Case: Mazgaon Dock Limited Vs. Association of Engineering & Others

P.B. SAWANT, J.The Appellant Messrs Mazgoan Docks Limited, Bombay (hereinafter referred to a the Company) is a public sector undertaking in the administrative control of the Ministry of Defence. It is engaged in ship building, ship repairing, merchant engineering and construction of off share platforms, and employees as on 31st March, 1989 about 11,920 workers of various categories (at the time of dispute they were about 10,000). The wages and other service conditions of the workmen were governed by various Awards/Settlements made from time to time. The last of the settlements was of August 28, 1973. On the expiry of the said settlement, demands were raised by the workmen as well as the Company between June to October, 1976 (there being different Unions of workmen, they had raised demands on different dates between the said period). The demands related to various items. We are, however, concerned in the present case with only five of the said demands. Although these demands, as stated earlier were raised in 1976, they were referred by the State Government for adjudication to the Industrial Tribunal only on January 11, 1980. The delay was on account, firstly of the dispute between the different Unions inter se with regard to the exclusive right to represent the workmen and secondly, on occount of the negotiations between the parties at various levels for settlement of the demands. The Industrial Tribunal made the present Award on December 11, 1984. It was challenged by the workmen by a writ petition filed under Article 226 of the Constitution on the Original Side of this Court, and the learned Single Judge decided the said petition by his impugned decision on August 14, 1987. These facts are referred to only to point out that the present dispute between the parties has been pending since 1976. We are informed that some of the demands are still pending adjudication before the Tribunal.2. The five demands with which we are concerned in this appeal are :(a) Change in the existing basis for neutralisation of variation in the cost of living index by adopting the neutralisation rate of Rs. 1.30 per month per point shift in the Bombay Cost of Living Index i.e. C.P.I. (1960 = 100) uniformally for all workmen including clerical and subordinate staff without linking it to their basic pay;(b) Revision of wage structure;(c) Change in the existing pattern or paying acting allowance;(d) Abolition of the payment of nucleus allowance; and (e) abolition of over time work for workmen of the launches and boats department and alternatively for payment of over-time wages at double the rate of wages inclusive of dearness allowance instead of at the rate of 1 1/4 times of basic and dearness allowance as at present.Demands at (a) and (b) are raised by the Company, while the rest of the demands are of the workmen.3. The Tribunal conceded the demand of the Company for change in the existing pattern of the payment of dearness allowance and also abolished the payment of nucleus allowance. It rejected the workmens demand for change in the pattern of the payment of acting allowance and also the demand for abolition of over time work and the payment of over-time wages at the higher rate. It granted their demand for revision of the basic wages.4. In the writ petition, the learned Single Judge set aside the Award with regard to the dearness allowance and acting allowance. He maintained the Tribunals direction to abolish the nucleus allowance. He further set aside the revision of wage structure and remanded the dispute with regard to the dearness allowance and the wage structure for fresh consideration of the Tribunal.5. The first contention of Shri Damania, the learned Counsel appearing for the appellant Company, was that the Tribunal having given well reasoned and well considered Award with regard to the dearness allowance and the basic wages, it was not open for the learned Judge, while exercising his extra ordinary writ jurisdiction under Article 226 of the Constitution, to set it aside unless there was an error apparent on the face of the record. In this connection, he pointed out that the Tribunal had given the following reasons for changing the existing system of the payment of dearness allowance :(i) the present dearness allowances formula does not only neutralise the increase in the cost of living but has the mischief of also raising the basic wages of the workmen who are at higher wage levels;(ii) the comparative statement showing the basic wages and dearness allowance for different categories of workmen in other ship-yards in the country and the general engineering concerns in Bombay, show that there was absolutely no justification for continuing the present dearness allowance formula with dual linkage resulting in the widening of the disparity in the minimum wages of the workmen in the different categories;(iii) the result of the present dearness allowance system was that the workmen received wages higher than the salary of their superiors such as Junior Engineers and other officers of the equivalent rank. The number of workmen receiving wages exceeding the salaries of the officers would go on increasing with the passage of time and that such a state of affairs is detrimental to the maintenance of industrial discipline and control;(iv) the rates of neutralisation prevailing in the Company militated against the very principle underlying the grant of dearness allowance. The rates of neutralisation for workmen vary from Rs. 1.78 to Rs. 2.89 per point in such concerns as Kamani Engineering Corporation on which the workmen have relied whereas the said rates vary upto as high as Rs. 8.01 per point in this Company ; and(v) about 89.5% of the workmen both in the public and private sectors get dearness allowance at the rate of Rs. 1.30 or less per point rise in the C.P.I. (1960 = 100); where as according to the present system of dearness allowance in the Company, as stated earlier, the workmen get dearness allowance at the rate of Rs. 8.01 per point rise in the C.P.I.As against this, the learned Single Judge has disturbed the Tribunals Award on the ground that the Company has not made out substantial grounds for the scrapping of the present slab system and that (i) it is not correct to argue that the higher paid workers cannot be disciplined by lower paid officers; (ii) that notions of class superiority, apart from being obnoxious to the Society, are misplaced in industrial adjudication; (iii) that the slab system has been condemned by the Tribunal for subserving the very object behind the grant of Dearness Allowance and that there were nothing alarming with the financial position of the Company.6. The learned Single Judge has further given his reasons as to why he has thought it prudent to interfere with the Award in writ jurisdiction. According to him, the Tribunals attack on the slab system rested on no substantial reasons. The reason given by the Tribunal that the system widens disparity between the workmen in different strata was in disregard of the need to consider the position from relativities-both horizontal and vertical. The other reason given by the Tribunal that it impaired the disciplining capacity of Junior Engineers and Officers was based on mere surmises. The further reason that the system was likely to affect the financial position of the Company as to put it in irretriveable position, was to take an alarmist view and that too on no worthwhile data, and hence the reasons given by the Tribunal to disregard the time tested slab system were inconvincing to the point of being non-existent and the view accepted by it was in plain disregard of the well established warning of not allowing theoretical forebodings to influence industrial adjudication. Hence to overlook the finding of the Tribunal which was so flawed would be to decline to exercise jurisdiction vested in the Court by Article 226 of the Constitution.7. There is no dispute before us, as indeed there was no dispute either before the learned Single Judge or the Tribunal, that the main bone of contention between the parties was the desirability or otherwise of the continuation of the present system of dearness allowance. Even the consideration of the demand of the workers for revision of the wage structure was linked to the Companys demand for change in the system for payment of dearness allowance. As is apparent from the Award of the industrial Tribunal, even the Tribunal has linked the change in the revision of the wage structure which it has granted, to the change in the dearness allowance system which it has introduced, and both changes are so linked by it as to be dependant upon each other. That is why even the learned Single Judge, while setting aside the Award of the Tribunal with regard to the dearness allowance, has also quashed the Award revising the wage structure and remanded both for fresh consideration to the Tribunal. Further, the Appellant Companys grievance before us against the learned Judges decision is also mainly on the ground that the learned Judge has interfered with the Award of the Tribunal introducing the new system of dearness allowance. Hence the preliminary contention as to whether the learned Judge was right in interferring with the award while exercising his jurisdiction under Article 226 of the Constitution is intimately connected with the larger question on merits as to whether the Tribunal was right in doing away with the existing system of dearness allowance and introducing a new one. It may also be mentioned in this connection that the reasons given by the learned Judge for interferring with the Tribunals Award in that behalf are also reasons connected intimately with the merits and demerits of the existing and the new system. Hence before we answer the preliminary contention, it is necessary to examine the arguments and counter arguments on the merits and demerits of the present and the new system of dearness allowance.8. It is necessary first to understand the existing system of dearness allowance in the Company. For the purposes of payment of dearness allowance under the existing system, the workers are classified by the Company into two categories namely (i) operatives and (ii) clerical and subordinate staff.Operatives are paid dearness allowance on the basis either of revised textile Scale A or under Scale B whichever is more favourable. Under scale A dearness allowance is paid at a flat rate of 1.9 pies per day per point rise in Bombay consumer Price Index Figure (1934 = 100) over 105 which was the pre-war consumer price index figure for Bombay plus 10% thereof. Under scale B dearness allowance is paid at 1% of basic pay for every two points rise in the consumer price index figure (1934 = 100) over 100. This scheme was introduced in the Company with effect from November 1, 1942 and is applicable to all daily and monthly rated operatives upto the basic wage of Rs. 306/- per month (upto Rs. 338 per month in the case of the workmen who are getting nucleus allowance of two increments), and for the portion of the amount in excess of the side basic wage, further dearness allowance is paid on a sliding scale applicable to the clerical and subordinate staff.Sub-ordinate and clerical staff are paid dearness allowance on the basis either of the revised textile scale A or the scale shown below whichever is more favourable :_______________________________________________________________________Rate of D.A. as Variation ina % of basic % age of everyPay slab pay when the 10 point move-index figure ment in theis in the slab index.901---910First Rs. 100/- 370% 5%On the next Rs. 100 185% 2%On the next Rs. 100 99% 1%On the next Rs. 100 80% 1%On the next Rs. 100 75% 1%On the next Rs. 100 35% 1%On the next Rs. 40 25% 1%No dearness allowance is paid for the basic wage in excess of Rs. 640/- per month, since the maximum basic pay of the clerical staff does not exceed Rs. 640/- per month with the exception of a few stenographers, who draw maximum basic pay of Rs. 675/- per month. This dearness allowance formula was evolved in 1951 before the Company became a Public Undertaking and was slightly amended under the settlement of 1973. At present 14.2% of operatives and 7.7% clerical and subordinate staff are on scale A Dearness Allowance, while, the rest are on scale B.10. It will thus be apparent that for the operatives drawing basic wage upto Rs. 306/- per month, there in no slab system under scale B. The dearness allowance paid to them is linked both to the percentage of basic pay and consumer price index figure ("CPI"). For every 2 points rise in CPI, they are paid dearness allowance at the rate of 1 per cent of their basic pay. It is only the operative whose basic pay is in excess of Rs. 306/- per month who are paid dearness allowance on the sliding scale shown in the table above applicable to the clerical and subordinate staff, there being again the same dual linkage to basic pay and CPI as shown in the table. It is possible to describe the system on which dearness allowance is paid to operatives drawing wage above basic wage of Rs. 306/- and to the clerical and subordinate staff, as being a slab system, since the rate of dearness allowance goes on varying on a sliding scale for every next Rs. 100/-. However, the rate of dearness allowance paid even to this category of workmen is not a varying lump sum amount but a varying percentage of basic wage.11. To appreciate what follows, it is first necessary to deal with the concept of neutralisation itself. The neutralisation of the rise in CPI may or may not mean the same thing as the neutralisation of the rise in cost of living depending upon the basket of goods and services which are taken into consideration for compiling the CPI and the income group whose cost of living is sought to be protected. The CPI which is used in industrial adjudication for considering the rise or fall in prices for fixing dearness allowance is the CPI of the basket of goods and services consumed by the average worker. This CPI is known as the All India Working Class Consumer Price Index. The dearness allowance is paid to workmen of all establishments on the basis of the rise and fall in this CPI. Further, as held by all Expert Committees and Commissions, the object of granting dearness allowance is to neutralise as nearly as possible 100% rise in the CPI for the lowest paid workman or the minimum wage earner in any establishment and the percentage of neutralisation should go on declining on a sliding scale with the higher wage groups. Although therefore theoretically it is possible to contend, as was done on behalf of the workmen before us, that the CPI does not necessarily indicate rise and fall in the cost of living of all sections of the workmen, for the purposes of industrial disputes, the wage Authorities, Committees and Commissions have not so far favourably considered the idea of comoiling different wage groups, and have in fact treated the concept of cost of living synonymously with that of the CPI of the working class. In fact, they have in terms discouraged the idea of neutralizing fully the cost of living of workmen save those at the minimum wage level. We may reproduce here the relevant passages from the Report of the "Dearness Allowance Commission on the Question of the Grant of Dearness Allowance to Central Government Employees in future" (1967). While commenting on the recommendations of the First and the Second Pay Commissions, the Dearness Allowance Commission observes :"For us, distinguished from the two Pay Commissions, it is a matter of great importance to arrive at what we may call a basic concept of dearness allowance, i.e. one which (a) is divested of all connection with pay revision, and (b) represents the irreducible minimum of the Governments obligation in this respect to their low-paid employees. We believe that the findings and recommendations of the two Commissions, looked at in their total context, are consistent with the view that the essence of the concept of dearness allowance is its application to the lowest paid categories of employees and that this is so whether or not other categories of employees are, for adventigious, reasons included in its operation at any given time."While discussing the two views on the basic character of dearness allowance, namely whether (1) dearness allowance should protect the real wages of salaries of all the employees whatever their pay or (2) whether its essential object is to mitigate the hardship of the employees in the lower pay ranges, the Commission concluded in paragraph 3.32 of its Report as follows :"We have considered these two views and have come to the conclusion that having regard to its basic character, dearness allowance is applicable to those employees whose salaries are at the subsistence level or a little above it. In our opinion, the words "dearness allowance primarily suggest and refer to an allowance paid to employees in order to enable them to face the increasing dearness of essential commodities. Besides, as we have already pointed out, dearness allowance has always been treated as a temporary expedient by the day. Commissions in the past and we think that is its main feature. It is thus clear that our view on this issue is substantially in accord with the conclusions of the Pay Commissions."While referring to the case of employees who were in higher salary/wage bracket and who were to receive additional dearness allowance in future on account of its recommendations the Commission observed that the requirements of the said employees were different in character from those of the employees within the vulnerable group, namely those in lower pay ranges. The Commission further stated that the problem that these employees face on account of steep rise in prices should be dealt with by a wage revision. The Commission, therefore, recommended in its report that the wage revision of the said employees should be undertaken at the end of two years or when the 12 month average of the index reached 245 whichever was earlier.12. The National Labour Commission dealing with the same subject in paragraphs 16.42, 16.44 and 16.45 observed as follows :"16.42 Compensation against decline in the purchasing power of money is claimed by all wage earning sections; the employees in the lower income brackets are the worst sufferers. They have little or no manoeuverablity. Extension of this protection to all employees may not be in accord with the principles enunciated earlier for framing wage policy. Employees in higher income brackets have to make a sacrifice in common with other sections of the population who do not get compensated for price rises. To draw a precise line where the D.A. should cease will depend on the level of prices at any point of time. The Dearness Allowance Commission, 1967 which went into this question in respect of Central Government employees, felt that in deciding the level at which additional D. A. should cease to be admissible, the following three considerations should be taken into account : (1) the level should be a little above but not substantially above the subsistence level; (ii) the level should be determined in relation to the current price level; and (iii) it may