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PETITIONER: KILLICK NIXON LIMITED

       Vs.

RESPONDENT: KILLICK & ALLIED COMPANIES EMPLOYEES UNION

DATE OF JUDGMENT02/05/1975

BENCH: GOSWAMI, P.K. BENCH: GOSWAMI, P.K. BEG, M. HAMEEDULLAH BEG, M. HAMEEDULLAH ALAGIRISWAMI, A. UNTWALIA, N.L. KHANNA, HANS RAJ BHAGWATI, P.N.

CITATION:  1975 AIR 1778            1975 SCR  453  1975 SCC  (2) 260  CITATOR INFO :  RF         1976 SC2439  (6,7,9,10)  RF         1977 SC 322  (26)  D          1978 SC 419  (12)  R          1980 SC  31  (8)  D          1986 SC1794  (7)  E&D        1992 SC 504  (31)

ACT: Industrial    Dispute--Fixation    of    ceiling    on    D. A.--Principles.

HEADNOTE: The  appellant-company  wanted to  introduce  the  following scheme of D.A for its clerical staff and drivers. ----------------------------------------------------------- Basic Pay slabs.    Percentage of              Variation for                     basic salary             every 10 points                    (C.P.I. 441-450)          of C.P.I. ------------------------------------------------------------ 1st Rs. 100            120                        5% 2nd Rs. 100             40                        2% Rs. 201 to Rs. 500      30                        1% Over Rs. 500            25 --------------------------------------------------------------            Maximum D.A. Rs. 325 ============================================================== Placing  the  ceiling  of  Rs.  325  on  the  D.A.  was  not acceptable to the employees and a reference was made to  the Industrial Tribunal and the Tribunal removed the ceiling. In appeal to this Court, HELD: While  the question of the desirability of ceiling  on  D.A. was  not in issue in any references to Tribunals of  appeals therefrom,  referred  to  by the parties,  the  question  of imposing  a  ceiling  on D. A. is not  an  absolutely  alien phenomenon.   Although  it might not have been  the  general practice, ceiling was not rejected out of hand as irrational

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or unjust by unions in the course .of collective  bargaining in  the  Bombay  region, in which  the  head-office  of  the appellant  is situated.  In the case of the employees  under the  Central Government also a kind of ceiling has  been  in vogue. [461F.G., 462A] (1)  The problem of imposing or removing a ceiling on D.  A. has  to be viewed from the following among  other  important aspects :               (1)   Condition of the wage scale prevalent in               the company.               (2)   Condition of the wage level prevalent in               the industry and the region.               (3)   The  wage  packet  as a  whole  of  each                             earner  in the company with all  ameni ties  and               benefits  and his ability and potency to  cope               with   the  economic  requirements  of   daily               existence   consistent  with  his  status   in               society, responsibilities, efficiency at  work               and industrial peace.               (4)   The  position of the company  viewed  in               relation  to other comparable concerns in  the               industry and the region.               (5)   Peremptive     necessity    for     full               neutralisation  of the cost of living  at  the               rock-bottom  of  wages scale if  at,  or  just               above, the subsistence level.               454               (6)   The  rate  of  neutralisation  which  is               being  given to the employees in  each  salary               slab.               (7)   Avoidance  of  huge distortion  of  wage               differentials   taking  into   reckoning   all               persons employed in the concern.               (8)   Degree  of sacrifice necessary  even  on               the part of workers in general interest.               (9)   The  compulsive  necessity  of  securing               social   and  distributive  justice   to   the               workmen.               (10)  Capacity  of  the company  to  bear  the               additional burden.               (11)  Interest of national economy.               (12)  Repercussions  on other  industries  and               society as a whole.               (13)  The state of the consumer price Index at               the time of the decision.               (14)  Forebodings  and  possibilities  in  the               foreseeable future as far as can be envisaged.               (15)  Price indices have now assumed  menacing               figures.Any problem regarding wage or D.A. has               to be considered in that  background  and   at               the same time not losing sight of the national               economy. [466E-H, 467A-C] II.  The  removal  of  ceiling in the instant  case  is  not justified  even  though,  on the.  appellant  company  is  a prosperous  company  with capacity to  bear  the  additional financial  burden  if the ceiling is removed, and  (ii)  the consumer  ,rice  index has been soaring higher  and  higher; because : [465A-B, 467D]               (a)   The  unprecedented rise in the  consumer               price index produces steep rise in D.A.[458H]               (b)   The absence of ceiling on D.A. can  thus               result in curious anomalous situations wherein               the  pay  packet of the clerical  staff  would               exceed  the  pay packet  of  junior  executives

