Case: Killick Nixon Limited Vs. Killick &amp; Allied Companies Employees Union

except to the lowest category of employees. In the view of the National Commission on Labour "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 employees irrespective of differences in their emoluments" (page 243). It was strenuously submitted that this view of the Commission should be accepted by us. In other words we should first ascertain what is the minimum wage in this company at which a worker would require complete neutralisation of the cost of living and whatever amount is found to be necessary for him as a protection against his real wages should only be available to all other employees. We are not required to give our opinion about this submission for the simple reason that the management here has already introduced a scheme in which there is percentage system on salary slabs linked with the consumer price index and there is no dispute about it.33. All that the management wants in this case is that D.A. must not go on rising with the soaring price index and a limit should be imposed. We have already observed that in view of the status of the company the capacity to pay will not alone be of moment in favour of removal of the ceiling. The problem will have to be viewed from the following important aspects:(1) Condition of the wage scale prevalent in the company.(2) Condition of the wage level prevalent in the industry and the region.(3) The 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 viewed in relation to other comparable concerns in the industry and the region.(5) Peremptive 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 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 society as a whole.(13) The state of the consumer price index at the time of decision.(14) Forebodings and possibilities in the foreseeable future as far as can be envisaged.34. We should also add that revision of D.A. is not the same thing as revision of wages.35. Having given our anxious thought to all the above aspects, which are not exhaustive, we are unable to come to the conclusion that removal of the ceiling in the present context will be justified. The company has been able to make out a case for imposition of a ceiling.At what particular amount there should be a ceiling on D.A. is a matter which will have to be gone into by the Tribunal keeping in view the above principles. The financial capacity will have to be judged with regard to the commitment of the company as a whole towards all its employees.36.We are unable to agree with the contention of the workers that unless there is a ceiling on profits there cannot be a ceiling on D.A. The question of D.A. being intimately connected with the cost of living, the matter cannot be judged by the test of the aforesaid submission of the workmen.37. There is, however, one thing which we must point out, lest there should be some misconception about it and that is that so far as the lowest paid employees at or just above the subsistence level are concerned, they are entitled to 100 per cent or at any rate not less than 95 per cent neutralisation of the rise in the cost of living and hence there should be no ceiling on dearness allowance payable to employees within the slab of first Rs. 100, unless it can be shown by the management that the rate of neutralisation in their case is more than 100 per cent. So far as the employees in the higher slabs are concerned, it would be for the Tribunal to consider, having regard to the aforesaid principles, whether a ceiling should be imposed at the second slab of Rs. 100 or only at the last slab of Rs. 201 to Rs. 500.The manner in which the ceiling may be imposed would also 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 the outside limit of the dearness allowance or by reference to the quantum of dearness allowance payable at a certain wage level. We do not wish to lay down as an invariable rule that in all cases there should be ceiling on D.A. Whenever a case of this nature comes for industrial adjudication it will always be a delicate task for the Tribunal to strike a balance keeping in view the above principles, weightage of each one of which being variable according to conditions obtaining. Whether or not there should be a ceiling on dearness allowance in a given case must depend on the facts and circumstances of that case. There can be no inexorable rule in that respect. We have formulated the various principles which must be taken into account by the Tribunal in determining this question but the most dominant of these must always be that of social justice, for that is the ideal which we have resolved to achieve when we framed our constitution.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]It will be seen that the minimum basic salary of a junior executive is Rs. 400 and maximum is Rs.With allowances the junior executive at the minimum gets a total of Rs. 700/and at intermediate stages, namely of Rs. 530 and Rs. 800, he gets a total of Rs. 830/and Rs. 1150/respectively. When he reaches the maximum the total with allowance is Rs.The clerical staff at the maximum grade which is Rs. 500/gets a total amount of Rs. 1230/inclusive of D.A. of Rs. 730/after removal of the ceiling at the C.P.1. 924. At the intermediate stage a clerk gets Rs. 874/in the same index (Rs. 300/basic salary plus Rupees 574/D.A.) At the minimum he gets Rs. 70/D.A. totalling Rs. 410/in the same index 924. The position is worse when the consumer price index touches 1194 as seen above. The absence of ceiling on D.A. can result in curious anomalous situations wherein the pay Packet of clerical staff would exceed the pay packet of junior executive staff. This is hardly conducive to discipline, efficiency and effective exercise of control.28. Although the change in the D.A. scheme imposing the ceiling was notified in May 1966, it could not have been then contemplated that the index would touch such a high mark; yet within these nearly nine years that the dispute unfortunately has dragged on, it has given the court an idea of the effect of removal of the ceiling.29. The management has submitted statements showing the actual working of the D.A. formula without the ceiling and tried to show that it would not be possible for it to bear the financial burden. The Tribunal went into this aspect, although at that time the figures of the actual working could not be there, and refused to accept the plea of incapacity to bear the burden. The main argument of the management was about the loss of Managing Agency which, according to it, resulted in shrinkage of income. The Tribunal went into the matter and came to the conclusion and, according to us, rightly, that the said plea had no substance.30. The company is one of the twenty big industrial houses in the country. Originally there were two companies, one Killick Industries Limited and another Killick Nixon and Co. Private Limited. Killick Industries Limited was incorporated as a Public Limited Company on November 14, 1947 and Killick Nixon and Co. Private Limited was incorporated as a Private Company on January 23, 1948. Some time in 1957 the Killick Industries Limited purchased all the shares of Killick Nixon and Co. Private Limited with the result that Killick Nixon and Co. Private Limited became a wholly owned subsidiary of Killick