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PETITIONER: AHMEDABAD MILL OWNERS’ ASSOCIATION ETC.

       Vs.

RESPONDENT: THE TEXTILE LABOUR ASSOCIATION

DATE OF JUDGMENT: 10/08/1965

BENCH: GAJENDRAGADKAR, P.B. (CJ) BENCH: GAJENDRAGADKAR, P.B. (CJ) WANCHOO, K.N. HIDAYATULLAH, M. RAMASWAMI, V.

CITATION:  1966 AIR  497            1966 SCR  (1) 382  CITATOR INFO :  RF         1969 SC 360  (21)  RF         1972 SC1234  (18)  RF         1972 SC2273  (15)  R          1972 SC2332  (64,72)  R          1978 SC 828  (20)  R          1978 SC1113  (18,26)  R          1980 SC  31  (15,22)  R          1986 SC 125  (8,19)  R          1992 SC 504  (27)

ACT: The Bombay Industrial Relations Act (11 of 1947), ss. 42 and 73-Payment  of  dearness allowance based on cost  of  living index-Principles.

HEADNOTE: After  the 2nd World War broke out the industrial  employees at  Ahmedabad, who had organised themselves as  the  Textile Labour  Association (Respondent herein) raisd a  demand  for payment  of  dearness allowance to meet the cost  of  living which  had  shot up as a result of the War, and  the  demand became  the subject-matter of arbitration and an  ,award  by the  Industrial Court at Bombay.  As a result  of  petitions filed  by  the  Parties  and  references  made  to  it,  the Industrial  Court had been giving directions, from  time  to time,  regarding the payment of dearness allowance  awarded, on the basis of cost of living index number, with 1926-27 as the  base year.  In the Second Five Year Plan, the  Planning Commission  recommended  that the series of cost  of  living indices  should  be  revised, and  accordingly,  the  labour Bureau  and  the  Central Statistical  Organisation  of  the Government of India undertook family living surveys in 1958- 59.  One of the centers chosen was Ahmedabad and the Govern- ment  of India began to publish consumer price index  number for  the city -of Ahmedabad from 1960 with 1960 as the  base year.   The  Government  of India  also  advised  the  State Government  to remove various anomalies in the State  series of  the price index number and publish a new series  linking the State series with that of Government of India, with 2.98 as the linking factor.  The Government of Gujarat set up  an

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expert  Committee  to  advise it on the  question  and  that Committee made recommendations for the removal of anomalies and  also  suggested  3.17 instead of 2.98  as  the  linking factor.   In November 1963, the Government accepted the re- commendations for   removing  the a normalies  and  adjusted the consumer price index number, and the appellants paid the dearness allowance according to the adjusted consumer  price index   number  under  protest.   In  February   1964,   the Government  of Gujarat announced its decision to  adopt  the linking  factor at 3.17. The appellants were not willing  to pay  dearness  allowance according to  the  converted  price index number in spite of a representation by the  employees, and  so,  the dispute was referred to the  Industrial  Court under  s. 73 of Bombay Industrial Relations Act, 1946.   The industrial  Court  decided that the  appellants  should  pay dearness allowance to their employees for the month of March 1964  and for subsequent months on the consumer price  index numbers  for  Ahmedabad published by  the  State  Government since February 1964 by using the index numbers in the series for  Ahmedabad compiled by the Labour Bureau at  Simla,  and the  linking factor of 3.17 adopted for linking that  series to  the State series with the old base. and gave  directions as to the manner of paying the dearness allowance. In their appeal to this Court, the appellants contended that (i)  the  reference was invalid because, before  making  the reference  to  requirements of s. 42, which  prescribes  the procedure  which has to be followed by the employer  or  the employee if either of them wants a change 383 to  be effected in the terms of the existing award, had  not been  complied  with;  (ii) the Industrial  Court  erred  in overruling  their contention that the new  survey  sufferred from  two  major infirmities, (a) inadequacy of  the  sample size, and (b) impropriety of the method of interview adopted by  the investigators; (iii) the linking factor of 3.17  was improper;  and  (iv) the Industrial Court was not  right  in coming  to. the conclusion that the additional burden  which its  award would impose upon the  appellants. would  not  be beyond their financial capacity.     HELD:  (i) The dispute must be treated as an  industrial dispute,  notwithstanding the fact that s. 42 had  not  been complied  with, and Industrial Court was right in coming  to the  conclusion that the objection raised by  the  appellant against  the competence of the reference was  mis-conceived. [398 F; 399 E]     The  Act  is a comprehensive piece  of  legislation  and makes  elaborate’ provision for the regulation of  relations between  employers and employees and for the  settlement  of disputes between them.  Section 73 deals  with the powers of the  State  Government to make a reference and as  such,  it could  not  have been intended that those powers are  to  be controlled   by  s.  42.  Section 42 provides  that,  if  an employer or employee intends to effect any change in respect of  certain industrial matters, he will have to give  notice of such intention to the representative of the employees  or tie   employer  respectively.  The  section  can   have   no application to cases where the State Government itself wants to make a reference.  The meaning of the non-obstante clause with which s. 73 opens also unambiguously indicates that the power  of  the  State  Government to  make  a  reference  is controlled   by  any  other  provision  in  the  Act.    The definition  of  "industrial dispute" in s. 3(17) is so  wide and  comprehensive,  that, even If an, award  is  subsisting between  the parties, if a difference arises  between  them, the  said difference would amount to an  industrial  dispute

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for the purpose of s. 73 and a notice of change need not  be given,  either by the employer or by the employee.   It   is true  that  the power conferred on the State  Government  to make a reference is. not absolute or unqualified, but  could be  exercised  only if one or the other  of  the  conditions specified in sub-ss. (1), (2) or (3) of s. 73 is  satisfied. But  once  the State Government is satisfied, its  power  to make  a  reference is not limited to cases where  notice  of change  has  been  given  by the parties  under  s.  42,  On principle  also,  the  conferment of  power  on  the  State, Government is fully justified, because, if as a result of  a dispute  between the employer and his employees,  a  serious outbreak of disorder, or a breach of public peace is  likely to  occur,  or a serious or prolonged hardship  to  a  large section  of  the community is likely to be caused,   or  the industry  concerned is likely to be affected  adversely,  it would  be  idle  to require that even in the  face  of  such serious  danger, the procedure prescribed by s. 42  must  be followed before reference can be made under s. 73. [396  DF; 397 E-H; 398 C-E, G; 399 C-B]     (ii)   (a):  The  appellants  were  not   justified   in contending that the inadequacy of the size of the sample  in relation  to  the  universe of the  working  class  families vitiated the enquiry. [414 H]     From the Report of Family Living Survey among Industrial workers  at Ahmedabad, 1958-59, it appears that  the  survey and field work was the result of the cooperation of  several expert  institutions, official as well as non-official.  and was based on accepted principles and method is.  The size of the  sample was determined in the light of  the  permissible margin  of  error  and was selected by  the  application  of scientific   sampling  techniques  and   according  to   the principle  that  it is the quality of survey  that  is  more important,  not  so  much the size of the  sample.   If  the quality  of  investigation has improved, and the  method  of working out the sample’ 384 survey  has made very great progress, then, it would not  be correct  to say that because the size of the sample  in  the survey  was  smaller as compared to the size of  the  sample taken  in  1926-27,  the  inadequacy  of  the  size  on  the subsequent   occasion   introduces  an  infirmity   in   the investigation itself.  [409 H; 410 G; 412 D, E, G; 413 D-E]     (b)  ’the  Industrial Court was right in  rejecting  the appellants’  contention  that the impugned survey  ,rut  the index  constructed  as  a  result  it,   suffered  from  the infirmity that the investigation was conducted in the survey by 1he interview method,  [416 D]     Having  regard  to the fact that a majority  of  working class  population  in  India is  illiterate  the  method  of interview is the only method which can be adopted.   Besides according  to  expert  opinion, the  interview  methods,  if properly  adopted gives better results than the  alternative method     of   supplying   account   books   and    written questionnaire.  [416 A-C]    (iii)  As  the  appellants  had  not  placed  before  the Industrial  Court any material to justify  their  contention that  for determining the linking factor. the  behaviour  of prices  for two or three years should have been studied,  it could  not  be said that the Industrial Court  committed  an error in upholding the decision of the Government of Gujarat that the linking factor should be 317.  [419 F-G; 420]     The Industrial Court had to choose between two  courses. One  was to  work out an entirely new scale of  basic  wages rounded not on the pre’war level of 1939 but on the cost  of

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living  of  1960  as the base year and  .to  award  dearness allowance thereafter.  The Industrial Court thought that  to adopt that course might conceivably create a large number of new  problems,  disturbing  industrial peace  and  would  be outside its terms of reference.  Therefore, it approved  the other course of linking the State series with the new series to maintain continuity, which was the method adopted by  the Government of Maharashtra also.  [418 E, G; 419     (iv)  The  appellants  had failed  to  substantiate  the contention that the -additional burden would be beyond their capacity to pay.  [429 E]     The claim of the employees for a fair and higher wage is undoubtedly, based on the concept of social justice, and  if employees  are paid better wages which would enable them  to live  in  comfort  and discharge their  obligations  to  the members  of their families in a reasonable way,  their  work would  show an appreciable increase in efficiency.   On  the ether  hand. industrial adjudication must take into  account the  problem  of  the  additional  burden  which  such  wage structure  would  impose  upon  the  employer  and  consider whether  the employer can reasonably be called upon to  bear such burden.  The task of constructing a wage structure must be tackled on the basis that such wage structure should  not be  changed from time to time.  It is a long-range plan  and in  dealing  with  the  problem,  which  is   difficult  and delicate  the  financial position of the  employer  and  the future  prospects of the industry and the additional  burden which  may  be  imposed on the consumer  must  be  carefully examined.   A  broad  and  overall  view  of  the  financial position  of  the employer must be taken  into  account  and attempt  should always be made to reconcile the natural  and just claims of the employees for a fair and higher wage with the  capacity of the employer to pay it, and in  determining such.  capacity,  allowance must be made  for  a  legitimate desire of the employer to make a reasonable profit.. Unusual profit  or loss should not be allowed to play a major  role. It  is  true that normally, once a wage structure  is  fixed employees  are reluctant to face a reduction in the  content of  the wage packet; but like all other problems  associated with  industrial adjudication, the decision of  the  problem must  also  be  based on the major  consideration  that  the conflicting                             385 claims  of  labour  and  capital must  be  harmonised  on  a reasonable  basis; and so, if it appears that  the  employer cannot  really bear the burden of the increasing wage  bill, industrial  adjudication cannot refuse to examine  his  case and  should  not  hesitate  to give  him  relief  if  it  is satisfied that if such relief is not Even, the employer  may have to close down his business. The last principle, however does  not  apply  to  cases where  the  wages  paid  to  the employees  are  no better than the basic minimum  wage.   If what  the employer pays to his employees is just  the  basic subsistence wage and if he cannot afford to pay it, he would not  be  justified in carrying on his industry.   Since  the wages paid to the textile employees at ,Ahmedabad cannot  be regarded as subsistence wages or bare minimum , it would not be  open  to the respondent to contend that  the  appellants must  pay the wages whether the employers can afford to  pay them or not.  If it is shown that the appellants cannot bear the  burden and that the implementation of the  award  would inevitably  have  extremely  prejudicial  effect  upon   the continued  existence of the industry itself, there would  be justification for revising the scale of dearness  allowance. In  considering the financial position of the appellants  it

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would not be appropriate to rely unduly on the profitability ratio  which has been adopted by the Bulletin issued by  the Reserve  Bank  of  India dealing  with  the  cotton  textile industry, or other single-purpose statements produced by the parties.   Industrial  adjudication  should  not  lean   too heavily  on  such statements whilst attempting the  task  of deciding  the  financial  capacity of the  employer  in  the context  of  the wage problem.  Taking a  broad  view  which emerged  from  a consideration of all  the  relevant  facts, there is little doubt that the productivity of the  industry is increasing and that the demand for textile products  will never  decrease  in  future.  It is true  that  the  textile industry  at  Ahmedabad  has been leaning  very  heavily  on borrowing%  but  that is a peculiar feature of  the  textile industry  at  Ahmedabad.  It helps the  development  of  the industry and so the extent of borrowings, cannot be  pressed into  service for the purpose of showing that the  financial position   of  the  industry  is  unsatisfactory.   On   the contrary,  the harmonious relations which have  consistently subsisted  between  the employer and the.  employees,  would help  the  textile industry in Ahmedabad  in  its  prospects towards     speedy economic growth. [420 C-E, F-G; 421  A-C. E-G, H-; 422 C, G-H; 426 B, F; 427 G-H; 428 A, D; 429 D]

JUDGMENT: CIVIL  APPELLATE JURISDICTION : Civil Appeals Nos.  167  to, 173, 537 and 538 of 1965. Appeals  by special leave from the award dated  October  26, 1964 of the Industrial Court Gujarat in Reference (I.C.) No. 67 of 1964. M.   C.  Setalvad, R. J. Kolah, 1. M. Nanavati, J. B.  Dada- chanji, O. C. Mathur and Ravinder Narain, for the  appellant (in CA. No. 167 of 1965). R.   J.  Kolah,  I.  M. Nanavati, J. B.  Dadachanji,  O.  C. Mathur  and Ravinder Narain, for the appellants (in  C.  As. Nos. 168 and’ 170 of 1965). N.   A. Palkhivala, 1. M. Nanavati, J. B. Dadachanji, O.  C. Mathur  and Ravinder Narain, for the appellants (in  C.  As. Nos.. 169 and 173 of 1965). I.   M.  Nanavati,  J.  B.  Dadachanji,  O.  C.  Mathur  and Ravinder Narain, for the appellants (in C. As.  Nos. 171 and 172 of 1965). 386 J.   B.   Dadachanji, O. C. Mathur and Ravinder Narain,  for the appellants (in C. As.  Nos. 537 and 538 of 1965). S.   R.  Vasavada, N. M. Barot, N. H. Shaikh, R. M.  Shukla, A.   N. Buch and D. T. Trivedi, for the respondents. C.   K. Daphtary, Attorney-General, K. L. Hathi and B. R. G. K. Achar, for intervener NO. 1. G.   .B. Pai, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for intervener No. 2. G.   Ramanujam, for intervener No. 4. B.   Narayanaswami,  J.  B.  Dadachanji, O.  C.  Mathur  and Ravinder Narain, for intervener No. 5. I.   M.  Nanavati,  J.  B.  Dadachanji,  O.  C.  Mathur  and Ravinder Narain, for intervener No. 6. H. K. Sowani and K. R. Chaudhuri, for intervener No. 7. The Judgment of the Court was delivered by Gajendragadkar, C.J. This is a group of seven appeals  which arise from an industrial dispute between the appellants, the Ahmedabad  Millowners’  Association, Ahmedabad, and  67  em- ployers  on  the one hand, and the respondent,  the  Textile Labour  Association, Ahmedabad, on the other.  This  dispute

