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MON'.OJLY-kATED WORKMEN AT TilE WADAIA ~

FACTORY OF IHE INDIAN HWE '., ' . '- PIPE C<JtPANY LTD. v.

INDIAN HlME PIPE (XMPANY LTD.,

BamA.Y

APRIL 11, 1986

..;1

[0 • CHINNAPPA REDDY, V. KHALID AND S. NATARAJAN, JJ.) ... .

Service Conditions of employees - Change from the slab system of Dearness Allowance in vogue for eighteen years to ·~· the textile scale of

D.A. affording 115 per cent neutralisation in respect of the head office staff and the monthly rated factory staff - Validity of the notice of change dated 15. 7. 75 given by the company under section 9A of the

Industrial Disputes Act, 1947 - Advisability of Tribunals and Courts to revise the wage sti:ucture of workmen to their prejudice \When a dispute arises - Burden of proof as to necessity of change, upon whom lies in a reference arising out of section 9A notice of change.

The respondent is an Engineering concern owning sixty factories spread throughout India. In Bombay, it has a factory

at Wadala and head off ice at Ballard Estate. There were four Industrial Disputes Awards in this company pertaining to he pay-scales and dearness allowance of the workmen. By the Award passed in reference No. II 82 of 1950 pay-scales and fixed dearness allowance were introduced with effect from l.].SO with the consumer price index in Bombay at 312 points in 1950 l.

In 1957 the index rose by 55 points and stood at 367 pointe as/~ a consequence of which by an Award passed in reference IT No. 17 of 1958 dated 21st May, 1959 the alab system of dearnesa allowance was introduced with effect from 1. 2. 58. nus , AWard was not challenged by the company at any time• By Award

published on 30.12.65 in reference II No.47 of 1964 at the instance of the labour marginal increase in the baSic paY 1 acalea was provided mainly on the ground that the slab systelll was working satisfactorily. By an Award publiahed on 1.1.11 in reference No. IT 42 of 1973 the clerical and subordinate staff 1n the head office were also given the slab system of D.A. lt wu c.ateg'lrically observed in this Award that there should not

 ...... _______ _

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l-10N1'HLY-RATED WORKMEN v. INDIAN HUME PIPE co. 485

r=f ~~ be any disparity in the D.A. between the monthly rated factor staff and the head office staff.

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While the wage structure stood thus, the company gave notice of change for doing away with the slab system on 15.7.75 of D.A. in respect of head office staff and the monthly rated factory staff. The notice of change in respect of bead office staff was not . pressed since a Settlement was

reached between the parties, in July 1976 whereunder the D.A. at consumer price index 1380 points was merged in the revised consolidated pay scale of different categories with effect . from 1.9.75. Although in September, 1975, the consumer price y........., index figure was 1270 points, it was taken notionally as 1380

1 for the purpose of merger, providing for review of • consolidated pay scales if the consumer price index IDO'."ed ~~ high. The notice of change in respect of mnthly rated factory l staff was, however, referred to adjudication. The Industrial .· Tribunal gave its Award on 27th October, 1980, holding that !

the employer was justified in seeking abolition of the slab system of D.A. and substituting it with the textile scale of 1 D.A. affording 115 per cent neutralisation. The Tribunal held \ that the workmen should be paid D.A. at 115% of the revised ..v-;'1 textile rate in the same manner in which the daily rated

t workmen are paid the.ir D.A. at the prevalent cost of living index in t~ month of November, 1980 or if such index number ia not available at that time then at the index No. 1771-1780.

While making this Award the Tribunal was conscious of the fact that the workmen were likely to lose quite a substantial amount of the D.A. but it was stated that it was inevitable when attempt was made to bring about uniformity and parity

~ woong the workmen of the same company working at the SCUI.Aa --, place doing similar work.. The Tribunal felt that if the parity

'• scheme was to come into force either from the date of the demand or from the date of reference, another unfortunate happening would take place in that the workmen would be liable to refund a lot of amount excessively recovered by them as and by way of D.A. on account of slab system ... The Tribunal the'refore felt that it would be too harsh and unk.ind to such v-. WOrkmen and held that the Award would come into force prospectively with effect from 1.11.80 and observed that the reduction in the monthly emoluments of the workmen should be a . gradual process so that they are able to bear the burden and

can learn to adjust themselves with little less income month to month. It therefore, directed the reduction to be spread

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over equally for a period of six months from 1.11.80. Hence the appeal by special leave.

, Allowing the appeal, the Court,

HELD : 1. In a reference arising out of the notice of change given by a company under section 9A of the Industrial Disputes Act, 1947 the company should make available all (' evidence necessary to justify its stand for a change from the existing system.

In the instant case, overlooking the circumstances under which reference was made such a burden was l. ; wrongly cast on the workmen to prove that a change in the '~ ...

system was not necessary. (496 :a-c)

.r 2.1 Normally itwould be inadvisable for Tribunals~ r Courts to revise the wage structure of workmen to their prejudice when a dispute arises. However, Tribunals arur Courts f can take judicial notice of one fact; and that is that the J wages of workmen, except in exceptionally rare cases, fall within the category of mere "subsisting wages", and as such

tinkering with the wage structure of workmen cannot be permitted except under compelling circumstances. Employers have seldom displayed a cooperative attitude where wage structures I of workmen are devised. lbey have never showed a willingness .

