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PETITIONER: UNICHEM LABORATORIES LTD.

       Vs.

RESPONDENT: THE WORKMEN

DATE OF JUDGMENT24/02/1972

BENCH: VAIDYIALINGAM, C.A. BENCH: VAIDYIALINGAM, C.A. DUA, I.D. MITTER, G.K.

CITATION:  1972 AIR 2332            1972 SCR  (3) 567  1972 SCC  (3) 552  CITATOR INFO :  R          1974 SC 526  (15)  RF         1975 SC1778  (20)  R          1978 SC1113  (15,24)  E          1980 SC  31  (13,20)  RF         1981 SC 599  (4)  RF         1981 SC1088  (4)  RF         1986 SC1794  (7)

ACT: Industrial    Dispute---Dearness     Allowance--Depreciation reserves whether to be deducted from profits--Concerns, with foreign  collaboration whether can be compared  with  purely Indian Companies--Slab system--Classification of grades  and fixation of wages--Gratuity--Incentive Bonus Scheme.

HEADNOTE: The  appellant carried on the business of manufacturing  and selling  pharmaceutical  products  in  Greater  Bombay.   In disputes arising bet the appellant and the respondents  the Industrial  Tribunal had to deal with questions relating  to dearness allowance, classification of grades and fixation of wages  and  the incentive bonus scheme as modified  ’by  the company.  In appeal against the award of the Tribunal, HELD : (i) The decisions of this Court in Gramophone Company Ltd. v. its Workmen and The Indian Link Chain  Manufacturers Ltd.  v. Their Workmen show that the Tribunal was  justified in  computing  gross  profits  without  deducting  taxation, depreciation and development rebate.  The latter decision is directly  in point to the effect that provision  for  depre- ciation cannot be deducted. [582E., 585B-C] Gramophone Company Ltd. v. Its Workmen, [1964] 11 L.L.J. 131 and  The  Indian  Link Chain  Manufacturers  Ltd.  v.  Their Workmen, [1971] 2 S.C.R. 759, applied. Ahmedabad Millowners’ Association Etc. v. The Textile Labour Association, [1966] 1 S.C.R. 382, referred to. (ii)So long and to the extent that concerns having  foreign collaboration   are  doing  business  in  India  and  in   a particular  concerned  region there is no  reason  why  they should  not  be  taken into account for  purposes  of  being teated as comparable units, provided that the tests for such purposes  as  laid down by this Court  are  satisfied.   The

