Case: The Silk and Art Silk Mills' Association Ltd. &amp; Another Vs. Mills Mazdoor Sabha

dearness allowance and similar conditions of service and in applying that principle Industrial Courts have to compare the wage scale or the dearness allowance prevailing in similar concerns in the region with which it is dealing, and generally speaking similar concerns would be those in the same line of business as the concern with respect to which the dispute is under consideration and further, even in the same line of business, it would not be proper to compare a small struggling concern with a large flourishing concern. In William Sons (India) Private Ltd. v. The Workmen, [1962 - I L.L.J. 302], the Court observed that the extent of business carried on by the concerns, the capital invested by them, the profits made by them, the nature of the business carried on by them, their standing, the strength of their labour force, the presence or absence and the extent of reserves, the dividends declared by them and the prospects about the future of their business and other relevant factors have to be borne in mind for the purpose of comparison. These observations were made to show how comparison should be made, even in the same line of business and were intended to lay down that a small concern cannot be compared even in the same line of business with a large concern. In Greaves Cotton and Co. and others v. Their Workmen, (1964) 5 S.C.R. 362 at pp. 367-369, the main argument was that the Tribunal went wrong in relying more on the region aspect of the industry-cum-region formula and not on the industry aspect when dealing with clerical and subordinate staff. The Court said that it was ordinarily desirable to have as much uniformity as possible in the wage-scales of different concerns of the same industry working in the same region, as this puts similar industries more or less on an equal footing in their production struggle. The Court then referred to the French Motor Car Co.s case, (1963) Supp. 2 S.C.R. 16 at pp. 20-21, and observed that in that case this Court held so far as clerical and subordinate staff are concerned that it may be possible to take into account even those concerns which are engaged in different lines of business for the work of clerical and subordinate staff is more or less the same in all kinds of concerns. The Court further observed that where there are a large number of industrial concerns of the same kind in the same region it would be proper to put greater emphasis on the industry part of the industry-cum-region principle as that would put all concerns on a more or less equal footing in the matter of production costs and, therefore, in the matter of competition in the market and this will equally apply to clerical and subordinate staff whose wages and dearness allowance also go into calculation of production costs; but where the number of comparable concerns is small in a particular region and, therefore, the competition aspect is not of the same importance, the region part of the industry-cum-region formula assumes greater importance particularly with reference to clerical and subordinate staff and this was what was emphasised in the French Motor Car Co.s case (supra) where that company was already paying the highest wages in the particular line of business and, therefore, comparison had to be made with as similar concerns as possible in different lines of business for the purpose of fixing wage scales and dearness allowance. According to the Court, the principle, therefore, which emerges from these two decisions is that in applying the industry-cum-region formula for fixing wage scales the Tribunal should lay stress on the industry part of the formula if there are a large number of concerns in the same region carrying on the same industry; in such a case in order that production cost may not be unequal and there may be equal competition, wages should generally be fixed on the basis of the comparable industries, namely, industries of the same kind. But where the number of industries of the same kind in a particular region is small it is the region part of the industry-cum-region formula which assumes importance particularly in the case of clerical and subordinate staff, for, as pointed out in the French Motor Car Co.s case (supra), there is not much difference in the work of this class of employees in different industries. 21. If the employer has the financial capacity, would it be just to reject the claim of the lowest paid workmen for an enhancement in dearness allowance to neutralize the rise in cost of living and thus to maintain their subsistence wage at its real level in terms of the purchasing capacity, merely because there is a comparable concern in the industry in the region in which workmen are paid dearness allowance at a low rate ? We do not think it necessary to answer this question for the purpose of deciding this case. 22. The association never wanted the Court to make any comparison with any other units in the same industry in the region. In the written statement of the association there was no averment that there were other comparable units in the same industry in the region. Nor did the association, at the time of argument before the Industrial Court, put forward the contention that there were comparable concerns in the same industry in the region and that the Court should make a comparison of the employer-units in question with those concerns to find out the extent of neutralization which could be granted. The association had a membership of 325 units in Greater Bombay on February 6, 1970, when the Miscellaneous Application (I.C.) No. 1 was filed. It was certainly in a position to tell the Court whether there were any other comparable units in the same industry in the region and the only inference from its conduct is that there were no comparable units in the industry in the region.

