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Anil Starch Products Ltd. Vs. Industrial Court, Gujarat and ors. - Court Judgment

LegalCrystal Citation
SubjectLabour and Industrial
CourtGujarat High Court
Decided On
Case NumberSpecial Civil Application No. 591 of 1964
Judge
Reported in(1965)GLR682; (1965)IILLJ441Guj
ActsIndustrial Disputes Act, 1947 - Sections 10(1)
AppellantAnil Starch Products Ltd.
Respondentindustrial Court, Gujarat and ors.
Cases ReferredLtd. v. Its
Excerpt:
labour and industrial - dearness allowance - section 10 (1) of industrial disputes act, 1947 - whether increase in dearness allowance from 90% to 95% justified - tribunal did not take into consideration total wage-packet earned by operatives in two classes of concerns - graded wage-scales did not exist in units sought to be compared by tribunal with petitioner-company - units compared with appellant-companies were not comparable units - matter remitted for reconsideration. - - it may be observed, however, that though these factories suffer from the handicap of shortage of raw materials, the import of starch being prohibited, these factories enjoy monopolistic protection as there is no competition from any outside agency, beside the advantage of nearly seventy, seven per cent of the.....shelat, c.j.1. by an order dated september 19, 1962 the government of gujarat referred to the industrial tribunal certain disputes between the petitioner company and its workmen under s. 10(1)(d) of the industrial disputes act, 1947. these disputes related to classification, redesignation and payment of wage- scales, increments according to the respective categories, abolition of the category of the daily-rated workmen, and dearness allowance. the wage-scales were fixed by an award in reference (i.t.) nos. 266 and 395 of 1958. though there was no demand in the present reference for the revision of wage-scales the demand was for reclassification of certain categories. 2. though there were thus several demands, all of which were referred to the tribunal, the tribunal gave its award only in.....
Judgment:

Shelat, C.J.

1. By an order dated September 19, 1962 the Government of Gujarat referred to the industrial tribunal certain disputes between the petitioner company and its workmen under S. 10(1)(d) of the Industrial Disputes Act, 1947. These disputes related to classification, redesignation and payment of wage- scales, increments according to the respective categories, abolition of the category of the daily-rated workmen, and dearness allowance. The wage-scales were fixed by an award in Reference (I.T.) Nos. 266 and 395 of 1958. Though there was no demand in the present reference for the revision of wage-scales the demand was for reclassification of certain categories.

2. Though there were thus several demands, all of which were referred to the tribunal, the tribunal gave its award only in respect of one of them, namely on demand 2. The tribunal decided to give its award on the rest of the demands at a later date although it had heard the parties on all of the and had also inspected the works. The tribunal felt that it would not be possible to give its award expeditiously on all the demands at one time, and since it felt that the reference was a fairly old one it decided to give its award separately on one of them, namely, demand 2 in respect of the dearness allowance. The tribunal felt that it could do so separately for demand 2 as there was no demand for revision of wage-scales and the demand for the revision of dearness allowance depended on the existing wage-scales as fixed by the award in the aforesaid Reference Nos. 266 and 395 of 1958.

3. Demand 2 was that 'all the workmen who are monthly rated should be paid full dearness allowance which is payable to the textile workmen at Ahmedabad.'

4. In order to appreciate this demand, it is necessary to relate a few facts. The petitioner-company was started in 1939 with a paid-up capital of rupees ten lakhs, consisting of five thousand ordinary shares of rupees one hundred each and five thousand shares of rupees one hundred each fully paid-up. The business of the company consisted of the productions of starch, an important industrial raw material extensively in use in textile and certain other industries. However, owing to the growing shortage of food in the country, the company suffered to a certain extent from the handicap of shortage of food in the country, materials, such as maize, and had in the past to suspend production for certain periods. This difficulty in fact was recognized in a survey by the Government of India Planning Commission called 'The Progress of Industrial Development, 1961 to 1966,' in which at P. 466 it was stated that

'difficulties were being experienced by the starch industry in procuring adequate quantities of its raw material, namely, maize, owing to the food shortage in the country. The use of indigenous maize is not allowed for the production of starch. The industry has, therefore, to depend entirely on the imports of maize for which arrangements are made from the United States of America under PL-480. Due to the limited availability of maize, the industry had been working fairly below its installed capacity.'

5. For this and certain other reasons, the petitioner-company developed other side lines, namely, a chemical division. According to 'The Programmes of Industrial Development, 1961 to 1966, ' another publication of the Planning Commission, the position at the end of the Second Plan was that there were in all only seven starch factories in India with a total annual installed capacity of 148,000 tons. Out of these seven factories two factories are situate in Ahmedabad, the petitioner-company and the maize products, and their respective annual capacities are 60,000 and 54,000 tons. Between these two undertakings, there is thus nearly seventy-seven per cent of the total capacity of 148,000 tons. It may be observed, however, that though these factories suffer from the handicap of shortage of raw materials, the import of starch being prohibited, these factories enjoy monopolistic protection as there is no competition from any outside agency, beside the advantage of nearly seventy, seven per cent of the installed capacity being concentrated between them. There is also another advantage enjoyed by these two concerns. According to Para. 10 of the affidavit in reply, whereas the textile industry has to face heavy competition and the labour cost therein works out at 22 to 24 per cent of the total cost, the labour cost in the petitioner-company works out only at about 8 per cent of the total cost.