have to be determined afresh in future if price levels went up substantially higher than the current level. These considerations, we feel, should be applied, mutatis mutandis to workers who fall within our terms.""16.44 Several employers have urged that the index which represents the price for the consumption basket of an average worker should not be taken to regulate the D.A. paid for compensating those at the minimum level. in deciding this issue, it is necessary to appreciate that when D.A. is linked with an index, exact correspondence should not be expected between the group of employees whose D.A. is tied to the index and the group on whose family budgets the index is based. There is always an area of applicability for each index, the limits for which are wide for all practical purposes. Obviously it is not possible to maintain separate indices for employees in different wage ranges at different centres. The 1958-59 family budget enquiries show that about 60 per cent of the families surveyed had incomes below Rs. 125 at the time the enquiries were under taken. The indices, therefore predominantly represent workers in lower income brackets. They can be taken to be a good indicator for regulating D.A.""16.45 also, in making the claim for working out a separate index for those drawing the minimum, the statistical points involved are generally ignored. The sample for enquiry is designed in such a way that it will give an idea of the average consumption basket. If on the basis of the enquiry so planned one has to work out an index for those at a minimum level, the data collected will not be representative for that class. If on the other hand, it is claimed that future inquiries should be restricted only to minimum wage earners, they would cease to be working class family budget inquiries. Moreover, the index measures changes in the price of a fixed basked of goods and services. Marginal adjustment in weights of individual items, which will result if the employers, claim for calculation of the index on the basis of budgets of minimum wage earners is accepted, does not affect the index substantially. Also wage fixing authorities use the index only for understanding price changes. They work out the quantum of D.A with a view to compensating the work drawing the minimum in such a way that payment of D.A. does not amount to increase in real wage even at the minimum level."In the context of this discussion and finding the Commission also recommended that neutralisation at the rate of 95% should be afforded to minimum wage earners. The minimum wage which was taken into consideration was the minimum wage in non-scheduled industries (that is those industries which were not mentioned in the schedule to the Minimum Wages Act). This was done because the minimum wages in the non-scheduled industries were fixed as a result of collective bargaining, arbitration or adjudication. The Commission further observed that the percentage of neutralisation in the said industries was also fixed by the same process of collective bargaining, etc.While dealing with the question as to whether only the quantum of dearness allowance permissible to the lowest paid employee should be paid to those at higher levels of wages/salaries to whom dearness allowance may be admissible, in paragraph 16.49, the Commission recorded its findings as follows :"16.49. A suggestion that has been before us is that only the quantum of D.A permissible to the lowest paid employee should be paid to those at higher levels of wages/salaries to whom D.A. may be admissible. The justification for it is sought in its simplicity, and in the argument that the principle aim of D.A. being to compensate only the increases in the prices of essentials, it should not vary with income level. On the other hand, some others argue that payment of a flat amount of D.A. is responsible for a substantial narrowing of wage differentials and such narrowing down acts as a disincentive to improve effort and affects production and productivity, particularly in the case of skilled workers. On this account, it is claimed that while percentage neutralisation may taper off beyond the minimum, at higher levels it need not necessarily result in the payment of same amount of D.A. at all levels. This however, assumes that the current differentials are justifiable on grounds of productivity and that our commitment to a socialist pattern of society will not eventually abridge these distances. There is little justification for these assumptions. According to our view, the only purpose of dearness allowance is to enable a worker in the event of a rise in cost of living to purchase the same amount of goods of basic necessity as before. This purpose would be served by an equal amount of dearness allowance to all employee irrespective of difference in their emoluments. But those employees who are at present getting an amount of dearness allowance higher than what is admissible on the basis of our recommendations, will not be deprived of that, though for any additional increases in the cost of living, they will be entitled only to the same amount of dearness allowance as is given to persons receiving the minimum wage"13. The Third Pay Commission while dealing with Dearness Allowance on page 2 paragraph 5 of Chapter 55, after noting the paramount fact that there had been a continuous upward trend in prices and there was no likelihood of the price level going down substantially in future, but that the prices will continue to rise in the coming years, observed as follows :"It is, therefore, necessary that there should be a regular scheme for compensating the Government employees against erosion of their money income. We are of the view that the dearners allowance should be treated as a compensatisn to the wage earness and salaried employees against a possible rise in price over the index level to which the pay structure devised by us is related. Our recommendations in the subsequent paragraphs have been made keeping this concept of dearness allowance in view".These observations do suggest that the Commission looked upon dearness allowance as a protection against erosion of the money income and not only as compensation to meet the rise in the price of the essential goods and services. However, while dealing with the demand of the Unions and Associations of Employees in paragraph 9 of the same Chapter that as and when there is an increase in the price index of a given order, the increase in dearness allowance should be granted automatically as in the case of employees serving in most of the public sector undertakings, nationalised Banks and the Industrial employees governed by the Wage Board Awards the Commission observed that though there are advantages in having a clearly enunciated scheme of dearness allowance as this would eliminate a possible source of friction and unrest, it was not desirable that the Government should be bound to automatically sanction an increase in dearness allowance according to any given formula even when the circumstances require that restraint should be exercised on wages and incomes, as in the case of national emergency or when it is necessary to impose a wage freeze to combat inflationary pressures. Further in paragraph 10, while dealing with the criticism of the Unions against paying dearness allowance on a graduated scale depending upon the pay ranges while ensuring the highest percentage of neutralisation in the lowest pay slab but neutralising the price increases for the higher pay slabs at a decreasing rate, thus tending to reduce the wage differentials and demanding that dearness allowance should be paid as a percentage of pay to maintain relativities, the Commission only observed that in the sector governed by the wage board awards, the dearness allowance is paid in most cases at a flat rate linked to the consumer price index generally on a point to point basis and that the scheme for the grant of dearness allowance on a percentage basis was in vogue in a number of public sectors undertakings The main advantage, according to the Commission, of the percentage basis was that both the quantum of dearness allowance and the neutralisation percentage change gradually and there was no abrupt change in them at different levels. The Commission then observed that by varying the percentage for different pay groups, it was feasible to achieve higher rates of neutralisations at the lower pay ranges and vice versa. The Commission then stated that their endeavour had been to devise a scheme which while doing away with the disadvantages of the slab system would not at the same time entail much additional administrative work.In paragraph 11, the Commission then discussed the question of upper pay limit to be fixed for the grant of dearness allowance and in paragraph 13 observed as follows :"13. We feel that while some differentiation might be justified it may not be appropriate to exclude a priori all the employees in the higher pay ranges from the scheme of dearness allowance. Having been at pains to recommend certain pay scales for different categories of employees on the basis of the qualifications, duties, responsibilities, etc., we think that the differentials that we have prescribed as between the different categories, should not get grossly distorted over a period of time by the operation of an extraneous factor, namely, a general increase in prices. We think that employees getting pay upto Rs. 2,250/- p.m. should be entitled to some compensation for an increase in the consumer price index, though the extent of the neutralization and its periodicity may differ from one category to another, with a greater measure of protection to the more vulnerable sections."The Commission further recommended that the pay plus dearness allowance should in no case exceed Rs. 2,400/- per mensem and recommended dearness allowance on the basis of the following formula :For an increase of 8 points in the index average (1960 = 100) upto the basic salary of Rs. 300,3.5 per cent of pay subject to a minimum of Rs. 10 per mensem, and above the salary range of Rs. 300/-, 2.5% of pay subject to a minimum of Rs. 10/-per mensem and a maximum of Rs. 20/- per mensem. The Commission also recommended neutralisation of about 95% on the lowest pay with a declining scale upto about 30% or less for higher salaried employees. These rates were modified by the Government ab initio to 4% of pay upto Rs. 300/- and 3% of pay subject to a minimum of Rs. 12/- and a maximum of Rs. 27/- per month for pay above Rs. 300/-. The rates were further revised in March, 1979 as 4% of pay upto basic pay of Rs 400/- and 3% of pay subject to a minimum of Rs. 16/- and a maximum of Rs 30/- per month above Rs. 400/-.14. The Study Group on Wages, Incomes and Prices popularly known as the Bhoothalingam Committee in its report of May, 1978, while dealing with Dearness Allowance in para 7.1 of Chapter VII observed :"7.1 The structure of wages in an organisation assumes that prices will remain relatively stable. But if prices do rise, the question arises of compensating wage and salary earners to protect, to some extent, the real value of their money incomes. In our country, the mechanism employed for this purpose is generally the payment of dearness allowance as a separate element of wages. This system originated during the Second World War as a temporary device in a period of rising prices, and is peculiar to India and some neighbouring countries. Elsewhere, employees are generally compensated through periodical salary revisions or salary indexation."The Committee then referred to the existing systems of payment of dearness allowance in the public and private sectors and noted considerable diversity in the same. It observed in paragraph 7.15 that the bewildering heterogeneity had resulted in distortions, anomalies and arbitrary narrowing of differentials in all sectors and stressed the need for a single national corrective formula to compensate for the rise in the cost of the essential consumption basket. The Committee thereafter observed that all the Commissions and Committees as well as the Supreme Court and the Wage Boards had accepted the linkage between dearness allowance and the consumer price index. Thereafter referring to the question as to the price index to which dearness allowance should be linked, it referred to the AICPI for industrial workers as well as the revised series of 1971. While commenting upon it, the Committee observed that the consumer basket which it represented contained several less essential items such as dry fruit, ghee, liquor, cigarette, cosmetics, ornaments, and air and taxi fare and stated that such items as a matter of policy did not need to be compensated at that stage of development of our economy, and recommended that for regulating dearness allowance a new index covering only the basic consumption items should ideally be utilised. However, it further observed that till such index is constructed and brought into use, AICPI for industrial workers, which had the merit of general acceptance, should continue to be used in spite of its deficiencies.The Committee then dealt with the vital question of the extent of neutralisation of the rise in prices. While dealing with this topic, the Committee in paragraph 7.21 observed that in view of large scale unemployment and poverty and in view of the large majority of workers in the agricultural and un-organised sectors without any protection against inflation, some sacrifice should reasonably be expected from those in employement and in receipt of wages above the minimum wage. The Committee further observed (para 7.22) that apart from the fact that in principle full neutralisation would mean chasing inflation, the basket of goods going into the present consumer price index included some items which did not need to be compensated for. Besides, the employees in organised sector were to some extent protected on account of the provision of certain fringe benefits at the employees or at the public cost, e.g. free primary education, medical aid, subsidised housing, transport and canteen meals, etc. changes in prices of all which were reflected in the index. Secondly, the rise in price of essential items should be compensated to an equal degree and that food and other essential items formed a decreasing proportion of total expenditure as incomes rise. The degree of neutralisation should, therefore, decline substantially in the higher pay brackets. The Committee, therefore, observed that keeping these factors in view, dearness allowance should compensate for the rise in price of the essential items in full only at the low salary level and go on tapering towards the top.The Committee then dealt with the Choice of Dearness Allowance formula :"7.23 The two main systems of dearness allowance are based on either a wage linked slab system or a value per index point system. The slab system, compensating differentially at different salary level, derives support from the consideration that dearness allowance should be regarded as an instrument of protection against inflation rather than of redistributive justice. To a limited extent, a wage-linked formula also protects salary differentials which represent varying degrees of responsibility and skill. Besides, what is regarded as essential consumption may not be similar for all salary levels.7.24 On the other hand, the per point formula has a manifest justice with an inbuilt progressive edge so that the employees at lower salary levels are compensated more fully than those at higher levels. It is more logical, simple and has ease of universal understanding and application. It compensates employees equally for a given essential basket of consumption and, unlike the wage-linked slab system, it does not further accentuate the existing relativities in wage structure. In the wage-linked slab system, the differentials get eroded or distorted and certain amount of bunching takes place which disturbs existing relativities. The per point formula does not have this defect and, in fact, is also more egalitarian. Under this system, higher amount of dearness allowance is not paid to better off people who spend more on non-essentials. Per point formula also finds support in the Report of the National Commission on Labour (para. 16.49, pages 242-3). If there are anomalies created by inflation, they should be squarely faced and wages appropriately revised at the affected levels instead of dearness allowance being used as an instrument of protection for anything more than the essentials.7.25 Under a per point formula, the lowest categories will get compensation to fully neutralise increases in the cost of living, while all those above a certain salary level will get fully compensated for that part of their expenditure which, in human terms, is vital. Further, it will completely and finally delink the question of dearness allowance and will put the latter outside the area of disputes. Most important, it will cause little or no further distortion in the wage structure or relative wage structures and wages. We can thus isolate the problem of anomalies and disparties which have arisen in the past. Further, in the case of Government employees there have been disputes about the existing basis on which compensation is given for each eight points rise in the Index and whether payment should be made in cash or otherwise. A formula providing automatic adjustment every quarter with reference to fixed value per index point should, therefore, help harmonious relations between Government and its employees.7.26 On these considerations, we have come to the conclusion that the per index point system of regulating dearness allowance is to be preferred for adoption uniformly.7.27 In para 7.15 we have pointed out the need for a single national formula. A sectoral approach limited only to, say, the Government and public sectors, could engender a sense of discrimination and generate consequential discontent in the affected sectors. We, therefore, recommend adoption of an across-the-board approach, covering all sectors of employment.7.28 Given the variety of D.A. formulae now in use, we have to recognise that whatever standard formula is adopted on a national wide scale, will benefit some and will affect others adversely. Our purpose is to bring in rationality in the payment of dearness allowance. In the process we should endeavour to minimise any adverse impact on the employees so that the per point" formula gains easier acceptance. The value to be adopted for each point of the Index has to keep the existing level of benefits in view.7.29 In the circumstances, we recommend adoption of the per point formula uniformly for future revisions, the value per point being around Rs. 1.30 (The rate of Rs. 1.30 per point allows full neutralisation at the basic pay of Rs. 260 related to C.P.I. level 200 for the basic pay of Rs. 353 related to Index level 272.) ). This is already prevalent in about two-thirds of the public sector enterprises as also in cement and steel industries. The per point formula with varying point values is in use in a number of other industries like cotton textiles, jute, engineering (West Bengal) and sugar."7.31. This formula avoids violent departure from existing neutralisation percentages at low levels. In fact, in the Central Government, persons getting basic pay of Rs. 415/- or less per month will benefit as a result of future dearness allowance being granted at the rate of 1. 