I for the involvement of the labour with the capital so as to

engende~ a participative labour capital relationshiP• Reckoning with this reality, the Courts and Tribunals have necessarily to k.eep their hands off from upsetting a wage : structure that has satisfactorily worked for a long time• lhe \ l sweat of the labour is never ref lee ted in any balance sheet .r"' t although the latent force behind every successful industrY is

this sweat. With their present wage structure, the labour jus~ exist. No one should try to deny them even this bare source 0 existence. 1503 G-H; 504 A-c)

) 1

'-51 fCrlownl dAluainf•r• Work.a v. Dleir Worblen. (1958} s.c.R ~L v , o owe • r 2 2 Th need

1 • e Supreme Court often times emphasised the lt for a living wage to workmen instead of a subsisting wage• is indeed a matter of concern and mortification that even ! today the as i 1 emain 1 P rat ons of a living wage for workmen r rage and a distant dream. Nothing short of a living wage can

HONTHLY-RATED WOIOOiEN v. INDIAN HUHE PIPE CO. 487

e be a fair wage. It should be the combined effort of all concerned including the Courts to extend to workmen a helping hand so that they get a living wage which would keep them to some extent at least free from want. Viewed against this background no case has been made out by the respondent in the instant case, for a change of the slab system of dearness allowance to the revised Textile rate of dearness allowance.

[503 D-F]

The slab system which has been appoved by Tribunals and by Courts was available at the head office and for the daily rated workmen at Wadala upto the year 1976 and worked satisfactorily for over 17 years. In the absense of any demand

from any region for the slab system, the applicability of well-settled principle of industry-cum-region, and the sound financial position of the company it cannot be said that if the slab system was introduced in all the factories it would result in the closing of the whole company itself. The question that it would work against the principle of parity and uniformity and that there would be a change of the subordinate staff getting more emoluments than their officers who might be recently employed does not arise. [496 C-E}

2.3 1be theory of ceiling on the quantum of dearness allowance cannot be accepted since under the prevailing conditions there is uo control over th~ prices of essential E COOJOOd.ities and as such a ceiling would not give sufficient cushion when prices of essential commodities continuously rise. (506 F-G]

ICU lick Nixon Ltd.

V• Kil.liclt & Allied Coapanfes Employees Union. (1975) Supp. S.C.R. 453, distinguished.

Unichea Laboratories I.Ld. v. The Worben, [1972] 3 S.C.R.. 567; Greeves Cotton and Co. and Ors. V• Their Workmen,

{1964] 5 S.C.R. 362; Bengal Oleaical l'ba..maceutical Works Ltd.


CIViL APPELLATE JURISDICTION Civil Appeal o. 3040 of 191)6.

 d 27 10 1980 of the Industrial L[ From the Award date • •

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488 SUPJ.ill1E COURT REPORTS

[1986} 2 S.C.R,

A N.B. Shetye, Dr. Y.S. Chitale, M.lkul Mudgal and Atul ("

Chitale for the Appellants. 1

G B P i P umaswami, H. S. Parihar and Vipin <llandra •• a, •'-'4 '

for the Respondent.

J.P. Cama and Mukul Mudgal for the Intervener.

The Judgment of the Court was delivered by

lWALID~ J. This appeal, by special leave, is directed against the award of the Industrial Tribunal in IT No. 531 of 4.~

1975, dated 27th October, 1980.

The appellants are the 1 monthly-rated workmen at Wadala Factory of the Indian Hume

Pipe Company Ltd., Bombay and the respondent the Company -~ mentioned above.

We will briefly refer to the history of the demands of the workmen in this Company to appreciate how the dispute involved in this appeal originated. The respondent (hereinafter referred to as the Company) is an Engineering concern .,._

owning sixty factories spread throughout India. In Bombay, it 1 has a factory at Wadala and head office at Ballard Estate• In this appeal, we are concerned with the monthly rated workmen at the Wadala Factory. In this factory there are about 375 daily rated workers and 80 monthly rated clerical and subordinate staff • The total labour strength all over India is about 3000 daily rated workers and 1000 monthly rated clerical

and subordinate staff.

\ - r~ In the year 1950, there was an industrial diSpute \ pertaining to the pay scales and dearness allowance of the I km .I wor en in this factory. An award was passed in this dispu by the concerned Industrial Tribunal in reference No IT 82 of 19S0 By this award pay scales and fixed dearness allowance were introduced w.e.f. 1-7-1950, with the consumer price inde; in Bombay at 312 pointe in 1950. In 1957, the index rose bY 5 points and stood at 367 points. There was another industrial dispute in 1958 in reference IT No. 77 of 1958 resulting i:

the award published on the 21st May 1959 introducing th slab system of O.A. w.e.f. l-2-195S. Thla award was not challenged by the Company at any time.

In 1964, the labour sought revision in the pay

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L MONTHLY-RATED WOIU<MEN v. lNDlAN HUME PIPE co. [KIIALID, J.] 489

for the monthly rated clerical and subordinate staff, as a consequence of which reference IT No. 47 of 1964 was made resulting in an award published on 30-12-1965, which provided marginal increase in the basic pay scales, mainly on the ground that the slab system was working satisfactorily.

2. In this Company the daily rated operatives were getting the old textile scale since the year 1942 which was

raised to the revised textile scale as D.A. by an award. Thus, the daily rated operatives and the monthly rated clerical and subordinate staff were paid D.A. on different basis and at different rates in this Company. As there was no revision in the pay scales from 1950, for about 22 years a demand was made for revision in pay sc ... les for monthly rated clerical and subordinate staff in the year 1972. This demand was referred to adjudication in reference IT No. 42 of 1973 as . a consequence of which an award was published on 7-7-1977. The clerical and subordi '1te staff in the head office of this Company were also being given the slab system of D.A. This award observed that there should not be any disparity in the D.A. between the monthly rated factory staff and the head office staff.