6. Since 1949, the petitioner-company has been paying to its workmen dearness allowance at the rate of 90 per cent of the dearness allowance paid to the workmen in the cotton textile mills at Ahmedabad. A demand for a revision of dearness allowance on par with the cotton textile workers was made in Reference (I.T.) No. 26 of 1954, but that demand was negatived by the tribunal by its award dated July 19, 1954. The demand for revision of wage-scales and dearness allowance was repeated in Reference Nos. 266 of 1958. The tribunal negatived the demand for the revision of dearness allowance on the ground that as it had awarded an increase in the wage-scales in Reference No. 266 of 1958, an increase in the dearness allowance was not at the same time warranted. The increase there made in the wage-scales inter alia consisted in raising the minimum wages from Rs. 26 to Rs. 28 per month. It is, however, a fact that the petitioner company is at present paying dearness allowance at different rates to the different categories of its employees. Dearness allowance equivalent to that paid to the cotton textile workers is being paid to its clerks, supervisors and the rest of the staff, while to the factory operatives 90 per cent of the textile dearness allowance is paid. According to the respondent-unions 2 and 3, the fact that this discrimination is made between the different categories of employees has been a cause of dissatisfaction amongst the operatives. Such a discrimination however, has been known in several cases and the dearness allowance paid to the clerical staff has been on par with that paid in other industries in the same region, though dissimilar to the concern in question. It is also a fact that the chemical division of the calico Mills, Ltd., Ahmedabad, has been paying to its factory workmen dearness allowance at the textile rate ever since 1953, although it has paid to them Rs. 10 per month as an additional wages since January, 1960. The fact has some bearing with the present dispute as the tribunal, while increasing the rate of dearness allowance in the present case, has sought to compare the chemical division of the Calico Mills with the petitioner-company.

7. According to the tribunal, the petitioner-company at present employs 650 persons. The dearness allowance received by the cotton textile workers in 1963 came to Rs. 85.17. At the rate of 90 per cent of the dearness allowances paid to the textile workers, the operatives in the petitioner company would be receiving Rs. 76.65. The discrepancy between the two, therefore comes to Rs. 8.52 per month. The increase from 90 per cent to 100 per cent would therefore, mean 650 x 8.52, i.e., Rs. 5,538 per month and Rs. 66,456 per year plus Rs. 5,482.12, that being the extra provident fund that would be payable by the company if the increase in the rate of dearness allowance was allowed. In all therefore the total liability of the petitioner-company per year would increase by Rs. 71,932.62. The tribunal also noted that owing to the recent revision adopted by the Government in the matter of computing the cost of living index, the dearness allowance payable to the textile workers would go up and consequently there would be an increase of Rs. 7.02 per month in the dearness allowance payable by the petitioner-company to its workmen even at the present rate of 90 per cent. This revision has, according to the tribunal. Entitled an extra burden of Rs. 59,000 a year] and if the dearness allowance were to be brought on par with that payable to the textile workers, there would be a further incidence of Rs. 6,585 per mouth. It was for this reason that the tribunal considered that the increase in the rate of dearness first instance from 90 per cent to 95 per cent and not 100 per cent to 95 per cent dearness allowance payable as from June 1963 and on wards.

8. Leaving aside the technical contentions raised by the petitioner company, the tribunal came to the conclusion that the petitioner company had in recent years made considerable leeway and was in such sound financial position that without affecting its financial soundness, it would be possible for the company to bear the extra burden as a result of the revision of dearness allowance from 90 to 95 per cent. The paid-up capital of the company which was only Rs. 10,00,000 in 1941 increased to Rs. 34,00,000 when the tribunal gave its award in Reference Nos. 266 and 395 of 1958 and stood at Rs. 44,84,000 in 1962. The company has also been able to build up a general reserve fund of Rs. 13,00,000, the development and rehabilitation reserve of Rs. 19,00,000 and odd, the statutory development rebate reserve fund of Rs. 14,00,000 and add and the depreciation fund of Rs. 81,00,000 and odd, the total reserve funds thus aggregating Rs. 128.85 lakhs. The total sales also have gone up from Rs. 1,91,17,135 in 1957 to Rs. 3,27,73,639 in 1962. The gross profits have also risen from Rs. 16,53,542 in 1957 to Rs. 40,35,508 in 1961 and the net profits from Rs. 7,89,953 in 1957 to Rs. 14,32,516 in 1962. The managing agent's remuneration also has increased from Rs. 58,325 in 1956 to Rs. 3,72,240 in 1962. There can, therefore, be no doubt that there has been a considerable change and improvement in the financial structure and condition of the company since the awards were made in 1954 and 1960 when, presumably on a consideration of the circumstances then existing, the tribunal on both the occasions declined to award an increase in the dearness allowance. This change is clearly reflected in the fact that on a subscribed capital of Rs. 44 lakhs and odd, the petitioner-company in 1962 made a gross profit of Rs. 46.88 lakhs and a net profit of Rs. 14.32 lakhs. This fact clearly shows that the petitioner-company has not only stabilized itself, but has also prospered well so that it is undoubtedly in a position to bear the additional burden of an increase in the dearness allowance. That fact was not disputed before the tribunal and has not been disputed before us.