0 per point; in State Government the corresponding limit may be higher. A rough estimate prepared sometime back showed that nearly 90 per cent of the total number of employees in all sectors of employment will not be adversely affected."15. The Palekar Award in respect of Working Journalists, as modified by the Government of India and published in the Government of India Gazette dated July 20, 1981 has recommended a fixed amount of Rs. 1.30 for the lowest bracket upto Rs. 300/- per point rise over the index every three months, and has given a rising percentage of neutralisation for the the higher salary bracket. As far as we see it, this is the only Award which strikes departure from the other Awards and the recommendations of the Committee and Commissions, in this behalf.16. The Fourth Central Pay Commission in its Report of June, 1986, while dealing with pay determination in paragraph 7.53 has observed as follows :"7.53 Another, and a more important assurance to the employee should be that his emoluments will not erode by increases in the cost of living, and Government will make an effort to provide as much relief as possible when the degree of tolerance is exceeded. Failure to do so will give rise to a sense of insecurity in the employees for he will not know what the future has in store for him, by dint of factors and circumstances, and their interplay, over which he has no control, by way of increase in the cost of living by inflation. To save him from that predicament, consumption has to be provided for not only in the present but also in the future. It is also necessary that a scientific and defined formula for it should be formulated well in advance. Not to do so will, in practical terms, amount to unjustified depression of pay scales, thereby giving rise to a kind of pay revision which is wholly to the disadvantage of the employee and was not within the contemplation of parties."Dealing with compensation for Price Rise in paragraph 13.12 the Commission has observed as follows :"13.12 Prior to the Third Pay Commission, dearness allowance was generally viewed as a compensation against the price rise which was considered to be a temporary phenomenon as the prices were expected to stabilised. Accordingly, the various Commission and Committees appointed by Government recommended compensation mainly to low paid employees who, according to them were likely to be more affected by the price rise. The Third Pay Commission, however, observed that dearness allowance should be treated as a compensation to the wage earners and salaried employees against rise in prices over the index level to which the pay structure was related. It therefore recommended a formula which provided compensation to all employees excepting those getting pay above Rs. 2,250/-, the percentage of neutralisation being higher at lower pay levels."Thereafter without any further discussion on whether dearness allowance was meant to off-set the price rise only in the essential goods and services or whether it was meant to protect the erosion of income, the Commission in paragraph 13.13 has stated as follows :"13.13 Prices have risen a great deal after January 1, 1973. Since the neutralisation allowed to employees at various levels has been different, the relativity among various pay levels determined by the Commission (i.e. Third Pay Commission) has been disturbed...."The Commission has then showed in a table-form the changes in the disparity ratios over the years between the minimum and maximum salary, and thereafter referring to the periodicity of the payment of dearness allowance, in paragraph 13.16 has gone on to recommend as follows:"We are also of the view that the compensation should provide full neutralisation of price rise to employees drawing basic pay upto Rs. 3500/-, 75 per cent to those getting basic pay between Rs. 3501/- and 6000/- and 65 per cent to those getting basic pay above Rs. 6000/- subject to marginal adjustments."It has to be noted that although the Third Pay Commission had not recommended dearness allowance to those drawing basic pay in excess of Rs. 2,250/-, and dearness allowance granted by the said Commission to employees drawing pay between Rs. 1,600/- and Rs. 2,250/- per month worked out to about 30 per cent or less, the Fourth Pay Commission removed the income-ceiling, and made all incomes entitled to dearness allowance. Further, the neutralisation percentage recommended by the Fourth Pay Commission is 100% upto basic pay of Rs. 3,500/-, 75 per cent to the employees drawing basic pay between Rs. 3,501/- and Rs. 6,000/- and 65 per cent to those who get basic pay above Rs. 6,000/- per month.17. It would thus appear from the aforesaid review of the discussion and findings of the Central Government Dearness Allowance Commission, National Labour Commission, Third Pay Commission, and Boothlingam Committee and the Fourth Pay Commission that certain broad principles were accepted as underlying any system of dearness allowance. It is accepted that the, the purpose of dearness allowance is to neutralise as far as possible the entire rise in the cost of living of the minimum wage earner. The minimum wage which is sought to be thus protected completely is the minimum wage in the non-Scheduled Industries and not necessarily the wage fixed under the Minimum Wages Act. This means that complete protection which is advised to be given against the price rise is to the employees who draw the lowest wage in any establishment. The percentage of neutralisation of the lowest paid worker may vary between 95 to 100. Till the Fourth Pay Commission made a departure in that respect it was commonly held that there need be no protection against the rise in the cost of living to incomes above a certain amount of salary firstly because the higher wage/salary earners are expected to make the same sacrifice as other sections of society whose incomes are not protected by dearness allowance, and secondly because, the higher salary they draw is expected to cushion them against the price rise. However, it is commonly accepted that all wage/salary earners who are paid dearness allowance need not be protected to the same extent, and their protection may be on a scale sliding or declining with the rise in the income. This is also on the principle that the higher the wage group, more the cushion and more the need to sacrifice. To this principle as pointed out above the Palekar Award has made an exception and has on the contrary granted higher rate of dearness allowance, to the higher incomes. The cost of price index which is generally taken into consideration for protecting the wage/salary is the cost of price index of the basket of goods and services consumed by the average worker because what is to be protected against is the rise in prices of the essentials and not of the other goods and services. These essentials are deemed to be the same for all wage/salary earners whatever their income bracket.18. The above norms are also followed by the Supreme Court uniformly in its decisions on the subject. In (Bengal Chemical and Pharmaceutical Works Ltd. and lts Workmen)1, 1969(1) L.L.J. 751, after reviewing the earlier decisions in (Clerks of Calcutta Tramways v. Calcutta Tramways Company)2, 1956(2) L.L.J. 450; (Hindustan Times case)3, 1963(1) L.L.J. 108; (Greaves Cotton Company Ltd. v. Their Workmen)4, 1964(1) L.L.J 342; (Ahmedabad Mill Owners Association v. Textile Labour case)5, L.L.J. 1; (Kamani Metals and Alloys Ltd. v. Their Workmen)6, 1967(2) L.L.J. 55; the emerging principles were stated as follows :(1) Full neutralisation is not normally given except to the very lowest class of employees;(2) The purpose of dearness allowance being to neutralise a portion of the increase in the cost of living, it should ordinarily be on a sliding scale and provide for an increase on the rise in the cost of living and decreased on its fall;(3) The basis of fixation of wages and dearness allowance is industry-cum-region;(4) Employees getting the same wages should get the same dearness allowance irrespective of whether they are working as clerks, members of subordinate staff or factory workmen; and(5) The additional financial burden which a revision of wage structure or dearness allowance would impose upon an employer and his ability to bear such burden are very material and relevant factors to be considered.The conclusions at (3) and (5) have a bearing on the other contentions in the appeal and they will be dealt with at the proper stage. The conclusions at (1), (2) and (4) above are, however, material for our present point.19. In a subsequent decision, in (Killick Nixon Limited v. Killick and Allied Companies Union)7, reported in 1975(2) L.L.J. 53, the Court after referring to the reports of various expert Committees and Commissions to which we have already made a reference, held that even a ceiling on dearness allowance paid to employees above the lowest paid employees, would be justifiable not only on the ground of financial capacity of the Company but also on other grounds. The Court held that the problem will have to be viewed from other important aspects as well and those aspects are :(1) Wage scales prevalent in the Company;(2) Wage level prevalent in the industry and the region;(3) Wage packet as a whole of each earner in the company with all amenities and benefits and its ability and potency to cope with the economic requirements of daily existence consistent with his status in society, responsibilities, efficiency at work and industrial peace;(4) the position of the company in relation to other comparable concerns in the industry and the region;(5) pre-emptive necessity for full neutralisation of the cost of living at the rock-bottom of wage scale if at or just above the subsistence level;(6) the rate of neutralisation which is being given to the employees in each salary slab;(7) avoidance of huge distortion of wage differentials, taking into reckoning all persons employed in the concern; (8) degree of sacrifice necessary even on the part of the workers in general interest;(9) the compulsive necessity of securing social and distributive justice to the workmen;(10) capacity of the company to bear the additional burden;(11) interest of national economy;(12) repercussions in other industries and the society as a whole;(13) the state of consumer price index at the time of decision and(14) Forebodings and possibilities in the foreseeable future as far as can be envisaged.|The Court further held that so far as the lowest paid employees, at or just above the subsistence level were concerned, they were entitled to 100% or at any rate no less than 95% neutralisation of the rise in the cost of living, and hence there should be no ceiling on dearness allowance payable to such employees, unless it was shown by the management that the rate of neutralisation in their case was more than 100%. The Court further held that the manner in which the ceiling may be imposed would have to be decided by the Tribunal in the exercise of its judicial discretion keeping in view the aforesaid principles. The ceiling may be fixed either by prescribing a certain amount as outside limit of dearness allowance or by reference to the quantum of dearness allowance payable at a certain wage level. Whenever a case of the nature came for industrial adjudication, it would always be a delicate task for the Tribunal to strike a balance keeping in view the above principles, weightage of each one of them being variable according to the conditions obtaining.In 1978(1) L.L.J. 532 (Shivaraj Fine Arts Litho Works, etc. and State Industrial Court and others)8, one of the questions which fell for consideration was whether cent percent neutralisation must be the criterion in fixing dearness allowance and whether financial capacity of the employer should be taken into consideration in fixing such allowance. After referring to the various authorities to which we have already made a reference above, the Court held that the Government in fixing the minimum wages under the Minimum Wages Act also makes a provision for special allowance to be paid along with the basic rate of wages. The special allowance is fixed to accord as nearly practicable with the variation in the cost of living index number applicable to such workers. Both the minimum wages as well as the special allowance so fixed under the Minimum Wages Act are fixed without any reference to the paying capacity of the employer. But when dearness allowance is fixed as a part of the fair wage, it will have to depend upon the paying capacity of the employer. The Court further held that though dearness allowance is given to compensate for the rise in the cost of living, cent percent neutralisation is not given as it may tend to inflation.In (Management of Shri Chalthan Vibhag Khan Udyog Sahakari Mandali Ltd. v. G.S. Barot, Member, Industrial Court & others)9, 1972(2) L.L.J. 383, after reviewing the decisions delivered till that time, the Supreme Court reiterated that dearness allowance was intended to neutralise portion of the increase in the cost of living, and though 100% neutralisation is not advisable as it will lead to inflation, full neutralisation may be permissible only in the case of the lowest class of employees. The management is entitled to complain if the neutralisation is more than 100%, for such neutralisation would in effect give the worker an increase wage. It is unnecessary to multiply the authorities on the subject.The aforesaid reports of the Commissions and Committees and the decisions of the Supreme Court were all before the Tribunal when it made its award in December, 1984, except the Report of the Fourth Pay Commission. One more report of significance also appeared thereafter, namely, that of the High Power Pay Committee, in November, 1988 It was published even after the decision of the learned Single Judge.20. The circumstances under which the High Power Pay Committee came to be appointed and its recommendations are also germane to the issue before us and they have been relied upon on behalf of the Union. There are in all 221 Public Enterprises (PEs) employing about 22.5 lakhs governed by two sets of Dearness Allowance formulae, viz. Central Dearness Allowance (CDA) (as recommended by the Pay Commissions from time to time and discussed above) and Industrial Dearness Allowance (IDA) which is Rs. 1.65 per point raise with effect from April 1, 1983. Some or all categories of executives and staff numbering about 2.4 lakhs in 68 PEs are at present on CDA. In some of these cases, the pay-scales were also on the basis of Central Government pay scales. The remaining 153 PEs have adopted IDA with related pay-scales for workmen and executives. Initially, PEs enjoyed almost complete autonomy in fixing pay-scales. D.A. and fringe benefits which resulted in wide disparity in service conditions in different PEs. In 1971-72, the Government therefore felt a need to impose certain restrictions. In July, 1977 the Government took a decision that while rationalising the scales of pay, IDA should be adopted. Between 1977 and 1981, about two dozen PEs which were following CDA opted for revised pay-scales with IDA. But a few PEs still continued on CDA pattern. In 1981, Bureau of Public Enterprises (BPE) issued instructions that as per Government policy public sector employees were required to pay IDA which then stood at Rs. 1.30 per point shift, and warned PEs which were still on CDA that they would no be allowed any wage revision till they shifted to IDA.It is not necessary to refer to later intervening events. Being aggrieved by the direction to switch over from the CDA to IDA, the Association/Unions of Executives in 57 PEs following CDA, filed writ petitions is Supreme Court and various High Courts. The main issues raised in these petitions were inter alia (a) that the petitioners should be permitted to draw the salary in the scale of pay applicable to them along with CDA as announced from time to time; (b) that they should be granted all the benefits of pay revision and revision of other allowances and (c) that there should be no discrimination between them and the Central Government employees in the matter of pay, allowances, etc.On 14th March, 1986, the Government of India expressed its willingness before the Supreme Court to refer to a High Power Pay Committee the question regarding the revision of pay-scales, additional D.A., Compensatory and other allowances and such other incidental aspects relating to the employees in the PEs governed by the Central pattern of pay-scales and D.A. (emphasis supplied). The Supreme Court accepted the proposal and the High Power Committee (HPPC) was constituted with the following terms of Reference---I. To examine the present structure of emoluments and conditions of service taking into account the total packet of benefits in cash and kind, available to the workers, clerical staff, supervisors and officers, below the Board level following the Central DA pattern and to suggest changes which may be desirable and feasible.II. To examine the variety of allowances and benefits in kind that are presently available to the above noted employees in addition to pay and DA and suggest rationalisation, simplification thereof with a review to promoting efficiency.III. To examine matters relating to grant of interim relief to the employees of all such public enterprises (belonging to the Government of India and following the Central DA pattern) who are drawing basic pay above Rs. 1000/- per month and grant necessary relief to them, if called for.IV. While making recommendations on the above points, the Committee would keep in view other related factors such as scales of pay. DA and allowances prevailing in other public sector undertakings on Industrial DA formula, economic conditions in the country, resources available at the disposal of these public enterprises".The terms of Reference related to the workers, clerical staff, supervisors and officers below the Board level. What is necessary to remember is that those who had filed writ petitions and whose grievances were referred to the Committee also included per July 1983 executives of the present company who were allowed to retain CDA pattern as personal to them as is evident from para 2.4 of the Committees Report.The recommendations of the Committee thus relate only to the employees in PEs who are on Central Government pay-scale and dearness allowance and not to other employees.The Committee noted that the employees in all 68 PEs were on CDA whereas those in 153 PEs where on IDA. Both CDA and IDA were paid on the basis of the All India Consumer Price Index Numbers for Industrial Workers (General) Base 1960 = 100 (AICPI) complied by the Labour Bureau, Shimla as the relevant Index. The CDA was based on a 12 monthly moving average, and DA was sanctioned twice a year while IDA on a 3 monthly average and DA was sanctioned every 3 months. On these two counts, the Committee opined that the IDA pattern was likely to be more beneficial than the CDA pattern. However, according to the Committee, the chief advantage of CDA was that it was based on a percentage neutralization linked to the basic salary for every level whereas IDA was worked out at a flat rate (of Rs. 1.65) per point rise in the quarterly average Index.The Committee therefore felt that the crucial issue to be decided was, whether they would consider it fair and necessary that DA should be fixed at a flat rate or on a percentage of basic salary, even if on a declining scale as they salary rises. The Committee observed that the principle involved here was in regard to the purpose and objective of DA and raised the fundamental question "Is the D.A. meant to protect the purchasing capacity in relation to a certain basket of essential goods on which the Index itself is based or is it meant to protect, to some extent or the other, the real wages/salaries as determined at the time of of the wage/salary fixation or revision" and discussed the question as follows :"....Several High Power Committees and Commissions, that had gone into the question of DA over a period of nearly half-a-century, have expressed different views on this matter. It would serve no purpose to try to determine as to what had been the preponderant view on this issue. However, merely in order to bring out the different views involved we may quote here, almost at random, two different views on this matter.The Dearness Allowance Commission of 1967 (Gejendragadkar Commission) was of the view that :"In our opinion, the words "dearness allowance primarily suggest and refer to an allowance paid to employee in order to enable them to face the increasing dearness of essential commodities" (Report of the Dearness Allowance Commission on the question of grant of Dearness Allowance to Central Govt. employees in future 1967, p 17).Or as the National Commission on Labour put it :"the only purpose of dearness allowance is to enable a worker in the event of a rise in cost of living to purchase the same amount of goods of basic necessity as before"(Report of the National Commission on Labour, p. 243).The other view, that DA is meant to neutralise the erosion of the real income of wage earners is put by the III PC as follows :"It is, therefore, necessary that there should be a regular scheme for compensating the Government employees against erosion of their money income. We are of the view that the dearness allowance should be treated as a compensation to the wage earners and salaried employees against a possible rise in prices over the index level to which the pay structure devised by us is related."