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PETITIONER: THE SILK AND ART SILK MILLS’ ASSOCIATION, LTD.

       Vs.

RESPONDENT: MILL MAZDOOR SABHA

DATE OF JUDGMENT19/04/1972

BENCH: MATHEW, KUTTYIL KURIEN BENCH: MATHEW, KUTTYIL KURIEN VAIDYIALINGAM, C.A. REDDY, P. JAGANMOHAN

CITATION:  1972 AIR 2273            1973 SCR  (1) 277  1972 SCC  (2) 253  CITATOR INFO :  R          1978 SC1113  (15)  R          1980 SC  31  (8)

ACT: Industrial Dispute-Dearness allowance-Neutralization of rise in  cost  of living-Financial  capacity,  determination  of- Relevant  materials  for-Principle  of  region-cum-industry, application of.

HEADNOTE: The  appellant Association was recognised under  section  27 read  with section 3(23) of the Bombay Industrial  Relations Act,  1946 as the Association of employers in Silk  and  Art Silk  Textile  Industry  within the local  area  of  Greater Bombay.  The respondent Sabha represented the workmen in the Industry.   By a supplementary award dated October 15,  1971 the  Industrial  Court  modified an existing  award  of  the Industrial  Court  of Maharashtra, Bombay, dated  April  25, 1962 by directing with retrospective effect from January  1, 1971  that the employees in Silk and Art Silk  Industry  who were  concerned  in the dispute shall be  granted  dearness, allowance  at the rate of 99 per cent neutralization of  the rise in the Bombay Consumer Price Index 106 (old series)  on the  basis of the minimum wage of Rs. 30/-4 per month of  26 working days.  The appellant Association and one of the Silk Mills appealed. HELD : The award did not suffer from any infirmity. (i)  The  Association represented 55 units of employers  and out  of  these  only 28 produced  their  balance-sheets  and profit and loss accounts.  The other 27 units did not supply any  materials with respect to their financial capacity  but agreed to abide by the decision of the Industrial’ Court  on the  basis of the materials furnished by the 28 units.   The award in so far as it concerned these 28 units proceeded  on the  basis  of  their  financial  capacity  as  judged  from accounts  produced  by them and the materials in  the  case. There  is  no substance in the complaint  that  any  adverse inference had been drawn against that 28 units on account of non-production of materials by others. [283-H] (ii) The  contention that the position of the  industry  was not  stable and that its prospects were bleak could  not  be

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accepted.   A  broad  and’ overall  view  of  the  financial position of the employer units was taken into account by the Industrial  Court and it had tried to reconcile the  natural and  just  claims  of the employees for  a  higher  rate  of dearness allowance with the capacity of the employer to  pay it  and  in  that  process  it  hadmade  allowance  for  the legitimate  desire  of  the  employer  to  make   reasonable profits.  What is really material in assessing the financial capacity of the employer units in this context is the extent of gross profits made by them.  On the basis of exhibit U.9, which  was an analysis of the balance sheet, and profit  and loss accounts of the 28 units, the Court found ’that the  28 mills had been making good profits and that, on an  average, the  profit  would work out at 40 and odd per  cent  of  the capital.  There was some decline in the profits made  during the years 1966, 1967 and 1968 but, the Court found that  the industry was rallying round in 1970. [286-C] 278 Ahmedabad  Mill  Owners’ Association, etc.  v.  The  Textile Labour  Association,  [1966]  1 S.C.R. 382  at  p.  426  and Unichem  Laboratories Ltd. v. Their Workmen,  Civil  Appeals No. 1091-93 of 1971, decided on 24-2-1971, referred to. (iii)     No evidence had been adduced to show what  exactly had  been the ,effect on the industry of the enhancement  in excise  duty.  Without further evidence it was not  possible to draw an inference that the sale of the products had  been adversely affected.  Moreover the economic incidence on  the excise  duty had been passed on to the consumer and the  em- ployer-unit  did not have to bear any additional  burden  on account of the levy. [286-H] (iv) Exhibit U.8 is a comparative Table showing the  minimum basic wages and dearness allowance paid in other  industries in  the region like the engineering,  pharmaceuticals,  etc. The  Court  relied  upon it only to show the  trend  in  the region.  The Court also relied upon the report of the  Norms Committee which stated that the trend for the last decade in industrial  adjudication  as  well  as  in  settlements  and awards, was to allow 100 per cent neutralization in the case of lowest-paid employees.  The Court was of the view that if 80 per cent neutralization could be allowed in the  industry under the settlement arrived at in 1957, there was no reason why  100  per cent neutralization should not be  granted  in view  of the steep rise in the cost of living from 1957,  to the lowest paid employees.  It is not possible to agree with the  contention of the appellant that the  Industrial  Court went wrong in relying upon exhibit U.8 or the report of  the Norms  Committee to find out the trend in the region  as  to the extent of neutralization to be allowed to the  employees concerned. [287-F] Bengal  Chemical  and  Pharmaceutical  Works  Ltd.  v.   Its Workmen, [1968] 2 S.C.R. 113 referred to. (v)  The  Association  never wanted the Court  to  make  any comparison with any other units in the same industry in  the region.   In the written statement of the Association  there was  no averment that there were other comparable  units  in the same industry in the region.  No did the Association, at the  time  of  argument before  the  Industrial  Court,  put forward  the contention that there were comparable  concerns in the same industry in the region and that the Court should make  a  comparison of the employer-units in  question  with those  concerns  to find out the  extent  of  neutralization which could be granted.  The Association was certainly in  a position  to  tell the Court whether there  were  any  other comparable units in the same industry in the region and  the