3. while the wage structure stood thus, the Company gave notice of change for doing away with slab system of D.A. by notice dated 15-7-1975, in respect of the head office staff and the monthly rated factory staff. The notice of change in respect of the' head office staff was not pressed since a settlement was reached between the parties. As per this ~A settlement arrived at in July 1976, the D.A. at consumer price index 1380 points was merged in the revised consolidated pay scale of different categories w .e. f. 1-9-197 s. Although in September, 1975, the consr price index figure was 1270 points, it was taken notionally as 1380 for the purpose of merger, indicated above, providing for review of consolidated pay scales if the consumer price inde~ moved high. The notice _., of change in respect of monthly rated factory staff was,

however, referrd to adjudication. The Company's claim was to do away with the slab systec of D.A. and to substitute it by revised textile scale. The Union filed a written statement justifying continuity of the slab system which was in vogue for 17 years. The Industrial Tribunal gave the award, impuged in this appeal, on 27th October • 19~0. The Tribunal came to

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490 SUPffi COURT REPORTS [19861 2 s.c.a.

the conclusion that the employer was justified in seeking abolition of the slab system of D.A. and substituting it with

the textile scale of D.A. affording 115 per cent neutralisation. ·

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4. The Tribunal said that. the workmen should be paid D.A. at 115 per cent of the revised textile rate in the same manner in which "the daily rated workmen are paid their D.A. -~ at the prevalent cost of living index in the month of November, 1980 or if such index. number is not available at that time then at the index No. 1771-1780." While making this award the Tribunal was conscious of the fact that the workmen .._ were likely to lose quite a substantial amount of their D.A. j1

However, the Tribunal got. over this concern stating that it was inevitable, when attempt was made to bring about , r; uniformity and parity among the workmen of the same company J working at . the same place doing sirullar work. The Tribunal j felt conscious of another distressing result of the award. The Tribunal felt that if the parity scheme was to come into force "either from the date of the demand or from the date of J.

reference, another unfortunate happening would take place in that the workmen would be liable to ref und a lot of amount . 1 excessively recovered by them as and by way of D.A. on account of slab system." The Tribunal felt that "it would be too harsh ' and unkind to such workmen" and therefore held that the award would come into force prospectively w.e.f. 1-11-1980. The '!ribunal, not rest content with the expression of concern for "! workmen, gave another palliative to them lest the reduction in their D.A. should cause them dislocation financially all of 8 f sudden and therefore observed that the reduction in the~ J monthly emoluments of the wo rkmen should be a gradual process •

"so that they are able to bear the burden and can learn to adjust themselves with little less income month to month•u 'The

reduction was, therefore, directed to be spread over equallY for a period of six months from 1-11-1980.

When the matter 15-12-1980, special leave interim relief wa8 given to

Ca bef this Court on me up ore was granted and the following the appellants.

"Special leave granted, Hy way of int:erim relief it 1 l b in the a lere y directed that the difference he D.A. a'tiarded by the Industrial Tribunal snd t.

MONTHLY-RATED WORKMEN v. INDIAN HUME PIPE CO. [KHALID, J.] 491

D.A. being paid on slab system which is directed to be reduced phasewise on monthly basis of l/6th, reduction will be implemented i.n payments to be made in the months of December, 1980 and January, February, March, April and May, 1981, but shall be based on monthly wages thereafter from payments in the subsequent months and this will be subject to the further direction of this Court. Appeal be expedited ••••••••••••••• "

This interim order was modified by the Vacation Judge on 14-3-1981, as follows :

"The order passed by this Court on 15.12.80 to continue till the end of August, 1981 on the appellants agreeing to reimburse the management in case they fail in the appeal which reimbursement will be by way of deduction from their dues."

6. We will now proceed to consider the rival contentions put forward by the parties in support of and against the award. The Company, in justification of their change of notice rand defending the award passed, put forward their case as follows:

The Company manufactures various pipes, cement concrete pipes as well as steel pipes for Hydro Electric Projects.

These products are manufactured as per definite orders and specifications by governmental bodies and other local authorities, unlike other industrial units which are at "(. liberty to manufacture their products and market them. Their products are usually bulky in nature, making transport difficult and costly. For easy transport of these bulky products, the Company decided to establish as many as sixty factories all over India to cater to the needs of the local markets ang to make them easily accessible to avoid damage to their products and. hevy transporting charges. The products of the Coany have only limited market and therefore, has to face keen competiton unlike cement, steel, sugar, chemicals etc. which have an expanding market and which can be programmed in anticipation of sale.

The Comp'any has three thousand . daily paid workmen and H chousand mOnthly paid workmen all over India. Out of these,

the appellants form only 80 monthly paid workmen, employed in Wadala manufacturing factory. The slab system of dearness allowance, according to the Company, has been universally condemned by successive Tribunals. The appellant - Union enjoys a privileged position out of this four thousand workmen of the Company all over India. While conceding that the appellant - Union had been enjoying the slab system of dearness allowance till the reference was made, it is stated ~

that at the time the slab system was introduced it was never conceived by the Tribunals that the cost of living index would spiral upto such great heights as to make payments difficult.

The dearness allowance enjoyed by the appellant - Union is so high in certain cases that neutralisation is at rates IIl.lCh; higher than 100 per cent which is discouraged and is disapproved consistently by this Court and other Industrial Tribunals. It is further stated that the Company does not have the capacity to pay the slab system of dearness allowance and in case the remaining monthly rated workmen put forward such a claim, the respondents will be forced to close down their factories.

The appellant - Union pleaded that the award of the Tribunal was defective both in law and on facts. The Tribunal did not have any material before it compelling it to change a E system that had satisfactorily worked for 18 years and in effect had become part and parcel of the service conditions of the workmen. The findings of the Tribunal that the slab system had become unscientific and improper, that continuance of the system was not in national interest or in public interest, that ever since slab system was introduced neutralisation had F become more than 100 per cent and that the slab system)' confined to the appellant alone would create disparity and discontent among workmen are according to the appellants not based on evidence. The observation in the award that the Union did not bring on record any evidence to show that wages paid to them were far below the living wage or to show that the G modification sought would cause them hardship which they would not be able to stand is incorrct and is made without being faithful to the facts and evidence in the case. With these rival contentions in view, we will now proceed to consider the award.

