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SHIVRAJ FfNE ART LIHIO WORKS

v.

THE STATE INDUSTRIAL COURT, NAGPUR & ORS

February 28, 1978

411

[N. L. UNTWALIA, JASWANT SINGH AND P. S. KA!LASAM, JJ.

lndustria[, Disputes Act, 1947-Powers of the Industrial Tribunal to fix

Industrial mininium wage-In the absence, Mininu1m Wage fixed under

Minin1un1 Wages Act 11 of 1948 will prevail-Factors to be reckoned f(Jr COHr­

puting Fair lf'agc Dcanlf'SS Allolvance etc .

An industrial award known as Puranik Award dated 26-10-1956 -f<·hich fixed

Rs. 35 /-a5 the minimum \vage in the Litho Industry in the Vidarbha regio•

stood terminated with effect from July 22, 1958 as per a notice dated January

22, 1958

from the employees of Litho Industry. Pending the

deci!i,ion in tke

reference riiade under s. 3 lA of the C.P. and Berar Industrial Disputes Settle­

ment Act, 1947 arising out of the demands of the employees of the Litho

IndHstry, an agreement \Vas entered into on February 21, 1966 between the

etnployers and the employees of various concerns requesting the State Go\'ern­

ment to exercise its po\ver u/s 39 ot the Act and to refer to the arbitration of

the State Industrial Court the disputes mentioned in the agreement.

By the

notification dated

7-1-1965 the Government referred the disputes in respect of

the demands of the employees set out in Schedule II to the Notification made

against

the

10 employers specifically mentioned in Schedule I to the notification,

being the employers in the Litho Press Industry in the Vidarbha region. The

demands in particular V.'ere to the disputes as to the living v;agc, for fitment of

the einptoyees already in service at the date of the demand for revised scales

of w;lges with retrospective effect from 1956, :ind for the <lea-mes~ allowance

with retrespective efiect from 1959 to be linked with the index nun1ber at the

rate of 8 paisc per point with 1956 as 100. The State Government by its nctifi­

cation dated Dcce-mber 31, 1964 fixed Rs.-70/-per month as the minimum wage

under the Minimum Wages Act. The notification divided the employees into

several classes.

It did not attach any scale of pay to the minimum

wages fixed

but previded that at interval of every six months the State Government may

issue a notification fixing certain amounts payable in addition to the mi&im11m

wages as special allowances.

The Industrial Court made its award on May 10. 1968.-The Award divided

the employers into two classes being Class A and Class B

on the

basi~ of the

financial capacity of the employers to pay. The award fixed rate~ and seal~

of wages for the employees of the three employers in Class A being Shivraj

Shakti and Vasant Litho Works. The award did not fix any rates and scales

of wages in respect of other units of the industry the reason being that they

did not have adequate :financial capacity.

In the case of Class A the award

also

fixed the employees of various duration of service by way of fitment into

the scales of wages awarded in the award.

It also fixed the date from which

the new rates and scales of \vages

\'ere to be deemed to have commenced.

Against the award six writ petitions were filed before the High Court,

three by the appellants in this Court and other three by the employees. The

High Court agreed with the view of the Industrial Court and held that the

award classifying the employers into two classes A

& B on the basis of their

paying capacity, determining the rates and scales of wages and the dearaess

allowance regarding Class A employees

is valid .

A.

B

c

E

F

G

The appellants in these appeals by special leave contend that there is no H

warrant for the direction by the High Court to the Industrial Court to fix an

industrial minimum wage regardless of the paying capacity of the industry or

the employer.

4!2 SUPREME COURT REPORTS [1978] 3 S.C.R.

.A Allowing the appeals in part and modifying the order of remand the Court

B

D

E

F

G

H

HELD : 1. (a) It is permissible to divide the industry into appropriate

classes and then deal with the capacity of the· industry to pay c!Jss-wise. l 418 H,

419 Al

Express

.iVcwsparers (P) Ltd. & Anr. v. []nfoii of Jndin arid Ors. [1959]

S.C.R. 12. followed.

(b) The extent of the business carried on by the concerns, the capital

invested, the profits made, the nature

of the

business., their standing, the

strength of labour force, the dividends declared and the prospects about the

future of business and other relevant factors have to be borne in mind for the

purpose of comparison. The principle

is that in applying the

industry-cun1-

region formula for fixing wage scales. the Tribunal should lay stress on the

industry part of the formula if there were 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 were small,

it was the region part of

the formula which assumed importance. In the former case in order that

pro­

duction cos.t may not be unequal and there may be equal cornpetition, wages

should generally be fixed on the basis of the comparable industries, namely,

industries of the ~ame kind. [419 B-C, G·H, 420 A1

Williamsons (India) Pvt. Ltd. v. The Warkmen, [1962] I L.L.J. 302; French

Motor Car Co. Ltd.

v. Workmen, [1963]

Supp. (2)S.C.R. 16; Cinema Theatre

v. Their Workmen, [1964] 2 L.L.J. 123; Workmen of Balmer Lawrie & Cc.

v. Balmer Lawrie & Co., [1964] 5 S.C.R. 344; Greaves Cotton & Co. & Ors.

v. Their Workmen, [1964] 5 S.C.R. 362; Unichem Laboratories Ltd. v. The

Workmen,

[1972] 3

S.C.R. 567; The Silk and Art Silk Mills' Association Ltd.

v. Mill Mazdoor Sabha, [1973] I S.C.R. 277 referred to.

2. 1'he dispute, in the instant case on the stand taken by th~ en1ptoyecs

related to fixation of a fair wage and not a minimum \vage, In fact, the

employees requested the Government to

fix a minimum wage

1,1.rhich was

accordingly fixed. Fair wage is a mean between the living wage and minimum

wage. The minimum wage contemplated above

is something more than the

bare minimum of the subsistence1 wage sufficient to cover the bare physical

needs of the worker and his family, providing also for the preservation of the

efficiency of the worker and for some measure of education, medical require­

ments and amenities.

So far as the minimum wage is concerned it is to be

fixed without any reference to the paying capacity of the indu~try. [420 F-Ci.

421 A-DJ

Express News Papers (P) Ltd.

v. Union of India, [1959]

S.C.R. 12 and U.

Unichoyi & Ors. v. The State of Kera/a [1962] I S.C.R. 946 referred to.

3(a) When a dispute is pending before any tribunal regarding the minimum

wage, the award will bind and to that extent the yrovisions of the Act will not

be applicable but in other cases the Government is entitled under the Minimum

Wages Act to

fix a minimum wage.

