Case: Mukand Limited Vs. Mukand Staff, Officers Association

( 2 ) IN the Reference which was made by the State Government before the Industrial tribunal, the following demands of the Union were referred for adjudication:(i) Basic scale and increments : The existing basic salary scale applicable to the monthly rated staff and officials was sought to be revised after merging the additional basic salary and special allowances with the existing scales of the respective grades. The revised scales which were claimed were as follows:One of the claims under this head was for deleting Grade Nos. 11 and 12 and for placement of existing members of the staff in these Grades in Grade 9. Service increments were also sought in the following manner: one increment for service between 3 and 6 years, 2 between 6 and 9 years, 3 between 9 and 12 years, 4 between 12 and 15 years and 5 for service upwards of 15 years. (ii) The existing scheme of Dearness allowance was sought to be replaced by the following Dearness Allowance scheme:Variable DA: Basic salaryNeutralisation for variation of 5 pointsNeutralisation for variation of 5 pointsRs. 301 to 350Rs. 351 to 400Rs. 401 to 450Rs. 451 to 500Rs. 501 to 550Rs. 551 to 600Rs. 601 to 650Rs. 651 to 700Rs. 701 to 750Rs. 751 to 850Rs. 851 to 950Rs. 951 to 1050Rs. 1051 to 1150Rs. 1151 to 1250Rs. 1251 to 1350Rs. 1351 to 1450Rs. 1451 to 1550Rs. 1551 to 1650Rs. 1651 to 1750Rs. 1751 to 1900Rs. 1901 to 2050Rs. 2051 and aboveUpto basic Rs. 300Rs. 301 to 350A + 87. 5% of basic above Rs. 300Rs. 351 to 400B + 75% of basic above Rs. 350Rs. 401 to 450C + 50% of basic above Rs. 400Rs. 451 to 500D + 25% of basic above Rs. 451Rs. 501 and aboveE + 20% of basic above Rs. 500The computation of DA in respect of the grades 01 and 00 shall also beldone on monthly basis. (iii) House Rent Allowance was sought to be revised to 15% of the revised basic and dearness Allowance(iv) Leave Travel Allowance was sought to be revised as follows:(a) Rs. 2500 lump sum together with respective monthly basic salary for Grades 2 to 9.(b) For Grades 01 and 00, the lump sum payable was claimed at an enhanced amount of Rs. 3500. 00 together with the respective basic monthly salary.(v) Gratuity was sought to be revised to 50% of gross salary for 5 years service. For service of 6,7, 8, 9 and 10 years respectively, the claim was for 60%, 70%, 80%, 90% and 100% of gross salary for every completed year of service.(vi) Education Allowance of Rs. 250. 00per month.(vii) Medical Allowance at 8. 33% of the revised basic salary and Dearness allowance per month.(viii) Shift Allowance of Rs. 4, 6 and 10 per day for the first, second and third shift respectively.(ix) Computer Allowance of Rs. 200. 00per month to those in the E. D. P. Department, stenos, Typists, Clerks and other computer Operators.(x) Washing Allowance of Rs. 75. 00 per month.( 3 ) THE Industrial Tribunal by its Award dated March 26, 1998, rejected (i) the demand for merging Grades 12 and 11 with Grade 09, (ii) the demand for placing employees in Grade 09 in 5 years experience in Grade 08, (iii) the demand for Shift Allowance and Computer allowance. The Tribunal granted the demand for the revision of basic scales as prayed for. However, in so far as the claim for service increments was concerned, while allowing the claim, the Tribunal has granted service increments in the following graded scale: From 8 years upto 12 yearsFrom 12 years to 18 yearsFrom 18 years to 24 yearsFrom 24 years and aboveIn so far as the claim for Dearness Allowance was concerned, the Tribunal also allowed the claim of the Union. The Tribunal thus granted a Variable Dearness Allowance and a Slab based Dearness Allowance which was linked to the Consumer Price Index and to the Basic salary. The House Rent Allowance was revised to 12. 5% of the revised basic pay and Dearness allowance. The Leave Travel Allowance was granted as prayed for. The claim for gratuity was allowed to the extent of gratuity being calculated at the rate of 21 days for every completed year of service. The Tribunal allowed the claims for Education Allowance to the extent of Rs. 250. 00 per month, a fixed medical Allowance of Rs. 300. 00 per month and washing Allowance of Rs. 50. 00 per month. The demands were granted by the Tribunal with effect from the date of the Reference, which was made on February 17, 1993.