Case: British India Electric Construction Company Limited Vs. Workmen

Per Sinha( 1 ) This appeal by special leave is directed against the decision of the Labour Appellate tribunal, dated 13/09/1955, modifying the award dated 29/06/1954, of the Third Industrial tribunal of Calcutta, in respect of an industrial dispute 1 between the appellant-company and its workers.( 2 ) The facts and circumstances leading up to this appeal are as follows: The appellant is an engineering company incorporated in India with its head office in Calcutta. It is 534 under the managing: agency of Balmer Lawrie and Co., Ltd., which .manages a number of other concerns also. Prior to 19/03/1947, the appellant used to pay dearness allowance to its workmen at a flat rate of Rs. 20.00 per month plus food concession, cost-of-living bonuses, etc. The practice of the appellant-company has been to regulate the wages including basic pay plus dearness allowance, by issuing circulars from time to time. One such circular is dated 18/02/1947, issued by the managing agents aforesaid, replacing the system of dearness allowance then prevailing with a consolidated monthly cash allowance based on Bengal Chamber of Commerce middle class cost of living figures as published from time to time. The new system was to come into force from 1/03/1947. Indus- trial disputes were apprehended in a large number of engineering concerns. The Government of West Bengal referred those disputes, between 119 engineering firms specified in the order of reference and their workmen to an industrial tribunal. In that reference, the appellant and its workmen were also parties. The award given by this tribunal, which will hereinafter be referred to as the first award, was published in the Calcutta Gazette Extra- ordinary, bearing the date 3/07/1948. The award was to be effective from 1/04/1948 for one year. The award fixed the dearness allowance payable to workmen of those engineering concerns at the following rates:It will, thus, be seen that the tribunal did not accede to the claim made on behalf of the workmen, of a minimum dearness allowance of Rs. 45.00 per month. The minimum they fixed at Rs. 25.00 per month, and then prescribed a graduated scale of dearness allowance subject to a maximum of Rs. 50.00 per month The tribunal also took notice of the fact that so me of the engineering firms which were members of the Bengal Chamber of Commerce were paying dearness allowance at higher rates than those prescribed by the award. The tribunal fixed the minimum scale but did not in any way affect the higher rate of dearness allowance actually paid by some of the firms aforesaid. In order to safeguard the interests of the workmen of such firms which were more generous to their workmen, the award contained the following reservations :-" Where the existing minimum basic pay plus dearness allowance in a particular firm is higher than the minimum basic pay plus dearness allowance fixed by this award, the total remuneration for the present employees will not be adversely affected by this award. Where the existing total remuneration is more but the minimum basic pay is less than that fixed by this award, the basic pay should be increased to the minimum fixed, and the dearness allowance reduced by the same amount, keeping the total remuneration unaltered. This is necessary for the purpose of calculating the contribution to the provident fund and calculating gratuity.( 3 ) We desire that the rules for holidays and leave should be standardized by all the firms as soon as possible, in order, to eliminate one of the important causes of labour trouble. If, however, any firm has already announced leave and holidays for the current year at a scale more liberal than what the award provides, the right to such leave and holidays should not be affected by this award. Further, leave at credit of any person under the existing leave rules of a firm will not lapse in spite of any provision as to leave contained in this award.( 4 ) This award will not affect adversely any other kind of existing advantage which the employees of a firm may be enjoying in excess of the benefits given by this award, unless an express provision has been made in this award concerning such advantage."( 5 ) As a matter of fact, at the time of the publication of the award, the appellant was paying dearness allowance to its general and clerical staff at the factory at the following rates based on the then current Bengal Chamber of Commerce middle class cost of living index of 311-32:70 per cent on the first 100 rupees.35 per cent on the second 100 rupees, and 171 per cent on the remainder of salary.535 The appellant was also paying dearness allowance at the flat rate of Rs. 43.00 per month to its subordinate staff at the factory. It is, thus clear that the appellant used to pay to its workers at rates much higher than those fixed by the award.Soon after the publication of the award, in July 1948, the appellant, through its managing agents, Balmer Lawrie and C., Ltd., issued a letter in these terms:" 21/08/1948ToAll works managers (B.I.E. C.Co., Ltd.)