Case: Management Of Lndian Oil Corporation Ltd Vs. Its Workmen

(AIR 1972 SC 1917 = 1972 Lab IC 1128) where this Court, while pointing out the object of S. 9A, observed as follows:"The real object and purpose of enacting Section 9-A seems to be to afford an opportunity to the workmen to consider the effect of the proposed change and, if necessary, to represent their point of view on the proposal. Such consultation further serves to stimulate a feeling of common joint interest of the management and workmen in the industrial progress and increased productivity. This approach on the part of the industrial employer would reflect his harmonious and sympathetic co-operation in improving the status and dignity of the industrial employee in accordance with the egalitarian and progressive trend of our industrial jurisprudence, which strives to treat the capital and labour as co-sharers and to break away from the tradition of labours subservience to capital"The observations made by this Court lay down the real test as to the circumstances in which Section 9A would apply. In the instant case, however we are satisfied - (1) that the grant of the compensatory allowance as an implied condition of service; and (2) that by withdrawing this allowance the employer sought to effect a change which adversely and materially affected the service conditions of the workmen. In these circumstances, therefore. Section 9A of the Act was clearly applicable and the non-compliance with the provisions of this section would undoubtedly raise a serious dispute between the parties so as to give jurisdiction to the Tribunal to give the award. If the appellant wanted to withdraw the Assam Compensatory Allowance it should have given notice to the workman, negotiated the matter with them and arrived at some settlement instead of withdrawing the compensatory allowance overnight.11. It was also contended that the compensatory allowance was only an allowance given in substitution for housing subsidy. We are, however, unable to agree with this contention. Mr. Sen Gupta appearing for the respondents rightly pointed out that there is a well-knit and a clear distinction between the compensatory allowance and a housing subsidy or house rent allowance. This distinction is clearly brought out by the Second Pay Commissions Report (1957-59) in which the Commission observed as follows:"The compensatory allowances considered here fall into three broad groups: (i) allowances to meet the high cost of living in certain specially costly cities and other local areas, including hill stations where special requirements such as additional warm clothing and fuel etc., add to the cost of living; (ii) those to compensate for the hardship of service in certain areas, e.g. areas which have a bad climate, or are remote and difficult of access; and (iii) allowances granted in areas, e.g. field service areas, where because of special conditions of living or service, an employee cannot besides other disadvantages have his family with him. There are cases in which more than one of these conditions for grant of a compensatory allowance are fulfilled."The Second Pay Commission also observed:"The rent concessions dealt with here are of two kinds: (i) provision of rent free quarters, or grant of a house rent allowance in lieu thereof; and (ii) grant of a house rent allowance in certain classes of cities to compensate the employees concerned for the specially high rents that have to be paid in those cities. The former is allowed only to such staff as are required to reside on the premises where they have to work, and is thus intended to be a facility necessary to enable an employee to discharge his duties. In some cases, it is a supplement to pay, or substitute for special pay etc., which would have been granted but for the existing of that concession. In either case, it is not related to the expensiveness of a locality. The latter, on the other hand, is a compensatory or a sort of a dearness allowance, intended to cover not the high cost of living as a whole but the prevailing high cost of residential accommodation; and it has no relationship to the nature of an employees duties."The observations made by the Second Pay Commission throw light on this question. In fact the compensatory allowance and housing subsidy are two different and separate categories of the terms of service conditions and they cannot be clubbed together, nor can the one be made dependent on the other. The object of these two concessions is quite different and both of them serve quite different purposes.12. It was next contended that even if Section 9A of the Act applied, the Tribunal should have gone into the question on merits instead of giving the award on the basis of non-compliance with the provisions of Section 9A. This argument also appears to us to be equally untenable. On the facts and circumstances of the present case the only point that fell for determination was whether there was any change in the conditions of service of the workmen and, if so, whether the provisions of Sec. 9A of the Act were duly complied with We cannot conceive of any other point that could have fallen for determination on merits, after the Tribunal held that S. 9A of the Act applied and had not been complied with by the appellant.13. It was also faintly suggested that there was no question of a customary claim or usage because the period during which the compensatory allowance was granted and withdrawn was too short. It is however. not necessary to take any notice of this argument, because counsel for the respondents Mr. Sen Gupta fairly conceded that he had not based his claim on any customary claim at all. It was argued by Mr. Sen Gupta that after the Central Government notification of September 3, 1957, the appellant took an independent and voluntary decision on their own to give the facility of the Assam Compensatory Allowance as an implied term of the contract and having done so they could not wriggle out from the provisions of Section 9A of the Act.

