Case: Hindustan Lever Ltd Vs. B.N. Dongre

Special leave granted in the aforesaid special leave petitions.2. Five references bearing Nos. (i) 123 of 1977, (ii) 215 of 1979, (iii) 91 of 1984, (iv) 92 of 1984 and (v) 43 of 1985, the first three under Section 10(2) and the remaining two under Section10(1) (d) of the Industrial Disputes Act, 1947, hereinafter called the I. D. Act, arose out of certain demands made by the workmen-employees of Hindustan Lever Limited as well as the Managements Notice of Change for the imposition of a ceiling on dearness allowance. These disputes concerned the demands made by the monthly-rated clerical and technical staff working at the Sewree factory of the Company as well as the monthly-rated C & T categories of workmen employed at the Companys head office and branch office in Bombay, the former represented by Hindustan Lever Employees Union, hereinafter called the Union and the latter represented by Hindustan Lever Mazdoor Sabha, hereinafter called the Sabha. The Company had desired placement of a ceiling on dearness allowance based on the premise that in the absence of such a ceiling the neutralisation factor exceeded 100%. It may here be mentioned that both the clerical and technical staff of the Company was, at all material times classified into four categories, namely, C-1 to C-4 and T-1 to T-4 carrying different pay scales. The clerical staff worked for 36 hours a week whereas the technical staff worked for 48 hours a week. It is not necessary for us to indicate the nature of demands made by the workmen in the aforesaid references because we are, in the present appeals, mainly concerned with the Companys demand for placing a ceiling on dearness allowance. The Industrial Tribunal, Maharashtra, by its award dated 18-12-1985 conceded the demand of the management for the placement of a ceiling on dearness allowance on basic pay exceeding Rs. 500 per month. The Tribunal also granted certain demands of the workmen in regard to upward revision of pay scales, grant of special allowance, social security allowance, ad hoc allowance, automatic promotion scheme, etc., but since we are concerned with the limited question in regard to the placement of a ceiling on dearness allowance as demanded by the management, it is unnecessary for us to refer to the demands of the workmen which were no conceded by the Tribunal and against which the workmen had approached the High Court. The workmen had also challenged the Tribunals award conceding the managements demand for placement of a ceiling on dearness allowance. The learned Single Judge who heard the writ petition upheld the order of the Industrial Tribunal placing a ceiling on dearness allowance but modified the award with regard to certain other demands. Against the decision of the learned Single Judge appeals were carried to the Division Bench of the High Court. IN the said appeals the Division Bench was called upto to examine the correctness of the view taken by the Industrial Tribunal in regard to the placement of a ceiling on dearness allowance which came to be affirmed by the learned Single Judge. In addition the Division Bench was also invited to deal with the demand for automatic promotion which was conceded by the Tribunal but spurned by the learned Single Judge who substituted it by the grant of stagnation increment. The management also made a grievance before the Division Bench in regard to grant of stagnation increment and upward revision of wages. The Division Bench rejected the managements plea against stagnation increment but preferred to make a remand in respect of wage revision. The major issue was, however, in regard to ceiling fixed on dearness allowance where basic wage exceeded Rs. 500.3. Under the extent scheme, the dearness allowance was linked to index 1450 of the Consumer Price Index (CPI), Bombay (1934=100) at 635% of basic wage for the first Rs. 100, at 284.25% of basic wage for the second Rs. 100 and at 251% of basic wage where the salary exceeded Rs. 200 per month. This was the Fixed Dearness Allowance (FDA) payable to the workmen. However, on the CPI exceeding 1450, the Variable Dearness Allowance (VDA) was payable on every 10 points rise at 5% of basic wage for the first Rs. 100, 2.25% of basic wage for the second Rs. 100 and 2% of basic wage on salary exceeding Rs. 200 per month. The Companys demand was that the existing scheme of dearness allowance should be applicable to workmen whose basic salary, inclusive of dearness allowance, did not exceed Rs. 1500 per month. However, for those whose basic salary, inclusive of dearness allowance, exceeded the said figure of Rs. 1500 per month, it was contended that the existing scheme should continue up to the CPI point of 1450 and for every 10 points rise above the same, 5% of basic wage should be allowed for first Rs. 100 and 1% of basic wage for the second Rs. 100 and to these whose basic wage exceeded Rs. 200 the workmen should not be paid any FDA. So far as VDA is concerned, it was contended that it should be subject to a maximum of Rs. 1, 310 for C-1, Rs. 1, 535 for C-2, Rs. 1725 for C-3, and Rs. 1900 for C-4 categories of clerical employees and Rs. 1285 for T-1, Rs. 1600 for T-2, Rs. 1775 for T-3 and Rs. 2025 for T-4 categories of technical employees. The Tribunal while continuing the existing scheme directed that the