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PETITIONER: FRENCH MOTOR CAR CO., LIMITED

       Vs.

RESPONDENT: WORKMEN

DATE OF JUDGMENT: 13/11/1962

BENCH: WANCHOO, K.N. BENCH: WANCHOO, K.N. GAJENDRAGADKAR, P.B. SARKAR, A.K.

CITATION:  1963 AIR 1327            1963 SCR  Supl. (2)  16  CITATOR INFO :  F          1963 SC1332  (16)  R          1964 SC 689  (6,15,16)  RF         1967 SC 948  (9)  R          1967 SC1286  (8)  RF         1969 SC 360  (20)  R          1969 SC 976  (3,4,5)  R          1970 SC 878  (9)  R          1972 SC 343  (13)  R          1972 SC2273  (20)  RF         1973 SC2758  (12)  R          1978 SC 828  (21)  R          1978 SC1113  (12,14)  RF         1984 SC 356  (14,15,16)

ACT: Industrial  Dispute-Fixation  of  wage  scale-Industry  cum- region  basis-Application-Large and dissimilar concerns,  if and  when  can be taken for  comparison-Adjustment-Power  of Tribunal.

HEADNOTE: The three matters canvassed in this appeal from an award  of the  Industrial Tribunal related to (1) wages and scales  of pay for clerical staff, (2) dearness allowance for  clerical staff  and (3) provident fund.  ’ The Tribunal  found;  that the  business of the appellant company was able to bear  the burden it imposed.  The Tribunal also went into the  history of the company and found there had been several revision  of wage, scales and dearness allowance in the recent past,  but since there had been a large increase in the cost of  living index for workmen from 1955 17 the   dearness  allowance  had  been  reduced  in  1954   by agreement, it held that a case of further revision of  wage- scales  had  been made out.  It was urged on behalf  of  the appellant that wages should   be   fixed  on   industry-cum- region basis and the Tribunal was  in  error in  taking  for comparison industrial concerns     which    were    entirely dissimilar  to the appellant’s and that since it was  paying the highest scale of wages in the industry concerned,  there could be no justification for increasing the wages.

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Held, that it is well settled that in considering  questions of wage structure, dearness allowance and similar conditions of service, an industrial court has to proceed on  industry- cumregion  basis and compare similar concerns in the  region which  would  be those in the same line of business  as  the concern in dispute.  But such comparison must not be between a small struggling concern and a large flourishing one. Williamsons (India) Private Ltd. v. The Workmen, (1962) 1 L. L. J. 302 and Novex Dry Cleaners v. Workmen, (1952) 1 L.L.J. 271, referred to. Since in fixing of wage scales for workshop’ employees,  the Tribunal  took into consideration concerns much larger  than the  appellant’s and not in the same line of  business,  the award  to  the  extent it was thus  affected  could  not  be upheld.   Although  the appellants were paying  the  highest wages  in the particular line of business, that could be  no ground  for  not revising the scales having  regard  to  the economic conditions prevailing at the time of the dispute  ; in such a case the greater emphasis should be on the  region part   of  the  industry-cum-region  principle  ;  but   the industrial court must see that the industrial concerns taken into  account  for  purposes of  comparison  are  as  nearly similar to the concern before it is possible. Although  the  Tribunal was justified in  looking  to  other concerns in the region for purposes of comparison, it should not  have  taken  such  concerns  for  comparison  as   were disproportionately large and absolutely dissimilar from  the appellant’s.   The  wage structure fixed  for  the  workshop employees  must  therefore  be set  aside.   The  same  rule cannot, however, apply to clerical and subordinate staff who stand  on  a  different footing from that  of  the  workshop employees who are skilled workers in the particular line  of business. Messrs.   Lipton Limited v. Their Employees, [1959] Supp.  2 S.C.R. 150, referred to. There  is  nothing  in  law to  prevent  the  Tribunal  from granting  adjustment  even  in cases  where  previously  pay scales 18 were in existence, but this must be done sparingly and on  a consideration of the facts and circumstances in each case.