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object  of  industrial adjudication is to secure as  far  as possible  uniformity of service conditions among  industrial units  in  the  same region,. if a  concern  having  foreign collaboration properly satisfies the tests of  comparability it  would  be improper to regard such unit  as  uncomparable merely  on  the  ground that it is a  concern  with  foreign collaboration or interest and that the unit with which it is sought  to  be  compared is entirely of  Indian  origin  and resources. [591A-C] Chemical Industries and Pharmaceutical Laboratories  Limited (Cipla)  Bombay v. Their Workmen, [1957] I.C.R. Bombay  1206 and  Alembic  Chemical Works Ltd.  Baroda  v.  Its,  Workmen [1967] 1 S.C.R. 652, Hindustan Antibiotics Ltd. v. The Workmen and Ors., [1967] 1 S.C.R. 652, relied on. (iii)On  the  materials  before  it  the  Tribunal  was justified  in treating M/S.  Burroughk Wellcome & Co.  as  a unit comparable with the appellant. 568 The  fact that Burroughs Wellcome employed a  lesser  labour force  did not deserve much importance because the  business performance of the two companies was equal.  Once  Burroughs Wellcome  Co.  was  treated as a comparable  unit  the  wage scales awarded by the Tribunal could not be considered to be unjustified. [598G-599A-D] Workmen of New Egerton Woollen Mills v. New Egerton Woollen Mills and Ors., [1969] 11 L.L.J. 782, applied. (iv)On  the  facts  of  the case it  was  not  possible  to disagree  with the view of the Tribunal that the  impact  of the  Drugs  (Price Control ) Order will not be  such  as  to affect  materially the business prospects of  the  appellant company.  If the Order materially affects the prosperity  of the  appellant’s  trade it would be open to it  to  raise  a dispute for the reduction in the wage structure and in  case they  are  able  to show that in view of  the  Drugs  (Price Control) Order their financial position has weakened to such an  extent  that  they cannot bear the burden  of  the  wage structure fixed by the present award, the matter may have to be examined on its merits. [598B-C] Williamsons  (India) Private, Ltd. v. Its Workmen, [1962]  1 L.L.J. 302, referred to. (v)The  Tribunal  had  acted within  its  jurisdiction  in classifying  the workmen and fixing the scales of pay  after fitting them in particular categories.  The objection  based on  s.  10(4) of the Industrial Disputes Act. 1947  must  be rejected. [599E-600B] (vi)When  the  Tribunal raised in the gratuity  scheme  the ceiling  limit from 15 months to 17 1/2 months according  to the pattern obtaining in Buroughs Wellcome Company there was no question of principle involved justifying an objection by the appellant company. [60OC-D] (vii)There were different systems of dearness allowance for the operators and the clerical and subordinate staff  in the  appellant  company.  That such a  different  system  of dearness  allowance  for employees working  under  the  same employer  is  not warranted is clear from the  decisions  of this  Court in the cases of Greaves Cotton & Co. and  Bengal Chemical & Pharmaceutical Works Ltd.  Therefore the Tribunal was  justified  in  devising a  uniform  scale  of  dearness allowance applicable to all the employees of the appellant. [600E-F] Greaves  Cotton and Co. and Ors. v. Their Workmen, [1964]  5 S.C.R.  362 and Bengal Chemical & Pharmaceutical Works  Ltd. v. Its Workmen, [1969] 2 S.C.R. 113, relied on.

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(viii)From  the date of the settlement in 1966 the  cost of living index had very rapidly gone up by 220 points.   At the  time when the demand for revision of wages  scales  and dearness  allowance  was  made by the Unions  and  when  the reference  order  was made by the Government,  the  cost  of living  index  had gone up very high.  That  clearly  showed that  the workmen bad made out a case for revision  of  wage scales  and  dearness  allowance.   The  contention  of  the appellant  that  because  a  system  of  dearness  allowance already  existed  there should be no revision of  the  same, could not be accepted. [6O2C; 601A] Co.  [1964] 5 S.C.R. 344 and Remington and of India  v.  Its Workmen, [1962] 1 L.L.J. 287, followed. 569 (ix)When  the  slab,  system  of  dearness  allowance   was prevailing  in  the  industry in  the  region  the  Tribunal committed  no error in introducing a similar pattern in  the case of the appellant. [603C-D] Kamani  Metals  &  Alloys Ltd. v. Their  Workmen,  [1967]  2 S.C.R. 463, referred to. (x)In  regard to the incentive Bonus Scheme  the  Tribunal had stated that the necessary material for that purpose  had not been made available and as such it had not been possible to  devise a scheme calculated to afford protection  to  the incentive   earning  of  a  workman  at  the   raised   base performance  index.  This Court could do nothing  further,in this ’regard and the result would be that observations  made by the Tribunal will have full, effect. [604G-H]

JUDGMENT: CIVIL  APPELLATE  JURISDICTION: Civil Appeals Nos.  1091  to 1093 of 1971. Appeals by special leave from the award dated April 15, 1971 of   the   Industrial  Tribunal,  Maharashtra,   Bombay   in References (IT) Nos. 20 of 1969, 70 of 1970 and 105 of 1969. V.M. Tarkunde, R. A. Jahagirdar and I.N. Shroff, for  the appellant (in all the appeals). K.T.  Sule.   Janardan Sharma and  Indira  Jaisingh,  for respondent No. 1 (in all the appeals). Urmila  Kapoor and Kamlesh Bansal, for respondent No. 2  (in all the appeals). The Judgment of the Court was delivered by Vaidialingam,  J.-These  three appeals,  by  special  leave, arise  out  of  the  Award, dated  April  15,  1971  of  the Industrial Tribunal, Maharashtra, Bombay in Reference  (I.T. Nos. 20 and 105 of 1969 and 70 of 1970). The  main  questions that arise for consideration  in  these appeals   relate  to  the  award  of   Dearness   Allowance, Classification  of  Grades  and  Fixation  of  Wages  and  a direction  given  by the Industrial Tribunal  regarding  the Incentive  Bonus Scheme, as modified by the Company.   There is  also a minor point regarding a particular clause in  the Gratuity Scheme as framed by the Tribunal in Reference (I.T. No.  20  of 1969).  Though there are certain  other  matters dealt  with in the Award in Reference (I.T. No. 20 of  1969) they are not the subject of controversy in these appeals. We  will now state the circumstances under Which the  Refer- ences came to be made to the Tribunal. 570 The  appellant was started as a proprietary concern  in  the year  1944  and was later transformed to  a  public  limited Company  and registered as such under the  Indian  Companies Act, 1962.  From its inception, the Company has been dealing