7. The dispute arose when the respondent-company served a

MONTHLY-RATED WORKMEN v. INDIAN HUME PIPE CO. [KHALID, J.} 493

~ notice under Section 9-A of the Industrial Disputes Act. The

dispute referred to arbitration reads as follows :

nThe rate of payment of Dearness Allowance payable to monthly rated clerical and subordinate staff working at the Wadala factory will be changed and will be worked out as per revised Textile scale calculated on the bas is of working days in the month with a ceiling on dearness allowance payment at consumer price index number for working class of Bombay at 800 (base 1933-34 : 100) with effect from

1975."

'y It was the TribWlal presided over by Shri Sawarkar, in I. T.

 I No. 77/58 by its award dated 21.5.1959 that introduced the

~ "f slab system of dearness allowance first. Before making the award, the Tribunal considered the various contentions put

forward by the company. The Tribunal considered the nature of this industry and held that it was an Enginering concern, and a member of the Engineering Association of India. The Tribunal examined the scales of dearness allowance in eight different units of the Engineering Industry and concluded that the total emoluments of the monthly rated staff of the Indian Hume Pipe r-- Company Ltd., at its Wadala factory (i.e. Rs. 125 to Rs. 385) were far lower than those of the other concerns with which they were compared. This Tribunal repelled the plea that an increase in dearness allowance woul~ cause disparity between the workmen at the head office and at the factory and passed the award introducing the slab system as follows :

Slab ~

1 - 100

D.A. at cost of living index 311-320.

65% of the basic salary or Textile scale calculated on the basis of the number of days in the month whichever is higher. 101 - 200 202- 300 301 & above

30% -do- IS% -dolO% -do-

VARIATION per 10 pts.

2% 1%

Dearness allowance was being paid to the appellants at ·~ this rte without any objection by the Company till the notice

of chate was given. It has to be borne in mind even at the

/ outset that the reference was occasioned because of the notice of change given by the Company. It was therefore necessary for the Company to make available before the Tribunal all evidence necessary to justify its stand for a change from the existing system. We were taken through the award in full by the learned Counsel for the appellants. All that we find in the award, by~ way of justification for this change, is that the Company would be confronted with similar demands by the workers in its other factories, that it has no capacity to pay the dearness allowance at this rate, that it would result in more than 100 per cent neucralisation and that this system had not found "'( " favour with many of the Tribunals who considered the question '. of the dearness allowance in Maharashtra. 1(

We will presently refer to some portions of the award to see whether the Tribunal was justified in doing away with the existing scheme and thus denying to the workmen what they were getting till the award was made. But before we do so, we would like to show the effect of the award on the emoluments of the workmen involved in this case if the award were to be~ implemented.

TABLE-I Monthly Pay at Monthly Pay at Index Reduction in Index 1771-1780 1771-1780 that would the monthly available prior be available as per emoluments. ,..,- to the award the award. under challenge. 'i Basic

D. A.

Total Basic

D.A.

Total Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs. 500 1,590 2,090 500 542 1,042 1,048 400 1,434 1,834 400 542 942 892 300 1,278 1,578 300 542 842 736 200 l, 117 1,317 200 542 742 575 100 795 895 100 542 642 253~ 40 544 584 40 542 582 2 ..

The table below shows the total monthly pay of the above workmen and the consolidated pay that similarly placed workmen get at the head office.

MONTHLY-RATED WORIOO:N v. INDIAN HLME PIPE CO. [KHALID, J.] 495

Basic pay

Rs.

500 400

~ 300

200 100

Dearness allowance as per slab system D.A. applicable at Index 1771-1780 prior to the award

Rs. 1,590 1,434 1,278 1,133 795

TABLE II -------------------------- Total monthly pay

Rs.

2,090 1,634 1,578' 1,347 895

Total monthly pay packet of Wadala Factory workmen as per the award

Rs.

1,042

942 842 742 642

Monthly consolidated pay packet at head

Difference between total pay packet of head office office workmen as per and total statepay packet ment of similar submitworkmen at ted by Wadala the Factory as company awarded before the Tribunal

Rs. 1,815 1,635 1,380 1,185

Rs •.

773 693 538 443 148 ------------------·------------------------------------ The first table glares one in the face. The reduction is

1 substantial in most of the cases. Mr. Pai, the learned counsel "1 for he company had to agree that as per the award the difference in the dearness allowance was substantial and the

~ damage to the workmen was not inconsequential.

However, he tried to get over this inconvenient position with the plea that continuance of the scheme would spiral up the dearness allowance so much that it would render the working of the Company difficult and create wide disparity between these workmen. and others.

The second table which shows the difference between the pay packet of Wadala Factory workmen and the head office was explained away by Mr. Pai with the plea that the head office workmen had bigger responsibilities and did better work. These justifications put forward by him, have been echoed by the Tribunal also.

As indicated1earlier, we will now refer to the award

496 SUPRFl1E COURT REPORTS (1986] 2 s.c.R.

under challenge. The company had a case that out of its sixty }- factories, each factor-y should be treated as an independent unit. This contention did not find favour with the Tribunal.

According to us, the Tribunal rightly held that since there was no functional integrality, the units had to be taken as one. The Tribunal also found that the Company's financial position taken as a whole was not only satisfactory but quite z:; ound till 1979.

