Case: Union Of India &amp; Anr Vs. Majur Mahajan Mandal &amp; Ors

This appeal on certificate is from the judgment of the High Court of Gujarat. The appellants 1 and 2 are respectively the Union of India and the Regional Provident Fund Commissioner. The 1st respondent is Majur Mahajan Mandal (hereinafter to be described as the union), a registered trade union representing the majority of the textile workers of the five textile mills of Baroda (respondents 2 to 6) who are not represented before us and who will be described hereinafter as the millsSince some time in 1973, industrial disputes in respect of dearness allowance (D.A.) had been pending between the union and the mills in five references before the Industrial Court, Gujarat, being References Nos. 406, 407, 408, 409, and 421 of 1973. The rate of D.A. for the employees in the cotton textile industry in Ahmedabad had earlier been fixed by an award of an Industrial Tribunal which will be referred to hereinafter as the Ahmedabad Rate. The prevalent D.A. in 1973 in the mills with which we are concerned was 90% of the Ahmedabad Rate. The union was raising the aforesaid disputes for increasing the D.A. to 100% of the Ahmedabad Rate with effect from October 1, 1972. Hence, the above references were pending before the Industrial CourtAs a result of negotiations between the parties during the tendency of the said disputes before the Industrial Court D.A. was agreed to be paid at the rate of 95% of the Ahmedabad Rate of D.A. with effect from January 1, 1974, as will appear from an interim award of the Industrial Court dated June 21, 1974. Thereafter, by further negotiations the disputes regarding D.A. were finally resolved by the mills and the union entering into a settlement on June 28, 1974, by fixing D.A. at 100% of the Ahmedabad Rate with effect from January 1, 1974. Awards were later made by the court in conformity with the said settlement in the pending disputes some time in August and September, 1974.It is not disputed that the workers and the mills in pursuance of the settlement of the disputes received D.A. at 100% of the Ahmedabad Rate retrospectively with effect from 1st January, 1974. It may even be assumed that the arrear D.A. for the past period from January 1, 1974, was paid to the workers in August or perhaps even later, that is to say, after 6th July, 1974, the significance of which date we will immediately seeWhile the aforesaid disputes were pending before the Industrial Court, the Ahmedabad Emoluments (Compulsory Deposit) Act, 1974 (briefly the Act), replacing the earlier Ordinance on the subject, came into force retrospectively from 6th July, 1974, the appointed day, under the Act. This Act was passed as the preamble says, "to provide, in the interests of national economic development, for the compulsory deposit of additional emoluments and for the framing of a scheme in relation thereto, and for matters connected therewith or incidental thereto"The employees to whom the Act is applicable are classified into three categories, namely, employees of the Government, of local authorities and other employeesThe principal object of the Ordinance and later of the Act is to control the menacing inflationary trend which has been the bane of the countrys economy. On the one hand there has been persistent demand from employees for revision of wages and increase of D.A. on account of the high cost of living and on the other the State has to tackle the national problem of mounting pressure of inflationary forces. While, therefore, meeting with the demands for rise in emoluments, simultaneously, steps with equal force had to be taken so that the additional amounts disbursed do not immediately flow to the market adding a further fillip to inflation. The Ordinance and later the Act thus provide for compulsory deposit for a period of one year of the whole of the additional wages and for a period of three years of half of the additional D.A.The additional emoluments earned are thus impounded under the Act and are not immediately available to the employees for instant consumption. The Act provides a scheme of beneficial forced and the deposited amounts will be finally repaid to the employees in different ways specified in the Act with interest at 2 1/2% over and above the Bank deposit rateBefore we proceed further we may note some of the provisions of the Act material for our purpose :By section 2(a) of the Act, "appointed day" means the "6th day of July, 1974"By section 2(b) " additional dearness allowance means such dearness allowance as may be sanctioned from time to time, after the appointed day, over and above of dearness allowance payable in accordance with the rate in force immediately before the date from which such sanction of additional dearness allowance is to take effect"By section 2(e) " dearness allowance means all cash payments, by whatever name called, made to an employee on account of rise in the cost of living". Under section 2(g) " emoluments include wages and dearness allowance"Under section 5 every specified authority (herein the employer) shall open two separate accounts, namely, the Additional Wages Deposit Account and the Additional Dearness Allowance Deposit Account. The employer shall open a separate ledger account in the name of each employee. Section 6(2)(b) of the Act enjoins on the employer a duty to make deductions and to remit to the nominated authority additional wages and additional D.A. from emoluments disbursed after the appointed day. In the case of additional wages it will be the whole amount and in the case of additional D.A. it will be half of itIt is common ground that the Act applies to the mills which are the "employer" under the Act and also "specified authorities" under the Additional Emoluments Compulsory Deposit (Employees other than Employees of Government and Local Authorities) Scheme, 1974, which is made under section 10 of the Act.The union applied to the High Court under article 226 of the Constitution for a writ of mandamus or other suitable order to permanently restrain the mills from effecting any deduction from the arrears of dearness allowance payable to their employees from January to June, 1974, on the basis of the settlement of 28th June, 1974. There was a further prayer to permanently restrain the mills from treating the base for calculation of additional D.A. at a rate less than the agreed 100% of the Ahmedabad Rate and to direct the mills not to deduct or deposit 2 1/2% of D.A. per month payable to each employee treating the same as not being additional D.A. within the meaning of section 2(b) of the Act. Lastly, there was a prayer for refund of the mount already deducted by the mills. The High Court allowed the writ application and also granted certificate to appeal to this court.

Court's reasoning:
In the instant case we have already held that the rise in D.A. to 100% of the Ahmedabad Rate of D.A. was sanctioned under the settlement of 28th June, 1974, that is, before the appointed day. One of the principal components of the definition clause is, therefore, clearly absent in this case since there is no sanction for any rise in D. A. after the appointed dayWe should observe that this is not a case where Explanation I to section 2(b) is applicableMr. Singhvi, for the appellants, submits that in view of the aim and object of the Act the count should lean in favour of an interpretation advancing the remedy by construing the word "sanctioned" in section 2(b) to mean sanctioned by the award and not by the settlement. We have already given our reasons for our inability to accept this submission. One other reason may be added.The Act recognises agreements and settlements and settlements is the same way as awards of Tribunals, vide section 2(c). The definition of "additional wages" under section 2(c) clearly points to that. Any wage revision "whether by or under an agreement or settlement between the parties or any award....." comes within the sweep of the aforesaid definition clause Agreements and settlements are separately and distinctly mentioned along with awards. Settlement is a type of sanction recognised under the Act. There is, therefore, sufficient warrant under the Act to give effect to the sanction by voluntary settlement in respect of D.A. when the same has never been repudiated by any of the concerned parties. When there is no ambiguity in the word "sanctioned" inspection 2(b), recourse to the aim and object of the Act is not even called for in this case.