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was referred by the Government of Gujarat to the  Industrial Court,  Gujarat, under section 73 of the  Bombay  Industrial Relations  Act, 1946 (No.  XI of 1947)  (hereinafter  called ’the   Act’).   In  making  the  order  of  reference,   the Government stated that it was satisfied that the  industrial dispute  in question was not likely to be settled  by  other means.   The  dispute itself consisted of  three  questions. These questions have been thus stated in the reference :"(1) Whether  under  the award of the Industrial  Court,  Bombay, dated the 2nd March, 1950, in Reference (1C) No. 189 of 1949 (as subsequently modified) read with award of the Industrial Court  dated the 27th April, 1948, in Revision Petition  No. Misc.  1 of 1947, the Ahmedabad Millowners’ Association  and the emploers mentioned in the Annexure are bound to  payness allowance  to  their employees on the Consumer  Price  Index Numbers  for  working class for Ahmedabad published  by  the State  Government since February, 1964, by using  the  index numbers  in the series for Ahmedabad compiled by the  Labour Bureau,  Simla, and the linking factor of 3.17  adopted  for linking that series to the State series with the old base; 387               (2)   If not, whether the said Ahmedabad Mill-               owners’   Association   and   the    employers               mentioned  in the Anexure should pay  dearness               allowance  to their employees for March,  1964               and   subsequent  months  in  terms   of   the               aforesaid   awards,  by  treating  the   index               numbers   for  working  class  for   Ahmedabad               published   by  the  State  Government   since               February,  1964, as the index numbers  in  the               State  series  compiled on the  basis  of  the               family budget survey made in 1926-27;               (3)   If  not, how the dearness  allowance  to               the  aforesaid  employees for March  1964  and               onwards  should be paid on the  index  numbers               for   Ahmedabad   published   by   the   State               Government since February, 1964". The  Industrial  Court has answered the  first  question  in favour   of  the  appellants,  whereas  the  two   remaining questions  have been answered in favour of  the  respondent. In  the  result, the appellants have been  directed  to  pay dearness  allowance  to  their employees for  the  month  of March, 1964 and for subsequent months on the consumer  price index  numbers for working class for Ahmedabad published  by the  State  Government since February, 1964, (by  using  the index  numbers in the series for Ahmedabad compiled  by  the Labour Bureau, Simla, and the linking factor of 3.17 adopted for  linking  that series to the State series with  the  old base)  at  the rate of 2.84 pies per day for  rise  of  each point  in the cost of living index number over  the  pre-war figure  73.  The Industrial Court has further directed  that as  per the award in Miscellaneous Application (1C-G) No.  1 of 1960, 75% of the average dearness allowance of the  first six  months  of  1959, i.e., Rs. 63-15-9  per  month  of  26 working days, shall be consolidated with the basic wage  and the difference between the dearness allowance as worked  out as  indicated  and  the said sum of  Rs.  63-15-9  shall  be continued to be paid as dearness allowance.  The other terms and conditions in regard to payment of wages, including  the dearness  allowance,  shall continue as under  the  existing award.   The Industrial Court has made it clear  that  these directions  should be given effect to from 1st  of  January, 1965  and the difference between what is paid and  what  has become  payable under the present award shall be paid on  or before   April  30,  1965.   It  appears  that  before   the

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Industrial  Court an agreement had been reached between  the Fine  Knitting Co. Ltd. of Ahmedabad and the Textile  Labour Association, and the award has, therefore, provided that the directions  issued  by it shall apply only to  the  spinning department of the Fine Knitting Co. and not to the 388 hosiery  department.   It  is against this  award  that  the appellants  have  come to this Court by special  leave.   On January  5,  1965,  while  granting  special  leave  to  the appellants,  this Court directed that the statements of  the case should be dispensed with and the appeals be listed  for hearing  in the week commencing March 8, 1965.  That is  how these appeals have now come for final disposal before us. Before  dealing with the points raised by the appellants  in these   appeals,  it  is  necessary  to  set  out   somewhat elaborately  the  previous history of the  present  dispute. The story about the payment of dearness allowance to textile industrial employees at Ahmedabad takes us back to the  time when the Second World War broke out in September, 1939.   As is  well-known,  as a result of the said War,  the  cost  of living shot up; and in consequence, the industrial employees at  Ahmedabad  who had organised themselves as  the  Textile Labour  Association, Ahmedabad, raised a demand for  payment of  dearness  allowance.  This demand  became  the  subject- matter  of  arbitration by the Industrial  Court  at  Bombay (Case No. 1 of 1940).  The Industrial Court had to consider, inter  alia, two major questions; the first was as  to  what was the extent of the rise in the cost of living  consequent upon  the  Second World War; and the second was  as  to  the extent  and  manner in which the said rise in  the  cost  of living  should  be neutralised by the  payment  of  dearness allowance.   The  Industrial Court examined  the  matter  at great length and came to the conclusion that for the purpose of determining the quantum of dearness allowance to be  paid to  the  employees, it would be reasonable to  rely  on  the working class budget inquiry which had been conducted by the Government  of Bombay between August, 1926 and  July,  1927. Another  similar  inquiry  had been conducted  by  the  same Government in 1933-35, but the Industrial Court preferred to base its conclusions on the first inquiry.  On the basis  of the  cost  of living index taken as 100 for  the  base  year 1926-27,  the  index for August 1939 which stood at  73  was accepted as datum index, so that the rise in cost of  living over the datum index of 73 had to be neutralised by  payment of dearness allowance to the employees. Having  reached this conclusion on the first  question,  the Industrial  Court examined the problem as to the extent  and method  by  which the rise in the cost of living  should  be neutralised.  On this question, its conclusion was that  for 11 points rise (which is equivalent to a rise of 15%) in the cost  of living for the month of December, a cash relief  to the extent of 10 per cent of the 389 average  wage,  i.e.  Rs. 3-8-0  per  employees,  should  be awarded  for  the  month of December and  a  similar  relief proportionately  determined  should  be  awarded  for  other months.   It  was  urged before the  Industrial  Court  that relief could be granted to the employees in kind rather than in  cash;  but this contention was negatived by  the  Court, though  it expressed a hope that the employers should  start cost price grain shops at convenient centres for the benefit of the employees.  That, in substance, is the result of  the proceedings in Case No. 1 of 1940.  It is with the  decision of this dispute that the story about the payment of dearness allowance  under an award began in Ahmedabad in  respect  of

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textile labour.  It appears that as a result of this  award, 66-2/3 per cent neutralisation was allowed. This  award  continued to be in  operation  till  September, 1941.   On  August 12, 1941, an agreement was  entered  into between  the. appellants and the respondent by which it  was resolved  that  the  dearness allowance to be  paid  to  the employees  in the member Mills of the appellant  Association be  raised by 45 per cent from the month of July, 1941,  and in accordance with this agreement, an award was made by  the Industrial Court on September 15, 1941.  As a result of this award,  neutralisation came to be effected to the extent  of 96%  on  the average wage over the pre-war  cost  of  living index  of  73  in  August, 1939,  and  to  that  extent  the respondent  gained.   We  have  already  noticed  that   the neutralisation  which was effected by the earlier award  was 66-2/3 per cent. Two  years  thereafter, the appellant  Association  filed  a petition (No.  1 of 1943) for a substantial reduction in the quantum  of dearness allowance.  It urged that in  the  year 1943,  the  textile  industry  at  Ahmedabad  had   suffered considerable  loss in its profits, and so, it was  necessary that  the  dearness  allowance fixed by  the  consent  award should  be reduced.  When the matter was considered  by  the Industrial  Court, it was discovered that the claim made  by the   appellant   Association  was  not   substantiated   by sufficient  or  satisfactory data in the form  of  published balance-sheets  for  the year 1943.  The  Industrial  Court, therefore,   refused  to  interfere  with  the  award,   but permitted  the  appellant  Association  to  raise  the  same dispute in April, 1944 if it thought necessary to do so.  No such  application  was,  however,  made  by  the   appellant Association in 1944, with the result that the consent  award passed on September 15, 1941, continued to be in operation. The  said consent award had provided that the  member  mills were to pay the dearness allowance prescribed by it till the termi- 390 nation  of the Second World War; and so, as soon as the  war came  to  an end, the member mills stopped  the  payment  of dearness  allowance  with  effect from  May  8,  1945.   The respondent  then  filed Petition No. 1 of  1945  before  the Industrial   Court  asking  for  a  direction  against   the appellant Association for payment of’ the dearness allowance on  the same scale as was then prevailing for  three  months after  May  8,  1945.   This  prayer  was  .granted  by  the Industrial Court.  That is how matters stood as a result  of the order passed on Petition No. 1 of 1945. Meanwhile, the respondent gave a notice of change on May 20, 1945  and  demanded continuance of the payment  of  dearness allowance  until the working class cost of living index  for Ahmedabad stood above 73.  It suggested that the quantum  of dearness  allowance should be related to the cost of  living index  as  awarded by the Industrial Court Award  dated  the 26th April, 1940, and revised by the subsequent Award  dated the  15th, September, 1941.  While making this  demand,  the respondent  made it clear that this demand was made  without prejudice  to the claim of the employees for a  revision  in the  entire  wage  structure.  It appears  that  during  the course of these proceedings, it was urged before the  Indus- trial  Court that the rise in the cost of living  should  be computed  not  with reference to the index figure of  73  in August,  1939,  but with reference to the figure of  100  in 1926-27.   This  contention was, however,  rejected  by  the Industrial  Court.   By  its  award,  the  Industrial  Court directed  that  neutralisation  should be  effected  to  the

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extent  of 76 per cent.  As a result of this  decision,  the Court awarded Rs. 4 for 11 points rise in the cost of living index. In  1946, the respondent moved for the revision of the  said award  (Revision Petition No. 1 of 1946).  By this  revision petition,  the respondent claimed that the rise in the  cost of  living should be neutralised fully instead of  76%,  and this  claim was based on the allegation that the profits  of the  textile  industry had maintained a high level  and  the reduction in the extent of neutralisation from 96% to 76% in the  award of the previous year had adversely  affected  the employees and they had in fact begun to leave the  industry. It  may  be  pointed out that on all  these  occasions,  the appellant Association urged before the Industrial Court that the  average monthly income and expenditure of  the  textile employees  in Ahmedabad left surplus with them and the  need for  neutralising the rise in the cost of living was not  as much  as was sought to be made out by the respondent.   This contention  has, however, been consistently rejected by  the Industrial Court.  Even so, the claim made by the respondent for increasing the extent of  391 neutralisation was rejected by the Industrial Court, liberty being  reserved  to both the parties to approach  the  Court with a request for continuance or revision of the  allowance at the end of seven months. As  soon  as seven months expired, the  respondent  tiled  a Revision  Petition  (No.  1 of 1947) before  the  Industrial Court  on March 8, 1947.  By this petition,  the  respondent renewed its claim for an increase in the dearness allowance. Meanwhile, the minimum wage for textile employees in  Bombay had been fixed at Rs. 30 and dearness allowance was  awarded to them with the object of neutralising the rise in the cost of  living to the extent of 90% on the minimum wage  of  Rs. 30.  Taking advantage of the fact that the minimum wage  for textile  employees in Bombay had been fixed at Rs.  30,  the appellant  association urged that there was no  occasion  to increase the rate of dearness allowance because the wages of the   employees  had  already  been  increased   under   the standardization scheme which had been adopted in  Ahmedabad. Alternatively,  the appellant Association contended that  if the Court was inclined to revise the dearness allowance,  it should follow the same formula as in Bombay and provide  for neutralisation at the most at 90% on the minimum wage of Rs. 28 in Ahmedabad.  This contention was, however, rejected  by the Industrial Court.  By its award, the Court directed that the  rise in the cost of living over pre-war level of 73  in the  case of the lowest paid employee should be  neutralised to  the extent of 100% and all employees earning Rs. 150  or less a month should be paid at a flat rate.  On arithmetical calculation,  it was found that this rate came to 2.84  pies per  day for rise of each point in the cost of living  index number over the pre-war figure. The  appellant  Association issued a notice on  October  31, 1949,  purporting to terminate this award with  effect  from 1st  January, 1950.  The -round for terminating,  the  award set out by the appellant Association in its notice was  that the  textile  industry in Ahmedabad was  passing  through  a crisis  and that certain mills were completely  closed  down while  others were partially closing down.  It appears  that about that time, the Central Government acting in  pursuance of the recommendations made by the Tariff Board, directed  a 4%  cut in ex-mill cloth prices; and that, according to  the appellant  Association,  led to a crisis  in  the  financial affairs  of the textile industry at Ahmedabad.  It was  also

