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Full Case Details
KULDIP SINGH, J.
- The first settlement between the Company and the workmen was entered into on August 11, 1964.
While accepting the double-linked DA it further provided variable DA limited to the cost of living index
up to 5.41-5.50. Further relief was given to the workmen in the settlement dated July 18, 1969 when the
limit on the variable DA was removed. The Company revised the rates of DA on August 7, 1971.
Thereafter, two more settlements were entered into on July 4, 1974, and January 4, 1979, respectively.
Slab system with variable DA continued to be the basic constituent of the wage structure in the Company
from its inception.
- The Reptakos Brett & Co. Ltd. (the ‘Company’) is engaged in the manufacture
of pharmaceutical and dietetic speciality products and is having three units, two at Bombay and one at
Madras. The Madras factory, with which we are concerned, was set up in the year 1959. The Company on
its own provided slab system of dearness allowance (DA) which means the DA paid to the workmen was
linked to cost of living index as well as the basic wage. The said double-linked DA scheme was included
in various settlements between the Company and the workman and remained operative for about thirty
years. The question for our consideration is whether the Company is entitled to restructure the DA
scheme by abolishing the slab system and substituting the same by the scheme – prejudicial to the
workmen – on the ground that the slab system has resulted in over-neutralisation thereby landing the
workmen in the high-wage island.
- The position which emerges is that in the year 1959 the Company on its own introduced slab
system of DA. In 1964 in addition, variable DA to the limited extent was introduced but the said limit was
removed in the 1969 settlement. The said DA scheme was reiterated in the 1979 settlement. It is thus
obvious that the slab system of DA introduced by the Company in the year 1959 and its progressive
modifications by various settlements over a period of almost thirty years, has been consciously accepted
by the parties and it has become a basic feature of the wage structure in the Company. - The workmen raised several demands in the year 1983 which were referred for adjudication to the
Industrial Tribunal, Madras. The Company in turn made counter demands which were also referred to the
said Tribunal. One of the issues before the Tribunal was as under:
“Whether the demand of the management for restructuring of the dearness allowance scheme
is justified, if so, to frame a scheme?”
The Tribunal decided the above issue in favour of the Company and by its award dated October 14, 1987
abolished the existing slab system of DA and directed that in future dearness allowance in the Company,
be linked only to the cost of living index at 33 paise per point over 100 points of the Madras City Cost of
Living Index 1936 base. The Tribunal disposed of the two references by a common award. The Company
as well as the workmen filed separate writ petitions before the Madras High Court challenging the award
of the Tribunal. While the two writ petitions were pending the parties filed a joint memorandum dated
June 13, 1988, before the High Court in the following terms:
“In view of the settlement dated May 13, 1988 entered into between the parties, a copy of
which is enclosed, both the parties are not pressing their respective writ petitions except with
regard to the issue relating to restructuring of dearness allowance.” - The learned Single Judge of the High Court upheld the findings of the Tribunal on the sole
surviving issue and dismissed the writ petition of the workmen. The writ appeal filed by the workmen
was also dismissed by the High Court by its judgment dated September 14, 1989. The present appeal by
special leave is against the award of the Tribunal as upheld by the High Court. - Mr M.K. Ramamurthi, learned counsel for the appellants has raised the following points for our
consideration:
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“(i) The Tribunal and the High Court grossly erred in taking Rs 26 as a pre-war wage of a
worker in Madras region and, on that arithmetic, reaching a conclusion that the rate of neutralisation
on the basis of cost of living index in December 1984 was 192 per cent.
(ii) Even if it is assumed that there was over-neutralisation – unless the pay structure of the
workmen is within the concept of a ‘living wage’ and in addition it is proved that financially the
Company is unable to bear the burden – the existing pay structure/DA scheme cannot be revised to the
prejudice of the workmen.
