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PETITIONER: PRECISION BEARINGS INDIA LTD.

       Vs.

RESPONDENT: BARODA MAZDOOR SABHA AND ANR.

DATE OF JUDGMENT16/12/1977

BENCH: GOSWAMI, P.K. BENCH: GOSWAMI, P.K. KRISHNAIYER, V.R.

CITATION:  1978 AIR  419            1978 SCR  (2) 400  1978 SCC  (1) 235

ACT: Industrial  Dispute-Award not covered by the reference  must be   quashed--Revision  of   dearness   allowance-Additional financial burden which revision of dearness allowance  would impose upon the employer and his ability to bear such burden are relevant considerations.

HEADNOTE: One  of  the  five principles laid down by  this  Court,  in Bengal  Chemical & Pharmaceutical Works Ltd. v. Its  workmen [1969] 2 S.C.R. 113, for considering a revision of  dearness allowance, is the additional financial burden which dearness allowance would impose upon the employer and his ability  to bear such burden. In its charter of demands, the respondent workmen Union made specific  demands  viz.;  (i)  that  the  existing   minimum dearness  allowance of RS. 146/be modified and that all  the workers  including  workers known as staff  should  be  paid minimum  dearness  allowance at the rate  of  full  dearness allowance that is being paid to textile workers at Ahmedabad i.e. 100% of Ahmedabad Textile, rate and (ii) with the above minimum dearness allowance, they should be further continued the higher dearness allowance of 40% plus Ahmedabad  Textile D.A. for those in the pay range of Rs. 100-200 and 20%  plus Ahmedabad  Textile D.A. for those in the pay range of  above Rs.  200/-.  The dispute was referred by the  Government  in the  form  viz.   "All  workmen  should  be  paid   dearness allowance at the rate of 100% dearness-allowance paid to the workers  of  the Cotton Textile Mills, at  Ahmedabad".   The Tribunal, however, ranted over and above the 100%  Ahmedabad Textile D.A., varying percentages from 80% to 89% phased  in a particular way. Allowing in part, the appeal by special leave the Court. HELD  :  It  is true that in  considering  the  question  of dearness allowance the capacity of the Company to pay is one of the most important considerations. In the instant case (a) in view of the fact that although  a substantial sum was kept as reserve towards the  replacement costs  only  a  fraction of it  was  utilised,  the  company therefore  cannot  make any grievance about the  award  that this  could  be done in a phased manner.  The  Tribunal  has exhaustively gone into the matter with care and kept in view

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the  five  principles in Bengal  Chemical  &  Pharmaceutical Works  Ltd.  v. Its- Workmen [1969] 2 S.C.R.  113;  (b)  The Tribunal  in view of the content of the dispute referred  to it  had no jurisdiction in this reference to grant  anything more  than  100%  of  the Ahmedabad  Textiles  D.A.  on  the outside.  Since the Tribunal, after having given appropriate consideration  to all aspects of the matter granted  varying percentages  from 80% to 89% phased in a particular way,  it bad  virtually  rejected the Union’s claim for 100%  of  the Textile D.A. Having done so,. the was no scope for  allowing to the higher brackets of wage earners in addition 40%     and 20% of basic wages as dearness allowance. [468C, G-H,  469G- H] Obiter Social  justice  perspectives being integral  to  industrial jurisprudence the high cost allowance as a component of D.A. is not impermissible in principle.  It is a legitimate item. Indeed  in  the instant case, the lowest  bracket  upto  Rs. 100/- needed full neutralisation of the rise in the cost  of living.  Such a dispute may well be referred by  Government, if it considers fit, and the decision in this case will  not bar such a cause. [470C-D] Killick  Nixon Ltd. v. Killick & Allied Companies  Employees Union [1975] Supp.  S.C.R. 453 referred to.  467

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 9 of 1977. Appeal  by  Special Leave from the Award of  the  Industrial Tribunal,  Gujarat dated 8th October, 1976 in Reference  No. 11  of  1975.,  published  in the  Gazette  Part  I-L  dated November 11, 1976. H.   R.  Gokhale,  A.  P. Hathi and  Ashok  Grover  for  the Appellant. R.   K.   Garg,  P.   H. Parekh, Miss Manju  Jetley  and  K. Vasudev for Respondent No. 1. The Judgment of the Court was delivered by GOWSAMI, J.-This appeal by special leave is directed against the award of the Industrial Tribunal, Gujarat, of October 8, 1976.   Although  it is a composite award disposing  of  two references  by  the :State Government, we are  concerned  in this  appeal with Reference (IT) No. 11 of 1975 as  per  the State  Government notification of January 21, 1975 and  even out  of  the  two questions referred to  therein  only  with regard to one of these regarding dearness allowance. The  relevant, issue which arises for consideration in  this appeal may be quoted below:               "All workmen should be paid dearness allowance               at the rate of 100% dearness allowance paid to               the  workers  of the Cotton Textile  Mills  at               Ahmedabad". Before  we  advert to the submission of  Mr.  H.R.  Gokhale, appearing on behalf of the appellant, it will be appropriate to  indicate  that  there is no dispute  about  granting  of dearness  allowance of the pattern ,of what is known as  the Ahmedabad Textile D.A. The question to ’be determined by the Tribunal  was  only with regard to the  percentage  ,of  the Textile D.A. to be paid to the employees of the company. The Tribunal has noticed that-               "the  recent trend in the several  industries-               textile, engineering and others, in Ahmedabad,               Baroda and in some other parts of the State of               Gujarat,  is  to make a  demand  for  dearness