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             which would hardly be conducive to discipline,               efficiency and effective exercise of  control.               [463-GA]               (c)   Although  the appellant employs a  total               of  1142 workmen in its various factories  and               branches,  the  dispute relates  to  only  265               workers in the head-office.  A general problem               like  imposition  of  ceiling  on  D.A.  in  a               company  cannot be treated on the  statistical               burden  relevant  only  to a  section  of  the               employees. [463C-E] 111.      D.A.  being intimately connected with the cost  of living, the matter cannot be judged by the test submitted by the workmen, namely, that there cannot be a ceiling on  D.A. unless there is a ceiling on profits. [467-F] IV.  Also, in dealing ’,with the problem of ceiling on D.A., the  Tribunal’s view that there should not be a  ceiling  on D.A.  unless the company would be required to close down  if the ceiling is removed, is not correct. [465-H] V.   At what particular amount there should be a ceiling  on D.A.  is  a matter which will have to be gone  into  by  the Tribunal.   But  so far as the lowest paid employees  at  or just  above  subsistence  level  are  concerned,  they   are entitled  to  100  per  cent or at  any  rate  95  per  cent neutralisation  of  the rise in cost of living,  and  hence, there  should  be no ceiling on D.A.  payable  to  employees within the slab of first Rs. 100/- unless it can be shown by the management that the rate of neutrailsation in their case is  more than 100per cent.  The manner in which the  ceiling may be imposed, that is, at a certain amount as the  outside limit  of  the D.A. or by reference to the quantum  of  D.A. payable  at  a certain wage level, or in any  other  manner, would also 455 have  to be decided by the Tribunal in the exercise  of  its judicial  discretion The Tribunal will have to perform  this delicate  task  by striking a balance the  weightage  to  be given  to  any  principle being variable  according  to  the conditions-and  keeping  in view the dominant  principle  of doing social justice. [467DE, CH, 468A-C]

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 734 & 735 of 1973. Appeal  by  special  leave from the  Award  dated  the  24th January,  1973  of the Industrial Tribunal, Bombay  in  Ref. Nos. (IT) 149 of 1966 & (IT) No. 257 of 1966. A.   K. Sen, I. N. Shroff, D. G. Shroff, M. S. Gagrat’ &  F. D. Dalmania, for the appellant. R.   J. Mehta, for the respondent A.   K. Gupta, for the, applicant/intervener (Killick  Nixon Employees’ Union) D.   C.  Shroff,  O. P. Mathur, K. J. John, F. K.  Kaka  and J.  .B.  Dadachanji, for the  applicant/intervener  (Cynamid India Ltd.) G.   B.  Pai, S. V. Gupte, O. C. Mathur, K. J. John,  A.  G. Meneses  and J. B. Dadachanji, for the  applicant/intervener (Voltas Ltd.). Janardan Sharma and Jitendra Sharma, and K. T. Sule, for the applicant/intervener (Cynamid Employees’ Union) Janardan    Sharma    and   Jitendra   Sharma,    for    the applicant/inter-vener The Judgment of the Voltas & Vol Kart Employees Union  court

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was delivered by Goswami, J.-The only question with which we are concerned in these appeals by special leave is: Should there be a ceiling on dearness allowance in this case ? On  May 11, 1966, the employers gave a notice of change  for placing  a ceiling on dearness allowance (for brevity  D.A.) already in vogue at the figure of Rs. 325/-.  Since this was not  acceptable  to  the  union, both  sides  agreed  for  a reference  to the Industrial Tribunal, Maharashtra.  By  the impugned order of January 24, 1973, the Tribunal removed the ceiling and hence this appeal. ’Mere  was also another demand with regard to the  D.A.  for drivers  on the same basis as that for clerical staff.   The Tribunal following this Court’s decisions in Bengal Chemical & Pharmaceuticals Works v. Its Workmen(1) and Greaves Cotton and Co. and Others v. Their Workmen (2) allowed the  union’s claim for the two categories to be treated on equal footing. This  Court  held  in the  above  decisions  that  employees getting the same wages should get the same D.A. irrespective of  whether  they  are working as clerks or  as  members  of subordinate  staff or as factory workmen.  This part of  the award is, therefore, rightly not challenged before us. (1)  [1969] 2 S. C. R. 113. (2)  [1964] 5 S.C. R. 362. 10 SC/75-30 456 The  reference was made in June 1966.  There was an  earlier award in the reference.  At the instance of the  management, the High Court set it aside and remanded the above two items of  dispute  alone for disposal.  The Tribunal  had  in  the earlier  award  rejected  all  other  claims  of  the  union including that of revision of wage scale. The  only point that survives, therefore, is with regard  to the ceiling on D.A. When the reference was made in June 1966 the cost of living index for  Bombay city was 626.   At  the time of the impugned award in January  1973 it rose  to  906 and in December 1974 it reached 1336 mark. Various  expert committees and commissions have  dealt  with the question of wages and D.A. from time to time.   Dearness ’allowance  as such is not known in foreign  countries  with the exception of Ceylon and Pakistan.  Whenever there is any significant rise in the cost of living in foreign  countries there is a revision of wage rather than payment of any  D.A. as such.  D.A. in India is a relic of the First World War to cope  with the rise of cost of living although then  in  the shape  of ad hoc payments not linked to any  consumer  price index.  During the Second World War it was introduced in the form  of  a Grain Compensation Allowance to  compensate  the hardship  of  the  employees  for  the  rise  in  prices  of foodgrains.  So far as the Central Government employees were concerned,   the  Government  constituted  the   First   Pay Commission  in  1947  to examine the  wage  structure.   The Government  of India also set up a Committee on  Fair  Wages and  the  report was submitted in June 1949.  A  Second  Pay Commission  was also constituted by the Government in  1959. The Government of India in August 1964 constituted a One-man Independent  Body  to  enquire into  the  question  of  D.A. payable  to the Central Government employees and the  report was  submitted in January 1965 by Shri S. K. Das.   In  July 1966, the Government of India appointed a Dearness Allowance Commission presided over by Shri P. B. Gajendragadkar.   The Commission  examined the principles which should govern  the grant of D. A. to Central Government employees in future and was  also  required to review the formula for the  grant  of D.A.  as  recommended by the Second Pay  Commission  and  to

