Case: Shivaraj Fine Arts Litho Works, Etc., Etc Vs. State Industrial Court and Others, Etc., Etc

2. The dispute relates to the Litho Industry in the Vidarbha region. An award known as the Puranik award was made on October 26, 1956. The award fixed Rs. 35 as the minimum wage but did not attach any scale of pay to the basic pay of Rs. 35 for the unskilled employees. By a notice dated January 22, 1958 the employees of the Litho industry gave notice of change and as a result the Puranik award stood terminated as from July 22, 1958. The employees of Shivraj, Shakti and Raj gave notice of change dated September 2, 1960 making certain demands against their respective employers. On March 13, 1961 the employees of the said three units filed three references under S. 38A of the C.P. and Berar Industrial Disputes Settlement Act, 1947 before the State Industrial Court, which were numbered as references 9, 10 and 11 of 1961. When the three references were pending employees of other industrial concerns made certain demands against their employers. Pending the decision in references 9, 10, and 11 of 1961 an agreement was entered into on February 21, 1964 between the employers and the employees of various concerns requesting the State Government to exercise its power under S.39 of the Act and to refer to the arbitration of the State Industrial Court the disputes mentioned in that agreement. On January 7, 1965 the State Government issued its notification making a reference to the State Industrial Court under S.39 of the Act. By the notification the Government referred the disputes in respect of the demands of the employees set out in Schedule II of the notification made against the 10 employers specifically mentioned in Schedule I to the notification, being the employers in the Litho Press Industry in the Vidarbha region. The demands that are set out in Schedule II are 15 in number but as we are concerned only with demands 3, 4, 5, 6 and 7 we will leave the rest out of consideration. Demand No. 3 relates to the disputes to living wage and Demand No. 4 for scales of wages for each category and occupation. Demand No. 5 is for fitment of the employees already in service at the date of the demand. Demand No. 6 is that the revised scales of wages should be given with retrospective effect from 1958 and Demand No. 7 is for dearness allowance with retrospective effect from 1959 and the dearness allowance should be linked with the index number at the rate of 2 paise per point with 1955 as 100. The State Government by its Notification dated December, 1964 fixed Rs. 70 per month as the minimum wage under the Minimum Wages Act. The notification divided the employee into several classes. It did not attach any scale of pay to the minimum wages fixed but provided that at an interval of every six months the State Government may issue a notification fixing certain amounts payable in addition to the minimum wages as special allowance3. The Industrial Court made its award on May 10, 1968. The award divided the employers into two classes being Classes A and B on the basis of the financial capacity of the employers to pay. The award fixed rates and scales of wages for the employees of the three employers in Class A being Shivraj, Shakti and Vasant Litho Works. The award did not fix any rates and scales of wages in respect of other units of the industry the reason being that they did not have adequate financial capacity. In the case of Class A the award also fixed the employees of various duration of service by way of fitment into the scales of wages awarded in the award. It also fixed the date from which the new rates and scales of wages are to be deemed to have commenced4. Against the award six writ petitions were filed before the High Court, three by the appellants in this Court, Shivraj Fine Arts Litho Works, Vasant Fine Arts Litho Works and Shakti Offset Works. Another three writ petitions were filed by the employees, they being Special Civil Application Nos. 210 of 1969, 733 of 1969 and 734 of 1969. There are no appeals filed in this Court by the employees5. The High Court agreed with the view of the Industrial Court and held that the award classifying the employers into two classes A and B on the basis of their paying capacity determining the rates and scales of wages and the dearness allowance regarding "A" employers is valid. The High Court set aside the award on Demands 3, 4, 5, 6 and 7 and directed the Industrial Court to reconsider the above 5 demands and to make a fresh award in accordance with the law and principles laid down by the High Court. In so directing the High Court held that fixation of an industrial minimum wage the factor of employers capacity to pay is irrelevant and the industry or the employer must pay it or perish. According to the High Court the Industrial minimum wage should be fixed on a consideration of different ingredients which it seeks to provide for, i.e., contents of the basket. It was possible that the industrial minimum wage can be higher in some cases than the current statutory minimum wage and when the industrial minimum wage happens to be higher than the statutory wage it will be industrial minimum wage which has to be paid because when it is fixed by an industrial award it become enforceable at law. The High Court further held that the provisions of minimum wages show that there is nothing in it to prevent payment of anything more than the minimum wage fixed under it.

