Appeal No 690 of 1976
Appeal from the Judgment and Order dated the 16th December 1975 the Gujarat High Court in Special Civil Appln
No 57175
GS Sanghi and Girish Chandra for the Appellants
VM Tarkunde KL Hathi and Mrs PC Kapur for Re spondent No 1
The Judgment of the Court was delivered by GOSWAMI J
This appeal on certificate is from the judgment of the High Court of Gujarat
The appellants 1 and 2 are respectively the Union of India and the Regional Provident Fund Commissioner
The 1st respondent is Majur Mahajan Mandal hereinafter to be described as the union a registered trade union representing the majority of the textile workers of the five textile mills of Baroda re spondents 2 to 6 who are not represented before us and who will be described hereinafter as the mills Since some time in 1973 industrial disputes in respect of dearness allowance DA had been pending between the union and the mills in five references before the Industrial Court Gujarat being Reference Nos
406 407 408 409 and 421 of 1973
The rate of DA for the employees in the cotton textile industry in Ahmedabad had earlier been fixed by an award of an industrial Tribunal which will be referred to hereinafter as the Ahmedabad Rate
The prevalent DA in 1973 in the mills with which we are concerned was 90 of the Ahmedabad Rate
The union was raising the aforesaid disputes for increasing the DA to 100 of the Ahmedabad Rate with effect from October 1 1972
Hence the above references were pending before the Industrial Court
As a result of negotiations between the parties during the pendency of the said disputes before the Industrial Court DA was agreed to be paid at the rate of 95 of the Ahmedabad Rate of DA with effect from January 1 1974 as will appear from an interim award of the Industrial Court dated June 21 1974
Thereafter by further negotiations the disputes regarding DA were finally resolved by the mills and the union entering into a settlement on June 28 1974 by fixing DA at 100 of the Ahmedabad Rate with effect from January 1 1974
Awards were later made bY the Court in conformity with the said settlement in the pending disputes some time in August and September 1974
It is not disputed that the workers of the mills in pursuance of the settlement of the disputes received DA at 100 of the Ahmedabad Rate retrospectively with effect from 1st January 1974
It may even be assumed that the arrear DA for the past period from January 474 1 1974 was paid to the workers in August or perhaps
even later that is to say after 6th July 1974 the signifi cance of which date we will immediately see
While the aforesaid disputes were pending before the Industrial Court The briefly the Act replacing the earlier Ordinance on the subject came into force retrospectively from 6th July 1974 the appointed day under the Act
This Act was passed as the preamble says to provide in the interests of national economic development for the compul sory deposit of additional emoluments and for the framing of a scheme in relation thereto and for matters connected therewith or incidental thereto
The employees to whom the Act is applicable are classi fied into three categories namely employees of the Govern ment of local authorities and other employees
The principal object of the Ordinance and later of the Act is to control the menacing inflationary trend which has been the bane of the country s economy
On the one hand there has been persistent demand from employees for revi sion of wages and increase of DA on account of the high cost of living and on the other the State has to tackle the national problem of mounting pressure of inflationary forces
While therefore meeting with the demands for rise in emoluments simultaneously steps with equal force had to be taken so that the additional amounts disbursed do not immediately flow to the market adding a further fillip to inflation
The Ordinance and later the Act thus provide for compulsory deposit for a period of one year of the whole of the additional wages and for a period of three years of half of the additional DA
The additional emoluments earned are thus impounded under the Act and are not immediately available to the employees for instant consumption
The Act provides a scheme of beneficial forced saving and the deposited amounts will be finally repaid to the employees in different ways specified in the Act with interest at 212 over and above the Bank deposit rate
Before we proceed further we may note some of the provi sions of the Act material for our purpose By section 2a of the Act appointed day means the 6th day of July 1974
By section 2b  additional dearness allowance  means such clearness allowance as may be sanctioned from time to time after the appointed day over and above the amount of dearness allowance payable in accordance with the rate in force immediately before the date from which such sanction of additional dearness allowance is to take effect
    By section 2e  dearness allowance  means all cash payments by whatever name called made to an employee on account of rise in 475 the cost of living
Under section 2g  emoluments  include wages and dearness allowance
Under section 5 every specified authority herein the employer shall open two separate accounts namely the Additional Wages Deposit Account and the Additional Dearness Allowance Deposit Account
The employer shall open a sepa rate ledger account in the name of each employee
Section 62b of the Act enjoins on the employer a duty to make deductions and to remit to the nominated authority addition al wages and additional DA from emoluments disbursed after the appointed day
In the case of additional wages it will be the whole amount and in the case of additional DA it will be half of it
It is common ground that the Act applies to the mills which are the employers under the Act and also specified au thorities under the Additional Emoluments Compulsory Depos it Employees other than employees of Government and Local Authorities Scheme 1974 which is made under section 10 of the Act
The union applied to the High Court under Article 226 of the Constitution for a writ of mandamus or other suitable order to permanently restrain the mills from effecting any deduc tion from the arrears of dearness allowance payable to their employees from January to June 1974 on the basis of the settlement of 28th June 1974