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recommend,   changes.  if  any.   In  December   1966,   the Government  of India set up a National Commission on  Labour presided  over by Shri P. B. Gajendragadkar with  exhaustive terms  of reference and the Commission submitted its  report on August 28, 1969.  Then in sequence came the report of the Third Pay Commission in 1973.  The parties have  extensively quoted from the above reports during arguments. Historically   and   by  the  industrial  texts   and   also observations of various commissions and committees, D.A. was regarded  as "applicable to those employees  whose  salaries are at the subsistence level or little above  it............ in  order to enable them to face the increasing dearness  of essential  commodities". .(See Gajendragadkar Commission  on Dearness Allowance, May, 1967). Like all changes in life and in continuous march in progress of society the concept of D.A. also may change to take in  a wider range 457 of commodities and services to make life worth living as far as practicable subject to compelling limitations of  general interest.  We recognise that the old definition of D.A.  may not  even  serve the climate of new aspirations  of  various classes  of  employees of this vast  country.   Luxuries  of Yesterdav  may be the comforts of to-day and necessities  of tomorrow.  Economic solutions must reckon the turnabouts  in social  urges.   Because even the  worm  turns.   Industrial adjudication which has not the limitations of the  ordinary, courts  has to respond to the needs of changing society  and it may be possible to widen the scope of D.A. if that serves the  cause of general welfare.  There may be  no  inexorable rule tying down economic existence to definitions of  bygone days,  if  unsuitable or irrelevant in the  context  of  the times. The National Commission on Labour (1969) while dealing  with D.A. observed :               "We  consider that payment of D.A. has  to  be                             viewed in broader context of wage poli cy,  many               elements  of which have been discussed in  the               previous  chapter.   In a  developing  economy               where price stabilisation has proved  ineffec-               tive, or the inflationary potential cannot  be               controlled,  any arrangement for  compensating               for  price rise will have its  raisin  d’etre.               At  the same time, a direct linkage between  a               rise  in  the index and the  D.A.  may  create               problems  for  price  stabilisation.   It  can               hardly be disputed that the index is the  best               available indicator of changes of price level.               The reason for a disproportionately high  D.A.               is  the fixation of basic wage on a  date  far               remote  from the present". (Para, 16,39,  page               240).               The Commission further observed               "It is obvious that unless money wages rise as               fast  as the consumer prices, it would  result               in  an erosion of real wages.  But the  extent               of  its  impact will depend on the  margin  of               cushion  available  at  different  levels   of               income......... We accordingly recommend  that               95  per cent neutralisation should be  granted               against  rise  in  cost  of  living  to  those               drawing   minimum   wage   in    non-scheduled               employments". (para 16.47, page 242). The  Third  Pay Commission in its Interim Report  made  some

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significant observations :               "We need hardly emphasise that it would be  an               exercise in futility to keep on increasing the               emoluments of Central Government employees, if               these  increases  are largely wiped  out  soon               afterwards by increases in prices of goods and               services.  There is, therefore, paramount need               to   maintain  price  stability  and  we   are               confident  that the Government will  take  all               necessary fiscal, monetary and other measures,               including   control   over   production    and               distribution, to maintain the price line". 458 D.A.  was  primarily intended to be  a  temporary  expedient and  .,as  sought to be made available as  a  protection  to those who have of cushion at all in their wage packet in the face  of  any appreciable rise in prices.  Some  relief  was given  to others also.  The hope of ’he two Pay  Commissions that  prices  will decline and stablise,  never  same  true. D.A.  has, therefore, come to stay.  The price indices  have now assumed menacing figures.  This is the stark reality  of the situation and any problem regarding wage or D.A. has  to be considered in that background at the same time not losing sight of the national economy. In considering the question of D.A. the total wage packet of the  employee must be kept in view.  The first and  foremost consideration  is the case of the employees at  the  minimum wage  level.  it must, however, be remembered  that  minimum wage  should  enable  an employee not merely  for  the  bare sustenance   of  life  but  for  the  preservation  of   his efficiency  by  providing  for some  measure  of  education, medical requirements and amenities.  The concept of  minimum wage as also of fair wage cannot be static.  It will  change with the progress of time and development. In  a  recent  decision of this  Court  in  Bengal  Chemical (supra)  ,the  principles  for fixing of D.A.  came  up  for consideration.  After reviewing the earlier decisions,  this Court held as follows :-               "1. Full neutralisation is not normally given,               except to the very lowest class of employees.               2.    The purpose of dearness allowance  being               to neutralise a portion of the increase in the               cost  of living, it should ordinarily be on  a               sliding  scale and provide for an increase  on               the rise in the cost of living and a  decrease               on a fall in the cost of living.               3.    The  basis  of  fixation  of  wages  and               dearness allowance is industry-cum-region.               4.    Employees getting the same wages  should               get the same dearness allowance,  irrespective               of  whether  they  are working  as  clerks  or               members   of  subordinate  staff  or   factory               workmen.                5.   The additional financial burden which  a               revision  of  the wage structure  or  dearness               allowance  would impose upon an employer,  and               his  ability  to bear such  burden,  are  very               material and relevant factors to be taken into               account". It is submitted on behalf of the employers that in a  scheme of D.A. linked not only to the cost of living index but also to  basic wages by way of slabs, there must be a ceiling  as otherwise  it will not be a compensation for increased  cost of  living but additional remuneration unconnected with  the increasing  cost  of  living at the  lowest  level.   It  is