maximum dearness allowance payable to the workmen shall be that which is payable to a workman drawing a basic salary of Rs. 500. To put it differently the Tribunal directed that those workmen drawing a salary exceeding Rs. 500 per month will get the same dearness allowance as admissible to those drawing a basic salary of Rs. 500 per month without their being any variation in the dearness allowance for salary slabs exceeding Rs. 500 per month. This direction given by the Tribunal was made retrospective from 1-10-1979. Those workmen who received dearness allowance in excess of the scheme worked by the Tribunal between 1-10-1979 and 30-12-1985, the date of the award, were directed to refund the excess amount by adjusting the same against dearness allowance payable to them subsequent to 30-12-1985. Thus the dearness allowance scheme worked out by the Tribunal immediately affected those workmen whose basic salary exceeded Rs. 500 per month and was likely to affect those who crossed the Rs. 500 mark at a future date. The contention of the management before the Tribunal was that the slab system of dearness allowance was unrealistic is it had the effect of distorting the entire wage-structure as it exceeded the 100% neutralisation factor which has always been the justification for the introduction of the dearness allowance formula.4. Indisputably the existing dearness allowance formula was in vogue for many years before the Company gave a Notice of Change under Section9-A of the I. D. Act sometime in 1976. The Company had entered into settlements in 1979 and 1983 with a section of the workmen whereunder it has agreed to continue the existing dearness allowance formula at certain levels of salary. It is unnecessary to go into the details in regard to the said settlements but if would be sufficient to say that the extant scheme provided neutralisation at the lowest level varying between 95% and 100% whereas for those drawing higher pay the neutralisation was much more than ordinarily granted to that class of employees. The main justification for imposition of a ceiling on dearness allowance payable to workmen drawing a basic salary exceeding Rs. 500 per month was that it exceeded what other comparable companies paid by way of dearness allowance to those whose basic wage exceeded Rs. 500 per month. The Tribunal noted that in such comparable companies, having no ceiling on VDA, the percentage of dearness allowance was quite low and, therefore, it did not result in any distortion in the wage-structure. The learned Single Judge while examining the impact of the dearness allowance formula on the wage-structure pointed out that the emoluments of workmen exceed the emoluments received by the junior executive staff of the Company notwithstanding the fact that the latter are promotion posts. Due to this reason workmen are unwilling to accept promotions as that would result in a shrinkage in their total emoluments. Such a situation, points out the learned single Judge, is not conducive to efficient working of the Company. In this view of the matter the learned Single Judge upheld the award insofar as it placed a ceiling on dearness allowance as explained earlier. It also upheld the Tribunals decision making the same retrospective w. e. f. 1-10-1979.5. It may be mentioned that the Tribunal while placing a ceiling on dearness allowance granted an upward revision in the wages. One of the justifications for the upward revision of basic salary was the placement of a ceiling on dearness allowance, vide paragraph 53 of the Award. The second reason was that the basic wage paid to workmen in TOMCO was higher at the maximum levels and, therefore, there was justification for increasing the maxima of the scales applicable to each category of workmen of the Company. In that view of the matter the Tribunal revised the basic wage of the workmen belonging to C-1 to C-4 categories and T-1 to T-4 categories as is evident from paragraph 53 of the Award. The revised wage-structure was also brought into force from 1-10-1979. It will thus be seen that the placement of a ceiling on dearness allowance had a direct nexus to the Tribunal revising the salary structure of a aforesaid categories of employees. Secondly the Tribunal also opted in favour of time-bound automatic promotion. The other demands conceded by the Tribunal have no direct bearing on the question of placement of a ceiling on dearness allowance and, therefore, need not be adverted to. The learned Single Judge while affirming the Tribunals decision in regard to placement of ceiling on dearness allowance granted stagnation increment in lieu of the Tribunals formula in regard to time-bound automatic promotion. It will thus be seen that over and above the upward revision of the salaries sanctioned by the Tribunal, the learned Single Judge granted stagnation increment as a substitute for the automatic promotion scheme introduced by the Tribunal. The grant of stagnation increment, therefore, it is contended has a direct nexus to the ceiling on dearness allowance.6. The Division Bench of the High Court upheld the learned Single judges view that time-bound automatic promotion would adversely affect merit and, therefore, upheld its substitution by stagnation increment. It disapproved of the ceiling on dearness allowance and summed up its conclusion