(iii) In any case the DA scheme – which was voluntarily introduced by the Company and
reiterated in various settlements cannot be altered to the detriment of the workmen.” - Before the points are dealt with, we may have a fresh look into various concepts of wage structure
in the industry. Broadly, the wage structure can be divided into three categories – the basic “minimum
wage” which provides bare subsistence and is at poverty line level, a little above is the “fair wage” and
finally the “living wage” which comes at a comfort level. It is not possible to demarcate these levels of
wage structure with any precision. There are, however, well accepted norms which broadly distinguish
one category of pay structure from another. The Fair Wages Committee, in its report published by the
Government of India, Ministry of Labour, in 1949, defined the “living wage” as under:
“(T)he living wage should enable the male earner to provide for himself and his family not
merely the bare essentials of food, clothing and shelter but a measure of frugal comfort including
education for the children, protection against ill-health, requirements of essential social needs, and a
measure of insurance against the more important misfortunes including old age.” - The Committee’s view regarding “minimum wage” was as under:
“the minimum wage must provide not merely for the bare sustenance of life but for the
preservation of the efficiency of the worker. For this purpose the minimum wage must also provide
for some measure of education, medical requirements and amenities.”
The Fair Wages Committee’s Report has been broadly approved by the Court in Express Newspapers (P)
Ltd. v. Union of India [AIR 1958 SC 578] and Standard Vacuum Refining Co. of India v. Its Workmen
[AIR 1961 SC 895]. - The Tripartite Committee of the Indian Labour Conference held in New Delhi in 1957 declared
the wage policy which was to be followed during the Second Five Year Plan. The Committee accepted
the following five norms for the fixation of ‘minimum wage’:
“(i) In calculating the minimum wage, the standard working class family should be taken to
consist of 3 consumption units for one earner; the earnings of women, children and adolescents should
be disregarded.
(ii) Minimum food requirement should be calculated on the basis of a net intake of calories, as
recommended by Dr Aykroyd for an average Indian adult of moderate activity.
(iii) Clothing requirements should be estimated at per capita consumption of 18 yards per annum
which would give the average workers’ family of four, a total of 72 yards.
(iv) In respect of housing, the rent corresponding to the minimum area provided for under
Government’s Industrial Housing Scheme, should be taken into consideration in fixing the minimum
wage.
(v) Fuel, lighting and other ‘miscellaneous’ items of expenditure should constitute 20 per cent of
the total minimum wage.” - This Court in Standard Vacuum Refining Company case has referred to the above norms with
approval. - The concept of ‘minimum wage’ is no longer the same as it was in 1936. Even 1957 is way
behind. A worker’s wage is no longer a contract between an employer and an employee. It has the force
of collective bargaining under the labour laws. Each category of the wage structure has to be tested at the
anvil of social justice which is the live-fibre of our society today. Keeping in view the socio-economic
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aspect of the wage structure, we are of the view that it is necessary to add the following additional
component as a guide for fixing the minimum wage in the industry:
“(vi) children’s education, medical requirement minimum recreation including
festivals/ceremonies and provision for old age marriages etc. should further constitute 25 per cent of
the total minimum wage.” - The wage structure which approximately answers the above six components is nothing more than
a minimum wage at subsistence level. The employees are entitled to the minimum wage at all times and
under all circumstances. An employer who cannot pay the minimum wage has no right to engage labour
and no justification to run the industry. - A living wage has been promised to the workers under the Constitution. A ‘socialist’ framework
to enable the working people a decent standard of life, has further been promised by the 42nd
Amendment. The workers are hopefully looking forward to achieve the said ideal. The promises are
piling up but the day of fulfilment is nowhere in sight. Industrial wage – looked at as a whole – has not yet
risen higher than the level of minimum wage. - Adverting to the first point raised by Mr Ramamurthi it would be convenient to quote – from the
award – the contentions of the company and the findings reached by the Tribunal. The Company’s case as
noticed by the Tribunal is as under:
“It is stated that the pre-war wage of a worker in the Madras Region was Rs 26. It is evidenced by
the decision of the Labour Appellate Tribunal reported in: Buckingham and Carnatic Mills Ltd. v.