Reasoning:
11. This Court has clearly laid down in a series of decisions starting from the case of Express Newspaper (P) Ltd., and another v. The Union of India and others, [1961-I L.L.J. 339]; (1959) S.C.R. 12, that it is permissible to divide the industry into appropriate classes and then deal with the capacity of the industry to pay class-wise. At p. 90 of the reports this Court in laying down the principles in determining the capacity of an industry observed :"The relevant criterion should be the capacity of a particular industry in a specified region and as far as possible the same wages should be prescribed for all units of that industry in that region". But the Court qualified the rule by stating "It is clear, therefore, that the capacity of an industry to pay should be gauged on an industry-cum-region basis after taking a fair cross-section of that industry. In a given case it may be ever permissible to divide the industry into appropriate classes and then deal with the capacity of the industry to pay class-wise"12. Williamsons (India) Private Limited v. The Workmen, [1962-I L.L.J. 302], this Court held that the extent of the 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 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. Approving the view expressed in the above decision in French Motor Car Co. Ltd. v. Workmen, [1962-II L.L.J. 744]; (1963) Suppl. 2 S.C.R. 16, this Court observed at p. 20 that comparison should be made in the same line of business and a small concern cannot be compared even in the same line of business with a large concern. When there is a large disparity in the two concerns in the same business, it would not be safe to fix the same wage structure as in the large concern without any other consideration13. In Cinema Theatres v. Their Workmen, [1964-II L.L.J. 123], this Court approved the classification of the Tribunal of the cinemas into two classes based on gross revenue. The Court observed that the gross revenue taken by the Tribunal as the basis for classification appears to be a satisfactory criterion14. In Workmen of Balmer Lawrie & Co., v. Balmer Lawrie and Co., [1964 - I L.L.J. 380]; (1964) 5 S.C.R. 344 at p. 353, this Court held that in determining the question whether one concern is comparable with another in the matter of fixing wages the total capital invested by the concern, the extent of its business, the order of the projects made by the concern the dividends paid, the number of employees employed in the concern, the standing in the industry to which it belongs and other matters have to be examined. In Greaves Cotton & Co., and others v. Their Workmen, [1964 - I L.L.J. 342]; (1964) 5 S.C.R. 362 after referring to the decision in French Motor Car Co., Ltd. v. Workmen (supra) this Court held that the principle 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 were a large number of concerns in the same region carrying on the same industry, but where the number of industries of the same kind in a particular region was small, it was the region part of the formula which assumed importance. In the former 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 same kind15. In Unichem Laboratories Ltd. v. The Workmen, [1972 - I L.L.J. 576] : (1972) 3 S.C.R. 567, this Court after referring to the cases cited above held that in the fixation of wages and dearness allowance the legal position is well-established that it has to be done on industry-cum-region basis having due regard to the financial capacity of the unit under consideration. The same view was reiterated in The Silk and Art Silk Mills Association Ltd. v. Mill Mazdoor Sabha, [1972 - II L.L.J. 175]; (1973) 1 S.C.R. 277 at page 288, where the Court reemphasised the principles laid down in the earlier cases. There is thus ample authority in support of the view taken by the Tribunal and the High Court that the employer can be classified according to his paying capacity25. After allowing certain deductions the High Court held that so far as bonus in concerned as the minimum bonus is compulsorily payable it can be deducted in determining the financial capacity of the employer. But the High Court was of the view that in the case of any amount which was paid as bonus in addition to the minimum bonus like the incidence of basic wage is fixed and is known at the beginning of the financial year of the employer and is not be calculated unlike in the case of excess bonus after the end of that year when the amount of profit that is available surplus is determined. We are unable to agree with the view taken by the High Court that any amount paid as bonus in addition to the minimum bonus cannot be deducted as expenses. The amount which is paid as bonus goes in substance to augment the wages and as such is liable to be deducted in determining the paying capacity of the employer. It seems that the High Court was influenced by the fact that the additional bonus cannot be deducted at the beginning of the year. We do not think that it will make any difference for the paying capacity of the concern can be ascertained after deducting the amount in the subsequent yearThe special allowances is fixed by the Government to accord us nearly as practicable with the variation in the cost of living index number applicable to such workers.So far as provisions under the Minimum Wages Act relating to the minimum wages and special allowances are concerned they are fixed without any reference to the paying capacity of the employer, but when a dearness allowance is fixed as a part of the fair wage it will have to depend upon the paying capacity of the employer. It has been held that though the dearness allowance is given to compensate for the rise of cost of living, cent per cent neutralisation is not given as it may tend to inflation. It was held in Clerks of Calcutta Tramways v. Calcutta Tramways Co. Ltd., [1956-II L.L.J. 