There was a further prayer to permanently restrain the mills from treating the base for calculation of additional DA at a rate less than the agreed 100 of the Ahmedabad Rate and to direct the mills not to deduct or deposit 212 of DA per month payable to each employee treating the same as not being additional DA within the meaning of section 2b of the Act
Lastly there was a prayer for refund of the amount already deducted by the mills
The High Court allowed the writ application and also granted certificate to appeal to this Court
The appellants contend that 100 of the Ahmedabad Rate of DA to the workers was sanctioned after the appointed day that is to say after 6th July 1974 when the awards were made between August and September 1974 in pursuance of the settlement of June 28 1974
The claim of the appellants is two fold First since the increased DA to the work ers was sanctioned after the appointed day only when the awards were made the difference between the increased DA at 100 of the Ahmedabad Rate and the prevailing rate pay able in arrears from 1st January 1974 to 30th June 1974 will be additional DA in terms of section 2b of the Act and is therefore subject to deduction of 50 of the same
Second for future deductions of additional DA after the appointed day the base for calculation of additional DA should be 95 of the Ahmedabad Rate of DA which was pre vailing prior to 6th July 1974 in terms of the interim award of 21st June 1974
In other words for future deductions of additional DA after 6th July 1974 the appellants claim that the workers should be treated as if they were in receipt of DA prior to the appointed day at 95 of the Ahmedabad Rate which had been in force in terms of the interim award of 21st June 1974 which is the earli er sanction for the 95 rate
Hence 2 12 that is 50 of 5 being the difference between 95 and 100 of the same will be liable for deduction under the Act from 6th July 1974
According to the appellants the benefit of 100 was available only after the making of the awards which was thus sanctioned after 476 the appointed day notwithstanding the fact that the settle ment had been entered upon on 28th June 1974
Section 2b will therefore be clearly attracted according to the appellants
It is submitted by the appellants that the word sanc tioned in the definition of additional dearness allowance  under section 2b is very significant
It is contended that the settlement during the pendency of an industrial dispute before the industrial Court has to be approved by the Court before it can be said to be sanctioned within the meaning of the provisions of section 2b
Reference is made to section 115A of the Bombay Industrial Relations Act 1946
That section so far as it is material for our pur pose provides that if any agreement is arrived at between an employer and the union which are parties to an industrial dispute pending before an Industrial Court the award in such proceeding shall be made in terms of such agreement unless the Industrial Court is satisfied that the agreement was in contravention of any of the provisions of the Act or the consent of either party to the agreement was caused by mistake misrepresentation fraud undue influence coercion or threat
Relying on section 115A it is submitted by the appellants that unless the award is made in pursuance of the settlement under the said section the settlement is inchoate and cannot be said to be effective in law prior to the making of the award which was done in the instant case between August and September 1974
It is therefore submitted that the additional DA can be said to be sanc tioned only under the award which was made admittedly after the appointed day that is after July 6 1974
We are unable to accept this contention
It is true that an agreement arrived at between the parties during the pendency of an industrial dispute before the Industrial Court has to be placed before that Court
It is also true that if the Industrial Court is satisfied that certain conditions enumerated in section 115A exist it will not recognise the settlement and dispose of the dispute in accordance with law
If however the conditions enumerated in section 115A do not exist the award shall be made in terms of the settlement
There is No other option
In this particular case the settlement was placed before the Industrial Court which ultimately passed the awards in conformity with the terms of the settlement
We are not required to consider a case where the Industrial Court has not approved of the settlement under section 115A
Once therefore the award is made in terms of the settlement under section 75 of the Bombay Industrial Rela tions Act the award shall come into operation on the date specified in the award or where no such date is specified therein on the date on which it is published under section 74
We are informed that the awards have not yet been published but that should not detain us in this case
It is common ground that the awards were in terms of the settle ment which had retrospective operation from January 1 1974
Since the settlement has merged in the awards the terms of the awards are those specified in the settlement
It is those dates which 477 are therefore specified in the awards and under section 75 of the Bombay Industrial Relations Act the awards came into operation with effect from January 1 1974
The sanc tion of the awards in such a case is the sanction under the settlement and since the settlement was prior to July 6 1974 the additional DA cannot be said to be sanctioned after the appointed day
100 of the Ahmedabad Rate of DA will be payable to the workers with effect from January 1 1974 and the sanction for that rise was on 28th June 1974 the date of the settlement which was prior to the appointed day
Sanction must have relevance to the reality of the transaction between the parties
The settlement of 28th June 1974 makes the increased DA of 100 payable with effect from January 1 1974
Hence the said rate of in creased DA which was payable to the workers between Janu ary 1 1974 and July 5 1974 was sanctioned prior to the appointed day
We have already noted the definition of additional DA in section 2b which is an integrated definition
The definition clause has twin components both of which will have to be satisfied in order that a particular amount can be held to
be additional DA