( 4 ) WHEN the award of the Tribunal was impugned in a Writ Petition under Article 226 of the Constitution of India, the learned single judge, by a Judgment and Order dated december 1, 1999, affirmed the Award of the tribunal save and except for the Dearness allowance which was substituted by the following formulation: variable DA base:CPI 1000 (1934) for gradesI 1200 (1934) for grades 0100 = Nil. For increase or decrease of 5 points above 1000 points index, the DA increases or decreases by Rs. 3 per 5 points. Slab D. A.a) upto basic Rs. 300100% of basic.b) Rs. 300 to Rs. 400A+ 60% of basic above Rs. 300. 00a) Rs. 400 to 500B + 40% of basic above rs. 300/d) Rs. 500 and aboveC + 20% of basic above Rs. 500. 00Thus, while retaining the Slab DA which had been awarded by the Industrial Tribunal, the learned single Judge modified the award of the Tribunal in so far as the Variable DA having a dual linkage with the Consumer Price Index and specified slab salary was concerned.( 5 ) THE Appellant in Appeal No. 194 of 2000 is a Public Limited Company incorporated under the Companies Act, 1956, and had factories at Kurla and Kalwe. The company is engaged in Steel making, industrial machinery and Engineering products. The Factory at Kurla is basically a foundry which manufactures steel castings. The Company supplies castings to Sugar Mills, cement Industries and Public Sector undertakings. The Company supplied bogies and couplers for the Railways from the Kurla plant. The steel castings have also been exported to the Commonwealth of Independent states and other countries. The Factory at kalwe has two divisions, the Steel Plant and machine Building Division. The product range of the steel plant comprises of a variety of products including ball bearing steel, stainless steel, high carbon wire rods, spring steel and forging steel. The Machine Building Division is engaged in the Design, Fabrication, Erection and Commissioning of E. O. T. Cranes, Rolling mills, Chemical Treatment Plants, Earth moving Equipment, Mobile Service Structures for ISROs space programme etc. The Division has also executed turnkey contracts. The engineering Construction Division of the company undertakes turnkey projects including feasibility studies, planning, engineering and construction, erection and commissioning of equipment. The Company has launched two subsidiary companies mukand Dravo Wellman Ltd. and Mukand soviet Engineering Ltd. with foreign equity participation.( 6 ) THE First Respondent is a registered trade Union representing the interests of the monthly rated staff and officers together numbering about 1200 persons employed by the Company in different grades between grade 12 at the lowest and Grade 00 at the other end of the spectrum. The Association has entered into a number of settlements regarding wage scales and other service conditions relating to the monthly rated employees of the company. The last two settlements relating to the salary and service conditions were entered into on June 8, 1982 and February 24, 1989. The Company has also daily rated workmen who are engaged at the Kalwe and Kurla factories and these workmen are represented by two separate Unions. Industrial settlements for the daily rated employees at Kalwe were entered into in May 1989 for the period3 and for Kurla in 1991 for the period. There are about 1200 daily rated workmen on the rolls of the Company at Kalwe and 596 at Kurla.( 7 ) THE last settlement relating to the monthly rated staff and officers which was entered into on February 24, 1989 expired on december 31, 1991. A charter of demands was submitted by the Firstn on November 4, 1991. The negotiations not having yielded a settlement, the dispute was taken in conciliation before the Assistant labour Commissioner but ended in a failure report dated October 20, 1992. A Reference was thereafter, made by the Government of maharashtra for adjudication on February 17, 1993 under Section 10 of the Industrial disputes Act, 1947, before the Industrial tribunal. The Reference, as already stated earlier, ultimately came to be adjudicated upon by the Tribunal in its award dated March 26, 1998. The award of the Tribunal having been challenged before the learned single Judge, the challenge came to be disposed of by the impugned Judgment and order dated December 1, 1999.

