Case: Ahmedabad Mill Owners' Association &amp; Others Vs. The Textile Labour Association

1. This is a group of seven appeals which arise from an industrial dispute between the appellants, the Ahmedabad Mill Owners Association, Ahmedabad, and 67 employers on the one hand, and the respondent, the Textile Labour Association, Ahmedabad, on the other. This dispute was referred by the Government of Gujarat to the Industrial Court, Gujarat, under Section 73 ofthe Bombay Industrial Relations Act, 1946 (No. XI of 1947) (hereinafter called the Act). In making the order of reference, the Government stated that it was satisfied that the industrial dispute in question was not likely to be settled by other means. The dispute itself consisted of three questions. These questions have been thus stated in the reference:-"(1) Whether under the award of the Industrial Court, Bombay, dated the 2nd March, 1950, in Reference (IC) No. 189 of 1949 (as subsequently modified) read with award of the Industrial Court dated the 27th April, 1948, in Revision Petition No. Misc. 1 of 1947, the Ahmedabad Millowners Association and the employers mentioned in the Annexure are bound to pay dearness allowance to their employees on the Consumer Price Index Numbers for working class for Ahmedabad published by the State Government since February, 1964, by using the index numbers in the series for Ahmedabad compiled by the Labour Bureau, Simla, and the linking factor of 3.17 adopted for linking that series to the State series with the old base:(2) If not, whether the said Ahmedabad Millowners Association and the employers mentioned in the Annexure should pay dearness allowance to their employees for March, 1964 and subsequent months in terms of the aforesaid awards, by treating the index numbers for working class for Ahmedabad published by the State Government since February, 1964, as the index numbers in the State series compiled on the basis of the family budget survey made in 1926-27:(3) If not, how the dearness allowance to the aforesaid employees for March, 1964 and onwards should be paid on the index numbers for Ahmedabad published by the State Government since February. 1964"2. The Industrial Court has answered the first question in favour of the appellants, whereas the two remaining questions have been answered in favour of the respondent. In the result, the appellants have been directed to pay dearness allowance to their employees for the month of March, 1964 and for subsequent months on the consumer price index numbers for working class for Ahmedabad published by the State Government since February, 1964, (by using the index numbers in the series for Ahmedabad complied by the Labour Bureau, Simla, and the linking factor of 3.17 adopted for linking that series to the State series with the old base) at the rate of 2.84 pies per day for rise of each point in the cost of living index number over the pre-war figure 73. The Industrial Court has further directed that as per the award in Miscellaneous Application (IC-G) No. 1 of 1960, 75 per cent of the average dearness allowance of the first six months of 1959, i.e., Rs. 63-15-9 per month of 26 working days, shall be consolidated with the basic wage and the difference between the dearness allowance as worked out as indicated and the said sum of Rs. 63-15-9 shall be continued to be paid as dearness allowance. The other terms and conditions in regard to payment of wages, including the dearness allowance, shall continue as under the existing award. The Industrial Court has made it clear that these directions should be given effect to from 1st of January, 1965 and the difference between what is paid and what has become payable under the present award shall be paid on or before April 30, 1965. It appears that before the Industrial Court an agreement had been reached between the Fine Knitting Co. Ltd. of Ahmedabad and the Textile Labour Association, and the award has, therefore, provided that the directions issued by it shall apply only to the spinning department of the Knitting Co. and not to the hosiery department. It is against this award that the appellants have come to this Court by special leave. On January 5, 1965, while granting special leave to the appellants, this Court directed that the statements of the case should be dispensed with and the appeals be listed for hearing in the week commencing March 8, 1965. That is how these appeals have now come for final disposal before us.