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in the business of manufacturing and selling  pharmaceutical products.   It  had  its factory in  Jogeshwari  in  Greater Bombay.   At  the  time of the Reference,  the  Company  was employing about 714 workmen of whom 558 were operatives  and 156 were members of the clerical and subordinate staff.  All these employees were covered by the demands comprised in all the  References.   The  wage  scales  of  the  workmen   had been     determined originally in Reference (I.T.No. 23  of 1959). The wage scales of the operatives were as follows               "Unskilled A    Rs.  1 .52-0 .09.2 .23-0  .12-               2 .93               Unskilled B     1.25-0.96 1.85-0.09.-2.30               Semi-skilled A  2 .00 0 .12 2 .72-0 .18-3 .80               Semi-skilled B  1  .76 0 .11--2  .64-0  .15-               3 .39               Skilled    2 59 0 .13- 2 .85-0 -22---3 .95-               0 .30--4 .25".               The   wage-scales   of   the   clerical    and               subordinate staff were as follows                                  .200               -260  "Junior Chemist     Rs. 120-10          -12  Manufacturing Assistant140-10-220-15-310  Store-keepers  Store-Assistants    180-10-260-15-350  Stenographers  Junior Clerk   60-8--90-10-146-E.B.-15-215.  Intermediate Clerks75-8-115-12-175-E.B.-15-               250.  Senior Clerks  115-10-255-15-315-E.B.-20-               395."               In  addition to the basic wages,  referred  to               above,  the  employees were  getting  dearness               allowance, which in the case of operatives was               equal  to 80% of the revised textile scale  of               dearness allowance and in the case of clerical               and  subordinate  staff 100%  of  the  revised               textile scale of dearness allowance.               The   nomenclature  of  the  grades   of   the               operatives  was changed by a consent award  in               Reference (I.T. No. 170 of 1961).  The  grades               and wages as per this award were as follows  "Unskilled     Rs.  1 -25-0 -06-1 -85-0 -09-2               -30                Semi-skilled A,          1 -52-0 -02-2 -33 -0               -12-2 -93  Semi-skilled B’          1 -76-0 -11-2  -64-0               -15-3 -39  Skilled        2 -00-0 -12-2 -72-0 -18-3 -39  Highly Skilled      2  -59-0  -13--2  -85--.O               -22-.-3            -95.-.-O -30-4 -25." The  dearness allowance of the operatives and  clerical  and subordinate  staff  underwent  a  change  by  the  award  in Reference  (I.T. No.- 402. of 1963).  Under that  award  the dearness allowance 571 of  the  operatives  was increased to  90%  of  the  revised textile scale of dearness allowance from January 1, 1964 and to  95% of the revised textile scale of  dearness  allowance from  July 1, 1964.  The dearness allowance of the  clerical and  subordinate staff was supplemented at  different  slabs with effect from January               1, 1964 as follows :               "Basic salary upto Rs. 100               Basic salary of Rs. 101 to 200

