Supreme Court of India

Workmen Of Gujarat Electricity ... vs The Gujarat Electricity Board, Baroda on 19 December, 1968

Equivalent citations: 1970 AIR 87, 1969 SCR (1) 174, AIR 1970 SUPREME COURT 87, 1970 LAB. I. C. 217, 1969 2 SCJ 818, 1969 3 SCR 174, 1969 2 LABLJ 791, 18 FACLR 308, 36 FJR 348, 11 GUJLR 241, 1970 ICR 283

Author:
Vishishtha Bhargava

Bench:
Vishishtha Bhargava
,
J.M. Shelat
,
C.A. Vaidyialingam

PETITIONER:
WORKMEN OF GUJARAT ELECTRICITY BOARD,BARODA

Vs.

RESPONDENT:
THE GUJARAT ELECTRICITY BOARD, BARODA

DATE OF JUDGMENT:
19/12/1968

BENCH:
BHARGAVA, VISHISHTHA
BENCH:
BHARGAVA, VISHISHTHA
SHELAT, J.M.
VAIDYIALINGAM, C.A.

CITATION:
1970 AIR 87 1969 SCR (1) 174
1969 SCC (1) 266

ACT:
Industrial dispute-Capacity of employer to pay increased
remuneration relevant if demands for more than minimum
wages--Comparisons with remuneration paid by other
employers-When relevant-Public sector undertaking to produce
and supply electricity and prepare and evecute development
schemes for supply to new areas-If profits to be calculated
taking account of all its activities or only commercial
activities.

HEADNOTE:
Over 9,000 employees of the Respondent Board, represented by
seven Unions, demanded an increase in the dearness allowance
payable to them, the payment of gratuity to some employees,
and the calculation of pension payable to other employees
after adding 50% of the dearness allowance. Six of the
Unions representing the employees amicably settled the
disputes with the Board which granted increases in dearness
allowance on the other demands being given up. The seventh
Union declined to accept the settlement and the dispute was
eventually referred for adjudication by the Industrial
Tribunal. Before the Tribunal took up the reference, all
except 466 of the employees individually accepted the
settlement.
At the hearing of the reference it was contended by the
remaining employees through the seventh Union that the total
wage packet including the dearness allowance claimed by them
would only satisfy the requirement of a minimum wage and the
Board's capacity to pay the increases demanded was,
therefore, irrelevant; furthermore, although the Board was
an industry in the public sector, it must also be made to
pay wages on the same basis as private sector employers; two
electric supply companies in ",the area were paving wages
which were much higher and there was no justification for
refusing the demand for additional dearness allowance which
would place the employees of the Board on par with the
,employees of those companies.
The Tribunal in its award rejected all the workmen's
demands. It found that the demand for increased dearness
allowance was not confined to achieving a minimum wage but
as a result of its acceptance the wages would be above the
minimum wage. The Tribunal also found that the Board having
inherited an accumulated deficit of over Rs. 2 crores from
its predecessor, the Bombay State Electricity Board, having
sustained heavy losses in its working and having undertaken
a further liability to pay increased dearness allowance, it
had no capacity to undertake the further burden of paying
about Rs. 49 lakhs per year as increased dearness allowance
or to meet the other demands. The Tribunal held that the
position in the other two electric supply companies was not
comparable 'with the Board.
In appeal to this Court against the award it was contended
inter alia, that the Tribunal was wrong in judging the
capacity of the Board after taking into account the deficit
of Rs. 2 crores which it had inherited from its predecessor;
and that the financial capacity of the Board should 174
have been judged only on the basis of its commercial
undertaking excluding the activities of the Board which were
in the nature of national duties.
HELD : The Tribunal had rightly rejected the demands of the
appellants.
(i) As the appellants had failed to show that they would
not be receiving the minimum wage with their basic pay and
the increased dearness allowance offered by the Board, the
financial capacity of the Board for acceding to the demands
made became a relevant consideration.
Hindustan Antibiotics Ltd. v. The Workmen & Others, [1967] 1
S.C.R. 652 and The Hindustan Times Ltd. v. Their Workmen,
[1964] 1 S.C.R. 234 referred to.
Although the deficit inherited by the Board from its
predecessor could not be treated as -a revenue loss for
determining the Board's financial capacity and was in the
nature of a capital loss, even this loss could not be
completely ignored. Apart from this, it was clear 'On the
facts that during three years after its formation the Board-
had incurred heavy losses of about Rs. 110 lakhs and it did
not, therefore, have the capacity of bearing the additional
financial burden involved in meeting the appellants'
demands. [179 D-F; 180 E]
(ii) When the Board was constituted under the
Electricity
(Supply) Act
No. 54 of 1948 and was, by its constitution,
charged with the general duty of promoting the coordinated
development of the generation, supply and distribution of
electricity within the State, its capacity to bear the
burden of paying wages to its employees had to be worked out
after taking into account all the activities which the
statute required it to carry on. The running of power
houses was only one of the branches of those activities.
The profit that the Board earned could only be worked out
after including in the accounts all the expenditure incurred
by it on all its development and other schemes for
distribution of electricity to consumers in urban and rural
areas. [181 B-D]
While an industry in the public sector was not exempt from
application of principles which apply to an industry in the
private sector and the respondent board must also be made to
pay wages on the same basis as private sector employers the
additional burden in either sector for paying anything above
a minimum wage can only be justifiably imposed in industrial
adjudication if the employer bad the capacity to meet that
burden. [181 E-F]
The Tribunal had rightly held that neither of the other two
electric companies were comparable with the Board. These
two companies merely carried on the activity of direct
supply of electricity to consumers in the towns and cities
whereas the functions of the Board included the development
and execution of schemes for supply of electricity to new
areas.
Williamsons (India) Private Ltd. v. Its Workmen [1962] 1
L.L.J. 302, referred to.

JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2431 of 1966.
Appeal by special leave from the Award of the Industrial
Tribunal, Gujarat in Reference (IT) NO. 88 of 1962.
A. S. R. Chari, M. K. Ramamurthi, Shyamala Pappu, Vineet
Kumar, P. S. Khera and Bindra Thakur, for the appellants.
I. N. Shroff, for the respondent.

The Judgment of the Court was delivered by
Bhargava, J. This appeal, by special leave, is directed
against an Award of the Industrial Tribunal, Gujarat, in an
industrial dispute referred to it by the Government of
Gujarat at the instance of the appellants who are 466
workmen of the Gujarat Electricity Board, Baroda
(hereinafter referred to as "the Board") represented by the
Saurashtra Vidyut Kamdar Sangh (hereinafter referred to as
"the Sangh"). The dispute referred to related to two
matters. One was the demand made in respect of rates of
dearness allowance to be paid to the workmen. The second
demand was that those of the workmen, to whom Contributory
Provident Fund or Employees Provident Fund scheme was appli-
cable, should be granted gratuity equal to 15 days wages for
every year of service in addition to the provident fund
benefits, while those workmen, who were entitled to pension
according to the pensionary scheme in force, should have
their pension calculated after adding 50 per cent of the
dearness allowance to the basic pay.

The facts needed to explain the second demand may first be
stated. The supply of electricity in the State of
Saurashtra, prior to the year 1954, was being carried out
departmentally by the Government of Saurashtra and the
workmen employed in the power houses were, consequently,
Government servants. On 1st July, 1954, a Saurashtra
Electricity Board was constituted to run the power houses
and the employees of the Electricity Department of the
Government were sent to work with the Saurashtra Electricity
Board on deputation. On 1st November, 1956, Saurashtra
became a part of the Bombay State, hereafter the Saurashtra
Electricity Board was dissolved with effect from 1st April,
1957 and its assets, liabilities, and employees were taken
over by the Bombay State Electricity Board. The employees,
who were originally in the service of the Saurashtra State
Government were entitled to the pensionary scheme of the
Saurashtra Government, while the Bombay State Electricity
Board had a Provident Fund Scheme. The Saurashtra State
Government servants, on being taken over by the Bombay State
Electricity Board, were given the option of either
continuing in their pensionary scheme, or of joining the
Provident Fund Scheme of the Bombay State Electricity Board
in which case the gratuity already accrued to them and the
equivalent of pensionary benefits were credited to their
accounts. Some of the employees opted for the Provident
Fund Scheme, while others continued under the pensionary
scheme. Thereafter, on 1st May, '1960, the State of Bombay
was bifurcated and a separate State of Gujarat was
constituted; and, with effect from the same date, the Board
came into existence. The Board ;took over all the
electricity, power-houses ,and electricity schemes in the
State of Gujarat from the Bombay State Electricity Board,
including the workmen who are the appellants in this