Section 5 prescribes the procedure under

which the minimum wage

is to be fixed and revised. Provision is made for

appointment of committees and consultation of the persons concerned before

the minimum wage is fixed. The procedure is that in the absence of a

dis­

pute pending before the Tribunal regarding the fixation of minimum wages,

the rninimnm 'Yages fixed by the Government ·will bind the pro.rtirs. f421 G-lt

422 A]

(b) In nn industrial dispute a ba-sic minimum wage can b-:-fixed when

the statute has not

fixed the minimum wage. Section 3 (2A) of the Minimum

Wages Act does contemplate fixation

of minimum wages by the Tribunal. In

fixing such a minimum wage the Tribunal may take into account an the facts

and

fix a minimun1 wage which may be higher than the minimum wage con­

templated under Minimum Wages Act. The Industrial Tribunal was

not

called upon to fix a minimum wage for both the employers as well as the

employees proceeded on the basis that the tribunal was fixing a fair wage.

In fact, the employees. reques,ted the Government to fix a minimum wage

which was accordingly done.

In this view no further

reference-need be made

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SHIVRAJ LITHO WORKS v. INDUSTRIAL COURT, NAGPUR 413

(Kailasam, J.)

to Section 3(2A) of the Minimum Wages Act. The tribunal proceeded on A

the basis that it was called upon to fix a fair wage. In the circumstances, the

view taken by the High Court that it was incumbent on the tribunal to fix an

industrial wage apart from the minimum wage without taking into account the

paying capacity of the Industry is erroneous. (422 B-E]

(c) In view of the finding that what the Tribunal was called upon to tix

was a fair wage and not a minimum wage, the financial capacity of the concerns

classified under B is relevant and the finding of the fribunal tha:: their tinances

would not justify any provision for fair wages has to be accepted. Further. 1t

will be seen that the employees of the concerns classified under, B have not

preferred any appeaJ. and the question cannot be gone into the appeals. [422 H,

423 Al

4. The fixation of rate of wages which includes within its compass the fixa~

tion of scales of wages and fitment of workmen into wages scales will also

depend upon the paying capacity of the industry. The tribunal dealing with

Demand No. 5 in its award accepted the suggestion that the Court may grant

some increments in proportion to the years of service put in by an employee.

It provided two increments for persons who have put in 2 to 5 years of ser­

vice, three increments for persons who

put in service of 5 to

10 years, four

increments for persons who have put in service of 10 to 15 years and five

increments who have put in service over 15 years. The Tribunal also directed

that tb.ere shall be a fitment and the employee should be fitted into the scale of

pay by placing him at the· itage in the scale equal to next above, his basic pay.

The award regarding the fitment and increment was accepted by the High

Court but in the order of remand the High Court directed a general revision

as it was

not satisfied with the manner in

"'hich the financial capacity of the.

concerns \Vas determined. [423 A-q

5. (a) After fixing of the financial capacity, the fair \vage which would.

inchxle fitment, wage scales and dearness allowances payable has to be deter­

mined. The qut·stion as to the period during ·v.·hich retrospective etiect has to

be given for payment of fair wages has also to be considered. A fair wage i~

related te the earning capacity and workload. While the lower limit of wage

structure

is

the minimum w"age CJ.DY increase over that will depend upon

the capacity of the industry to pay. Tha factors which determine the capacity

to pay will be the productivity of the labour, the prevailing rates of wages in

the same or similar industries, in the same or neighbouring localities, the pre­

sent economic· position of the industry, its prospect as 1n the near future etc.

The fair wage will grow wi~ the growth and development of the national

economy and the progress made by the industry and must approximate to the

capacity

of the industry to pay. The claim of the employees for

a fair and

higher wage depends

not only on the financial capacity of the employer but also on the interests of the consumer and the State, the employers' desire for a

reasonable profit the rise

in price which may effect the consumer and the

national economy

\Vhich may have an adverse effect on the la"bour Itself. [423

D-H]

(b) In order to determine the fair wage including the scale of pay, the

price rise, the dearness .allowance etc., the financial capacity

of the concern

ha~

to be determined. A close scrutiny of the concern's working has to be made.

The profit and la«s account, the prospects of the company improving il'lelf in

future and all other relevant matters will have to be taken into account. The

expenses properly incurred for working the industry such as buying of raw

materials, expenses incurred in running the factory, office and other transport

expenses, the expenses incurred in marketing and other such allowable expen­

diture has to be deducted. Neither the contention of the respondents that the

gross profits alone has

to be taken into account nor the

pleas on behalf of the

appellants that the net profit alone should be the basis

of detern1ining the

financial capacity can be accepted. The determination

of

cross profit arid net

profit vary according to the basis of accounting adopted. The provision for

income tax and for reserves must take second place a~ compared to provision

for wage structure and gratuity, which stands on the same footing as Provi­

dent Fund which

is also

a retiral benefit. The provisioi..~ for income-tax,

9-277 SCI /78

B

c

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414 SUPREME COURT REPORTS [1978] 3 S,C.R·

A reserve and depreciation are not permitted. The High Court, was therefore

right in

its view that no rebate can be allowed towards payment of

income.tax.

(424 A-H, 425 AJ

II

c

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E

F

G

Gramophone Company Ltd. v. Its Workmen, [1964] 2 L.L.J. 131 and

Indian Link Chain Manufacturers Ltd. v. Their Workmen, [1973] 1 S.C.R.

791l; applied.

(c) The High Court is not correct in its view that any amount paid a~

bonus in addition to the minimum bonus cannot be deducted as expenses. The

amount which

is paid as bonus goes, in substance to augment the wages and

as such

is liable to be, deducted in determining the paying capacity of the

employer. It seems that

the High Court was influenced by the fact that the

additional bonus cannot be deducted

at the beginning of the year. This fact

will

not make any difference for the paying capacity of the concern

call be

ascertained after deducting the amount in the subsequent year. [425 B-D]

6. When a dearness allowance is fixed as a part of the fair wage it will

have to depend upon the paying capacity of the employer. Though the dear­

ness allowance

is given to compensate for the rise of cost of living, cent per

cent neutralisation

is not given as it may, lead to inflation, and therefore

Dearness Allowance

is often little less than 9ne-Hundred per cent

neutralisa­

tion. In fixing of the dearness allowance, the principle that is followed in

determining the paying capacity for fixing wage structure, is equally applicable.

In deterrn!ning the dearness allowance increase in the cost of living, the result­

ing change in the economic conditions and the pattern of dearness allowance

prevailing

in other concerns in the same region are factors, to be taken

Into

consideration. The increase in the cost of living since· the titue when the

dearness allo\11.rance was last fixed is also taken into account. Therefore the

High Court

is not right in its observation that the dearness allowance should

effect

a cent per cent neutralisation. [425 F-H, 426 A-B]

Clerks of Calcutta Tramways v. Calcutta Tramways Co. Ltd., [1956]

S.C.R. 772, Hindustan Times Ltd. New Delhi v. Their Workmen [1964] 1

S.C.R. 234 and Ahmedabad Mill Owners Association v. The Textile Labour

Association.