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emphasised  that  where  there is a  dual  link,  a  ceiling removes  the incongruity in the D.A. rising with  the  basic wages  out of proportion to the cost of living  compensation at the 459 lowest level.  It is fairly admitted that the ceiling  fixed act  any given time on the basis of a possible rise  in  the cost  of  living  index in the  foreseeable  future  may  be altered if the rise in the cost of living index later  makes the ceiling unreflective of the requisite neutralisation  of the increase in the cost of living at the lowest level.   It is  submitted that without a ceiling it will  be  impossible for  any  management to plan the business of  the  employers including production, expansion, etc. without any  certainty of wage bill being estimated at any definite figure for  the foreseeable future. On  the other hand it is submitted on behalf of the  workers that  there  should be no ceiling on D.A. till  the  workers reach  the level of living wage.  It is also submitted  that in the interest of social justice there should be no ceiling on  wages  without first putting a ,ceiling on  profits  and controlling and stablising prices. The award pertains to the clerical staff and drivers working in the Head Office of the appellant numbering about 265  out of about 743 workmen in its various establishments (page 120 of  the  record).   Out of that also  only  two  classes  of workers  are involved, namely, the clerks and  the  drivers. Amongst the clerical staff. there are three grades, Grade A, Grade   B   and   Grade   C   as   under   ,Grade   A:   Rs. 165-15-240-20-400-E.B.-25-500. Grade B: Rs. 110-10-150-12-1/2-200-15-260-E.B.-20-360. Grade C: Rs. 70-5-90-8-130-10-200-E.B.-12-1/2-250. The wage scale for drivers is as follows: Rs. 75-5-100-7-135-7-50-150. The scheme of D.A. which is sought to be introduced with the ceiling is as under -----------------------------------------------------------                       Percentage                 Variations Basic Pay slabs      of Basic Salary             for every                     (C.P.I. 44 1-450)            10 points                                                  of C.P.I. =========================================================== 1st Rs. 100            120                       5 %. 2nd W.  100             40                       2% Rs. 201 to Rs. 500      30                       1% Over Rs. 500            25 ============================================================            Maximum D.A. Rs. 325/- ============================================================ Mr.  Mehta, representing the union, has drawn our  attention to.  a  few  awards in the Bombay  region  prescribing  slab system  of D.A. without ceiling.  The first is that  of  the Ahmedabad  Manufacturing & Calico Printing Company  Limited. It is true that on 4th slab of Rs. 100/- and balance,  9.75% D.A.  was allowed without imposition of any  ceiling.   D.A. was  awarded  by the Industrial Tribunal in this case  on  a slab system at the consumer price index 841-850.  The second is the case of Indian Vegetables Products Limited, Bombay, 460 where there was no introduction of any ceiling and 10%  D.A. at the 3rd slab of Rs. 100/- and above was granted.  In that case  the  consumer price index was at 311-320.   The  third case  is  that of Godrej Soap Private  Limited  where  again although  no ceiling on D.A. was imposed, the  Tribunal  was dealing  with  a case when the consumer price index  was  at