(Third Pay Commission Report, Vol. IV, Part 1, Chapter 55, para 5, p. 2).The IV P.C. observed that "another, and a more important assurance to the employee should be that his emoluments will not erode by increases in the cost of living, and Government will make an effort to provide as much relief as possible when the degree of tolerance is exceeded. Failure to do so will give rise to a sense of insecurity in the employee for he will not know what the future has in store for him by dint of factors and circumstances, and their interplay, over which he has no control, by way of increase in the cost of living by inflation. To save him from that predicament, consumption has to be provided for not only in the present but also in the future."(Fourth Pay Commission Report (Part 1) Para 7.53, p. 89).6.7 A further argument in support of the DA being designed to protect the real incomes of only those who are at or near the subsistence or minimum wage is the principle of "equality of sacrifice". This was stated by the National Commission on Labour in the following terms :"Employees in higher income brackets have to make a sacrifice in common with other sections of the population who do not get compensated for price rises".(Report of the National Commission on Labour, Para 16.42, p. 241)On the other hand, an argument against a flat rate of DA has been that in a period of fairly rapid price increase, the flat rate of DA tends to distort the wage differentials by unduly compressing them. If, as a matter of principle, it is felt that the differential between the lowest and the highest salaries has to be of a particular magnitude, this should be decided at the time the wage structure is determined. Once such a decision is taken, we cannot envisage a situation where an entirely unrelated, arbitrary and exogenous factor, such as price rise is allowed to distort this differential. The Bhoothalingam Committee which finally supported the flat rate of DA, however, commented that :"The emoluments structure has thus become topsy turvy, reversing at some levels the principle of higher emoluments going with increased responsibility. Such a situation can unduly strain the administrative machinery and leave no monetary incentive to subordinate staff for advancement to positions of higher responsibility".(Report of the Study Group on Wages, income and Prices headed by Shri S. Bhoothalingam (1978), Chapter VII, para 7, 12, p. 71)The III PC took the view that :"Having been at pains to recommend certain pay scales for different categories of employees on the basis of the qualifications, duties responsibilities, etc., we think that the differentials that we have prescribed as between the different categories should not get grossly distorted over a period of time by the operation of an extraneous factor, namely, a general increase in prices." (Third Pay Commission Report, Vol. IV, Part I, Chapter 55, Para 13, p. 4).6.8 Therefore, the first issue we have to decided in choosing between the CDA and the IDA is as to whether we take the view that DA is meant to only protect the capacity of the worker of the minimum wage to purchase certain essential commodities or whether it is also meant to protect, if not fully, at least in some measure the real incomes of wage earners and salaried employees as they were determined when the pay structure was initially fixed. The former principle is the basis of the IDA while the latter is the basis of the CDA. The IDA rate is arrived at by dividing the minimum wage at a particular point of time by the index number at that point of time giving a certain rate in rupees per point. It is assumed that this represents the amount required to fully neutralise the price rise represented by a one point increase in the index. It is, therefore, a 100% neutralisation of all the price increases beyond the price level at which the minimum wage had been fixed. Logically this DA should have been given only to those drawing the minimum wage, because it has relevance only to that wage. But it is assumed that the basket of goods on which the Consumer Price Index is based forms a part of the total consumption of the other wage and salary brackets also. By giving the same rate of DA to all others, that part of their consumption which can be considered to be basic minimum consumption is sought to be protected in their case also.6.9 According to the other principle mentioned above the DA is meant not merely to protect the capacity to purchase a basket of essential commodities on which the index is based, but also to compensate for the increase in the cost of living subsequent tot he date when a particular rate of wages and salaries may have been fixed. On this principle, DA will have to be expressed as a percentage of the wage or salary and will then vary with it. However, while at the minimum wage, the entire income of the wage earner can be assumed to be spent on the essential commodities and will, therefore, need to be protected against price rise the same cannot be assumed in regard to those with incomes higher than this ; there is bound to be an element of luxury or in essential expenditure in the case of their consumptions and this element need not be protected. On this principle, therefore, the extent to which the price increase is neutralised will decrease progressively and this is expressed in terms of a decrease in the percentage of DA to wage or salary as the wage or salary level goes up. This is the principle on which CDA is based.6.10 The choice of the pattern of DA will, therefore, depend upon which of these principles we accept. There is sometimes an impression that the protection of the relativities between different wages/salaries is essentially intended to protect the higher salaries. The problem, however, is not restricted only to those levels. The distortion of relativities affects the lower levels of wages/salaries also, particularly those between unskilled and skilled staff. Studies have shown that the compression of wage differentials has adversely affected skilled staff and in some industries semiskilled staff also. We need not pass any opinion here in regard to wage differentials or what the ratio between the minimum and the maximum salaries should be. It is presumed that these are matters that would be determined at the time of the wage fixation or revision itself. Whatever principles are sought to be enforced in this regard, that would be the occasion for it. But once this is done we cannot, as the III PC has pointed out, consciously allow inflation to serve the purpose of compressing wage differentials since this would be an irrational means of achieving the objective even if that be our objective.6.11 While the principles involved in the two DA patterns can be compared and judged, any comparison in quantitative terms present some difficulties because of the difference in the basis of the two patterns. For instance the IDA is, as explained above, Rs. 1.65 per point rise. This represents full neutralisation of the price increase at the minimum wage. Since the same DA is being given to all others at higher wage and salary levels also, the DA will be the same in absolute terms at all levels per point rise of the index. Expressed mathematically as a percentage of the wage salary at different levels, this will give a percentage that decreases from 100 to 20. But this would give a wrong impression since this is not the basis on which the IDA has been given. Similarly the percentage DA on the Central Government pattern will also be finally a certain amount in rupees payable at different wage and salary levels. The amount can then be expressed as so many rupees per point rise and it will naturally increase in absolute rupees per point as the salary level goes up. But this would again not be a correct way of looking at the pattern because the intention was not to calculate DA as so many rupees per point.6.12 Even if the principle of a DA based on a percentage of the wage/salary is accepted, it can be argued that the Index for determining such percentage protection should be related to the consumption pattern of the income level concerned. On this basis, the AICPI, now being used, should apply only to those for whom the basket of goods on which the index is based is relevant. If the intention is to protect the real incomes of others at higher wage or salary levels to some extent or the other, this should be done on the basis of an index which is more relevant to their pattern of expenditure and not on the basis of an index for Industrial workers. The III PC had taken note of this line of argument and had attempted to determine the wage level upto which it can be said that the basket on which the AICPI is based is relevant. (Third Pay Commission Report, Vol, IV, Part I Chapter 55, Paras 11 and 12, P. 3-4). This basket may not be relevant upto the level to which the IV PC has now allowed 100 per cent neutralisation, namely, Rs. 3,500/- per month. However, the distortion caused by the use of this index would be less than what this argument would in theory lead us to believe. If we are adopting the principle of protecting the real incomes to some extent at least against the price rise, what we need is a reasonable indicator of the price rise. For instance, besides the AICPI, there are three other indicators, the all India Consumer Price Index for Urban Non-manual employees, the All India Wholesale Price Index and the CDP deflator. A comparison of the behaviour of these four over a period of 15 years given in Annexe 6.2 shows that the movement of these indices has not been significantly different. This would mean that the AICPI has served as a good indicator of general inflation in the economy. The distortion, if any, caused by the basket of goods being not indicative of the pattern of consumption of the higher levels of wage and salary earners, would not, therefore, be substantial or significant To the extent there is a distortion, this can be taken into account in reducing the percentage neutralisation at higher salary levels. (emphasis ours).6.13 Even after having accepted the method of neutralisation, there could be difference of opinion in regard to the percentage neutralisation at different levels of wages or salaries. Some have felt that 100% neutralisation upto a salary of Rs. 3500/- per month is too high a level. Since we had decided, for reasons which we have mentioned earlier that we will have to choose between the CDA pattern on the one hand and the IDA pattern on the other, we will not express any opinion on this aspect. We take the structure of CDA pattern in its totality and as it is at present. 6.14 A view has been expressed that the IV PC recommendation is in the specific context of the duties and responsibilities of Government servants and cannot be automatically applied to employees of undertakings which, by the nature of their activities and their organisation, are industrial in nature, even though they may be ultimately owned by the State. There may be some justification to this argument in regard to pay scales but we are not able to find any such justification in regard to the DA pattern. DA is meant to compensate for price increases. Since price increases affect wages and salaries of all in the same manner, whether one be in Government or in an industrial Unit, there seems to be no reason why DA should vary with the nature of employment, it could be argued that there are grounds for a DA varying from region to region, if it can be established that the behaviour of prices is significantly different in different regions. But in general the AICPI is being used for determining DA and this would mean that price increase is by definition the same. Taking into account the present practice, which has evolved over a long period, we do not find any advantage in now discussing the merits of adopting regional indices of this purpose.6.15 It has also been argued that DA for Government servants could be more generous than for industrial employees because pay revisions for Government servants taken place infrequently whereas for industrial workers there is a pay revision every 4 or 5 years when price increases can also be taken into account. There is considerable force in this argument. In fact, most of the parties who appeared before us have directly or indirectly accepted the logic of this argument when they urged that while their colleagues in the PEs or IDA had revised wage and salary revision every 4 years, they had not had any such revision since 1973 as was the case with Government employees. They considered this to be a factor in support of their claim for Central Government DA and pay scales. As for the future, most of them agreed that accepting that Central Government DA formula and scales of pay would mean that they would not get any further revision till Government servants themselves get a pay revision again. Some of them stated that they preferred this since they had no bargaining power for four yearly negotiations and hence they would prefer to sink or sail with the Government servants. The appointment of a High Power Pay Committee (HPPC) to determine their pay scales etc. shows that this matter was being dealt with in their case in a manner which is analogous to the procedure adopted for Government servants and was different form the procedure of bilateral negotiations that take place in the PEs on IDA. A wages or salary can be said to have three elements, one that is related to a minimum wage or to the skill requirements of the job, an element related to variations in cost of living from the time the original wage or salary was fixed and an element related to increase in productivity since such a base period. Once a DA formula is so devised as to protect the employees against price increases and protect the original wage differentials, the only point for any periodic negotiations will be that part of the wage or salary which can be related to increase in productivity.6.16 We, therefore, have two alternatives either we have a restricted DA formula which does not fully compensate the increase in cost of living and then we have periodic negotiations in which the entire wage structure is open for negotiations, including the erosion in real wages since the last negotiations or we have a Da formula that does compensate for price increases so that the only variable since the last negotiations would be either the job content or the linkage of the wage to increased productivity. Even a hundred per cent neutralisation of the increase in the cost of living merely prevent an erosion of the pre-existing wage. If, therefore, the payment of DA becomes a burden or any ratios of wages to other factors get upset, it can only mean that exogenous factors have effected the other element in the equations and DA cannot be blamed for this consequence. Some sections have been expressing an opinion that a liberal DA formula would be disastrous for industry as well as for the economy of the country. Such a view would not be correct if a rational DA formula forms part of a total regimen in which the negotiations regarding the remaining elements in the wage are based on a linkage with increased productivity. It is only if the discipline of productivity-linked wages is not accepted together with a fair and rational DA formula that the consequences can be deleterious.6.17 in the Chapter dealing with the legal issues we have come to the conclusion that the employees on CDA pattern are entitled to continue on the pattern. In this Chapter we have discussed the various aspects of the CDA and IDA pattern and their relative merits. On a consideration of all these aspects and the several views that have been expressed by various authorities on these aspects, we are more inclined towards the view that looks at DA not merely as an allowance to protect the purchasing capacity of those at the level of the minimum wage in relation to a certain basket of goods, but as an allowance that is meant to protect all categories of employees from an erosion of their wages and salaries due to price increases subsequent to a wages revision. Justice, of course, demands that the minimum wage should be protected from any erosion, whatsoever, after it is initially fixed But considerations of equity and the necessities of efficiency also demand that the differences that may have been established between different levels of wages and salaries after due consideration, should not be unduly disturbed after the initial fixation by an exteraneous and, in this context irrational factor such as inflation. We are not impressed by the argument of equality of sacrifice when it is applied to one category alone, namely the wage