JUDGMENT: CIVIL  APPELLATE,  JURISDICTION : Civil Appeal  No.  391  of 1962. Appeal by special leave from the award part I dated December 23, 1961 of the Industrial Tribunal Maharashtra in Reference (IT) No. 127 of 1960. C.   K.   Daphtary,  Solicitor  General  of  India,  J.   B. Dadachanji,  O.  C.  Mathur and  Ravinder  Narain,  for  the Appellant. R.   J. Mehta, Secretary, Engineering Mazdoor Sabha. 1962.  November 13.  The judgment of the Court was delivered by WANCHOO,  J.-This appeal by special leave arises out  of  an industrial  dispute between the appellant,  Messrs.   French Motor  Car  Co.,  Limited, and their workmen,  who  are  the respondents  before  us.   Four matters  were  referred  for adjudication by the Government of Maharashtra under s. 10 of the Industrial Disputes Act, No. XIV of 1947, to the  Indus- trial  Tribunal, Maharashtra, Of these we are  concerned  in the  present  appeal with (i) wages and scales  of  pay  for clerical  staff, workshop employees and  subordinate  staff,

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(ii)  dearness  allowance  for  clerical  staff,  and  (iii) provident fund. The  case of the respondents was that the appellant  company was in a very flourishing condition and therefore the  wage- scales  should  be revised.  The appellant did  not  contend that  its financial position was not good enough to bear  an increased  burden  ; it, however, contended  that  the  wage scales  had been revised only a few years before  and  there was no ground for further revision so soon thereafter.  The  19 tribunal  went into the financial capacity of the  appellant to  bear an increased burden of wage scales and  found  that its  finances would be able to bear the burden which it  was going to put on it by revision of wage scales.  It also went into  the  history  of the  appellant  company  to  consider whether  a  case had been made out for further  revision  of wages.   That history shows that for the first time in  1948 there was an agreement between the appellant and its workmen by  which  scales of wages were fixed.  Soon  thereafter  an award  was  made by another tribunal in the case  of  United Motors  (India)  Limited,  which is a  concern  carrying  on similar  business  as  the appellant and  much  higher  wage scales  were  found  to  exist  in  that  concern  and  were confirmed  by  the award.  These higher  scales  were  later adopted  by two other similar concerns in  Bombay,  namely’, Dadajee  Dhakjee  and Metro Motors.  Then  followed  another dispute  between the appellant and its workmen in 1953  with respect  to  wage  scales and an award  was  made  by  which practically  the same wage scales were prescribed as in  the other three concerns, with respect to workshop employees and subordinate staff.  Then in 1954 there was another agreement between the appellant and its workmen for fixing wage scales for  clerical staff., The present dispute started  in  1958, and  eventually  reference  was made by  the  Government  of Maharashtra in 1960, and the contention of the appellant was that there was no reason to revise so soon the wage  scales, which  are  expected  to be a long  term  arrangement.   The tribunal  has,  however, pointed out that there has  been  a large increase in the cost of living since 1955 and the cost of  living index number for workmen had gone up from 338  in 1955  to 420 in 1960.  It had gone to 428 in 1961  when  the award  was  made.   In  view  of  this  change  in  economic conditions  the tribunal was of the opinion that a case  had been  made  out  for, a further  revision  of  wage  scales, particularly  as the dearness allowance was also revised  in 1954 by agreement and the effect 20 of  that  was to reduce the dearness allowance.  We  see  no reason  in these circumstances to disagree with the view  of the tribunal that a case has been made out for revising  the wage structure. The main contention on behalf of the appellant is that wages are fixed on industry-cum-region basis and the tribunal went wrong  when it took into account for  comparison  industrial concerns which were entirely dissimilar to the  appellant’s. It  is now well settled that the principle of  industry-cum- region  has  to be applied by an industrial court,  when  it proceeds to consider questions like wage structure, dearness allowance  and similar conditions of service.   In  applying that principle industrial courts have to compare wage scales Prevailing  in similar concerns in the region with which  it is dealing, and generally speaking similar concerns would be those  in  the  same line of business as  the  concern  with respect  to  which  the  dispute  is  under   consideration. Further, even in the same line of business, it would not  be

