Case: Management, Ghaziabad Engineering Co (P) Ltd Vs. Its Workmen

1. By order dated February 24, 1965 the Chief Commissioner of Delhi referred for adjudication, industrial disputes between the appellant company and its workmen relating to dearness allowance and introduction of a scheme of gratuity for the benefit of the workmen. The Industrial Tribunal Delhi framed the following "gratuityOn death or retirement on attaining the age of supernnaution or on becoming mentally or physically unfit for further service.Onemonths wages for each year of service or part thereof in excess of six months subject to a maximum of 15 months wages. In case of death of employee the gratuity shall be payable to his nominee or if there is no nominee to his legal heirs.(2) On termination after five years service for any cause whatsoever except by way of retrenchment or resignation.15days wages for each year of service or part thereof in excess of six months subject to a maximum of 15 months wages.(3) On resignation after 10 years of service.15days wages for each year of service or part thereof in excess of six months subject to a maximum of 15 months wages.Provided that if termination is for any misconduct causing financial loss to the company, the amount of loss shall be deducted from the gratuity payable. The word wages in this Scheme shall mean the total pay packet of the workman including dearness which he was last drawing.The Tribunal also directed that "all workmen who were appointed in 1960 or earlier should get dearness allowance at Rs. 3 for every ten point rise in the cost of Consumer Price Index base 1962 over and above their existing wages with effect from 1st January, 1965. In case of workmen appointed after 1960, the Consumer Price Index base 1960 on the date of his appointment shall be found out and he shall be given Rs. 3 as dearness for every ten point rise in cost of Consumer Price Index base 1960 above it with effect from 1st January, 1965 or such later date on which the limit of 10 point rise in cost of Consumer Price Index base is crossed." The Tribunal also directed that dearness allowance will not be enhanced till the limit of ten points be "crossed" and that dearness allowance once granted will not be reduced till the Consumer Price Index falls by more than 10 points. The Company has appealed to this Court with special leave.3. In the view of the Tribunal, the financial position of the company "is very sound" and that it has "financial capacity and stability to bear the additional burden of dearness allowance and of the gratuity scheme." In reaching that conclusion the Tribunal relied upon a news item published in the newspapers that 2000 Russian Tractors were being immediately imported by the company even though the agency of the Company was being terminated. In relying upon newspaper reports the Tribunal may have erred. But the conclusion of the Tribunal is founded upon a review of several other circumstances. It is true that one of the primary, lines of business of the company was of selling tractors as agents of Russian manufacturers. That agency was in danger of being terminated because the State Trading Corporation had arranged to take over the agency. But the balance sheets of the company show that the agency was only one of the many lines of business and the closure of the agency of the tractor manufacturers was not likely to affect the financial structure of the Company seriously.The Tribunal has on appreciation of evidence come to the conclusion that the financial position of the company was sound and assuming that the Tribunal is governed by the strict rules prescribed by the Evidence Act, sitting in appeal with special leave we will not be justified in interfering with the finding of the Tribunal even if it be open to the criticism that a part of the evidence relied upon is not in law relevant.

Reasoning:
6. The Tribunal has awarded dearness allowance at the flat rate of Rs. 3 for every 10 point rise in the cost of Consumer Price Index. The rise is not related to the quantum of basic wage or consolidated wage. It is a flat uniform rate applicable to every workman.The Tribunal was of the view that the allocation between the basic wage and the dearness allowance was "not fair", but for the purpose of the present reference, the question is academic because dearness allowance is not related to the quantum of salary that the workmen receive. The argument that the rise will operate to give to the workmen besides the additional dearness allowance, percentage increase in dearness allowance already paid as part of the consolidated wage cannot be accepted. We do not therefore see any reason to interfere with the order passed by the Tribunal with regard to the dearness allowance "at the rate of Rs. 3 for every 10 point rise in the Consumer Price Index".The Court after referring to the schemes framed in respect of the industries in Bombay and Ahmedabad and other industries concluded that"determination of gratuity is not based on any definite rules. In each case it must depend upon the prosperity of the concern, needs of the workmen and the prevailing economic conditions examined in the light of the auxiliary benefits which the workmen may get on determination of. There is no clear evidence on the record, and no precedents have been brought to our notice, to justify a departure from the normal rule that the quantum of gratuity is related not to the consolidated wage packet but to the basic wage. A departure may be made from the normal rule, if there be some strong evidence or precedent in the industry. or conduct of the employer or other exception circumstances to justify that course. In the absence of such evidence, we are of the view that gratuity should be related to the basic wage and not to the consolidated wage packet. In the present case it is found that the financial position of the Company is sound but there is no evidence that the company is "making abnormally high profits" nor is there any evidence that in its sister concerns or in other engineering concerns in the region there is a practice of awarding gratuity related to consolidated wages.We make no modification in cl. (1) of the scheme. We modify the scheme in so far as it relates to the dearness allowance and direct that for the last sentence of the gratuity scheme the following shall beword wages in the scheme shall mean basic salary or emoluments excluding dearness allowance and other allowances and benefits payable to the workman which he had last drawn".