9. In the city of Ahmedabad, the textile industry is undoubtedly the main and dominant industry and though several other industrial undertakings exist, they are of a comparatively less significance in respect of their volume and capacity of production and the number of employees working in them. The textile operatives are being paid dearness allowance on a scale known as the textile scale, and on the basis of the minimum wage of Rs. 28 per month, the dearness allowance paid to the textile operatives completely neutralizes the rise in the cost of living. In the city of Bombay too, the position is practically the same, for the minimum wage payable to textile operatives there is Rs. 30 a month and the scale of the dearness allowance there neutralizes the rise in the cost of living to the extent of about 99 per cent. As stated by the tribunal a large number of engineering, pharmaceutical chemical and other industrial concerns in Bombay pay to their operatives dearness allowance at the same rate as the textile operatives, provided, of course, the concern has the capacity to pay. That being so, the position is,

(a) that the textile operatives in Bombay and Ahmedabad are paid dearness allowance at a rate which neutralizes the rise in the cost of living to the extent of 99 per cent and 100 per cent respectively,

(b) the non-textile undertakings in Bombay pay dearness allowance on par with the textile rate of dearness allowance, and

(c) the chemical division of the Calico Mills, Ahmedabad, has been paying its operatives at the same rate as the textile operatives in this city since about the year 1953.

10. The question arising in this petition is whether there is justification in increasing the rate of dearness allowance from 90 per the cent to 95 per cent as has been done by the award under discussion. In substance, the complaint of the petitioner-company is not that its financial position is not sound, but that owing to the fact that its only competition in the field of production of starch, the Maize Products, is paying dearness allowance at 85 per cent, any increase in the rate of dearness allowance payable by the petitioner company would unbalance the production struggle between them and give an undue advantage to its only rival.

11. On behalf of the petitioner-company, the award under discussion was assailed on the following grounds :

(1) that the tribunal ought to have declines to reopen the previous awards of 1954 and 1960 on the ground that principles analogous to rest judicata applied in the present case;

(2) that granting 95 per cent of the textile rate would mean cent per cent or near cent per cent neutralization of the rise in the cost of living from the pre-war level, and that was opposed to the well-recognized principles in the grant of dearness allowance;

(3) that the principle of industry-cum-region, accepted by the Supreme Court in several decisions as the correct formula applying to both the wage-scales as also dearness allowance, has been departed from;

(4) that even if the region part of the formula of industry-cum-region were to be stressed, as the tribunal has purported to do, a comparison in the circumstances of the case ought to have been made with nontextile industries in Ahmedabad and near about cities like Baroda;

(5) that while making the award, the tribunal relied on certain facts and figures, produced by the respondent-unions relating to the only comparable unit, namely, the Maize Products, which facts and figures were never proved, although they were seriously disputed by the petitioner-company;

(6) that the tribunal erred in disregarding certain evidence led by the petitioner company;

(7) that while granting the increase in the rate of dearness allowance, the total wage packet of the workers in the petitioner company and in the textile factories and the chemical division of the Calico Mills, Ltd., were not taken into consideration and lastly

(8) that the additional burden which would be imposed on the petitioner-company if the first demand for re-classification and upgrading were to be allowed, was not taken into consideration.

12. Sri Nanavati, however, did not press contentions (1), (2), (6) and (8) and therefore, we will confine our consideration to the remainder of the contentions, namely, contentions (3), (4), (5) and (7).

13. As regards the application of the formula of industry-cum-region, we think it is better to ascertain first the content of that formula and see if that formula has been departed from by the tribunal and, if so, whether it was validly departed. In Express Newspapers, Ltd. v. Union of India [1961 - I L.L.J. 339], the Supreme Court approved the principle of industry-cum-region while fixing the rates of wages and the scales of wages as suggested by the report of the Committee on Fair Wages (1947 to 1949). The Supreme Court observed that as a principle the capacity of the industry to pay was one of the essential circumstances to be taken into consideration, except in cases of bare subsistence or minimum wage where the employer was bound to pay the same irrespective of such capacity and further that the capacity of the industry to pay was to be considered on an industry-cum- region basis after taking a fair cross-section of the industry. That principle was re-stated in the case of Hindustan Motors [1962 - II L.L.J. 352], where at p. 355 the Supreme Court stated that it would be ordinarily desirable to have as much uniformity as possible in the wage-scales of different concerns of the same industry working in the same region. It might not always be possible to attain that objective because of the different financial capacities of the different concerns. Where, however no such obstacle was present, industrial adjudication always tried to secure the same wage rates for the different concerns in the same industry in the same region. On the one hand that tended towards the maintenance of industrial peace of the entire region, and on the other; put the different concerns more or less on equal footing in their production struggle. The basis of the principle, therefore, is the maintenance of industrial peace in the region on the one hand and equalizing more or less the different concerns in the same industry in the same region in their production struggle. The principle that industry-cum-region formula applied equally to both the fixation of wage-scales as also to dearness allowance was laid down in the case of French Motor Car Company, Ltd. [1962 - II L.L.J. 744]. In that case, the question related to