[Dearness allowance-Bengal Chamber scale.]Please note that the above scale does not apply to clerical staff at works covered by the Engineering Trades tribunal award.There will, therefore, be no increase in the dearness allowance paid to clerical staff at works, all of whom are at present on a scale considerably in excess of that laid down by the tribunal." The appellant, thus, gave an unequivocal notice to all its employees concerned, through the works manager, that the current rate of dearness allowance which was considerably in excess of the dearness allowance prescribed by the award aforesaid, shall not be increased so as to be on the same level with the rate of dearness allowance prescribed by the Bengal Chamber of Commerce, which will hereinafter be referred to as the "chamber scale," for the sake of brevity. The result of the letter aforesaid, quoted above, dated 21/08/1948, was that the rate of dearness allowance was freezed at the scale at which it stood at the date. Even after 1/04/1949, on which date the award had ceased to be operative, the appellant continued to pay its employees at the same enhanced rate of dearness allowance though it was not legally bound to do so. At the same time, the appellant did not increase the rate of dearness allowance after that date even though the cost of living index rose higher and the " chamber scale " called for payment at a higher percentage as dearness allowance. On 25/02/1949, the Labour Commissioner, West Bengal, addressed a letter to the works manager of the appellant company, drawing its attention to the demands of the workers union, for increased dearness allowance according to the " chamber scale." He also pointed out that though the award had no force after 31/03/1949 except of a recommendation on the question of dearness allowance, the appellant might reconsider its position and see if it could adjust the allowance with the rise in the cost of living. The letter was answered by the appellants letter dated 11/03/1949, to the effect that the appellant could find no reasons for modifying its conclusions already conveyed to the government in its previous letters. The government, thereafter, made a second reference to the industrial tribunal on the question of dearness allowance between 64 engineering firms including the appellant and their workmen. The award of the second tribunal was published in the Calcutta Gazette Extraordinary in September 1950. It will be referred to hereafter as the " second award." It fixed the dearness allowance for all categories of employees on the following scale :-As compared to the first award, the second award, in all the pay ranges, allowed a higher rate of dearness allowance.( 6 ) Before the industrial tribunal which gave the second award, the " chamber scale " was being insisted upon by the employees. The tribunal went carefully into the matter and made the following observations giving reasons why they did not recommend that scale for all employees :- " The Bengal Chamber of Commerce scheme is meant essentially for commercial establishments which employ middle class clerical employees and subordinate (menial) staff and have nothing to do with such manual labour as nothing to do employed in manufacturing concerns. Commercial establishments ordinarily employ a much lesser number of persons than manufacturing concerns like engineering firms. What can be done in respect of a smaller personnel doing an entirely different type of work in commercial offices cannot necessarily be done in respect of a large number of employees-manual, clerical and otherwise working in engineering concerns. The cost of production must necessarily be a big factor for consideration in dealing with engineering firms as distinguished from pure mercantile firms. We are of opinion that the conditions of service on the basis of the Bengal Chamber of Commerce scheme cannot be reasonably applied to engineering firms which have no function in a competitive market and have to sell their products to consumers in this country and abroad. We have come to the conclusion that we should not make any distinction between the factory office and the head office attached to engineering firms. It has been pointed out to us that the Bengal Chamber of Commerce scheme of dearness allowance is actually being applied in the head offices of some engineering concerns. We have no desire to interfere with the policy of those concerns who have chosen to be generous, but we are unable to compel anyone to be equally generous and we think our task is to determine the minimum standard applicable to all concerns, leaving it open to individual concerns to pursue a more liberal policy if they so desire. Where a more liberal policy is already being pursued as regards dearness allowance, we shall direct that the existing scale of dearness allowance, whether based on the Bengal Chamber of Commerce scheme or anything else, shall not be reduced. We are unable to direct that, generally speaking, the Bengal Chamber of Commerce scheme of dearness allowance should be adopted for clerical employees in the head office, the factory office, or the factory of any engineering firm or for the manual workers, skilled or unskilled, working under it."( 7 ) It is noteworthy that even after the second award came into operation, the appellant- company was paying to its employees dearness allowance at a rate higher than that fixed by the second award. At pp. 19-20 of part 2 of the paper book are set out the names of the 58 employees of the company on the clerical staff, as in April 1954, showing Their basic pay, dearness allowance actually being paid to them, and the dearness allowance as it would work out at the rates prescribed by the second award. Comparing the two rates of dearness allowance, we find that in every case the dearness allowance actually paid by the appellant to its clerical staff was considerably higher than that prescribed by the second award. In aggregate, the figure monthly paid by way of dearness allowance, came to Rs. 4,063.00 omitting annas, whereas the aggregate figure at the rate given by the second award would come to Rs. 2,616.00. Thus, the company was paying by way of dearness allowance Rs. 1,447.00 more than the prescribed rate of dearness allowance. it may also be added that the workers of the appellant-company did not, in terms, raise the question during the pendency of the proceedings before the second tribunal aforesaid that the "chamber scale" was apart and parcel of their conditions of service, and, as such, they were entitled to that scale in all respects. Naturally, therefore, the second award did not deal with that aspect of the matter. It only considered, as stated above, the desirability and feasibility of making that scale applicable to all grades of employees, irrespective of other considerations.