The Tribunal committed an error by overlooking the circumstances under which reference was made and casting the burden wrongly on the workmen to prove that a change in the system was not ne.cessary. The Tribunal assumed that so far as the Bombay Region was concerned) it was an admitted fact that \...oilllilll the daily rated workmen at Wadala factory and the staff at the ,.. head office were not paid wages as per the slab system. This ¥ assumption is wrong because the slab system was available at the head office and for the daily rated workmen at Wadala upto•f the year 1976. The Tribunal apprehends that if the slab system was introduced in all the factories the net result would be that the whole company will have to be closed down. This apprehension is without any foundation because at the time the Tribunal considered the dispute there was no demand from any

region for the slab system. D1e Tribunal admits that the slab -4rf system hact been in vogue for 18 years and that it had worked satisfactqrily and had become part of the service conditions of the mQnthly rated workmen. However, the Tribunal observes that the system could be revised if it was shown that the system had out-lived its utility. The justification for this ~~ observation is that at the time the slab system was introduced no one fore-saw the spiralling rise in the cost of living , index and that it would work against the principle of parity Y and uniformity and the danger of the subordinate staff getting more emoluments than their officers who might be recently employed.

These are all assumptions without necessary materials and this is the second error committed by Tribunals.

It is not uncommon that even in prestigious institutions recently employed officers get emoluments less than the subordinate staff. On this plea, the benefits that the workmen were enjoying till then should not be denied to them. To say that the system had become 'unscientific' and 'improper' because the workmen were getting fantastic amount of dearness allowance was again without necessary material. 'The Tribunal;:-

MONTHLY-RATED WORKMEN v. INDIAN HUME PIPE CO. [KHALID, J.] 497

f then proceeded to say that change in the slab system was necessary in the larger interest of the country", "in the interest of social justice", "in the interest of jus tice and fair play 11 ,

11to avoid industrial unrest.,, 11genera1 interest of the company and in the larger interest of the nation. 11 These ·• are empty verbiage without any basis on the facts of the case. , The discussion in the award that continuation of t he dearness allowance would bring about neutrali&ation above 100 per cent 1 is also not supported by sufficient materials. The Tribwtal devoted some discussion in support of the highly placed , j officers and went to their rescue with the plea t.hat they were - ·""" subject to taxation rendering their salaries modest. We wish

J:' to state that all these statements could have been avoided in

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i a matter where the Tribunal had only to consider whether the

:~ . ·. management was justified in trying to upset a scheme that had1 worked satisfactorily for a period of 18 years. We do not propose to make further comments upon the award of the Tribunal. Suffice it to say that the whole approach is erroneous and the conclusions were arrived at on assumptions Without acceptable evidence. The management had not produced before the Tribunal sufficient evidence to persuade it to change the existing system. It may be that the slab system did not find favour with some other Tribunals. But that is no reason why a system that had existed for a long period of time Should be stopped to the detriment of the workmen without

COmpelling reasons.

Notice of change was given by the company to bring about Parity or uniformity of D.A. in respect of its workmen. The :. f Tribunal accepted this case of the company in passing the

~~- award. A close scrutiny of the facts of the case, however,

would indicate that such a parity was not possible and that

the company also knew that parity was impossible of

achievement. This is evident from the fact that notice of . change did not relate to all the workmen in the company • It Will be seen that the company had three systems for payment of 1dearness allowance i.e., dearness allowance based on revised

.,. teJttile for daily rated factory workers; dearness allowance 1 lllithout ceiling for JDOnthly rated factory staff and I ton.aolidated wages and dearness allowance for KOOnthly rated lif:ad Office staff The Company has not shown that it had I

.lldovttd a Uniform earness allowance system for all its wor~-

1 a.tn even in the Bombay region. 'Therefore, the Tribunal s

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A conclusion based on the object of achieving uniformity in )... dearness allowance does not appear to be correct.

Mr. Pai learned counsel for the respondent-company took us through the various awards passed by different Tribunals in his attempt to impress upon us the fact that such Tribunal had not only discouraged the slab system of dearness allowance but had even condemned it.

In the case of Hind Cycles Ltd., an award was given by Mr. M.R. Mehar, Industrial Tribunal, Bombay, wherein it was observed as follows :

" •••• • The slab system was devised when it was not U expected that the consumer price index would shoot up to the extent that it has with the result that where the slab system is followed (as in the .. concerns listed in Exhibit U-3) the dearness l allowance of monthly paid staff have shot up completely out of proportion to basic wages with the result that in industries and occupations in which that system is not followed but some other system is followed the dearness allowances, even though linked with the index, are much lower than~ the dearness allowance in the concerns listed in Exhibit U-3 •••••••••••• "

In the case of Shaw Wallace & Co.

Tribunal, presided over by Mr.

M.R. follows :

Ltd., the Industrial Mehar, observed as ~

" ••••••• I have made reference to the dearness'J' allowance in Banks, Mill companies and in Government offices not because these are concerns comparable with Hind Cycle but to show the varying systems of dearness allowance and to illustrate how the total emoluments of employees in industrial employments in which the slab system referred to above prevails have shot up so as to be completely , t~ out of proportion with those employees doing similar work in employments in which there is either fixed dearness allowance or the dearness allowance though linked with the index, is not on

MONTHLY-RATED WORKMEN v. INDIAN HUME PIPE CO. [KHALID, J,] 499

the slab system. Thus, by the slab system a certain A class of fortunate employees have been absolutely protected against rise in cost of living and have not to bear hardships which other larger sections of employees have to suffer on account of inflation •••• "

-+The same Tribunal has this to say in the case of the Wadala B factory, with which we are concerned, in its award dated 6th December, 1965 :

"This dispute concerns only the monthly rated staff of the factory. The demands concerning daily rated staff is pending before a Board of C Conciliation •••••••••• ! have therefore to make the award having in mind the total emoluments i.e. wage scales and dearness allowance prevailing in factories of this size in the region belonging to other prosperous concerns in the engineering industry.