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             allowance   on  the  lines  of  the   dearness               allowance  paid to the workers of  the  cotton               textile  mills  at Ahmedabad, with  a  varying               percentage". The Tribunal describes this as what in ordinary parlance  is called  ’the  "Textile D.A." and reckons it "as  before  the revision of the basic wage in the mills prior to 1-1-1974". The company is manufacturing high precision ball and  roller bearings  in collaboration with a West German  company.   It has its plant in the district of Baroda with a manufacturing capacity  of 24 lakh pieces of bearings per annum upto  1973 and 28.82 lakh pieces per annum from 1974.  The company  was incorporated  in  April,  1962  and  went  into   commercial production  from  June 1965.  Its registered office  is  in Bombay and has its sales offices in Bombay, Calcutta, Delhi. ,and  Madras.   The plant is being operated almost  to  full capacity  from June 1965 onwards.  The production  has  also increased progressively. 468 The  number  of  workers on 31-8-1974 was  about  630.   The company’  is said to be the third largest unit in  the  ball bearing industry in the-country-the other two concerns being Antifriction Bearings and the Associated Bearings, the  next one to the company being Shriram Bearings. Two questions are raised before us by Mr. Gokhale.   Counsel is,  conscious  of his limitations in an appeal  by  special leave  under  Article  136  of  the  Constitution  and  has, therefore,  fairly enough confined his,  submissions  within narrow bounds and we fully appreciate this stand.  The first submission  of Mr. Gokhale in the forefront of his  argument is  that the Industrial Tribunal has failed to consider  the impact  of the rise in dearness allowance granted by  it  on the financial capacity of the appellant to bear the burden. It  is  true that in considering the  question  of  dearness allowance, the capacity to pay of the company is one of the most important considerations.  Mr. Gokhale has pointed  out that the additional liability as a result of the award would be  Rs.  8,29,312 in 1975, Rs. 7,42,563’ in  1976,  and  Rs. 12,42,395  in  1977  and the percentage  increase  over  the annual wage bill will respectively be 3 6.76 %, 32.91 %  and 5 5.07 % for the said three years.  He has also pointed  out that  the  company was able to declare 8% dividend  for  the first  time in the year 1970-71 and had been incurring  loss for  the  earlier years from 1962-63.  He: also  points  out that  although dividends have been progressively  increasing from  8% to 12%, from 1970-71 to 1974-75, only  8%  dividend was declared in the year 1975-76.  Besides, the, company has to,  spend huge sums for replacement costs which,  according to  counsel,  the  Tribunal  has  not  properly  taken  into account.  It is true that the Tribunal has mentioned in  the award  that  this could be done in a;  phased  manner.   Mr. Gokhale submits with some justification that this was purely a management function and the Tribunal should have taken the figures  as furnished by the management in  making  reserve& for replacement costs.  We have, however, seen that although a   substantial  sum  was  kept  as  reserve   towards   the replacement  costs,  only  a fraction  of  it  was  actually utilised.    The  company,  therefore,  can-not   make   any grievance about the manner in which the Tribunal has,  dealt with  this aspect.  Mr. Garg, on behalf of the  respondents, also  drew  our attention to paragraph 4  of  the  company’s written  statement  (page 62, Volume 1) where  after  having referred  to  certain  offers made by  it  the  company  was prepared  to  the  "increase of about Rs.  15  lacs  in  the employee cost in the very first year. . . . . .

