1. The petitioners are a registered firm carrying on business as manufactures of rolling shutters, rolling grills, etc., in Bombay. A dispute between the petitioners and their employees, who are represented by respondents 2, 3 and 4, was referred for adjudication to the industrial tribunal under S. 17 of the Industrial Disputes Act. The tribunal made its award on 6 January 1962. The petitioners have challenged this award in so far as it relates to revision of pay-scales and dearness allowance, the consequential adjustments to be made and the differences to be paid as result of the decision of the tribunal. The award in regard to the demand for gratuity has also been objected to by the petitioner.
2. In so far as the award relates to the pay-scales, the dearness allowance, the adjustments to be made and the differences to be paid, the petitioners have contended that the tribunal has not followed the industry-cum-region principle, that the award of the tribunal in regard to these matters is inconsistent with the findings of the tribunal itself and that though the tribunal has made an observation that the petitioners have the capacity to bear the burden imposed upon them, the tribunal has really not applied its mind and considered the financial capacity of the petitioners to bear the burden of the increases in pay and dearness allowance granted by the tribunal. It seems to us that there is considerable force in these arguments. The principles, which are to be followed in fixing pay-scales, have been laid down by the Supreme Court in Express Newspapers (Private), Ltd., and another v. Union of India, and others : (1961)ILLJ339SC Two of the principles enunciated by the Supreme Court are that in the fixation of rates of wages which include within its compass the fixation of scales of wages also, the capacity of the into consideration, and that the capacity of the industry to pay is to be considered on an industry-cum-region basis after taking a fair cross-section of the industry. At p. 365 the Supreme Court has quoted with approval the observations from a decision of the Labour Appellate Tribunal in Union Drug Company. Ltd., case 1954 - I L.L.J. 766 that the financial condition of the company must be such as to lead to the conclusion that it would be able to pay the increments year by year for an appreciable number of years, for wage-scales when settled are intended to be long-term schemes. In the present case it appears from the award that instances of wages paid in many engineering concerns, which it was stated on behalf of the workers were in several respects comparable to the petitioners' firm, were brought to the notice of the tribunal After referring to this fact the tribunal has observed in Para. 17 :
'I do not think the concerns mentioned in Ex. U. 1 can be considered as comparable in all material respects to this suit.'
3. By this observation the tribunal suggests that in the opinion of the tribunal the wages to be fixed in the present case should be somewhat lower than those given in the other concerns. The same inference is suggested by the following other observation made by the tribunal in the same paragraph :
'The union cannot claim that the basic wages should be as in other comparable concerns which are paying less dearness allowance than this unit.'
4. The scheme for the payment of dearness allowance followed by the petitioners is different from that followed by other concerns. According to this scheme the dearness allowance varies with the cost of living index. For instance, if the cost of living index is 438, the company deducts from it 100 points, which are supposed to be covered by the basic wage, and then divides the remaining figure 338 by 2. The figure arrived at by this division is 169. The workman is then paid 169 per cent of his basic salary as dearness allowance. The dearness allowance at this rate in the case of workers, who are getting Rs. 2 or more per day, is higher than the full textile rate. The full textile rate is paid only in very few of the other comparable concerns. As the petitioners pay a higher rate of dearness allowance, the tribunal was inclined to take the view that the basic wages in the petitioners' concern should be lower than those in the other concerns. This has, however, not been borne in mind, while fixing the pay-scales. We have been supplied with a statement prepared by the petitioners, from which it appears that the effect of the award will be that after a worker has put in about four years' service, he will receive total remuneration, which will be considerably higher than that paid in any of the other comparable concerns. This is party due to the fact that the dearness allowance according to the scheme followed by the petitioners, increases as the worker's pay increases on account of increments given to him. Thus in Jayant Metal Manufacturing Company, in the case of welders blacksmiths and turners, for whom the tribunal has fixed the same scale, the maximum basic pay is Rs. 171.60. According to the award the maximum basic 200. The maximum remuneration, including dearness allowance, which a welders, blacksmith or turner, receives in Jayant Metal Manufacturing company is Rs. 263.60. According to the award such a worker will receive a maximum remuneration of Rs. 538 after 17 years of service. It will therefore be seen that although the tribunal did not intend that the remuneration in the petitioners' firm should be very much higher than that paid in other comparable concerns, the tribunal has actually made an award, according to which the remuneration will be considerable higher than, in some cases almost twice of, what is paid in other comparable concerns. The tribunal does not seem to have attached due weight to the fact that if the scheme of calculating dearness allowance followed by the petitioners is continued, the dearness allowance is likely to increase year by year, as the worker receive his increments. The tribunal does not also appear to have determined the financial effect of the award made by it. It is true that the tribunal has observed that the petitioners have the capacity to bear the burden, which was proposed to be imposed upon them by the award. But apart from this observation in Para. 17 of the award, there is nothing to show that the tribunal had considered the full financial implications of the award made by it, and whether the petitioners were in a position to bear the additional liability cast upon them.