(1) the wages and scales of any for clerical staff workshop employees and the subordinate staff.

(2) dearness allowance for the clerical staff, and

(3) provident fund.

14. The case of the respondent-workmen was that the appellant-company was in a very prosperous condition and that therefore, the wage-scales should be revised. As in the instant case, the appellant company there did not contend that its financial condition was not sound enough to bear the increased burden, but its contention was that the wage-scales had been revised only recently and therefore, there was no ground for a further revision. The tribunal went into the financial condition of the appellant-company as also its history and concluded that there was a case of revision of the wag-structure. The Supreme Court approved this conclusion, but the contention of the appellant-company was that the tribunal had failed to apply the formula of industry-cum-region and instead took into account for comparison concerns which were entirely dissimilar to the appellant-company, The Supreme Court, in dealing with this contention, observed that in considering questions like wage-structure, dearness allowance and similar conditions of service, the formula of industry-cum-region had to be applied, that in applying that formula the industrial tribunal had to consider the wage-scales prevailing in similar concerns in the region in which it was falling, that similar concerns meant generally speaking those which were in the same line of business as the concern in question, that evening the same line of business, comparison could not be proper between a small struggling concern with a large flourishing concern, that for such comparison even in the same line of business, factors such as the extent of the business carried on 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 the labour force, the extent of the reserves, if any, the dividends declared by them, and the prospects of the business in future and other relevant facts have to be considered, and finally that the disparity between the concerns compared should not be such as would make the comparison unreal. Having laid down these principles, the Supreme Court proceeded to deal with the contention of the appellant company and in doing so considered the case of workshop employees and the clerical staff separately. So far as the workshop employees were concerned, the Supreme Court accepted the contention of the company and set aside that part of the award concerning them on the ground that the comparison with concerns

(i) which were in a different line of business altogether, and

(ii) those concerns which were bigger concerns than the company,

was not proper. The tribunal had, in that case, made comparison of the appellant-company with concerns like Greaves Cotton & Co. and Dumex, which were bigger concerns and were also not in the same line of business. As regards the clerical and the subordinate staff, the Supreme Court, however, rejected the very same contention urged by the appellant-company, though the tribunal had taken for comparison concerns which were clearly not comparable. The Supreme Court observed that there was difference between workshop employees and the clerical and the subordinate staff in that whereas the workshop employees generally required a particular skill peculiar to that particular industry, that could not be said of the clerical staff. Relying on its earlier decision in Lipton, Ltd. v. Their employees [1959 - I L.L.J. 431] where such a question arose, the Supreme Court held that in the case of employees such as the clerical staff who did the same kind of work, whether they were employed in concerns comparable or not it would be possible to take into consideration even those concerns which were engaged in entirely different lines of business, for the work of employees in that class would be more or less similar in all concerns. The Supreme Court next considered the contention urged by the appellant-company that it was paying to its employees the highest wages as compared with concerns in its own line of business and therefore, there was no case for revision of the wage-structure. The Supreme Court repelled that contention stating that such a contention would mean that if a concern was paying the highest wages in a particular line of business, there could not be any increase in the wages in that concern, whatever might be the economic conditions prevailing at the time of the dispute. For such a case, the Supreme Court observed, it was justifiable to lay greater stress on the region part of the principle of industry-cum-region part if that were done, it would be the duty of the tribunal to see that for purposes of comparison, such other industries in the region were taken into account as were as nearly similar to the concern in question as possible. In other words, though in such a case the wages paid in that region in other lines of business could looked into, the concerns from other lines of business taken into account must be as nearly as possible similar to the concern in questions. Such concerns in the other lines of business should not also be disproportionately large so as to afford no proper basis for comparison. The Supreme Court felt that in the matter of workshop employees, though the company was paying the highest wages in its won line of business, the tribunal was justified in considering for comparison other concerns in different lines of business in that region, but the tribunal was not right to take concerns like Dumex and Greaves Cotton Company into consideration as they were completely in different and dissimilar lines of business and also were disproportionately large so as not to stand any real comparison.