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We  find  that the Tribunal has exhaustively gone  into  the wholes matter with care and kept in view the five principles laid   down  by  this  Court  in  the  Bengal   Chemical   & Pharmaceutical  Works  Ltd. v. Its Workmen(l), the  5th  one being  additional financial burden which dearness  allowance would impose upon the employer and his ability for bear such burden.  We are unable to find any infirmity in the Tribunal dealing  with  the point of the financial  capacity  of  the employer to bear the burden.  The Tribunal finally  observed as follows (1)  [1969] 2 S.C.R. 113. 469 .lm15 "On a careful consideration of all the relevant factors,  in my  opinion,  the dearness allowance paid to the  PBI  (Pre- cision Bearings India) workmen at the minimum level of basic pay from Rs. 26-upto Rs. 100-should be from 80 per cent,  of the textile D.A. to 89 per cent, of the textile D.A.  phased over a period of three years, The dearness allowance in  the higher pay scale of Rs. 101-to Rs. 200should be 40 per  cent and.  in the still higher slab of Rs. 201 and above,  should be  20  per cent, the percentage for the  higher  two  slabs remaining the same". The  40 per cent and 20 per cent of the basic wages  in  the higher  slabs  were  in addition to  the  Ahmedabad  Textile Dearness  Allowance granted in the award.  This takes us  to the second objection of Mr. Gokhale. It is submitted that in the charter of demands of the  union there  were  two specific demands with  regard  to  dearness allowance.  These were as follows :-               1  :  1.  It is  demanded  that  the  existing               minimum dearness allowance of Rs. 146/- should               be modified and that all the workers including               workers known as staff should be paid  minimum               dearness   allowance  at  the  rate  of   full               dearness  allowance  that  is  being  paid  to               Textile  workers  at Ahmedabad, i.e.  100%  of               Ahmedabad Textile rate.               1   :  2  With  the  above  minimum   dearness               allowance  the  workers and workers  known  as               staff  should be further continued the  higher               dearness allowance as under-               Below  Rs.  100  pay-100%  Ahmedabad   Textile               Dearness Allowance.               Pay  range  between Rs. 100  to  Rs.  200-100%               Ahmedabad Textile DA+40% of basic               Pay above Rs. 200/-100% Ahmedabad Textile  DA+               20% + of basic." Even though the demand for dearness allowance was as  above, the  State Government referred the dispute only in the  form set out at the outset.  The Government did not entertain the claim  of  dearness allowance in addition to the  100%  D.A. paid  to  the  workers  of  the  cotton  textile  mills   at Ahmedabad.  In other words, while the claim of the union was Ahmedabad   Textile  D.A.  plus,  the  Government  did   not entertain the  dispute between the parties in that form.  We find  great  force in the above submission of  Mr.  Gokhale. The Tribunal in view of the content of the dispute  referred to  it  had  no  jurisdiction in  this  reference  to  grant anything more then 100% of the Ahmedabad Textile D.A. on the outside.  Since, the Tribunal after having given appropriate consideration  to all aspects of the matter granted  varying percentage  from 80% to 89% phased in a particular  way,  it had  virtually  rejected the union’s claim for 100%  of  the Textile D.A. Having done so, there was no scope for allowing

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to  the higher brackets of wage earners in addition 40%  and 20% of basic wages as dearness 470 allowance.  This part of the award is, therefore, beyond the scope, of the reference and must be quashed which we  hereby do.  If the Government at a future time intends to entertain a  dispute of this nature with regard to higher brackets  of wage  earners  that will be a different dispute but  such  a claim could not be entertained by the Tribunal in the present reference. We  may  observe that during the course of  the  proceedings before  the Tribunal the clerical and the supervisory  staff seem  to  have  withdrawn from the  reference  and  even  an application was filed by some of them before the Tribunal to confine  the  dispute  as  pertaining  to  the,  manual  and technical workers.  The Tribunal however, did not accede  to this  request  and  proceeded on the footing  that  all  the members of the-staff were included in the reference. We should not be taken to suggest that the 40% and 20%  plus is either wrong or excessive by way of high cost  allowance. Indeed, we even felt that the lowest bracket upto Rs.  100/- needed full neutralisation of the rise in the cost of living as  has  been  held in Killick Nixon Limited  v.  Killick  & Allied  Companies Employees Union.(1) Nor do we fail to  see the  force  of Shri Garg’s submission  that  social  justice perspectives being integral to industrial jurisprudence. the high   cost  allowance  as  a  component  of  D.A.  is   not impermissible  in principle.  It is a legitimate item.   But we disallow because there is I deliberate omission to make a reference,   of  that  item  and  so,  falls   outside   the jurisdiction of the tribunal.  That is why we have expressly observed  that  such  a  dispute may  well  be  referred  by Government, if it considers fit, and this decision will  not bar such a course. In  the result the appeal is partly allowed.  The  award  of the  Tribunal with regard to the 40% and 20% for the  higher two slabs is set aside In all other aspects the award of the Tribunal stands.  The appellant will pay the costs (one set) of  the respondents as ordered at the time of granting  the special leave and will also pay interest as ordered therein. The arrears calculated in terms of the Award now upheld will be  paid  to the respondents in two equal  instalments,  the first  instalment within three months from today  and  final instalment within three months thereafter. Appeal partly allowed. S. R. 47 1