and salary earner. If quality of sacrifice is to be enforced for larger social purposes, there are other, more rational, ways of enforcing it than through the medium of inflation which no one admits to have started and no one accepts to control. We are, therefore, in favour of a DA that is based on a percentage of the pay. In view of the financial constraints and the inadequacies of the index used, the protection against erosion of real wages cannot be equal at all levels. For this reason the percentage neutralisation has to decrease as the pay increases.6.18 Since the CDA has these features, we are of the view that it is preferable to IDA. A comparison of total emoluments under the CDA pattern and the IDA pattern (Annexe 6.3) shows that at the lower levels the employees on the IDA pattern are getting higher emoluments. This is not due to any defect in the DA pattern. Both the IDA and the CDA are based on a 100% naturalisation at the lowest level. In fact the IDA is based on a 100% neutralisation at a particular wage near the minimum, while the CDA gives 100% neutralisation upto the level of Rs. 3500/- p.m. If, therefore, the total emoluments in the IDA pattern are higher at the lower levels, this is due to a higher basic wage, that those on the IDA have been able to obtain as a result of bilateral negotiations. There may be different views about the percentage neutralisation allowed at different levels under the present CDA pattern. But, as pointed out above, we have felt that it would be more practical, in the context of which we are functioning, to take that pattern as given and confine our choice to one between the IDA and the CDA pattern as they are at present, rather than attempt to combine the two or improve on either. On these several considerations, we are of the view that the CDA pattern is preferable to the IDA pattern even on-merits and not merely on the legal grounds we have discussed in Chapter 5. We, therefore recommend that in the PEs with which we are concerned, the DA pattern for the employees should be the same pattern as now applicable for Central Government employees on the basis of the recommendations of the IV PC".21. One thing, therefore, is certain that the trend beginning from the Third Pay Commission is in favour of the view that the object of the dearness allowances is to prevent the erosion of real income, and not merely to protect the consumption basket of essential goods and services against the price rise. The Fourth Pay Commission and the High Power Pay Committee have, as pointed out earlier, felt the need to protect monthly basic pay upto Rs. 3,500/- of the Government employees fully. Whatever the view, therefore, with regard to the object of dearness allowance that one may accept, it can sagely be concluded on the authority of these expert Government panels that the rise in the cost of living upto the basic pay of at least Rs. 3,500/- per month needs to be neutralized to the extent of 100%. As observed by the High Power Pay Committee, the consumption basket, which is the basis of the All India Consumer Price Index is not relevant up to the said basic pay range. It has also to be noted that these expert panels have afforded substantial protection even to monthly incomes above Rs. 3,500/- by recommending 75% and 65% of neutralization to incomes between Rs. 3,505/- to Rs. 6,000/- and above Rs. 6,000/- respectively.22. We must now deal with the case of (Hindustan Lever Mazdoor Sabha v. Hindustan Lever Limited & another)10. Writ Petition No. 864 of 1986 along with two other connected matters being Writ Petition No. 865 of 1986 Hindustan Lever Employees Union v. Hindustan Lever Limited & anr., and Writ Petition No. 1224 of 1986 Hindustan Lever Limited v. B.N. Dongre, Industrial Tribunal, Maharashtra Bombay & others), decided by the learned Single Judge of this Court on 31st October, 1988 and 1st November, 1988 on which the Company had relied for contending that there was a trend of placing ceiling on the dearness allowance payable to the workmen. This trend according to the Company acknowledges the need to curb dearness allowance and the wage packets beyond and certain level. Soon after the close of the arguments in the present case, the Supreme Court in Special Level Petition being SPL (C) Nos. 3457-58/59 filed against the said decision had remanded the matter to this Court on April 28, 1989 for decision by the Appellate Bench. By a fortuitous circumstances, the learned Chief Justice on June 8, 1989, assigned the said matter to the Bench of which one of us (Sawant, J.) was a member. It was, therefore, necessary to hear the said Appeal before deciding the present matter since any comment on the said decision and unfair to them. We, therefore, decided to defer the decision in the present matter till that matter was heard and finally decided. That appeal was decided only yesterday and now we have the said decision before us for reference. The decisions is of September 6th , 1989 in Appeal No. 1606 of 1988 in Writ Petition No. 864 of 1986 (Hindustan Lever Mazdoor Sabha v. Hindustan Lever Limited & anr.)11 with Appeal No. 1607 of 1988 in Writ Petition No. 865 of 1986 Hindustan Lever Employees Union v. Hindustan Lever Limited & anr., and appeal No. 151 of 1989 in Writ Petition No. 1224 of 1986 Hindustan Lever Limited v. B.N. Dongre, Industrial Tribunal, Bombay & ors. . That decision has disapproved of the view taken by the learned Single Judge and the Industrial Tribunal that a ceiling on the dearness allowance in that case was justified. Following the Supreme Court decisions, it is held there that the existing dearness allowance system or for that matter any of the existing service conditions of the workmen should not be disturbed if they are beneficial to the workmen and replaced by less beneficial conditions unless there are compelling reasons to do so. It is demonstrated there on the basis of the method devised for the purpose that the dearness allowance system prevalent in that Company did not over-neutralise the rise in the cost of living and the Company had failed to make out any other reason for change in the existing system Hence the Companys demand for placing a ceiling on dearness allowance was not justified. That decision has become most relevant and important for our purpose for three reasons in particular. Firstly, the method evolved there to find out whether the dearness allowance system existing in an establishment over-neutralises the rise in the cost of living can be applied in the present case to find out the neutralisation under the existing system. Secondly, the decision has discussed the circumstances in the light of which the distortions and disparties in the incomes of the workmen and their superiors have to be examined. Since the Tribunal in the present case have given such distortions as one of the grounds to replace the existing system, and the Company also relies heavily on that circumstances in support of its demand, it will be necessary to examine the contention in the light of the said decision. It is in the light of that decision also, further that we will have to consider whether the Company has made out any other compelling reason for changing the present system of the payment of dearness allowance and to replace it by the new one as the Tribunal has done.23. The method evolved by that decision to determine whether the existing dearness allowance system result in over-neutralisation of the rise in the cost of living is as follows. First the rate at which the future rise in the cost of living is to be neutralized is found out by dividing the total wage packet of the workmen (basic pay plus dearness allowance) in the base year by the cost of living index of that year, is multiplied by the said neutralization rate. If the wage packet thus arrived at exceeds the wage packet payable to the workmen under the existing system, there is no over-neutralization under the existing system and the converse. To illustrate the working of the method, we may quote the same example, which has been given in the said decision :The base year taken in the statement is 1972, since the last settlement of wages arrived at was effective from 1st October, 1972. In columns 3 and 4 the statement shows the total wage packets of the workmen involved in the Reference, at the minimum and maximum pay scale respectively in the year 1972 at C.P.I. 901, and in columns 5 and 6 their total wage packets at the minimum and maximum pay scale in December, 1988 at C.P.I. 3956. Columns 7 and 8 show the total wages which are actually paid to them at their minimum and maximum pay scale under the existing system. Columns 9 and 10 show the percentage of neutralization of wages actually paid at CPI 3956 to the total wages which ought to be paid if the rise in the CPI is to be neutralized at 100% by the above method.24. It is, therefore, clear that the existing dearness allowance system does not over neutralise the rise in the cost of living either at the minimum or the maximum pay scale of any of the workmen involved in the Reference, Hence the Company cannot be said to have made out a case for change in the existing system on that ground.25. It was, however, contended before us that the aforesaid table does show that at least in some cases the higher income groups have more percentage---neutralization than some of the lower income groups. The instances cited it this connection are of Office Attendant, Assistant Time Clerk, Clerk B Grade, Clerk A Grade and Draftsman B Grade, as against all the categories above Office Attendants up to semi-skilled, Grade II. The case of Draftsman B Grade is also contrasted with Clerk E grade and it is contended that whereas the principles for the payment of dearness allowance require that the neutralization rate should go on tapering as the incomes rise, the existing system results in some high income groups getting a more neutralization-percentage than some lower income groups. It is true that the existing system, as indicated by the aforesaid table does show this anomaly in some cases. But the anomaly is so marginal as to require no serious consideration at least for replacing it by a totally new one as the Tribunal has done. It has also to be remembered that the demand for affecting the changes is not raised by the workmen. If the workmen have no grievance against it, there is no reason to tinker with the system which has been prevalent in the Company for more about 40 years now.25-A. It was then contended that firstly the workman at the lowest level does not get 100% neutralization under the existing system. As is clear from the aforesaid table, the lowest paid workman gets 96.92---and 92.38% neutralization rate at the minimum and maximum pay scale respectively. Secondly, it was submitted that the existing system does not ensure tapering of dearness allowance as the incomes rise and hence it does not conform to the principles laid down so far. As regards the first contention, we may point out that the National Labour Commission has prescribed the neutralization percentage at the lowest level between 95 to 100. The existing scheme by ensuring it at 96.92% at the minimum scale does confirm to the pattern. It is only orginally less at the maximum pay scale. But as is pointed out earlier, the workmen have no grievance against it. As regards the second contention, there is no law to prevent, an employer from giving equal neutralization percentage to all employees. If, therefore, an employer has already given it, he cannot ask for a reduction in it, except for compelling reasons.25-B Mr. Damania further contended that the new system introduced by the Tribunal ensures 10% neutralization to the lowest paid workman and by the said method about 40% of the workmen would stand to gain higher wages packets, though the remaining 60% will find their wage packets reduced. That is in keeping with the principles of payment of dearness allowance and hence on this ground also there is a need to replace the present system by the new one. We are afraid that this argument also misses the point, namely that the present demand for change in the dearness allowance system is not made by the workmen, including those whose wages are not protected fully. What is more, as is admitted by Mr. Damania, the new system introduced by the Tribunal is bound to affect adversely the wage packets of 60% of the workmen. On balance, therefore, the existing system is not disadvantageous to the workmen as a whole. There is also no grievance against it from any of the section of the workmen. Further under the new system the lowest paid workmen stand to gain only marginally. But a more disarming reply to all these contentions advanced on behalf of the new system is that the Companys demand for the introduction of the new system is not motivated by a concern for the lowest paid workmen but by its alarm at the alleged disproportionate wage packets of the workmen in the higher income brackets. As has been held by the Supreme Court in the Indian Hume Pipe case (supra) the existing service conditions should not be tinkered with to the disadvantage of the workmen unless there are compiling reasons to do so. Hence, these contentions by themselves have no merit in them.26. The next ground urged by Mr. Damania and also given by the Tribunal is that the increases in the wage packets at higher level are totally out of proportions to the increases in the cost of basic necessities. We have already appointed out that there has been a change in the trend of thinking on the object of the dearness allowance. The Third and the Fourth Pay Commissions and the High Power Pay Committee have now come to accept the view that it is the real value of the income of the workman which requires to be protected against its erosion by inflation. The object of dearness allowance is no longer merely to protect the workman against the rise in the cost of living of the basic necessities. There is nothing in law to prevent an employer from introducing a system which protects the real value of the workmens income. If, therefore, an employer has done so, so long as, it is not shown that the dearness allowance paid to the workman protects more than the real value of their income, it is not possible to accept that the existing system should be changed merely because the incomes are allegedly out of proportion to the increases in the cost of basic necessities. The table reproduced above which is also worked out by the method suggested by the Division Bench in the Hindustan Liver case (supra) shows that under the existing system the extent of the protection afforded to the income of the workmen at all levels is less than 100%.26-A. Shri Damania then contended that for finding out whether the existing system over neutralizes the increase in the cost of living, what has to be taken into consideration is the total emoluments of the workmen including other allowances besides the dearness allowance, since the CPI already takes care of some of the items for which the other allowances are paid. The argument was general in nature and not with reference to any particular allowance and therefore has to be met by a general reply. The argument firstly forgets that what is under scrutiny is the working of the existing system of dearness allowance and the extent to which the same neutralizes the rise in the CPI. The other allowances, if any, have nothing to do with the dearness allowance system. They are paid independently of it. The purposes for which they are paid are also different. Secondly, the CPI though it takes into account the items for some of which these separate allowances are paid (such as house rent allowance, for example) does no more than take into account only the all India average of their incidence. The allowances, on the other hand, are paid to compensate for more than average or normal incidence of these items. For example, the house rent allowance is not paid in every town but only in such cities as Bombay where the rents are abnormally high. Such disproportionate costs are not reflected in the AICPI is complied on an All India average of the prices of the items which go into the consumer basket. Hence it is not possible to accept the said contention.27. The next ground given by the Tribunal and also supported vehemently by Mr. Damania was that the wage packets of the workmen of the same category in other shipyards in the country and the General Engineering concerns, and the rates of neutralization of the cost of living in them were lower than in the Company. Admittedly, none of the shipyards in the country are comparable to the Company either on the basis of the size of its operation or the nature of the work undertaken by it. Secondly, the business of the Company is unique not only in the country but also in the region. Hence the wage packets of the General Engineering concerns in the region cannot also be compared with those in the Company. Thirdly, what has to be compared is the totality of the service condition and not merely the wage packet. There is no material on record in that respect. For all these reasons, the region-cum-industry formula cannot be applied in the resent case and certainly not for reducing the existing benefits. The Tribunal has, therefore, certainly erred in the applying the said formula.28. For introducing the new system, the Tribunal has further taken into consideration the fact that about 89% of the workmen in the public sector to which admittedly the Company belongs, are paid dearness allowance at the uniform rate as prescribed by the Public Bureau of Enterprises. The tribunal has, however, forgotten the fact that it was not introducing the dearness allowance system for the first time in the Company but was replacing the existing system. There is no doubt that the said consideration would have been valid if the Tribunal was called upon to formulate a dearness allowance system for introduction in the Company for the first time. When an adjudication body is called upon to replace the existing system, the first thing that it is required to consider is whether the system which is sought to be introduced is more or less beneficial to the workmen compared to the existing one. If it finds that the new system is less beneficial than or deprives the workmen of the benefits available in, the existing system, it has to stay its hands off the new system, unless of course there are compelling reasons to do so. Any consideration such as the uniformity with the other concerns is not a valid consideration for downgrading the existing benefits. The existing system of dearness allowance further, as stated earlier, is about 40 years old. It was introduced when some of the other public sector concerns had not even come into existence. The workmen cannot be deprived of their existing benefits on the ground that the other concerns give lesser benefits to their workmen. It is equally open for the workmen to argue that the need in such cases is to upgrade the service conditions in the other concerns, and not the reverse.28-A. Shri Damania then contended that on account of the existing system of dearness allowance the workmen in such concerns as the present Company had become "high income islands". When, as observed by the Bhoothalingam