Their Workers [(1951) 2 LLJ 314] and Good Pastor Press v. Their Workers [(1951) 2 LLJ 718]. It
is contended that taking the pre-war minimum wage of worker at Madras being Rs 26 per month
equivalent to 100 per cent neutralisation the rate of dearness allowance at 26 paisa for every point
above 100 points of cost of living index would work out to 100 per cent neutralisation. On the above
basis at 2780 points of cost of living index in December 1984, the 100 per cent neutralised wage
should be Rs 722.80 (basic wage of Rs 26 plus dearness allowance of Rs 696.80). As against the
above wage a workman of lower grade in the petitioner-Company in December 1984 was getting a
total wage of Rs 1394 comprising basic plus dearness allowance plus house rent allowance and the
rate of neutralisation of dearness allowance correspondingly works out to 192 per cent.” - The Tribunal accepted the above contentions of the Company. The evidence produced by the
Company, regarding prevailing DA schemes in the comparable industries in the region, was also taken
into consideration. The Tribunal finally decided as under:
“Taking an overall view of the rate of dearness allowance paid by these comparable concerns
in the region and the higher total emoluments received by the workmen in this establishment, the
slab system of dearness allowance now in existence shall stand abolished and in future, dearness
allowance in the petitioner management would be linked only to the cost of living index at 33
paise per point over 100 points of the Madras City Cost of Living Index 1936 base and it shall be
effective from the month in which the award is published in the Tamil Nadu gazette. “ - The learned Single Judge of the High Court upheld the above findings of the Tribunal. The
Division Bench of the High Court, in writ appeal, approved the award and the judgment of the learned
Single Judge in the following words:
“The learned Judge has observed that the counsel for the management had taken him through all
the relevant materials which were filed in the form of exhibits before the Tribunal in order to show
that the matter of overneutralisation cannot be in dispute. Thus the learned Judge proceeded on the
basis that there is overneutralisation which called for devising a scheme for restructuring the wage
scale. This finding cannot be interfered with as no materials have been placed before us by the learned
counsel for the appellant to show that the exhibits which were perused by the learned Judge do not
support his conclusion. Hence, we hold that the contention that there are no compelling circumstances
in this case to revise the pattern of dearness allowance is unsustainable.”
135 - According to the Company the only purpose of DA is to enable a worker – in the event of a rise in
cost of living – to purchase the same amount of goods of basic necessity as before. In other words the DA
is to neutralise the rise in prices. The said purpose can be achieved by providing maximum of 100 per
cent neutralisation. Accepting the calculations of the Company based on Rs 26 being the pre-war (1936)
minimum wage in Madras region the Tribunal came to the finding that there was 192 per cent
neutralisation. - The Tribunal accepted Rs 26 as the pre-war minimum wage in Madras region on the basis of the
decisions of Labour Appellate Tribunal of India in Buckingham and Carnatic Mills Ltd. v. Their
Workers and Good Pastor Press v. Their Workers. - In Buckingham case the Appellate Tribunal came to the conclusion that the basic wage of the
lowest category of operatives on the cost of living index of the year 1936 was Rs 28. The said wage
included Rs 16 1/2 as expenses on diet. The workers relied upon the Textile Enquiry Committee’s report
to claim 25 per cent addition to the diet expenses. The Appellate Tribunal rejected the report on the
ground that the recommendations in the said report were for the purpose of attaining the standard of
“living wage” and not of ‘minimum wage’. The Appellate Tribunal stated an under:
“The Union however, contends that Dr Aykroyd revised his opinion when submitting a specially
prepared note to assist the Textile Enquiry Committee, Bombay of which Mr Justice Divatia was the
Chairman, where he is said to have stated that 25 per cent more will have to be added for obtaining a
balanced diet for a minimum wage earner. The report of that Enquiry Committee, which was
published in 1940, however, shows that Dr Aykroyd added 25 per cent as the costs of the extra items
to his standard menu such as sugar etc., for the purpose of attaining the standard menu of ‘living
wages’ (Final Report of the Textile Labour Enquiry Committee 1940, Vol. II, pages 70 to 71).
Therefore, for the purpose of fixing ‘minimum wages’ that 25 per cent is not to be added. “ - The question as to whether the recommendations of Textile Enquiry Committee were in relation
to ‘living wage’ or ‘minimum wage’ came for consideration before this Court in Standard Vacuum case.