[1966] I S.C.R. 382, followed.

7. In granting retrospective effect the Tribunal

has a discretion to fix

the date taking into account the financial position of the Company. [426 G]

8. The High Court is not correct in its view that the Industrial fnbunal

should fix an industrial minimum wage without taking into account, the paying

capacity of the employer.

r427 A-B1

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CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2418 of

1972.

Appeal by special leave from the Judgment and Order dt.

25-11-71 of the Bombay High Court (Nagpur Bench) in Special

Civil Application No. 640 of 1968.

Civil Appeal No. 2419 of 1972

Appeal

by

Special Leave from the Judgment and Order dated

23-12-1971 of the Bombay High Court (Nagpur Bench) in Special

Civil Application No. 614/68.

And

Civil Appea; No. 2643 of 1972

Appeal by Special Leave from the Judgment and Order dated

25-11-71 of the Bombay High Court (Nagpur Bench) in Special

H Civil Application No. 641 of 1968.

P. N. Phadke, A. G. Menesses, J. N. Sinha &. K. J. John for the

Appellants in CA Nos. 2418-2419/72.

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SHIVRAJ LITOO WORKS V. INDUSTRIAL COURT, NAGPUR

(Kai/asam, J.)

415

M. C. Bhandare, V. P. Sathe & S. Bhandare for Respondent A ·

No. 2.

P. C. Bhartari for Respondent No. 8.

C.A. No. 2418/72 set down exparte against RR 1, 3, 4, 7, 9 & 11.

C.A.

No. 2419/72 set down exparte against RR 1, 3, 4, 6 & 12 .

Shankar Anand & A. G. Ratnaparkhi for the appellant in CA B

No. 2643/72. V. P. Sathe & S. Bhandare for R2 in CA 2643/72.

The Judgment of

the Court was delivered by

KAILASAM, J: Ti>ese three appeals are filed by the Shivraj Fine

Ar1E Litho Works, Vasant Fine Arts Litho Works and Shakti Offset

Works

by special leave granted by this Court against the decision of C

the Nagpur

High Court. The history of the industrial dispute may be

shortly stated.

The dispute relates

to

the Litho industry in the Vidarbha region.

· An award known as the Puranik Award was made on October 26,

1956. The award

fixed Rs. 35 as the minimum wage but did

riot

attach any scale of pay to the basic pay of Rs. 35 for the unskilled D

employees.

By a notice dated January 22, 1958 the employees of

th<>

Iitho industry gave notice of change and as a result the Puranik award

stood terminated

as from July 22, 1958. The employees

af Shivraj,

Shakti and Raj gave notice of change dated September 8, 1960 making

certain demands against their

.respective employers.

On March 13,

l'J61 the employees of the said three Units filed three references under

section 38A

of the C.

P. and Berar Industrial Disputes Settlement E ·

Act, 1947, before the State Industrial Court, which were numbered

as references 9, 10 and 11 of 1961. When the three references were

pending employees

of other industrial concerns made certain demands

against their employers.

Pending the decision in reference~ 9, I 0 and

11 of 1961 an agreement was entered into on February 21, 1964 bet-

ween the employers and the

employees of various concerns requesting

the

State Govermnent to exercise its powers under section 39 Of the F

Act and to refer to the arbitration

of the

Stale Indu;trial Court the

disputes mentioned in that agreement. On January 7, 1965 the State

Govermnent issned its notification making a reference to the State

Industrial Court under section 39 of the Act. By tl1e notification the

Government referred the disputes

in respect of the demands of the

employees

set out in Schedule II to the notification made against the

10 employers specmcally mentioned in Schedule I to the notificat!on, G

being the employers in the Litho Press Industry in the Vidarbha reg10n.

The demands that are set out in Schedule II are 15 in number bnt as

we are concerned only demands 3, 4, 5, 6 and 7 we will leave the

rest out of consideration. Demand

No. 3 relates to the dispute as to

living wage and Demand No. 4 for 'scales of wages for each category

and occupation. Demand

No. 5 is for fitment of the employees already

in service at the date of the demand Demand No. 6 is that the revised H

scales of

wages should be given with retrospective effect frbm 1958,

and Demand No. 7

is

for dearness allowance with.retrospective effect

from 1959 and that the dearness allowance should be linked with the

.A

B

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416 SUPREME COURT REPORTS [1978] 3 s.c.R.

index number at the rate of 2 paise per point with 1955 as 100. The

State Government by the notification dated December 31 1964 fixed

Rs. 70 per month as the minimum wage under the Minimum Wages

Act. The notification divided the employees into several classes. It

did not attach any scale of pay to the minimum wages fixed but provid­

ed that at an interval of every six months the State Government may

issue a notification fixing certain amounts payable in addition to the

minimum wages as special allowances.

The Industrial Court made its award on May JO, 1963. Tiile award

divided the employers into two classes being Classes A and B on the

basis of the financial capacity of the employers to pay. The award

fixed rates and scales of wages for the employees of the three employers

in Class A being Shivraj, Shakti and Vasaut Litho Works. Tue award

did not

fix any rates and scales of wages in respect of other units of

the industry the reason being that they did not have adequate financial

capacity.

In the case of class A the award also fixed the

employe~

of various duration of service by way of fitment into the scales of wages

awarded in the award. It also fixed the date from which the new rates

and scales of wages were to be deemed to have commenced.

Against the award six writ petitions were filed before the High Court,

three by the appellants in this Court, Shivraj Fine Arts Litho Works,

Vasant Fine A:rfs Litho Works and Shakti Offset Works. Another three

writ petitions were filed by the employees, they being Special Civil

Applications Nos. 210 of 1969, 733 of 1969 and 734 of 1969. There·

are no appeals filed in this Court by the employees.

The High Court agreed with the

view of the Industrial Court and

held that the award classifying the employers into two classes A and

B

on the basis of their paying capacity determinirig the rates and scales

of wages and the dearness allowance regarding class 'A' employers is

valid. The High Court set aside the award on Demands 3, 4, 5, 6 and

7 and directed the Industrial Court

to reconsider the above 5

Demands

and to make a fresh award in accordance with the law and principles laid

down by the High Court.

In so directing the High Court held that

fixation of au industrial minimum wage

is

necessary and that in fixing

such industrial minimum wage the factor of employer's capacity to pay

is irrelevant and the industry

or

th!l' employer must pay it or perish.