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only  inference  from  its conduct was that  there  were  no comparable units in the industry in the region. [290-A] French  Motor  Car Co. Limited v. Workmen,  [1963]  Supp.  2 S.C.R. 16. at pp. 20-21.  Williamsons (India) Private  Ltd., v.  The Workmen, [1962] I L.L.J. 302 and Greaves Cotton  and Co. and others v. Their Workmen, [1964] 5 S.C.R. 362 at  pp. 367-369, referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 276 277  of 1972. Appeals by Special Leave from the Supplementary Award  dated the 15th October, 1971 of the Industrial Court, Maharashtra, Bombay in Misc.  Applications (IC) Nos. 1 and 2 of 1970. S.   T.  Desai and I. N. Shroff, for the appellant (In  C.A. No. 276 of 1972). 279 (Mathew, J.) M.   C.  Setalvad  and I. N. Shroff, for the  appellant  (In C.A. No. 277 of 1972). S.   V.  Gupte, M. C. Bhandare, Sunanda Bhandare, and P.  H. Parekh  and Advocates of M/s.  Bhandare Parekh and Co.,  for the respondent (in both the Appeals). The Judgment of the Court was delivered by Mathew, J. These two appeals by special leave are directed against a supplementary award dated October 15, 1971, passed by   the   Industrial   Court,   Maharashtra,   Bombay,   in Miscellaneous  applications  (IC) Nos. 1, 2 and 3  of  1970, filed by the respondent, the Mill Mazdoor Sabha, hereinafter called  the  ’Sabha’.   By  the  supplementary  award,   the Industrial  Court  has  modified an existing  award  of  the Industrial Court, Maharashtra, Bombay, dated April 25, 1962, passed  in  reference (IC) Nos. 131, 138, 139 and  155  of 1961,  and published in the Maharashtra  Government  Gazette dated June 14, 1962, by directing with retrospective  effect from  January  1, 1971, that the employees in Silk  and  Art Silk  Industry  who were concerned in the dispute  shall  be granted  dearness  allowance  at  the  rate  of  99  percent neutralization  of  the rise in the  Bombay  Consumer  Price Index  106 (old series) on the basis of the minimum wage  of Rs. 30/- per month of 26 working days. We  will  deal  with  appeal No. 276  of  1972  first.   The Appellant is the Silk and Art Silk Mills’ Association, Ltd., a  public  company having its registered office  in  Bombay, hereinafter  called ’the Association’.  For the purpose,  of Bombay  Industrial Relation Act, 1946, the  Association  was recognised under section 27 read with section 3(23) of  that Act  as  the Association of employers in Silk and  Art  Silk Textile  Industry within the local area of Greater  Bombay. Silk Textile Industry was started in India sometime in  1933 and the Association came into being in 1939 with 16  members having  2,000 looms.  Till 1965, the Association was  regis- tering  as  members  only mills having  25  or  more  looms. Thereafter, it began to register smaller units also as  its members.   Such smaller units numbered 308 with 2,326  looms in  March,  1969.   The total number  of  mills  within  and outside  the State of Maharashtra which were members of  the Association  on  March  31, 1969, was 512 with  a  total  of 20,200 looms.  According to the Association, out of the  512 units  which  were  its members, a  large  number  of  units numbering about 444 were grey units, which means, that  none of these units has its own raw materials and that they  have not  got  any equipment for dyeing, bleaching  or  otherwise