Court's reasoning:
25. It is, however, urged that the power conferred on the State Government by S. 73 is the power to refer an industrial dispute to the arbitration of the Industrial Court, and there can be no industrial dispute unless a notice of change has been given either by the employer or the employee. In other words, the argument is that unless a notice of change is given as required by S. 42, no industrial dispute can be said to arise between the employer and his employee, and that is how S. 42 governs S. 73.If it was the true legal position that there can be no industrial dispute between an employer and his employee unless a notice of change is given by either of them, there would have been some force in this contention but the definition of the words "industrial dispute" does not justify the assumption that its only a notice of change that brings into existence an industrial dispute. Section 3 (17) of the Act defines an "industrial dispute" as meaning any dispute or difference between an employer and employee or between employers and employees or between employees and employees and which is connected with any industrial matter. This definition is so wide and comprehensive that it would be impossible to accept the argument that it introduces the limitation suggested by Mr. Setalvad. Even if an award is subsisting between the parties but a difference arises between them, as in the present case, it is not easy to hold that the said difference does not amount to an industrial dispute for the purpose of S. 73 merely because notice of change has not been given either by the employer or the employee. Therefore, we are satisfied that the dispute which has been referred by the Government of Gujarat in the present case must be treated as an industrial dispute, notwithstanding the fact that S. 42 has not been complied with either by the appellant or by the respondent26. It is true that the power conferred on the State Government to make a reference is not absolute or unqualified. It can be exercised only if one or the other of the conditions specified by sub-s. (1), (2) or (3) of S. 73 is satisfied. But once the State Government comes to the conclusion that one or the other of the said conditions is satisfied, its power to make a reference is not limited to cases where notice of change has been given by the parties as required by S. 42. It is an over-riding power which is intended to be exercised to avoid anomalies or other serious consequences which would flow in case the Government does not make an immediate reference. The requirements prescribed by sub-ss. (1), (2) and (3) of S. 73 indicate the types of cases which are intended to be referred without requiring the parties to take recourse to S. 42.In the present case, the Government of Gujarat was satisfied that the dispute was not likely to be settled by other means, and so, it made the present reference. Therefore, we do not think there is any substance in the argument that the reference is bad, because S. 42 has not been complied with. The terms of S. 73 are plain and unambiguous and they leave no doubt that the power of the State Government to make the reference is not at all controlled by the requirements of S. 4227. On principle the conferment of this power seems to be fully justified. It as a result of a dispute between the employer and his employees, a serious outbreak of disorder or a break of the public peace is likely to occur, or a serious or prolonged hardship to a large section of the community is likely to be caused, or the industry concerned is likely to be affected adversely, it would be idle to require that even in the face of such a serious danger, the procedure prescribed by S. 42 must be followed before reference can be made under S. 73.The very nature of the conditions prescribed by sub-ss. (1), (2) and (3) of S. 73 emphasises the fact that the said conditions refer to categories or cases or types of occasions on which reference has to be made promptly and immediately, and that explains the conferment of the wide powers on the State Government as prescribed by S. 73.We are, therefore, satisfied that the Industrial Court was right in coming to the conclusion that the preliminary objection raised by the appellants against the competence of the present reference was misconceived. It appears that a similar view has been expressed by the Bombay High Court in Suryaprakash Weaving Factory v. Industrial Court 52, Bom LR 902; (AIR 1951 Bom 16  )81. We do not think in considering the financial position of the appellants in the context of the dispute before us, it would be appropriate to rely unduly on the profitability ratio which has been adopted by the said Bulletin.Indeed, in appreciating the effect of the several statements produced before the Industrial Court by the parties in the present proceedings, it would be relevant to remember that some of these single-purpose statements are likely to create confusion and should not ordinarily be regarded as decisive. As Paton has observed:"Different groups for whom financial statements are prepared are interested in varying degree in particular types of information; and so, it has been held in some quarters that no one form of statement will satisfactorily serve all these purpose, that separate single-purpose statements should be prepared for each need or that the statements usually prepared for general distribution should be expanded so as to include all the detail desired"(9)(9)"Accountants Handbook" Edited by Paton, p. 13. Paton cites the comment of Wilcox against these single-purpose statements. Said Wilcox:"The danger in undertaking to furnish single-purpose financial statements lies in increasing confusion and misunderstanding, and in the possible misuse of such statements for unintended purposes"Paton has then referred to certain methods for determining the financial position of a commercial and industrial concern. In this connection, he refers to the proprietary ratio rate of earnings on total capital employed, rate of dividends on common stock-holders equity and others. Our purpose in referring to these comments made by Paton is to emphasise the fact that industrial adjudication cannot lean too heavily on such single-purpose statements or adopt any one of the tests evolved from such statements, whilst it is attempting the task of deciding the financial capacity of the employer in the context of the wage problem. While we must no doubt examine the position in detail, ultimately we must base our decision on a broad view which emerges from a consideration of all the relevant factors82. What then is the broad picture which emerges from the evidence on the record in respect of the financial position of the textile industry at Ahmedabad? The cotton textile industry at Ahmedabad can legitimately claim to be the oldest organised industry in the country. It recently celebrated its centenary in 1961. The story about the growth