Case: D.C.M. Chemical Works Vs. Its Workmen

These two appeals by special leave arise out of the same award of the Industrial tribunal, Delhi, and will be dealt with together. Appeal No. 4 is by the management of the D.C.M. Chemical Works while Appeal No. 5 is by the workmen. The management hereinafter will be referred to as the appellant for the purposes of both appeals and the workmen will be referred to as respondents. A dispute arose between the parties with respect to various matters including wage scales, dearness allowance and gratuity. As the parties could not come to terms, it was referred to the Industrial tribunal for adjudication and there were as many as eleven issues which were the subject-matter of reference. The main point, however, on which the parties differed was whether in determining the wage structure, etc., of the chemical works which is a constituent unit of the Delhi Cloth and General Mills, Limited (hereinafter called the company), the overall position of the company should be taken into account or only the position of this one unit, namely, the chemicalrespondents contended that the chemical works was an integral part of the company and therefore the overall position of the company should be taken into account and the wage structure, etc., fixed accordingly; in particular it was pointed out that there were differences in wage structure, etc., between the various units which were controlled and owned by the company and which were all situate in the same area in Delhi and that these differences should be eliminated and all the enterprises in Delhi controlled by the company should be treated on the sameOn the other hand, the contention of the appellant was that though the chemical works was one unit of a large number of industries controlled by the company, some of which were situate in the same area in Delhi, the various units were independent industries and each unit had to be considered on its own and the wage structure, etc., fixed on the basis of the financial position of each unit; in particular, it was urged that two of the main units in Delhi were the textile mills run by the company and the claim of the respondents that the chemical works should in all matters be treated on a par with the textile units, was untenable, on the ground, among others, that it would be against the principle ofIndustry-cum-region. Before, therefore, we take up the particular matters raised in the two appeals before us, we shall first have to consider whether the claim of the respondents that the overall position of the company should be taken into account in fixing the wage structure, etc., of the chemical works is sound; for if that position to accepted, the award may have to be set aside as the tribunal has held that in the circumstances of this case, the chemical works should be treated as an independent unit and that the wage structure, etc., therein cannot be fixed on the basis of the overall position of the company.In order to appreciate the various contentions put forward by the parties on this question, it may be useful to look into the history of the company and how it has grown. The company came into existence in 1889 with a modest capital of about Rs. 10 lakhs. It seems that the policy of those in control of the company was to plough back a substantial part of the profits into the industry itself and to create a reserve for that purpose. Originally the company started with a textile mill but in course of time, with the help of ploughed back profits and also with the aid of further capital, the company set up a large number of other industrial concerns in Delhi and elsewhere. In Delhi itself, the company now has the Delhi Cloth Mills, the Swatantra Bharat Mills, which are both textile concerns, the D.C.M. Tent Factory established in 1940, and the chemical works with which we are concerned in the present appeals. Besides, there are other industrial concerns owned and controlled by the company outside Delhi, as for example, the Daurala Sugar Works established in 1932, the Lyallpur Cotton Mills in 1934 and the Mawana Sugar Works inchemical works were started in 1942 and the only line of production at that time was sulphuric acid. In 1943, an alum plant was set up, in 1944 a soap plant, in 1945 a superphosphate plant and in 1946 a contact sulphuric acid plant. In 1947, a vanaspati plant was established and also a power-house was erected in order to meet the requirements of the vanaspati plant. In 1948-49, a caustic soda plant was added, so that what began as a modest subsidiary to the textile mills, has now expanded into a full-fledged unit for production of chemicals and vanaspati. The total capital which was originally about Rs. 10 lakhs when the company started in 1889 has now grown to Rs. 4 crores. Even so, the capital employed in the chemical works has always been found from the reserves of the company and is now of the order of over a crore. It is also not in dispute that very little out of the production of the chemical works is used in the textile mills of the company and that by far most of the production is sold in the open market. Further, even the small part of the production that is used by other units is charged at market rates and not at cost price, so that for all practical purposes, the chemical works is being run as an independent unit.Certain features have, however, been pointed out by the respondents to show that the overall position of the company should be taken into account in determining the wage structure, etc., of the chemical works which should be treated as an integral part of the entire industry of all kinds carried on by the company. These features are :No unit has any separate paid up capital and there is no separate depreciation fund or reserve fund for each units;the company publishes one balance-sheet showing the total profits of all the under-takings after taking into account losses incurred in any undertaking;the shareholders of the company are the shareholders in all the units;the company has got one board of directors and a common managing agency and the policy of the various units is determined on the basis of the company as one integrated unit;the profits of the company are all pooled together and the profits in any undertaking are not earmarked for expenditure in that undertaking;the dividends are paid from the profits of the company as a whole;the company has a single provident fund for all its employees in all its units and the company has established various units from the profits earned by the company as a whole in the past and income-tax is paid on the entire profits of the company made by all the units after taking into account the losses, if any, incurred by a particular unit.