According to the High Court the industrial minimum wage should be·

fix~d on a consideration of different ingredients which it seeks to provide

for i.e. contents of the basket. It was possible that the industrial mini·

mum wage can be higher in some, cases than the current statutory

minimum wage and when the industrial minimum wage happens to be

higher than the statutory minimum wage it will be industrial minimum

wage which has to be paid because when it is fixed by an industrial

award it becomes enforceable at law.

The High Court further held

that the provisions of minimum

wages show that there is nothing in it

to prevent payment of anything more than the minimum wage fixed

under it. The appellants in these appeals seriously challenge the direc­

tion of the High Court to the Industrial Court to fix an industrial mini­

mum wage regardless of the paying c~pacity of the industry or the­

employer. Their contention is that there is no warrant for such a:

.conclusion.

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SHIVRAJ LITHO WORKS V. INDUSTRIAL COURT, NAGPUR . 417

(Kailasam, !.)

The High Court went into the question as to how the cap·acity of

u industry to pay a fair wage has to be determined. For determining

the surplus for paying capacity the High Court held that a sort of Joss

and profit account will have to be prepared having a credit and debit

side. On the credit side will appear all the gro8s takings of the unit

of the industry. Gross taking will include gross realisations by the sale

of the goods or services, the income,

if any, earned by way of rents,

interest or dividends or investments and the

mcome 0£ all other nature.

Dealing with the items of expenses that can be legitimately deducted

from the gross income the High Court held that all the expenses incurred

by the employer in connection with the working of the industry will have

to be deducted. It accepted the plea on behalf of the. employers that

the cost

of raw materials which are necessary for production and

expenses in connection with the working of the industry and sale of the

finished products will have to

be deducted, but not any other wage paid

apart from the minimum

wage payable. The court held that appropriate

amount for depreciation i£ deductible and interest on capita! will also

have to be deducted.

It also held that a fair amount of remuneration

payable to the partners can also

be deducted. Regarding the bonus

the High Court held that annual incidence of only the minimum bonus

can

be deducted, and any excess bonus paid is not deductible. It

disallowed the claim

of the an1ounts that wer~ paid as income-tax or

other taxes in ascertaining the paying capacit i of the industry or the

employer.

Regarding dearness allowance the High Court held that the indus­

trial minimum wage has got to be paid on the basis of pay or perish

and the neutraJigation must

be

100 per cent of the rise in prices. Reiard­

ing the claim for giving e.ffect to the enhanced rates of wage, scales of

wages and dearness allowance from the date of the order of reference

i.e. from 7th January, 1965 the court held that the provisions of the

award should Uike effect from January 7, 1965 being the date of the

order ol reference. While fixing January 7, 1965 as the date of opera­

tion it gave a discretion to the Industrial Court for valid and lawful

reasons to fix a later date in respect of all or any of the employer-units.

In the rei>ult the High Court found that the award in respect of Demands

3, 4, 6 and 7 was not in accordance with law and had to be set aside

as the award did not ascertain the rates

and scales of wages and dearness

allowance on

the

basis of an industrial minimum wage and that the indus..

trial minimum wage should be ascertained without any referenco to the

capacity of

the industry or the employer to pay. The court also found tha( the correctness and truthfulness of the accounts and the balance­

sheets of some of the employer-units has not been praperly appreciated,

investigat!)d into and taken into account. The financial capacity to pay

has

not been properly evaluated. The

financial capacity to pay has

not been taken into consideration fol'. the purpose of awarding a fair

wage with corresponding dearness allonance. Finally, the question of

¢.ving retrospective effect and fixing the date from which the wages and

dearness allowance awarded should become operative has not been

properly considered. As Demand No. 5

is also an integral part of the , award the court also quashed the award on that Demand.

A

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418 SUPREME COURT REPORTS [1978] 3 S.C.R.

The appellants in these appeals challenge the correctness of the order

of the

High Conrt remanding the award for fresh disposal according to

the directions given in the judgment. First and foremost the appellants

questioned the correctness of the order of the Industrial Court

as con­

firmed by the High Conrt classifying the employers into two categories

Classes A

and B and directing that the employers belonging to Class A

should

pay enhanced wages, dearness allowance etc. Secondly, it was

submitted that the

High Court misdirected itself in

holding; that the

Industrial Court ought to have fixed an industrial minimum wage and

that such wage should have been fixed without taking into account the

paying capacity

of the

industry or the employer. Thirdly, it was con­

tended that the conrt erred in holding that in determining the paying

capacity certain items such as minimum wage and the minimum bonus

can alone

be

deducted. The disallowance of the income-ta'!: and other

taxes that were paid was also questioned. The method of fixation of

the dearness allowance

as well as the direction to give retrospective

effect to the payment of wages, dearness allowance etc. from the date

of the order

of, reference was

challenged as imposing an intolerable

burden on the industry. We will now proceed to deal with each of the

above contentions.

D Mr. Phadke, the learned counsel for the appellants, submitted that

the classification of the employers into two categories A and B depend­

ing upon the profits is not justified in law. He submitted that the rule

is that the wages, dearness allowance, scales of pay etc. should be fixed

on the basis of region-cum-industry, the wages normally being the same

in all industries in the region. The Tribunal

in its award found that

the Industrial Court

is entitled to fix a wage for every unit in accordance

E with its capacity to pay. This view

was affirmed by the High Court.

But the submission of the learned counsel is that this view is unsustain­

able in

law.

Before the High Court apart from the proposition of law

enunciated

that the classification should be fixed on the basis of region-cum-industry,

it was submitted that as on the facts of the present case no such classifi-

F cation

was contemplated in the agreement between the parties or in

the reference by the Government,

the Tribunal ought not to have classi­

fied the industry into two categories. Reliance was placed on the word~

ing of the agreement requesting the Government to make an industry­

wise reference to the entire region and the reference necessarily being

in accordance with the agreement it was submitted would not justify any

such classification. This argument was rejected by the High Court on

G the ground that the Industrial Court had inherent jurisdiction to classify

the employers into several categories. Reference was made by the

appellants to the demands and it was submitted tlfat the power to classify

was restricted only in respect of employees and not as regards employers.

This plea was rightly rejected by the High Court as no such express

reference

is necessary in view of the powers of the Industrial Court. The

third contention

of the appellants before the

High Court was that the

H pleadings did not refer to the classification of the employers. It was

rightly held by the

High Conrt that the absence of any reference to the

classification of the employers in the

pleadings would not affect the

power of the Industrial Conrt. The other contentions put forward

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SH!VRAJ LITHO WORKS V. INIJUSTRIAL COURT, NAGPUR 41 \j

(Kailasam, !.)

before the High Court basing on the construction of section 22 of the A

Industrial Disputes Act and Rule 238 of the C.P. and Berar Industrial

Disputes Settlement Rules, 1949, that the increase or decrease of wages

should be in an industry

as a whole and not differing from one industry

to another is also

without any basis.