of this industry during this century is very heartening. In its early stages, it no doubt made a small and modest beginning; but at the time when the centenary celebrations were held, it had an installed capacity of about two million spindles and 42,000 looms and it employed 1,30,000 workmen. Statistics show that textile mills at Ahmedabad account roughtly for one-third of the total mill production in the country, and it would be no exaggeration to say that some of the best varieties of cloth produced in the country are manufactured at Ahmedabad83. The paid up capital by cash of the industry in 1939 was 4.07 crores and it became 7.70 crores in 1962. The total paid up capital including bonus shares was 4.42 crores in 1939 and in 1962 it rose to 21.29 crores. It would thus be seen that out of the total paid up capital of 21.29 crores in 1962, the capital collected by cash is 7.70 crores. Whereas the balance of 13.59 crores is by way of bonus shares. In other words, the cash capital is increased by 175 per cent because of capitalisation of the reserves. Similarly, the gross block in 1939 was 19.15 crores and in 1962 it rose to 93.41 crores. Almost the same rate of progress is evidenced by the Reserves. The Reserves excluding Depreciation Fund and other liability funds at the end of 1939 was 3.60 crores and they have gone to 25.18 crores in 1962. The gross profits have registered a similar rise. In 1939, the gross profit including Managing Agents Commission and depreciation was 1.59 crores, whereas in 1962 it has reached the magnitude of 12.96 crores. In this connection, it would be unreasonable to ignore the fact that the industry has been able to save and capitalise from 1939 onwards 13.85 crores and has been able to pay a fair amount of dividend on equity shares throughout the period, in spite of a very large capitalisation of reserves84. It is true that the textile industry at Ahmedabad has been leaning very heavily on borrowings; but that may partly be due to the fact that the said industry has for several decades been under-capitalised. Besides, the tendency to rely upon borrowings for expanding the business is noticeable throughout this period of the life of textile industry at Ahmedabad and has been the subject-matter of comment by several persons. In fact, sometimes it is treated as a peculiar feature of the development of the textile industry at Ahmedabad; and so, the extent of borrowing cannot be pressed into service for the purpose of showing that the financial position of the industry is unsatisfactory85. One remarkable feature of the textile industry at Ahmedabad is the harmonious relations which have consistently subsisted between the employers and the employees. The employers, on the whole, are enlightened and progressive in their outlook, and the Trade Union leadership of the employees is also enlightened and progressive.Both the employers and the employees realize that the progress of the industry depends primarily on the co-operation between capital and labour; and the large number of consent awards and agreements to which they have been parties over a period of several years, is a standing tribute to the spirit of cooperation which inspires the textile industrial life in Ahmedabad. As one looks back over the last hundred years of the life of the textile industry at Ahmedabad, one is struck by the fact that industrial life in that area has rarely been disturbed by bitterness, feuds or general strikes. This spirit of co-operation, based on the willingness to give and take, alone can ensure the economic and industrial growth of our country, for afterall, it is the speedy economic growth of industry of the country which must be the ultimate object of both capital and labour.In considering the prospects of the textile industry in Ahmedabad, this feature must be given a place of pride86. It is significant that as a result of the spirit of co-operation between capital and labour, the textile industry at Ahmedabad has been able to enter into several agreements for rationalising the industry itself.It is well known that an attempt to rationalise textile industry inevitably involves retrenchment of a large number of employees; but the appellants and the respondent have entered into agreements of rationalisation after both of them agreed to three basic principles in that behalf. These principles are:-(a) Rationalisation to be effected without creating unemployment of the existing workers;(b) Gains of Rationalisation should be adequately shared between the Management and the workers; and(c) The workload should not be increased in a manner which may jeopardise the health of the workersThe fact that a large number of agreements have been made between the parties by consent concerning the vexed subject of rationalisation also shows that the future of the textile industry at Ahmedabad is bound to be as bright as it has been in the past. In this connection, we may refer to the tribute paid by the Central Wage Board to the Cotton Textile Industry at Ahmedabad. Says the Board:-"The industry, however, is conscious of the need for rationalisation and modernisation as the sine qua non of survival, the pace of which had been checked in the past by the fear of unemployment; that fear has been allayed, and labour now recognises that its own welfare depends on rationalisation and modernisation, and it has agreed upon the broad lines for their introduction. Some mills even today have very modern and upto-date machinery, and all mills which can manage to do so will have to rationalise and modernise; for the nation is on the march and this industry must clothe the nation"87. Let us then consider the question about the prospects of the demand for textile products in future and the increasing productivity of the industry. On this point again, it is difficult to share the pessimism disclosed by the attitude adopted by the appellants.There is little doubt that the productivity of the industry is increasing and that the demand for textile products will never be on the decrease in future. Therefore, we do not see how we can differ from the conclusion of the Industrial Court that the appellants have failed to substantiate their contention that the additional burden would be beyond their capacity to pay.In this connection, we ought to recall the fact that what the appellants are required to prove is that the prospects of their financial position in future justify a reduction in the wage which is being paid to the industrial employees during all these years; for that on the ultimate analysis would be the result it their contention is accepted.The Industrial Court has made a definite finding that it does not think that the financial condition of the industry has deteriorated so as to justify a departure from the principles in regard to dearness allowance hitherto laid down in respect of this industry at this centre. In our opinion, this conclusion is well founded.