Reasoning:
. There is, however, in our opinion, a very cogent reply to these features pointed out on behalf of the respondents, and that is, that the company is a single limited concern owning and controlling various industrial units of different kinds under it and therefore under the company law as the company is one legal entity, these features are bound to be common and may not be enough to lead to the conclusion that the various undertakings carried on by the company are one integrated whole and therefore when wage structure, etc., has to be fixed in any particular unit, the overall position of the company as a whole must be taken into account.On the other hand, there are certain features which have been pointed out by the tribunal and which are not in dispute which go to show that the company has been treating its various units as independent concerns in actual practice. Each unit has separate books of account and separate profit and loss account showing how each particular business is faring. Each unit has separate muster-rolls for its employees and transfers from one unit to the other, even where such transfers are possible considering the utterly different kinds of businesses that the company is carrying on, usually take place with the consent of the employees concerned. Further each unit has got its own separate wages and separate dearness allowance and other different allowances and bonus is also paid differently in each concern. Further, even where sales take place from one unit to another, they take place at market-rate and not at cost price and are adjusted on this basis in the books of account. Lastly, though there is a common board of directors and a common managing agency of the company, each unit has its own separate management as it is bound to be for the business carried on by different units is in many cases utterlywould, therefore, in our opinion be not right to emphasize these common features and to hold on their basis only that the various businesses carried on by the company have to be treated as one integrated whole for the purposes of wage structure, etc. The outstanding fact in the present case is that though a large number of businesses is being carried on by the company, their nature in many cases is utterly different and one has, generally speaking, nothing to do with the other. The three main lines of business which the company is carrying on are sugar, textiles and chemicals. It is obvious that there is nothing common between these three different lines of business and there can be no question of one depending upon the other and there cannot be functional integrality generally speaking between these three lines of business. There might be some connexion between the chemical works and the textile mills of the company inasmuch as come of the chemicals might be used in the textile mills; but the evidence shows that a very small proportion of the chemicals produced in the chemical works is used in the textile mills and that most of the production is sold in the open market. It cannot therefore be said that the chemical works as it now exists is there for the purposes of the textile mills and is thus integrated with the textile mills. Even in the matter of employment, the evidence is that there is separate recruitment of labour for the different units and each unit has separate muster-rolls of employees and this is quite natural considering that different skill lie required for the three lines of business carried on by the company. It cannot also be said that there is any essential dependence of the chemical works on the textile units or that one cannot be operated without the other. Further the way in which the company has been dealing with different units in the past also shows that they have been treated as independent units. Each unit has its own separate labour union and separate agreements are entered into between the company and its unions with respect to the conditions of service which are also different for different units. Even in the matter of bonus there are differences between the different units and these differences sometimes arose out of the different agreements between the various units and their unions. It appears that even in the case of units carrying on the same business, as for example, textile, the workmen themselves contended in an earlier adjudication that the Delhi Cloth Mills and the Swatantra Bharat Mills were two distinct and separate units of the company. In any case whatever may be said as to the units in the same line of business, it is in our opinion perfectly clear that there is no nexus of integration between different lines of business carried on by the company on the facts which have been proved in this case. We are of opinion therefore that the ratio of the decision in the Fine Knitting Co. case [1962 - I L.L.J. 275] (supra) applies to the facts of this case and it must be hold that the chemical works is an independent unit and therefore in fixing the wage structure, etc., we have to look to the position of the chemical works only and cannot integrate it with other units and consider its wage structure, etc., on the basis of such integration.It is in the background of the above finding, namely, that the chemical works is an independent unit that we now come to the specific points raised in the two appeals. We shall first take the appeal by theagree however with the tribunal that in spite of the possibility that in