Committee a large majority of workers in the agricultural and un-organized sectors are without protection against inflation, the high incomes to workman only in some concerns were not justified. We can do no better than quote what the Division Bench in the Hindustan Lever case (supra) has said while dealing with a similar argument. In para 41 of the judgment the Bench has observed as follows :"41. It was contended that the workmen such as the present ones in the organised sector get wages out of proportion to those in unorganised sectors and particularly in the rural areas. There are also vast disparities in the incomes of the workmen in the organised sector itself depending upon the concerns they work in. The incomes of the workman in concerns such as the present one are described as "high island groups" and it was urged that in view of the low average earnings of the workman all over the country high incomes to workmen of one or the other unit were not justified. This consideration should also weigh with the Court in upholding the ceiling on dearness allowance. The argument ignores certain primary facts. In the first instance we are dealing here not with the basic wages but the dearness allowance which is meant to protect the basic wages. Even assuming that the basic wages paid are above the subsistence level, there is no data to show how much above they are and whether they are at the lower, middle or the higher level of the fair wage. The level of the basic wage at which the ceiling is sought to be fixed, viz. Rs. 500/- can hardly be described as high. The consideration may become relevant while revising the basic wage structure, if it is shown that the proposed structure as quite out of proportion with the general level of income. Secondly, in the absence of a national income policy, it is neither proper nor practicable for the Courts to curb incomes only in one or the other establishment. It should not be forgotten that wage and salary earners do not form a major section of the society not do wages and salaries form a major portion of the national income. So long as therefore the other incomes are not controlled or disciplined there is no justification for controlling only the wages and salaries. Thirdly, the moneys saved by a concern on account of the denial to its workmen the higher wage packet due to them, do not flow to any national fund for levelling up the incomes of the lower income groups elsewhere. They only add up to the coffers of the employer. The acceptance of the contention therefore does not serve its underlying purpose, assuming that that is its purpose.In this connection it is necessary to remind that the Fourth Pay Commission has accepted the need to protect the real incomes of the employees and has recommended 100% neutralisation upto the basic pay of as high as Rs. 3,500/- per month, 75% neutralization to those between Rs. 3,501/- and Rs. 6000/- and 65% to those drawing salaries above Rs. 6,000/-. This was in June, 1986 and these recommendations have been implemented as pointed out earlier. The High Power Pay Committee, as stated earlier, has endorsed the said recommendations and has in terms observed that there is no justification for asking only the wage and salary earners to make sacrifices and that if equality of sacrifices is to be enforced for larger social purpose, there are other more rational ways of enforcing it than through the medium of inflation."No further comments are, therefore, necessary on this contention.29. The Tribunal has also harped upon the fact that the existing dearness allowance system has a dual linkage both with the basic salary and the rise in the cost of living and it is this dual linkage which is responsible for giving the workers wages allegedly out of proportion to the increase in the cost of the basic necessities. In the first instance, it has to be remembered that the dual linkage is not unique to this Company. In fact, such system is prevalent in many other concerns. Even the recommendations of the Pay Commissions and the High Power Pay Committee are based on such dual linkage. What is further, the Supreme Court in the case of the Indian Hume Pipe (supra) has in terms observed that there is nothing wrong with the slab system as such. In fact, the Court has referred to the present Award in that case and has observed as follows :"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 deteriment of the workers. All that this Court held in that case was that the employer having made out a case for puting a ceiling on dearness allowance, it was for the Tribunal to decide at what particular amount there should be a ceiling on dearness allowance."We are referring to these observations only for the purpose of pointing out that the reason given by the Tribunal for abolishing the slab system, namely the dual linkage, is not by itself a valid one. We have already pointed out that in spite of the dual linkage under the existing system, the neutralization of the cost of living for all workman involved in the Reference is less that 100% and varies between 88.98% and 97.05% at the minimum of the scales of pay and between 82.92% any 94.80% at the maximum. Hence, according to us, this reason by itself cannot furnish a ground for replacing the existing system.30. The further reason given by the Tribunal for replacing the existing system is that the existing system results in the ever widening of disparities in the minimum and maximum wages of the workmen in the different categories. In that connection, the Tribunal has referred to Exhibit C-104/28 which gives the number of workmen in different categories who received wages exceeding the salary received by their officers in the year 1983. According to that statement, about 2,539 workmen drew higher wages than the salary of the junior engineers and other equivalent ranks of officers. The Tribunal has further observed that the number of workmen receiving wages exceeding the salaries of the officers would go on increasing as a result of the present Dearness Allowance Formula and that such a state of affairs would be detrimental to industrial discipline. Before us, the Company produced yet another statement at pages 1205 to 1207 showing the total emoluments drawn in December, 1988 by officers and workmen/clerical staff working under them. The statement does show dispartities in the wage packets of the workmen and the officers. However, admittedly this statement was not before the Tribunal and as is rightly contended on behalf of the Union, the workmen had no opportunity to test the statement by cross-examination Besides, as has been observed by the Division Bench in The Hindustan Lever case (supra) it is not enough to show that the wages received by the workmen are higher than their superiors. The alleged disparities have to be examined from various other angles. We may reproduce the relevant portion from paragraph 36 of the judgment which is as follows :"36.... .......The other reason which has appealed to the learned Judge is that on account of the existing system the salaries of the workmen in the higher income slabs exceeded those of the junior executives. There is no doubt that in Killick Nixon 1975(2) L.L.J. 53, the Supreme Court has stated that the distortions in wage packets such as when the pay packets of workman exceed the pay packets of the executives can be a consideration for placing a ceiling on dearness allowance. But that is one of the 14 tests (and by no means exhaustive) laid down by the Court to examine the problem from various angles. Such distortions alone, irrespective of the other considerations, cannot therefore justify the placing of ceiling on dearness allowance. What is further more of ten forgotten while urging this ground is that the service conditions of workmen and of the executive staff are not fixed by the same authority and by the same process. Whereas the service conditions of the former are fixed either by the Wage Bodies or adjudicating machinery or through collective bargaining, the service conditions of the executives are more often than not fixed and dictated by the employer at his will. They can also be varied by him at will. In such case, therefore, the adjudicating authority has first to examine whether the service conditions and in particular the wage structure as obtains in the establishment at the relevant time, is fixed on some rational differentiation between the higher, and the lower staff, which may not always be the case. Hence it is not fair merely to compare the service conditions of both as they obtain however irrational their basis. If the initial differentiation in wages is itself irrational, the distortions are bound to set in and when that happens, the remedy in most cases may be to up grade the service conditions of the higher staff. But such distortion by itself may not be a ground for lowering the existing benefits of the workmen, which benefits often come to be earned through a long and arduous process, and sometimes even though struggle. If further the distortions in wages were to furnish the only ground for placing ceiling on dearness allowance the ground would almost always be available to the employer where he chooses to fix the salaries of the executives at low level. As has been observed by the Supreme Court in the case of the Indian Hume Pipe Limited (supra), it is also not enough to show that the wage packets of the workmen exceed those of the non workmen like executives. In most of the cases the initial salary of the total wage packet of his subordinate who has put in long years of service. There cannot, therefore, be any comparison between the wage packet of a senior workmen and the wage packet of a beginner executive. Unless, therefore, it is shown that a workmen with the same years of service gets salary more than an executive with the same number of years of service, it cannot be said that the case of distortions in wage structure is made out. Lastly, it is not enough that only the wage packets of the two are compared. The comparison has to be between the total service conditions of the two which should include also the value of the perquisites available to the executives ........."31 The wage disparities pointed out by the Company, therefore, will have to be examined in the light of what has been observed above. Neither the Tribunal nor the learned Single Judge has taken these factors into consideration. It is also necessary to observe in this connection that, with respect, we do not agree with the learned Judge that the disparities and distortions between the emoluments of the workmen and their superiors would not create discontent or problems of control and discipline. However, according to us, the disparities have to be established by applying the aforesaid tests. The argument based on disparities, therefore, cannot either be accepted or rejected off hand or on mere philosophical rhetorics. We are, therefore, of the view that this question requires serious reconsideration in the light of what has been held by the Division Bench in Hindustan Lever case (supra), as pointed out above. That can be done only giving an opportunity to both the parties to prove their respective case in that behalf. For that purpose the matter will have to be remanded to the Tribunal.32. Although the Company had not pleaded before the Tribunal that it was unable to bear the burden of the existing dearness allowance system, the Tribunal has referred to the Companys statement Exhibit C-104/31 giving the figures of profits before tax for the years 1976-77 to 1981-82 with yearwise additional burden "if the workmens demands" were granted. The result shown in that statement is that the Company would suffer during these years a net loss of Rs. 3,787.87 lakhs. The Union had in reply to this statement filed its statement Exhibit UC-15/7 showing the Companys figures of profits and the burden which indicated that the Company would get substantial profits during all these years, except for the year 1977-78. The Tribunal has commented upon the Unions statement by observing that the Union had arrived at the figures of gross profits by adding back to the profits before tax, depreciation, bad debts written off, provision for doubtful debts, provision for disallowances, provision for Guarantee repairs, etc. It appears that on this point, namely whether these items and in particular, depreciation should be added book to the gross profits there was at good deal of debate before the Tribunal. A further detailed statement was filed by the Company showing the additional financial burden involved in the demands. The Tribunal, after perusing the said statement, observed that if the workmens demands were granted in full, the wage bill would increase by more than 50%. It further appears that no specific issue was raised with regard to the financial capacity of the Company to bear the burden of the workmens demands. The debate with regard to the financial burden further was not in the context of the existing dearness allowance system but in the context of the demands of the workmen. The Tribunal has also referred to the financial capacity of the Company not in the context of the existing dearness allowance system but the demands of the workman. In fact, the Tribunal has also observed that on the whole the Company is prospering because it is mainly engaged in ship construction and in the manufacture and installation of offshare platforms. The Tribunal has further observed that for the ship construction, the Company surpasses all other ship yards in the country and for offshore platforms, it has no competitors in the country. The Tribunal has then gone on to observe as follows :".........It is true that the company is a national asset and it is expected to generate more and more surpluses for the expansion of the industry and to contribute to the National Development in general. At the same time, it cannot be ignored that the workers have also a due share in the prosperity of the Company. Dr. Kulkarni rightly pointed out to bear in mind the dicta of the Supreme Court that a Company cannot claim any special or partial treatment by virtue of its being a public undertaking and it is required to pay wages on par with employees of the Private Sector [(1967)1 L.L.J. 114; (1969)II L.L.J. 291]".All these observations have further been made in the context of the demands of the workmen for revision of pay scales and other benefits only.33. In paragraph 8 of their Writ Petition filed in this Court, the workmen have alleged as follows :"8. The latest financial position as disclosed by the Annual Report for 1983-84 discloses that the profits before taxes which were 261 corers in 1979-80 have risen to 14.95 crores in 1983-84, viz., there is about 7 times rise of 700% rise in the profits before taxes. Similarly, this annual report discloses that the profit after taxes increased form 1.66 crores to 14.25 crores between 1979-89 and 1983-84."The workmen have also quoted there observations from the Directors Report for the year 1983-84 which are as follows :"The Company registered further increase in both production and profit for the year. The production achieved is an all time high of Rs. 289.82 corers and amounts to an increase of 28% over the previous years. The profits before taxes amounting to Rs. 14.95 crores in again a record for the Company and represents an increase of 42% over the previous year. Companys New Projects in the East Yard Bhava and Mangalore are making good progress. With the additional facilities, the Companys production and profits are expected to substantially go up in 1984-85."The workmen have then submitted there in view of this position, the Company had not only been prospering during the last 12 years from the date of the earlier settlement but had also a very bright prospects and future. The petition thereafter goes on to state as follows :"Having regard to the direction and growth of our National economy, increasing emphasis on export orientation, ship construction, ship building and ship repair industry of which this is a leading unit in our country and in fact, one of the leading units in whole, word, is bound to grow by leaps and bounds."34. In paragraph 23 of its affidavit in reply to the petition, the Company has stated as follows :"23. With reference to paragraph 9 of the petition I say that the statements contained in the Records have been torn out of context and have been summarised in a deliberate attempt to mislead this Honble Court, I deny that the increase in profits is 700% as alleged in fact the increase is nowhere near 700%. I say that the petitioner ought to have stated that between 1979-80 and 1983-84 there has been a phenomenal increase in the funds invested in the 2nd respondent which has resulted in an increases of nearly 400% in the turn over of second respondent and that a substantial part of such increase was in view of the rapid growth of installation of offshore oil platform. The increase in profits is also due to the fact that the scheme of charges leviable by the 2nd respondent in respect of ships constructed for the Indian Navy was revised to the advantage of the second respondent after many years of negotiations. I say that in fact the composition of turn over of the second respondent has drastically changed in the last 5 years. Ship repair constitutes barely 4% of its total turn over whereas it constituted nearly 14 per cent in 1979-80. In any event, I say that the growth and the financial position of the 2nd respondent had bean are fully considered by the 1st respondent and therefore the 1st respondent by its ward placed a burden of about 3.2 cores rupees initially and starting with the 1st year a recurring burden of nearly also Rs. 3.20 crores p.a. and directed that interim relief of nearly Rs. 3.17 crores be foregone by the 2nd respondent. In paragraph 30 of its award that 1st respondent has observed that the on account of the recurring benefits granted to the workmen the wage bill of the 2nd respondent increase by nearly 17%."35. The learned Judge in his judgment has dealt with the financial aspect in paragraph 18 of the judgment, which discussion we may reproduce verbatim :"18, A strongly-worded passage from the impugned award reads as if the slab system is driving MDL to bankruptcy. This is sought to be countered or supported by Annual Reports and some brochures of the undertaking brought out since 1979-80. Till the making of the reference, the MDL was thriving. Care must be taken in assessing the financial viability of Government undertakings, more so when they have a captive customer or operate in a sellers market. But if the prospective buyer is the Government which is forced to pay any price, it is the country that loses. Every uneconomic enterprise run by the Government whether as a producer or customer adds to the burden of the common man in supporting the Leviathan. The test should not be the position reflected in the dressed-up accounts dished out in the glossy reports and booklets brought out by the companies. As the South-South countries are now discovering to their great cost, even public utilities run by Government cannot discard commercial considerations if they are to survive and if possible, thrive. According to the Tribunal, the