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

Explanation:
0[ds]11. For reaching the conclusion that the industry is prosperous and has a bright future, the Court relied on the speech made by the Chairman of the Silk and Art Silk Mills Association at the 30th annual general meeting in 1969, in which he said that the man-made fibre industry had made remarkable progress during the last decade, that the production during the year 1969 exceeded the Third Plan target by over 25 per cent, that there was a rise in the per capita consumption of fabrics, that rapid progress was expected in the production of non-cellulosic yarn and that the total demand in relation to the year 1969 was likely to increase by 41 per cent by the year 1973-74 and by 110 per cent by the year 1978-79. The Court also relied upon the fact that actual export in 1970 exceeded the export in the previous three years, the fact that production has substantially increased in the first six months of 1970, that it was as much as 525.77 million metres compared to the total production of 892.67 million metres in 1969, and the fact that the total production of art silk yarn had reached the figure of 114.680 thousand kilograms compared to 106.480 thousand kilograms in 1969. The Court estimated that export of rayon fabrics and synthetic textiles will reach Rs. 26.50 crores a year by 1973-74. Although excise duty has been increased, the Court found that it had not adversely affected the industry in any substantial degree as the economic incidence of the burden of the excise duty was passed on to the consumer. As regards the financial capacity of the units, the Court relied on Exhibit U. 9 which is an analysis of the profit and loss accounts of the 28 mills and Exhibit U. 10, which is a consolidated statement showing the financial conditions of these mills and Exhibit U. 11, the statement regarding the bonus paid by the mills which did not file their balance-sheet and profit and loss accounts and Exhibit U. 12, a statement showing the interest paid by some of the units which had filed their balance-sheets and Exhibit U. 13, a statement showing the profitability ratio for art silk industry in Bombay and Exhibit U. 14, a comparative statement of the profitability ratio in cotton textiles, engineering and chemical industry. The Court found from Exhibit U. 9 that there was an increase in the paid up capital of Rs. 44.07 lakhs from 1965, an increase in the reserve amounting to Rs. 32.96 lakhs, an increase in the gross block amounting to Rs. 285.54 lakhs and an increase in the net block of Rs. 140.63 lakhs from 1965 to 1968. From the figures given in Exhibits U. 9 and U. 10, the Court found that, after providing for depreciation to the total paid up capital, the profit would work out at 40.02 per cent and that after providing for depreciation to the total paid up capital and reserve, it would work out at 21.10 per cent. From the large amount of interest paid by some of the units as disclosed in Exhibit U. 12, the Court inferred that these units are under-capitalised but that, at the same time, they preferred to borrow money at the current rate of interest. The Court also found from Exhibit U. 11 that 17 mills which did not file their balance-sheets or profit and loss accounts were in a position to pay bonus in excess of the 4 per cent which is the statutory minimum under the Payment of Bonus Act and, therefore, these units must have been making profits and, as their present financial position was not shown to have become worse, they had the financial capacity to bear the additional burden16. We think that the Industrial Court has carefully examined the financial position of the employer-units as also the position of the industry and its future prospects. The Court was fully aware of the nature of the demand and the extent of the burden which the employer-units will have to bear. A broad and overall view of the financial position of the employer-units was taken into account by the Court and it has tried to reconcile the natural and just claims of the employees for a higher rate of dearness allowance with the capacity of the employer to pay it and in that process it has made allowance for the legitimate desire of the employer to make reasonable profit. What is really material in assessing the financial capacity of the employer-units in this context is the extent of gross profits made by them. See Unichem Laboratories Ltd. v. Their Workmen, [1972 - I L.L.J. 567]. On the basis of Exhibit U. 9 which is an analysis of the balance-sheets and profit and loss accounts of the 28 units, the Court found that the 28 mills have been making good profits and that, on an average, the profit would work out at 40 and odd per cent of the capital. There was some decline in the profits made during the years 1966-67 and 1968, but the Court found that the industry was rallying round in 197019. We do not think that the Industrial Court went wrong in relying upon exhibit U. 8 or in granting 99 per cent neutralization on account of the steep rise in the cost of living. Exhibit U. 8 it may be recalled is a comparative table showing the minimum basic wages and dearness allowance paid in other industries in the region like the engineering, pharmaceuticals, etc. The court relied upon it only to show the trend in the region. The Court also relied upon the report of the Norms Committee which stated that the trend for the last decade in industrial adjudication as well as in settlements and awards, was to allow 100 