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396-405.   It  is pointed out that in all  the  three  above cases  special  leave  was refused  by  this  Court.   That, however,  cannot  be a ground for holding  that  this  Court endorsed  non-imposition of ceiling on D.A. as a  principle. The question as such was neither raised before the  Tribunal nor before this Court in any of the above cases. Mr.  Mehta also filed a list of 25 awards during the  period between  1st January, 1970 and December, 1974 in the  Bombay region.  This was with the object of establishing case for a slab system of D.A. linked to the consumer price index  with point variation without ceiling, Mr. A. K. Sen has commented that some of these awards were as a result of settlement and the  question of ceiling on D.A. was not even raised  for  a decision.   In the case of Dorr-Oliver (India) Limited,  the scale  of pay was fixed on the basis of the  consumer  price index 700 and D.A. was fixed, if the index rose beyond 700,. on a slab system.  It is to be noted that a flat sum of  Rs. 9/- as D.A. was allowed on the salary of Rs. 5001- and above and for variation for rise of every ten points in slab above 700,  Rs.  9/- was fixed for such slab.  It is to  be  noted that there is no percentage basis of D.A. on the salary  and it  is any linked to the consumer price index.  In the  case of  Kanji Jadhavji,210 & Company, it is, however, seen  that for  pay in excess of Rs. 210/- but upto Rs.  670/per  month 1/2 paisa per rupee per point upto Rs. 180/- per month  plus 1/3  paisa per rupee per point in excess of Rs.  180/-  upto Rs. 210/- plus 1/4th paisa per rupee per point in excess  of Rs.  210/-  subject to a maximum of Rs. 1.65 per  point  per month  was  allowed.  There is a fixed salary of  Rs.  670/- beyond  which D.A. was not made admissible.  In the case  of Tata  Press  Limited  which  is  an  award  said  to  be  by settlement, additional D.A. of 10 per cent has been given on the basic wage of above Rs. 401, but there is no linkage  to the  consumer  price index.  In Godavari Sugar  Mills  Mamli Private Limited, D.A. stopped at the 4th Rs. 100/- of  basic salary.   At  this slab 36 per cent D. A. was  awarded  with variation of 1 per cent for every ten points rise or fall in the consumer price index 791-800.  Identical is the case  of another  award  in  the case  of  Somaiya  Organo  Chemicals Limited.   In Britannia Biscuit Company Limited’s  case.  no D.A. has been awarded beyond the salary slab of Rs. 500/  D. A. was considered in this case when the cost of living index number was 301-310 (old series).  In serveral awards in  the compilation given by Mr. Mehta, minimum D.A. has been fixed. On  the  other hand Mr. Kaka intervening for  Cynamid  India Limited has drawn our attention to a number of awards in the Bombay region wherein there appears to he a ceiling on D. A. These are : 1. National Machinery Manufacturers Ltd. Maharashtra Gazette (M.G.G.) dated 30.6.1966. 2. Indian organic Chemicals Ltd. M.G.G. dated 21.11.1974. 461 3. The Millowners Association.M.G.G. dated 31.10.1974. 4. PhoeuLx Mills Ltd.    M.G.G. PaRt I-L dated 22.6.1972. 5.  Bayer (India) Ltd.   M.G.G. dated 31.1.1974 6.  West Coast Paper MillsM. G. G. dated 20.7.1972 7.  voltas Limited  1. C. R. February 1970’ page 57 8.  Murphy India LimitedM. G. G. dated 27. 7. 1972 9.  Polychen Limited     M. G. G. dated 6. 8. 1970 Mr.   Mehta  has,  however,  submitted  that  most  of   the settlements in pursuance of which awards had been made  have expired  and notices of termination have been served on  the employers and in some cases disputes have been raised. The  management also argued that this Court in  M/s  Unichem Laboratories Ltd. v. The workmen (1) noticed in paragraph 33

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of the decision-               "Another feature of the scheme adopted by  the               Tribunal  is  that it puts a  ceiling  on  the               employees  drawing basic wages up to  Rs.  300               per  month alone being eligible  for  dearness               allowance;   whereas   under   the    practice               originally obtaining in the company there  was               no such limit." and, therefore, must be held to have approved of  imposition of  ceiling.   We are unable to accept that this  Court  was called upon to decide about the question of. ceiling in that appeal which was at the instance of the employers and not of the  employees nor against the imposition of  ceiling.   The management  also  drew our attention to a decision  of  this Court in Remington Rand of India v. Its Workmen (2) when the scheme  of D.A. contained a maximum of Rs. 200 at the  index figure  351-360 and the maximum was not interfered  with  by this Court.  It is sufficient to point out that the question of  desirability of ceiling or otherwise was not at  all  in issue  in  that  appeal and therefore, this  Court  was  not called upon to pronounce upon the matter. We,  however, find that in the case of employees  under  the Central Government a kind of ceiling has been in vogue.  For example  one of the Second Pay Commission’s  recommendations was that the benefit of D.A. should in future adjustments be extended to all employees drawing a basic pay below Rs.  400 per  menses  in such a way that the total of basic  pay  and D.A. paid to an employee in the pay range of Rs. 300 to  Rs. 400  does not exceed Rs. 400 (page 97, paragraph  16).   The Third Pay Commission also after fixing D.A. at a  percentage of 3.5 per cent of pay upto the pay range of Rs. 300 fixed a maximum  of  Rs.  10 per month and a minimum of  Rs.  7  per month.   Similarly for the pay range above 300 a  percentage of 2.5 per cent of pay was fixed subject to a maximum of Rs. 20  per  month  and  a minimum of Rs.  10  per  month.   The Commission further recommended that the pay plus D.A. should in no case exceed Rs. 2,400 per month. (1)  [1972] 1 L. L. J. 576, (2)  [1962] 1 L. L. J. 287, 462 From  the  above  one  thing, however,  is  clear  that  the question  of  imposition  of  ceiling  on  D.A.  is  not  an absolutely  alien  phenomenon.  Although it might  not  have been  the general practice, ceiling was not rejected out  of hand  as  irrational or unjust by unions in  the  course  of collective bargaining in the Bombay region. So  far  as  the  workers  involved  in  these  appeals  are concerned  the  question  whether D.A.  should  cease  at  a certain  level of salary does not arise  for  consideration. The maximum basic of the highest grade in the case of  these employees  is  Rs. 500.  It may, however, be  noted  that  a system has been in vogue in the case of Government employees where  D.A.  ceases to be admissible on reaching  a  certain level  of  salary.   The question remains as  to  whether  a ceiling  should be- placed on D.A. itself, when  it  exceeds Rs. 325 as has been sought to be done by the employers.  The employers gave a notice of change for imposition of  ceiling on  D.A. in May 1966 when the cost of living index has  been on the constant rise each year.  While the for 1966 was  630 those  for the subsequent years from 1967 to 1974 were  697, 740, 766, 797, 832, 876, 982 and 1198.  In December 1974  it was 1336.  The cost of living index being on a constant rise it is necessary to consider the totality of the wage  packet of the workers and other relevant factors in order to decide if a ceiling on D.A. should be imposed.  In this context our

