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PETITIONER:

PRECISION BEARINGS INDIA LTD.

Vs.

RESPONDENT:

BARODA MAZDOOR SABHA AND ANR.

DATE OF JUDGMENT16/12/1977

BENCH:

GOSWAMI, P.K.

BENCH:

GOSWAMI, P.K.

KRISHNAIYER, V.R.

CITATION:

1978 AIR 419 1978 SCR (2) 400

1978 SCC (1) 235

ACT:

Industrial Dispute-Award not covered by the reference must

be quashed--Revision of dearness allowance-Additional

financial burden which revision of dearness allowance would

impose upon the employer and his ability to bear such burden

are relevant considerations.

HEADNOTE:

One of the five principles laid down by this Court, in

Bengal Chemical & Pharmaceutical Works Ltd. v. Its workmen

[1969] 2 S.C.R. 113, for considering a revision of dearness

allowance, is the additional financial burden which dearness

allowance would impose upon the employer and his ability to

bear such burden.

In its charter of demands, the respondent workmen Union made

specific demands viz.; (i) that the existing minimum

dearness allowance of RS. 146/be modified and that all the

workers including workers known as staff should be paid

minimum dearness allowance at the rate of full dearness

allowance that is being paid to textile workers at Ahmedabad

i.e. 100% of Ahmedabad Textile, rate and (ii) with the above

minimum dearness allowance, they should be further continued

the higher dearness allowance of 40% plus Ahmedabad Textile

D.A. for those in the pay range of Rs. 100-200 and 20% plus

Ahmedabad Textile D.A. for those in the pay range of above

Rs. 200/-. The dispute was referred by the Government in

the form viz. "All workmen should be paid dearness

allowance at the rate of 100% dearness-allowance paid to the

workers of the Cotton Textile Mills, at Ahmedabad". The

Tribunal, however, ranted over and above the 100% Ahmedabad

Textile D.A., varying percentages from 80% to 89% phased in

a particular way.

Allowing in part, the appeal by special leave the Court.

HELD : It is true that in considering the question of

dearness allowance the capacity of the Company to pay is one

of the most important considerations.

In the instant case (a) in view of the fact that although a

substantial sum was kept as reserve towards the replacement

costs only a fraction of it was utilised, the company

therefore cannot make any grievance about the award that

this could be done in a phased manner. The Tribunal has

exhaustively gone into the matter with care and kept in view

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the five principles in Bengal Chemical & Pharmaceutical

Works Ltd. v. Its- Workmen [1969] 2 S.C.R. 113; (b) The

Tribunal in view of the content of the dispute referred to

it had no jurisdiction in this reference to grant anything

more than 100% of the Ahmedabad Textiles D.A. on the

outside. Since the Tribunal, after having given appropriate

consideration to all aspects of the matter granted varying

percentages from 80% to 89% phased in a particular way, it

bad virtually rejected the Union's claim for 100% of the

Textile D.A. Having done so,. the was no scope for allowing

to the higher brackets of wage earners in addition 40% and

20% of basic wages as dearness allowance. [468C, G-H, 469G-

H]

Obiter

Social justice perspectives being integral to industrial

jurisprudence the high cost allowance as a component of D.A.

is not impermissible in principle. It is a legitimate item.

Indeed in the instant case, the lowest bracket upto Rs.

100/- needed full neutralisation of the rise in the cost of

living. Such a dispute may well be referred by Government,

if it considers fit, and the decision in this case will not

bar such a cause. [470C-D]

Killick Nixon Ltd. v. Killick & Allied Companies Employees

Union [1975] Supp. S.C.R. 453 referred to.

467

JUDGMENT:

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 9 of 1977.

Appeal by Special Leave from the Award of the Industrial

Tribunal, Gujarat dated 8th October, 1976 in Reference No.

11 of 1975., published in the Gazette Part I-L dated

November 11, 1976.

H. R. Gokhale, A. P. Hathi and Ashok Grover for the

Appellant.

R. K. Garg, P. H. Parekh, Miss Manju Jetley and K.

Vasudev for Respondent No. 1.

The Judgment of the Court was delivered by

GOWSAMI, J.-This appeal by special leave is directed against

the award of the Industrial Tribunal, Gujarat, of October 8,

1976. Although it is a composite award disposing of two

references by the :State Government, we are concerned in

this appeal with Reference (IT) No. 11 of 1975 as per the

State Government notification of January 21, 1975 and even

out of the two questions referred to therein only with

regard to one of these regarding dearness allowance.