in that behalf in paragraph 42 of the judgment as underTo sum up, the present dearness allowance system, as shown above, does not result in over-neutralisation of the cost of living index at any level of the income group. It maintains a tapering scale, though not a steeply declining one. The system also does not result in distortion of total incomes either of the workmen inter se or between the workmen and their superiors, namely, the executive staff. The Company does not plead any financial inability. The industry-cum-region formula does not warrant its replacement. There are no other compelling reasons why the existing system which is beneficial to the workmen should be replaced by the new one which is less beneficial to them and which would result in steep decline in their incomes they would otherwise gain. It is a well-recognized principle of industrial adjudication that the courts, wage bodies and the industrial adjudicators should not tinker with the existing benefits available to the workmen unless it becomes unavoidable and obligatory to do so. The Company has failed to make out any such case."in regard to the upward revision of wages it felt the issue should go back to the Tribunal for a de novo consideration whether in view of the rejection of the managements demand for a ceiling on dearness allowance, upward revision of wages was any more justified. This is how the Division Bench concluded in paragraph 48 of itsWe have commented upon the approach of the Tribunal and the learned Judge by observing that to the extent that they have mixed up the considerations for increasing the wage scale with those for fixing the dearness allowance, they have committed an error apparent on the face of the record. It cannot also be gainsaid that one of the main considerations, which has weighed with the Tribunal, while introducing the revised pay scales is that it was introducing the ceiling on dearness allowance, for those earning salary above Rs. 500 per month. In fact, as pointed out earlier, what the Tribunal has done is to give by way of some increase in the maximum of the pay scale, particularly to those in Category C-3, C-4 and T-3 and T-4, what it has taken away from them by reduction in dearness allowance. Thus both the revision of salary and introduction of the new dearness allowance system are interlinked. Since we are setting aside the award with regard to the dearness allowance and directing the continuation of the existing dearness allowance system, it is only fair that the remand the matter to the Tribunal to consider the case for revision of wage scales afresh independently and irrespective of the change in the dearness allowance system which was proposed by it. We are aware that this would involve prolongation of the letigation between the parties. But in the circumstances it is unavoidable. We, therefore, set aside the award with regard to the revision of wage scale and remand the demand of the workmen for the revision of wage scales to the Tribunal for fresh consideration, in the light of what we have stated hereinabove."issue of upward revision of wages was, therefore, remanded to the Tribunal in the aforestated circumstances.7. After the matter went back to the Tribunal, the Tribunal went into the question whether or not an upward revision of wages for the clerical and technical staff was called for. On the question of financial capacity of the employer-company it rightly concluded that the financial position of the Company was sound and the Company was in a position to bear an additional financial burden. On this point there was no controversy even before us. Secondly it compared the extant wage-structure with the wage-structure prevailing in comparable similar concerns and came to the conclusion in paragraph 25 of its order dated 25-6-1991 as underTo sum up, since 1970 there is no wage revision as such in HLL Company in respect of the employees of C-1 to C-4 and T-1 to T-4 grades. As in 1970 there was Reference, which has been decided by the President, Shri Chitale in 1974 and Shri Bhojwani, J. slightly modified it. Thus for allowing the period till today, there is no revision of wage scales. Admittedly the cost of living index has increased from 1400 to 2900 and in September 1990 it is 4524. Considering this, it is clear that there is justification for the wage scale, as demanded by the workmen."Party allowing the Reference the Tribunal revised the wage scales w. e. f. 1-10-1970 as under :Clerical Grade Modified DemandC-1 160-15-445 C-2 211-18-553 C-3 220-20-620 C-4 260-22-700Technical GradeT-1 200-17-523 T-2 250-20-630 T-3 270-22-710 T-4 320-25-820It is against this order of the Tribunal in Reference No. 1233 of 1977 that Special Leave Petition Nos. 14558-59 of 1991 came to be preferred.9. Against the aforesaid decision of the Division Bench of the High Court the Company approached this Court seeking special leave to appeal under Article 136 of the Constitution. Pending grant of special leave an ad interim stay was granted against the implementation of the judgment of the Division Bench. Ultimately this Court while granting special leave vacated the ad interim stay of the judgment of the Division Bench. The Company, therefore, become liable to implement the award as modified by the judgment and order of the Division Bench. Despite the same the