Case: Management of Shri Chalthan Vibhag Khan Udyog Sahakari Mandal Ltd Vs. B.S. Barot Member, Industrial Court, Gujarat and Another Etc

All these appeals and special leave petition are by the management of five cooperative sugar factories in Gujarat State. The demand of the workmen of the factories in Gujarat was for payment of the U.P. Government revised scales for sugar factories in U.P. regarding pay, dearness allowance and other benefitsThe second Wage Board for the sugar industry gave its report in 1970. The Wage Boards report was due to expire on 31st October, 1974. The Government of U.P. on 31st October, 1974, issued the U.P. Pattern Scales of Wage s and Dearness Allowance for workmen employed in all sugar factories working by vacuum Pan Manufacturing Process. The Labour Minister gave the award and as a result of that award, an order was passed under section 3 sub-clause (b) of the U. P. Industrial Disputes Act, 1947. This order relating to U.P. Pattern of Pay, Graduated Dearness Allowance, Variable Dearness Allowance came into force from 31st October, 1974 and effect was to be given to these pay-scales and dearness allowance from 1st October, 1974. As the sugar factories were seasonal factories a retention allowance for unskilled seasonal workmen for off-season at the rate of 10% of the basic wage and dearness allowance payable during the crushing year 1974-7 5 was also provided for. The demand put forward by the workmen in all these appeals is for payment according to the U.P. PatternThe Industrial Court, Gujarat, increased the graduated dearness allowance of the unskilled employees from Rs. 21 to Rs . 40. But this increase was not given at one stage but was spread over in three stages, the first stage being from 1st July, 1976 to 30th June, 1977, the second stage being from 1st July, 1977 to 30th June, 1978 and the third stage being from 1st July , 1978 to 30th June, 1979 and onwards. The increased graduated dearness allowance for the first period would be Rs. 32 per month; for the second period Rs. 36 per month and for the third period Rs. 40 per month. The existing basic wage for the unskilled employee is Rs. 110. The variable dearness allowance of Rs. 151 per month is being paid and the Court found that there was no dispute as raised in demand No. 2(c). Regarding variable dearness allowance demand Nos. 3, 4 and 5 the C ourt revised the rates from 83 paise per point on the rise over 301 points of All India Average Consumer Price Index Number for Industrial Workers (Base 1960-100) at Re. 1.00 per point for skilled B operatives and for clerks drawing upto Rs. 150 pe r month as asked for in demand 5(i) (b) and from Re. 0.95 to Re. 1.12 for All India Average Consumer Price Index for other employees as per demand No. 5(i)(d). This increase was also spread over for a period of three years i.e. 7 paise for the f irst period from 1st July, 1976 to 30th June, 1977; 5 paise for the second period from 1st July, 1977 to 30th June, 1978; and 5 paise for the third period from 1st July, 1978 to 30th June, 1979 and onwards. Regarding demand No. 7 relating to retaining allowance to be paid to the unskilled seasonal employees at the rate of 10 per cent of the basic wage and dearness allowance payable during the crushing season 1974-75 and for subsequent years, the Court found that the demand wa s justified. The Court gave a retention allowance of 10%, as demanded, of the basic wage and dearness allowance payable during the crushing season 1974-75 and also for the three subsequent years.On appeal the High Court passed an order o n 18th October, 1978 as follows stating that reasons will be given later"(1) The impugned award is hereby quashed and set aside(2) There is no justification for the phasing awarded by the Indus trial Court and hence, the phasing is quashed and set aside(3) x x x x(4) x x x x(5) The respective cooperative sugar societies will pay the costs of the other side. Costs quantified at Rs. 300/- in each matter. Rule is made absolute accordingly in Special Civil Applications Nos. 1136 of 1977, 1148 of 1977, 602 of 1978 and 311 of 1978, Special Civil Applications Nos. 1036 of 1977 and 1505 of 1977 are dismissed."By this order the Court quashed the award and set it aside. It also found that there was no justification for phasing as awarded by the Industrial Court and therefore quashed it and set it aside. It confirmed with retrospective effect the award as given by the Industrial Court. The High Court also directed that U.P. Pattern will be given full effect with retrospective effect from the date mentioned in the award. The reasons were given by the High Court by its judgment dated 30th January, 1979.

Court's reasoning:
This plea cannot be accepted for the award of equalisation of more than 100% in these cases is not based on seasonal employment. To mitigate the hardship of unemployment during the off-season a retention allowance has been provided for the seasonal workers. The plea that the neutralisation of more than 100% is based on seasonal employment was not taken in the pleadings or raised before the courts below.Demand No. 7 relates to claim for payment of retaining allowance for the unskilled seasonal employees in the off- season at the rate of 10% of their basic wage and dearness allowance payable during the crushing season 1974-75. The Industrial Court as regards demand No.7 directed that the unskilled seasonal employees be paid retaining allowance for the season 1975 at the rate of 10% of t he basic wage and dearness allowance payable during the crushing season 1974- 75. The claim regarding the variable dearness allowance is demand No. 2(c) and 5(1) (a) (b). There is no reference in the proceedings before the Industrial Court or the High Court that the variable dearness allowance of more than 100% equalisation was awarded due to the seasonal employment of the workers. In the result we accept the contention of the appellants that variable dearness allowance cannot be more than 1 00% neutralisationRelying on the provisions of the section which requires that taxes and depreciation should be deducted from gross profits for arriving at net profits, it was submitted that in determining the financial capacity of the industry the net profits as prescribed in the section would have to be determined. We do not read the section as meaning that wages and dearness allowance could only be determined after the net profits are arrived at. The sub-section itself provides that contributions towards provident fund and g ratuity fund of its employees should all be deducted from the gross profits for arriving at the net profits. The provision for deducting depreciation occurs after providing for contribution towards provident fund and gratuity. The determination of the net profits under the section is for a different purpose, namely for appropriation of the net profits as provided for in the Act and does not in any way support the contention of the appellantsIt is settled law that in fixing fair wages or dearness allowance or for making contribution to provident fund or providing for gratuity the financial capacity of the industry to bear the additional burden will have to be taken into account. On principle of social justice with the development of industrial law it has now been accepted that when the industry can bear the burden provision should be m ade for provident fund and gratuity scheme. In determining the financial capacity of an industry all relevant facts will have to be taken into account. The principles followed in arriving at the profit and loss account for income-tax and other purposes may not be conclusive. The claim of the employer to a reasonable profit, that of the shareholders for a fair dividend and the interest of consumer and other relevant factors and circumstances will have to be taken into account. It is necessary to take into account all the facts and circumstances relating to the industry for determining the financial capacity of the industry to payIn view of the order we propose to make we do not feel called upon to examine in detail the financial capacity of the various factories or to remit it to the Industrial Court for that purpose. We have found that the order of the Industrial Court and the High Court relating to the provision for variable dearness allowance of more than 100% neutralisation is not sustainable in law and will have to be set aside. Regarding the award relating to the retention allowance of the unskill ed workers at 10% of the basic wage and the dearness allowance payable during the crushing season, it was not challenged before the High Court.The only question therefore which is in dispute is the increase of graded dearness allowance from R s. 21 to Rs. 40 with effect from the date of the award.We do not think that the increase in burden under this head would be beyond the financial capacity of the factories especially as we are satisfied that the claim for depreciation is highly exaggerated. Taking all the circumstances relating to the financial capacity of the factories we are satisfied that the increase in the burden due to the increase in the graduated dearness allowance will be within the capacity of the industry. We therefore find no reason for remitting the matter back to the Industrial Court.