Court's reasoning:
On the one hand is often times a pressing need to revise the wages and the service conditions of workmen so as to protect their livelihood from an erosion in the real value of the pay packet. Inflation and increase in the cost of living in metropolitan areas spare no one, including the workers. The law has to protect the just aspirations of the working class and, the function of the industrial adjudicator has to necessarily go beyond protecting a minimum or subsistence level of wages, A realistic assessment has to be made of the basket of commodities and services which the worker, like any other human being is entitled to aspire for as a part of a decent and dignified standard of life. With the spread of education, the growth of technology with the attendant access to information and the impact of the media, workers and their families cannot be deprived of just expectations for an improvement in the standard of living. Equally, the Industrial adjudicator has to take due note of the position of the employer per se and in relation to other comparable concerns, the nature of the business of the employer, the financial capacity of the employer, the financial and economic conditions in which the business is operating and its future prospects. The extent of capital employed, the turnover, sales, reserves and profits must all weigh in the balance. The position of the employer, however, cannot be considered in isolation because if that were done, there would be a distortion in the wage structure prevalent in the region and in the industry. Therefore, our law embodies principle of. The industrial adjudicator has to assess the pattern of conditions prevalent in comparable concerns in the region and the industry. Where the number of concerns in the industry in the region is large, the industry aspect of the formula has to be emphasized.e where the number of concerns in the industry is relatively few in number, the region aspect of the formula has to be emphasizedApart from this the company supplies castings to sugar mills, cement industries, and public sector undertakings such as bhel, BEML, BSP etc. The alloy steel foundry manufactures and supplies a variety of allied steel castings for oil refineries, petrochemical units, diesel, mining and construction and defence. The company has also been exporting its product to USA, Canada, Germany, finland, United Kingdom. The export performances during the financial year9 was Rs. 2. 76 crores, in0 rs. 3. 40 crores and in1 Rs. 5. 01 crores. The company has declared 30% dividend for the years1 and 32. 5% in2 on the enhanced capital for the bonus issue in9 @ 1:2 ratio. The company has launched two subsidiary companies recently i. e. Mukand dravo Wellman Ltd. and Mukand Soviet engineering Limited in Association and equity participation with the Americans and the Russians. During the year7 the sales turnover has grown from 528 crores to 868. 49 crores. The paid up capital of the company in2 was 14. 73 crores. It has increased to 27. 09 crores. The reserves were 105. 13 crores. It has increased to 379. 01 crores in. The gross block including WIP was 239. 43 crores in2 and has increased to 445. 13 crores. The net worth of the company grew from Rs. 107. 49 crores to Rs. 408. 02 crores. The total assets have grown from Rs. 262. 04 crores to Rs. 990. 67 crores. Gross profit of the company for the period7 is 34. 22 crores. It is true that the company has been registering losses in the last year but that may be particularly due to the factor of recession which has affected the industries in generalIn the present case, these economic and financial indicators reflective of the performance and financial health of the employer establish beyond doubt that this is a company which is financially sound. Indeed, all the indicators including capital, reserves, sales, turnover, exports, assets, net worth and profits have consistently shown an upward increase save and except for an occasional aberration as in the year 199899. The fact that the financial performance of9 was an exception to an exceptionally notable performance by the Company over the years is reflected by the subsequent balance sheet for the year. The 62nd Annual report for the year0 is appropriately entitled the Turnaround. Making due allowance for some hyperbole which companies are known to adopt in order to present a picture of optimism for the shareholdersY Formula: industrial adjudication, in matter where the question of wage revision or revision of service conditions is involved, has to have regard to they principle. The underlying principles have been elaborated by the Supreme Court in several judgments which have already been noted earlier including French Motor Car Company and Greeves Cotton. In the present case, there was, in our view, sufficient material on the record relating to they in question, so as to enable the Industrial Court to adjudicate upon the disputeHaving given our anxious consideration to this submission and upon duly perusing the material which was produced before the Tribunal and in these proceedings with the assistance of the learned counsel, we are of the view that the submission which had been made on behalf of