-appeal. The assets and liabilities of the Bombay State
Electricity Board were divided between the Board, and the
Maharashtra Electricity Board which was constituted for the
State of Maharashtra which came into existence on
bifurcation of the Bombay State. The Board continued both
the Pensionary Scheme as well as the Provident Fund Scheme
for the employees in the manner they were in force when the
employees were working under the Bombay State Electricity
Board. The employees, who were originally servants of the
State Government, had ceased to be government servants with
effect from 1st April, 1957 and later on 1st May 1960,
became the employees of the Board, so that they were no
longer entitled to the rights which the State Government
might subsequently grant in respect of pension under the
rules applicable to the government servants. The result was
that even improvements granted in the pensionary scheme by
the State Government to its employees did not enure to the
benefit of the appellants. In these circumstances, the
Sangh put forward the claim that the pension of employees,
who were governed by the pensionary scheme, should be
calculated not on the basis of basic salary, but after
adding 50 per cent of the dearness allowance to it. In
respect of employees, who were governed by the Provident
Fund Scheme, a second benefit of gratuity was claimed.
The demand for dearness allowance was that it should be
linked with the scale prescribed for the Ahmedabad
Millowners' Association. The workmen demanded that
employees, drawing up to Rs. 50 as basic pay, should be
given dearness allowance at the scale applicable to
Ahmedabad Millowners' Association, those drawing between Rs.
50 to Rs. 100, D.A. at that scale plus Rs. 5, and those
drawing above Rs. 100, dearness allowance at that scale plus
Rs. 10. This demand was put forward before the Board
originally on behalf of all the 9,208 employees of Class III
and Class TV and some employees of Class I and Class II
whose salary was below Rs. 300 per mensem, who were working
either in the Gujarat Region or the Saurashtra Region.
These employees were represented by seven different Unions,
one of which was the Sangh who represented about 3,000
employees working in the Saurashtra region. The six Unions
representing the employees working in the Gujarat region
amicably settled these disputes with the Board by entering
into agreements. The
17 8
Board gave some increase in dearness allowance
retrospectively with effect from 1st October, 1961, while
the second demand relating to gratuity and calculation of
pension after adding 50 per cent of the dearness allowance
was given up. The Sangh declined to accept this settlement,
whereupon the Board offered terms in accordance with the
settlement to all the employees in the Saurashtra region
individually. Out of the total of 3,042 in the Saurashtra
region, 622 signed General Standing Order 56, under which
the Board had made its offer to individual employees ,on the
basis of the settlements arrived at before the reference to
conciliation. 1152 signed before the date of the failure
report by the Conciliation Officer; 2058 signed before the
reference and 518 signed after the reference. Thus, the
dispute, after the reference, became confined to the
remaining 466 employees who did not, on individual basis,
accept the offer made by the Board.
The Tribunal considered
this dispute relating to the dearness allowance raised by
these employees through the Sangh as also the other demand
relating to gratuity and calculation of pension, and, by the
impugned Award, rejected these demands. Consequently, the
workmen have come up in this appeal through the Sangh.
The main ground for rejecting these demands, on which the
Award is based, is that the Board does not have the capacity
to meet the additional expenditure that would have to be
incurred if these demands are acceded to Before the
Tribunal, this aspect of the case was sought to be met by
the Sangh by urging that the total wage packet, including
the dearness allowance claimed by them in the demand, would
only satisfy the requirement of a minimum wage, so that the
Board's capacity to pay was irrelevant; but the award shows
that- the Sangh completely failed to provide any material to
prove that the total wages, including the dearness allowance
as offered by the Board on the basis of the settlements, are
less than the minimum wage. This Court, in
Hindustan
Antibiotics Ltd. v. The Workmen & Others
(1), recognised the
three concepts of minimum wage, fair wage, and living wage
by quoting the following passage from the decision in
The
Hindustan Times Ltd. v. Their Workmen
(2), and stating that
it briefly and neatly defined the three concepts :