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attention  has  been drawn by Mr. Sen to  the  statement  of objects and reasons to the Additional Emoluments (Compulsory Deposit) Bill 1974 which is as follows :-               "Controlling  inflation  is today  the  single               most   important  task  facing  the   country.               Periodical  revision of wages and  adjustments               in the rates of dearness allowance, which have               been  adopted as remedies for  moderating  the               impact  of  rising prices, have  been  proving               ineffective.  In view of the mounting pressure               of inflationary forces, payments of additional               wages  or  dearness  allowance  will  give  an               upward  thrust to prices and  will  inevitably               aggravate  the situation, and also  neutralise               the  effect  of any increase in the  wages  or               dearness  allowance.   In  the  circumstances,               urgent  steps aimed at breaking  this  vicious               circle of money incomes chasing prices be came               inescapable.    These   measures   undoubtedly               involve some sacrifices by different  sections               of  the community.  As a part of  these  anti-               inflationary  measures, the Additional  Emolu-               ments  (Compulsory Deposit)  Ordinance,  1974,               was  promulgated by the President on  the  6th               July, 1974........... Reference  to  the above is made in order to  highlight  the dreadful  consequences  of inflation and the  inefficacy  of mere wage rise as a solution. We  may, however, in this connection usefully refer to  what the National Commission on Labour said on this subject:               "Firstly,  the increased purchasing  power  in               the  hands  of  the  workers  on  account   of               compensatory  payments  for rise  in  cost  of               living  forms  a  small part  of  the  overall               increase 463 in   purchasing   power.   Secondly,   the   elasticity   of compensatory  payments  to  changes in  cost  of  living  is generally  less than unity so that the feed-back must  taper off.   Money  wage  stability, though  important  for  price stability,  is  seldom a necessary, much less  a  sufficient condition  for it.  On the other hand, holding of the  price line,  particularly  of the cost of living  is  an  adequate condition  for preventing increases in money  wage  payments that  are  not related to increases in  productivity.   This alone can prevent a fall in real wages." Before  we proceed further we have to take note  of  certain facts concerning the dispute.  Although the company  employs a  total  of  1142  workmen  in-its  various  factories  and branches  the present dispute relates to 265 workers in  the Head  Office (Bombay) out of them.  It is not disputed  that the supervisory staff consisting of 86 members, although not involved  in  this reference. have been in receipt  of  D.A. under  the same scheme.  There is no ceiling on D.A. in  the Calcutta  branch of the company where the workers  are  paid according  to the Bengal Chamber of Commerce’s  rates.   The industry-cum-region  aspect may at present take care of  the few  employees  working in Calcutta.  It  is,  however,  not unlikely that all the employees of the company may claim  to be  treated  alike.   There are  also  disputes  pending  in respect  of  the  subordinate  staff  at  the  Head  Office. Without  adding  further details it is sufficient  to  state that a general problem like imposition of ceiling on D.A. in a  company  cannot  be treated  on  the  statistical  burden relevant  only  to  a section of the  employees.   Both  the