per cent neutralization in the case of lowest-paid employees. The Court was of the view that if 80 per cent neutralization could be allowed in the industry under the settlement arrived at in 1957, there was no reason why 100 per cent neutralization should not be granted, in view of the steep rise in the cost of living from 1957, to the lowest-paid employees. We cannot agree with the contention of the appellant that the Industrial Court went wrong in relying upon Exhibit U. 8 or the report of the Norms Committee to find out the trend in the region as to the extent of neutralization to be allowed to the employees concerned. The question of the extent of neutralization to the workmen in the units does not depend solely upon the fact whether neutralization to that extent has been allowed to the employees in comparable concerns in the same industry in the same region. Much distinction cannot be made in this respect among the lowest-paid employees in the region merely because some of them are employed in other industries. In other words, for finding the trend or the norm in the region as regards the extent of neutralization for the lowest-paid employees, the Industrial Court cannot be said to have gone wrong in relying upon either the Norms Committee Report or on Exhibit U. 8The Court said that it was ordinarily desirable to have as much uniformity as possible in the wage-scales of different concerns of the same industry working in the same region, as this puts similar industries more or less on an equal footing in their production struggle. The Court then referred to the French Motor Car Co.s case, (1963) Supp. 2 S.C.R. 16 at pp. 20-21, and observed that in that case this Court held so far as clerical and subordinate staff are concerned that it may be possible to take into account even those concerns which are engaged in different lines of business for the work of clerical and subordinate staff is more or less the same in all kinds of concerns. The Court further observed that where there are a large number of industrial concerns of the same kind in the same region it would be proper to put greater emphasis on the industry part of the industry-cum-region principle as that would put all concerns on a more or less equal footing in the matter of production costs and, therefore, in the matter of competition in the market and this will equally apply to clerical and subordinate staff whose wages and dearness allowance also go into calculation of production costs; but where the number of comparable concerns is small in a particular region and, therefore, the competition aspect is not of the same importance, the region part of the industry-cum-region formula assumes greater importance particularly with reference to clerical and subordinate staff and this was what was emphasised in the French Motor Car Co.s case (supra) where that company was already paying the highest wages in the particular line of business and, therefore, comparison had to be made with as similar concerns as possible in different lines of business for the purpose of fixing wage scales and dearness allowance. According to the Court, the principle, therefore, which emerges from these two decisions is that in applying the industry-cum-region formula for fixing wage scales the Tribunal should lay stress on the industry part of the formula if there are a large number of concerns in the same region carrying on the same industry; in such a case in order that production cost may not be unequal and there may be equal competition, wages should generally be fixed on the basis of the comparable industries, namely, industries of the same kind. But where the number of industries of the same kind in a particular region is small it is the region part of the industry-cum-region formula which assumes importance particularly in the case of clerical and subordinate staff, for, as pointed out in the French Motor Car Co.s case (supra), there is not much difference in the work of this class of employees in different industries21. If the employer has the financial capacity, would it be just to reject the claim of the lowest paid workmen for an enhancement in dearness allowance to neutralize the rise in cost of living and thus to maintain their subsistence wage at its real level in terms of the purchasing capacity, merely because there is a comparable concern in the industry in the region in which workmen are paid dearness allowance at a low rate ? We do not think it necessary to answer this question for the purpose of deciding this case22. The association never wanted the Court to make any comparison with any other units in the same industry in the region. In the written statement of the association there was no averment that there were other comparable units in the same industry in the region. Nor did the association, at the time of argument before the Industrial Court, put forward the contention that there were comparable concerns in the same industry in the region and that the Court should make a comparison of the employer-units in question with those concerns to find out the extent of neutralization which could be granted. The association had a membership of 325 units in Greater Bombay on February 6, 1970, when the Miscellaneous Application (I.C.) No. 1 was filed. It was certainly in a position to tell the Court whether there were any other comparable units in the same industry in the region and the only inference from its conduct is that there were no comparable units in the industry in the region.