( 8 ) During the currency of the second award, an event of great importance occurred, as will presently appear, which created further complications and differences between the appellant and its employees. The Indian Galvanizing Company 1926), Ltd., is one of the engineering firms managed by Balmer Lawrie and Co., Ltd., with its head office at Calcutta. In 1949, the government of West Bengal had made a reference of the disputes between the company and its employees to an industrial tribunal. It gave its award which was published officially in August 1951. On the question of dearness allowance, the industrial tribunal considered the rates paid by the company as compared to the rates prescribed by the second award. It considered the rates actually paid by the company, which were the same as in the present case, to be fair, and naturally, directed the dearness allowance to be continued to be paid according to the existing scale. But the workmen preferred an appeal to the Appellate tribunal which allowed the appeal by its decision dated 16/10/1952, holding that the "chamber scale" had become one of the conditions of service as a matter of interpretation of the first award with particular reference to the reservations made therein, as set out herein above. This interpretation gives rise to the main controversies which we have to determine in the present case. It decided that the dearness allowance according to the "chamber scale" was an "existing advantage" within the meaning of the last paragraph of the reservations made in the first award. It directed the Indian Galvanizing Company aforesaid to pay to its clerks employed in the factory dearness allowance according to that scale with retrospective effect from August 1948. From this award an application for special leave to appeal to this court was dismissed in limine on 17/04/1953.( 9 ) The course of events as summarized above, had its repercussions on the relations between the appellant and certain of its employees who made similar demands in respect of dearness allowance and claimed that the "chamber scale" should be applicable to them also. On this question, the parties differed and on representations made to the Government of West Bengal, it referred the dispute to the Third Industrial tribunal in October 1953. The matters referred to the tribunal for adjudication were "dearness allowance" with date of giving effect thereto. The said tribunal made its award on 29/06/1954, which was officially published in July 1954. The tribunal held, on the basis of the decision aforesaid, in the case of the Indian Galvanizing Company, Ltd., that the claim of the workmen for dearness allowance on the "chamber scale" was well-founded In view of the reservations made as aforesaid, and that that scale had become a condition of service. It further held that the employees at the factory were entitled to be paid dearness allowance according to the "chamber scale" linked with the rise in the cost-of-living index. The tribunal also rejected the contention of the company that the workmen, not having raised this question at the time of the second award, could not agitate the matter at the time of the third award. The tribunal further held that the subordinate staff and various categories of the employees at the factory, were entitled to the same scale of dearness allowance. As to the date from which the "chamber scale" of dearness allowance, thus adjudicated in favour of the employees, should be paid, the tribunal held that the companys financial condition was not such as to bear the additional burden of arrears on the "chamber scale" from August 1948; hence, it directed that the "chamber scale" of dearness allowance should lie paid from the date of the third reference, namely, 26/10/1953.( 10 ) Three appeals were filed from the saif third award. They were all heard together and disposed of by a single judgment dated 13/09/1955, by the Labour Appellate Tribunal. The Appellate tribunal dismissed the companys appeal directed against the award in so far as it had ordered payment of dearness allowance on the "chamber scale." On the other hand, it allowed the workmens appeals directing, inter alia, that the "chamber scale" of dearness allowance shall be payable from August 1948. Against the decision aforesaid, of the Labour Appellate tribunal, the appellant moved this court and obtained special leave to appeal.( 11 ) On this appeal, the learned counsel for the appellant urged that the tribunals below erred in interpreting the first award in no far as they held that the last paragraph of the "reservations" aforesaid, meant to include dearness allowance at the "chamber scale" as an "existing advantage." Secondly, it, was urged that the workmen, not having specifically pleaded before the Second Engineering tribunal that the "chamber scale" was a condition of their service, could not urge it at the time of the third reference ; and thirdly that, in any view of the matter, the appellant was at liberty to alter the rate of dearness allowance after the expiry of the first award, that is to say, from 1/04/1949, as had been done by the usual circular dated 21/08/1948.