In considering the demands for improved wage scales the total emoluments have to be borne in mind.

While the daily rated staff get the textile rate of dearness allowance the monthly rated staff get dearness allowance according to the slab system at E the same rate as for the Head Office, and which dearness allowance is very satisfactory •••••••••• "

The Tribunal did not interfere with the slab system prevalent vi, n the Company.

In the case of Central Tin Works, a demand was made for the intorduction of the slab system. But the Industrial Tribunal, Bombay, presided over by K.R. Pawar, raised the rate of dearness allowance to 100 per cent of the cotton textile rate.

y¥ In the case of Voltas Limited, in an award given on the 30th September, 1965, the Industrial Tribunal presided over by t-lr. v; A. Naik raised ceiling of maximum dearness allowance from Rs. 400 to Rs. 450. Fixation of the ceiling, according to Mr. Pai, is to contain the rigours of the slab system.

In Forbes Forhes Compbell & Co. Ltd., an award was passed~ A by the Industrial Tribunal presided over by Mr. V.A. Naik on 23-12-1969, on the claim for raising the dearness allowance declining the demand.

Mr. R. D. Tulpule, Industrial Tribunal Bombay, passed an award in the case of Polychem Ltd., on 9th June, 1970. In this case, the Tribunal noticed the criticism of the slab system o~ B dearness allowance and sought to rectify it by granting 110 per cent of the revised textile dearness allowance along with fixed ad-hoc payment tapering with increase of the slab of the salary.

Considerable stress was made by Mr. Pai on the following~ C observation of the Tribunal at page 246 of Volume VII paper'(

book :

"I have not come across a case where slab rate of dearness allowance was introduced for the first

time."

The answer to this observation is that in the case of the Company with which we are concerned it was introduced for the~ first time in 1958. We may also state that we have not come across any award wherein the slab system once introduced was abolished except in one case.

In the case of Mazagaon Ihcks, an award was passed by the Industrial Tribunal presided over by Shri S.A. Patel on 13th Y December, 1984, substituting the existing scheme of dearness allowance based on the slab system by a revised textile seal~

/ of dearness allowance. This was done following the decision of F this Court in tilllck HUon Ltd. v. Iillick & Allied t; cwpanietJ E.ployees Union, [1975] Supp. S.C.R. 453 rendered on May 2~

1975. It can be argued, perhaps justifiably, that in this case this Court introduced a ceiling on dearness allowance in place of slab system available in the Mazagaon Docks. This decision was pressed into service in support of the submission thatthe G situation obtaining in the company with which we are dealing y._ ....

is the same as in the above case and to contend that the slab system should yield place to at least a ceiliqg on dearness allowance.

MONTHLY-RATED WORKMEN v. INDIAN HUME PIPE CO. [KHALID, J.] 501

~ We have no quarrel with the conclusion arrived at in the above case on the facts of that case. However, the conclusion arrived at in that decision cannot be applied in a general manner in all cases. In that case, the employer's grievance was this: The post of junior executives is a promotional post for supervisors. Still the foer were drawing less emoluments than the latter. This is because there was no ceiling on

-dearness allowance in respect of workmen and supervisors. The employer produced a chart in support of his case and contended that this would restilt in indiscipline and unrest in this industry. It was in this context that this Court laid down fourteen different aspects, not exhaustive in their scope, which had to be taken into account before tinkering with the I dearness allowance. The Mazagaon Docks case has taken support f ) from Killick Nixon U:d. case without sufficient material to sustain its conclusion that slab system should be abolished to avoid huge distortion of wage differences among the persons employed in that concern. A close study of Ki.llick. Nixon Ltd. case will bear out that this Court did not lay down that in all cases slab system of dearness allowance should be abolished or done away with to the detriment of the workers.

All that this Court held in that case was that the employer • having made out a case for putting a ceiling on dearness allowance, it was for the Tribunal to decide at what particular amount there should be a ceiling on dearness allowance. An attempt was made by the employer in that case to press into service the view of the National CoDIJ.lissioner of Labour to ascertain the minimum wage in the Company at which a worker would require complete neutralisation of the cost of living and then find the aiOOunt necessary as a protection

gainst his real wages. This was not accepted by this Court •.

The Court observed

" •••• we do not wish to lay down as an invariable rule that in all cases there should be ceiling on D.A. Whenever a case of this nature comes for industrial adjudication, it will always be a delicate task for the Tribunal to s'trike a balance keeping in view the above principles, weightage of each one of which being variable according to conditions obtaining. Whether or not there should be a ceiling on dearness allowance in a given case must depend on the facts and circumstances of that

case. There can be no inexorable rule in that respect. We have formulated the various principles which must be taken into account by the Tribunal in determining this question, but the most dominant of these must always be that of social justice, for that is the ideal which we have resolved to achieve when we framed our Constitution ••••••••• "

Thus, the ratio of that case cannot be extended to every case to interfere with the existing D.A. Scheme, which is beneficial to the workmen.

Mr. P.S. Mavalenkar, Industrial Tribunal, Bombay, in an award dated 30-ll-1976, imposed a ceiling of Rs. 700 on the '\ slab system of dearness allowance. ¥ ...

We thought it necessary to refer to the various awards read by Mr. Pai only for the completeness of the Judgment. It has to be borne in mind that in most of these cases, awards were passed at the instance of the employees when demands were made for raising the dearness allowance paid to them. Here, we have the case of the employer trying to get over a system of dearness allowance which had worked smoothly for 18 years, on ~

the specious plea that at the time the slab system was introduced, it was not in the expectation of anyone that the cost of price index would spiral up so much as to make it impossible for the Company to pay according to this scheme.