15. Therefore, what emerges from this decision is that -

(a) ordinarily the formula of industry-cum-region must be followed,

(b) that emphasis, however, on the region part of the formula is permissible where the company is already paying the highest wages in its own line of business in the region and the question of the capacity to bear the additional burden does not arise : but even where such deviation is permissible, care has to be taken to take into consideration those concerns in that region, though not in the same line of business, which are as nearly similar as possible to the concerns in question, and

(c) that so far as employees, such as the clerical and the subordinate staff, are concerned, it is permissible to take into consideration other concerns in the region, though not in same line of business, as such employees would be doing more or less the same kind of work in one class of concern or the other.

16. The question as to whether and, if so in what circumstances, emphasis can be laid on the region part of the formula of industry-cum-region, was again considered by the Supreme Court in the case of Greaves Cotton & Co., Ltd. [1964 - I L.L.J. 342]. The main dispute there was with reference to wages, dearness allowance and gratuity payable by the four appellant-companies. Greaves Cotton & Co., Ltd. was the first company and its activity was investment of money in manufacturing concerns. The second company was Greaves Cotton and Crompton Parkinson (Private), Ltd. and its main business was distribution of products of a manufacturing concern known as Crompton Parkinson (Works) (India), Ltd., and service and repair to the said products at its workshop. The third company was Kenyon Greaves (Private), Ltd., and its main business was to manufacture high grade interstandard ropes for the textile industry, and the fourth company was Rustom and Hornsby (India) (Private), Ltd., whose main business was to manufacture oil-engines and pumps. The last three companies were controlled in one way or the other by Greaves Cotton & Co., Ltd. The wages and dearness allowance were the same in all the four companies so far as the clerical and the subordinate staff was concerned and the same was the case with respect to the factory workmen. The tribunal dealt with the clerical and the subordinate staff separately from the factory-workmen. Regarding the clerical and the subordinate staff, the tribunal, after comparing the wages and dearness allowance prevalent in the four companies with those in comparable concerns, revised them. As regards the factory-workmen also, the tribunal prescribed certain rates of wages and gave them the same dearness allowance as to the clerical and the subordinate staff. The Supreme Court also dealt with the cases of the factory-workmen and the clerical and the subordinate staff separately and it appears [1964 - I L.L.J. 342 at 348] that it had set aside the award relating to the wage-scales of the factory-workmen and, therefore, the award relating to their dearness allowance also had to go. The Supreme Court, however, added that when the tribunal reconsidered the case of the factory-workmen on remand, it was at liberty to fix the same rates of dearness allowance as for the clerical and the subordinate staff, but cautioned at the same time that in doing so the tribunal must, when making comparison, take into account the total wage packet, that is, the basic wages fixed by it as well as the dearness allowance, and then compare it with the total wage packet of comparable concerns and thus arrive at a just figure for the basic wages for each category of factory-workmen. The Supreme Court, therefore, in this judgment was concerned only with the clerical and the subordinate staff and this fact has to be borne in mind in ascertaining what has been laid down in this case. Two contentions were, it seems, urged before the Supreme Court in regard to the award relating to the clerical and the subordinate staff -

(1) that the tribunal had wrongly applied the formula of industry-cum-region in making comparison with concerns which were not comparable, and (2) that it had also erred in relying more on the region aspect of that formula and not on the industry aspect.

17. In dealing with these contentions, the Supreme Court stated that in Hindustan Motors case [1962 - II L.L.J. 352] (vide supra) it was laid down that it was ordinarily desirable to have as much uniformity as possible in the wage-scales of different concerns working in the same region as that would put similar industries on an equal footing in their production struggle. In French Motor Car Company case [1962 - II L.L.J. 744] (vide supra) however, it was held that so far as the clerical and the subordinate staff was concerned, it was possible to take into account even those concerns which were engaged in different lines of business, for the work of the clerical and the subordinate staff was more or less the same in all kinds of concerns. The Supreme Court also stated that there was no inconsistency in the two decisions and then observed :

'As we have already said the basis of fixation of wages and dearness allowance is industry-cum-region. Where there are a large number of industrial concerns of the same kind in the same region it would be proper to put greater emphasis on the industry part of the industry-cum-region principle as that would put all concerns on a more or less equal footing in the matter of production costs and therefore in the matter of competition in the market and this will equality apply to clerical and subordinate staff whose wages and dearness allowance also go into calculation of production costs.'

18. That is one aspect of the problem, that is, where there are a number of concerns dealing in the same business in the same region but where that is not so and the number of comparable concerns is small in a particular region -

'the region part of the industry-cum-region formula assumes greater importance particularly with reference to clerical and subordinate staff and this was what was emphasized in French Motor Car Company case [1962 - II L.L.J. 744] (vide supra) where that company was already paying the highest wages in the particular line of business and therefore comparison had to be made with as similar concerns as possible in different lines of business for the purpose of fixing wage-scales and dearness allowance.'

19. 'The principle that emerges from these two decisions,' said the Supreme Court,

'is that in applying the industry-cum-region formula for fixing wage-scales the tribunal should lay stress on the industry part of the formula if there are a large number of concerns in the same region carrying on the same industry ... But where the number of industries of the same kind in a particular region is small, it is the region part of the industry-cum-region formula which assumes importance particularly in the case of clerical and subordinate staff.'