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finishing their products. On February 6, 1970, when Miscellaneous Application (IC) No. 1 was filed, the Association had, as its members, about 325 280 units  of employers in the art silk textile industry  within the  local  area  of  Greater  Bombay.   Out  of  these  325 employer-units, 90 employer-units alone were concerned  with the  Miscellaneous Application (IC) No. 1 of 1970,  as  that application sought modification of the award dated April 25, 1962,  in reference Nos. (IC) 131, 138, 139 and 155 of  1961 which  governed only the 90 units of the Art Silk  Industry. In  this  case, we are directly concerned worth  55  member- units  only,  as  the remaining 35 units  had one  out  of business between April 25, 1962 and February 5, 1970. There  were  two previous decisions binding on  these  units regarding  dearness allowance.  One was the award passed  in reference No. 97 of 1951 which granted neutralization to the extent  of  75 per cent rise in the  Bombay  Consumer  Price Index 106 (old series).  The other was a settlement  arrived at during the pendency of Miscellaneous Application (IC) No. 3  of 1957 which modified the award in reference No.  97  of 1951  by raising the percentage of neutralization to 80  per cent with effect from June 1, 1957. The Sabha is recognised under section 30 read with section 3 (32)   of  the  Bombay  Industrial  Relation  Act   as   the representative  Union of employees in the Silk and Art  Silk Industry within the local area of Greater Bombay. The  demand of the Sabha in Miscellaneous  Application  (IC) No. 1 of 1970 was, that "the employees shall be granted with effect  from May 1, 1970, dearness allowance at the rate  of 100  per  cent  neutralization of the  rise  in  the  Bombay Consumer  Price Index 106 (old series) on the basis  of  the minimum  wage  in force, at present, namely  Rs.  36.50  per month   of  26  working  days".   As  already  stated,   the application  was, in effect, to modify the award  passed  on April 25, 1962, in reference (IC) Nos. 131, 138, 139 and 155 of  1961; that award provided that the employees covered  by the references should be given an adhoc increase of Rs. 5.20 per month of 26 working days over their wages at that  time, that  the  increase should be in force for  two  years  from February  1, 1962, that thereafter, the increase  should  be Rs. 6.50 per month of 26 working days instead of Rs 5.20 and that  this  will continue for a further period of  2  years. The award rejected the prayer for increase rate of  dearness allowance. The  grounds  on  which  the  Sabha  claimed  100  per  cent neutralization  were,  that  the total  pay  packet  of  the employees  in  the industry was far lower than  the  minimum need of the workmen and also less than that of the employees in  other industries in the region., that there has  been  a steep rise in the cost of living since the last revision  of basic  wages and a greater rise in the cost of living  since the  decision  fixing neutralization at 80 per cent  of  the basic  wage of Rs. 30/- per month for 26 working days,  that the employer-units 281 (Mathew, J.) have the capacity to bear the additional burden as the  art- silk’  industry in the region has prospered and  established itself as a stable one with good prospects. The main contentions of the Association were that the  total pay’  packet  of the workmen in Rayon  and  Artificial  Silk industry in the, local area of Greater Bombay was Rs. 190.12 per  month of 26, working days, that dearness  allowance  to the  extent of 80 per cent neutralization was  automatically