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proper  to compare (for example) a small struggling  concern with  a large flourishing concern.  In  Williamsons  (India) Private Ltd. v. The Workmen ( 1), this Court had to consider this aspect of the matter, where Williamsons Private Limited was  compared  by  the  tribunal  with  Messrs.   Gillanders Arbuthnot and Company for purposes of wage fixation, and  it was  observed that the extent of the business carried on  by the concerns, the capital invested by them, the profits made by  them,  the nature of the business carried  on  by  them, their  standing,  the strength of their  labour  force,  the presence  or  absence  and  the  extent  of  reserves,   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.’  These observations  were  made to show how  comparison  should  be made, even in the same line of business and were intended to lay down that a small concern cannot be compared even in the same  line  of business with a large  concern.   Thus  where there is (1)  (1962) 1 L. L. J. 302. 21 a  large  disparity  between 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 consideration.    The  question  whether  there   is   large disparity  between  two  concerns  is,  however,  always   a question of fact and it is not necessary for the purposes of comparison  that the two concerns must be exactly  equal  in all respects.  All that the tribunal has to see is that  the disparity is not so large as to make the comparison  unreal. In Novex Dry Cleaners v.  Workmen (1) this Court pointed out that  it would not be safe to compare a comparatively  small concern  with a large concern in the same line  of  business and impose a wage structure prevailing in the large  concern as  a  rule of thumb without considering the  standing,  the extent  of  labour  force, the extent of  business  and  the extent of profits made by the two concerns over a number  of years. The contention on behalf of the appellant is that in  fixing the wage structure for workshop employees in particular, the tribunal  has taken into account for purposes of  comparison concerns   which  are  in  a  different  line  of   business altogether and which are also very much bigger concerns than the  appellant  company.  There is in our opinion  force  in this  contention.  In dealing with the  workshop  employees, the  tribunal  has  taken into account  wages  prevalent  in concerns like Greaves Cotton and Dumex, which are very  much larger  concerns  than the appellant company and  which  are also  not in the same line of business.  It is obvious  that the fixing of wage scales for workshop employees made by the tribunal has been affected by taking into account these con- cerns,  and to that extent the award cannot be  upheld.   At the  same  time  it appears that the  appellant  company  is practically paying the highest wage scales in the particular line of business in which it is engaged, and it is urged  on its  behalf that if it is compared with concerns in its  own line of business, there would (1)  (1962) 1 I. L. J. 271. 22 be no justification for increasing the wage scales for it is already paying the highest scales in that line of  business. We are of opinion that this argument cannot be accepted, for it  would then mean that if a concern is paying the  highest wages  in  a particular line of business, there  can  be  no increase  in  wages  in that concern  whatever  may  be  the