workmen complained that the Company had failed to implement the Award as modified by the Division Bench in regard to grant of stagnation increment to those employees who had reached the maxima in their pay scales and were entitled to stagnation increment every alternate year of their service from 1-10-1979 and that the Company had refused to pay the dues under the modified Award to those employees who had in the meantime retired or left service of the Company. Complaint was, therefore, lodged with the Tribunal under Item No. 9 of Schedule IV of the MRTU and PULP Act. This complaint was contested by the Company. The Tribunal after considering the various contentions raised on behalf of the Company came to the conclusion that the Company had engaged in unfair trade practice falling within the mischief of the said item and that it should desist from doing so in future. The Company was directed to implement the modified Award in relation to the grant of stagnation increment and to work out the benefit on the wage scales existing on the date of the reference and pay the monthly benefits unconditionally to the retired workmen or those who had left the service of the Company in the meantime with interest at 12% per annum of the arrears. It is against this order of the Tribunal that the Company has approached this Court directly by way of Special Leave Petition Nos. 13327 and 13339 of 1990. Once this Court vacated the interim stay in regard to the implementation of the modified Award while granting leave to appeal, one fails to understand how the Company can refuse to implement the Award for the grant of stagnation increment. To do so would be to refuse to comply with the High Courts order in regard to which this Court refused to continue the interim stay. Therefore the Tribunal was justified in directing the Company to implement the modified Award relating to the grant of stagnation increment and to work out the benefit on the existing wage-structure. We, therefore, do not work out any merit in these two special leave petitions and summarily dismiss the same.

Court's reasoning:
It must be remembered that the jurisdiction of the Industrial Tribunal under the I. D. Act was invoked both by the management as well as the workers. It is well settled that the decision of the Tribunal rendered under the I. D. Act would be subject to review by the High Court under Articles 226/227 of the Constitution. Since against the decision of the Industrial Tribunal no remedy was available under the provisions of the I. D. Act, the aggrieved party could only invoke the jurisdiction of the High Court under the aforesaid articles. Since both the Company and the workers were aggrieved by the award, to the extent it went against them, they preferred writ petitions challenging the award. All the three writ petitions, two on behalf of the workers by the Sabha and the Union, the third by the Company, were heard together and disposed of by a common judgment. Against the decision of the learned Single Judge, appeals under the Letters Patent were preferred once again by the said three parties. The Company never questioned the jurisdiction of the High Court to hear and decide the writ petitions nor did it question the jurisdiction of the Division Bench under the Letters Patent. Even the Company had appealed against the learned Single Judges decision to the extent it was against it. No contention regarding the scope and ambit of the jurisdiction of the Division Bench was raised in the appeal. If the jurisdiction of the learned Single Judge was not challenged by the Company, the Company itself had invoked it, it is difficult to comprehend how the Company can challenge the jurisdiction of the appellate court. If the learned Single Judge had jurisdiction to hear the writ petitions against the decision of the Industrial Tribunal, at any rate if his jurisdiction was not questioned by the Company, it cannot lie in the mouth of the Company to challenge the appellate jurisdiction of the Division Bench since that jurisdiction is conferred by the Letters Patent. We are, therefore, of the view that this contention belatedly raised before us cannot and should not be entertained. We reject it.20. We now come to the main issue. We have indicated in detail the nature, scope and ambit of the controversy. The contesting parties have updated the tables on which they relied before the Tribunal and the High Court and have also presented fresh calculationsthe Company endeavouring to show that the percentage of neutralisation soars above 100% and hence the need to impose a ceiling so that the existing differentials between the emoluments drawn by the workers in the higherdo not exceed those drawn by the junior executives immediately above them; the workers on the other hand refuting the contention that there isand the need to impose a ceiling. In fact an attempt has been made to point out that those in the higherare scientists anddoing highly skilled work and it is wrong to think that they are in any manner inferior to junior executives. The workers have tried to emphasise that as the record stands it is not possible to say whether theis at the subsistence level,ge level orlevel to enable this Court to decide whether or not a case for imposition of ceiling is made out. It is also contended that the Company has tried, time and