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alleged  in  the notice that though the  prices  fixed  were uniform,  the  dearness allowance paid was not  uniform  and that  the  member mills of the  appellant  Association  were paying Rs. 15-4-0 more per 392 month  per  employee in dearness allowance at  Ahmedabad  as compared  to that paid to the textile employees  in  Bombay. Arithmetical  calculations showed that as a result  of  this extra payment, the Ahmedabad mills had to bear an additional burden  of Rs. 238 lakhs in 1949 as compared to  the  burden bore by the Bombay textile mills. Before  the notice thus issued by the appellant  Association came  into force, the respondent gave a notice of change  to the  mills  to  continue  to  pay  the  dearness   allowance according  to  the existing award; and since  no  settlement could  be reached between the parties, a reference was  made to the Industrial Court.  As a result of these  proceedings, however,  neither  party  scored a victory,  and  the  award directed  that payment of the dearness allowance  should  be made  in  accordance  with the  orders  passed  in  Revision Petition No. 1 of 1947.  Since the date when this order  was made,  the terms of the award in Revision Petition No. 1  of 1947 have been in operation between the parties. Meanwhile,  the  Central Wage Board for the  Cotton  Textile Industry was constituted.  One of the points which the  Wage Board  had to consider was the demand made by the  employees for  consolidating a part of the dearness allowance  in  the basic  wage.   The Wage Board recommended that  75%  of  the dearness allowance should be consolidated in the basic wage, and the remaining 25% should bear a flexible character.  The Board also made other recommendations which are not relevant for our purpose.  In consequence of the recommendation  made by  the  Board  as  to the  consolidation  of  the  dearness allowance,  an agreement was reached between  the  appellant Association and the respondent, as a result of which a joint application  (No.  1 of 1960) was made by both  the  parties under s. 11 6A of the Act; and on this joint application  an award  by  consent  was passed directing  that  75%  of  the average  dearness  allowance of the first 6 months  of  1959 which is Rs. 63-15-9 p.m. of 26 working days should be  con- solidated  with  the  basic wage, and  the  balance  of  the dearness  allowance  should  be paid as worked  out  on  the existing basis.  That is how matters then stood between  the parties. It appears that about this time, there was a growing feeling amongst  both  the  employers and  the  employees  that  the different  series  of  consumer  price  index  compiled  and published  in India were not very satisfactory and  some  of them had become obsolete.  In the Second Five Year Plan,  it was, therefore, recommended that it was desirable that steps should be taken simultaneously with the undertaking of  wage census to institute enquiries for the                             393 revision of the present series of cost of living indices  at different centres.  According to the recommendation made  by the  Planning Commission Report, the Labour  Bureau,  Simla, and  the Central Statistical Organisation of the  Government of  India took steps to conduct fresh family living  surveys among working class and middle class population respectively with  a view to construct the new series of  consumer  price index numbers.  The working class surveys were conducted  at 50  selected  centres  and the middle class  surveys  at  45 centres, 18 centres being common to both.  The work of these surveys  was  commenced in the second half of 1958  and  was concluded  by September, 1959.  One of the centres  selected

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for  this  survey was Ahmedabad.  The  Government  of  India began to publish consumer price index number for the city of Ahmedabad,  having index number 100 for the base year  1960. The publication of these series naturally raised the problem of  arriving at a linking factor between the present  series published  by  the  State  Government  and  the  new  series published  by  the Government of India.  The  Government  of India considered this problem and indicated that 2.98  would be a proper linking factor.  This figure was arrived at as a result  of  taking the annual average of the  monthly  index numbers  of  the State series for 1960 which then  stood  at 298.   For  the  base year of 1960, the figure  of  the  new series was 100 and the linking factor was, therefore,  taken at 2.98. It then appeared clear that there were several anomalies  in regard  to  the collection of prices in  the  State  series. Some  of the items which were specified in such  series  had ceased to exist, whereas quotation for one major item, viz., house rent allowance had been frozen for many years.   After the Government of India began to publish its new series,  it advised’  the Government of Gujarat to stop  publishing  its old  series  and publish the converted index in  its  place. The  Government of India thought that it would be unjust  to the  employees if the conversion were allowed to take  place without removing anomalies of the State series. Faced with this problem, the Government of Gujarat set up an expert Committee under the Chairmanship of Dr. M. B.  Desai. The   terms  of  reference  of  this  Committee  were   thus formulated               "(1)   to   examine  the   validity   of   the               submissions   and  representations   made   to               Government  and to make recommendations as  to               whether  any readjustment is necessary in  the               existing series for Ahmedabad published by the               State Government, and if so, what readjustment               should be made; 394               (2)   to  consider  how  the  new  series   of               Consumer  Price  Index Numbers  for  Ahmedabad               should be linked with the existing series,  so               readjusted  if  found  necessary;  and  in  so               considering,  to take into  consideration  the               factor  that  the  period  of  family   budget               enquiry on which the new series for  Ahmedabad               is based is different from the base period for               the said new series". The  said Committee made a fairly exhaustive  investigation, and made two main recommendations.  The first recommendation involved an addition of 19 points in the overall price index in the State series and the same was fixed at 317 instead of 298 as it stood when the new series and its base period were decided  upon.  The other recommendation which it  made  was that the conversion or the linking factor should be 3.17  as against 2.98 per point in the new series. The Government of Gujarat accepted the first  recommendation and  revised  the index number for the  month  of  November, 1963, by adding 19 points to the figure originally  released by it and stated that its existing series would be  adjusted month  to month by the addition of 19 points  for  adjusting the index for clothing and house rent groups as  recommended by   the  Expert  Committee.   In  regard  to   the   second recommendation,  the  Government took the view that  it  was necessary  to continue publication of the current series  to permit   industry   and  labour  time  to   have   necessary modifications  in the existing agreements,  settlements  and

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awards  made to link up the dearness allowance with the  new series published by the Labour Bureau, Simla.  This decision was  announced by the Government by a Press Note on  January 31, 1964. When  this  decision  of  the  Government  of’  Gujarat  was announced, the appellant Association found that it  entailed considerable additional burden on the textile industry  even so,  it  advised  its  member  mills  to  pay  the  dearness allowance  according  to the adjusted consumer  price  index number  by adding 19 points for the month of January,  1964, under protest.  This protest was expressed by the  President of  the Appellant Association by issuing a press  communique criticizing  the  Government for its  unilateral  and  hasty decision in the matters. On  February  29,  1964, the  Government  of  Gujrat  issued another   Press  Note  by  which  it  accepted  the   second recommendation  made  by the Expert Committed  to  take  the linking factor at 317 instead of 298.  The Press Note  shows that this decision was reached by the Government of  Gujarat in accordance with the  395 advice   received   from  the  Government  of   India.    In consequence  of  this decision, the  Government  of  Gujarat discontinued publication of the cost of living index  number of its 1926-27 numbers from January, 1964.  This decision of the Government raised a storm of protest from the  appellant Association.   A  general  meeting of  the  members  of  the appellant  Association  was held on March 30, 1964,  and  it passed a resolution to the effect that the discontinuance of the  publication  of  the  cost  of  living  index  by   the Government  of Gujarat made it impossible for the  appellant Association  to comply with the terms of the existing  award in  respect  of  the payment of dearness  allowance  in  the manner  prescribed  by  the  award  and  so,  the  appellant Association  advised its members to pay to  their  employees dearness allowance for the month of March, 1964,  calculated on  the  basis of the last published index  number  for  the month of December, 1963 in the State’s 1926-27 series and to continue to pay dearness allowance for succeeding months  on the  basis  of the same index number till such time  as  the Government  of Gujarat resumed publication of index  numbers in the said series.  According to the appellant Association, as a result of the decision of the Government of Gujarat, an unbearable  burden  would be imposed on the members  of  the appellant  Association in the matter of dearness  allowance; and so, it was not prepared to accept that decision. When  the  appellant  Association  adopted  this   attitude, the  .Secretary of the respondent Association expressed  his profound   sorrow   at  the  decision   of   the   appellant Association,  and by his letter addressed to  the  appellant Association  on April 3, 1964, he requested the  members  of the appellant Association to pay dearness allowance to their employees according to the converted number published by the Government  of  Gujarat.  This letter was accompanied  by  a resolution passed by the respondent Association in which  it set  forth  its  version of the financial  position  of  the members of the appellant Association and the justice of  the claim  made  by the employees for the payment’  of  dearness allowance in accordance with the decision of the  Government of  Gujarat.  ’no appeal thus made by the Secretary  of  the respondent   Association  did  not,  however,  receive   any sympathetic  response  from the appellant  Association;  and that  made  it necessary for the Government  of  Gujarat  to refer the present dispute to the Industrial Court at Gujarat under  s.  73  of the Act.  That,  broadly  stated,  is  the

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background and the previous history of the present dispute. At   the  hearing  of  the  present  reference  before   the Industrial  Court  the appellants had  urged  a  preliminary objection against 3 9 6 the  competence  of the present reference.   They  contended that  the  reference  under s. 73 of the  Act  was  invalid, because, before making the reference, the requirements of s. 42 of the Act had not been complied with.  The argument  was that, in substance, the reference relates to a change in the terms  of  the award binding between the  parties,  and  for effecting  such a change, the procedure prescribed by S.  42 and the other sections in Chapter VIII of the Act has to  be complied with.  It is common ground that the -said procedure has not been followed and the Government of Gujarat has made the present reference in exercise of the power ,conferred on it  by  s.  73.   The  Industrial  Court  has  rejected  the appellants’  contention and has held that the  reference  is valid.  Mr. Setalvad for the appellants has urged before  us that the view taken by the Industrial Court is not justified by the terms of S. 73 read along with s. 42 of the Act. The  Act was passed by the Bombay Legislature in  1947.   It purports   to  regulate  the  relations  of  employers   and employees,  to make provision for settlement  of  industrial disputes, and to provide for certain other purposes.  It  is a comprehensive piece of legislation and it makes  elaborate provisions for the regulation of relations between employers and  employees  and for the settlement of  disputes  between them.   Section  42  of the Act provides  for  a  notice  of change.   It  is unnecessary to cite the provisions  of  the said  section, because for the purpose of dealing  with  the point raised by Mr. Setalvad, it would be enough if we state the  sum and substance of S. 42 (1) & (2).  Section  42  (1) provides that if an employer intends to effect any change in respect of an industrial matter specified in Schedule II, he will have to give notice of such intention in the prescribed form  to  the  representative  of  employees.   Similarly,s. 42(2)provides  that  if  an employee  desires  a  change  in respect of an industrial matter not specified in Schedule  I or  III, he shall give notice in the prescribed form to  the employer  through  the  representative  of  employees.   Mr. Setalvad relies on the fact that Entry 9 in Sch.  II relates to  wages including the period and mode of payment,  and  be points out that the definition     of "wages" prescribed  by S. 3(39) includes dearness allowance.   His case is that the present dispute falls under Sch. 11, Entry   9,  and if  the employees  had  intended to make a change  in  the  existing award  in relation to the payment of dearness allowance,  it would  have  been  necessary  for them  to  take  action  as prescribed  by s. 42(2).  Since it is common ground that  no notice  of  change has been given by the respondent,  it  is urged  that the reference made by the Government of  Gujarat under  S.  73 -of the Act is invalid.  It would  be  noticed that this argument  397 assumes  that  the  provisions of S.  42  would  govern  the provisions  of S. 73.  The question is: is  this  assumption well-founded ? Let us then read S. 73; it reads thus :-               "Notwithstanding  anything contained  in  this               Act,  the State Government may, at  any  time,               refer an industrial dispute to the arbitration               of  the Industrial Court, if on a report  made               by  the  Labour  Officer or  otherwise  it  is               satisfied that-

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             (1)   by  reason  of the  continuance  of  the               dispute (a)     a serious outbreak of disorder               or  a breach of the public peace is likely  to               occur;               (b)   serious or prolonged hardship to a large               section  of  the  community is  likely  to  be               caused; or               (c)   the  industry concerned is likely to  be               seriously affected or the prospects and scope,               for employment therein curtailed; or               (2) the    dispute is not likely to be settled               by other               means; or               (3) it is necessary in the public interest  to               do so". On  a fair reading of s. 73, it is plain that it deals  with the  powers of the State Government to make a reference  and as  such, it is difficult to assume that the said powers  of the  State Government are intended to be controlled  by  the provisions  of S. 42.  Section 42 prescribes  the  procedure which  has to be followed by the employer and  the  employee respectively if either of them wants a change to be effected as contemplated by it.  The scheme of S. 42 read along  with the  other  provisions in Ch.  VIII clearly shows  that  the said  Chapter  can have no application to  cases  where  the State Government itself wants to make a reference.  That  is the   first  consideration  which  militates   against   the construction which Mr. Setalvad suggests. The  opening  clause in s. 73 also  unambiguously  indicates that  the power of the State Government to make a  reference will  not be controlled by any other provision contained  in the  Act.  This clause plainly repels the argument that  the provisions  of  S.  42 should be  read  as  controlling  the provisions of s. 73.  The meaning of the non-obstante clause is clear and it would be idle to urge that the  requirements of S. 42 must be satisfied before the power under s. 73  can be invoked by the State Government. Sup.Cl/65-11 398 It is, however, urged that the power conferred on the  State Government  by  s. 73 is the power to  refer  an  industrial dispute  to  the arbitration of the  Industrial  Court,  and there can be no industrial dispute unless a notice of change has  been given either by the employer or the employee.   In other words, the argument is that unless a notice of  change is given as required by s. 42, no industrial dispute can  be said  to  arise between the employer and his  employee,  and that  is how s. 42 governs s. 73.  If it was the true  legal position that there can be no industrial dispute between  an employer and his employee unless a notice of change is given by either of them, there would have been some force in  this contention  but  the  definition of  the  words  "industrial dispute"  does not justify the assumption that it is only  a notice  of change that brings into existence  an  industrial dispute.   Section 3(17) of the Act defines  an  "industrial dispute"  as  meaning any dispute or difference  between  an employer and employee or between employers and employees  or between employees and employees and which is connected  with any  industrial  matter.   This definition is  so  wide  and comprehensive  that  it would be impossible  to  accept  the argument that it introduces the limitation suggested by  Mr. Setalvad.   Even  if  an award  is  subsisting  between  the parties  but  a difference arises between them,  as  in  the present  case,  it  is  not  easy  to  hold  that  the  said difference does not amount to an industrial dispute for  the