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parties  realise the importance of this aspect and  produced before  us  a large number of documents  containing  various details including balance-sheets of the company upto 1973 to enable us to have a complete picture of the entire matter. The management has produced a statement showing the  compar- ison  of total emoluments of clerical and supervisory  staff after  implementation of the award and those of  the  junior executive  staff.   We  have quoted  therefrom  showing  the figures  in  April 1973 and July 1974  with  the  respective index at 924 and 1194. It  will be seen that the minimum basic salary of  a  junior executive  is  Rs.  400  and maximum  is  Rs.  1000’.   With allowances the junior executive at the minimum gets a  total of  Rs. 700 and at intermediate stages, namely, of  Rs.  530 and  800,  he  gets  a  total  of  Rs.  830  and  Rs.   1150 respectively.   When he reaches the maximum the  total  with allowance  is Rs. 1350.  The clerical staff at  the  maximum grade  which  is  Rs. 500 gets a total amount  of  Rs.  1230 inclusive of D.A. of Rs. 730 after removal of the ceiling at the C.P.I. 924.  At the intermediate stage a clerk gets  Rs. 874  in  the same index (Rs. 300 basic salary plus  Rs.  574 D.A.). At the minimum he gets Rs. 70 basic pay plus Rs.  340 D.A.  totaling Rs. 410 in the same index 924.  The  position is worse when the consumer price index touches 1194 as, seen above.  The absence of ceiling on D.A. can result in curious anomalous  situations  where in the pay packet  of  clerical staff would exceed the pay packet of junior executive staff. This  is  hardly  conducive to  discipline,  efficiency  and effective exercise of control. 464 KILLIK NIXON LIMITED BOMBAY. COMPARISON  OF TOTAL EMOLUMENTS OF CLERICAL SUPERVISORY  AND JUNIOR EXECUTIVE STAFF.                                         CLERICAL                                         Basic                            Salary     D.A.       Total              -----------------------------------------                              Rs        .Rs.         Rs. APRIL 1973   Minimum         70         340       410 Min (Feb. CPI    Middle         300         574       874 Mid 924)         Maximum        500         730      1230 Mid                                                       Max. JULY 1974    Minimum         70         475       545 Min (May CPI     Middle         300         790      1090 Mid 1194).       Maximum        500        1000      1500 Mid                                                       Max SUPERVISORY                        JUNIOR EXECUTIVE Basic                       Basic  House     Travel- Salary      D.A. Total      Salary Rent Al-  ling Al- total                                    lowcante  lowance =============================================================== Rs.         Rs.   Rs.       Rs.     Rs.       Rs.     Rs. 275       555     830       400    150        150     700 520       730    1250       530    150        150     830 800       730    1530       800    200        150    1150 1200      730    1930      1000    200        150    1350 275       764    1039       400    150        150     700 520      1000    1520       530    150        150     830 800      1000    1800       800    200        1501    150 1200     1200    2200       1000   200         150    1350  465 Although the change in the D.A. scheme imposing the  ceiling was  notified  in  May 1966, it could  not  have  been  then contemplated  that the index would touch such a  high  mark; yet  within  these  nearly  nine  years  that  the   dispute

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unfortunately has dragged on, it has given the court an idea of the effect of removal of the ceiling. The  management has submitted statements showing the  actual working of the D.A. formula without the ceiling and tried to show  that  it  would not be possible for  it  to  bear  the financial  burden.   The  Tribunal went  into  this  aspect, although  at  that time the figures of  the  actual  working could  not  be  there, and refused to  accept  the  plea  of incapacity  to  bear the burden.  The main argument  of  the management  was  about the loss of  Managing  Agency  which, according  to  it,  resulted in shrinkage  of  income.   The Tribunal  went  into the matter and came to  the  conclusion and,  according  to us, rightly, that the said plea  had  no substance. The  company is one of the twenty big industrial  houses  in the  country.   Originally  there were  two  companies,  one Killick  Industries Limited and another Killick Nixon &  Co. Private    Limited.    Killick   Industries   Limited    was incorporated  as  a Public Limited Company on  November  14, 1947   and   Killick  Nixon  &  Co.  Private   Limited   was incorporated as a Private Company on January 23, 1948.  Some time  in 1957 the Killick Industries Limited  purchased  all the  shares of Killick Nixon & Co. Private Limited with  the result  that  Killick Nixon & Co. Private Limited  became  a wholly  owned  subsidiary  of  Killick  Industries  Limited. Under section 43A of the Companies Act, 1956, Killick  Nixon &  Co. Private Limited became a Public Limited Company  with effect  from  March 28, 1961 and by an order of  the  Bombay High  Court of March 24, 1970, was amalgamated with  Killick Industries   Limited  with  effect  from  August  1,   1969. Following  the  amalgamation and with the  approval  of  the Central  Government the name of Killick  Industries  Limited was  changed to Killick Nixon Limited (the appellant).   The activities of the company are : manufacturing of engineering products,   namely,   Jhonson   Vibrators,   dall   Pressing equipments   and  E.F.C.C.  Furnaces;  Selling   agency   of engineering products such as Vibrators, drilling  equipment, electric  meters  and dredgers, general  selling  agency  in respect of snowcem cement print and allied products,  carbon papers; slotted angles, Hawkins pressure cookers; export  of piece  goods; and agency of City Line and Hall Line of  U.K. and clearing and forwarding work. The  question, however, in this case may not be  simply  the financial  capacity  of the company alone.   Ordinarily  the capacity to bear the additional burden would certainly be  a relevant  factor.   We  are, however,  not  considering  the matter from that aspect in the present case.  We will assume that  the  company  will  be able  to  bear  the  additional financial burden if the ceiling is removed.  We do not agree with  the Tribunal that it is only if the company  would  be required  to  close  down  that  such  a  demand  should  be rejected.   That  is an incorrect view to take  in  dealing, with the problem with which we are concerned. 466 We  have,  therefore, a company which  is  prosperous.   The consumer  price  index has been soaring higher  and  higher. The  employees have to get protection of their  real  wages. It is well settled that complete neutralisation of the  rise of  cost  of living cannot be allowed except to  the  lowest category  of  employees.   In  the  view  of  the   National Commission on Labour "the only purpose of dearness allowance is  to  enable a worker in the event of a rise  in  cost  of living  to  purchase  the  same amount  of  goods  of  basic necessity  as  before.  This purpose would be served  by  an equal   amount  of  dearness  allowance  to  all   employees