again, to cloud the facts and has falsely alleged that the 1970 base was not adopted by consent. Since that was the year in which the last revision had taken place under the Chitale/Bhojwani Awards, 1970 was taken as the base year by consent. It is, therefore, contended by the workers that the Company has tried to shift its stand from stage to stage of the litigation to suit its purpose in the fond hope that it may be able to persuade this court to its point of view. The respondents, therefore, have requested us not to look into these revised and misleading statements.21. We have, however, carefully examined the various statements placed on record to prove the rival points of view. The principal question is whether the Companys case ofed and, if yes, whether there is need to impose a ceiling on dearness allowance as advocated by the Tribunal and affirmed by the learned Single Judge. Now it is established that the present dearness allowance formula has been in vogue since long. It is also not in dispute that after the Chitale/Bhojwani Awards the Company had entered into settlements in 1979 and 1983 with theed employees in the Sewree factory and continued the existing formula. Before the Tribunal the Company produced statements to show that the neutralisation was as high as 204% at the minimum ofgrade tapering to 132.4% at the maximum ofgrade. As against that the workers contended that the percentage of neutralisation was 80% and 46%, respectively. The Tribunal held that the calculations made by both sides were incorrect. Referring to the Chitale Award the Tribunal points out that the Companys own statement showed that the neutralisation was 97.4% at the lowest and tapered to 86% at the highest. It, however, felt that 86% neutralisation was on the higher side. It was for this reason that the Tribunal opted for placement of a ceiling. However, the Tribunal did not determine the percentage of neutralisation on the basis of calculations submitted to it.The second ground on which the Company sought imposition of control or ceiling on dearness allowance is that it distorts the vertical relativity, in that, clerks receive emoluments exceeding what is paid to junior executives and are, therefore, disinclined to accept promotion. Since the basic pay of the workers belonging to theC1 to C4T1 to T4 categoriesis low they continue to be governed by the provisions of the I. D. Act whereas the junior executives are not governed by the said statute. The wages of the former would be determined either by settlements or by award made on reference under the said statute. These workers, therefore, constitute a class by themselves and their wage determination is under the provisions of the I. D. Act. But the junior executives do not belong to that class and their salaries are differently determined. The process of determination of their salary plan has nothing to do with the workers governed by the I. D. Act. How to make the promotional post attractive is for the company to decide but it may not be by denying the workers of a part of their dearness allowance for pegging down their emoluments. Besides it is well known that executives enjoy a certain status and perquisites which the workers do not receive. We think the better way to overcome the difficulty is make the junior executive grade more attractive rather than deny to the workers what they are receiving since long.24. Next, we have pointed out earlier the relation between wages and prices of food, clothing and other necessities of life which even the lowest wage earner purchases month after month. If the prices of these commodities rise and the basic wage remains constant, real wage actually falls creating a problem for survival for the lowest wage earner. And it is common knowledge that this frequently happens during period of inflation as is reflected from how rapidly the index rose from 313 points in 1950 to 6229 points by August 1993. To prevent the real wages from falling with the rise in CPI, some allowance had to be paid to the workers which gave rise to the introduction of the dearness allowances scheme. Besides, it must be realised that the protection against price rise is limited to only those items included in the basket and not to all items which a wage earner at the lowest level consumes. For those items not included in the basket, the wage earner at every level has to bear the brunt of inflation. It must also be remembered that while dietary habits change, the food items in the basket remain constant for want of periodical revision with the result that the new items of food which are highly price do not count for neutralisation. Again wage revisions do not take place for long spells. In certain wage plans upward revision of wages take place by the merger of a portion of the dearness allowance in the basic wage plus an addition thereto to take care of the inflationary dents in thein respect of other items outside the basket. Under certain dearness allowance schemes, neutralisation is allowed on tapering percentages on the assumption that those in the higher wage groups have a certain cushion to bear a part of the inflation. Such a scheme is in vogue in Central and State Government servants salary plans. That cushion does not remain static and gets depleted as the prices rise and there comes a time when it becomes