MDL would end-up with a net loss of Rs. 2,252.75 lakhs if it has to accede to all the demands of the workmen and that for the period 1976-77 to 1981-82. This is on the basis of a submission made by Counsel for the MDL. What is lost sight of is the possibility, if not near certainty, of an increase in prices of the products and services rendered by the Undertaking. Next if the wage bill was becoming oppressive, there was the alternative of selective retrenchment. Petitioners rightly complain that earnings of labour were being pounced upon to recover up the true causes of a recent decline in the Company. This is borne out by a quick glance through the material. At page 4 of the Annual Report for 1979-80 are charts showing the growth trends and dividend from 1975-76 to 1979-80. Next, is the production chart at page 7. Both show a steady advance. Such a report for 1981-82 at page 10 reveals an actual decline of the ratio of salaries and wages to the other heads of income distribution. The 1984-85 report at page 7 records an increase in production vis-a-vis that of the preceding year despite adverse factors-these not being attributable to labour. Again at page 15 the income distribution figures show a pleasant decrease in the ratio of the salaries and wages vis-a-vis the preceding year. This leads to an interference of increased productivity on the part of the workers. It is in the 1985-86 report-for the first time-that high labour costs are cited as a reason for decline in profits. But this is along with other factors such as high levels of inventory and other overheads. Pages 8 and 9 speak of the order book expected to keep the concern occupied for years to come The oil and drilling equipment market had created a "no order" situation for the MDL. The year ended with a loss. The income distribution chart shows a nearly 5% increase in the salaries and wages bills vis-a-vis the 1984-85 figure. How far can this report be said to reflect a persisting trend. It is a truism that a years adverse results cannot be indicative of long term trends. It was argued that the slab system brought about abrupt and vital changes in the out goings of the undertaking on account of the wage bill thus making it difficult for the enterprise to formulate and implement long term plans. Planning would be easy if wages were constant. But the economic situation being what it is---scarcity of goods in comparison demand therefore--prices will keep Increases. If prices keep rising and, they have been there is no alternative but to provide for an escalation clause in every plan. An overall view of the MDLs performance show no hard evidence to prove that high labour costs or the slab system is leading the undertaking to ruin."The learned Judge thus came to the conclusion that there was no hard evidence to prove that high labour costs of the slab system was leading the Company to ruin.36. In their appeal memo filed in this Court, the Company has taken a specific plea that the learned Judge has totally failed to understand the implications of the annual financial reports of the Company and that he had erred in holding that the said reports led to an inference of increased productivity on the part of the workmen. They have also alleged that the learned Judge has erred in holding that an over-all view of the appellants performance did not show evidence to prove that high labour costs or the slab system was leading the Company to ruin. They have then specifically alleged that the appellants were not in a position to pass on the increase in labour costs to their customers and they had placed adequate material before the learned Judge to establish the fact. It appears that the General Manager of the Company had filed his affidavit dated January 7, 1987 before the learned Judge summarising its financial position for the years 1982-83 to 1985-86. Before us, the same General Manager has filed his affidavit dated March 14, 1989 producing along with it up dated statement showing certain financial particulars of the Company since 1982-83 to 1987-88 and also producing along with it, balance-sheets for the years 1986-87 and 1987-88 to contend that the financial position of the Company has since undergone a change for the worse. On behalf of the workmen, Mr. Deshmukh objected to the production of both affidavits and the balance-sheets. He contended, and according to us rightly, that the financial position sought to be pleaded by the Company with the help of the said documents cannot be taken into consideration by this Court unless the workmen have an opportunity to test these documents by cross-examination. Mr. Deshmukh, in particular, submitted that on the basis of the very same documents the workmen were in a position to show firstly that the pathetic picture that the Company has sought to paint is far from true and that the existing wage structure is unlikely to make any differences to the Companys financial position even in future. Mr. Damania sought to counter these contentions by pointing out that the Company was a public enterprise and that its balance-sheets were audited by the Auditor General. They were also accepted by the workmen for bonus settlement. Hence there was no need to tests them by cross-examination. We are afraid that this contention ignores that the documents have to be disseminated from different angels and in different light depending upon the purpose for which they are sought to be utilised.We are, therefore, of the view that while it is not possible to ignore the financial position of the Company as it is pleaded before us today, it is also not possible to accept the documents and the companys mere assertion in that behalf without giving an opportunity to the workmen to test the said documents by cross-examination. It is, therefore, only fair that both sides should get an opportunity to prove their case on this aspect vis-a-vis the existing and the new wage structure, both old and new, including dearness allowance system. There is no doubt that if the Company is unable to bear the burden of the existing wage structure that will be one of the compelling reasons to modify or replace it.37. It must in fairness to the tribunal be observed that either the 4th Pay Commission Report not the High Power Pay Committee Report nor the Supreme Court decision in The Indian Hume Pipe case (supra) was before it when it gave the award. But it ignored some obvious considerations. The workman are not to be deprived of their existing benefits except for compelling reasons. The Tribunal was impressed by the uniform dearness allowance which neutralized the increase in the cost of only essential goods and services for all income groups. But the Tribunal forgot to find out whether the existing dearness allowance system which was giving more benefits to the workmen over-neutralized the rise in the cost of living as indicated even by AICPI itself. That had to be found out by the method formulated by the Division Bench in its decision Hindustan Lever case (supra). Secondly, the tribunal did not examine the case sought to be made out by the Company on the basis of disparities in income from all angles. It merely accepted a bald table showing the wage packets of the different categories of workman and the staff. Lastly, the Company had not even leaded before it, its financial incapacity to bear the burden on account of the existing dearness allowance system which the Company wanted to replace. The bleak picture of its finances in future was painted by the Company in the context of the workmens demands which had nothing to do with the Companys demand. The Tribunal has not recorded its finding with regard to the Companys finances, even in the context of the workmens demands. These according to us are the errors apparent on the face of the award and it is for these reasons, and not necessarily for the reasons given by the learned Judge that an interference with the award was and is justified even in exercise of the writ jurisdiction.38. There is further no dispute that the Tribunal has revised the wage scales upward because it has replaced the existing system of dearness allowance by a new system. The learned Judge has, with respect, correctly pointed out that the new system of payment of dearness allowance is interlinked with the new pay scales, and since he was remanding the Companys demand for introducing new system of dearness allowance, it was also necessary to set aside the award with regard to the revision of the wage scales and remand it to the Tribunal. Since we are setting aside the new Dearness Allowance System for the reasons given above and since admittedly the new dearness allowance system and the new wage-scales granted are intimately interlinked and are dependent upon each other, it is only just and fair that the revision of pay scales granted by the Tribunal is also set aside and the workers demand in that behalf is also sent back to the tribunal for fresh consideration.39. The question whether there should be a replacement of the existing system of dearness allowance will have to be examined in the light of the two circumstances, namely distortions or the disparities in the incomes of the workmen and their superiors and the financial capacity of the Company to bear the burden of the existing system. Both parties should be given an opportunity to lead evidence and to test each others case in that behalf. If the Company succeeds in proving either of the circumstances, then a reconsideration of the existing pattern of the payment of dearness allowance may become necessary notwithstanding that there is no over-neutralization of the increase in the cost of living under the existing system and notwithstanding further that the existing system has been prevalent for a long time.40. The Respondent Association has filed an objection petition challenging the decision of the learned Judge with regard to the nucleus allowance, and overtime allowance claimed by the workmen in the Launches and Boats Department. The nucleus allowance was started as an incentive for workman primarily engaged in ship repair, to move over to the ship building work. The incentive was given to overcome the workmens reluctance to lose over-time allowance which was available in ship repair work, but not in his building work. Since admittedly today the ship building predominates and the ship repair work is considerably reduced, there is no need for continuance of this allowance to compensate the loss of over time allowance. As observed by the learned Judge the raison detere for the nucleus allowance has thus disappeared and hence there is no need to continue it.We also do not find any reason to interfere with the denial of over time allowance for the workmen of the Launches and Boats Department. As has been observed by the tribunal and accepted by the learned Judge, a similar demand made in an earlier reference No. 126 of 1954 was rejected by the then Tribunal on the ground that the duties of the workmen involved were intermittent and leisurely in character as compared to the continuous and arduous nature of the work done by other workmen. The Associations contention in that behalf that the workmen in the Launches and Boats Department have to suffer long waits which cause as much fatigue as continuous work does not merit any consideration, since we are of the view that the alleged fatigue cause by such waits even if true, needs no additional compensation.The objection petition of the workmen, therefore, has to be rejected.

Decision:
1[ds]7. There is no dispute before us, as indeed there was no dispute either before the learned Single Judge or the Tribunal, that the main bone of contention between the parties was the desirability or otherwise of the continuation of the present system of dearness allowance. Even the consideration of the demand of the workers for revision of the wage structure was linked to the Companys demand for change in the system for payment of dearness allowance. As is apparent from the Award of the industrial Tribunal, even the Tribunal has linked the change in the revision of the wage structure which it has granted, to the change in the dearness allowance system which it has introduced, and both changes are so linked by it as to be dependant upon each other. That is why even the learned Single Judge, while setting aside the Award of the Tribunal with regard to the dearness allowance, has also quashed the Award revising the wage structure and remanded both for fresh consideration to the Tribunal. Further, the Appellant Companys grievance before us against the learned Judges decision is also mainly on the ground that the learned Judge has interfered with the Award of the Tribunal introducing the new system of dearness allowance. Hence the preliminary contention as to whether the learned Judge was right in interferring with the award while exercising his jurisdiction under Article 226 of the Constitution is intimately connected with the larger question on merits as to whether the Tribunal was right in doing away with the existing system of dearness allowance and introducing a new one. It may also be mentioned in this connection that the reasons given by the learned Judge for interferring with the Tribunals Award in that behalf are also reasons connected intimately with the merits and demerits of the existing and the new system. Hence before we answer the preliminary contention, it is necessary to examine the arguments and counter arguments on the merits and demerits of the present and the new system of dearness allowance.It will thus be apparent that for the operatives drawing basic wage upto Rs. 306/per month, there in no slab system under scale B. The dearness allowance paid to them is linked both to the percentage of basic pay and consumer price index figure ("CPI"). For every 2 points rise in CPI, they are paid dearness allowance at the rate of 1 per cent of their basic pay. It is only the operative whose basic pay is in excess of Rs. 306/per month who are paid dearness allowance on the sliding scale shown in the table above applicable to the clerical and subordinate staff, there being again the same dual linkage to basic pay and CPI as shown in the table. It is possible to describe the system on which dearness allowance is paid to operatives drawing wage above basic wage of Rs. 306/and to the clerical and subordinate staff, as being a slab system, since the rate of dearness allowance goes on varying on a sliding scale for every next Rs.However, the rate of dearness allowance paid even to this category of workmen is not a varying lump sum amount but a varying percentage of basic wage.It would thus appear from the aforesaid review of the discussion and findings of the Central Government Dearness Allowance Commission, National Labour Commission, Third Pay Commission, and Boothlingam Committee and the Fourth Pay Commission that certain broad principles were accepted as underlying any system of dearness allowance. It is accepted that the, the purpose of dearness allowance is to neutralise as far as possible the entire rise in the cost of living of the minimum wage earner. The minimum wage which is sought to be thus protected completely is the minimum wage in theIndustries and not necessarily the wage fixed under the Minimum Wages Act. This means that complete protection which is advised to be given against the price rise is to the employees who draw the lowest wage in any establishment. The percentage of neutralisation of the lowest paid worker may vary between 95 to 100. Till the Fourth Pay Commission made a departure in that respect it was commonly held that there need be no protection against the rise in the cost of living to incomes above a certain amount of salary firstly because the higher wage/salary earners are expected to make the same sacrifice as other sections of society whose incomes are not protected by dearness allowance, and secondly because, the higher salary they draw is expected to cushion them against the price rise. However, it is commonly accepted that all wage/salary earners who are paid dearness allowance need not be protected to the same extent, and their protection may be on a scale sliding or declining with the rise in the income. This is also on the principle that the higher the wage group, more the cushion and more the need to sacrifice. To this principle as pointed out above the Palekar Award has made an exception and has on the contrary granted higher rate of dearness allowance, to the higher incomes. The cost of price index which is generally taken into consideration for protecting the wage/salary is the cost of price index of the basket of goods and services consumed by the average worker because what is to be protected against is the rise in prices of the essentials and not of the other goods and services. These essentials are deemed to be the same for all wage/salary earners whatever their income bracket.One thing, therefore, is certain that the trend beginning from the Third Pay Commission is in favour of the view that the object of the dearness allowances is to prevent the erosion of real income, and not merely to protect the consumption basket of essential goods and services against the price rise. The Fourth Pay Commission and the High Power Pay Committee have, as pointed out earlier, felt the need to protect monthly basic pay upto Rs. 3,500/of the Government employees fully. Whatever the view, therefore, with regard to the object of dearness allowance that one may accept, it can sagely be concluded on the authority of these expert Government panels that the rise in the cost of living upto the basic pay of at least Rs. 3,500/per month needs to be neutralized to the extent of 100%. As observed by the High Power Pay Committee, the consumption basket, which is the basis of the All India Consumer Price Index is not relevant up to the said basic pay range. It has also to be noted that these expert panels have afforded substantial protection even to monthly incomes above Rs. 3,500/by recommending 75% and 65% of neutralization to incomes between Rs. 3,505/to Rs. 6,000/and above Rs. 6,000/is demonstrated there on the basis of the method devised for the purpose that the dearness allowance system prevalent in that Company did notthe rise in the cost of living and the Company had failed to make out any other reason for change in the existing system Hence the Companys demand for placing a ceiling on dearness allowance was not justified. That decision has become most relevant and important for our purpose for three reasons in particular. Firstly, the method evolved there to find out whether the dearness allowance system existing in an establishmentthe rise in the cost of living can be applied in the present case to find out the neutralisation under the existing system. Secondly, the decision has discussed the circumstances in the light of which the distortions and disparties in the incomes of the workmen and their superiors have to be examined. Since the Tribunal in the present case have given such distortions as one of the grounds to replace the existing system, and the Company also relies heavily on that circumstances in support of its demand, it will be necessary to examine the contention in the light of the said decision. It is in the