From the materials available we do not find that this plea can be accepted. The records produced show that despite this system of dearness allowance the Company has been making profits and has been improving its position year by year. ; f

At page 103 of Volume I paper book, the appellants have produced a table showing dearness allowance paid by seven companies including the respondent company at the slab system to show that other companies have been paying more dearness allowance to their workmen than the respondent company with inconsequential differences in certain pay scales. They have also given a comparative statement showdng how the increase in ~

total wages including dearness allowance as per slab system, for pay scale of Rs. 100 to Rs. 500 is less than .the percentage of increase in consumer price index. The percentage of increase in consumer price index of 2642 over CPI 320 in

,_ 1

-4,

MONTHLY-RATED WORKMEN v. INDIAN HUME PIPE CO. [KHALID, J.] 503

1958 ls 826 while the percentage of increase in wages for the .same CPI is only 806.

In reply to the Company's case of capacity to pay, the appellants have produced at page 101, Volume V paper book, a table showing the net profit and the gross profit of the CQmpany from 1979 to 1984. The net profit has increased from a

~ sum of Rs. 19.65 lakhs in 1978 to a sum of Rs. 176.38 lakhs in 1984 and the gorss profit from Rs. 115.60 lakhs toRs. 439.11 lakhs, after paying the slab system of dearness allowance to the appellants. They have also produced a table showing the

inancial position of the Company from the year 1979 to 1984.

Sales have increased from Rs. 1221.56 lakhs in the year 1979 . to Rs. 2193.94 lakhs in the year 1984 and the dividend on

.. ,. equity capital from 12. 80 per cent in 1979 to 18 per cent in 1984.

We do not think it necessary to deal at length about the evolution of the concept of dearness allowance. Suffice it to say that this Court has, often times, emphasised the need for a living wage to workmen instead of a subsisting wage. It is indeed a matter of concern and mortificatlon that even today the aspirations of a living wage for workmen remain a mirage and a distant dream. Nothing short of a living wage can be a fair wage. lt should be the combined effort of all concerned including the Courts to extend to workmen a helping hand so that they get a living wage which would keep them to some ( extent at least free from want. It is agalnst this background • that a claim by employers to change the conditions of service of workmen to their detriment has to be considered and it is ':'against this background that we have coidered the award review. We are not satisfied that a case has been made out on the facts available, for a change.

The question is often asked as to whether it would be advisable for Tribunals and Courts to revise the wage structure of workmen to their prejudice when a dispute arises.

Normally the answer would be in the negative. Tribunals and f Courts can take judicial notice of one fact; and that is that the wages of workmen, except in exceptionally rare cases, fall within the category of mere "subsisting wages". That being so, it would be inadvisable to tinker with the wage structure of workmen except under compelling circumstances. Employers have

seldom displayed a cooperative attitude where wage structure of workmen are devised. They have never showed a willingness for the involvement of the labour with the capital so as to engender a participative labour capital relationship. This is a reality that Tribunals and Courts have to reckon with that being so, Courts and Tribunals have necessarily to keep their hands off from upsetting a wage structure that has satisfactorily worked for a long time. The sweat of the labour~

is never reflected in any balance sheet, although the latent force behind every successful industry is this sweat. With their presnt Mage structure, the labour just exist. No one should try to deny them even this bare source of existence.

In re-inforcement of our conclusion, we will refer to "-.. the following passage in the case of Crown Aluadnium WOrks v. Their Workmen, [1958] S.C.R. 651 :

"The question posed before us by Mr. Sen is : Can the wage structure fixed in a given indus try be never revised to the prejudice of its workmen ?

Considered as a general question in the abstract it must be answered in favour of Mr. Sen. We do not

thir~~ it would be correct to say that in no conceivable circumstances can the wage structure be revised to the prejudice of workmen. When we make this observation, we must add that even

... theoretically no wage structure can or should be revised to the prejudice of workmen if the structure in question falls in the category of the bare subsistence or the minimum wage. If the wage 1 structure in question falls in a higher category,~ then it would be open to the employer to claim its revision even to the prejudice of the workmen provided a case for such revision is made out on the merits to the satisfaction of the tribunal •••••••••• It would be interesting to notice in this connection that all the tribunals that have dealt with the present dispute have consistently directed that existing wages should not be reduced ~

to the prejudice of the workmen. In other words, though each tribunal attempted to constitute a wage structure in the light of materials furnished to it, a saving clause has been added every time

MONTHLY-RATED WORKMEN v. INDIAN HUHE PIPE CO. [KHALID, J.] 505

protecting the interests of such workmen as were A drawing higher wages before. Even so it would not -be right to hold that there is a rigid and inexorable convention that the wage structure once fixed by industrial tribunals can never be changed to the prejudice of workmen. In our opinion, therefore, the point raised by Mr. Sen must be answered in his B favour subject to such relevant considerations and limitations as we have briefly indicated."

We are not prepared to accept the submission made by the learned counsel for the respondent that the slab system has not been approved either by Tribunals or by Courts, not to say ( tha.t they have been condemned.


Court has occasion to consider the slab system and this Court gave its seal of approval to this system. This Court after considering the various materials placed before it observed that in the . Bombay region there were several Pharmaceutical units adopting slab system of dearness allowance. We read the 0 following passage in support of our conclusion that the.slab system did find favour with this Court on mre than one '- occasion :

'i'

" •••• When once such units can be taken into account as comparable units, the pattern of dearness E allowance obtaining therein can very well be considered to ascertain the system adopted by the industry as that will show the trend in the region.

