sense of a wage which is adequate to cover the normal needs of the average employee regarded as a human being in a civilised society
Above the fair wage is the living wage a wage which will maintain the workman in the highest state of industrial efficiency which will enable him to provide his family with all the material things which are needed for their health and physical well being enough to enable him to qualify to discharge his duties as a citizen These decisions make it clear that if the claim be for a minimum wage the employer must pay that wage in order to be allowed to continue the industry and in such a case the capacity of the industry to pay is irrelevant
However if the industry is already paying the minimum wage and the claim is for fair wage or living wage the capacity of the industry to pay is a very important factor and the burden above the minimum wage can only be justifiably imposed if the industry is capable of meeting that extra burden
On this principle in the present case if the appellants had succeeded in showing that they were not receiving even the minimum wage on the basis of the offer made by the Board in line with the settlements arrived at with the other Unions and individual workmen members of the Sangh there would have been full justification for granting additional dearness allowance ignoring the inability of the Board to meet that extra expenditure
The finding of the Tribunal however is that the demand of the workmen is not confined to minimum wage but that as a result of the demand the wages will be above the minimum wage
Learned counsel appearing for the appellants before us did not try to contend that the wages which were being paid by the Board were lower than the minimum wage so that the claim for the additional dearness allowance cannot be considered without taking into account the capacity of the Board to meet the expenditure
So far as the question of capacity of the board to pay is concerned there is a clear finding by the Tribunal that the Board is running at heavy losses so that it is not in a position to meet the extra expenditure of about Rs 49 lakhs a year which will be involved if the dearness allowance is fixed as claimed by the Sangh
The Tribunal has found that the Board when constituted on 1st May 1960 inherited an accumulated deficit of over Rs 2 crores from the Bombay State Electricity Board
In its own working the Board sustained a loss of over Rs 29 lakhs between 1st May 1960 and 31st March 1961 and in 180 the two succeeding years 1961 62 and 1962 63 the losses in curred were in the region of Rs 39 lakhs and Rs 41 lakhs
The Tribunal thus held that the total loss was to the tune of Rs 31 millions and since the Board had undertaken a further liability of over Rs 675 lakhs a year under the settlements and the offer to individual workmen it could not possibly undertake the further burden of paying about Rs 49 lakhs per year as increased dearness allowance
The Tribunal was also of the opinion that considering this financial condition of the Board there was no justification for introducing a gratuity scheme for workmen governed by the Provident Fund Rules nor was there any justification for calculation of pension on the basis of adding 50 per cent of the dearness allowance to the basic pay
Mr Chari counsel for the appellants challenged this decision of the Tribunal on two grounds
The first ground was that the Tribunal was wrong in judging the capacity of the Board to pay after taking into account the deficit of over Rs 2 crores which it had inherited from the Bombay State Electricity Board and the second ground was that the financial capacity of the Board should be judged only on the basis of its commercial undertakings excluding the activities of the Board which were in the nature of national duties
So far as the first point is concerned we think that there is some force in the submission made by learned counsel
The deficit inherited by the Board from its predecessor cannot be treated as are venue loss which will have bearing on its paying capacity
Such inherited deficit should really have been treated as capital loss but even this loss cannot be completely ignored because the paying capacity of an employer has to take into account even capital losses
However even if this accumulated deficit of over Rs 2 crores is ignored it is clear that during the three years after its formation the Board itself incurred heavy losses which totaled to about Rs 110 lakhs
Consequently even if that accumulated deficit is not taken into account it cannot be held that the Board will have the capacity of bearing the additional financial burden to the tune of Rs 49 lakhs a year if required to pay dearness allowance at the rates claimed by the Sangh
On the second point we are unable to accept the submission made by learned counsel
The Board was constituted under the Electricity Supply Act No 54 of 1948 and section 18 of that Act lays down the duties of the Board
By its very constitution the Board is charged with the general duty of promoting the coordinated development of the generation supply and distribution of electricity within the State in the most efficient and economical manner with particular reference to such develop 181 ment in areas not for the time being served or adequately served by any licensee
In particular the duty of the Board is to prepare and carry out schemes with the objects mentioned above to supply electricity to owners of controlled stations and to licensees whose stations are closed down under this Act and to supply electricity as soon as practicable to any other licensees or persons requiring such supply and whom the Board may be competent under this Act so to supply
When the Board was constituted to carry out these duties its capacity to bear the burden of paying wages to its employees has to be worked out after taking into account all the activities which the Statute requires it to carry on
The running of Power Houses is only one of the branch of those activities
The profit that the Board can be held to have earned can only be worked out after including in the accounts all the expenditure incurred by it on all its schemes for distribution of electricity to licensees or to consumers whether in urban areas or in rural areas