This Court has clearly laid down in a series of decisions starting

from the case of

Express Newspapers

(P) Ltd. and Anr. v. The Union B

of lndia and Others('), that it is permissible to divide the industry into

appropriate classes and then deal with the capacity of the industry

to pay classwise. At p. 20 of the Reports this Court in laying down the

principle in determining the capacity of an industry observed : "The

relevant criterion should be the capacity of a particular industry in a

specified region, and as far as possible the same wages should be pres­

cribed for all units of that industry in that region." But the Court C

qualified the rule by stating "It is clear therefore that the capacity of

an industry

to pay should be gauged on an industry-cum-region basis

after taking a fair cross-section of that industry.

In a given case it

may be even permissible to divide the industry into appropriate classes

and then deal with the capacity of

the industry to pay classwise."

In Williamsons (India) Private Ltd. v. The Workmen(') this Court D

he:Jd that the extent of the business carried on by the concerns the capi-

tal invested by them, the profits made

by them, the nature of the bu·siness

carried

on by them, their standing, the strength of their labour force, the

dividends declared·

by them and the prospects about the future of their

business and other relevant factors have to be borne in mind for the

purpose of comparison. Approving the view expressed in the

abo·ve

decision in French .Motor Car Co. Ltd. v. Workmen,(

8

)

this Court

E.

observed at p. 20 thai comparison should be made in the same line of

business and a small concern cannot be compared even in the same line'

of business with a large concern. When there is a large disparity in

the two concerns in the same business, it would not be safe to fix the

same wage structure

as in the large concern without any other con­

sideration.

In

Cinema Theatres v. Their Workmen,(') this Court approved the

F

dassification of the Tribunal of the Cinemas into two classes based on

gross· revenue. The Court observed that the gross revenue taken by

the Tribunal as the oasis for classification. appears to be a satisfactory

criterion.

In Workmen of Balmer Lawrie and Co. v. Balmer T.awrie cmd

Co.,(~) at p. 353 this Court held ihat in determining the question whe-c;.

ther one concern is comparable with another in th.e matter of fixing

wages, ·the total capital invested by the concern, the extent of its bnsi-

ness, the order of the profits made by th~ concern, the dividends paid,

the number of employees employed in the concern, the standing in the

industry

to which it belongs and other

matters have to be examined. In

(I) (1939] S.C.R. 12.

(2) [1962] 1 L.L.J. 302. H

(3) [1963] Snpp, 2 S.C.R. 16.

(4) [1964] 2 L.L.l. 128.

(5) [1964} 3 S.C.R. 344.

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420 SUPREME COURT REPORTS [1978] 3 S.C.R.

Greaves· Cotton and Co. and Others v. Their Workmen,(') after refer­

ring to the decision

in French Motor

Car Co. Ltd. v. Workmen (supra)

this Court held that the principle is that in applying the industry-<:um­

region formula for fixing wage scales the Tribunal should lay stress on

the industry part of the formula

if

Uurre were 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 was small, it was

the region part of the formula which assumed importance. In the former

case in order that production cost may not be unequal and there may

be equal competition,

wages should generally be fixed on the basis of

the comparable industries, namely, industries of the same kind.

In

Unichem Laboratories Ltd. v. The Workmen(") this Court after

referring to the cases cited above held that in the fixation of wages and

dearness allowance the legal position

is well-established that it has to

be done on industry-cum-region basis having due regard to the financial

capacity of the unit under consideration. The same view

was reiterated

in The

Silk and Art Silk Mills' Association Ltd. v. Mill Mazdoor

Sabha(

3

) at p. 288, where the Court re-emphasised the principles

laid down in the earlier cases. There

is !hus ample authority in sup­

port of the

view taken by the Tribunal and the

High Court that the

employer can be classified according to

his paying capacity.

·n1e second contention of the learned counsel for the appellants is

that the High Court was

in error in holding that the Tribunal ought to

have fixed an industrial minimum wage without any reference to the

paying capacity of the employer. According to the High Court even

when a statutory minimum wage is payable an industrial minimum wage

has to be ascertained to find out which is high because it

is the higher of

the

two which has to be paid. The High Court also held that the

industrial minimum wage will have to be fixed without reference to the

paying capacity of the industry.

The agreement

dated July

30, 1968 entered into between the parties

which led to the reference by the Government states that both the

parties also requested the Govemmen~ to expedite fixation of minimum

wages in the Litho Industry in the Vidarbha region if necessary by

appointing a sub-committee for this purpose.

In

pursuance of the

agreement the notification was issued by the Government on January

7, 1965. Schedule II lists the demands of the employees. The demands

with which

we are concerned in this appeal have already been referred

to. The demand is that the employees should be paid a living wage.

In pursuance of the agreement the Government fixed a minimum

wage

on December 30, 1964 under the Minimum Wages Act, 11 of 1948

and again revised it pending the· appeal before this Court on May 7,

1966. It

was conceded before the Tribunal by the employees that there

was no justification for demanding a living

wage but that the units had

the capacity to pay fair wages. On the basis of the stand taken by the

employees, the Tribunal proceeded to

fix a fair wage· taking into ac­

count the paying capacity of the industry. The dispute therefore related

(I) [1964] 5 S.C.R. 362.

(2) 11972] 3 S.C.R. 367.

(31 (1973] 1 S C.R. 277

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SHIVRAJ LITHO WORKS V. INDUSTRIAL COURT, NAGPUR 421

(Kai/asam, J.)

to fixation of a fair wage and not a minimum wage. In fact, the em­

ployees requested the Government to

fix a

mi;iimum wage w~i~h was

accordingly fixed. The High Court relied mainly on two dec1S1ons of

this Court in

Express Newspapers (P) Ltd. and Anr. v. The

Union of

India and Others (supra) and U. Unichoyi and Others v. The State of

Kera/a,(') for coming to the conclusion that the Tribunal is bound to

fix an industrial minimum wage. In the former case this Court stated

that broadly speaking the wages have been classified into three cate­

gories, the living wage, the

fair wage and

th~ minimum wage. After

elaborately setting out the concept of living wage at

p. 79, the concept

of minimum

wage at p. 82 and the concept of a fair wage at p. 84 of

the Reports, this Court observed that fair wage

is a mean between liv­

ing

wage and minimum wage and even the minimum wage contem­

plated above

is something more than the bare minimum of the subsis­

tence

wage which would be sufficient to cover the bare physical needs

of the worker and

his family, a wage which would provide also for the

preservation of the efficiency of the worker and for some measure of

education, medical requirements and amenities. The Court fnrther ob­

served that it must be remembered that whereas the bare minimum

or

subsistence wage wonld

hav,e to be fixed irrespective of the capacity of

the industry to pay, a minimum wage thns contemplated postulates the

~apacity of the industry to pay and no fixation of wages which ignores

this essential factor of the capacity of the industry to pay could ever

be

supported. This view is explained in

U. Unichoyi and Others v. The

State of Kerala (supra). The Court in rejecting thfl contention on be­

half

of the employers that the minimum wage prescn'bed under the

Minimum Wages Act can only be

fixed taking into account the capa­

city of the industry to pay held that it had no hesitation in rejecting the

argument that because the Act prescribed the minimum wage rates

it

is necessary that the capacity of the employer to bear the burden of

the

wage structure must be considered. It is now not in dispute that

so far as minimum wage is concerned it is to be

fixed without any

refe­

rence to the paying capacity of the industry .