the employer is not justified. At the outset, it would be well to have regard to the fact, that industrial adjudication is not an exercise involving a pure mathematical computation. Statistics and figures are undoubtedly important facets of the process of wage fixation but, in the practical application of they formula, difficulties do arise before the industrial adjudicator. The circumstances relating to two industries within the same region or two establishments within the same industry in the same region, can rarely, if ever, be identical. Each establishment in the industry is bound to have its own peculiar characteristics relating to not merely to the nature of its business but, also those relating to its own peculiar industrial relations scenarioApart from the documentary material which was produced before the Industrial Tribunal, a comprehensive compilation collating the material was filed in the proceedings before it. This collation of material included a chart showing whether the demands of the Association which had been referred to adjudication in the Reference before the Tribunal were paid in comparable Companies. This included the claim for service increments, Dearness Allowance, house Rent Allowance, Leave Travel Allowance, Gratuity, Education Allowance, Medical allowance, Shift Allowance, ComputerWashing Allowance. Out of 16 companies, it was stated that the wage settlements of 11 companies had already. expired and were due for revisionIt has become necessary to advert to the material which was produced before the Industrial Tribunal because the material which was on record before the tribunal would clearly show that the justification for the demands of the Union was made in terens of tiieregion formula. Reliance was placed upon service conditions prevailing in comparable concerns with reference to different components of service conditions including basic scales, service increments, Dearness Allowance, House Rent allowance and Leave Travel Allowance to name some of our components. Therefore, in our view, it would not be correct to criticize or impugn the award of the Industrial Tribunal on the ground that there has been ae of well settled legal precepts relating to wage setting. Once again it would need emphasis that the data relating to 3 largen Lever, Mahindra and mahindra and Larsen and Toubro were kept aside by the learned single Judge on the ground that these were much larger in size than the employer in the present case. The limitations of the data were also duly taken into account by the learned single Judge while considering the matter. Ultimately an objective assessment of the case has been made, upon which the demands which have been granted by the Industrial Tribunal have been pruned down by the order passed by the learned single JudgeThe learned single Judge found substance in the criticism by the learned counsel appearing on behalf of the employer of the award of the Industrial tribunal on the ground that the total financial burden had not been evaluated correctly. The learned single Judge has observed that even according to the Employees Association, the total burden on account of the award works out to Rs. 35. 20 crores and the net burden for the year 1999 for the monthly rated employees and daily rated workmen at Kurla would be around Rs. 10 crores. The learned single Judge held that the Tribunal was obviously in error in holding that the yearly burden under the award would be Rs. 3. 3 crores to Rs. 3. 7 crores and wo have also to 6% to 7% of the total profits of the Company as a matter of fact, according to the learned single Judge, the burden on account of the award works out to about 25% of the gross profits and this factor would have to be borne in mind in fixing the wage structure for the concerned employeesThe difference between the two figures which works out to Rs. 1320 million i. e. Rs. 132 crores is sought to be explained by the employer by contending that the investment allowance and certain other figures including the net profit for3 on account of write back of an excess provision for taxation have been wrongly calculated. Reliance has been placed on behalf of the employer on figures relating to gross profit of various comparable concerns as a percentage of sales (Vol. II page 367) and of the percentage of capital employed. On the other hand, it has been sought to be submitted on behalf of the Association that an exaggerated and misleading picture of monthly emoluments payable to the employees before and after the award has been given on behalf of the employer. The Association representing the employees contends that the computations made on behalf of (he Company are based onn and that these computations were neither produced before the Industrial Tribunal in the form of documentary or oral evidence. In considering as to whether the revision of wage scale and other service conditions is justified, we have duly considered the financial position of the Company, the total pay packet that would be allowed to the employees as a result of the revision, the financial burden and the impact of the wage revision upon the financial health of the Company. It would now be appropriate to deal with each one