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economic  conditions prevailing at the time of dispute.   It seems  to us, therefore, that where a concern is paying  the highest wages in a particular line of business, there should be greater.emphasis on the region part of the  industry-cum- region  principle,  though  it  would be  the  duty  of  the industrial court to see that for purposes of comparison such other industries in the region are taken into account as are as  nearly  similar to the concern before  it  as  possible. Though,  therefore, in a case where a particular concern  is already  paying  the  highest  wages  in  its  own  line  of business,  the  industrial  courts  would  be  justified  in looking  at  wages  paid in that region in  other  lines  of business, it should take care to see that the concerns  from other  lines of business taken into account are such as  are as  nearly  similar  as possible, to the  line  of  business carried  on by the concern before it.  It should  also  take care to see that such concerns are not so disproportionately large  as to afford no proper basis for comparison.  In  the present  case even though the tribunal had justification  to go  beyond the concerns in the particular industry in  which the appellant company is engaged for purposes of comparison, because  the  appellant is already  practically  paying  the highest wages in that line of business, it was not right for the tribunal to take for comparison concerns like Dumex  and Greaves  Cotton which are in completely different  and  dis- similar  lines  of business and also  so  disproportionately larger than the appellant company as not to afford a  proper basis of comparison.  We are therefore of opinion that,  the wage  structure  fixed by the tribunal so  far  as  workshop employees  are  concerned cannot be upheld and must  be  set aside.  In the circumstances  23 the  award  with respect to the workshop  employees  is  set aside and the matter remanded to the tribunal to fix  proper wage scales in the light of the observations made by us. It  appears that evidence was given before the tribunal  for purposes of comparison of concerns which were in the fine of business  nearly similar to the business carried on  by  the appellant company.  Consequently, it would not be  necessary to take fresh evidence on the point and the tribunal  should proceed to fix the wage structure afresh after excluding for purposes  of  camparison concerns  in  absolutely  different lines  of  business  and also  concerns  which  are  dispro- portionately larger than the appellant company. Turning now to the wage scales for clerical and  subordinate staff, the argument on behalf of the appellant. is the  same viz.,  that the tribunal has taken for  comparison  concerns which  were  really  not  comparable.   There  is   however, difference  between workshop employees on the one  hand  and clerical  and subordinate staff on the other,  for  workshop employees  generally  require a particular  skill  which  is peculiar  to the particular industry, while the same  cannot be  said to a great extent with respect to the clerical  and subordinate   staff.   A  somewhat  similar   question   was considered by this Court in Messrs. Lipton Limited v.  Their employees(1).  In that case the tribunal was considering the question  of  wage  fixation for  clerical  and  subordinate staff,  and the argument on behalf of the employer was  that there  was  no  reliable  evidence  to  show  that  in   any comparable industry in the same region the wages were higher and  therefore  the wage structure in  the  particular  case required revision.  The employer concerned in that case  was Messrs.   Lipton  Limited,  carrying  on  tea  business   as merchants  in Delhi.  Evidence was given by the  workmen  in that case about the scales of pay of employees in the  Delhi

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office of a (1)  [1959] Supp. 2 S. C. R. 150. 24 number  of  other  concerns like  the  Standard  Vacuum  Oil Company,  Thomas Cook (Continental) Overseas, Burmah  Shell, Lever Brothers (India) Limited, and Associated Companies and Marshall  Sons  and  Company (India) Limited.   But  it  was contended  on  behalf of the employer that  these  were  not comparable  concerns.   Some  were  oil  concerns  and  some engineering  and some manufacturing concerns.  The  workmen, however, contended that so far as drivers, sweepers,  peons, clerks, godown keepers, typists, stenographers, and the like were concerned, the nature of their work was the same in all the aforesaid concerns which were relied on for  comparison, and  therefore  it  could  not be  said,  as  urged  by  the employer, that there was no evidence of comparable concerns. This  Court observed in that connection that it  was  impos- sible  to  say  that  there was no  evidence  on  which  the tribunal  could  proceed, to revise the wage  structure  and that  on the contrary there was evidence which  justified  a revision  of  the wage structure.  In effect  this  decision means  that  in  case of employees of  the  class  mentioned therein  it may be possible to take into account even  those concerns  which are engaged in ’entirely different lines  of business for the work of employees of this class is more  or less similar in all concerns.  We are in agreement with this view and the argument therefore urged on behalf of the appe- llant  company  cannot  prevail  so  far  as  clerical   and subordinate staff are concerned: It  appears  however  that a mistake has been  made  by  the tribunal  in respect of subordinate staff.  The  subordinate staff   in  the  appellant  company  consists  of   drivers, watchmen,  peons, cleaners and, sweepers.  According to  the system  prevailing  in the company..  drivers  and  watchmen stood  by  themselves  and  had  separate  scales.    Peons, cleaners  and  sweepers were however in the same  scale  and were  treated similarly in this company.  What the  tribunal has done is to prescribe one scale for drivers another for 25 watchmen, peons and cleaners and a third for sweepers,  thus distributing the system prevailing in the appellant  company without  any  reason  given  for it.  It  appears  that  the tribunal  made a mistake inadvertently when it said that  in this company the scales of watchmen, peons and cleaners  had been uniform.  That was in fact not so and the  respondents’ counsel  also  fairly admits it.  In  the  circumstances  we direct  that the order of the tribunal fixing the  scale  of 50-3-77-4-85  for  watchmen, peons and  cleaners  will  only apply  to watchmen and not to peons and cleaners.   We  also order  that the scale of 40-2-58-373 will apply not only  to sweepers  but  also  to  peons  and  cleaners.   The  appeal therefore  with  respect to clerical staff  and  subordinate staff  must fail except as to the modification  pointed  out above. We  now come to dearness allowance for clerical  staff.   We have  already indicated that dearness allowance was  revised by agreement in 1954 with respect to clerical staff, and the revision resulted in reduction.  What the tribunal has  done is to set aside the agreement of’ 1954 and to bring back the system   of  dearness  allowance  prevailing   before   that agreement.   In  the  circumstances we cannot  see  how  the system now introduced by the tribunal which is also more  in consonance with the pattern of dearness allowance prevailing in  Bombay and which was in force in the  appellant  company itself  before  1954  can be  successfully  challenged.   We