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purpose  of  s. 73 merely because notice of change  has  not been   given  either  by  the  employer  or  the   employee. Therefore, we are satisfied that the dispute which has  been referred  by the Government of Gujarat in the  present  case must  be treated as an industrial  dispute,  notwithstanding the fact that s. 42 has not been complied with either by the appellants or by the respondent. It is true that the power conferred on the State  Government to make a reference is not absolute or unqualified.  It  can be  exercised  only if one or the other  of  the  conditions specified  by  sub-sections  (1), (2) or (3)  of  s.  73  is satisfied.   But  once  the State Government  comes  to  the conclusion  that one or the other of the said conditions  is satisfied,  its power to make a reference is not limited  to cases  where notice of change has been given by the  parties as  required by s. 42.  It is an over-riding power which  is intended to be exercised to avoid anomalies or other serious consequences  which would flow in case the  Government  does not   make   an  immediate  reference.    The   requirements prescribed  by  sub-sections  (1),  (2) and  (3)  of  S.  73 indicate  the  types  of  cases which  are  intended  to  be referred  without requiring the parties to take recourse  to s. 42.  In the present case, the  399 Government of Gujarat was satisfied that the dispute was not likely  to  be settled by other means, and so, it  made  the present reference.  Therefore, we do not think there is  any substance in the argument that the reference is bad, because s.  42 has not been complied with.  The terms of s.  73  are plain and unambiguous and them leave no doubt that the power of the State Government to make the reference is not at  all controlled by the requirements of s. 42. On principle, the conferment of this power seems to be fully justified.  If as a result of a dispute between the employer and  his  employees,  a serious outbreak of  disorder  or  a breach of the public peace is likely to occur, or a  serious or prolonged hardship to a large section of the community is likely to be caused, or the industry concerned is likely  to be affected adversely, it would be idle to require that even in  the  face  of  such  a  serious  danger,  the  procedure prescribed by s. 42 must be followed before reference can be made  under  s.  73.   The very  nature  of  the  conditions prescribed  by  sub-sections  (1),  (2) and  (3)  of  s.  73 emphasises  the  fact  that the  said  conditions  refer  to categories of cases or types of occasions on which reference has  to be made promptly and immediately, and that  explains the conferment of the wide powers on the State Government as prescribed by s. 73.  We are, therefore,, satisfied that the Industrial Court was right in coming to the conclusion  that the preliminary objection raised by the appellant-,  against the  competence of the present reference  was  misconceived. It  appears  that a similar view has been expressed  by  the Bombay  High  Court in Suryaprakash Weaving Factory  v.  The Industrial Court(1). That  takes us to the merits of the controversy between  the parties  in  the present appeals.  Let us begin  by  briefly indicating  the broad contentions raised by  the  appellants before  the Industrial Court and its findings on them  which are  relevant for the purpose of the present  appeals.   The first contention which was urged before the Industrial Court was that the family living survey which was conducted by the Labour  Bureau, Simla, in 1958-59, was  unreliable,  because the sample survey on which it was based was inadequate,  and the interview method which was adopted in conducting it  was unsatisfactory.   It  was also contended  that  the  linking

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factor  at 3.17 which had been adopted by the Government  of Gujarat  was  unscientific  and  irrational;  and  that  the scientific  and  rational  way  to  deal  with  the  problem presented by the new (1)  53 B.L.R. 902 400 consumer  price index recently adopted by the Government  of Gujarat  would be to devise a scheme of  dearness  allowance afresh,  taking  the  present basic salary as  a  base,  and relating  it  to the changing price pattern  from  month  to month  with the base year 1960 = 100.  The appellants’  case in  respect  of this aspect of the matter was that  for  the purpose  of fixing the dearness allowance, the basic  salary should be taken to be the total amount which is paid to  the lowest-paid employee after consolidating 75% of the dearness allowance  in  the  basic wage.  That amount,  it  is  said, represents  the true basic wage today.  In the  alternative, it  was  suggested that if it is intended to  correlate  the present  prevailing wage structure, including the scheme  of payment   of   dearness  allowance,   by   making   suitable adjustments required by the change in the level of prices in the light of the new consumer price index with the same base year, it would be more rational and scientific to watch  the behaviour of prices for two or three years and then devise a linking factor on the average rise in prices during the said period.  The appellants also emphasised the fact that before the  Industrial  Court accepts the new  arrangement  on  the basis  of  the linking factor of 3.17, it  is  essential  to examine their paying capacity, and in this connection,  they strongly  urged  that the burden which would be  imposed  on them  by  the  new  scheme would  be  plainly  beyond  their capacity. The  validity of these contentions was strenuously  disputed by  the   It urged that the, sample survey was conducted  on rational and scientific lines and it did not suffer from any infirmity  at  all.  It further argued that the  attempt  to construct  a new wage structure by taking the  basic  salary with 75% of the consolidated dearness allowance as the basis with 1960 := 100 as the base year, would be beyond the terms of  reference, and it would, besides, create  many  problems and  complications.  According to the respondent, the  basic salary still continues to be what it was before, though  for practical  purposes 75% of the dearness allowance  has  been consolidated  with it.  The respondent seriously  challenged the  appellants’  case  that the operation  of  the  linking factor was either unscientific, unreasonable or unjust;  and the  appellants’  theory  that the average  rise  in  prices should be determined after watching the behaviour of  prices for two or three years, was characterised by the  respondent as   unreasonable,   inexpedient  and   unscientific.    The respondent  emphatically  contended  before  the  Industrial Court that the appellants’ financial position was  perfectly sound and the argument that the burden would be beyond their capacity is wholly untenable.  401 During  the course of hearing before the  Industrial  Court, the  appellants  examined two Experts, Mr. Gokhale  and  Mr. Chokshi.   They  also led voluminous  documentary  evidence. The  respondent  filed  detailed  statements  disputing  the correctness  of  the pleas taken by the appellants,  and  in support  of  them,  they filed  several  charts  which  were prepared   from   the  balance-sheets  of   the   appellants themselves.  Both parties referred to the opinions expressed by  several  writers on the subject of  the  preparation  of consumer  price  index  and on other  matters  which  became

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relevant  for the decision of the present dispute.   Broadly stated,   the   Industrial  Court  has  rejected   all   the contentions raised by the appellants.  It has found that the recent survey was conducted under the advice and guidance of a technical advisory committee of a high order and that  the work of carrying on the survey had scrupulously followed the relevant  recommendations made by the  International  Labour Office and the United Nations.  The Industrial Court did not accept the contention of the appellants that the sample size was  inadequate or had vitiated the quality of  the  survey. It   held  that  the  method  of  inquiry  adopted  by   the Investigators  who  conducted  the survey was  by  no  means unsatisfactory  or unscientific, and in its opinion,  having regard  to  the  local conditions, it was  indeed  the  most feasible and satisfactory way to adopt.  The adoption of the interview  method did not, in the opinion of the  Industrial Court,   introduce  any  infirmity  in  the   survey.    The Industrial Court was thus not satisfied that the compilation of  the  consumer price index number by the  Labour  Bureau, Simla,  for  the  city of Ahmedabad was not  proper  or  was unscientific or suffered from any more infirmity. In  regard  to the question of the linking factor  on  which both parties addressed the Industrial Court elaborately, the Court  consider  the matter in the light of  expert  opinion cited  before it and held that the Government of  India  was justified  in recommending a sample arithmetical  method  of linking; it found that the said method had been accepted  by the Expert Committee appointed by the Government of  Gujarat and  had been recommended by the Expert Committee  appointed by  the Government of Maharashtra as well.   It,  therefore, reached  the  conclusion that the said method based  on  the application  of  the  linking factor at 3.17  was  the  most suitable  to  adopt.  In this connection,  it  rejected  the appellants suggestion that the dearness allowance, should be paid  at  a  flat  rate  and  held  that  flexible  dearness allowance  alone  would meet the ends of justice  and  would lead  to  industrial peace.  It noticed the  fact  that  now there  was  only  one  cost  of  living  index  existing  in Ahmedabad and that is based on the new series 402 The  old series had rightly gone out of existence  since  it had  become antiquated.  In this situation, there  were  two possibilities; one was to work out an entirely new scheme of basic wages based not on the prewar level of 1939 but  based on the cost of living of 1960 as the base year and to  award dearness allowance thereafter.  The Industrial Court thought that  if such a course was to be adopted, it would create  a large number of problems in the industry and would seriously disturb  industrial peace.  It observed that this aspect  of the matter would also be beyond the terms of its  reference. Nevertheless,  it  was inclined to take the view  that  "the results  in terms of rupees, annas and pies may also not  be very  different", if this alternative, method  was  adopted. It  suggested  that  such a method may  be  adopted  by  the Central  Cotton Textile Wage Board which had  been  recently appointed with a view to bring out a fair amount of  uniform wage level all over India; but speaking for itself, it  held that it would not be Necessary, advisable or practicable for it to attempt that task.  That left only one alternative and that is the adoption of the arithmetical method of  linking. The argument that even if the arithmetical method of linking is intended to be adopted, it should be worked on the  basis of the average result derived from watching the behaviour of prices  during two or three years, does not appear  to  have been  seriously pressed before the Industrial Court and  has

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not been examined by it. The Industrial Court then considered the question about  the paying  capacity of the appellants.  As a matter of law,  it rejected  the  respondent’s argument that a  wage  structure once  constructed  by industrial adjudication can  never  be revised to the detriment of workmen, and it held that if  it was  shown that the financial position of the  employer  had substantially deteriorated and such deterioration was likely to  persist  for some time, it would be open  to  industrial adjudication  to  make  a  suitable  revision  of  the  wage structure, provided, of course, the wage structure does  not represent   the   wages  at  their  basic   minimum   level. Considering the problem presented by the appellants plea  of incapacity  to  bear the burden in the light of  this  legal position,  the  Industrial  Court has  found  that,  in  its opinion,  the  textile industry of Ahmedabad is in  a  sound financial  position.  It has also added that "in any  event, there has been no substantial deterioration in its condition so  as to justify any wage cut or abandonment of  the  basic principles in respect of its employees which have been  laid down  in  the  past".   It is on  these  findings  that  the Industrial Court has held against the appellants on  issuer, 2  & 3. As we have already mentioned, the  Industrial  Court has found against the respondent  403 on issue No. 1; but since the respondent has not  challenged the  correctness  of  the  said  finding,  it  is  only  the conclusions of the, Industrial Court on issues 2 and 3  that fall to be considered in the present appeals. The  first point which we must now consider is  whether  the appellants  are justified in contending that the  Industrial Court  erred  in over-ruling their contention that  the  new survey suffered from two major infirmities-inadequacy of the sample  size,  and impropriety of the  method  of  interview adopted by the Investigators.  In support of this plea,  the appellants  examined Mr. Gokhale as an expert witness.   Mr. Gokhale who served in the Labour Office at Bombay from  1926 to  1937,  was directly associated with  the  family  budget inquiries, compilation of cost of living index numbers,  and with  the first General Wage Census conducted by the  Labour Office in Bombay.  He also worked as Assistant Secretary  of the  Bombay  Textile Labour Enquiry  Committee.   Later,  he joined the Millowners’ Association, Bombay, as their  Labour Officer  on  1-1-1938 and served in that capacity  until  he retired  on  1-11-1962.  He was deputed on a study  tour  to Lancashire  in  1951 and attended the  International  Labour Conference  at’  Geneva.  He has also been a member  of  the I.L.O.  Committee on Women’s Employment.  According  to  Mr. Gokhale,  the ’new survey was not as scientific as it  might have been.  He was inclined to take the view that the sample selected in the Ahmedabad inquiries was very inadequate.  He commented on the fact that the choice of the size of  sample was  determined, inter alia, on the ground of  the  workload manageable  by  the investigator, and he said  that  it  was difficult  for him to understand as to why in  deciding  the sample size.  "workload manageable by the investigator"  had to  be considered as a relevant factor.  He then produced  a chart showing the ratio of the size of the universe with the size  of sample, and said that nowhere had he found  such  a low size of the sample as in the impugned inquiry.  The size of the sample, according to him, in the impugned inquiry was less than even half a per cent of the population group which was intended to be covered. Mr.  Gokhale was cross-examined by the respondent.   It  was put  to  him  that his experience in the  matter  of  sample

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survey was somewhat limited and that the said experience had now  become  antiquated  in view of  the  great  strides  of progress which had been made in the science of sample survey after  1926.   He agreed that  sampling  technique  involves knowledge of statistics and statistics involves mathematics, and he did not make any claim to be an 404 expert  either  in  statistics or in  mathematics.   In  his examination-in-chief, Mr. Gokhale appeared to criticise  the extent of imputation which was evident in the preparation of the  new  series; but in his  cross-examination,  he  fairly conceded  that  amputations have always got to  be  done  in compiling  consumer  price index.  It had been done  in  the past,  he said, as also in the case of the  present  series. When  he  was asked whether he knew what the  percentage  of imputation  was  in the compilation of  the  consumer  price index of 1926-27, he admitted that he did not know.  He was, however, reluctant to agree with the Labour Bureau in so far as the application of their reasons to individual items  was concerned,  and in support of his theory he relied upon  the illustrations  given  by him in the affidavit which  he  had filed before he gave evidence. The  statements  made by Mr. Gokhale in his  affidavit  were disputed by the respondent and the accuracy and the validity of  the views expressed by him were seriously challenged  by Mr.  Vasavada who filed a reply on behalf of the  respondent (Item 19).  In his reply, Mr. Vasavada referred to Clause 14 of the Resolution as reported at p. 403 of the International Labour Code-1951 Vol.  III; and emphasised the fact that the main  distinguishing feature of the new survey was  that  it was carried out under the technical guidance of professional statisticians  not only with adequate knowledge of  sampling theory but also with actual experience in sampling practice, and with the help of a properly trained field and  computing staff.    This  was  the  requirement  laid  down   by   the publications issued by the I.L.O. and the United Nations  as a  very  important  test,  and  the  impugned  survey  fully satisfies the said test.  Mr. Vasavada also referred to  the opinion  expressed by Dr. Basu who is at present the  I.L.O. Expert on the subject, that the size of the sample should be determined  in the light of the permissible margin of  error in the resulting series of consumer price index numbers.  In our  country, the permissible margin of error in  the  index has been broadly set at 2 per cent; and so, the case set out by  Mr. Vasavada on behalf of the respondent was  that  when the  permissible  margin of error in the index  is  2%,  the number  of families, viz. 722 taken at Ahmedabad, is  highly satisfactory. Mr.  Vasavada then questioned the accuracy of Mr.  Gokhale’s statement  that such a small percentage of the universe  had never  been adopted before in any other inquiry.   He  urged that  the  present techniques have advanced so  far  that  a small sample size can achieve the best results; and he cited the  example of a survey carried out in the  United  Kingdom where the proportion of 13,000  405 households   surveyed   to  the   total   households   which constituted the universe came to 0.1%.  The Industrial Court has  considered  the evidence given by Mr. Gokhale  and  has taken  into  account the arguments urged on  behalf  of  the respondent,  and  it has held that the size  of  the  sample selected for the impugned survey cannot be said to introduce any infirmity in the survey.  The question which we have  to decide  is whether the Industrial Court was right in  coming to this conclusion.