necessary to inflate it once again by an upward revision of the salary structure. But in certain industries merger of dearness allowance in the basic wage does not take place at all as in the present case and instead periodically increases are allowed in the basic wage to nullify the adverse effect of inflation on items outside the basket. It must, however, be remembered that in the case of employees belonging to high wage islands, theirshrink on account of the deduction of2. It was the Company which had challenged the revisedprepared under the Dongre Award. The learned Single Judge spurned the Companys challenge. The Division Bench found it necessary to remit the matter to the Tribunal for reconsidering the question regarding revision of pay scales as in its view the Dongre Award had considered the revision necessary as a package formula since it had placed a control on dearness allowances, which control the Division Bench had lifted. Counsel, therefore, vehemently contended that there was no question of a further upward revision beyond what was allowed under the Dongre Award. Counsel submitted that the Deshpande Award whereunder higher pay scales have been granted is wholly unsustainable. We see merit in this line of reasoning.33. The learned Single Judge in paragraph 8 of his judgment points out that the Tribunal had while making the Award "awarded a package deal to the workers" and had allowed various other benefits since he had placed a ceiling on dearness allowance. He has granted revision of pay scales, special allowances, etc. However, in paragraph 11 there is a mention that counsel for the workers had raised the contention that the salary structure of TOMCO was higher, the entirewas in fact better, and since it was a comparable industrial unit the workers of the company were entitled to the same. In fact the learned Single Judge notes that he had enquired of the management if it would be willing to grant the entireof TOMCO to the workers of the Company and the management after taking time showed its willingness to do so but the workers did not agree. Thus although the learned Single Judge explored the possibility of the management giving the TOMCOto the workers of the Company when the workers backed out on second thought he did not interfere with the Dongre Award in that behalf in view of the aforesaid statement.34. The Division Bench noticed the submission made on behalf of the Company in paragraph 46 of its judgment and conceded in paragraph 48 : "It cannot be gainsaid that one of the main considerations, which was weighed with the Tribunal, while introducing the revised pay scales is that it was introducing the ceiling on dearness allowance, for those earning salary above Rs. 500 per month, " which accords with what counsel for the Company has urged. It was on this consideration that the Division Bench concluded that both the revision of salary and introduction of the new dearness allowance system were interlinked and since the ceiling on the latter was lifted, the Division Bench considered it "only fair" to remand the matter to the Tribunal "to consider the case for revision of wage scales afresh independently and irrespective of the change in the dearness allowance system which was proposed by it". The observations of the Division Bench had to be understood in the backdrop of the fact that the workers were content with the revised pay scales worked out under the Dongre Award and had therefore not questioned that part of the award. Since the learned Single Judge had not interfered with it, there was no question of their getting higher pay scales. When the Division Bench remitted the matter in this background the Tribunal should have realised that the remand was necessitated because the factum of imposition of a ceiling on dearness allowance was the reason which had impelled the Tribunal to increase the pay scales and since the ceiling was lifted it was necessary to consider whether upward revision of the pay scales was at all necessary in the changed circumstances and, if yes, whether the revision ordered under the Dongre Award was justified. There was no question of the pay scales being revised above the Dongre Award stipulations. Besides, we are also not happy with the approach of the Tribunal. It is not correct to say that the Division Bench had imposed any limitation of the type read by the Tribunal as evidenced by the recital in paragraph 22 of its order extracted earlier. We also find that the Tribunal has merely set out the rival contentions and the data in support thereof and has, without analysing the same, concluded that the modified revision of pay scales suggested by the workers was justified. This approach is far from satisfactory. The need for stagnation increment would again depend on the time span in each scale in the revisedIf the length of the pay scale is sufficient not to result in stagnation there would be no need for stagnation increment. We would, therefore, like the Tribunal to consider that question but if it comes to the conclusion that it is necessary to revise the pay scales and that the revised scales may cause some workers to stagnate at the maxima of the scale, it may opt in favour of the retention of the stagnation increase but if it does not see any scope for its retention it may for reasons to be stated to away with it.