"In trying to keep true to the two points of social
philosophy and economic necessities which vie for
consideration, industrial adjudication has set to itself
certain standards in the matter of wage fixation. At the
bottom of the ladder, there is the minimum basic
(1) [1957] 1 S.C.R. 652.

(2) [1964] 1 S.C.R. 234.
wage which the employer of any industrial
labour must pay in order to be allowed to
continue an industry. Above this is the fair
wage, which may roughly be said to approximate
to the need based minimum, in the sense of a
wage which is "adequate to cover the normal
needs of the average employee regarded as a
human being in a civilised society". Above
the fair wage is the "living wage"-a wage
'which will maintain the workman in the
highest state of industrial efficiency, which
will enable him to provide his family with all
the material things which are needed for their
health and physical well-being, enough to
enable him to qualify to discharge his duties
as a citizen."

These decisions make it clear that, if the claim be for a
minimum wage, the employer must pay that wage in order to be
allowed to continue the industry; and, in such a case, the
capacity of the industry to pay is irrelevant. However, if
the industry is already paying the minimum wage, and the
claim is for fair wage or living wage, the capacity of the
industry to pay is a very important factor, and the burden
above the minimum wage can only be justifiably imposed if
the industry is capable of meeting that extra burden. On
this principle, in the present case, if the appellants had
succeeded in showing that they were not receiving even the
minimum wage on the basis of the offer made by the Board in
line with the settlements arrived at with the other Unions-
and individual workmen members of the Sangh, there would
have been full justification for granting additional
dearness allowance, ignoring the inability of the Board to
meet that extra expenditure. The finding of the Tribunal,
however, is that the demand of the workmen is not confined
to minimum wage, but that, as a result of the demand, the
wages will be above the minimum wage. Learned counsel
appearing for the appellants before us did not try to
contend that the wages which were being paid by the Board,
were lower than the minimum wage, so that the claim for the
additional dearness allowance cannot be considered without
taking into account the capacity of the Board to meet the
expenditure.

So far as the question of capacity of the board to pay is
concerned, there is a clear finding by the Tribunal that the
Board is running at heavy losses, so that it is not in a
position to meet the extra expenditure of about Rs. 49 lakhs
a year which will be involved if the dearness allowance is
fixed as claimed by the Sangh. The Tribunal has found that
the Board, when constituted on 1st May, 1960, inherited an
accumulated deficit 'of over Rs. 2 crores from the Bombay
State Electricity Board. In its own working, the Board
sustained a loss of over Rs. 29 lakhs between 1st May, 1960
and 31st March, 1961, and in
the two succeeding years 1961-62 and 1962-63, the losses in-
curred were in the region of Rs. 39 lakhs and Rs. 41 lakhs.
The Tribunal, thus, held that the total loss was to the tune
of Rs. 31 millions; and since the Board had undertaken a
further liability of over Rs. 6.75 lakhs a year under the
settlements and the offer to individual workmen, it could
not possibly undertake the further burden of paying about
Rs. 49 lakhs per year as increased dearness allowance. The
Tribunal was also of the opinion that, considering this
financial condition of the Board, there was no justification
for introducing a gratuity scheme for workmen governed by
the Provident Fund Rules, nor was there any justification
for calculation of pension on the basis of adding 50 per
cent of the dearness allowance to the basic pay. Mr. Chari,
counsel for the appellants, challenged this decision of the
Tribunal on two grounds. The first ground was that the
Tribunal was wrong in judging the capacity of the Board to
pay after taking into account the deficit of over Rs. 2
crores which it had inherited from the Bombay State
Electricity Board; and the second ground was that the
financial capacity of the Board should be judged only on the
basis of its commercial undertakings, excluding the
activities of the Board which were in the nature of national
duties.