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responsive to the rise in the cost of living and, therefore, there  was no real fall in the pay packet consequent on  the rise in the cost of living, that the workmen had received an ad  hoc  increase of Rs. 5.20 per month of 26  working  days from February 1, 1962, and that this has been further raised to  Rs.  6.50  from  February 1, 1964,  that  the  base  for neutralization  which was Rs. 30/- should not and ought  not to  be changed to Rs. 36.50 as demanded by the  Sabha,  that the  demand was beyond the capacity of most of the 55  units concerned,  that  the dearness allowance paid in  the  other industries  in  the  region  cannot  furnish  any   relevant criterion as the financial position of these units was quite different, that over the years, the position of the industry has steadily deteriorated, that on account of the paucity of foreign  exchange,  restrictions on import of  the  required machinery,  the non-availability of the necessary  types  of raw  materials, the high cost of yam, the heavy excise  duty on  indigenous yarn, the industry has been  declining,  that the  import  on nylon yarn was canalised through  the  State Trading  Corporation of India and it kept for itself a  very high  profit margin, that the price of raw materials in  the industry has gone up, that prior to March, 1970, the  excise duty  on  processed yarn and artificial silk  fabric  varied from  9  paise  to 30 paise per square  metre  whereas  from March,  1970, onwards, the was a steep rise in  the  excise, duty per square metre and therefore the industry cannot bear any further burden and that in any event, the demand for 100 per cent neutralization is unwarranted As  already stated, the Industrial Court,  after  evaluating the  materials produced by parties, came to  the  conclusion that the employees in the Silk and Art Silk Industry  should be  granted dearness allowance at the rate of 99  per  cent neutralization  of  the rise in the  Bombay  Consumer  Price Index  106  (old series) on the basis of the  minimum  basic wage  of Rs. 30/- per month of 26 working days  with  effect from January 1, 1971. The Court found that at the time when the wages were  raised in  1962, the consumer price index stood at 429, that  there has been a steep rise in the cost of living as reflected  in the Bombay Consumer Price Index-in May 1970 it stood at 799- and on the date of the award it stood at 839, and so,  there was  a fall in real wages by 39 paise per day of the  lowest class of workers.  The Court, 19-1208 Sup CI/72 282 therefore,  came  to  the conclusion  that  the  demand  for neutralization  of  the  rise  in the  cost  of  living  was reasonable.  It further found that exhibit U. 8, which is  a comparative  Table  showing  the  minimum  basic  wages  and dearness  allowance paid in other industries in  the  region was  a relevant document as it indicated the trend in  other industries  in  the region to allow full  neutralization  on account  of the rise in the cost of living.  The Court  then proceeded to assess the financial capacity of the  employer- units with particular reference to their volume of business, the  capital invested, tile profits earned, the standing  of the industry, the strength of the labour force employed, the position  of reserves, the dividend declared and the  future prospect  of  the industry.  The  Association,  although  it represented 55 employer-units, produced no data as  regards, the  financial  capacity of 27 units in spite of  the  clear direction  of the Court, and so, the Court, on the basis  of the  in materials placed before it by the other units,  came to  the  conclusion that the art and art-silk  industry  has

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prospered  and has established itself, that the prospect  of the  industry was bright and that the financial position  of the 28 units which produced their balance sheets and  profit and  loss  accounts or other documents to show  their  gross profits  was  such  that  they  could  afford  to  bear  the additional burden. For reaching the conclusion that the industry is  prosperous and has a bright future, the Court relied on the speech made by  the Chairman of the Silk and Art Silk Mills  Association at the 30th Annual General Meeting in 1969, in which he said that  the  manmade,  fibre  industry  had  made   remarkable progress during the, last decade, that the production during the year 1969 exceeded the Third Plan target by over 25  per cent,  that there was a rise in the, per-capita  consumption of  fabrics,  that  rapid  progress  was  expected  in   the production of non-cellulosic yarn and that the, total demand in  relation to the, year 1969 was likely to increase by  41 per cent by the year 1973-74 and by 110 per cent by the year 1978-79,  The  Court also relied upon the fact  that  actual export  in  1970 exceeded the export in the  previous  three years, the fact that production has substantially  increased in  the  first six months of 1970, that it was  as  much  as 525.77  million metres compared to the total  production  of 892.67  million metres in 1969 and the fact that the,  total production  of art-silk yam had reached the figure  1  4.680 thousand kilograms compared to 106.480 thousand kilograms in 1969.  The Court estimated that export of Rayon fabrics  and synthetic  textiles  will reach Rs. 26.50 crores a  year  by 1973-74, Although excise duty has been increased, the  Court found that it had not adversely affected the industry in any substantial degree its the economic incidence of the  burden of  the  excise  duty was passed on to  the  consumer.   As regards  the  financial  capacity of the  units,  the  Court relied  on exhibit U. 9 which is an analysis of  ,he  profit and  loss accounts of the 28 mills and exhibit U. 10,  which is a consolidated statement showing the financial  condition of these 283 (Mathew, J.) mills  and exhibit U. 11. the statement regarding the  bonus paid  by the mills which. did not file their balance  sheets and profit and loss accounts and Exhibit U. 12, a  statement showing  the  interest paid by some of the units  which  had filed  their balance sheets and Exhibit U. 13,  a  statement showing  the  profitability ratio for art-silk  industry  in Bombay  and  exhibit U. 14, a comparative statement  of  the profitability  ratio  in cotton  textiles,  engineering  and chemical  industry.  The Court found from exhibit U. 9  that there was an increase in the paid-up capital of 44.07  lakhs from  1965,  an increase in the reserve amounting  to  32.96 lakhs  and  increase  in the gross block  amounting  to  Rs. 285.54 lakhs and an increase in the net block of Rs.  140-63 lakhs from 1965 to 1968.  From the figures given in exhibits in U. 9 and U. 10, the Court found that, after providing for depreciation to the total paid up capital, the profit  would work  out  at 40.02 per cent and that  after  providing  for depreciation  to the total paid up capital and  reserve,  it would work out at 21.10 per cent.  From the large amount  of interest  paid by some of the units as disclosed in  exhibit U.  12,  the  Court inferred that  these  units  are  under- capitalised  but that, at the same time, they  preferred  to borrow  money  at the current rate of interest.   The  Court also  found from exhibit U. II that 17 mills which  did  not file  their balance sheets or profit and loss accounts  were in a position to pay bonus in excess of the 4 per cent which