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In  dealing  with this question, it is  necessary  to  refer briefly  to the genesis and growth of the science of  Social Survey.  "In, its broadest sense", says the Encyclopedia  of the  Social  Sciences,  "  social Survey  is  a  first  hand investigation,   analysis  and  coordination  of   economic, sociological,  and  other  related  aspects  of  a  selected community  or  group.   Such  a  survey  may  be  undertaken primarily  in  order  to  provide  material   scientifically gathered,  upon  which  social  theorists  may  base   their conclusions;  or  its chief purpose may be  to  formulate  a programme of amelioration of the conditions of life and work of  a  particular group or community"(1).  Wells  defines  a social survey as a "fact-finding study dealing chiefly  with working-class  poverty and with the nature and  problems  of the  COmmunity"(2).   As Moser has,  however,  pointed  out, "this definition might have covered the classical  community and poverty studies but would hardly be adequate, the  first part at any rate, to the modern forms of survey"(3). The history of social survey in England can be said to  have begun  with the publication of May hew’s book  "London  Life and  the  London Poor" published in 1851; and Booth  made  a very significant contribution to the scientific  development of social survey by publishing his book "Labour and Life  of the  People of London" (1889-1902).  Rowntree followed  with his  book  "Poverty: A Study of Town Life".   Thereafter,  a number  of studies have been made by social scientists,  and the subject of the theory and practice of social surveys has been the subject-matter of valuable and extensive literature all  over the civilised world.  During the First  World  War and thereafter, social scientists devoted their attention to the  problem of family living studies mainly from the  point of  view  of  the  impact of  price  changes  on  consumers’ economic  situation.  The development of  reliable  consumer Price indices naturally involved the use of weights that (1)  Encyclopaedia  of the Social Scinces, Vol.  XIV  edited by Edwin R. A. Seligman, p. 162 (2)  Wells.  A. F. (1935).  The Local Social Survey in Great Britain, Allen and Unwin, London. (3)  "Survey  Methods  in  Social Investigation"  by  C.  A. Moser, P. 1. 406 would  properly reflect the consumption expenditure  of  the population.  This led to further extension of family  living studies  in different countries and for  different  periods, mainly  to  secure information on  patterns  of  consumption expenditure(1). The Second World War and the conditions that flowed from  it made it necessary to carry on investigations on a wide range of  inquiry  relating to all aspects  of  conditions,  c.g., nutrition,  health,  education and  employment.   The  whole question  of family living survey came up for  consideration in   the   Seventh  International   Conference   of   Labour Statisticians in 1949.  This Conference adopted a resolution defining the objectives of family living studies and setting new  international standards as regards the Organisation  of enquiries  and the analysis and presentation of the  results that flowed from it(1). In  India, a standardised statistical type of family  living study  was  -first  initiated  in  Bombay  in  1921.    Such enquiries  were  also  conducted in  Sholapur  in  1925,  in Ahmedabad  in  1926 and in some centers in  Bihar  in  1923. While reviewing the position of social surveys in India, the Royal Commission on Labour pointed out the great paucity  of statistical  material  in  this  country  for  judging   the standard of living of the workers and recommended conduct of

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socioeconomic  enquiries  of  the  type  of  family   living surveys.   This  report  naturally gave an  impetus  to  the conduct of family budget enquiries.  In all the surveys that followed, sampling and interviewing techniques were adopted, though,  of  course,  not  of a  much  advanced  nature.   A statistical   analysis  of  the  data  collected  was   also attempted(2) The Second World War saw the appointment of the Rau Court of Enquiry constituted under the Trade Disputes Act, 1929.  One of  the recommendations made by the said Court was that  the Central   Government  should  take  up  responsibility   for maintaining  up-to-date  cost of living  index  numbers  for important  areas  and  centres.   The  Government  of  India accepted   this   recommendation  and  set  up   a   special Organisation called ’the Directorate of Cost of Living Index Numbers’  and  family  budget  enquiries  among   industrial workers  were conducted at 28 centres during 1944-45 in  the course of which 2,700 budgets were collected.  A  remarkable feature  of these enquiries was that for the first  time  in this country, an attempt was made to conduct such  enquiries simultaneously  at a large number of centres under  more  or less uniform techniques.  During the same period, the Labour Bureau of the Government of (1)  Labour  Survey Techniques issued by the Labour  Bureau, Ministry of labour & Employment, pp. 171-72. (2)  Labour Survey Techniques. pp. 171-72.  407 India  and  some of the Organisations of  State  Governments continued  to conduct family budget enquiries from  time  to time  at  specific  areas or centres,  either  for  deriving weighting  diagrams for consumer price index numbers or  for collection   of  data  required  for  fixation  of   minimum wages(1). It  was  in the background of these events that  the  Second Five Year Plan made a significant recommendation.  The  Plan said that :-               "The  existing wage structure in  the  country               comprises,  in  the main, a basic wage  and  a               dearness allowance.  The latter component in a               majority  of  cases has relation  to  cost  of               living   indices   at   different   industrial               centres.  These indices have not been built up               on  a uniform basis; some of them  are  worked               out  on primary data collected about 20 to  25               years  ago  and  are, therefore,  not  a  true               reflection  on the present spending habits  of               workers.  Since one of the questions which the               wage commission will have to take into account               is   the   demand   made   by   the   workers’               organisations  for merging a part of  dearness               allowance   with  the  basic  wage,   evolving               recommendations for such a merger will not  be               sufficiently  scientific  if  cost  of  living               indices  at  different centres do not  have  a               uniform  basis.  Steps will therefore have  to               be  taken simultaneously with the  undertaking               of  a wage census, to institute enquiries  for               the revision of the present series of cost  of               living indices at different centres". It is in pursuance of this recommendation that the  impugned survey was made. Let  us now see on what principles and methods the  impugned survey was made.  It is necessary to be-in the discussion of this question with the observation "that the consumer  price index number measures nothing but changes in prices, as they

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affect a particular population group; and so, it is really a price  index number as distinct from a cost of living  index number.  In fact, these indices used to be termed as cost of living index numbers in the past, but in order to make their meaning  clear, it was decided by Government to  change  the name  to  consumer price index numbers  in  accordance  with international recommendations and growing practice in  other countries.   Most  of the State Governments  compiling  such index numbers have also adopted this (1)  Labour Survey Techniques, pp. 171-72. 408 usage"(1).   This  index number is intended to show  over  a period  of time the average percentage change in the  prices paid  by  the consumers belonging to  the  population  group proposed  to  be covered by the index for a  fixed  list  of goods and services consumed by them.  The average percentage change,  measured  by the index, is calculated  month  after month  with reference to a fixed period.  This fixed  period is  known as the "base-period" of the index; and  since  the object  of  the  index is to measure the  effect  of  price- changes  only, the price-changes have to be determined  with reference  to  a fixed list of goods and  services  of  con- sumption  which  is known as a fixed "basket" of  goods  and services. The index does not purport to measure the absolute level  of prices but only the average percentage change in the  prices of a fixed basket of goods and services at different periods of time.  There are certain preliminary considerations which are  relevant  in the construction of consumer  price  index numbers.   The first consideration is the purpose which  the index  is intended to serve; and that  necessarily  involves the definition of the group of consumers to which the  index is  intended to relate.  Then it is necessary  to  determine the consumption level and pattern of the population group at a period of time which generally becomes the base period  of the index numbers.  For that purpose, a list of  commodities and services has to be made.  Usually, this list would  con- tain  items of food, fuel and light, clothing,  and  others; items  of  services,  such  as  barber  charges,  bus  fare, doctor’s  fee,  etc., have also to be selected.  It  is  the combined total of the items of commodities and services that constitutes  the basket.  Then follows a description of  the quality  of each commodity and service through  which  price changes  have to be measured.  Generally, one quality  which is  popularly consumed by the population group  is  selected for  each commodity and service.  The importance  or  weight which  has  to be attached to each commodity or  service  is also a material factor.  For instance, if rice is considered to  be  twice  as important -is  wheat  in  the  consumption pattern,  the weight of rice will be 2 in relation to  I  of wheat. Having  determined the consumption level and the pattern  of the population group, the next task to attempt is to arrange for  the  regular collection of price data for  the  various qualities  of  commodities  and  services  which  enter  the basket.  With this material, the consumer price index has to be  compiled  from  month to month subsequent  to  the  base period.  That, shortly stated, is (1)  A Guide, to Consumer Price index Numbers is such by the Labour Bureau, M.O. Labour & Employment, 5.  409 the  nature of the preliminary considerations which have  to be borne in mind while constructing the consumer price index numbers. We  have  just  noticed  the  theory  of  weights  on  which

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weighting  diagrams are prepared.  Weights are  intended  to indicate  the importance attached to the percentage  changes in  the  prices  paid  by  consumers  for  different   items (commodities  and  services) of  consumption.   Accordingly, each item in the index is given, what is called in technical language, a "weight" to represent the relative importance of the price changes recorded for that item.  This weight means nothing more than the percentage of expenditure on each item of goods and services in relation to the total  expenditure. It will thus be seen that the main basis for determining the weights  of  respective  commodities  and  services  is  the investigation of the family budget; and that emphasises  the importance  and  significance  of  a  proper  investigation. During  the course of investigation, data are  collected  on all items on which money has been defrayed by families;  but only  such  items  as involve  consumption  expenditure  are included  in  the  average  budget.  Even  so,  it  is  only selected items which find a place in the index calculations, because it is obviously neither practicable nor necessary to include  all items featuring in the average  budget.   Since only  a sample of items from each group is included  in  the index, it becomes necessary to enquire as to what happens to other items featuring in the average budget but not included in the index.  Their weights are added or distributed to the items  included in the index, so that the total  expenditure of  the  average budget is fully taken into account  in  the weights  adopted  for the index.  This process is  known  as "imputation" of weights.  Besides the weights the other  set of primary data which enter into the compilation of a series of  consumer  price index numbers are the prices;  and  that emphasises  the  importance of collecting material  data  in respect of prices.  The Investigator, therefore, has to bear in mind ,)II the relevant factors that ultimately go to ,,he construction  of  the  index.  and  has  to  carry  on   his investigation in a proper and scientific way. Having thus briefly reviewed the theoretical aspects of  the factors that govern the construction of consumer price index numbers, let us now proceed to see how the impugned  inquiry was  in fact held.  The material evidence which will  assist us in this part of our inquiry is furnished by the Report on Family Living Survey among Industrial Workers at  Ahmedabad, 1958-59.  From this report it appears that the  Organisation of the survey 410 was based on the co-operation of several institutions.   The survey  was  sponsored  by the Labour  Bureau,  Ministry  of Labour & Employment, Government of India; and its  technical details  were worked out under the guidance of  a  Technical Advisory   Committee  on  Cost  of  Living   Index   Numbers consisting  of  the  representatives of  the  Ministries  of Labour  and  Employment,  Food  and  Agriculture,   Finance, Planning Commission, the National Sample Survey Directorate, the   Department   of  Statistics   (C.S.O.),   the   Indian Statistical  institute and the Reserve Bank of  India.   The field  work  was entrusted to the  Directorate  of  National Sample  Survey,  and  processing  and  tabulation  of   data collected  in  Schedule ’A’ (Family Budget)  to  the  Indian Statistical  Institute,  Calcutta.  The tabulation  of  data collected  in Schedule ’B’ which deal with Level  of  Living was  done  in  the Labour Bureau.   It  was  a  multipurpose survey; and so, the investigation conducted under it covered both  the Family Budget, and the Level of Living.   Ultimate analysis of the data, publication of reports on the  results of  the  surveys  and construction and  maintenance  of  new series   of   consumer   price  index   numbers   were   the

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responsibilities of the Labour Bureau. The  first thing that the Organisation did was to  define  a working  class family", because this  definition  determined the size of the universe.  A working class family which  was the  basic  unit  of the survey, was  defined  in  terms  of sociological  and economic considerations as  consisting  of persons :               (i)   generally related by blood and  marriage               or adoption;               (ii)  usually  living together  and/or  served               from the same kitchen; and               (iii) pooling  a  major part of  their  income               and/or  depending on a common pool  of  income               for major part of their expenditure. Then  followed the delimitation of area.   The  geographical area  to  be  covered  during  the  survey  was  decided  in consultation with local Organisation both official and  non- official.   At  the  Ahmedabad centre,  46  localities  were selected for the purpose of the survey; they consisted of 16 Chawls,  21  Labour  Colonies  (Housing  Societies)  and   9 Villages.   Before setting the ultimate units of the  family living  survey,  viz., the families, two types  of  sampling methods  were adopted; they were the tenement  sampling  and the pay-roll sampling.  The sample size for a centre was  411 determined on the basis of the number of industrial workers, the  type of sampling followed, the work-load manageable  by an Investigator and the required precision of weights to  be derived from Schedule ’A’ for consumer price index  numbers. The  sample  size  for  Ahmedabad was  720  families  to  be canvassed for Schedule ’A’.  The number of schedules finally collected  and tabulated was 722 for Schedule ’A’.  The  two samples drawn for Schedules ’A’ & ’B’ were however, mutually exclusive,  because canvassing for both the  schedules  from the same sampled families would have caused fatigue both  to the Investigators and the informants.  The whole sample  was staggered  over  a  period  of 12 months  evenly  so  as  to eliminate  the seasonal effects on the consumption  pattern. The  selection  of sample was done in two  stages.   In  the first stage the chawls within each of the wards were grouped to form blocks of about 150 households each and these blocks along  with  the labour colonies  (housing  societies)  were grouped  to form clusters of about 450 households  each,  so that each cluster had blocks from different wards.  From the list  of these clusters and villages, 4  independent  simple systematic  samples  of 12 clusters or  villages  each  were selected for survey.  Each of the 12 clusters sampled for an Investigator was assigned to a particular month for  enquiry by  a  random  process.  That is how  the  first  stage  was arranged. The  second  stage unit for selection was  a  working  class family.   Each  month,  the  Investigator  listed  all   the families in the cluster allotted to that month by  house-to- house  visit and classified them as working  class  families and  others.  While listing, information was also  collected on  the  family  size, the expenditure  class  to  which  it belonged and the State of origin of the head of the  family. This  information was utilised to arrange the working  class families  in  the cluster, first by family size  and  within these  classes by expenditure class and within these by  the State  of origin.  A simple systematic sample of 20  working class  families  was drawn from this arranged  list.   Every fourth  family  in  this sample was  contacted  for  filling Schedule  ’B’ (on Level of Living} and the  remaining  three were  for  Schedule  ’A’ (on Family Budget).   That  is  the