light of that decision also, further that we will have to consider whether the Company has made out any other compelling reason for changing the present system of the payment of dearness allowance and to replace it by the new one as the Tribunal has done.23. The method evolved by that decision to determine whether the existing dearness allowance system result inof the rise in the cost of living is as follows. First the rate at which the future rise in the cost of living is to be neutralized is found out by dividing the total wage packet of the workmen (basic pay plus dearness allowance) in the base year by the cost of living index of that year, is multiplied by the said neutralization rate. If the wage packet thus arrived at exceeds the wage packet payable to the workmen under the existing system, there is nounder the existing system and the converse.It is, therefore, clear that the existing dearness allowance system does not over neutralise the rise in the cost of living either at the minimum or the maximum pay scale of any of the workmen involved in the Reference, Hence the Company cannot be said to have made out a case for change in the existing system on thatis true that the existing system, as indicated by the aforesaid table does show this anomaly in some cases. But the anomaly is so marginal as to require no serious consideration at least for replacing it by a totally new one as the Tribunal has done. It has also to be remembered that the demand for affecting the changes is not raised by the workmen. If the workmen have no grievance against it, there is no reason to tinker with the system which has been prevalent in the Company for more about 40 yearsregards the first contention, we may point out that the National Labour Commission has prescribed the neutralization percentage at the lowest level between 95 to 100. The existing scheme by ensuring it at 96.92% at the minimum scale does confirm to the pattern. It is only orginally less at the maximum pay scale. But as is pointed out earlier, the workmen have no grievance against it. As regards the second contention, there is no law to prevent, an employer from giving equal neutralization percentage to all employees. If, therefore, an employer has already given it, he cannot ask for a reduction in it, except for compellingare afraid that this argument also misses the point, namely that the present demand for change in the dearness allowance system is not made by the workmen, including those whose wages are not protected fully. What is more, as is admitted by Mr. Damania, the new system introduced by the Tribunal is bound to affect adversely the wage packets of 60% of the workmen. On balance, therefore, the existing system is not disadvantageous to the workmen as a whole. There is also no grievance against it from any of the section of the workmen. Further under the new system the lowest paid workmen stand to gain only marginally. But a more disarming reply to all these contentions advanced on behalf of the new system is that the Companys demand for the introduction of the new system is not motivated by a concern for the lowest paid workmen but by its alarm at the alleged disproportionate wage packets of the workmen in the higher income brackets. As has been held by the Supreme Court in the Indian Hume Pipe case (supra) the existing service conditions should not be tinkered with to the disadvantage of the workmen unless there are compiling reasons to do so. Hence, these contentions by themselves have no merit inhave already appointed out that there has been a change in the trend of thinking on the object of the dearness allowance. The Third and the Fourth Pay Commissions and the High Power Pay Committee have now come to accept the view that it is the real value of the income of the workman which requires to be protected against its erosion by inflation. The object of dearness allowance is no longer merely to protect the workman against the rise in the cost of living of the basic necessities. There is nothing in law to prevent an employer from introducing a system which protects the real value of the workmens income. If, therefore, an employer has done so, so long as, it is not shown that the dearness allowance paid to the workman protects more than the real value of their income, it is not possible to accept that the existing system should be changed merely because the incomes are allegedly out of proportion to the increases in the cost of basic necessities. The table reproduced above which is also worked out by the method suggested by the Division Bench in the Hindustan Liver case (supra) shows that under the existing system the extent of the protection afforded to the income of the workmen at all levels is less thanargument was general in nature and not with reference to any particular allowance and therefore has to be met by a general reply. The argument firstly forgets that what is under scrutiny is the working of the existing system of dearness allowance and the extent to which the same neutralizes the rise in the CPI. The other allowances, if any, have nothing to do with the dearness allowance system. They are paid independently of it. The purposes for which they are paid are also different. Secondly, the CPI though it takes into account the items for some of which these separate allowances are paid (such as house rent allowance, for example) does no more than take into account only the all India average of their incidence. The allowances, on the other hand, are paid to compensate for more than average or normal incidence of these items. For example, the house rent allowance is not paid in every town but only in such cities as Bombay where the rents are abnormally high. Such disproportionate costs are not reflected in the AICPI is complied on an All India average of the prices of the items which go into the consumer basket. Hence it is not possible to accept the saidnone of the shipyards in the country are comparable to the Company either on the basis of the size of its operation or the nature of the work undertaken by it. Secondly, the business of the Company is unique not only in the country but also in the region. Hence the wage packets of the General Engineering concerns in the region cannot also be compared with those in the Company. Thirdly, what has to be compared is the totality of the service condition and not merely the wage packet. There is no material on record in that respect. For all these reasons, theformula cannot be applied in the resent case and certainly not for reducing the existing benefits. The Tribunal has, therefore, certainly erred in the applying the said formula.28. For introducing the new system, the Tribunal has further taken into consideration the fact that about 89% of the workmen in the public sector to which admittedly the Company belongs, are paid dearness allowance at the uniform rate as prescribed by the Public Bureau of Enterprises. The tribunal has, however, forgotten the fact that it was not introducing the dearness allowance system for the first time in the Company but was replacing the existing system. There is no doubt that the said consideration would have been valid if the Tribunal was called upon to formulate a dearness allowance system for introduction in the Company for the first time. When an adjudication body is called upon to replace the existing system, the first thing that it is required to consider is whether the system which is sought to be introduced is more or less beneficial to the workmen compared to the existing one. If it finds that the new system is less beneficial than or deprives the workmen of the benefits available in, the existing system, it has to stay its hands off the new system, unless of course there are compelling reasons to do so. Any consideration such as the uniformity with the other concerns is not a valid consideration for downgrading the existing benefits. The existing system of dearness allowance further, as stated earlier, is about 40 years old. It was introduced when some of the other public sector concerns had not even come into existence. The workmen cannot be deprived of their existing benefits on the ground that the other concerns give lesser benefits to their workmen. It is equally open for the workmen to argue that the need in such cases is to upgrade the service conditions in the other concerns, and not thefurther comments are, therefore, necessary on this contention.29. The Tribunal has also harped upon the fact that the existing dearness allowance system has a dual linkage both with the basic salary and the rise in the cost of living and it is this dual linkage which is responsible for giving the workers wages allegedly out of proportion to the increase in the cost of the basic necessities. In the first instance, it has to be remembered that the dual linkage is not unique to this Company. In fact, such system is prevalent in many other concerns. Even the recommendations of the Pay Commissions and the High Power Pay Committee are based on such dualare referring to these observations only for the purpose of pointing out that the reason given by the Tribunal for abolishing the slab system, namely the dual linkage, is not by itself a valid one. We have already pointed out that in spite of the dual linkage under the existing system, the neutralization of the cost of living for all workman involved in the Reference is less that 100% and varies between 88.98% and 97.05% at the minimum of the scales of pay and between 82.92% any 94.80% at the maximum. Hence, according to us, this reason by itself cannot furnish a ground for replacing the existing system.30. The further reason given by the Tribunal for replacing the existing system is that the existing system results in the ever widening of disparities in the minimum and maximum wages of the workmen in the different categories. In that connection, the Tribunal has referred to Exhibitwhich gives the number of workmen in different categories who received wages exceeding the salary received by their officers in the year 1983. According to that statement, about 2,539 workmen drew higher wages than the salary of the junior engineers and other equivalent ranks of officers. The Tribunal has further observed that the number of workmen receiving wages exceeding the salaries of the officers would go on increasing as a result of the present Dearness Allowance Formula and that such a state of affairs would be detrimental to industrial discipline. Before us, the Company produced yet another statement at pages 1205 to 1207 showing the total emoluments drawn in December, 1988 by officers and workmen/clerical staff working under them. The statement does show dispartities in the wage packets of the workmen and the officers. However, admittedly this statement was not before the Tribunal and as is rightly contended on behalf of the Union, the workmen had no opportunity to test the statement byBesides, as has been observed by the Division Bench in The Hindustan Lever case (supra) it is not enough to show that the wages received by the workmen are higher than theirThe wage disparities pointed out by the Company, therefore, will have to be examined in the light of what has been observed above. Neither the Tribunal nor the learned Single Judge has taken these factors into consideration. It is also necessary to observe in this connection that, with respect, we do not agree with the learned Judge that the disparities and distortions between the emoluments of the workmen and their superiors would not create discontent or problems of control and discipline. However, according to us, the disparities have to be established by applying the aforesaid tests. The argument based on disparities, therefore, cannot either be accepted or rejected off hand or on mere philosophical rhetorics. We are, therefore, of the view that this question requires serious reconsideration in the light of what has been held by the Division Bench in Hindustan Lever case (supra), as pointed out above. That can be done only giving an opportunity to both the parties to prove their respective case in that behalf. For that purpose the matter will have to be remanded to the Tribunal.32. Although the Company had not pleaded before the Tribunal that it was unable to bear the burden of the existing dearness allowance system, the Tribunal has referred to the Companys statement Exhibitgiving the figures of profits before tax for the years82 with yearwise additional burden "if the workmens demands" were granted. The result shown in that statement is that the Company would suffer during these years a net loss of Rs. 3,787.87appears that the General Manager of the Company had filed his affidavit dated January 7, 1987 before the learned Judge summarising its financial position for the years6. Before us, the same General Manager has filed his affidavit dated March 14, 1989 producing along with it up dated statement showing certain financial particulars of the Company since88 and also producing along with it,for the years88 to contend that the financial position of the Company has since undergone a change for theare afraid that this contention ignores that the documents have to be disseminated from different angels and in different light depending upon the purpose for which they are sought to be utilised.We are, therefore, of the view that while it is not possible to ignore the financial position of the Company as it is pleaded before us today, it is also not possible to accept the documents and the companys mere assertion in that behalf without giving an opportunity to the workmen to test the said documents byIt is, therefore, only fair that both sides should get an opportunity to prove their case on this aspectthe existing and the new wage structure, both old and new, including dearness allowance system. There is no doubt that if the Company is unable to bear the burden of the existing wage structure that will be one of the compelling reasons to modify or replace it.37. It must in fairness to the tribunal be observed that either the 4th Pay Commission Report not the High Power Pay Committee Report nor the Supreme Court decision in The Indian Hume Pipe case (supra) was before it when it gave the award. But it ignored some obvious considerations. The workman are not to be deprived of their existing benefits except for compelling reasons. The Tribunal was impressed by the uniform dearness allowance which neutralized the increase in the cost of only essential goods and services for all income groups. But the Tribunal forgot to find out whether the existing dearness allowance system which was giving more benefits to the workmenthe rise in the cost of living as indicated even by AICPI itself. That had to be found out by the method formulated by the Division Bench in its decision Hindustan Lever case (supra). Secondly, the tribunal did not examine the case sought to be made out by the Company on the basis of disparities in income from all angles. It merely accepted a bald table showing the wage packets of the different categories of workman and the staff. Lastly, the Company had not even leaded before it, its financial incapacity to bear the burden on account of the existing dearness allowance system which the Company wanted to replace. The bleak picture of its finances in future was painted by the Company in the context of the workmens demands which had nothing to do with the Companys demand. The Tribunal has not recorded its finding with regard to the Companys finances, even in the context of the workmens demands. These according to us are the errors apparent on the face of the award and it is for these reasons, and not necessarily for the reasons given by the learned Judge that an interference with the award was and is justified even in exercise of the writ jurisdiction.38. There is further no dispute that the Tribunal has revised the wage scales upward because it has replaced the existing system of dearness allowance by a new system. The learned Judge has, with respect, correctly pointed out that the new system of payment of dearness allowance is interlinked with the new pay scales, and since he was remanding the Companys demand for introducing new system of dearness allowance, it was also necessary to set aside the award with regard to the revision of the wage scales and remand it to the Tribunal. Since we are setting aside the new Dearness Allowance System for the reasons given above and since admittedly the new dearness allowance system and the newgranted are intimately interlinked and are dependent upon each other, it is only just and fair that the revision of pay scales granted by the Tribunal is also set aside and the workers demand in that behalf is also sent back to the tribunal for fresh consideration.39. The question whether there should be a replacement of the existing system of dearness allowance will have to be examined in the light of the two circumstances, namely distortions or the disparities in the incomes of the workmen and their superiors and the financial capacity of the Company to bear the burden of the existing system. Both parties should be given an opportunity to lead evidence and to test each others case in that behalf. If the Company succeeds in proving either of the circumstances, then a reconsideration of the existing pattern of the payment of dearness allowance may become necessary notwithstanding that there is noof the increase in the cost of living under the existing system and notwithstanding further that the existing system has been prevalent for a long time.40. The Respondent Association has filed an objection petition challenging the decision of the learned Judge with regard to the nucleus allowance, and overtime allowance claimed by the workmen in the Launches and Boats Department. The nucleus allowance was started as an incentive for workman primarily engaged in ship repair, to move over to the ship building work. The incentive was given to overcome the workmens reluctance to loseallowance which was available in ship repair work, but not in his building work. Since admittedly today the ship building predominates and the ship repair work is considerably reduced, there is no need for continuance of this allowance to compensate the loss of over time allowance. As observed by the learned Judge the raison detere for the nucleus allowance has thus disappeared and hence there is no need to continue it.We also do not find any reason to interfere with the denial of over time allowance for the workmen of the Launches and Boats Department. As has been observed by the tribunal and accepted by the learned Judge, a similar demand made in an earlier reference No. 126 of 1954 was rejected by the then Tribunal on the ground that the duties of the workmen involved were intermittent and leisurely in character as compared to the continuous and arduous nature of the work done by other workmen. The Associations contention in that behalf that the workmen in the Launches and Boats Department have to suffer long waits which cause as much fatigue as continuous work does not merit any consideration, since we are of the view that the alleged fatigue cause by such waits even if true, needs no additional compensation.The objection petition of the workmen, therefore, has to be rejected.