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             Basic salary of Rs. 201 to 300               Basic salary of over Rs. 300 .               Operatives’ dearness allowance plus Rs. 7 .50               Operative-,’ dearness allowanceplus Rs. 15.               Operatives dearness allowance               plus Rs. 22 -50.               Operatives’ dearness allowance plus Rs. 25." Though the award prescribed to the clerical and  subordinate staff the same rate of dearness allowance of the  operatives plus  a  fixed  amount, as referred to  above,  the  Company continued  to give them dearness allowance equal to 100%  of the  revised textile scale of dearness allowance.  This  was also  supplemented with the fixed amount depending upon  the slab of the salary.  There was a settlement on June 24, 1966 between the Company and  its employees, in and by which the wages of the  opera- tives  and  the clerical and subordinate staff  underwent  a final  revision.  The wages of the operatives were fixed  as follows  "Unskilled     Rs.  1 .25-0 .10-2 .75  Semi-skilled B      1 -60-0 .12-2 -32-0  .15-               3 .67  Semiskilled A       1  .80-0 .15-2-85-0  .20-               4 . 45  Skilled        2  .,10-0  -20.3  .10-0   .25-               5 .10  Highly skilled      2 .75- 0 -20-3 -75-0 .25-               5 -00-  0 .30-            6 .50."               Similarly,  the  wages  of  the  clerical  and                             subordinate staff were as follows :               "Junior Clerk   Rs.  75-6-105-10-155-15-260-E.               B.-       17-311.  Intermediate Clerk  90-8-130-12-190-15-295-E.               B.-       18--349.  Senior Clerk   125 -10 -195.-15-270-20-390-E.               B-       25-440.  Steno  and   Storekeeper180-10-260-15-380--E.               B.---20-4-       460." The above basic scales in respect of all the categories were again supplemented by dearness allowance as provided for  in the  award passed in Reference (I.T. No. 402 of 1963).   The Company  had  also an Incentive Bonus Scheme, by  virtue  of which  a  large  number of operatives were  getting,  on  an average  an  additional  sum of Rs.  28/-  per  month.   The Company further revised 572 from  about November 1, 1969 the wage scales of Drivers  and Watchmen as follows : "Drivers  Rs. 70-6-100-9-145-12-205-E.  B.-15-250. Watchmen           45-4-65-6-95-E.  B.-8.-135". The above was the pattern of the wage structure and dearness allowance   for   the  operatives  and  the   clerical   and subordinate staff. The  Unions  concerned made a demand  for  -introducing  the following scheme of dearness allowance in respect of all the workmen with immediate effect :      Wage slab .    When the working classVariation    in the           cost of living in-dearness      allow-           dex figure is inance for every 10

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         the group of 401-points rise       or           410. fall.      upto 100  100 per cent   5  per cent      From Rs. 101 to 200 50 per cent2 1/2 per cent      From Rs. 201 and above   25 per centII percent Minimum  dearness allowance Rs. 100.  Minimum variation  Rs. 5." They also demanded that the above scheme of dearness  allow- ance  was to have retrospective effect from August 1,  1967. In  the  same demand the Unions required  that  the  workmen should  be  granted  one month’s wages  for  every  year  of service  as  gratuity  in case  of  resignation,  dismissal, discharge,  death or termination of service for any  reason. By this demand the Unions required modification of the  then existing pattern of payment of dearness allowance at 95%  of revised  textile scale of dearness allowance  to  operatives and 100% of revised textile scale of dearness allowance plus Rs.  7.50 to Rs. 25/- paid to the clerical and other  staff. The Company did -not agree to the demand and in  consequence by   order  dated  January  14,  1969  the   Government   of Maharashtra  referred  for adjudication  to  the  Industrial Tribunal  the  demands.  This Reference  was  registered  as Reference (I.T. No. 20 of 1969). The Unions again made a demand for revision of scales of pay as well as the classification of employees, their grades and their fitment in the revised scales of pay.  As against  the then  existing  six  categories of workmen  and  their  wage scales   of   the  operatives  the   Unions   demanded   new classification and gradation into eight grades with new wage scales.  Similarly, as against the then existing five grades of  the clerical and subordinate staff, the Unions  demanded the  creation of six categories with enhanced  wage  scales. These  demands again were not accepted by the Company  which led  to the State Government making a reference Oil  January 9,  1970, which reference was registered as Reference  (I.T. No. 70 of 1970). 573 The  Company  some time in the year 1959 had  introduced  an Incentive  Bonus Scheme.  This was introduced, according  to the appellant, because of the fact that the workmen were not giving  a substantial production.  The basis of the  scheme, introduced  by the appellant, was that if the  workmen  gave only  30%  of the 100% production expected  of  them,  their performance would be considered zero.  On the other hand, if they gave production above 30% and upto 100%, they would  be eligible for payment of Incentive Bonus which would be  from 31  to 100 points.  In other words, for the 70 points  above the  first  30  points, the workmen would get  Rs.  501-  as Incentive Bonus which would work out approximately to  about Rs.  71.43 per point.  The appellant desired that  the  then existing  floor  limit  of 30% ought to  be  raised  to  75% without varying the quantum of Rs. 501- that was  originally payable  on  achievement  of  100%  production.   What   was intended  was that the 25 points between 75 and  100  points Were  to be made eligible for payment of Incentive Bonus  of Rs. 2/-for each point. The ’Company served a notice of change on the workmen  under s. 9A of the Industrial Disputes Act, 1947.  As the  workmen protested  against this change, this led the  Government  to make   a   Reference   to  the   Industrial   Tribnual   for adjudication.  This was numbered as Reference, (I.T. No. 105 of 1969). The  appellant  resisted  the claims made  for  revision  of dearness   allowance  and  wage  scales  as  well   as   the modification  sought  for  in  the  gratuity  scheme.    The