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nature  of the procedure adopted in selecting  the  families for  sample survey and determining the size of  the  sample. The same survey was designed to cover a period of 12  months at each centre. At Ahmedabad centre, the work was carried on between  August, 1958 and July, 1959.  The method of  survey was  the "interview method".  The questionnaire  which  each Investigator  adopted  covered  a wide  range  of  subjects, accurate replies to some of 412 which  could not be had without explaining the  significance of the questions to the persons concerned. The  population  of  Ahmedabad is  about  11.5  lakhs.   The working  class  population in Ahmedabad was reported  to  be concentrated  in 13 localities.  The  markets  predominantly patronised by the working class population in Ahmedabad were 6  and  it  is  the  markets  that  were  selected  for  the collection  of retail prices for the new series of  consumer price index number for Ahmedabad centre. This  summary of the Report gives us a broad idea as to  the manner  in which and the method by which  the  investigation was  made  which ultimately led to the construction  of  the consumer price index number. Reverting  then to the objections raised by  the  appellants that the size of the sample was inadequate and the method of investigation  was  inappropriate, can it be said  that  the Industrial  Court  was  in  error  in  holding  that   these objections  were not valid ? In dealing with this  question, it is necessary to bear in mind that the size of the  sample has to be determined in the light of the permissible  margin of  error  in the resulting series of consumer  price  index numbers.   As Dr. Basu has observed : "In our country,  this permissible  margin of error in the index has  been  broadly set  at 2 per cent";(1) and that is not contradicted by  the opinion of any other Expert.  The sample of consuming  units has to be selected by the application of scientific sampling techniques;  and there is no doubt whatever that during  the last  40  years,  this branch of human  knowledge  has  made remarkable  progress.   The  optimum sample  design  is  now worked  out by competent statisticians in the light  of  the available material and requirements in each case, and as Dr. Basu has observed, "the desired data are secured at  minimum cost  and  at  an  evaluation of  sampling  errors  in  tile estimated data obtained from the survey".  It is the quality of  the survey that is more important, not so much the  size of   the  sample  or  the  number  of  families  with   whom investigation was made. On  the  question  about the adequacy  of  the  sample  size selected for investigation on the present occasion it  would be  material to refer to the opinion expressed by  Moser  on this subject.  Says Moser:-               "Most people who are unfamiliar with  sampling               probably  over-rate the importance  of  sample               size as A Basu, "Consumer Price index,  pp.54-               55.                413               such,  taking  the view that "as long  as  the               sample  is  big  enough,  or  a  large  enough               proportion of the population is included,  all               will  be well".  The fallacy in this is  clear               as  soon  as one looks at any  standard  error               formula,  say  (5.1) on p. 61 above.   If  the               population  is  large, the  finite  population               correction  N-n/N-1 practically  vanishes  and               the precision of the sample result is seen  to               depend  on n, the size of the sample,  not  on

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             n/N, the proportion of the population included               in the sample.  Only if the sample  represents               a relatively high proportion of the population               (say, 10 per cent or more) need the population               size  enter into the estimate of the  standard               error". (1) Mr.  Kolah for the, appellants has not cited before  us  the opinion of any Expert to the contrary. Considering  the question from a commonsense point of  view, it  seems  to us reasonable to hold that if the  quality  of investigation  has improved, and the method of  working  out the  sample  survey has made very great  progress,  then  it would  not  be correct to say that because the size  of  the sample  in the present case was smaller as compared  to  the size  of the sample taken in 1926-27, the inadequacy of  the size  on the subsequent occasion introduces an infirmity  in the  investigation  itself.   That is  the  view  which  the Industrial  Court has taken, and we see no reason to  differ from it. At  this  stage,  it would be interesting  to  consider  the comparative contents of the basket as it was devised in  the two respective enquires, one held in 1926-27, and the  other in  1958-59.   The former enquiry reflects  the  consumption pattern  of  the working class as it existed in  1926.   The index number then devised was composed of five groups, viz., (1)  Food,  (2) Fuel and Lighting, (3) Clothing,  (4)  House rent,  and  (5) Miscellaneous.  The food group in  its  turn consisted  of  16 items; the fuel and lighting  group  of  4 items;  the clothing group of 7 items; the house rent  group of  the item of house rent; and the miscellaneous  group  of two items, viz. bidis and soap.  Thus, in all( 30 items were included.   These  items  represent 82-32%  of  the  average monthly expenditure, and they were respectively assigned 58, 7, 10, 12 and 4 weights which together aggregate 91.  At the time   of  this  enquiry,     the  items  included  in   the investigation  totalled 49; out of them, 30 were priced  and 19 were unpriced; and in respect of the (1) C. A. Moser, Survey Methods in Social investigation,  p. 115, para 3. L6sup65-12 414 latter,  the method of imputation was adopted.  This  series was  prepared after collecting the budgets of  985  families when  the estimated population of the city of Ahmedabad  was 2,90,000. The  new  series is based on the enquiry  into  722  working class   families  conducted  in  1958-59  when   the   total population  of  the  city was about  11  lakhs.   The  total working  class  families at this time were estimated  to  be 51.5 thousand; and so, the percentage of the sample size  in relation to the universe of the working class families would come  to  about 1.4 and not less than 5 as appears  to  have been assumed by Mr. Gokhale.  The weighting diagram for  the new  series is based on 110 articles divided into  the  main groups  of food, fuel and lighting, housing,  clothing,  and miscellaneous.  The important groups in this enquiry carried respectively  the  weights of 64-41, 6.22, 5.05,  9.08,  and 15.24  which  aggregate to 100.  The total number  of  items included  in the basket was 239.  Of these, 89  were  priced items  and 150 unpriced, and in respect of the  latter,  the method  of imputation was adopted.  It is true that  in  the new series, the unpriced items are considerably more than in the earlier one; but it must be remembered that it is not so much the number of items that makes the difference, but  the percentage of expenditure on unpriced items to priced items.

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The  total expenditure of all items in the  1926-27  enquiry was  Rs.  36.01 of which Rs. 32.35 was  the  expenditure  on priced items and Rs. 3.66 was the expenditure on  non-priced items.   In terms of percentage, the expenditure  on  priced items to total expenditure was 89.8% and expenditure on non- priced  items to total expenditure was 10.2%. In the  latter enquiry  of 1958-59, the total expenditure on all items  was Rs.  139.06.  Of  this, Rs. 124-91 was  the  expenditure  on priced items and Rs. 14.15 was the expenditure on non-priced items.   In terms of percentage, the first  expenditure  was 89.8%  and the second is 10.2%. Thus, it is clear  that  the expenditure on unpriced items in the present enquiry is  not larger than in the former enquiry at all.  The fact that the components of the basket have considerably increased, cannot be  a matter of surprise, because with the growth of  Indian economy  and  the change in the standard of  living  of  all citizens,  the requirements of the working class  have  also increased and the components of the basket which was devised in  1926-27 have now become completely obsolete.  It  is  in the light of this position that we have to consider  whether the   appellants  are  justified  in  contending  that   the inadequacy  of the size of the sample vitiates the  enquiry. In our opinion, the answer to this question must be  against the appellants. 415 The  next  question  to consider is  whether  the  Interview method  is unscientific and its adoption makes  the  enquiry itself  defective  and  unreliable.  In  dealing  with  this question  again,  it  is  necessary  to  remember  that  the interview  method itself has made very great progress  since 1926.   The  task  of investigation is in  no  sense  merely mechanical;  it  is  a  constructive  task,  the   efficient discharge of which requires a well-trained Investigator.  As Moser  observes, the investigators are expected to  ask  all the applicable questions; to ask them in the order given and with  no  more elucidation and probing  than  is  explicitly allowed;  and  to  make no unauthorised  variations  in  the working (p. 188).  Interviewers, according to Moser, are not machines.    Their   voices,  manner,   pronunciations   and inflections differ as much as their looks, and no amount  of instruction   will  bring  about  complete   uniformity   in technique; and so, interviewers have to be properly educated in   the   task  of  putting  questions  to   the   families interviewed.   What is true about asking questions, is  also true  about  recording  the  answers.   "The  recording   of answers",  says Moser, ’would seem a simple enough task  and one  which  interviewers might be expected to  perform  with accuracy".  But he adds that "the task of interviewers is  a fairly  tiring one.  With random sampling,  the  interviewer may  have travelled and walked a good way before getting  to the  respondent.   He  has to go through  what  is  often  a lengthy,  and always a somewhat repetitive,  operation"  (p. 190);  and  that makes the task of  recording  answers  also important.  The Interviewers are, therefore, appointed after selection, and it is now realized that their work is not  at all  mechanical  and  cannot  be  compared  to  the  work-of Investigators  who  collect data at the time  of  population census.   The  Investigator must take interest in  the  task that he has undertaken, must be accurate in asking questions and  recording  answers, must show an  equitable  temper  in meeting  the persons interviewed and must, above all,  be  a man  of  education  who  understands  the  significance   of sampling  survey  and the purpose which it  is  intended  to serve. It is true that in England, the method of supplying account-

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books  to the families is adopted.  Under this  method,  the families  are  expected  to  fill in  every  detail  in  the account-book, and the cost of living is compiled from  exact and  correct  information  given by  the  persons  who  keep regular accounts according to the directions issued.  But on the  other  hand, in countries like Canada  and  the  United States, the method of interview is preferred to that of  the account-books.  It seems that according to Moser, the method of mail questionnaire, which corresponds in a sense 416 with  the  method  of account-books,  suffers  from  several infinities;  and  so,  he  seems to  prefer  the  method  of interview,    provided,   of   course,   this   method    is scientifically and efficiently adopted. In our country where a majority of working class  population still  suffers from illiteracy, the method of  interview  is obviously  indicated.  It would be impracticable to  suggest that  a  written  questionnaire should be  supplied  to  the members  of  the working class or  account-books  should  be given  to  them in the expectation that they  would  furnish answers in return.  Having regard to this special feature of the  life of the working class as it obtains in our  country today, the method of interview is the only method which  can be adopted.  Besides, as we have just indicated, even on the merits,  expert  opinion  seems  to  suggest  that  if   the interview  method  is  properly  adopted,  it  gives  better results  than  the  alternative  method  of   account-books. Therefore,  we are satisfied that the Industrial  Court  was right  in  rejecting  the appellants’  contention  that  the impugned survey and the index constructed as a result of it, suffer  from the infirmity that investigation was  conducted in this survey by the interview method. That  takes  us to the question about the propriety  of  the linking  factor  which  has been upheld  by  the  Industrial Court.   We  have  already noticed that  the  Government  of Gujarat  has  adopted the linking factor at  3.17,  and  the Industrial  Court has taken the view that no case  has  been made  out  by  the appellants to  interfere  with  the  said decision of the Government of Gujarat.  Mr. Kolah  contended that if a linking factor has to be adopted it would be  more rational and scientific to watch the behaviour of prices for two  or three years and then devise a factor on the  average rise in prices during the period in question. Mr.  Vasavada,  on the other hand,  seriously  disputed  the correctness  of  Mr. Kolah’s contention.  As this  case  was being argued on the 24th March, 1965, the parties  suggested that the question about the proper procedure to be  followed in ’determining the linking factor in such cases was a  very important  question and that it would be better if  we  hear the   views  of  associations  or  bodies  which  would   be interested  in a proper solution of this problem.   That  is why on the said date we adjourned the hearing of the appeals to  enable such interested parties to appear before us.  The parties  furnished a list of sixteen institutions or  bodies which,  according to them, would be interested in  assisting us  with  arguments  on this issue.  On April  12,  1965,  a letter  of  request  was accordingly sent  to  these  bodies indicating  to them the nature -of the question on which  we wanted their assistance.  In response  417 to the said letter, only four bodies have appeared; they are :  The All-India Organisation of Industrial  Employers;  the All-India   Manufacturers’  Organisation;  the   Millowners’ Association,  Bombay;  and the Indian National  Trade  Union Congress.  The first three bodies appear broadly to  support