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therefore  reject  the contention of the appellant  in  this behalf We  now  come to provident fund.  It appears  that  in  this company  there is a scheme of gratuity as well as  provident fund.   Originally, the rate of provident fund  contribution in  this company was 8 1/3 per centum of the basic  pay  but from  July 1, 1960, the rate has been changed to 6  1/4  per centum  of the gross earning i. e. basic pay  plus  dearness allowance,  on  the application of  the.Employees  Provident Funds  Act, (No.  XIX of 1952) and the  Employees  Provident Funds 26 Scheme, 1952, to this industry.  What the tribunal has  done is  to  fix the contribution at 8 per centum  of  the  gross earnings  (i. e. basic pay plus dearness allowance)  instead of the present rate of 6 1/4 per centum.  This has been done on  the sole ground that a technical committee had  reported some  time before the tribunal made its award that the  rate should  be raised to eight per centum of the gross  earnings (i.e.  basic  pay plus dearness  allowance).   The  Tribunal therefore increased the provident fund contribution to eight per   centum  on  the  ground  that  that   percentage   was recommended  by  the technical committee  after  a  thorough study  of the problem from all points of view and it  should be adopted by well-established and prosperous concerns  like the  appellant, though the tribunal was not unaware  of  the fact that this was not the rate generally prevalent in  that region.   It  is  urged on behalf of  the  respondents  that legislation is under contemplation in this respect; but  the fact  remains  that no law has so far been made  making  any change  in the rate of contribution.  We see no  reason  why simply  because  some recommendation, which is still  to  be implemented,  has  been  made  by  a  Committee,  that   the contribution should be increased to eight per centum in  the case of the appellant company only, when the general rate is only  6 1/4 per centum.  In the circumstances, this part  of the  award must be set aside and the rate of provident  fund contribution  so far as the appellant company  is  concerned should remain at 6 1/4 per centum of the gross earnings (i.  e. basic pay plus dearness allowance) as at present. We  now come to the question of adjustment.  The  contention on  behalf of ’the appellant is that when wage  scales  were introduced in the appellant company, they were granted on  a generous  scale  and  there  was  therefore  no  reason  for adjustment  in the manner in which the tribunal has done  in this  case,  for it is not usual to grant  adjustment  where wage scales already existed, though adjustment is granted 27 when wage scales are fixed for the first time by  tribunals. On  the  other  hand,  it is  contended  on  behalf  of  the respondents  that industrial tribunals have  been  granting, adjustments even where wage scales existed formerly and that the grant of adjustment is not limited to those cases  where wage  scales are being, introduced for the first  time.   In this  connection,  reliance  was placed  on  behalf  of  the respondents  on a number of awards which were listed in  Ex. U-15.   We asked parties to give an agreed statement  as  to what  these awards provided in the matter of adjustment  and whether  they  showed that adjustment had  been  granted  by industrial tribunals even where there were wage scales  from before.  Such an agreed statement has been filed.  The large majority  of the awards listed in Ex.  U-15 show  that  they are  cases where wage scales were being fixed for the  first time  and adjustment was therefore granted whether point  to point  or in such other manner as the  tribunals  considered