In fact there is not even an assertion on behalf of the appellants workmen that they were employed solely in connection with a profitable undertaking of the Board and had nothing to do at all with the other activities which the Board is actually carrying on
No doubt learned counsel is right in urging on the basis of the decision of this Court in Hindustan Antibiotics Ltd that the circumstance that the Board is an industry in the public sector does not exempt it from application of principles which apply to an industry in private sector and the Board must also be made to pay wages on the same basis as Private sector employers
This however does not advance the case of the appellants because even in a private sector additional burden over and above a minimum wage can only be justifiably imposed in industrial adjudication if the employer has the capacity to meet that burden
In this case the Tribunal has refused to grant the demand of the appellants not on the ground that the Board is an industry in public sector but on the ground that it does not have the capacity to pay
That capacity has rightly been judged on the basis of all the undertakings being worked by the Board
The Tribunal after holding that there was no justification for granting the demands of the workmen because the Board had no capacity to bear the additional burden proceeded further to examine whether the Board s existing scheme of payment of dearness allowance was reasonable and took into account various factors for arriving at its finding that it could not be held that the terms offered by the Board were unreasonable
In this connection reliance was placed on behalf of the appellants on the fact that two Electric Supply Companies were paying wages which 1 19671 SCR652
182 were much higher than the wages being paid by the Board and there was no justification for refusing the demand for additional dearness allowance which would place the employees of the Board on par with the employees of those Electric Supply Companies
One of those Electric Supply Companies is the Ahmedabad Electricity Co Ltd Ahmedabad in whose case wages were fixed by an Award published in 1956 Industrial Court Reporter at p 746
The other is the Viramgam Electric Supply Co Ltd Viramgam the Award relating to which is published in 1968 Industrial Court Reporter at p 1010
The argument was that wages paid by the Board should not be lower than those paid by these two Electric Supply Companies which were engaged in the same line of business of production and supply of electricity
The Tribunal brushed aside these example by stating that they were not comparable with the Board
In taking this view we do not think that the Tribunal committed an error
In Williamsons India Private Ltd vs Its Workmen1 this Court clearly laid down what criteria had been established for considering what are comparable concerns when dealing with a question of wage fixation
It was held  This Court has repeatedly observed that in considering the question about comparable concerns tribunals should bear in mind all the relevant facts in relation to the problem
The extent of the business carried by the concerns the capital invested by them the profits made by them the nature of the business carried on by them their standing the strength of their labour force the presence or absence and the extent of reser ves the dividends declared by them and the prospects about the future of their business these and all other relevant facts have to be borne in mind
 In the present case it is clear that if these various factors are taken into account neither the Ahmedabad Electricity Co Ltd nor the Viramgam Electric Supply Co can be held to be a concern comparable with the Board
As we have indicated earlier the activities carried on by the Board are not only production of electricity and direct distribution in some areas but also include preparation of schemes for development of supply of electricity in areas not served so far and for supply of electricity to licen sees
The two concerns at Ahmedabad and Viramgam merely generate and supply electricity to consumers in the cities or towns served by them
The Board according to the Act constituting it has primarily to supply electricity to licensees and not confine its supply to direct consumers like these two concerns
The 1 1962 1 LLJ302
183 supply to consumers is only undertaken where there are no licensees to undertake the distribution of electricity generated by the Board and this activity of direct supply to consumers is primarily carried on in rural areas where the population is sparsely distributed as compared to the cities or towns served by the other two concerns
Then there is the important factor that the Board is running at a huge loss every year
The workmen did not provide figures to show what was the profitability of the other two concerns though the Awards in their cases seem to indicate that both of them are running at a profit
In these circumstances we cannot hold that the Tribunal committed any error in ignoring the wages being paid by these two concerns when dealing with the question of payment of dearness allowance by the Board
In this connection a request was made by learned counsel that we may remand the case to the Tribunal in order to enable the Sangh to produce evidence to the satisfaction of the Tribunal that these two concerns are comparable or to cite examples of other undertakings in the same industry in the Saurashtra region or it there be no such undertakings available of undertakings in other industries in the Saurashtra region so as to enable the Saingh to claim wages on parity with those undertakings
We do not think that there is any justification for remanding the case for such a purpose at this stage
It was open to the Sangh to produce material before the Tribunal when the dispute was first investigated by it and no reason is shown why the Sangh did not do so
Further as we have indicated earlier the very circumstance that the Board does not have the financial capacity to meet the additional burden of the demands made by the workmen justifies the order made by the Tribunal
The further request that the remand would enable the Sangh to show whether the losses brought to the notice of the Tribunal by the Board were in fact net losses has also no force be cause when the losses were proved before the Tribunal by production of an affidavit on behalf of the Board and the deponent appeared in the witness box no attempt was made on behalf of the Sangh to cross examine the deponent in order to establish that the losses had not been correctly represented