4. Sri Gadkari, who appears on behalf of the respondents, has referred us to the statement in Para. 17 of the tribunal' award that Sri Bhagwat on behalf of the petitioners had made an offer that the petitioners were prepared to give the wages in any of the concerns cited in Ex. U. 1 provided the dearness allowance was not increased and continued to be the same. He has pointed out that the minimum of the wages-scales fixed by the tribunal is in many cases lower than It may, however, be noted that the above observation in regard to the offer made on behalf of the petitioner follows another observation ink the same paragraph that the union could not claim that the basic wages should be as in other comparable concerns, which are paying less dearness allowance than the petitioners. It is followed by the following observation :
'I do not think that the concerns mentioned in Ex. U. 1 can be considered comparable in all material respects to this unit. They do not all belong to the same industry, and some of them have a much larger capital and bigger business organization.'
5. Reading the statement in regard to the offer made by Sri Bhagwat on behalf of the petitioner in this context, it therefore appears that the offer made was that the company was prepared to pay the same total remuneration as was paid in any other concern.
6. It seems to us, therefor, that the tribunal has neither followed the industry-cum-region principle, nor has it fully considered whether the petitioner will be able to bear the burden of both recurring and non-recurring, which the new scales of pay and the dearness allowance will impose upon them. In the circumstances, the award in regard to demands 1, 2, 3 and 4 will have to be set aside and the matter remanded to the tribunal. I may add that we do not find any error of law in the decision of the tribunal in regard to dearness allowance. Dearness allowance is however intimately connected with pay-scales. In order, therefore, that the tribunal may be able to consider the whole matter again and to decide what total remuneration each worker should receive, we think it desirable to set aside the award in regard to dearness allowance also.
7. The other item, in regard to which objection is raised on behalf of the petitioners, is that of gratuity. This has been dealt with by the tribunal in Para. 45 of the award. Beyond stating that the union's demand is much too high, the tribunal has given no reasons for the gratuity scheme framed by it. The tribunal has neither considered the schemes existing in other comparable concerns, nor has it ascertained what the financial liability on the petitioners would be in consequence of the adoption of this scheme In Jardine Henderson, Ltd. v. Their employees : (1961)ILLJ641SC the Supreme Court has held that in awarding the retirement benefit of gratuity the financial position of the employer must be considered and the industrial tribunal must keep in mind whether the burden of the gratuity scheme could be borne by the employer before it proceeds to frame a scheme. This principle does not appear to have been borne in mind by the tribunal.
8. In the result, therefore, we set aside the award respect of demands 1, 2, 3, 4 and 9 and remand the matter to the tribunal. The tribunal should hear both the parties, allow them to lead further evidence and then pass appropriate orders in regard to demands 1, 2, 3, 4 and 9. While fixing the revised scales of pay, and the dearness allowance and the scheme of gratuity, the tribunal should ascertain the additional financial liability, which the petitioners will have to bear, and determine whether the petitioners are in a position to bear the extra burden proposed to be imposed upon them.
9. No order as to costs.