This Court held as under:
It is obvious that the Committee was really thinking of what is today described as the minimum
need-based wage, and it found that judged by the said standard the current wages were deficient. In its
report the Committee has used the word ‘minimum’ in regard to some of the constituents of the
concept of living wage, and its calculations show that it did not proceed beyond the minimum level in
respect of any of the said constituents. Therefore, though the expression ‘living wage standard’ has
been used by the Committee in its report we are satisfied that Rs 50 to Rs 55 cannot be regarded as
anything higher than the need-based minimum wage at the time. If that be the true position the whole
basis adopted by the appellant in making its calculations turns out to be illusory. - This Court, therefore, in Standard Vacuum case came to the conclusion that the Textile Labour
Committee Report in the year 1940 in its calculations did not proceed beyond the minimum level of the
wage structure. It was further held that Rs 50 to Rs 55 was the need-based minimum wage in the year
1940. - The Appellate Tribunal in Buckingham case therefore, misread the Textile Committee Report and
was not justified in rejecting the same on the ground that it related to the category of ‘living wage’. - We are of the view that it would not be safe to accept the findings of the Appellate Tribunal in
Buckingham case as the basis for fixing the wage structure to the prejudice of the workmen. This Court
in Standard Vacuum case has further held that in Bombay the minimum wage in the year 1940 was Rs 50
to Rs 55. On that finding it is not possible to accept that the minimum wage in the year 1936 in Madras
region was Rs 26/28. So far as the Good Pastor Press case is concerned the question of determining the
minimum wage in pre-war 1936 was not before the Appellate Tribunal. It only mentioned the fact that Rs
26 was held to be so by some of the subordinate tribunals. There was no discussion at all on this point.
The Tribunal’s reliance on this case was wholly misplaced.
136 - In any case we are of the opinion that purchasing power of today’s wage cannot be judged by
making calculations which are solely based on 30/40 years old wage structure. The only reasonable way
to determine the category of wage structure is to evaluate each component of the category concerned in
the light of the prevailing prices. There has been sky-rocketing rise in the prices and the inflation chart is
going up so fast that the only way to do justice to the labour is to determine the money value of various
components of the minimum wage in the context of today. - We may now move on the second and third point raised by Mr Ramamurthi. We take up these
points together. Mr F.S. Nariman, learned counsel appearing for the Company, contended that the existing
DA scheme can be revised even to the prejudice of the workmen and for that proposition he relied upon
the judgment of this Court in Crown Aluminium Works v. Their Workmen [AIR 1958 SC 30]. Mr
Ramamurthi has however, argued that even if the contention of Mr Nariman is accepted in principle, the
Company has not been able to make out a case for such a revision. In Crown Aluminium Works case this
Court speaking through Gajendragadkar, J. (as he then was) held as under:
“The question posed before us by Mr Sen is: Can the wage structure fixed in a given industry 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 think 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 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. In dealing with a claim for such
revision, the tribunal may have to consider, as in the present case whether the employer’s financial
difficulties could not be adequately met by retrenchment in personnel already effected by the
employer and sanctioned by the tribunal. The tribunal may also enquire whether the financial
difficulties facing the employer are likely to be of a short duration or are going to face the employer
for a fairly long time. It is not necessary, and would indeed be very difficult, to state exhaustively all
considerations which may be relevant in a given case. It would, however, be enough to observe that,
after considering all the relevant facts, if the tribunal is satisfied that a case for reduction in the wage
structure has been established then it would be open to the tribunal to accede to the request of the
employer to make appropriate reduction in the wage structure, subject to such conditions as to time or
otherwise that the tribunal may deem fit or expedient to impose.” - The above dicta was reiterated by this Court in Ahmedabad Mills Owners’ Association v. Textile
Labour Association [AIR 1966 SC 497], wherein this Court through Gajendragadkar, C.J. laid down as
under:
“The other aspect of the matter which cannot be ignored is that if a fair wage structure is
constructed by industrial adjudication, and in course of time, experience shows that the employer
cannot bear the burden of such wage structure, industrial adjudication can, and in a proper case
should, revise the wage structure, though such revision may result in the reduction of the wages paid
to the employees if it appears that the employer cannot really bear the burden of the increasing wage
bill, industrial adjudication, on principle, cannot refuse to examine the employer’s case and should not
hesitate to give him relief if it is satisfied that if such relief is not given, the employer may have to
close down his business ….