As pointed out above at least 11 units, referred to in Ex. DU.l have adopted the system now introduced in the case of the appellant by the Tribunal. Under F those circumstances, when such system is prevailing in the industry in the same region, it cannot be held that the Tribunal has coamitted an _error, in introducing a similar pattern in the case of the appellant. The slab system has been approved by G this Court as will be seen by the decisions in Greeves Cotton and Co. and Others v. 'lbeir workmen,

[1964] s s.c.R. 362 and Bengal Cbe.deal and Pbar.ac:eutical Works Ltd v. Its workmen, [1969] 2 s.c.R.

113. Even in Bombay that such a pattern of dearness allowance as the one introduced in the case of the H

appellant is existing, is seen by the decisions of this Court in Greeves Cotton aud Co. and others v.

Their wor"-en and Kamf.ni Metals and Alloys Ltd. v.


But that such a system exists in Bombay region is clear from the above decisions."

This Court then noticed that in a number of awards rendered +- during the year 1965 to 1968 the slab system of dearness allowance was adopted and wound up by saying :

"These facts clearly show that the scheme of dearness allowance provided in the award before us ~

in respect of the appellants is not anything new." v""

(at page 604)

The only grievance that the respondent's counsel can have against these observations is that the Court in those cases were considering pharmaceutical units which were not couparable with the unit in question. We do not agree that this distinction can be pressed into service to deny the workmen the slab system existing in this unit. The Tribunal has found this unit to be an engineering unit which is not in a far less disadvantageous position than pharmaceutical units.

The learned Counsel for the respondent made a strong plea for substitution of the exising system of dearness allowance with ceiling on the quantum of dearness allowance. We have already indicated that in the absence of compelling materials~ a system that gives benefit to the workmen caqnot lightly b~ interfered with to their detriment. The theory of ceiling on the quantum of dearness allowance cannot be accepted since under the prevailing conditions there is no control over the prices of essential coiDJOOdities and as such a ceiling would not give sufficient cushion when prices of essential commodities continuously rise.

Mr. Pai apprehended the possibility of similar demal by - the workers in other factories which would render the working of the factory itself difficult and sometimes coel it to close them down. He has made available to us a statement

. .

MONTHLY~D WORFMEN v. INDIAN HUME , PIPE co. [KHALID, J.] 507

. '

' .=:-~~ r. shwing the amounts :. that ·. the company will have to dole out if the present system is to cmtinue. In respect of 80 monthly A rated workmen the .difference payable will be Rs. 75,000 per l month, which works out to Rs. 9, 00, 000 per year. If this slab L

system is to be introduced for 4000 employees, the liability will be about Rs. 4,50,00,000. Though at the first flush one , would be t .empted to agree .with Mr. Pai, the temptation will 'i disappear when we inform ourselves of the fact that in a B catena of decisions this Court has laid down the industry-cum-region basis . as the acceptable basis while

A~ working out dearness allowance. This is the usual alarmdst cry . ;,., of the employers. Uniformity of wage structure throughout the L

country if accepted will be giving a go-by to the well settled principle of industry-cum-region. This Court has time and C

." again laid down the industry-cum-region principle whenever the question of wage structure arose.

f L , ..

i t l

As an answer to this plea of the respondent, we will only read the following passage from the Judgment in the case of Work.en v. Indian Oxygen Ud. 1 to which one of us was a party. D Desai J. while repelling the plea that in an industrial undertaking which has an all India operationt the unit as a whole should be considered, observed thus :

 .... , 1

.· .. ,

1114. On behalf of the l<armachari Union, it was contended that in devising a dearness allowance E formula, the region-cum-industry principle should ordinarily be accepted. As pointed out earlier dearness allowance generally has a local flavour. A man is exposed to the vagaries of the market where he resides and works, even though he may be an employee of a national, multinational or F transnational industrial empire. The workmen is concerned with the vagaries of price fluctuation in the area in which he resides and works for gain and {. l' •

I. • . r '

1 I ;

......_...~.._ .

to which he is exposed. Therefore, the region-cum-industry principle must inform industrial adjudication in the matter of dearness allowance.

In Woolco-bers of lDdia Lt.d. v.

Woolwmbere Workers lmioo. (1974] l S.C.R. 504,

this Court following ita earlier decision in Creeves Cotton a.od Co. V• Workmen. [1964) 5 S.C, R.

362 held that in devising basic wages and dearness

. H ~------------------~--~~--

allowance structure, industrial adjudication sometimes leans on the industry part of the industry-cum-region formula and at other times, on the region part of the formla as the situation demands.

This well recognised principle of industrial adjudication cannot be given a goby on the specious plea that the workmen are employed by an industrial undertaking which has an ail India operation.

In this case, the Tribunal has overlooked this important principle of industrial,1 adjudication ••••••••••• "

We have extracted the above passage to repel the argumen~ that if the status quo is allowed to continue in this case, there will be demands from other . .; ectors and other factories.

This is only a theoretical appretension with which we are not concerned.

We have repeatedly stated that in this case reference to adjudication was made not at the instance of the workmen, but at the instance of the employer who wanted to bring about a change in the existing system which had satisfactorily worked for 18 years, without producing compelling materials, in support of their claim.

On a careful consideration of the various questions-' involved in this case, we are of the view that the Tribunal erred grossly in its approach to the questions raised and in answering the reference in favour of the employer. We,

therefore, allow the appeal, set aside the award and diret that the existing slab system will continue for the appellant y unit._ The interim order passed on 14.3.1981 is hereby vacated.

The. res-pondent is directed to 'lay the cost of the appellant, quantified at Rs. 5,000. "''

The Construction Employees Union of the respondent-company in.tervened in the case and filed the:!,... written arguments as dlrected by this Court. In the written arguments, the said UniOn supported the appellant's case.

S.R.

Appeal allowed.~