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is the statutory minimum under the Payment of Bonus Act  and therefore, these units must have been making profits and, as their  present  financial  position was not  shown  to  have become  worse, they had the financial capacity to  bear  the additional burden. Mr.  S.  T.  Desai  for the  appellant  submitted  that  the Industrial  Court drew an adverse inference against  the  28 units  although they had produced their balance  sheets  and profit and loss accounts on the ground that the 27 mills did not  produce  any data to show their financial  capacity  to bear  the additional burden and that that  was  unjustified. He  argued  that so far as the 28 mills which  had  produced their  balance sheets and profits and loss  accounts,  there should  have  been an appreciation of the  materials  placed before  the  Court on their merit and no  adverse  inference should have been drawn against them because the other  units did  not  place  any relevant  materials  as  regards  their financial  capacity.  In other words, his argument was  that as  the  28 mills had produced relevant  documents  to  show their  financial capacity, the Court should not  have  drawn any  adverse inference as against them merely from the  non- production of the relevant documents by the other units.  We lo not think that there is any substance in this argument. As  already stated, the Association represented 55 units  of employers  and out of the 55 units, only 28  units  produced their  balance  sheet,-,  and  profit  and  loss   accounts. Statements were filed by 284 17  units (exhibits C. 1 8 5 to 201 ) undertaking that  they would  abide by the information and the balance  sheets  and profit  and  loss  accounts supplied by  the  28  mills  and praying  for  decision of the dispute on the  basis  of  the information  and  statement of accounts  so  supplied.   The remaining 10 mills orally agreed that they would also  abide by the statement and balance sheets supplied by the 28 mills and  for deciding the dispute on that basis.  Therefore,  an adjudication by the Industrial Court as regards the rate  of neutralization  to be allowed on the basis of the  financial capacity  of the 28 units as guaged from the balance  sheets and  profit and loss accounts produced by the 28  mills  was quite proper.  To put it differently, the award in so far as it  concerned the 28 units, proceeded on the basis of  their financial  capacity  as guaged from the balance  sheets  and profit  and  loss  accounts produced by them  and  from  the materials in the case.  They can, therefore, have no  reason for any complaint, that the Court drew any adverse inference as   regards  them  from  the  non-production  of   relevant materials  in  the possession of the other  employer  units. And,  as regards the 27 employer-units which did not  supply any materials with respect to their financial capacity, they cannot  also have any reason for complaint in view of  their undertaking to abide by the decision of the Industrial Court on the basis of materials furnished by the 28 units The only reason  why  they did not furnish the basic  information  as regards  their financial capacity in spite of the  direction of the Court, is that the information, if furnished,  would. go, against them.  We are satisfied that the award was based on  the  materials produced in the case so far  as  the  28 units  are concerned and not on any adverse inference  drawn from the non-production of the relevant materials by the  27 units. Mr.  Desai contended that the, position of the  industry  is not  stable and that its prospects are bleak.  He said  that the  Court did not give due weight to exhibits C. 1 to C.  4 and  C. 15 in reaching-the conclusion that the  position  of