Industries Limited. Under Section 43A of the Companies Act, 1956, Killick Nixon and Co. Private Limited became a public Limited Company with effect from March 28, 1961 and by an order of the Bombay High Court of March 24, 1970, was amalgamated with Killick Industries Limited with effect from August 1, 1969. Following the amalgamation and with the approval of the Central Government the name of Killick Industries Limited was changed to Killick Nixon Limited (the appellant). The activities of the company are: manufacturing of engineering products, namely, Jhonson Vibrators, Udall Pressing equipments and E.F.C.C. Furnaces; Selling agency of engineering products such as Vibrators, drilling equipment, electric meters and dredgers; general selling agency in respect of snowcem cement paint and allied products, carbon papers, slotted angles, Hawkins pressure cookers; export of piecegoods; and agency of City Line and Hall Line of U.K. and clearing and forwarding work.31. The question, however, in this case may not be simply the financial capacity of the company alone. Ordinarily the capacity to bear the additional burden would certainly be a relevant factor. We are, however, not considering the matter from that aspect in the present case. We will assume that the company will be able to bear the additional financial burden if the ceiling is removed. We do not agree with the Tribunal that it is only if the company would be required to close down that such a demand should be rejected. That is an incorrect view to take in dealing with the problem with which we are concerned.32. We have, therefore, a company which is prosperous. The consumer price index has been soaring higher and higher. The employees have to get protection of their real wages. It is well settled that complete neutralisation of the rise of cost of living cannot be allowed except to the lowest category of employees. In the view of the National Commission on Labour "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 employees irrespective of differences in their emoluments" (page 243). It was strenuously submitted that this view of the Commission should be accepted by us. In other words we should first ascertain what is the minimum wage in this company at which a worker would require complete neutralisation of the cost of living and whatever amount is found to be necessary for him as a protection against his real wages should only be available to all other employees. We are not required to give our opinion about this submission for the simple reason that the management here has already introduced a scheme in which there is percentage system on salary slabs linked with the consumer price index and there is no dispute about it.Having given our anxious thought to all the above aspects, which are not exhaustive, we are unable to come to the conclusion that removal of the ceiling in the present context will be justified. The company has been able to make out a case for imposition of a ceiling.At what particular amount there should be a ceiling on D.A. is a matter which will have to be gone into by the Tribunal keeping in view the above principles. The financial capacity will have to be judged with regard to the commitment of the company as a whole towards all its employees.36.We are unable to agree with the contention of the workers that unless there is a ceiling on profits there cannot be a ceiling on D.A. The question of D.A. being intimately connected with the cost of living, the matter cannot be judged by the test of the aforesaid submission of the workmen.37. There is, however, one thing which we must point out, lest there should be some misconception about it and that is that so far as the lowest paid employees at or just above the subsistence level are concerned, they are entitled to 100 per cent or at any rate not less than 95 per cent neutralisation of the rise in the cost of living and hence there should be no ceiling on dearness allowance payable to employees within the slab of first Rs. 100, unless it can be shown by the management that the rate of neutralisation in their case is more than 100 per cent. So far as the employees in the higher slabs are concerned, it would be for the Tribunal to consider, having regard to the aforesaid principles, whether a ceiling should be imposed at the second slab of Rs. 100 or only at the last slab of Rs. 201 to Rs. 500.The manner in which the ceiling may be imposed would also 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 the outside limit of the dearness allowance or by reference to the quantum of dearness allowance payable at a certain wage level. We do not wish to lay down as an invariable rule that in all cases there should be ceiling on D.A. Whenever a case of this nature comes for industrial adjudication it will always be a delicate task for the Tribunal to strike a balance keeping in view the above principles, weightage of each one of which being variable according to conditions obtaining. Whether or not there should be a ceiling on dearness allowance in a given case must depend on the facts and circumstances of that case. There can be no inexorable rule in that respect. We have formulated the various principles which must be taken into account by the Tribunal in determining this question but the most dominant of these must always be that of social justice, for that is the ideal which we have resolved to achieve when we framed ourare unable to accept that this Court was called upon to decide about the question of ceiling in that appeal which was at the instance of the employers and not of the employees nor against the imposition of ceiling. The management also drew our attention to a decision of this Court in Remington Rand of India v. Its Workmen (1962) 1 Lab L.J. 287 (SC) wherein the scheme of D.A. contained a maximum of Rs. 200/at the index figureand the maximum was not interfered with by this Court. It it sufficient to point out that the question of desirability of ceiling or otherwise was not at all in issue in that appeal and, therefore, this Court was not called upon to pronounce upon the matter.21. We, however, find that in the case of employees under the Central Government a kind of ceiling has been in vogue. For example one of the Second Pay Commissions recommendations was that the benefit of D.A. should in future adjustments be extended to all employees drawing a basic pay below Rs. 400/per mensem in such a way that the total of basic pay and D.A. paid to an employee in the pay range of Rs. 300/to Rs. 400/does not exceed Rs. 400/(page 97, paragraph 16). The Third Pay Commission also after fixing D.A. at a percentage of 3.5% of pay upto the pay range of Rs. 300/fixed a maximum at Rs. 10/per month and a minimum of Rs. 7/per month. Similarly for the pay range above Rs. 300/a percentage of 2.5% of pay was fixed subject to a maximum of Rs. 20/per month and a minimum at Rs. 10/per month. The Commission further recommended that the pay plus D.A. should in no case exceed Rs. 2,400/per month.22. From the above one thing, however, is clear that the question of imposition of ceiling on D.A. is not an absolutely alien phenomenon. Although it might not have been the general practice, ceiling was not rejected out of hand as irrational or unjust by unions in the course of collective bargaining in the Bombay region