20. But as held in French Motor Car Company case [1962 - II L.L.J. 744] (vide supra), where greater stress is laid on the region part of the formula, care should be taken to see that comparison was made with concerns as nearly similar as possible to the concern in question. In the case before the Supreme Court, two reasons appear to have weighed with it :

(1) that the four companies before it were carrying on different business and the main company was an investment and financing company and it was not clear from the record whether there were several comparable concerns in the same region, and

(2) in the documents filed by both the parties, there were certain concerns which were, according to both the parties, comparable concerns.

21. That being so, the Supreme Court came to the conclusion that the tribunal was not wrong in the case of the clerical and subordinate staff in leaning towards the region part of the formula and comparing the appellant-companies with those concerns which were comparable according to both the parties.

22. Having thus cleared the ground as to what are the principles applicable in the fixation of wage-scales, dearness allowance and the other conditions of service, we will now proceed to consider whether in the present case the tribunal has correctly followed those principles. Before the tribunal, the respondent-unions had pressed the claim for an increase in dearness allowance mainly on two grounds :

(1) the flourishing state of the petitioner-company, and

(2) dearness allowance paid in what they alleged were comparable units.

23. The petitioner-company countered these grounds by stating that the company had been paying 90 per cent of the textile rate since 1949, that when the award was given in 1960 in Reference Nos. 266 and 395 of 1958, the tribunal increased the wage-scales, but rejected the demand for an increase in dearness allowance as neither fair not necessary. The petitioner-company also urged that any increase now in the dearness allowance would upset the balance in the production struggle between it and its only rival in the industry, namely, the Maize Products, a unit of Sayaji Mills, especially as, though there were other factories producing starch in the country, 77 per cent of the total production was concentrated in these two units and the production of starch by Maize Products was nearly as much as that of the petitioner-company. It also urged that the only unit comparable to the petitioner-company was thus the Maize Products and since that unit was paying only 85 per cent of the textile rate as compared to the 90 per cent of the textile rate paid by the petitioner-company, there was no justification for any increase until the Maize Products raised dearness allowance paid by it. The tribunal rejected this contention of the petitioner-company on two grounds :

(1) that though the two units produced the bulk of starch between them and their production was practically the same, the financial condition of the Maize Products, was until recently not comparable with that of the petitioner-company, and

(2) that it was doubtful whether two units in a region would make an industry for adopting the formula of industry-cum-region.

24. For the first conclusion, the tribunal relied on a statement of figures produced by the respondent-unions from an earlier adjudication where the Maize Products had produced it. The tribunal relied upon the statement although the petitioner- company had challenged its correctness. The Maize Products is merely a unit of a composite concern, namely, Sayaji Mills, and therefore it had no separate balance sheet and the figures of profits and losses shown in the statement were not the actual but only figures allocated by the directors of the Sayaji Mills to the unit. The statement was not reliable evidence, for as stated in the case of Petlad Turkey Red Dye Works Company, Ltd. [1960 - I L.L.J. 548] :

'In many cases the directors of the companies may feel inclined to make an incorrect statement in the balance sheets for ulterior purposes. While that is no reason to suspect every statement made in a balance sheet, the balance sheet does not by itself prove any fact mentioned therein and the law requires that such an important fact as the utilization of a portion of the reserve as working capital has to be proved by evidence given on affidavit or otherwise and after giving an opportunity to the opposite party to contest the correctness of such evidence by cross-examination.'

25. The statement of figures relied upon by the tribunal was therefore no evidence on which it could found its conclusion as the statement was not proved through any affidavit nor was the petitioner-company given any opportunity to test its correctness by cross-examination, though it had disputed its correctness.

26. For the second conclusion, the tribunal concluded that the two units only, namely, the petitioner-company and the Maize Products, could not constitute an industry in the region and therefore, accent should be placed on the region rather than the industrial part of the formula of industry-cum-region, and for that purpose relied on the case of French Motor Car Company, Ltd. [1962 - II L.L.J. 744] (vide supra). The tribunal on this reasoning reached the following conclusions :

'It appears to me that as there are only two concerns doing similar work in the present instance, as observed by the Supreme Court there should be greater emphasis on the region part of the region-cum-industry principle. If this was done, the proper comparison could only be with what the textile industry is paying. This unit can certainly be compared to a number of units of the textile industry and many of the textile units could not be considered to be disproportionately large as to afford no proper basis for comparison. It appears to me that this unit is from the point of view of its paid-up capital, its sales, its profits better of than a large number of units in the textile industry.'