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

Explanation:
0[ds]5. As regards the firm contention that the concession of the compensatory allowance was granted to the workers by way of a temporary measure and would not amount to a condition of service, we find absolutely no material on the record to support the same. There is no evidence to show that the management before granting the concession of the compensatory allowance had in any way indicated to the workers that this was only a stop-gap arrangement which could be withdrawn after the housing subsidy was granted. Even before the unilateral withdrawal of the concession granted by the appellant no notice was given to the workers nor were they taken into confidence, nor any attempt was made to open a dialogue with them on this question. Indeed if the circulars of the Central Government are admittedly not binding on the Corporation then we are unable to appreciate the stand taken by the appellant that the management unilaterally withdrew the concession merely because of the Central Government circulars. So far as the compensatory allowance is concerned it was given in order to enable the workers to meet the high cost of living in a far-fetched and backward area like Assam. It had absolutely no causal connection with the housing subsidy or house rent allowance which was a different type of concession. Furthermore, the grant of compensatory allowance by the appellant was indeed a very charitable act which showed that the employers were extremely sympathetic towards the needs of their workers. In these circumstances we have no hesitation in holding that the grant of compensatory allowance was undoubtedly an implied condition of service so as to attract the mandatory provisions of S. 9A of the Act which runs thus:"No employer, who proposes to effect any change in the conditions of service applicable to any workman in respect of any matter specified in the Fourth Schedule shall effect such change.-(a) without giving to the workmen likely to be affected by such change a notice in the prescribed manner of the nature of the change proposed to be effected; or(b) within twenty-one days of giving such notice:Provided............,.."An analysis of Section 9A of the Act clearly shows that this provision comes into operation the moment the employer proposes to change any condition of service applicable to any workman, and once this is done twenty-one days notice has to be given to the workmen. This admittedly was not done in this case. By withdrawing the Assam Compensatory Allowance the employers undoubtedly effected substantial change in the conditions of service, because the workmen were deprived of the compensatory allowance for all times tois true that this Court held on the facts of that case that the Company had abolished one department, but as the work-load was not increased the workers were not adversely affected and the abolition of one department could not be brought under item 11. The contingency contemplated in the aforesaid case, however, cannot be equated with the present case by virtue of the unilateral deprivation of the compensatory allowance which was received by the employees by the withdrawal of which they were undoubtedly prejudiced. It cannot be contended that the sudden withdrawal of a substantial concession in the conditions of service would not materially or adversely affect the workmen. We are therefore, of opinion that the aforesaid case also does not support the contention of the learned counsel for theobservations made by this Court lay down the real test as to the circumstances in which Section 9A would apply. In the instant case, however we are satisfied - (1) that the grant of the compensatory allowance as an implied condition of service; and (2) that by withdrawing this allowance the employer sought to effect a change which adversely and materially affected the service conditions of the workmen. In these circumstances, therefore. Section 9A of the Act was clearly applicable and the non-compliance with the provisions of this section would undoubtedly raise a serious dispute between the parties so as to give jurisdiction to the Tribunal to give the award. If the appellant wanted to withdraw the Assam Compensatory Allowance it should have given notice to the workman, negotiated the matter with them and arrived at some settlement instead of withdrawing the compensatory allowancecannot conceive of any other point that could have fallen for determination on merits, after the Tribunal held that S. 9A of the Act applied and had not been complied with by the appellant.13. It was also faintly suggested that there was no question of a customary claim or usage because the period during which the compensatory allowance was granted and withdrawn was too short. It is however. not necessary to take any notice of this argument, because counsel for the respondents Mr. Sen Gupta fairly conceded that he had not based his claim on any customary claim at all. It was argued by Mr. Sen Gupta that after the Central Government notification of September 3, 1957, the appellant took an independent and voluntary decision on their own to give the facility of the Assam Compensatory Allowance as an implied term of the contract and having done so they could not wriggle out from the provisions of Section 9A of the Act.