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the  appellants’ case, whereas the fourth body has  resisted the  appellants’ contention that the Government  of  Gujarat was in error in adopting the linking factor at 3.17. The appeals were then set down for hearing before us on  the 2nd  August,  1965,  and we indicated to  the  parties  that having  regard  to  the unsatisfactory  response  which  our letter of request had received, we did not think it would be appropriate  that  we should proceed to  decide  the  larger issue raised by Mr. Kolah as to what would be a rational and satisfactory  method  of  evolving a  linking  factor.   The Indian  National Trade Union Congress in its  affidavit  has urged that the method of linking of the new series with  the old  by the simple arithmetical ratio,at the base period  is universals accepted.  It appears that the employers’ and the employee,s  are not able to take a consistent stand on  this issue  and their approach apparently differs from region  to region  and industry to industry, because considerations  of expediency  and  self  interest do not  seem  to  dictate  a uniform  common approach to be adopted in the present  case. Besides, the issue is of a very technical character and  any decision  of  this Court on such an issue  of  principle  is likely  to  affect several industries in this  country.   We have,  therefore,  decided  not to  embark  upon  a  general enquiry on this point.  Our decision will be confined to the material  placed before the Industrial Court in the  present proceedings,   and  we  will  merely  examine  Mr.   Kolah’s contention  that the view taken by the Industrial  Court  is not correct.  That is why we wish to make it clear that  our present  decision should not be taken to be of  any  general significance  and  should be confined to the facts  of  this case.   If  it  is thought necessary  or  desirable  by  the employers  and  the employees that this question  should  be scientifically examined and determined in a general way,  it would  be  appropriate for them to more  the  Government  to appoint a special body of experts to deal with it. Reverting  then  to the narrow question as  to  whether  the appellants  are  justified in attacking the finding  of  the Industrial  Court  on  this  issue, lot  us  mention  a  few relevant facts and considerations.  We have already  noticed that  at  the  request  of  the  Government  of  India,  the Government  of Gujarat discontinued the publication  of  the State series of the consumer price index; 418 and so it became necessary for the said Government to secure the  advice of an Expert Committee as to how the new  series of consumer price index for Ahmedabad should be linked  with State series after making such adjustments therein as may be found  necessary.   The  Expert Committee  dealt  with  this problem of arriving at the linking factor, so that when  the new series is adopted and the State series is  discontinued, the dearness allowance on the present scale can be  computed even  on  the basis of the new series.   The  Government  of India had, in this connection. indicated that 2.98 would  be an appropriate linking factor.  This figure had been reached by taking the annual average of the monthly index number  of the State series for the year 1960 which then stood at  298. The  figure  of the base year 1960 was obviously  100.   The linking  factor of 2.98 was deduced by dividing 298 by  100. In  doing so, however, the question about  making  necessary adjustments in the index numbers of the State and of the new series had not been considered.  This question was consider- ed  by  the  Desai Expert Committee, and it  held  that  the linking  factor should be 3.17 as against 2.98 per point  in the new series as was worked out without correcting the  old series  In other words, the Desai Committee suggested  as  a

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linking factor a mere arithmetical ratio of 3.17. A  similar  question  was  referred  by  the  Government  of Maharashtra to the Lakdawala Expert Committee, and the  said Committee  was inclined to take the same view.  It no  doubt observed  that "in spite of the fact a linking on the  basis of  a simple ratio corrects a series only in respect of  one of  its dimensions, we recommend this course because we  are of  opinion  that  such a correction  is  adequate  for  the requirements of our terms of reference and in any case,  the only  correction  that we can meaningfully ,carry  out."  It would  thus be seen that in accepting the linking factor  at 3.17,  the Government of Gujarat has adopted the  conclusion of the Desai Expert Committee. The question which arises is whether in upholding this view, the  Industrial  Court  has committed  any  error.   As  the Industrial  Court has observed, two possibilities  presented themselves  in attacking this problem.  One was to work  out an entirely new scale of basic wages founded not on the pre- war level of 1939, but on the cost of living of 1960 as  the base year of the new series and to award dearness  allowance thereafter.  The Industrial Court thought that to adopt this course  may  conceivably create a large number  of  problems which  do not exist at present and in fact, it may  tend  to destroy industrial peace.  The Industrial Court  419 thought  that such a course might even be outside its  terms of  reference.   Even so, in its opinion, the  result  which would be achieved by adopting this course may not in the end be  very different.  The other course is to link  the  State series  with the new series to maintain continuity.   It  is this  latter  alternative  which has  been  adopted  by  the Government of Gujarat, and the Industrial Court has approved of  the  said  course.   We  are  not  satisfied  that   the conclusion thus recorded by the Industrial Court is shown to be erroneous. As  we  have  just indicated, the  problem  is  a  technical problem  and  it  can be decided only in the  light  of  the opinion which experts may form on examining all the  aspects pertaining to the problem and after taking into account  all the  pros  and  cons which may be put  before  them  by  the respective interested parties.  The stand which the  parties may  take  in  regard  to  this  controversy  would   differ according  as the change in the cost of living index in  the respective  States  may help their interest one way  or  the other.   That  explains  why there is no  unanimity  in  the approach  adopted  by the different parties.  This  is  made clear  by the contentions raised by the  respective  parties before the Lakdawala Expert Committee. There  is  no doubt that on the material as  it  stands,  it would  be unreasonable, inexpedient and in  fact  impossible for this Court to attempt to resolve this controversy on the basis of the larger issue of law raised by Mr. Kolah  before us.  The decision of that question must, therefore, be  left to  a  Committee  of experts if and when  it  is  appointed. Meanwhile, the question will have to be dealt with on an  ad hoc  basis  in  each  industry,  taking  into  account   the particular facts and circumstances of each case. Looking  at the question from this narrow point of view,  we do   not  think  the  appellants  have  placed  before   the Industrial  Court any material to justify  their  contention that  for  determining a linking factor,  the  behaviour  of prices  for  two or three years during the  relevant  period should  and  can  be  studied.   In  fact,  Mr.   Vasavada’s contention  is that a study of the behaviour of  prices  for such  a period and deducing the average therefrom  would  be

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inconsistent  with the notion of evolving a linking  factor. He  contends that we have to take one year by  reference  to which this problem must be resolved.  We express no  opinion on  this  part of the controversy between the  parties.   In fact,  the Award under appeal shows that the argument  which Mr.  Kolah has urged before as was not placed in this  form, and in any case does not appear to have been pressed, before the Industrial Court.  Even assum- 420 ing that it would have been open to the Industrial Court  to consider this larger issue under the terms of its reference, we do not see how the Industrial Court could have  attempted to  solve the problem satisfactorily on the material  placed before it.  Therefore, we cannot accept Mr. Kolha’s argument that the Industrial Court was not justified in upholding the decision  of  the  Government of Gujarat  that  the  linking factor should be taken at 3.17. The  last  question to consider is  whether  the  Industrial Court  was  right  in  coming to  the  conclusion  that  the additional  burden  which its award would  impose  upon  the appellants would not be beyond their financial capacity.  In dealing   with   this  question,  there  are   two   general considerations   which   cannot  be  ignored.    The   first consideration  is  that  the task  of  constructing  a  wage structure of industrial employees is a very responsible task and   if,-  -present.,:,  several  difficult  and   delicate problems.  The claim of the employees for a fair and  higher wage is undoubtedly based on the concept of social  justice, and it inevitably plays a major part in the construction  of a  wage  structure.  There can be little doubt that  if  the employees are paid a better wage which would enable them  to live in fair comfort and discharge their obligations to  the members of their families in a reasonable way, they would be encouraged to work whole-heartedly and their work would show appreciable increase in efficiency. On the other hand, in trying to recognise and give effect to the  demand  for  a  fair wage,  including  the  payment  of dearness  allowance to provide for  adequate  neutralisation against  the  everincreasing  rise in the  cost  of  living, 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 upon to bear such  burden. The problem of constructing a wage structure must be tackled on the basis that such wage structure should not be  changed from  time  to time.  It is a long-range plan;  and  so,  in dealing  with  this problem, the financial position  of  the employer  must  be carefully examined.  What  has  been  the progress of the industry in question; what are the prospects of  the  industry in future; has the  industry  been  making profits; and if yes, what is the extent of profits; what  is the  nature of demand which the industry expects to  secure; what  would  be  the extent of the burden  and  its  gradual increase  which the employer may have to face ?   These  and similar  other considerations have to be  carefully  weighed before a proper wage structure can be reasonably constructed by industrial adjudication, vide  Express Newspapers  421 (Private)  Ltd., and Another v. Union of India &  Others(1). Unusual  profit made by the industry for a single year as  a result  of  adventitious  circumstances,  or  unusual.  loss incurred by it for Similar reasons, should not be allowed to play  a  major  role in the  calculations  which  industrial adjudication would maker in regard to the construction of  a wage structure.  A broad and overall view of ’the  financial

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position  of  the employer must be taken  into  account  and attempt  should always be made to reconcile the natural  and just claims of the employees for a fair and higher wage with the  capacity of the employer to pay it; and in  determining such  capacity,  allowance  must be made  for  a  legitimate desire of the employer to make a reasonable profit.  In this connection, it may also be permissible to take into  account the  extent of the rise in price structure which may  result from   the   fixation   of  a  wage   structure,   and   the reasonableness of the additional burden which may thereby be imposed  upon  the,  consumer.  That is one  aspect  of  the matter which is relevant. The  other aspect of the matter which cannot be, ignored  is that  if a fair wage structure is constructed by  industrial adjudication,  and in course of time, experience shows  that the employer cannot bear the burden of such wage  structure, industrial  as judication can, and in a proper case  should, revise  the wage structure. though such revision may  result in  the reduction of the wages paid to the employee.  It  is true  that  normally,  once  a  wage  structure  is   fixed, employees are reluctant ’to face a reduction in the  content of their  wage   Packet;   but  like  all   major   problem, associated  with  industrial adjudication, the  decision  of this  problem must also be based on the major  consideration that  the, conflicting claims of labour and capital must  be hormonised  on,  a reasonable basis; and so  if  it  appears that  the  employer cannot really ’hear the  burden  of  the increasing wage bill, industrial adjudication, on principle. cannot refuse to examine the employer’s care and should  not hesitate to give him relief if it is satisfied that if  such relief is not given, the employer may have to close down his business.    It  is  unlikely  that  such  situation   would frequently arise but principle if situations arise, a  claim by  the  employer for the reduction of  the  wage  structure cannot be rejected summarily. This  principle, however, does not apply to cases where  the wages  paid  to the employees are no better than  the  basic minimum  wage.  If, what the employer pays to his  employees is  just  the basic subsistence wage, then it would  not  be open  to  the employer to contend that even such a  wage  is beyond his paying capacity. (1)  [1961] 1 L. L. J. 339. 422 Industrial  adjudication  has  consistently  recognised  and enforced the principle that social justice requires that  an industrial employer must be able to pay his employees a wage structure which can be reasonably regarded as basic  minimum wage.  No employer can be allowed to pay his employees wages which  are below the basic minimum or the subsistence  wage. It  is well-known that in certain industries, minimum  wages are fixed by the statute.  Even where minimum wages are  not fixed   by  statute,  industrial  adjudication  can   easily determine  whether in a given case, the wage paid  is  basic minimum or not.  In either case, where the wage answers  the description of the basic minimum or subsistence wage, it has to  be paid by the employer; and if he cannot afford to  nay it,  he would not be justified in carrying on  his  industry vide Crown Aluminium Works v. Their Workmen(1).  That is the second  consideration  which  has to be  borne  in  mind  in dealing with the point raised by the appellants about  their incapacity to bear the burden. We  have  thought  it  necessary  to  refer  to  these   two theoretical  considerations at this stage, because  if  they are  borne  in  mind, we get a  proper  perspective  of  the problem  raised  by the appellants’ contention as  to  their

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financial   capacity.   In  the  present  proceedings,   the Industrial Court is not constructing any wage structure  for the  first  time,  nor is it dealing with  the  question  of determining  the  quantum  or  the  sliding  scale  of   the dearneses  allowance to be paid to the textile employees  at Ahmedabad.   These matters have been considered in the  past on several occasions and they are governed by consent awards passed between the parties.  It is because of the new survey made   in   1958-59  and  the  consequent  change   in   the construction of the consumer price index made by the  series published  by  the Government of Gujarat  that  the  present dispute   has  arisen;  and  so,  while  dealing  with   the appellants’  contention,  it would be pertinent  to  enquire whether  the appellants show that a case has been  made  out for reduction of the wages paid to the employees.  It is, of course, true that the wages paid to the textile employees at Ahmedabad  cannot be regarded as subsistence wages  or  bare minimum  wages:  and  so,  it  would  not  be  open  to  the respondent to contend that the appellants Must pay the  said wages whether they can afford to may them or not.  If it  is shown  that the appellants cannot bear the burden  and  that the  implementation  of  the  award  would  inevitably  have extremely prejudicial effect upon the continued existence of the  textile  industry  itself, we  would  be  justified  in revising  the scale of dearness allowance.  But. as we  have just indicated, such a plea (1)  [1958] 1 L. L. J. 1. 423 can  succeed  only if it is shown  satisfactorily  that  the burden  cannot  truly  and really be borne  by  the  textile industry at Ahmedabad.  That is the proper approach to adopt in  dealing  with this problem; and the award  under  appeal shows that the Industrial Court did approach the problem  in a proper way. In support of their contention that the textile industry  at Ahmedabad  cannot bear the burden which would be imposed  by the award, the appellants examined Mr. Chokshi.  Mr. Chokshi is  a Chartered Accountant and a senior partner in the  firm of Messrs.  C. C. Chokshi & Co. He has been practising as  a Chartered Accountant for about 24 years.  He was a member of the Council of the Institute of Chartered Accountants for  8 years  and its President for one year.  It appears that  the appellant Association sent to him five statements and  asked for  his  opinion on the financial position of  the  textile industry at Ahmedabad.  Mr. Chokshi first filed an affidavit in  which  he  set  out his  opinions  and  then  gave  oral evidence.   In  his affidavit, Mr. Chokshi referred  to  the respective statements on which his opinion was based and  he stated  that the financial position of the textile  industry at Ahmedabad was, on the whole, not very satisfactory. In appreciating the evidence given by Mr. Chokshi, it would, therefore,  be  material  to  indicate  the  nature  of  the statements  on  which  his opinion  was  based.   The  first statement  shows the depreciation, development  rebate,  and increase  in  gross block per year of the  Ahmedabad  Cotton Textile  Mill  Industry  for the years 1945  to  1963.   The statement indicates that all these items have increased from year to year; depreciation was Rs. 0.83 crore in 1945 and it rose to Rs. 6.68 crores in 1963; development rebate was  Rs. 0.05  crore in 1954 and it became Rs. 1.26 crores  in  1963; gross block rose from Rs. 20.25 crores in 1945 to Rs. 101.98 crores in 1963; and increase in gross block Per year for the same years was Rs. 1.31 and Rs. 9.77 crores. The  second statement shows the net worth and borrowings  of the  said industry during the same period.  The emphasis  in