of the heads under which wage revision has been grantedIn justification of its demand, the association relied upon the fact that the Bombay Consumer Price index which was 892 in June 1972 had gone upto 5435 in December 1991. The year 1972 was referred to because the basic scales were formulated much prior to 1972 and thereafter no revision in the basic scales had taken place apart from giving a fixed additional basic salary. The Association has sought to rationalize the basic scales, the additional basic salary and special allowances by merging all these three components and converting them into one basic salary thereby lifting the starting point of the basic scale. Apart from the rationalization, the Association has sought service incrementsThe learned single judge was of the view that the Tribunal had after a careful analysis of the material produced before it, granted the demand for revision of basic scales and service increments. The learned single Judge also observed that the tribunal had referred to wage paid in similarly situated concerns and had also taken into account the fact that a number of settlements and awards had been arrived at. The learned single judge in this view of the matter declined to interfere with the revision of basic scales. In so far as the service increments were concerned, the Tribunal by its Award had restricted the grant of relief to an extent lesser than what was claimedWe are of the view that the following pattern for the grant of service increment should be substituted in place and instead of what has been directed by the learned single Judge and in the award of the tribunal:1 increment between 10 to 18 years service. 2 ncrements between 18 to 25 years service. 3 increments above 25 years serviceThe learned single Judge has modified this part of the award of the Industrial Tribunal. The slabs and percentages laid down by the learned single Judge have already been extracted in paragraph 4 of the judgment and need not be extracted again. In justifying the award of the Industrial Tribunal in respect of Dearness Allowance, it has been sought to be submitted on behalf of the association that the existing scheme of Dearness Allowance did not protect even the need based minimum wage of thed period. According to the Association, thed of ,the Tribunal only enhanced Dearness Allowance to bring it near 100% neutralization of the earlier basic wageThe Association also drew the attention of the Court to the fact that the enhanced dearness Allowance was for the first time linked both to the basic wages and to the consumer Price Index. This was the method that was followed in almost all the other concerns which were held to be comparable. The dearness Allowance Scheme provided according to the Association, a neutralization of the effect of the rise in price index upon the basic wage to the extent of 94% at the lowest level of wage and which was gradually reduced to around 85% for the higher levels of wages. The association has challenged the decision of the learned single Judge in so far as it denied a dual linkage with the basic pay and Consumer Price index granted by the Tribunal in relation to the variable Dearness AllowanceHaving considered the award of the Tribunal, the Judgment of the learned single Judge and the material on record, we are of the view that a case for the revision of Dearness Allowance had been made out and the Dearness Allowance was required to be revised. First and foremost, in dealing with the question of Dearness Allowance regard must be duly had to the fact that in comparable concerns, a slab system of Dearness Allowance linking the allowance both with the basic salary as well as the Consumer Price index, is a matter of prevalent practiceIn the present case the erstwhile scheme which was prevalent in the Company was divided into 3 parts,(i) A slab D. A. at C. P. I. 1000 in which specified amounts of D. A. ranging from Rs. 376. 00 and Rs. 406. 00 was provided for various scales of basic pay upto rs. 200/and thereafter Nil D. A. was, however, provided upto C. P. I. 1200 for grades 01 and 00;(ii) Variable D. A. at the rate of Rs. 1. 72 for variation of 5 points for c. P. I, above 1000 for Grades upto 02 and in the case of Grades 01 and 00 at the rate of Rs. 10 for variation of 25 points for C. P. I, above 1200 and(iii) a fixed additional Dearness allowance gradewise. The award of the tribunal provides a Variable Dearness allowance as well as the Slab Dearness allowance linked to basic pay and to the consumer Price Index.The Variable Dearness allowance in turn had a linkage to the Consumer price Index as well as the basic pay as already noted earlier. The learned single Judge has pruned down the Dearness Allowance formula by excluding the linkage of Variable Dearness allowance with the basic pay. The Variable dearness Allowance is now payable for Grades 09 to 02 of Rs. 386 at C. P. I. 1000 (1934 ). For grades 01 and 00 there is no Dearness Allowance upto C. P. I. 1200 (1934 ). However, for an increase or decrease of 5 points above 1000 points on the Consumer Price Index, Dearness allowance is to increase or decrease, as the case may be, by Rs. 3 per 5 points. The decision of the learned single