This principle, however, does not apply to cases where the wages paid to the employees are no
better than the basic minimum wage. If, what the employer pays to his employees is just the basic
subsistence wage, then it would not be open to the employer to contend that even such a wage is
beyond his paying capacity.” - The ratio which emerges from the judgments of this Court is that the management can revise the
wage structure to the prejudice of the workmen in a case where due to financial stringency it is unable to
bear the burden of the existing wage. But in an industry or employment where the wage structure is at the
level of minimum wage, no such revision at all, is permissible not even on the ground of financial
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stringency. It is, therefore, for the management which is seeking restructuring of DA scheme to the
disadvantage of the workmen to prove to the satisfaction of the tribunal that the wage structure in the
industry concerned is well above minimum level and the management is financially not in a position to
bear the burden of the existing wage structure. - Mr Ramamurthi further relied upon this Court’s judgment in Monthly Rated Workmen at the
Wadala factory of the Indian Hume Pipe Co. Ltd. v. Indian Hume Pipe Co. Ltd., Bombay [(1986) 2
SCR 484] and contended that an employer cannot be permitted to abolish the DA scheme which has
worked smoothly for almost thirty years on the plea that the said scheme is more beneficial than the DA
scheme adopted by other industries in the region. In the Indian Hume Pipe Co. Ltd. case the management
pleaded that the dearness allowance enjoyed by the workmen was so high in certain cases that
neutralisation was at rates much higher than 100 per cent. It was further contended that the management
did not have the capacity to pay the slab system of DA and in the event of a claim for similar DA by other
workmen the management might have to close down the factories. - We agree with Mr Ramamurthi that the DA scheme – which had stood the test of time for almost
thirty years and had been approved by various settlements between the parties – has been unjustifiably
abolished by the courts below and as such the award of the tribunal and the High Court judgments are
unsustainable. - Mr Nariman has also relied on the judgment of this Court in Killick Nixon Ltd. v. Killick & Allied
Companies Employees Union (1975) 2 SCC 260 to support the findings of the tribunal and the High
Court. The said case does not lay down that in all cases the slab system of DA should be abolished to the
prejudice of the workers. In the said case this Court on the facts of the case came to the conclusion that
the employer had made out a case for putting a ceiling on the dearness allowance. The ratio of that case
cannot be extended to interfere with the existing DA schemes in every case where such schemes are
beneficial to the workmen. - Mr Nariman has invited our attention to para 20 of the award wherein the tribunal has held as
under:
“These figures as detailed in Ex. M-13 would establish that the company is not in a financial
position to bear the additional burden on account of increased wages.” - From the above finding it was sought to be shown that the Company has proved to the satisfaction
of the Tribunal that financially it was not in a position to bear the burden of the existing DA scheme. We
do not agree with the learned counsel. The Tribunal gave the above finding in the reference made on
behalf of the workmen asking for bonus increase and various other monetary benefits. While rejecting the
demands of the workmen the Tribunal gave the above finding which related to the additional burden
accruing in the event of acceptance of the workers’ demands. The tribunal nowhere considered the
financial position of the Company vis-a-vis the existing DA scheme. The Company neither pleaded nor
argued before the tribunal that its financial position had so much deteriorated that it was not possible for it
to bear the burden of the slab system of DA. The tribunal has not dealt with this aspect of the matter while
considering the demand of the Company for restructuring the DA scheme. - It has been pleaded by the Company that its workmen are in a high wage island and as such the
revision of DA scheme was justified. The Company also produced evidence before the Tribunal to show
that comparable concerns in the region were paying lesser DA to its workmen. On the basis of the
material produced before the tribunal all that the Company has been able to show is that the DA paid by
the Company is somewhat higher than what is being paid by the other similar industries in the region.
There is, however, no material on the record to show that what is being paid by the Company is higher
than what would be required by the concept of need based minimum wage. In any case there is a very
long way between the need based wage and the living wage. - Mr Nariman reminded us of the limits on our jurisdiction under Article 136 of the Constitution of
India and relying upon Shaw Wallace & Co. Ltd. v. Workmen, AIR 1978 SC 977 and Statesman Ltd. v.
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Workmen [AIR 1976 SC 758], contended that so long as there is “some basis, some material to validate
the award” the “jurisdiction under Article 136 stands repelled”. The tribunal and the High Court, in this
case, has acted in total oblivion of the legal position as propounded by this Court in various judgments
referred to by us. Manifest injustice has been caused to the workmen by the award under appeal. We see
no force in the contention of the learned counsel. - In view of the above discussion we are of the view that the tribunal was not justified in abolishing
the slab system of DA which was operating in the Company for almost thirty years. We allow the appeal
and set aside the award of the tribunal and the judgment of the learned Single Judge in the writ petition
and of the Division Bench in the writ appeal. The reference of the Company on the issue of restructuring
of the dearness allowance is declined and rejected. The appellant-workmen shall be entitled to their costs
throughout which we assess at Rs 25,000.