So far as the first point is concerned, we think that there
is some force in the submission made by learned counsel.
The deficit inherited by the Board from its predecessor
cannot be treated as are venue loss which will have bearing
on its paying capacity. Such inherited deficit should
really have been treated as capital loss; but even this loss
cannot be completely ignored, because the paying capacity of
an employer has to take into account even capital losses.
However, even if this accumulated deficit- of over Rs. 2
crores is ignored, it is clear that, during the three years
after its formation, the Board itself incurred heavy losses
which totaled to about Rs. 110 lakhs. Consequently, even
if that accumulated deficit is not taken into account, it
cannot be held that the Board will have the capacity of
bearing the additional financial burden to the tune of Rs.
49 lakhs a year, if required to pay dearness allowance at
the rates claimed by the Sangh.

On the second point, we are unable to accept the submission
made by learned counsel. The Board was constituted under
the
Electricity (Supply) Act
No. 54 of 1948, and
section 18

of that Act lays down the duties of the Board. By its very
constitution, the Board is charged with the general duty of
promoting the coordinated development of the generation,
supply and distribution of electricity within the State in
the most efficient and economical manner, with particular
reference to such develop-
ment in areas not for the time being served or adequately
served by any licensee. In particular, the duty of the
Board is to prepare and carry out schemes with the objects
mentioned above; to supply electricity to owners of
controlled stations and to licensees whose stations are
closed down under this Act; and to supply electricity as
soon as practicable to any other licensees or persons
requiring such supply and whom the Board may be competent
under this Act so to supply. When the Board was constituted
to carry out these duties, its capacity to bear the burden
of paying wages to its employees has to be worked out after
taking into account all the activities which the Statute
requires it to carry on. The running of Power Houses is
only one of the branch of those activities. The profit that
the Board can be held to have earned can only be worked out
after including in the accounts all the expenditure incurred
by it on all its schemes for distribution of electricity to
licensees or to consumers, whether in urban areas or in
rural areas. In fact, there is not even an assertion on
behalf of the appellants-workmen that they were employed
solely in connection with a profitable undertaking of the
Board and had nothing to do at all with the other activities
which the Board is actually carrying on. No doubt, learned
counsel is right in urging on the basis of the decision of
this Court in Hindustan Antibiotics Ltd() that the
circumstance that the Board is an industry in the public
sector does not exempt it from application of principles
which apply to an industry in private sector, and the Board
must also be made to pay wages on the same basis as Private
sector employers. This, however, does not advance the case
of the appellants, because, even in a private sector,
additional burden over and above a minimum wage can only be
justifiably imposed in industrial adjudication, if the
employer has the capacity to meet that burden. In this
case, the Tribunal has refused to grant the demand of the
appellants not on the ground that the Board is an industry
in public sector, but on the ground that it does not have
the capacity to pay. That capacity has rightly been judged
on the basis of all the undertakings being worked by the
Board.

The Tribunal, after holding that there was no justification
for granting the demands of the workmen because the Board
had no capacity to bear the additional burden, proceeded
further to examine whether the Board's existing scheme of
payment of dearness allowance was reasonable and took into
account various factors for arriving at its finding that it
could not be held that the terms offered by the Board were
unreasonable. In this connection, reliance was placed on
behalf of the appellants on the fact that two Electric
Supply Companies were paying wages which
(1) [1967]1 S.C.R.652.
were much higher than the wages being paid by the Board, and
there was no justification for refusing the demand for
additional dearness allowance which would place the
employees of the Board on par with the employees of those
Electric Supply Companies. One of those Electric Supply
Companies is the Ahmedabad Electricity Co. Ltd., Ahmedabad,
in whose case wages were fixed by an Award published in 1956
Industrial Court Reporter at p. 746. The other is the
Viramgam Electric Supply Co. Ltd., Viramgam, the Award
relating to which is published in 1968 Industrial Court
Reporter at p. 1010. The argument was that wages paid by
the Board should not be lower than those paid by these two
Electric Supply Companies which were engaged in the same
line of business of production and supply of electricity.
The Tribunal brushed aside these example by stating that
they were not comparable with the Board. In taking this
view, we do not think that the Tribunal committed an error.