The Minimum Wages Act, Act 11 of 1948, secures the payment of

the minimum wage. This Act was enacted with a vk-w to provide for

fixing minimum rates of wages

in certain employments. It

pmvides

under section 3 that the appropriate Government shall fix the' minimum

rates of wages according to the provisions of the section. Section 4

provides that the minimum rate of wages

fixed or revised by the Govern­

ment

in respect of scheduled employments under section 3 may

consist

of basic rate of wages and a special allowance at a rate to be adjusted,

at such intervals and

in such manner as the appropriate Government may

direct, to

accord as nearly as practicable with the variation in the cost

of living index. Section 5 provides the procedure for fixing and revising

minimum wages. Section 3 (2A) provides that when an industrial

. dispute relating to !he rates of wages payable to any of the employees

employed

in a

5cheduled employment is pending before a Tribunal or

National Tribunal under the Industrial Disputes Act, 194;' or before any

like authority under any other law for tiJe time being in force, or an

award made by any Tribunal, National Tribunal or such authority is in

(!) [1962]

I S.C.R. 946.

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422

SUPREME COURT RllPORTS [1978] 3 S.CR.

operation, ~d a notification fixing or revising the minimum rates of

wages is issued during the pendency

of such proceeding or the operation

of the award, then, notwithstanding anything contained in the Act, the

minimum

rates of wages so fixed or so revised shall not apply to those

employees during the period in which the proceeding

is pending and

the award is made.

It is therefore clear that when a dispute is pending

before any Tribunal regarding the minimum wage, the award will bind

and to that extent the provisions

of the Act will not be applicable but

in

otheo: cases the Government is entitled under the Minimum Wages

Act to

fix a minimum wage. Section 5 prescribes the procedure under

which the minimum wage

is to be fixed and revised. Provision is made

for appointment of committees and consultation of the persons con­

cerned before the minimum

wage is fixed. The procedure is that in

the absence of .a dispute pending before the Tribunal regarding the

fixation of

minimum wages the minimum wages fixed by the Government

will bind the parties.

It has been decided in Ah1nedabad Mill Owners'

Association

v. The Textile Labour Association('), that in an industrial

dispute a basic minimum wage can be

fixed when the statute has not

fixed the minimum

wage. Section 3 (2A) of the Minimum Wages Act

does contemplated fixation of minimum wages by the Tribunal.

In fixing

such a minimum wage the Tribunal may take into account all the facts

and

fix a minimum wage which may be higher tl1an the minimum wage

contemplated under the

Min.imum Wages Act. We have already found

that the Industrial Tribunal was not called upon to

fix a minimwn wage

for both the employers as well

as the employees proceeded on

the

basis that the Tribunal was fixing a fair wage. In fact, the employees

requested the Government to fix a minimum wage which was accordingly

done.

In this view no further reference need be made to section 3 (2Al

of the Minimum Wages Act. The Tribunal proceeded

on the basis that

it was called upon to

fix a fair wage. In

the circwustances, we do not

find any support in law for the view taken by the High Court that it

was incumbent on the Tribunal to fix an industrial wage apart from the

minimum wage without taking into account the paying capacity

of the

industry.

The Tribunal was not called upon to

fix the

mininlum wage. The

demand by the employees

was for a living wage and after observing that

living wage cannot be secured the Tribunal proceeded

to determine the

fair

wage. In

the circmmtances, there is no substance in the plea of

the respondent that the Tribunal was only

fixing a minimum wage. The

plea of the respondents that the cases under appeal fall under section

3 {2A) in that the dispute as to fixation

of minimum wage was pending

before the Tribunal and it was a continuation of the proceedings in

reference 9, 10 and 11 cannot be accepted, for the three references in

question got merged in the reference by the Government under section

39 which included not only demands which were not included in the

original reference but also disputes relating to either industries. The

reference as i' bas been pointed out earlier did not relate to the fixa­

tion

of minimum

~ages as shown either in the agreement or i!1 !he

.order of reference by the Government..

(I) [1966] 1 S.C.R. 382.

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SHIVRAJ L!THO WORKS V. INDUSTRIAL COURT, NAGPUR

(Kailasam, J.)

423

At this stage it will be proper to deal with the plea of the respondents

that the Tribunal

was in error in stating that so, far as the industries

classified

as B are concerned, the employees are not entitled to any relief

by way

of fair wage fixation, fitment or dearness allowance as the con­

cerns did not have the financial capacity.

In view of our finding that

what the Tribunal was called upon to

fix was a fair wage and not a

minimum

wage, the financial capacity of the concerns classified under B

is relevant and the finding of the Tribunal that their finances would not

justify any provision for fair

wages has to be accepted. Further, it will

be seen that the employees of the

concerns classified under B have not

preferred any appeal and the question cannot

be gone into in these

appeals.

The fixation of rate of

wages which

include;; within its compass the

fixation of scales of wages and fitment of workmen into, wage scales

will also depend upon the paying capacity of the industry. The Tribunal

dealing with Demand

No. 5 in its award accepted the suggestion that

the Court may grant some increments in proportion to the years

<:'!

>ervice put in by an employee. It provided two increments for persons

who have put in 2 to 5 years of service, three increments for persons

who put in service of 5 to 10 years, four increments for persons who

have put in service of 10 to 15 years and five increments who have

put in service over

15 years. The Tribunal also directed that there shall

be a fitment and the employee should

be fitted into the scale of pay by

placing him at the

stage in the scale equal to next above, his basic pay.

The &ward regarding the fitment and increment was accepted by the

High Court but

in the order of remand the High Court directed a

general revision

as it was not satisfied with the manner

in which the

financial capacity of the concerns

was determined.

This leaves us with the question

as

to how the financial capacity of

the concerns

is to be determined. After fixing of the financial capacity

the fair wage which would include fitment, wage scales and

dearnes~

allowance payable has to be determined. The question as to the period

during which retrospective

effect has to be given for

payment of fair

wages has also to be considered.