To put it clearly the two components are  1  additional DA is that part of the DA which is sanctioned after the appointed day and 2 which is over and above what was payable immediately before the date from which sanction of the particular rise in DA is to take effect
With regard to the first component any unilateral deci sion to increase the DA or a bilateral settlement for its increase to take only two instances must take place after the appointed day
It is manifest that if the sanction is after the appointed day it is then only the question of additional DA will arise within the meaning of section 2b
Once it is found that the sanction of rise in DA
is prior to the appointed day section 2b will not at all be attracted
In that event it will not be necessary even to
consider the second component of the definition mentioned above
In the instant case we have already held that the rise in DA to 100 of the Ahmedabad Rate of DA was sanctioned under the settle ment of 28th June 1974 that is before the appointed day
One of the principal components of the definition clause is therefore clearly absent in this case since there is no sanction for any rise in DA after the appointed day
We should observe that this is not a case where Explana tion I to section 2b is applicable
Mr Singhvi for the appellants submits that in view of the aim and object of the Act the Court should lean in favour of an interpretation advancing the remedy by constru ing the word sanctioned in section 2b to mean sanc tioned by the award and not by the settlement
We have already given our reasons for our inability to accept this submission
One other reason may be added
478 The Act recognises agreements and settlements in the same way as awards of Tribunals vide section 2c
The definition of additional wages under section 2c clearly points to that
Any wage revision whether by or under an agreement or settlement between the parties or any award  comes within the sweep of the aforesaid defi nition clause
Agreements and settlements are separately and distinctly mentioned along with awards
Settlement is a type of sanction recognised under the Act
There is there fore sufficient warrant under the Act to give effect to the sanction by voluntary settlement in respect of DA when the same has never been repudiated by any of the concerned parties
When there is no ambiguity in the word sanctioned in section 2b recourse to the aim and object of the Act is not even called for in this case
Both the contentions of the appellants therefore fail on the solitary
ground namely that the particular sanc tion of additional DA in this case is not after the ap pointed day
The appeal is dismissed with costs
PB R
Appeal dismissed


Summary:
Section 2b of the defines additional dearness allowance to mean such dearness allowance as may be sanctioned from time to time after the appointed day ie July 6 1974 over and above the amount of dearness allowance payable in accordance with the rate in force immediately before the date from which such sanction of additional dearness allowance is to take effect
Section 62 b enjoins on the employer the duty to make deductions and to remit to the nominated au thority additional dearness allowance from the emoluments disbursed after the appointed day
Section 115A of the Bombay Industrial Relations Act 1946 provides that if any agreement is arrived at between the employer and employees who are parties to an industrial dispute pending before the industrial court the award in such proceeding shall be made in terms of such agreement except in certain circumstances stated therein
As a result of negotiations between the employers and employees a settlement was entered into between the parties on June 28 1974 enhancing the dearness allowance with retrospective effect from January 1 1974
The Indus trial Court before which certain disputes were pending gave the award conformity with the settlement sometime in August September 1974
Arrears of dearness allowance were paid after the appointed day
In a petition under Article 226 of the Constitution by the employees  Union the High Court issued a writ re straining the employers from effecting any deduction from the arrears of DA payable to the employees on the basis of the settlement and granted certain other reliefs
In appeal it was contended that since the settlement of June 28 1974 could not be effective prior to the award made in August September 1974 additional dearness allow ance could be said to be sanctioned only after the award and so the provisions of section 2b would be attracted
Dismissing the appeal HELD One of the components of cl 2b namely that the additional dearness allowance is that part of the DA which is sanctioned after the appointed day is absent since there was no sanction for any rise in dearness allowance after the appointed day
477 G 1 According to section 115A of the Bombay Industrial Rela tions Act if the conditions enumerated therein did not exist the award shall be made in terms of the settle ment
Since the settlement in this case had merged in the award the terms of the award are those specified in the settlement
The sanction of the award in such a case was the sanction under the settlement and since the settlement was prior to the appointed day additional dearness allow ance could not be said to be sanctioned after the appoint ed day
476 F  H In the instant case the Industrial Court having passed the award in conformity with the terms of the settlement the award came into operation on the date specified in it
2 Sanction must have relevance to the reality of the transaction between the parties
Increased dearness allowance payable between January 1 1974 and July 5 1974 was sanctioned prior to the appointed day
Once it is found that the sanction was prior to the appointed day section 2b would not be attracted
4 3 From the definition of additional wages in section 2c it is clear that the Act recognises agreements and settle ments in the same way as awards of Tribunals
Any wage revision whether by or under an agreement or settlement between the parties or any award comes within the sweep of the definition clause
Agreements and settlements are distinctly mentioned along with awards
Settlement is a type of sanction recognised under the Act
There is there fore sufficient warrant under the Act to give effect to the sanction by voluntary settlement in respect of DA
When there is no ambiguity in the word sanctioned in section 2b recourse to the aim and object of the Act is not called for
478 A B