( 12 ) It is manifest that if the first argument relating to the interpretation of the reservation in the last paragraph set out above, raised on behalf of the appellant, is well founded, no other question will require determination by this court in this appeal. The Labour Appellate tribunal, while discussing the effect of the reservations aforesaid, made the following observations:- "The first of the aforesaid two reservations does not, in our opinion, lend support to the claim of the factory clerical staff now made either in respect of the wage-scales, grades or dearness allowance. It only preserved intact the total emolument they were actually getting at the time when the award was made. The claims can only be supported on the basis of the second reservation." According to the Appellate tribunal, the claim to dearness allowance on the "chamber scale" was an " existing advantage " which was being enjoyed by the employees and which was not to be adversely affected by the first award. The reason for this conclusion of the Appellate Tribunal may best be stated in its own words as follows: "The claim for dearness allowance, however, stands on a different footing. Dearness allowance, according to the scales of the Bengal Chamber of Commerce, was at that time an existing advantage. The fact that many engineering firms which were parties to the reference were paying at these scales was noticed by the tribunal and the tribunal did not expressly make any other provision in its award respecting that advantage. We. therefore, hold that this claim comes within the saving."( 13 ) The question is whether this interpretation by the Appellate tribunal, of what it calls the second reservation, is correct. It has to be recalled that the first award, in terms, did not make the "chamber scale" applicable to the workmen as had been claimed by them. The award prescribed a much lower scale of dearness allowance, but, at the same time, it did not intend to deprive the workmen of the benefit of a more generous treatment which was being accorded by some of the engineering firms including the appellant. After having prescribed a graduated scale of dearness allowance with reference to the pay range, as set out above, and after having definitely negatived the claim of the work- men to dearness allowance on the " chamber scale," the award proceeded to make certain reservations. The first reservation, as rightly pointed out by the Appellate Tribunal, was concerned with conserving the total emoluments actually enjoyed by the employees. In the last paragraph, the reservation to the effect that " this award will not affect adversely any other kind of existing advantage which the employees of a firm may be enjoying "must, on a proper reading of the entire award, have reference to " existing advantage " of a kind other than those dealt with in the preceding paragraphs. One of the preceding paragraphs had specifically dealt with the question of dearness allowance. Hence, dearness allowance could not come within the purview of the reservation in respect of " other kind of existing advantage." This expression may have reference to emoluments other than basic salary and dearness allowance. Perhaps, it may have reference to other advantages like housing allowance, supply of free electricity, medical relief, etc. The whole history of the Industrial dispute relating to dearness allowance, as set out above and covered by the first two awards, is against the interpretation given to the reservation aforesaid by the tribunals below. Besides, if Cl. (3) refers to dearness allowance as suggested by the respondents, Cl. (1) would really be redundant since its provisions would, by necessary implication, be covered by Cl. (3) itself. As already stated, soon after the publication of the first award, the appellant notified that there would be no further increase in dearness allowance on the basis of the "chamber scale " in view of the fact that the dearness allowance actually paid to the workmen was considerably in excess of what had been prescribed by the first award. That notice was given effect to and dearness allowance was paid to the workmen accordingly, which they received without any protest. When there was a second reference to the Engineering tribunal, resulting in the second award as aforesaid, no such controversy was raised by the workmen who must have known all the time that the "chamber scale" of dearness allowance was not being enjoyed by them. Thus, the workmen themselves under- stood the first award in the same sense in which the appellant understood it and gave effect to it. It is not correct to interpret the reservation in the last paragraph as having any reference to dearness allowance. The alternative argument, urged by the learned counsel for the respondents before us, was that Cl. (1) of the reservations as quoted above, itself protected the respondents right to have dearness allowance linked up with the " chamber " index of the cost of living. But this argument, In our opinion, is not well-founded on a reasonable 539 construction of the first paragraph aforesaid. It cannot be said that it has any reference to the "chamber scale " of dearness allowance. Clearly, this reservation has been made with a view to ensuring that the total remuneration payable to a workman after giving effect to the dearness allowance fixed by the first award, should not be less than the total emoluments already being paid to him. In other words, the first paragraph is meant so to adjust the proportion between the minimum basic pay and the enhanced dearness allowance fixed by the award as not to prejudicially affect the total emoluments already being enjoyed by the workmen of a particular concern. This reservation had to be made in view of the fact that a large number of firms were concerned with the first award and the tribunal was anxious to ensure that every workman enjoyed the benefit of the enhanced clearness allowance ; and that those workmen who enjoyed the benefit of higher emoluments, were not adversely affected by the new scale of dearness allowance. The adjustment contemplated by the first clause of the reservations, was also necessary as is clearly mentioned therein, for the purpose of calculating contributions to provident fund and gratuity. This reservation does not make even an indirect reference to the " chamber scale " of dearness allowance. The alternative argument, thus, has no force. It must, therefore be held that the tribunals below were in error in basing their award on the question of dearness allowance and directing the appellant to pay it on tile "chamber scale " either from the date of the first award or from the date of the third reference.