27. It then proceeded to examine the capacity of the petitioner-company and concluded that it could easily bear the burden of the additional dearness allowance. As already stated, the formula of industry-cum-region is based on the principle that on the one hand, workmen doing work of a similar nature in different units of the same or similar industry must get the same wages so as to prevent dissatisfaction, and on the other, there should be no inequality in the production struggle between the concern in question and the rest of similar concerns in the same industry in the same region. When, however, there are not several such comparable concerns, deviation from the formula is permissible and more emphasis can be placed on the region rather than the industry aspect of the formula. But in such a case, comparison has to be made with concerns as nearly similar as possible to the concern in question. It is clear that the only thing from which the tribunal saw similarity between the petitioner-company and the units of the textile industry referred to by it was the financial capacity of the petitioner-company, but that obviously is not the test of comparability laid down in the case of French Motor Car Company, Ltd. [1962 - II L.L.J. 744] (vide supra). Apart from the total dissimilarity in the manufactured products of the two, the nature of the work, the peculiar skill, the training and the aptitude required in the two industries are so dissimilar that there could hardly be said to be any comparability between the two. It is clear, therefore, that for its first conclusion, the tribunal relied on evidence which was inadmissible and, therefore, not to be relied upon, and for its second conclusion it suffered from a misapprehension of the principle laid down in the case of French Motor Car Company, Ltd. [1962 - II L.L.J. 744] (vide supra).

28. Even Sri Shah, appearing as the representative of respondent 2 union, felt that comparison between the petitioner-company and the units in the textile industry referred to by the tribunal cannot be apt or proper, but argued that we would not be justified in laying too much stress on this part of the award and that if it were read as a whole it would appear that the tribunal had relied on the chemical division of the Calico Mills, Ltd., which was paying one hundred per cent of the textile rate since 1953 and that what the tribunal in the passage quoted above intended to say was only that the workmen of the petitioner- company should be paid dearness allowance at the same rate as the operatives in the textile units of the city. It will be seen, however, from the award that the only place where the tribunal has referred to the chemical division of the Calico Mills is where it felt that it could not rest its conclusion on a comparison between the petitioner-company and the Maize Products and that accent, therefore, should be not on the industry but on the region aspect of the formula. The only thing that the tribunal has stated in that part of the award is that

'In any event, the chemical division of the Calico Mills which, though not manufacturing starch, is paying the full textile scale of dearness allowance.'

29. From this fact, the tribunal posed to itself the question as to why the petitioner-company should also not be made to pay the full textile scale of dearness allowance as is being paid to the textile operatives in Ahmedabad and to the operatives of the chemical division of the Calico Mills. Assuming that the chemical division of the Calico Mills in Ahmedabad can be considered to be a comparable unit, the tribunal unwittingly was doing what it had declined to do in the case of the Maize Products, namely to treat two units as constituting one industry or, in any event, compared the petitioner-company as similar or as nearly similar to the chemical division of the Calico Mills, Ltd., and to rest its conclusion only on one comparable unit as similar or as nearly similar as possible. The contention of the petitioner- company before the tribunal was that if comparison was to be resorted to with the chemical division of the Calico Mills, the tribunal should take into consideration other chemical concerns such as the Alembic Company, the Sarabhai Chemicals and other such concerns situate in Baroda where it is an undisputed fact that dearness allowance is not paid at the Ahmedabad textile rate. But comparison with the chemical division of the Calico Mills was not valid at least for two reasons :

(1) That the chemical division of the Calico Mills is not an independent unit but a part of the composite unit of the Calico Mills, situate in the same premises as the mills and managed under a common management. It has, therefore, no independent share capital and no independent balance sheet from which the extent of the profits, its financial position, etc., could be reliably appreciated and compared. Situate in the same premises and conducted by the same management, it is possible that it pays hundred per cent of the textile rate because the Calico Mills Ltd., pays to its textile operatives dearness allowance at the textile rate and cannot discriminate its own operatives working in the same premises though in two units without creating a feeling of discontent.

(2) It is not disputed, and in fact Sri Shah himself gave us the figures that whereas 80 per cent of the production of the petitioner-company consists of starch, glucose, dextrose and calcium gluconate, the last three products being subsidiary products of starch, and only twenty per cent of its production consists of chemical and pharmaceutical products, and while the Maize Products produce only starch, glucose and dextrose and not chemical or pharmaceutical products, the production of the chemical division of the Calico Mills consists of pharmaceutical and allied products only.

30. From the outset, the petitioner-company had disputed comparability between the petitioner-company and the chemical division of the Calico Mills, and we think there was justification in its stand, because it is neither possible nor proper to compare one part of a composite unit with another independent entity, particularly as it would not be possible to get reliable economic and financial figures of profits and losses, and secondly because of the possibility that the chemical division of the Calico Mills pays dearness allowance at the full rate on account of the fact that it could not discriminate both class of its operatives from the other, both classes of operatives working in the same premises and under a common management.