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the industry was stable. Exhibit C.1 is a statement  showing the number of mills and the looms owned by them as on  April 1, 1970.  Exhibit C. 2 is a statement showing the number  of members of the Association and their looms.  Exhibit C. 3 is a  statement  showing the looms run by member-mills  of  the Association  as  on  April  1, 1970.  Exhibit  C-.  4  is  a statement showing the number of grey and composite units in- the industry and their looms.  Exhibit C. 15 is a  statement concerning   25  mills.   It  shows  the  number  of   looms installed,  average number of loom-shifts worked per  month, average production and average export per month during the 4 years  namely  1966 to 1969.  Exhibits C. 1 to C. 4  do  not throw  much light upon the question in controversy  as  they only  show the all-India figures.  Exhibit C. 15  was  taken into consideration by the Industrial Court But the Court did not place much reliance upon it as it was of 285 (Mathew, J.) opinion  that the data furnished by the balance  sheets  and profit and loss accounts was more relevant. Counsel  submitted that the number of looms has  gone  down, that  the  cost of production has gone up,  that  export  of manufactured silk has dwindled, that Sales have declined and therefore, the profits of the units have gone down from 1965 to 1968.  Counsel in this connection referred to exhibit  U. 13,   a  document  produced  by  the’  Sabha  to  show   the profitability  ratio  and argued that  that  document  would itself indicate that there was decline in profits from  1965 to 1968 . Exhibit U. 13 is a statement of the gross  profits for  the  years from 1965 to 1968 of these  units  from  the point of view of total sales, of total capital and of  total net  Worth. In Ahmedabad Mill Owners,’ Association, etc.  v. The Textile Labour Association(1) the Court observed               "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 satisfactorily serve all these  purposes,               that separate single-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"  (Accountant’s               Handbook Edited by Paton, p. 13).  Paton cites               the  comment of Wilcox against  these  single-               purpose statements.  Said Wilcox : "The danger               in   undertaking  to   furnish   singlepurpose               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

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             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 (1)  [1966] 1 S.C.R.382 at p. 426, 286               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". We  think that the Industrial Court hag  carefully  examined the  financial  position of the employer-units as  also  the position  of  the industry and its  future  prospects.   The Court  was fully aware of the- nature of the demand and  the extent of the burden which the employer units. will have  to bear.  A broad and overall view of the financial position of the employer units was taken into account by the Court and it has tried to reconcile the natural and just claims of the employees  for a higher rate of dearness allowance with  the capacity  of the employer to pay it and in that  process  it has made allowance for the legitimate desire of the employer to  make  reasonable profit.  What is  really  material  in assessing  the financial capacity of the  employer-units  in this  context  is the extent of gross profits made  by  them (see Unichem Laboratories Ltd. v. Their Workmen(1).  On  the basis  of exhibit U. 9 which is an analysis of  the  balance sheets  and  profit and loss accounts of the 28  units,  the Court found that the 28 mills have been making good profits and  that, on an average, the profit would work out  at  40 and odd per cent of the capital.  There was some decline  in the  profits made during the years 1966, 1967 and 1968  but, the  Court  found that the industry was  rallying  round  in 1970. Mr.  Desai  contended  that the  Industrial  Court  did  not appreciate the impact on the industry of the enhancement  of excise duty upon the manufacture of silk products.   Counsel contended  that  there  has been  considerable  increase  in excise  duty on all varieties of silk and that has  affected the consumption of manufactured silk products.  No  evidence his been adduced to show what exactly has been the effect on the  industry of the enhancement in excise  duty.   Although the  Managers of two units were examined as witnesses No.  2 and  3  in  March and April, 1971, they  did  not  give  any evidence as regards the adverse effect on the sale of  silk products  on  account of the imposition of  enhanced  excise duty  during the financial year 1970.  We do not think  that without  further  evidence  as regards  the  effect  of  the enhancement  in the excise duty, it is’ possible to draw  an inference  that the sale of the products has  been"adversely affected.  Quite apart from this, we do not (1) Civil Appeals No. 1091-93 of 1971, decided on 24-2-1971, 287 (Mathew, J.) understand  how  when the-economic incidence of  the  excise duty has been passed on to the consumer, the  employer-units