The relevant, issue which arises for consideration in this

appeal may be quoted below:

"All workmen should be paid dearness allowance

at the rate of 100% dearness allowance paid to

the workers of the Cotton Textile Mills at

Ahmedabad".

Before we advert to the submission of Mr. H.R. Gokhale,

appearing on behalf of the appellant, it will be appropriate

to indicate that there is no dispute about granting of

dearness allowance of the pattern ,of what is known as the

Ahmedabad Textile D.A. The question to 'be determined by the

Tribunal was only with regard to the percentage ,of the

Textile D.A. to be paid to the employees of the company.

The Tribunal has noticed that-

"the recent trend in the several industries-

textile, engineering and others, in Ahmedabad,

Baroda and in some other parts of the State of

Gujarat, is to make a demand for dearness

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allowance on the lines of the dearness

allowance paid to the workers of the cotton

textile mills at Ahmedabad, with a varying

percentage".

The Tribunal describes this as what in ordinary parlance is

called 'the "Textile D.A." and reckons it "as before the

revision of the basic wage in the mills prior to 1-1-1974".

The company is manufacturing high precision ball and roller

bearings in collaboration with a West German company. It

has its plant in the district of Baroda with a manufacturing

capacity of 24 lakh pieces of bearings per annum upto 1973

and 28.82 lakh pieces per annum from 1974. The company was

incorporated in April, 1962 and went into commercial

production from June 1965. Its registered office is in

Bombay and has its sales offices in Bombay, Calcutta, Delhi.

,and Madras. The plant is being operated almost to full

capacity from June 1965 onwards. The production has also

increased progressively.

468

The number of workers on 31-8-1974 was about 630. The

company' is said to be the third largest unit in the ball

bearing industry in the-country-the other two concerns being

Antifriction Bearings and the Associated Bearings, the next

one to the company being Shriram Bearings.

Two questions are raised before us by Mr. Gokhale. Counsel

is, conscious of his limitations in an appeal by special

leave under Article 136 of the Constitution and has,

therefore, fairly enough confined his, submissions within

narrow bounds and we fully appreciate this stand. The first

submission of Mr. Gokhale in the forefront of his argument

is that the Industrial Tribunal has failed to consider the

impact of the rise in dearness allowance granted by it on

the financial capacity of the appellant to bear the burden.

It is true that in considering the question of dearness

allowance, the capacity to pay of the company is one of the

most important considerations. Mr. Gokhale has pointed out

that the additional liability as a result of the award would

be Rs. 8,29,312 in 1975, Rs. 7,42,563' in 1976, and Rs.

12,42,395 in 1977 and the percentage increase over the

annual wage bill will respectively be 3 6.76 %, 32.91 % and

5 5.07 % for the said three years. He has also pointed out

that the company was able to declare 8% dividend for the

first time in the year 1970-71 and had been incurring loss

for the earlier years from 1962-63. He: also points out

that although dividends have been progressively increasing

from 8% to 12%, from 1970-71 to 1974-75, only 8% dividend

was declared in the year 1975-76. Besides, the, company has

to, spend huge sums for replacement costs which, according

to counsel, the Tribunal has not properly taken into

account. It is true that the Tribunal has mentioned in the

award that this could be done in a; phased manner. Mr.

Gokhale submits with some justification that this was purely

a management function and the Tribunal should have taken the

figures as furnished by the management in making reserve&

for replacement costs. We have, however, seen that although

a substantial sum was kept as reserve towards the

replacement costs, only a fraction of it was actually

utilised. The company, therefore, can-not make any

grievance about the manner in which the Tribunal has, dealt

with this aspect. Mr. Garg, on behalf of the respondents,

also drew our attention to paragraph 4 of the company's

written statement (page 62, Volume 1) where after having

referred to certain offers made by it the company was

prepared to the "increase of about Rs. 15 lacs in the

employee cost in the very first year. . . . . .

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We find that the Tribunal has exhaustively gone into the

wholes matter with care and kept in view the five principles

laid down by this Court in the Bengal Chemical &

Pharmaceutical Works Ltd. v. Its Workmen(l), the 5th one

being additional financial burden which dearness allowance

would impose upon the employer and his ability for bear such

burden. We are unable to find any infirmity in the Tribunal

dealing with the point of the financial capacity of the

employer to bear the burden. The Tribunal finally observed

as follows

(1) [1969] 2 S.C.R. 113.