A fair wage

is a mean between the Jiving wage

and the minimum

wage. Wages must be fair, that is to say sufficiently high to provide a

standard family with food, shelter, clothing, medical care and education

of children appropriate to the workmen but not at a rate exceeding its

wage earning capacity

in the class of establishment to which he

belon~s.

A fair wage is thus related to the earning capacity and workload .. While

the lower limit of wage structure

is the minimum wage any increase over chat will depend upon the capacity of the industry to pay. The factors

which determine the capa.City to pay will be the productivity of the

labour, the prevailing rates of wages in the same or similar industries.

in the same or neighbouring localities, the present economic position

of the industry, prospects in the near future etc. The fair wage

will

grow with the growth and development of the national economy ana

the progress

made by the industry and must appro~imate to th~ c~pacity

of the industry to pay. As stated by the Nattonal Comnuss1on on

Labour a policy dealing with this chronic problem cannot be simply

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424 SUPREME COURT REPORTS L1978] 3 S.C.B..

A .economic as it is to reckon with relative multi-dimensional, social

phenomena in which the workers and the management,

the consumer

and the society

at large and in consequence the State are all vitally

interested. The claim of the employees for a fair and higher wage

depends not only on the financial capacity of the employer but

also on

the interests of the consumer and the State, the employers' desire for a

reasonable profit,

the rise in price which

may affect the consumer and

B the national economy which may have an adverse effect on the labour

itself.

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In order to determine the fair wage including the scale of pay, the

price rise, the dearness allowance etc., the financial capacity of tht:

concern has to be determined. A close scrutiny of the concern's work­

ing has to be made. The profit and loss account, the prospects of the

company improving itself in future and all other relevant matters will

have to

be taken into account. The expenses properly incurred for

working the industry such as buying of the raw materials, expenses

incurred in running the factory,

office and other transport expenses, the

expenses incurred in marketing and other such allowable expenditure

has to

be deducted. We are unable to accept the contention of the

learned counsel for the respondents that the gross profit alone has to

be taken into account. Equally

we are unable to accept the pleas on

behalf of the appellants that net profit alone should be the basis of

detern1ining the financial capacity. The determination of gross profit

and net profit vary according to !he basis of accounting adopted. Jn

Gramophone Company Ltd. v. Its Workmen('), this Court held that

"When an industrial tribunal is considering the question of wage struc­

ture and gratuity which, in our opinion, stands more or less on the same

footing

as wage-structure, it

has to look at the profits made without

considering provision for taxation in the shape of income-tax and for

reserves. The provision for income-tax and for reserves must,

in our

opinion, take second place

as compared to provision for wage-structure

and gratuity, which stands

.on the same footing as provident fund which

is also a retiral benefit. Payment towards provident fund and gratuity

is expense

to

be met by an employer like any other expense including

wages and if the financial position shows that the burden of payment of

gratuity and provident fund can

be met without undue strain on the

financial position of the employer, tha't burden must be home by the

employer

..

, .. While on the one hand casting of this burden reduces th,e

margin of profit, on the other hand it will result in th~, reduction of taxa­

tion

in the

shape of income-tax." This Court affirmed the view taken

in the above case in Indian Link Chain Manufacturers Ltd. v. Their

Workmen(

2

). The law was stated in Unichem Laboratories Ltd. v.

The Workmen (supra) at p, 583 as follows :-

"From the above decision it is clear that : ( 1 ) Fixation of

wage-structure stands more or less

on the same footing as

framing of a gratuity scheme and the principles applicable for

ascertaining the profits are the same; (2) Provision for taxa­

tion and provision for reserves cannot take precedence

ovt>r

(I) [J964J2LLJ. 131.

(2) [1973] I S.C.R. 790 ..

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SHIVRAJ LITHO WORKS V. INDUSTRIAL COURT, NAGPUR 425

(Kailasam, !.)

for gratuity and fixation of wages; and (3) the provision for

income-tax_and for reserves must take second place as com­

pared to provision for wage-structure and gratuity."

Summing up the position the Court held that the above decision

( Gramaphone Company Ltd .. v. Its Workmen) categorically rules out

any deduction of ~ation. It also excludes from deduction all provi­

sion for reserves which will take in depreciation reserve also. The deci­

sion makes it clear that provisions for taxation and reserve cannot take

precedence over gratuity and fixation of wages. The provisions for

income-tax, reserve and depreciation are not pennitted. The High

Court was therefore right in its view that

no rebate can be allowed

towards payment of

income-tax.

After allowing certain deductions the High Court held that so far as

bonus is concerned as the minimum bonus is compulsorily payable it

can be deducted in determining the financial capacity of t)le employer.

But the High Court .was of the view that in the case of any amount

which was prrid as bonus in addition td the minimum bonus fixed, such

amount cannct be deducted. The reason given by the High Court

is

thaf

the incidence of minimum bonus like the incidence of basic wage is

fixed and

is known at the beginning of the financial year of the

em­

ployer and is not to be calculated unlike in the case of excess bonus

after the end of that year when the amount of profit that is available

surplus

is determined. We are unable to agree with the

view taken by

the High Court that any amount paid as bonus in addition to the

minimum bonus cannot be deducted

as expenses. The

amount which

is paid as bonus goes, in substance, to augment the wages and as such

is liable to be deducted in determining the pa)ing capacity of the

employer. I: seems that the High Court was influenced by the fact

that the additional bonus cannot be deducted at the beginning of the

year. We do not think that it

will make any difference for, the

pay­

ing capacity of the concern can be ascertained after deducting the

amount in the subsequent year.

The two questions that now remain. for consideration are the fi:o.ation

of dearness allowance and the date from which the dearness allowance

and the wage structure as determined should be given effect to. The

Government in fixing the minimum rate

of

wages under the Minimum

Wages Act also makes a provision for special allowance to be paid

along with the basic rate of wages. The special allowance is fixed by

the Government to accord as nearty

as practicable with the variation:

in the cost

of living index number applicable to such workers. So far

as

provisions under the Minimum Wages Act relating to the minimum wage~

and special allowances are concerned they are fixed without any reference

to the paying capacity of the employer, but when a dearness allowance

is fixed

as a part of the fair wage it will have to

depend npon the

paying capacity of the employer.

It

has been held that thon)!'h the

dearness allowan~e is given to compensate for the rise of cost of livin)!'.

cent per cent neutralisation Is not given a:s it may tend to inflation. It

was held in Clerks of Calcutta Tramways v. Calcutta Tramways Co.

Ltd.('), "We can now take, it as settled that in matters of the grant of

(1) [1956] S.C.R .. 772.