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this  statement was on the ever-increasing  borrowings.   In 1945,  the borrowings, consisting of secured  and  unsecured loans  and  other deposits, were of-the order  of  Rs.  9.58 crores,  whereas  in 1.963, they rose to Rs.  47.76  crores. The third statement shows the working capital and borrowings for  the  period in question.  The  fourth  statement  shows profits  after  tax as percentage of net worth of  the  said industry  for  the same period.  This  statement  refers  to profits before tax, loss, tax provision, profits after  tax, net  worth, and the last column gives profits after tax  and indicates percent- 424 age  of  net  worth.  It is the last  column  on  which  Mr. Chokshi  relied when he gave his opinion that the  financial position  of  the Ahmedabad textile industry  was  not  very satisfactory.  Whereas in 1945, the percentage of profits to net worth was 13.4%, in 1963 it was 3.3%. The last statement shows  dividends  as percentage of net  worth  in  different industries.   It  covers the period between 1951  and  1962. This statement shows that the dividends paid by the industry in  question are comparatively on the low  side.   Dividends paid  by 12 industries are shown in this statement,  and  it would be right to say that the textile industry has not been paying  dividends  which  can be said to  be  very  high  in comparison to the dividends paid by other industries. On  the  other  hand,  the  respondent  has  filed   several statements  showing  that  the  financial  position  of  the appellants has been conSistently good, and the fear that the appellants would not be able to bear the burden is  entirely unjustified.  Annexure 11 filed by the respondent along with its statement shows the percentage of wages to total  income in  Ahmedabad  Cotton Textile Industry from  1939  to  1962. This  percentage was 26 in 1939 and is 24 both in  1961  and 1962; for the intervening period, it has risen to 28 in 1949 and fallen to 20 in 1943.  Annexure III gives the  statement showing  the growth of paid up capital by cash in  the  said industry for the same period.  In 1939, the paid up  capital by  cash was 407 lakha. where as in 1962 it was  770  lakhs. Annexure  IV  shows  the growth of  total  paid  up  capital including bonus shares for the same Period.  This  statement shows  a remarkable growth of total paid up Capital in  this manner.   In 1939, the total paid up capital was  442  lakhs whereas in 1962 it has reached the magnitude of 2,129 lakhs. From  1950  onwards,  this  category  of  capital  has  been consistently  rising.  Annexure V shows the value  of  gross block  for  the same period.  In 1939, it  was  1,915  lakhs whereas  in 1962 it rose to 9,341 lakhs.  Annexure VI  shows the  amount  of  Depreciation  Fund  including   Development Rebate;  in  1939 it was 745 lakhs, whereas in 1962  it  was 5,643  lakhs.   Annexure VII shows the  amount  of  Reserves excluding  Depreciation  Fund and Liability Funds;  in  1939 they  were 360 lakhs, while in 1962 they were  2,518  lakhs. From Annexure VII we gather that the amount of Gross  Profit including  the Managing Agents’ Commission and  Depreciation was  Rs.  159 lakhs in 1939, and it was Rs. 1,860  lakhs  in 1961  and Rs. 1,296 lakhs in 1962.  Incidentally, it is  the figure  of gross profit which is more important, because  it is  not disputed that wages payable to the employees  are  a first  charge,  and all other liabilities take  their  place after the wages.  There are  425 three  other  Annexures filed by the respondent, but  it  is unnecessary to refer to them. The  main  comment  which falls to be made  on  the  opinion expressed  by  Mr.  Chokshi is that he  has  looked  at  the

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problem merely from the investor’s point of view.  In  fact, he  fairly  stated that he had made his  analysis  from  the point of view of an investor.  That explains why Mr. Chokshi took the view that absolute figures of more gross profit  or net  profit from year to year would be misleading.   He  did not agree that most of the textile mills in Ahmedabad are at present under capitalised.  He conceded that in dealing with the  problem of expanding business and increasing  the  wage bill, one of two methods can be adopted by the industry; the industry  can  increase the capital or borrow  money.   Very often,  said  Mr.  Chokshi, borrowing is  preferred  to  the increase  of capital in certain market conditions.   He  was not  certain whether borrowings had been resorted to by  the textile  industry for the purpose of expansion.  In  dealing with the problem of the financial capacity of the appellants to bear the burden, it would be inappropriate to rely solely upon  the approach which an investor would adopt in  such  a case;  and  so,  we  are  not  prepared  to  hold  that  the Industrial Court was in error in not accepting Mr. Chokshi’s estimate  about  the  financial  position  of  the   Textile industry at Ahmedabad. Mr.  Kolha  for  the appellants  has  strongly  relied  upon certain  statements  made  in  the  Reserve  Bank  of  India Bulletin  issued in July, 1964, in support of  his  argument that  the  financial  position of  the  appellants  was  not satisfactory.   Dealing  with  the position  of  the  Cotton Textile  Industry  during  the  period  under  review,  tile Bulletin says that cotton textiles recorded a steep fail  of Rs. 17.0 crores in net profits as against a rise of Rs.  2.1 crores  in  the previous year.  Applying  the  profitability ratio,  the  Bulletin goes on to say that  cotton  textiles, amongst others. showed declines in profitability.  This test is  evolved by the ratio of gross profits to sales, and  the return on capital, as measured by the ratio of gross profits to  total capital employed.  According to the Bulletin,  the IF  decline in the return on shareholders equity  (ratio  of profits after tax to net worth) was substantial in the  case of cotton textiles along with other named industries.  Table 4  in  the  Bulletin gives a comparative  statement  of  the profitability ratios, industry-wise, in 1960-61, 1961-62 and 1962-63.   It  is  arranged  in  five  columns  which   deal respectively with gross profits as percentage of sales gross profits  as  percentage of total capital  employed,  profits after   tax  as  percentage  of  net  worth,  dividends   as percentage of net worth, and dividends as percentage of paid up capital.  The figures 426 shown  against  the cotton textiles in  these  five  columns support  the  main  comment made in the  Bulletin  that  the position  of the textile industry, considered as a whole  in this country, was not quite satisfactory. We do not think in considering the financial position of the appellants in the context of the dispute before us, it would be  appropriate  to rely unduly on the  profitability  ratio which  has  been adopted by the said Bulletin.   Indeed,  in appreciating  the effect of the several statements  produced before  the Industrial Court by the parties in  the  present proceedings,  it would be relevant to remember that some  of these   single-purpose  statements  are  likely  to   create confusion and should not ordinarily be regarded as decisive. As Paton has observed : "Different groups for whom financial statements are prepared are interested in varying degree  in particular types of information; and so, it has been held in some  quarters  that no one form of  statement  will  satis- factorily  serve all these purposes, that  separate  single-

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purpose statements should be prepared for each need or  that the  statements  usually prepared for  general  distribution should  be  expanded  so  as  to  include  all  the   detail desired".(1) Paton cites the comment of Wilcox against these single-purpose  statements.   Said Wilcox : "The  danger  in undertaking  to furnish single-purpose financial  statements lies  in increasing confusion and misunderstanding,  and  in the  possible  misuse  of  such  statements  for  unintended purposes".   Paton has then referred to certain methods  for determining  the  financial  position of  a  commercial  and industrial  concern.  In this connection, he refers  to  the proprietary   ratio  rate  of  earnings  on  total   capital employed,  rate of dividends on common stockholders’  equity and others.  Our purpose in referring to these comments made by   Paton  is  to  emphasise  the  fact   that   industrial adjudication cannot lean too heavily on such  single-purpose statements  or adopt any one of the tests evolved from  such statements, whilst it is attempting the task of deciding the financial  capacity  of the employer in the context  of  the wage  problem.  While we must no doubt examine the  position in  detail, ultimately we must base our decision on a  broad view which emerges from a consideration of all the  relevant factors. What  then is the broad picture which emerges from the  evi- dence on the record in respect of the financial position  of the  textile  industry  at Ahmedabad ?  The  cotton  textile industry  at  Ahmedabad  can legitimately claim  to  be  the oldest  organised  industry  in the  country.   It  recently celebrated its centenary in (1)  ’Accountants’ Handbook Edited by Paton, p. 13 427 1961.   The story about the growth of this  industry  during this century is very heartening.  In its early stages, it no doubt  made. a small and modest beginning; but at  the  time when  the  centenary  celebrations  were  held,  it  had  an installed capacity of about two million spindles and  42,000 looms  and it employed 1,30,000: workmen.   Statistics  show that  textile  mills at Ahmedabad account roughly  for  one- third  of the total mill production in the country,  and  it would  be  no  exaggeration to say that  some  of  the  best varieties of cloth produced in the country are  manufactured at Ahmedabad. The paid up capital by cash of the industry in 1939 was 4.07 crores and it became 7.70 crores in 1962.  The total paid up capital  including bonus shares was 4.42 crores in 1939  and in 1962 it rose to 21.29 crores.  It would thus be seen that out  of the total paid up capital of 21.29 crores  in  1962, the  capital collected by cash is 7.70 crores,  whereas  the balance of 13.59 crores is by way of bonus shares.  In other words,  the  cash capital is increased by  175%  because  of capitalisation of the reserves.  Similarly, the gross  block in  1939  was  19.15 crores and in 1962 it  rose  to,  93.41 crores.   Almost the same rate of progress is  evidenced  by the Reserves.  The Reserves excluding Depreciation Fund  and other liability funds at the end of 1939 was 3.60 crores and they  have gone to 25.18 crores in 1962.  The gross  profits have  registered a similar rise.  In 1939, the gross  profit including  Managing Agents’ Commission and depreciation  was 1.59 crores, whereas in 1962 it has reached the magnitude of 12.96 crores.  In this connection, it would be  unreasonable to  ignore the fact that the industry has been able to  save and  capitalise from 1939 onwards 13.85 crores and has  been able  to  pay  a fair amount of dividend  on  equity  shares throughout   the   period,  in  spite  of   a   very   large capitalisation of reserves.

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It  is true that the textile industry at Ahmedabad has  been learning very heavily on borrowings; but that may partly  be due  to  the  fact that the said industry  has  for  several decades  been under-capitalised.  Besides, the  tendency  to rely   upon  borrowings  for  expanding  the   business   is noticeable  throughout  this period of the life  of  textile industry  at  Ahmedabad and has been the  subject-matter  of comment  by  several  persons.  In  fact,  sometimes  it  is treated  as  a peculiar feature of the  development  of  the textile  industry  at  Ahmedabad;  and  so,  the  extent  of borrowings cannot be pressed into service for the purpose of showing  that  the  financial position of  the  industry  is unsatisfactory. 428 One remarkable feature of the textile industry at  Ahmedabad is   the  harmonious  relations  which   have   consistently subsisted  between  the employers and  the  employees.   The employers, on the whole, are enlightened and progressive  in their  outlook,  and  the  Trade  Union  leadership  of  the employees  is  also enlightened and progressive.   Both  the employers and the employees realize that the progress of the industry  depends  primarily  on  the  cooperation   between capital  and labour; and the large number of consent  awards and agreements to which they have been parties over a period of several years, is a standing tribute to the spirit of co- operation  which  inspires the textile  industrial  life  in Ahmedabad.  As one looks back over the last hundred years of the life of the textile industry at Ahmedabad, one is struck by  the  fact that industrial life in that area  has  rarely been  disturbed  by bitterness, feuds or,  general  strikes. This  spirit  of co-operation, based on the  willingness  to give and take, alone can ensure the economic and  industrial growth  of  our country, for, after all, it  is  the  speedy economic growth of industry of the country which must be the ultimate object of both capital and labour.  In  considering the  prospects  of the textile industry in  Ahmedabad,  this feature must be given a place of pride. It  is  significant that as a result of the  spirit  of  co- operation  between capital and labour, the textile  industry at Ahmedabad has been able to enter into several  agreements for  rationalising  the industry itself.  It  is  well-known that  an attempt to rationalise textile industry  inevitably involves  retrenchment of a large number of  employees;  but the  appellants  and  the  respondents  have  entered   into agreements  of rationalisation after both of them agreed  to three  basic  principles in that behalf.   These  principles are:- (a)  Rationalisation   to  be  effected   without   creating unemployment of the existing workers; (b)  Gains  of Rationalisation should be  adequately  shared between the Management and the workers; and (c)  The workload should not be increased in a manner  which may jeopardise the health of the workers. The  fact that a large number of agreements have  been  made between the parties by consent concerning the vexed  subject of rationalisation also shows that the future of the textile industry  at  Ahmedabad is bound to be as bright as  it  has been  in the past.  In this connection, we may refer to  the tribute paid by the Central 429 Wage  Board  to the Cotton Textile  Industry  at  Ahmedabad. Says the Board               "The  industry, however, is conscious  of  the               need for rationalisation and modernisation  as               the  sine  quo non of survival,  the  pace  of

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             which had been checked in the past by the fear               of  unemployment; that fear has been  allayed,               and labour now recognises that its own welfare               depends on rationalisation and  modernisation,               and  it  has agreed upon the broad  lines  for               their  introduction.   Some mills  even  today               have very modem and up-to-date machinery,  and               all mills which can manage to do so will  have               to  rationalise and modernise; for the  nation               is on the march, and this industry must clothe               the nation". Let us then consider the question about the prospects of the demand  for  textile products in future and  the  increasing productivity  of the industry.  On this point again,  it  is difficult  to share the pessimism disclosed by the  attitude adopted  by the appellants.  There is little doubt that  the productivity  of  the industry is increasing  and  that  the demand for textile products will never be on the decrease in future.  Therefore, we do not see how we can differ from the conclusion of the Industrial Court that the appellants  have failed to substantiate their contention that the  additional burden  would  be  beyond their capacity to  pay.   In  this connection,  we  ought  to recall the  fact  that  what  the appellants  are required to prove is that the  prospects  of their  financial position in future justify a  reduction  in the  wage  which is being paid to the  industrial  employees during  all these years; for that on the  ultimate  analysis would  be the result if their contention is  accepted.   The Industrial  Court has made a definite finding that  it  does not  think that the financial condition of the industry  has deteriorated  so  as  to  justify  a  departure  _from   the principles  in  regard to dearness allowance  hitherto  laid down  in  respect of this industry at this centre.   In  our opinion, this conclusion is well-founded. It was conceded before us that our decision in Civil Appeals Nos.  167-173  of 1965 would govern the  decision  of  Civil Appeals  Nos. 537-538 of 1965.  So, the result is  that  all the said appeals fail and are dismissed with costs.  One set of hearing fee. Appeals dismissed. 3up.CI,/65-13 430