time to come the chemical works might acquire stability and prove a source of increasing profit to the company, the fact remains that up to now the chemical works has been running at a loss except for two years and one cannot be certain that it will start earning profits soon. In these circumstances it seems to us that the tribunal was justified in not framing an incremental scale of wages at the present juncture as that would put a heavy strain on the finances of the chemical works which has yet to attain financial stability. At the present moment the losses incurred in this unit have to be met from the profits earned in other units of the company and in this situation we do not think that the tribunal was wrong in refusing to frame incremental scales.It is, however, urged on behalf of the respondents that if in the course of the last twenty years, the capital invested in the chemical works ham increased tremendously as compared to the modest amount with which it was started in 1942 and if the company can find capital for the purpose of expansion, it should be able to pay incremental scales of wages by dipping into the same source from which it has been able to find capital. In effect this argument means that even though the concern may be making losses year after year, it should find money for paying the labour force higher wages in spite of the circumstance that that may load it into incurring further losses. The argument seems to be that even though there may be losses, the concern must pay higher wages to the workmen and if necessary pay them out of what may be called capital. Now this argument would, in our opinion, be unanswerable if the claim was for what is called minimum wage-SeeCrown Aluminium Works v. Their workmen [1958 - I L.L.J.If the wages paid by the appellant in the present case were below the minimum wage, the tribunal would certainly be justified in ordering it to pay the minimum wage, for no industry can have a right to exist if it cannot pay wages at the bare subsistencetherefore agree with the tribunal that in the circumstances no case has been made for fixing an incremental scale of wages at the present juncture. The contention on this head must therefore be rejected.Re. (ii) : As to the canteen workmen, it appears that the canteen to run by the appellant departmentally on a no-profit-no-loss basis. The workmen employed in the canteen are the workmen of the appellant and their number is sixteen or seventeen. The minimum basic wage for unskilled workmen in this concern at the relevant time was Rs. 38 plus Rs. 55, i.e., Rs. 93; but the workmen in the canteen get consolidated wages and all of them (except one) get much less than the minimum, the figures varying from Rs. 50 to Rs. 78. The tribunal has held that there is no reason why the conditions of service of the workmen in the canteen should not be brought on a par with the conditions of service of the rest of the workmen. It, therefore, ordered that the workmen in the canteen would be entitled to the same facilities relating to leave, provident fund, bonus, and gratuity, etc., as are available to the other workmen in the chemical works; but so far as wages and dearness allowance are concerned, it has not given them even the minimum as indicated above. The case of the appellant was that even if the minimum was paid to the workmen in the canteen, the Price of the various foodstuffs supplied by the canteen to the workmen would go up substantially and it was on that ground that the appellant resisted the increase in the wages of those workmen in the canteen who are getting leas than the minimum of Rs. 93. The tribunal has held-and we think rightly-that the fact that the bettering of the conditions of service of the workmen in the canteen may load to a rise in the price of things sold there, is no reason for refusing the demand of the workmen; but it has not carried into effect fully the implications of this observation. It has ordered that same conditions as to leave facilities, etc., should be extended to the canteen workmen but has stopped short of giving them the same wages and dearness allowance. The reason why the tribunal did not give the workmen the same wages and dearness allowance is that there was no satisfactory material before it to permit it to fix wages and dearness allowance for the workmen in the canteen. We are of opinion that there is no reason why the tribunal should not have at least granted the minimum which is paid to the other workmen in the concern to those workmen in the canteen who are getting lose than the minimum. We can see no reason for not giving them also the minimum wages as indicated above. This will certainly result in bringing the fifteen workmen who are getting between Rs. 50 and Rs. 78 per mensem as consolidated wages into an equal position, for each will then get the minimum, namely, Rs. 38 plus Rs. 55 and may remove part of the discontent. In the circumstances that is all that can be done in the absence of the material to which the tribunal has referred. Therefore, the wages of those fifteen workmen who are getting less than the minimum should be brought to the same level. There is no reason why they should not get such benefits as may be due to them, by their wages being brought to the same minimum as the wages of the other workmen in the concern. We, therefore, disagree with the tribunal with respect to the workmen employed in the canteen and order that the wages