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have to bear any additional burden on account of the levy. Counsel  next  contended that the Industrial Court  was  not justified  in  relying upon exhibit U. 8 for coming  to  the conclusion that 99 per cent of neutralization on account  of rise in cost of living should be granted to the employees on the  basis  of the percentage of neutralization  in  other industries in the region.  Counsel said that granting 99 per cent neutralization has not been countenanced by this Court, that  the,  basis  of  fixation  of  dearness  allowance  is industry-cum-region and that the Industrial Court went wrong in  taking into account the percentage of neutralization  in other  industries  in the region for fixing  the  extent  of neutralization  on account of the rise in cost of living  to the employees in question here and relied on the decision of this Court in Bengal Chemical and Pharmaceutical Works  Ltd. v.  Its  Workmen(1).   In  that  case,  Vaidialingam.    J., speaking  for the Court, laid down among other  things,  the following  propositions  :  1. Full  neutralization  is  not normally  given  ,  except  to  the  very  lowest  class  of employees,  2. the purpose of dearness allowance  being  to Tieutralize  a  portion  of the increase  in  the.  cost  of living,  it  should  ordinarily be on a  sliding  scale  and provide  for an increase in the rise in the cost  of  living and decrease on a fall- in the cost of living, 3. the  basis of   fixation   of   wages  and   dearness   allowance.   is industry-cum-region. We  do  not think that the Industrial Court  went  wrong  in relying  upon  exhibit  U. 8, or, in granting  99  per  cent neutralization  on account of the steep rise in the cost  of living.   Exhibit U. 8, it may be recalled is a  comparative Table showing the minimum basic wages and dearness allowance paid in order industries in the region like the engineering, pharmaceuticals, etc.  The Court relied upon it only to show the  trend  in the region.  The Court also relied  upon  the report  of the Norms Committee which stated that  the  trend for the last decade in industrial adjudication as well as in settlement,,  and  awards,  was’  to  allow  100  per   cent neutralization  in the case of lowest-paid  employees.   The Court  was  of the view that if go per  cent  neutralization could  be  allowed  in the industry  under  tile  settlement arrived  at  in 1957, there was no reason why 100  per  cent neutralization  should not be granted in view of  the  steep rise  in  the cost of living from 1957, to the  lowest  paid employees.   We  can not agree with the  contention  of  the appellant  that the Industrial Court went wrong  in  relying upon  exhibit U. 8 or the report of the Norms  Committee  to find  out  the  trend  in the region as  to  the  extent  of neutralization  to  be allowed to the  employees  concerned. The question of the extent of neutralization to the  workmen in the units (1)  [1969] 2 S.C.R. 113. 288 does not depend solely upon the fact whether  neutralization to  that  extent  has  been  allowed  to  the  employees  in comparable concerns in the same industry in the same region. Much  distinction cannot be made in this respect  among  the lowest  paid employees in the region merely because some  of them are employed in other industries.  In other words,  for finding  the trend or the norm in the region as regards  the extent of neutralization for the lowest paid employees,  the Industrial  Court  cannot  be said to  have  gone  wrong  in relying upon either the Norms Committee Report or on-exhibit U. 8. Counsel  for  the appellant submitted  that  the  Industrial Court did not make any attempt to fix the dearness allowance

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on  the basis of the industry-cum-region formula,  and  that that was a fatal blemish in the award.  In French Motor  Car Co.  Limited  v.  Workmen(1) this Court  observed  that  the principle  of  industry-cumregion has to be  applied  by  an industrial  court,  when it proceeds to  consider  questions like   wage  structure,  dearness  allowance   and   similar conditions-of service and in applying that principle  indus- trials courts have to compare the wage scale or the dearness allowance prevailing in similar concerns in the region  with which it is dealing, and generally speaking similar concerns would  be those in the same line of business as the  concern with respect to which the dispute is under consideration and further, even in the same line of business, it would not  be proper  to compare a small struggling concern with  a  large flourishing concern.  In Williamsons (India) Private Ltd. v. The  Workmen(2)  the  Court  observed  that  the  extent  of business carried an by the concerns. the capital invested by them,  the profits made by them, the nature of the  business carried  on by them,- their standing, the strength of  their labour  force,  the presence or absence and the  extent.  of reserves,  the dividends declared by them and the  prospects about  the  future  of their  business  and  other  relevant factors  have  to  be  borne in  mind  for  the  purpose  of comparison.   These  observations  were  made  to  show  how comparison should be made, even in the same line of business and were intended to lay down that a small concern cannot be compared  even  in the same line of business  with  a  large concern.   In  Greaves Cotton and Cc,. and others  v.  Their Workmen  (3), the main argument was that the  Tribunal  went wrong in relving more on the region aspect of the  industry- cum-region  formula  and  not on the  industry  aspect  when deali ng  with  clerical and subordinate staff.   The  Court said  that  it  was ordinarily desirable the  have  as  much uniformity  as  possible  in the  wage-scales  of  different concerns of the same industry working in the game region, as this  puts  similar industries more or less  on an  equal footing  in  their  production  struggle.   The  Court  then referred to, the French (1)  [1963] Supp. 2, S.C.R. 16, at pi). 20-21. (2) [1962]  1 L.J. 302. (3) [1964] 5 S.C.R 362,at pp.  367-369, 289 (Mathew, J.) Motor  Co.’s(1)  case and observed that in  that  case  this Court  held  so far as clerical and subordinate  staff  ’are concerned that it may be possible to take into account  even those  concerns  which are engaged in  different,  lines  of business  for the work of clerical and subordinate staff  is more  or less the same in all kinds of concerns.  The  Court further  observed  that where there are a  large  number  of industrial  concerns of the same kind in the same region  it would be proper to put greater emphasis on the industry part of  the industry-cum-region principle as that would put  all concerns  on a more or less equal footing in the  matter  of production costs and therefore in the matter of  competition in  the market and this will equally apply to clerical  and subordinate staff whose wages and dearness allowance also go into calculation of production costs : but where the  number of  comparable concerns is small in a particular region  and therefore  the  competition  aspect  is  not  of  the   same importance,  the  region  part  of  the  industry-cum-region formula   assumes  greater  importance   particularly   with reference  to  clerical and subordinate staff and  this  was what  was  emphasised in the French Motor Car  Cos((1)  case where  that company was already paying the highest wages  in

