APPEAL NO 691 of 1976
From the Judgment  Order dated the 16th December 1975 of the Gujarat High Court in Special Civil Appln
No 572 of 1975
GL Sanghi and Girish Chandra for the Appellants
480 VM Tarkunde KL Hathi and Mrs PC Kapur for respondent 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
Dhrangadhra Chemical Works Kamdar Sangh hereinafter to be described as the union is the first respondent
The second respondent is Dhrangadhra Chemical Works hereinafter to be described as the employer
With respect to the dearness allowance DA of the workers under the employer there was a reference No 7070 before the Industrial Tribunal at Ahmedabad
The parties arrived at a settlement of the said industrial dispute and an award was passed in terms of the settlement
According to the award the employer was to pay DA to its employees at the rate of the quarterly average cost of living index as settled by the Simla Bureau popularly known as All India Consumers Price Index for the relevant quarter
Thus for the months of January February and March 1974 the rate of DA was on the basis of the average cost of living index for the months of July August and September 1973 as pub lished by the said Bureau and this was to follow for every quarter
It is the accepted position that for the months of April May and June 1974 the DA worked out at Rs 78 per month but for the quarter
commencing on 1st July 1974 and ending on 30th September 1974 it worked out at Rs 8850 per month
In other words it was an agreed position between the union and the employer that the rate of DA payable to all the workers from 1st July 1974 was at the rate of Rs 8850 per month
With effect from 6th July 1974 The Additional Emolu ments Compulsory Deposit Ordinance 1974 came into force
This Ordinance was replaced by The 
Act No 37 of 1974 briefly the Act and the Act is deemed to have come into force on the 6th day of July 1974
We have already made a detailed reference to the aim and object of the Act and also dealt with the material provi sions thereof in dealing with a similar question in Civil Appeal No 690 of 1976 in which we have delivered our judg ment to day1
It is therefore not necessary to repeat those observations here
The short question that arises in this particular appeal turns on the Explanation I to section 2b of the Act
We will therefore read that provision 2b additional dearness allowance  means such dearness allowance as may be sanc tioned 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
1 1977 2 SCR472
481 Explanation I
Where payment of dearness allowance is linked to a cost of living index or any other factor any automatic payment after the appointed day of dearness allowance in consequence of any rise in such cost of living index or in consequence of any change in such other factor shall notwithstanding the provisions of this clause be deemed to be the additional dearness allowance
 It is clear under section 2b that additional DA has to be sanctioned after the appointed day Sanctioned is the heart of the definition clause
Since additional DA is defined to mean such DA as may be sanctioned from time to time after the appointed day Explanation I to the definition is inserted to
deal with a situation to avoid any controversy about the sanction while there is an auto matic rise in DA linked to a cost of living index
Where DA is linked to a cost of living index any automatic payment after the appointed day of DA in consequence of any rise in such cost of living index shall be deemed to be the additional DA
In the absence of Explanation I there would have been scope for controversy whether additional DA which is paid automatically with the rise in the cost of living index as agreed upon can be said to be DA sanctioned from time to time
Such a controversy is set at rest by insertion of Explanation I which is a deeming clause
The question that arises for consideration in this appeal is whether the rise in the cost of living index has also got to be after the appointed day
The union contends that the DA of Rs 8850 which is payable from 1st of July 1974 for the quarter 1st July 1974 to 30th Septem ber 1974 is an pursuance of the rise of cost of living index between January to March 1974 which is prior to the appointed day namely 6th July 1974
It is therefore submitted that no additional DA is deductible under the Act
The High Court has accepted the contention of the union and allowed the application under Article 226 of the
Con stitution granting a Mandamus restraining the employer from deducting additional DA from the emoluments of the em ployees
The High Court also granted certificate to appeal to this Court
it is common knowledge that when DA is linked to a cost of living index actual determination of the DA takes place after the index is published and known
The index therefore is always of a past period by the yardstick of which DA is adjusted
This being the concept about link age of DA to cost of living index Explanation I makes it clear that when payment of DA is linked to a cost of living index any automatic payment after the appointed day of DA in consequence of any rise in the cost of living index shall
notwithstanding the provisions of this clause be deemed to be the additional DA
The non obstante clause in the Explanation takes note of the definition clause where sanction after the appointed day has been mentioned
Explanation I therefore plays its role not withstanding whatever is stated in section 2b the definition clause
We do not find anything in Explana tion I to warrant the conclusion that rise of the cost of living index should be after the appointed day
What is to be after the appointed day is any automatic payment of DA in consequence of any 482 rise  and not that any rise in the cost of living index should be after the appointed day
We are therefore unable to agree with the High Court that the rise of cost of living index also should be after the appointed day
It is sufficient for the purpose of Explanation I if payment of DA in consequence of rise of cost of living index takes place after the appointed day on account of rise in the cost of living index even prior to the appointed day
The nexus for the purpose of Explana tion I is with the payment after the appointed day and not with the rise in the cost of living index
The specified percentage of additional DA which is 50 of the rise being the difference between Rs 78 and Rs 8850 is therefore deductible under section 62b of the Act and the High Court was not correct in holding to the contrary
The appeal is allowed and the judgment of the High Court is set aside
There will be however no order as to costs
PBR Appeal allowed


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 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
Expla nation I to the clause states that where payment of dearness allowance is linked to the cost of living Index any auto matic payment after the appointed day of dearness allowance in consequence of any rise in such cost of living index or in consequence of any change in such other factor shall notwithstanding the provisions of this clause be deemed to be the additional dearness allowance
Dearness allowance was paid to the employees of the respondent at the rate of quarterly average cost of living index for the relevant quarter
The rate of dearness allow ance for one quarter eg the first quarter of 1974 was paid on
the basis of the average cost of living index for the months of July September 1973
For the quarter July September 1974 there was a rise in the cost of living index and consequently there was a rise in the dearness allowance payable to the employees
In a writ petition under article 226 of the Constitution the employees contended that the increased dearness allowance payable for the quar ter July September 1974 was as a result of rise in the cost of living index between January March 1974 which was before the appointed day in July 6 1974 and therefore no additional dearness allowance was deductible under the Act
The High Court granted the writ
Allowing the appeal HELD The High Court was wrong in its view that the rise of cost of living index should be after the appointed day
The nexus for the purpose of the explanation is with the payment after the appointed day and not with the rise in the cost of living index
There is nothing in the Explanation to warrant the conclusion that rise in the cost of living index should be after the appointed day
What is to be after the appointed day is any automatic payment of dearness allowance in consequence of any rise in such cost of living index and not that any rise in the cost of living index should be after the appointed day
482B 481H When DA is linked to the cost of living index actual determination of the DA takes place after the index is published and known
The index therefore is always of a past period by the yard stick of which DA is adjusted
This being the concept about linkage of DA to cost of living index
Explanation I makes it clear that when pay ment of DA is linked to cost of living index any automatic payment after the appointed day of DA in consequence of any rise in the cost of living index shall notwithstanding the provisions of this clause be deemed to be the addition al DA 481G