We do not think that in these circumstances any remand of this case is called for
It does appear that the Tribunal in its award committed the error of comparing the Board with the Maharashtra Electricity Board and similar Electricity Boards in other States and thus acted against the principle that wages should be compared on industry cum region basis but that mistake does not justify any interference with the award which is otherwise correct and justified
The Tribunal was quite right in rejecting the demands made by the Sangh particularly in the light of the further fact relied upon by the Tribunal that all the employees of 184 the Board in the Gujarat Region as well as large majority of over 2500 employees even in the Saurashtra Region had accepted the existing rates based on the settlement and only 466 employees had come forward with this demand without establishing that the demand wag restricted to bringing up their wages to the level of minimum wages
The appeal is dismissed but we make no order as to costs
RKPS Appeal dismissed


Summary:
Over 9000 employees of the Respondent Board represented by seven Unions demanded an increase in the dearness allowance payable to them the payment of gratuity to some employees and the calculation of pension payable to other employees after adding 50 of the dearness allowance
Six of the Unions representing the employees amicably settled the disputes with the Board which granted increases in dearness allowance on the other demands being given up
The seventh Union declined to accept the settlement and the dispute was eventually referred for adjudication by the Industrial Tribunal
Before the Tribunal took up the reference all except 466 of the employees individually accepted the settlement
At the hearing of the reference it was contended by the remaining employees through the seventh Union that the total wage packet including the dearness allowance claimed by them would only satisfy the requirement of a minimum wage and the Board s capacity to pay the increases demanded was therefore irrelevant furthermore although the Board was an industry in the public sector it must also be made to pay wages on the same basis as private sector employers two electric supply companies in the area were paving wages which were much higher and there was no justification for refusing the demand for additional dearness allowance which would place the employees of the Board on par with the employees of those companies
The Tribunal in its award rejected all the workmen s demands
It found that the demand for increased dearness allowance was not confined to achieving a minimum wage but as a result of its acceptance the wages would be above the minimum wage
The Tribunal also found that the Board having inherited an accumulated deficit of over Rs 2 crores from its predecessor the Bombay State Electricity Board having sustained heavy losses in its working and having undertaken a further liability to pay increased dearness allowance it had no capacity to undertake the further burden of paying about Rs 49 lakhs per year as increased dearness allowance or to meet the other demands
The Tribunal held that the position in the other two electric supply companies was not comparable with the Board
In appeal to this Court against the award it was contended inter alia that the Tribunal was wrong in judging the capacity of the Board after taking into account the deficit of Rs 2 crores which it had inherited from its predecessor and that the financial capacity of the Board should 174 175 have been judged only on the basis of its commercial undertaking excluding the activities of the Board which were in the nature of national duties
HELD  The Tribunal had rightly rejected the demands of the appellants
i As the appellants had failed to show that they would not be receiving the minimum wage with their basic pay and the increased dearness allowance offered by the Board the financial capacity of the Board for acceding to the demands made became a relevant consideration
Hindustan Antibiotics Ltd vs The Workmen  Others  and The Hindustan Times Ltd vs Their Workmen 1964 1 SCR 234 referred to
Although the deficit inherited by the Board from its predecessor could not be treated as a revenue loss for determining the Board s financial capacity and was in the nature of a capital loss even this loss could not be completely ignored
Apart from this it was clear On the facts that during three years after its formation the Board had incurred heavy losses of about Rs 110 lakhs and it did not therefore have the capacity of bearing the additional financial burden involved in meeting the appellants  demands
179 D F 180 E ii When the Board was constituted under the Electricity Supply Act No 54 of 1948 and was by its constitution charged with the general duty of promoting the coordinated development of the generation supply and distribution of electricity within the State its capacity to bear the burden of paying wages to its employees had to be worked out after taking into account all the activities which the statute required it to carry on
The running of power houses was only one of the branches of those activities
The profit that the Board earned could only be worked out after including in the accounts all the expenditure incurred by it on all its development and other schemes for distribution of electricity to consumers in urban and rural areas
181 B D While an industry in the public sector was not exempt from application of principles which apply to an industry in the private sector and the respondent board must also be made to pay wages on the same basis as private sector employers the additional burden in either sector for paying anything above a minimum wage can only be justifiably imposed in industrial adjudication if the employer bad the capacity to meet that burden
181 E F The Tribunal had rightly held that neither of the other two electric companies were comparable with the Board
These two companies merely carried on the activity of direct supply of electricity to consumers in the towns and cities whereas the functions of the Board included the development and execution of schemes for supply of electricity to new areas
Williamsons India Private Ltd vs Its Workmen  referred to