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426 SUPREME COURT REPORTS [1978] 3 s.c.R.

Dearness Allowance accept to the very lowest class of manual labourers

whose income is just sufficient to keep body and soul together, it

is

impolitic and unwise to neutralise the entire rise in the cost of living by

Dearness

Allowance." In Hindustan Tlines Ltd., New Delhi v. Their

Workmen('), it was held that the purpose of Dearness Allowance was

to neutralise a portion of tl\e increase in the cost of living. The same

view was exj»"essed ini Kamani Metals and Alloys Ltd. v. Their Work­

men(2). It was noted that one-hundred per cent neutralisation is not

advisable as it

will lead to inflation and

therefore Dearness Allowance

is often a little less than one-hundred per cent neutralisation. In fixing

the dearness allowance, the principle that is followed in determining the

paying capacity for fixing wage structure, is equally applicable. In

determining the dearness allowance, increase in the cost of living, the

resulting change in the economic conditions and the pattern of dearness

allowance j»"evailing in other COl!cems in the same region are factors

to be taken into consideration. The increase in the cost of living since

the time when the dearness allowance

was last fixed is also taken into

account.

In

Ahmedabad Mill Owners' Association v. The Textile

Labour Association

(supra) it has been held that in giving effect to the

demand for a

fair wage including the payment of Dearness Allowance

to provide for adequate neutralisation, industrial adjudication must

always take into account the problem

of the additional burden which

such wage-structure would impose upon the employer and ask itself

whether

the employer can reasonably be called npon to bear such bur­

den. The Tribunal has taken into account the paying capacity of the

three concerns which it has classified as A and fixed the dearness allow­

ance payable by

them. But the High Court has found that the Tribunal

has

not adopted the correct principles in arriving at the paying capacity.

The learned counsel appearing for the respcildents also pointed out that

even n: cursory examination of the profit and Joss account would show

that the three companies which are classified

as A had a larger income

than

was taken into account by the Industrial Tribunal. The High

Court

is' not right in its observation that the dearness allowance should

effect a cent per cent neutralisation

as it is not in conformity with the

decisions cited above.

Regarding the date from which retrospective effect should be given

the High Court has observed that the reference was made on 7th

Jann•

ary, 1965 and the award was given on 10th May, 1968, that is after

a lapse of about three and a half years. Taking all the circumstances

into acco:mt the High Court directed that subject to any other considera­

tion which

may require to the contrary effect should have been

itlven

to the provisions of the award relatin!( to the rates and scales of ,;;ages

and dearness allowance as and from 7th January, 1965 being the date

of the general reference. Having observed so the High Court left it

open to the Tribunal to examine whether there are any other circum·

stances which would require the later date to be fixed in the case of all

or any of the employers. In granting retrospective effect the Tribunal

has a discretion to

fix the date taking into account the financial position

of the company.

The delay in giving the award and the subsequent

proceedings in the High Court and in the Supreme Court has caused

(I) [1964] I S.C.R. 234.

(2)

[19671 2 S.C.R. 463.

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SHIVRAJ LITHO WORKS V. INDUSTRIAL COURT, NAGPUR 427

(Kai/asam, 1.)

a lapse of severall years. Though the employees are entitled 1o be A

given the increase in wages from the date of reference it may not be

practicable-taking into account the considerable lapse of time-The

employers may not have the capacity to pay the entire arrears. It may

be tliat in some cases the employer may be able to do so if it is directed

to make the payment in instalments. Th~ questions will have to be

taken into account depending upon the facts and circumstances of each

~- B

To sum up we agree with the view taken by the Tribunal and the

High Court that the appellants belong to A category and are liabltj

to pay fair wages.

We

Jo not agree with the view taken by the High Court that the

Industrial Tribunal should

fix an industrial minimum

wage without taking C

into account the paying capacity of the employer. To this extent the

order of the

High. Court will have to be set aside.

Mr. Phadke, the learned counsel for the appellants, submitted that

as

the. employees have not preferred any appeal against the judgment of

t.'ic High Court no order adverse to the industry can be passed in these

appeals. As

we

have not agreed with the view of the High Court that

an industrial minimum wage should be fixed by the Tribunal even though

it was

fixed by the Government under the Minimum

Wages Act, the

judgment

of the High Court cannot be sustained. As in the absence of

an appeal by the employees final decision can only be by the Tribunal,

we confirm the order of the High Court remanding the matter for afresh

disposal

by the Tribunal. But as we do not agree with some of the

conclusions arrived at by the High Court we modify the order of remand.

We confirm the classification of the industries into class A and B as

determined by the Tribunal and the High Court.

We also find that

the appellants and industries belonging to class A are

in a position to

pay fair wages. We also find that so far

as the order of

the Industrial

Tribunal <tS confirmed by the High Court that the industries classified

as B are not in a position to pay anything more than the minimum

wages under the Mmimum Wages Act is concerned, it will have to be

confinned.

D

E

F

The High Court has found that the determination of the paying

capacity of the industry has not been satisfactory.

It

has found that

some of !he accounts maintained by the industry are suspicious and

cannot be accepted. The Tribunal

will have to examine the accounts

afresl1 and determine the paying capacity. In fixing

the paying capacity G

the Tribunal will have to

fix the income

as-well as permitted deductions

and allowances properly incurred. There can

be no dispute

that

expenses incurred for purchase of raw material, maintenance of the

factory expenses incurred towards rent, public charl!es, maintenance of

the establishment and expenses incurred in marketing of the produce

should be deducted. The items mentioned above are not exhaustive.

As to whether a particular item of expenditure is liable to be deducted II

or not will have to be determined on the facts of the case. This Court

has clearly laid down that no deduction should

be allowed for payment

of income-tax or for allowances made for depreciation or for making

A

B

428 SUPREME COURT REPORTS [1978J 3 s.c.R.

provision for reserves. So far as expenses incurred towards payment

of wage bill inclusive of dearness allowance, bonus, gratuity etc. are

concerned they will have to be deducted. After properly determining

the paying capacity

of the industry the Tribunal will have to proceed

to fix fair wages which would include the fitment, scale of wages and

dearness allowance. While after fixing the above the Tribunal will have

to determine as to from which date retrospective effect will have to

be given for payment of the wages thus fixed.

As the paying capacity

will have to be re-determined the wage structure

in~luding fitment, scale

of wages, dearness allowance, period during which retrospective effect is

to be given will have to be determined afresh.

We,

accordingly, allow the5e appeals in part and modify the order

of remand made by the

High Court to the extent and in the manner

C indicated above. We

make no order as to costs. As there has been

enormous delay, the tribunal

will dispose of the case as expeditiously

as possible preferably not more than six months.

S.R. Appeals allowed in part.

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