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just  on the facts and circumstances of each case.  In  some of the cases, however, it appears that adjustment was grant- ed  even  though  there  were  previous  scales  of  pay  in existence.  The ground for such grant of adjustment seems to have been that the previous scales were found to be low  and the increments prescribed thereunder ’were particularly low. In  the   circumstances, the tribunal was of the  view  that adjustment  should  be granted even though  there  had  been previous scales of pay. A  review  therefore  of the cases cited on  behalf  of  the respondents  shows  that generally adjustments  are  granted when  scales  of wages are fixed for the  first  time.   But there  is  nothing  in  law to  prevent  the  tribunal  from granting  adjustment  even  in cases  where  previously  pay scales were in existence; but that has to be done  sparingly taking  into  consideration the facts and  circumstances  of each  case.  The usual reason for granting  adjustment  even where 28 wage   scales  were  formerly  in  existence  is  that   the increments   provided  in  the  former  wage   scales   were particularly  low  and  therefore  justice-  required   that adjustment should be granted a second time.  In the  present case,  however, grades of pay for clerical staff which  were existing previously provided increments from Rs. 5/- to  Rs. 10/-  per  year, which was in accordance with  the  rate  of increments  prevailing  generally  in the  region  for  such staff.  Further in the case of unskilled workshop  employees and subordinate staff the previous rate of increment in  the appellant  company was comparatively on a generous scale  as compared to even such companies as Dumex Private Limited and Greaves Cotton Company.  The same could be said of the semi- skilled  grade and even of the skilled grade  previously  in force  in. this company.  In the circumstances, it seems  to us  that  there is no justification for  adjustment  in  the manner provided by the tribunal when new scales are fixed in the present case, and all that should be reasonably provided in  the  matter of adjustment is that when  an  employee  is brought on to the new scale his pay should be stepped up  to the next step in the new scale in case there is no such  pay in the new scale.  We ought to add that in making the  order of  adjustment the tribunal did not consider the  merits  of the  rival contentions from this aspect.  In a case of  this kind  we  do  not think that  adjustment  should  have  been ordered  almost  as  a  matter  of  course.   Nor  have  the respondents  satisfied us that a case has been made out  for granting adjustments even when a comparatively generous rate of increment was in force in this company previously and the company  was  paying the highest wages in its  own  line  of business.  We are therefore of opinion that the order as  to adjustment should be modified as above. The last point is with respect to clarification.  So far  as that  is  concerned,  the  parties  agreed  that  after  the publication of Part I of the award the 29 company   will   classify  its  employees   and   send   its classification  to the sabha (i. e. the union).   The  sabha will then file its objection if any and finally the disputed cases  will  be  decided  by  the  tribunal.   The  tribunal therefore  did  not go into the question  of  classification when  it gave the award under appeal, though there are  some observations in the award which appear to have some  bearing on the question of classification.  However, in view of  the fact  that  the tribunal has not gone into the  question  of classification at this stage any tentative observations made

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by  it would not affect the agreement between  the  parties, viz,.  that  the  employees will in the  first  instance  be classified  by the appellant company and the  classification will  be  sent  to the union which will have  the  right  to object and thereafter the disputed cases will be decided  by the  tribunal.  ln  view of this agreement  no  question  of classification arises at the present stage. We therefore partly allow the appeal and set aside the order of  the  tribunal  with respect to  workshop  employees  and remand  the case for fixing their wages in the light of  the observations made by us in this judgment.  We also set aside the  order  with respect to provident fund  and  reduce  the contribution to 61 per centum.  We also set aside the  order as to adjustment which shall be carried out hereafter in the manner  provided  in this judgment.  The appeal  as  regards salary  in the case of clerical staff and subordinate  staff (except  for  the  modifications:  subordinate  staff),  and dearness  allowance  to  the clerical staff  fails  and.  is hereby dismissed.  We may add that the new scales of pay  to be  fixed on remand shall take effect from July 1, 1960,  as already ordered in the present award.  In the  circumstances the parties will bear their own costs. Appeal allowed in part. 30