Decision reasoning: 1[ds]But this argument, In our opinion, is not well-founded on a reasonable 539 construction of the first paragraph aforesaid. It cannot be said that it has any reference to the "chamber scale " of dearness allowance. Clearly, this reservation has been made with a view to ensuring that the total remuneration payable to a workman after giving effect to the dearness allowance fixed by the first award, should not be less than the total emoluments already being paid to him. In other words, the first paragraph is meant so to adjust the proportion between the minimum basic pay and the enhanced dearness allowance fixed by the award as not to prejudicially affect the total emoluments already being enjoyed by the workmen of a particular concern. This reservation had to be made in view of the fact that a large number of firms were concerned with the first award and the tribunal was anxious to ensure that every workman enjoyed the benefit of the enhanced clearness allowance ; and that those workmen who enjoyed the benefit of higher emoluments, were not adversely affected by the new scale of dearness allowance. The adjustment contemplated by the first clause of the reservations, was also necessary as is clearly mentioned therein, for the purpose of calculating contributions to provident fund and gratuity. This reservation does not make even an indirect reference to the " chamber scale " of dearness allowance. The alternative argument, thus, has nohas to be recalled that the first award, in terms, did not make the "chamber scale" applicable to the workmen as had been claimed by them. The award prescribed a much lower scale of dearness allowance, but, at the same time, it did not intend to deprive the workmen of the benefit of a more generous treatment which was being accorded by some of the engineering firms including the appellant. After having prescribed a graduated scale of dearness allowance with reference to the pay range, as set out above, and after having definitely negatived the claim of the work- men to dearness allowance on the " chamber scale," the award proceeded to make certain reservations. The first reservation, as rightly pointed out by the Appellate Tribunal, was concerned with conserving the total emoluments actually enjoyed by the employees. In the last paragraph, the reservation to the effect that " this award will not affect adversely any other kind of existing advantage which the employees of a firm may be enjoying "must, on a proper reading of the entire award, have reference to " existing advantage " of a kind other than those dealt with in the preceding paragraphs. One of the preceding paragraphs had specifically dealt with the question of dearness allowance. Hence, dearness allowance could not come within the purview of the reservation in respect of " other kind of existing advantage." This expression may have reference to emoluments other than basic salary and dearness allowance. Perhaps, it may have reference to other advantages like housing allowance, supply of free electricity, medical relief, etc. The whole history of the Industrial dispute relating to dearness allowance, as set out above and covered by the first two awards, is against the interpretation given to the reservation aforesaid by the tribunals below. Besides, if Cl. (3) refers to dearness allowance as suggested by the respondents, Cl. (1) would really be redundant since its provisions would, by necessary implication, be covered by Cl. (3) itself. As already stated, soon after the publication of the first award, the appellant notified that there would be no further increase in dearness allowance on the basis of the "chamber scale " in view of the fact that the dearness allowance actually paid to the workmen was considerably in excess of what had been prescribed by the first award. That notice was given effect to and dearness allowance was paid to the workmen accordingly, which they received without any protest. When there was a second reference to the Engineering tribunal, resulting in the second award as aforesaid, no such controversy was raised by the workmen who must have known all the time that the "chamber scale" of dearness allowance was not being enjoyed by them. Thus, the workmen themselves under- stood the first award in the same sense in which the appellant understood it and gave effect to it. It is not correct to interpret the reservation in the last paragraph as having any reference to dearness