Judge in this regard has reduced the financial burden which is cast upon the employer as a result of the award of the Industrial tribunal. The separation of the Variable dearness Allowance from the dual linkage formula provides some relief to the employer. However, having regard particularly to the financial difficulties which the employer has faced in the recent past attendant upon the recession during the financial year, we are of the view that the Award of the Industrial tribunal should be modified to a certain extent. The Slab Dearness Allowance which has been granted by the Award of the Tribunal, as affirmed by the judgment of the learned single Judge is as) upto basic Rs. 300100% of basic b) Rs. 300 to 400A + 60% of basic above rs.) Rs. 400 to Rs. 500B + 40% of basic above Rs. 300. 00d) Rs. 500 and aboveC + 20% of basic above Rs. 500. 00In our view, the modification should be in the following) upto basic Rs. 300100% of basic b) Rs. 300 to 400A + 40% of the basic above Rs.) Rs. 400 to 500B + 20% of the basic above Rs. 400/~d) Rs. 500 and aboveB + 10% of the basic above Rs. 5007In our view this modification is necessitated in order to reduce the financial impact of the grant of Dearness Allowance as aforesaid. Therefore, while we are of the view that the introduction of the slab system of the dearness Allowance is entirely justified, the rates which have been granted should be substituted by a direction as hereinabove.( 25 ) LEAVE Travel Allowance: we are of the view that the revision of l. T. A. is entirely justified, having regard to the increased cost of all modes of transport, travel and other attendant expenses related thereto. The Tribunal has granted an amount of rs. 2,500/lump sum plus the respective monthly basic salary as the annual leave travel allowance for Grades 12 to 02. For Grades 01 and 00, the Tribunal has granted a lump sum of Rs. 3,500. 00 plus the respective monthly salary. We affirm the decision and the reasoning of the Tribunal and the learned single judge in this regard( 26 ) GRATUITY: in so far as gratuity is concerned, the tribunal has allowed the claim of the workmen for gratuity calculated at the rate of 21 days for every completed year of service. The learned single Judge has noted that the daily rated workmen at Kalwe are paid gratuity at the rate of 21 days of their basic wages plus Dearness allowance under an agreement dated February 15, 1994. The employees covered by in this case. reference were entitled to gratuity of 15 days of their basic wages and dearness allowance under the existing scheme. In this regard, we find a considerable degree of substance in the contention urged by the learned counsel appearing on behalf of the employer that the gratuity scheme at Kalwe is on the basis of a minimum attendance (the requirement is stated to be of 260 days) and of 20 years of service. The award gives a flat rate of gratuity of 21 days to all the employees. The learned counsel submitted that the Tribunal in para 72 in its judgment has ignored the qualification which were prescribed for the Kalwe Unit. Having regard to the aforesaid circumstances and particularly to the statutory provision relating to the payment of gratuity, we are of the view that at the present stage, the gratuity should be maintained as under the existing scheme of 15 days for every completed year of service.( 27 ) HOUSE Rent Allowance; Education allowance; Fixed Medical Allowance; Washing allowance: in so far as House Rent Allowance is concerned, the demand of the Union was for payment of 15% of the basic pay and dearness allowance. At present, House Rent Allowance was being paid at varying rates between 7% and 12%. The Tribunal has fixed a flat rate of 12. 5% of the revised basic scale plus dearness allowance. The learned single Judge has found that there was no reason to interfere with the award of the Tribunal. We do not find any infirmity in the award. Similarly, we are of the view that the grant of Education Allowance at the rate of Rs. 250. 00 per month, of the fixed medical Allowance at the rate of Rs. 300. 00 per month and washing allowance of Rs. 50. 00 per month to those employees who are given uniform and whose uniform is not washed at the Companys cost does not call for interference in appeal.( 28 ) THE Industrial Tribunal has granted a revision of the conditions of service from the date of the Reference which is February 17, 1993. We have duly considered the question of the burden which would be imposed on the employer by the award of the Industrial tribunal as modified in these proceedings.We have duly taken into account the rival submissions and have carefully considered the figures which have been submitted before us by both the sides. The Court will have also necessarily to have regard to the impact of the financial performance of the Company over a period of time. This includes the financial difficulties faced by the Company in. Having regard to the financial burden under the award of the Tribunal as modified by us, we are of the considered view that the award of the tribunal as modified should be made operative not from February 17, 1993 as directed by the industrial Tribunal but, with effect from january 1, 1996.