450]; (1956) S.C.R. 772."We can now take it as settled that in matters of the grant of dearness allowance except to the very lowest class of manual labourers whose income is just sufficient to keep body and soul together, it is impolitic and unwise to neutralise the entire rise in the cost of living by dearness allowance."In Hindustan Times Ltd., New Delhi v. Their Workmen, [1963-I L.L.J. 108]; (1964) 1 S.C.R. 234, it was held that the purpose of dearness allowance was to neutralise a portion of the increase in the cost of living. The same view was expressed in Kamani Metals and Alloys Ltd. v. Their Workmen, [1967-II L.L.J. 55]; (1967) 2 S.C.R. 463. It was noted that one-hundred per cent neutralisation is not advisable as it will lead to inflation and, therefore, Dearness Allowance is often a little less than one-hundred per cent neutralisation. In fixing the dearness allowance the principle that is followed in determining the paying capacity for fixing wage structure, is equally applicable. In determining the dearness allowance, increase in the cost of living, the resulting change in the economic conditions and the patterns of dearness allowance prevailing in other concerns in the same region are factors to be taken into account. In Ahmedabad Mill Owners Association v. The Textile Labour Association, (supra) it has been held that in giving effect to the demand for a fair wage including the payment of dearness allowance to provide for adequate neutralisation, industrial adjudication must always take into account the problems of the additional burden which such wage structure would impose upon the employer and as itself whether the employer can reasonably be called upon to bear such burden. The Tribunal has taken into account the paying capacity of the three concerns which it has classified as A and fixed the dearness allowance payable by them. But the High Court has found that the Tribunal has not adopted the correct principles in arriving at the paying capacity. The learned counsel appearing for the respondents also pointed out that even a cursory examination of the profit and loss account would show that the three companies which are classified as A had a larger income than was taken into account by the Industrial Tribunal. The High Court is not right in its observation that the dearness allowance should effect a cent per cent neutralisation as it is not in conformity with the decision cited above27. Regarding the date from which retrospective effect should be given the High Court has observed that the reference was made on 7th January, 1965 and the award was given on 10th May, 1968, that is after a lapse of about three and a half years. Taking all the circumstances into account the High Court directed that subject to any other consideration which may require to the contrary effect should have been given to the provisions of the award relating to rates and scales of wages and dearness allowance as and from 7th January, 1965 being the date of the general reference. Having observed so the High Court left it open to the Tribunal to examine whether there are any other circumstances which would require the later date to be fixed in the case of all or any of the employers. In granting retrospective effect the Tribunal has a discretion to fix the date taking into account the financial position of the company. The delay in giving the award and the subsequent proceedings in the High Court and in the Supreme Court has caused a lapse of several years. Though the employees are entitled to be given the increase in wages from the date of reference it may not be practicable taking into account the considerable lapse of time. The employers may not have the capacity to pay the entire arrears. It may be that in some cases the employer may be able to do so if it is directed to make the payment in instalment. These questions will have to be taken into account depending upon the facts and circumstances of each case28. To sum up we agree with the view taken by the Tribunal and the High Court that the appellants belong to A category and are liable to pay fair wages31. The High Court has found that the determination of the paying capacity of the industry has not been satisfactory. It has found that some of the accounts maintained by the industry are suspicious and cannot be accepted. The Tribunal will have to examine the account afresh and determine the paying capacity. In fixing the paying capacity the Tribunal will have to fix the income as well as permit deduction and allowances properly incurred. There can be no dispute that expense incurred for purchase of raw material, maintenance of the factory expenses incurred towards rent, public charge, maintenance of the establishment and expenses incurred in marketing of the produce should be deducted. The item mentioned above are not exhaustive. As to whether a particular item of expenditure is liable to be deducted or not will have to be determined on the facts of the case. This Court has clearly laid down that no deduction should be allowed for payments of income-tax or for allowances made for depreciation or for making provision for reserves. So far as expenses incurred towards payment of wage bill inclusive of dearness allowance, bonus, gratuity, etc., are concerned they will have to be deducted. After properly determining the paying capacity of the industry the Tribunal will have to proceed to fix fair wage which would include the fitment, scale of wages and dearness allowance. While after fixing the above the Tribunal will have to determine as to from which date retrospective effect will have to be given for payment of the wages thus fixed. As the paying capacity will have to be re-determined the wage structure including fitment, scale of wages, dearness allowance, period during which retrospective effect is to be given will have to be determined afresh.