469

.lm15

"On a careful consideration of all the relevant factors, in

my opinion, the dearness allowance paid to the PBI (Pre-

cision Bearings India) workmen at the minimum level of basic

pay from Rs. 26-upto Rs. 100-should be from 80 per cent, of

the textile D.A. to 89 per cent, of the textile D.A. phased

over a period of three years, The dearness allowance in the

higher pay scale of Rs. 101-to Rs. 200should be 40 per cent

and. in the still higher slab of Rs. 201 and above, should

be 20 per cent, the percentage for the higher two slabs

remaining the same".

The 40 per cent and 20 per cent of the basic wages in the

higher slabs were in addition to the Ahmedabad Textile

Dearness Allowance granted in the award. This takes us to

the second objection of Mr. Gokhale.

It is submitted that in the charter of demands of the union

there were two specific demands with regard to dearness

allowance. These were as follows :-

1 : 1. It is demanded that the existing

minimum dearness allowance of Rs. 146/- should

be modified and that all the workers including

workers known as staff should be paid minimum

dearness allowance at the rate of full

dearness allowance that is being paid to

Textile workers at Ahmedabad, i.e. 100% of

Ahmedabad Textile rate.

1 : 2 With the above minimum dearness

allowance the workers and workers known as

staff should be further continued the higher

dearness allowance as under-

Below Rs. 100 pay-100% Ahmedabad Textile

Dearness Allowance.

Pay range between Rs. 100 to Rs. 200-100%

Ahmedabad Textile DA+40% of basic

Pay above Rs. 200/-100% Ahmedabad Textile DA+

20% + of basic."

Even though the demand for dearness allowance was as above,

the State Government referred the dispute only in the form

set out at the outset. The Government did not entertain the

claim of dearness allowance in addition to the 100% D.A.

paid to the workers of the cotton textile mills at

Ahmedabad. In other words, while the claim of the union was

Ahmedabad Textile D.A. plus, the Government did not entertain the

dispute between the parties in that form. We

find great force in the above submission of Mr. Gokhale.

The Tribunal in view of the content of the dispute referred

to it had no jurisdiction in this reference to grant

anything more then 100% of the Ahmedabad Textile D.A. on the

outside. Since, the Tribunal after having given appropriate

consideration to all aspects of the matter granted varying

percentage from 80% to 89% phased in a particular way, it

had virtually rejected the union's claim for 100% of the

Textile D.A. Having done so, there was no scope for allowing

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to the higher brackets of wage earners in addition 40% and

20% of basic wages as dearness

470

allowance. This part of the award is, therefore, beyond the

scope, of the reference and must be quashed which we hereby

do. If the Government at a future time intends to entertain

a dispute of this nature with regard to higher brackets of

wage earners that will be a different dispute but such a

claim could not be entertained by the

Tribunal in the present reference.

We may observe that during the course of the proceedings

before the Tribunal the clerical and the supervisory staff

seem to have withdrawn from the reference and even an

application was filed by some of them before the Tribunal to

confine the dispute as pertaining to the, manual and

technical workers. The Tribunal however, did not accede to

this request and proceeded on the footing that all the

members of the-staff were included in the reference.

We should not be taken to suggest that the 40% and 20% plus

is either wrong or excessive by way of high cost allowance.

Indeed, we even felt that the lowest bracket upto Rs. 100/-

needed full neutralisation of the rise in the cost of living

as has been held in Killick Nixon Limited v. Killick &

Allied Companies Employees Union.(1) Nor do we fail to see

the force of Shri Garg's submission that social justice

perspectives being integral to industrial jurisprudence. the

high cost allowance as a component of D.A. is not

impermissible in principle. It is a legitimate item. But

we disallow because there is I deliberate omission to make a

reference, of that item and so, falls outside the

jurisdiction of the tribunal. That is why we have expressly

observed that such a dispute may well be referred by

Government, if it considers fit, and this decision will not

bar such a course.

In the result the appeal is partly allowed. The award of

the Tribunal with regard to the 40% and 20% for the higher

two slabs is set aside In all other aspects the award of the

Tribunal stands. The appellant will pay the costs (one set)

of the respondents as ordered at the time of granting the

special leave and will also pay interest as ordered therein.

The arrears calculated in terms of the Award now upheld will

be paid to the respondents in two equal instalments, the

first instalment within three months from today and final

instalment within three months thereafter.

Appeal partly allowed.

S. R.

47 1