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the particular line of business and therefore comparison had to be made with as similar concerns as possible in different lines of business for the purpose of fixing wage scales  and dearness allowance.  According to the Court, the principle, therefore, which emerges from these two decisions is that in applying  the  industry-cum-region formula for  fixing  wage scales  the Tribunal should lay stress on the industry  part of  the formula if there are a large number of  concerns  in the  same  region carrying on the same industry; in  such  a case  in order that production cost may not be  unequal  and there  may be equal competition, wages should  generally  be fixed  on  the basis of the comparable  industries,  namely, industries  of  the  same kind.  But  where  the  number  of industries of the same kind in a particular region is  small it  is  the region part of the  industry-cum-region  formula which  assumes  importance  particularly  in  the  case   of clerical  and subordinate staff, for as pointed out  in  the French  Motor Car Cos case("), there is not much  difference in  the  work  of  this  class  of  employees  in  different industries. If the employer has the financial capacity, would it be just to  reject  the  claim of the lowest  paid  workmen  for  an enhancement in dearness allowance to neutralize the rise  in cost  of living and thus to maintain their subsistence  wage at  its  real  level in terms of  the  purchasing  capacity, merely because there is a comparable concern in the industry in the region.  In which workmen are paid dearness allowance at a low rate ? We do not think it necessary to answer  this question for the purpose of deciding this case. (1)  [1963] Supp. 2 S.C.R. at 20-21. 290 The Association never wanted the Court to make any  compari- son with any other units in the same industry in the region. In  the  written statement of the Association there  was  no averment  that there were other comparable unit,,,,.-.,  the same  industry in the region.  Nor did the  Association,  It the  time  of  argument before  the  Industrial  Court,  put forward  the contention that there were comparable  concerns in the same industry in the region and that the Court should make  a  comparison of the employer-units in  question  with those  concerns  to find out the  extent  of  neutralization which could be granted.  The Association had a membership of 325  units in Greater Bombay on February 6, 1970,  when  the Miscellaneous  Application  (IC) No. 1 was  filed.   It  was certainly in a position to tell the Court whether there were any other  comparable units in the same  industry  in  the region and the only inference from its conduct is that there were no comparable units in the industry in the region. We  do not think that the award suffers from any  infirmity. At  the time of the admission of the Special Leave  Petition the Court has ordered that the appellant should pay the cost of the respondent irrespective of the result of the  appeal. We  dismiss the appeal and direct the appellant to  pay  the cost of the respondent. In Civil Appeal No. 277 (NL) of 1972, the contentions raised on behalf of the appellant are much the same as those raised in  Civil  Appeal No. 276(NL) of 1972 and  for  the  reasons given in the above judgment, we dismiss that appeal also and direct the appellant to pay the cost of the respondent. G.C.                               Appeals dismissed. L1208SupCI/72-2500-30-8-73-GIPF. 291