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irrespective of differences in their emoluments" (page 243). It   was  strenuously  submitted  that  this  view  of   the Commission  should  be accepted by us.  In  other  words  we should  first  ascertain what is the minimum  wage  in  this company   at   which  a  worker   would   require   complete neutralisation of the cost of living and whatever amount  is found  to be necessary for him as a protection  against  his real wages should only be available to all other  employees. We  are  not required to give our opinion  about  this  sub- mission  for the simple reason that the management here  has already  introduced  a scheme in which there  is  percentage system on salary    slabs  linked  with the  consumer  price index and there is no dispute about it. All that the management wants in this case is that D.A. must not  go on rising with the scaring price index and  a  limit should be imposed.  We have already observed that in view of the status of the company the capacity to pay will not alone be  of  moment  in favour of removal of  the  ceiling.   The problem will have to be viewed from the following  important aspects :-               (1)   Condition of the wage scale prevalent in               the comnpany.               (2)   Condition of the wage level prevalent in               the industry and the region.               (3)   The  wage  packet  as a  whole  of  each               earner  in the company with all amenities  and               benefits and it-, ability and potency to  cope               with   the  economic  requirements  of   daily               existence   consistent  with  his  status   in               society, responsibilities, efficiency at  work               and industrial peace.               (4)   The  position of the company  viewed  in               relation  to other comparable concerns in  the               industry and the region.               (5)   Peremptive     necessity    for     full               neutralisation  of the cost of living  at  the               rock-bottom of wage scale if at or just  above               the subsistence level.               (6)   The  rate  of  neutralisation  which  is               being  given to the employees in  each  salary               slab.               (7)   Avoidance  of  huge distortion  of  wage               differentials   taking  into   reckoning   all               persons employed in the concern.               467               (8)   Degree  of sacrifice necessary  even  on               the part of workers in general interest.               (9)   The  compulsive  necessity  of  securing               social   and  distributive  justice   to   the               workmen.               (10)  Capacity of the company         to  bear               the additional burden.               (11)  Interest of national economy.               (12)  Repercussions  in other  industries  and                             society as a whole.               (13)  The  state of the consumer price,  index               at the time of decision.               (14)  Forebodings  and  possibilities  in  the               foreseeable future as far as can be envisaged. We  should  also Add that revision of D.A. is not  the  same thing as revision of wages. Having  given our anxious thought to all the above  aspects, which  are  not  exhaustive, we are unable to  come  to  the conclusion  that  removal  of the  ceiling  in  the  present context  will  be justified.  The company has been  able  to

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make  out  a  case for imposition of  a  ceiling.   At  what particular  amount  there should be a ceiling on D.A.  is  a matter  which  will  have to be gone into  by  the  Tribunal keeping  in  view  the  above  principles.   The   financial capacity  will  have  to  be  judged  with  regard  to   the commitment  of  the  company  as a  whole  towards  all  its employees. We  are unable to agree with the contention of  the  workers that unless there is a ceiling  on profits there cannot be a ceiling  on  D.A.  The question  of  D.A.  being  intimately connected  with  the cost of living, the  matter  cannot  be judged  by  the  test of the  aforesaid  submission  of  the workmen. There  is, however, one thing which we must point out,  lest there should be some misconception about it and that is that so  far  as the lowest paid employees at or just  above  the subsistence  level are concerned, they are entitled  to  100 per  cent  or  at  any  rate  not  less  than  95  per  cent neutralisation  of the rise in the cost of living and  hence there should be no ceiling on dearness allowance payable  to employees within the slab of first Rs. 100, unless it can be shown  by the management that the rate of neutralisation  in their  case  is  more  than 100 per cent.   So  far  as  the employees in the higher slabs are concerned, it would be for the  Tribunal  to consider, having regard to  the  aforesaid principles,  whether  a ceiling should, be  imposed  at  the second  slab of Rs. 100 or only at the last slab of Rs.  201 to Rs. 500.  The manner in which the ceiling may be  imposed would  also  have  to  be decided by  the  Tribunal  in  the exercise  of  its judicial discretion keeping  in  view  the aforesaid  principles.  The ceiling any be fixed  either  by prescribing a certain amount as the outside 468 limit  of  the  dearness allowance or by  reference  to  the quantum  of  dearness allowance payable at  a  certain  wage level.   We  do no’ wish to lay down as an  invariable  rule that in all cases there should be ceiling on D.A. Whenever a case  of  this nature comes for industrial  adjudication  it will always be a delicate task for the Tribunal to strike  a balance  keeping in view the above principles, weightage  of each  one  of which being variable according  to  conditions obtaining.   Whether  or not there should be  a  ceiling  on dearness allowance in a given case must depend on the  facts and circumstances of that case.  There can be no  inexorable rule  in  that  respect.  We  have  formulated  the  various principles which must be taken into account by the  Tribunal in determining this question but the most dominant of  these must always be that of social justice, for that is the ideal which  we  have  resolved  to achieve  when  we  framed  our Constitution. In  the result the award is set aside with regard to  demand No. 2(a) relating to ceiling.  The reference stands restored with regard to that specific matter and will be disposed  of by   the  Tribunal  as  early  as  possible   after   giving opportunity to the parties.  The appeals are partly  allowed without costs. Appeals partly allowed.  V.P.S. 469