31. There is yet, in our view, another infirmity in the award and that is that while taking the textile mills and the chemical division of the Calico Mills as comparable, the tribunal nowhere in the award appears to have applied its mind to the total pay packet of the operatives in the textile mills and the chemical division of the Calico Mills. There is nothing in the award, not even a reference to the total emoluments received in these concerns, to show that the tribunal applied its mind to this aspect before it decided to increase the rate of dearness allowance from 90 per cent to 95 per cent of the Ahmedabad textile rate. We were told by Sri Shah that he had produced the figures of basic wages and dearness allowance payable by the chemical division of the Calico Mills, the Maize Products and the Indian Oxygen, Ahmedabad, and the petitioner-company had produced like figures of the Maize Products. But it appears that no such figures were produced in respect of any of the units of the textile units in Ahmedabad, although the tribunal took those units as comparable. The tribunal thus appears to have overlooked consideration of what would be the total wages packet of the operatives of the petitioner-company which would include all the emoluments and the benefits if dearness allowance was increased on the one hand, and that in textile mills or the chemical division of the Calico Mills on the other, as was done by the Supreme Court in Hindustan Times, Ltd. v. Their workmen [1963 - I L.L.J. 108] and Titaghur Paper Mills v. Their workmen [1959 - II L.L.J. 9] Cf. also Greaves Cotton & Co., Ltd. v. Workmen (1964 - I L.L.J. 342) (vide supra)]. The tribunal ought to have compared the total wage packet of the petitioner-company on the one hand and the total wage packet payable by those units which it though were comparable before reaching its conclusion for increasing the rate of dearness allowance.

32. On behalf of the respondent-unions, it was however, urged that the tribunal was justified in coming to the conclusion that the rate of dearness allowance paid by the petitioner-company needed revision. The contention of the petitioner-company on the other hand was that amongst the non-textile units in the region, the petitioner-company has been paying dearness allowance at the highest rate and as compared with the Maize Products its rate of dearness allowance has been 90 per cent as against 85 per cent. The petitioner-company's contention that as it has been paying dearness allowance at the highest rate amongst all the non-textile units in the region there can be no justification for any revision, cannot be accepted as a correct principle. It cannot be disputed that since 1949 there has been a rise in the cost of living and yet there has been no revision in the rate of dearness allowance paid by the petitioner-company for the last about twelve years. It cannot also be disputed that there has been a distinct trend for an increase in the rate of dearness allowance in several other units in the region. It is clear, therefore, that a change of circumstances has taken place justifying the revision in the rate of dearness allowance paid by the petitioner-company and also for maintaining the leading position which the petitioner-company has enjoyed since the last several years. But Sri Nanavati urged that even if the tribunal was right in holing that there was justification for a revision, the tribunal could not raise the rate to 95 per cent without taking into consideration other comparable units, if not exactly similar, at least as nearly similar as possible. Since the tribunal was not inclined to treat the Maize Products as a comparable unit, the petitioner-company was the only unit of its kind in this region and therefore, before the tribunal raised the rate, it was its duty to find out units as nearly similar as possible to the petitioner-company and compare the wage packet earned by the operatives of the petitioner-company with that in such comparable units. A case nearest to the present case is to be found in Indian Oxygen, Ltd. v. Its workmen [1963 - II L.L.J. 83], where the appellant-company was holding a leading position in the region in the matter of wage-scales and was the only one of its kind in the Bombay region and yet the revision of wage-scales by the tribunal was upheld by the Supreme Court. However, from the observations made [1963 - II L.L.J. 83 at 85], it is clear that the tribunal was in fact compared the total wage packet earned by the members of the company with that earned by the workmen of certain engineering units which were conceded by the appellant-company as comparable, though in fact they were not similar or nearly similar as far as their lines of business were concerned. The Supreme Court upheld their comparison as the appellant company had conceded them to be comparable. The principle applicable in such cases, i.e. the cases where the company in question is the only one of its kind and where revision in the wage-scales or other conditions of service is justifiable on the ground that the leading position of such company must be maintained, is clear and that is that before such revision is made the other units in the region found to be as nearly similar as possible to the unit in question should be looked into and the total wage packet in both should be compared. In the case of Greaves Cotton & Co. [1964 - I L.L.J. 342] (vide supra), though the Supreme Court accepted the principle that the rate of dearness allowance for both the clerical and the subordinate staff and the factory workmen ought to be the same, it set aside the award on the wage- scales and dearness allowance of the factory-workmen on the ground that the units compared with the appellant-companies there were not comparable units and remanded the case to the tribunal so far as the factory-workmen were concerned. The same is unfortunately the position in the present case. The textile units and even the chemical division of the Calico Mills cannot be said to be units comparable with the petitioner - company. In any event, the tribunal did not take into consideration the total wage- packet earned by the operatives in the two classes of concerns, particularly in the light of the graded wage-scales awarded in Reference Nos. 266 and 395 of 1958 by the tribunal which graded wage-scales do not exist in any one of the units sought to be compared by the tribunal with the petitioner-company.

33. For the reasons aforesaid, it is not possible for us to uphold the tribunal's award, and the case will have to be sent back to the tribunal for its reconsideration and decision in the light of the observations made hereinabove. The petition is allowed and the rule is made absolute. No order as to costs.


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