In
Williamsons (India) Private Ltd. v. Its Workmen
(1), this
Court clearly laid down what criteria had been established
for considering what are comparable concerns when dealing
with a question of wage fixation. It was held :-

"This Court has repeatedly observed that, in
considering the question about comparable
concerns, tribunals should bear in mind all
the relevant facts in relation to the problem.
The extent of the business carried by the
concerns, the capital invested by them, the
profits made by them, the nature of the
business carried on by them, their standing,
the strength of their labour force, the
presence or absence and the extent of reser-
ves, the dividends declared by them and the
prospects about the future of their business-
these and all other relevant facts have to be
borne in mind."

In the present case, it is clear that, if these various
factors are taken into account, neither the Ahmedabad
Electricity Co. Ltd., nor the Viramgam Electric Supply Co.,
can be held to be a concern comparable with the Board. As
we have indicated earlier, the activities carried on by the
Board are not only production of electricity and direct
distribution in some areas, but also include preparation of
schemes for development of supply of electricity in areas
not served so far and for supply of electricity to licen-
sees. The two concerns at Ahmedabad and Viramgam merely
generate and supply electricity to consumers in the cities
or towns served by them. The Board, according to the Act
constituting it, has primarily to supply electricity to
licensees, and not confine its supply to direct consumers
like these two concerns. The
(1) [1962] 1 L.L.J.302.
supply to consumers is only undertaken where there are no
licensees to undertake the distribution of electricity
generated by the Board, and this activity of direct supply
to consumers is primarily carried on in rural areas where
the population is sparsely distributed as compared to the
cities or towns served by the other two concerns. Then,
there is the important factor that the Board is running at a
huge loss every year. The workmen did not provide figures
to show what was the profitability of the other two
concerns, though the Awards in their cases seem to indicate
that both of them are running at a profit. In these
circumstances, we cannot hold that the Tribunal committed
any error in ignoring the wages being paid by these two
concerns, when dealing with the question of payment of
dearness allowance by the Board. In this connection, a
request was made by learned counsel that we may remand the
case to the Tribunal in order to enable the Sangh to produce
evidence to the satisfaction of the Tribunal that these two
concerns are comparable, or to cite examples of other
undertakings in the same industry in the Saurashtra region,
or, it there be no such undertakings available, of
undertakings in other industries in the Saurashtra region so
as to enable the Saingh to claim wages on parity with those
undertakings. We do not think that there is any
justification for remanding the case for such a purpose at
this stage. It was open to the Sangh to produce material
before the Tribunal when the dispute was first investigated
by it, and no reason is shown why the Sangh did not do so.
Further, as we have indicated earlier, the very circumstance
that the Board does not have the financial capacity to meet
the additional burden of the demands made by the workmen
justifies the order made by the Tribunal. The further
request that the remand would enable the Sangh to show
whether the losses brought to the notice of the Tribunal by
the Board were, in fact, net losses has also no force, be-
cause, when the losses were proved before the Tribunal by
production of an affidavit on behalf of the Board and the
deponent appeared in the witness-box, no attempt was made on
behalf of the Sangh to cross-examine the deponent in order
to establish that the losses had not been correctly
represented. We do not think that, in these circumstances,
any remand of this case is called for. It does appear that
the Tribunal in its award committed the error of comparing
the Board with the Maharashtra Electricity Board and similar
Electricity Boards in other States and thus acted against
the principle that wages should be compared on industry-cum-
region basis; but that mistake does not justify any
interference with the award which is otherwise correct and
justified. The Tribunal was quite right in rejecting the
demands made by the Sangh, particularly in the light of the
further fact relied upon by the Tribunal that all the
employees of
the Board in the Gujarat Region as well as large majority of
over 2500 employees even in the Saurashtra Region had
accepted the existing rates based on the settlement and only
466 employees had come forward with this demand without
establishing that the demand wag restricted to bringing up
their wages to the level of minimum wages.

The appeal is dismissed, but we make no order as to costs.
R.K.P.S. Appeal dismissed.