of those workmen who are getting less than the minimum paid to the other workmen in the concern should be brought to the same minimum level. The rest of the award on this head will stand. The minimum wages as above will be paid from the date the tribunal has ordered its award to come into force. Re. (iii) : The claim of the workmen in this connexion was that there were three hundred workmen employed in the civil engineering department and that they should be made permanent. The tribunal, however, rejected this contention and pointed out that most of the workmen were temporarily engaged to carry on construction work which was of a temporary nature and therefore they could not be made permanent simply because the construction had lasted for more than a year. This view of the tribunal is in our view correct in so far as the claim put forward with respect to all the three hundred workmen was concerned. It appears, however, that at the time when the tribunal recorded evidence, the large majority of these three hundred workmen had been discharged because they were no longer required and only about 65 remained in service. It appears from the evidence of the joint works manager that a skeleton staff on the civil engineering side is kept for maintenance of buildings and this skeleton staff is of a more or less permanent nature. The argument therefore before us is that at any rate this skeleton staff should be made permanent. It was, however, urged on behalf of the appellant that this was not the way in which the matter was put before the tribunal. The position now is however clear that a skeleton staff is kept on a permanent basis for the civil engineering department and it seems to us fair that the appellant should be directed to make this skeleton staff permanent and give them the same facilities and wages, etc., as are given to the other workmen. We, therefore, direct that the appellant shall make such of the skeleton staff as is maintained for civil engineering purpose permanent and give them the same conditions of service including the same minimum wages, etc., as to the rest of the workmen. It is however left to the discretion of the appellant to determine what should be the strength of this staff and which persons should be retained as permanent employees. We say this because the matter was not gone into from this point of view before the tribunal and we have no material on which we ourselves can determine the strength of the skeleton staff and the persons who should be made permanent on that account. This direction will be given effort to within three months of this judgment.Re. (iv) : The workmen have been given 2 1/2 months basic wages as bonus for the years in dispute, namely, 1953-54 and 1954-55. They have claimed additional bonus. It is, however, conceded fairly on behalf of the respondents that if the chemical works to treated as an independent unit, their case for additional bonus on the basis of the Full Bench formula cannot succeed. The demand for additional bonus was rightly rejected by the tribunal, considering the chemical works as an independent unit. We may add that this case to distinguishable from the case of South India Millowners Association [1962 - I L.L.J. 223] (supra), for here the two lines of business are distinct and have nothing to do with eachare of opinion that the Increase is not sustainable on its own merits on the ground of the financial capacity of the concern, which the tribunal Itself found was not sound, as the concern had been running at loss practically since It came into existence except for two years. The contention therefore on behalf of the appellant on this head must be accepted and the order of the tribunal Increasing the dearness allowance setis, however, nothing on the record to prove this. As the record stands, we have no reason to hold that the gas allowance which was originally paid to the workmen of the nitric acid gas plant was not merged In their pay. On the whole, therefore, the reasons given by the tribunal for making the allowance of Rs. 3 to those workmen who are engaged In the manufacture of chlorine, sulphuric acid, caustic soda and hydrochloric acid appear to us to be sound and we are no reason to interfere with that part of theis true that in this concern there is already a provident fund schemes in force. But it to now well settled that both gratuity as well as provident fund schemes can be framed in the same concern if its financial position allows it. It is true that the financial position of the chemical works has not been round to be good and stable enough to warrant an incremental wage structure; but gratuity is a long-term provision and there is no reason to suppose that in the long run the appellant will not be in a flourishing Condition. As to the burden of the scheme, we do not think that, looking at it from a practical point of view and taking into account the fact that there are about 800 workmen in all in the concern, the burden per year would be very high, considering that the number of retirements is between three to four per centum of the total strength. Further, we find that in this very concern there is a gratuity scheme for clerks who number between 100 and 200 and are part of the labour force. We can see under the circumstances no reason why a similar gratuity scheme should not be framed for the rest of the workmen. We, therefore, see no reason to interfere with the order of the tribunal in this respect.