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appellant  also wanted the Tribunal to uphold the notice  of change  given by it under s. 9A of the  Industrial  Disputes Act in respect of the Incentive Bonus Scheme.  In particular the appellant contended that it was not a comparable concern with  the  units  referred to by the  Unions  and  that  any modification  in the scale of dearness allowance  and  wages would be beyond its financial capacity.  The appellant  also relied  oil  the  coming  into force  of  the  Drugs  (Price Control)  Order,  1970  with  effect  from  May  16,   1970. According to the appellant the wages and dearness  allowance paid  by  it to the workmen were far higher than  what  were paid  by  other  units  in the  region.   The  Company  also referred to the various awards wherein it had been held that it  could  not  be compared with  an  International  Company having  branches  in Bombay or with foreign  concern  though incorporated  in India.  The wage scales had been  fixed  by Settlement  dated  June,  24,  1966  and  that  nothing  has happened since the date of Settlement to justify a  revision of  wage  scales  ’and dearness  allowance.   The  appellant further urged before the Tribunal that the double linking of dearness allowance, as required by the Unions had never been adopted  for the Pharmaceutical units in the Bombay  region. According to the appellant, the revision 574 effected regarding the Incentive Bonus Scheme was  justified and  the amount of 2/- offered per point was much more  than the  prevailing  rate  of Rs. 71.43p. per  point.   It  also opposed the revision of the then existing gratuity scheme as demanded  by  the Unions.  According to  the  appellant  the gratuity scheme which was in force had been introduced by  a consent award in 1963. The appellant filed copies of balance sheets and profit  and loss  accounts  from 1962-63 to 1969-70  and  various  other charts  in support of its plea that it will not be  able  to bear  the additional financial burden that would  result  if the  wage scales and dearness allowance are revised  as  per the demands made by the Unions. It  will be seen from the facts mentioned above  that  thr main controversy between the parties related to the revision of wage structure and dearness allowance.  As the demands of the workmen related to regrouping, in different grades,  the operatives  and  the clerical and subordinate staff  and  as this involved a very radical change in the existing  pattern of  grades, the Tribunal felt that the opinion of an  expert should   be   obtained   on   the   advisibility   of    the reclassification.   In this regard both the Unions  and  the against  filed  a  joint application on  December  22,  1970 requesting  the  Tribunal  to appoint  Sri  N.  L.  Gadkari, retired  Chief Inspector of Factories, Maharashtra State  as an assessor.  They also prayed that the points mentioned  in the application be referred for the opinion of the assessor. The  Assessor submitted his report on February 22, 1971,  in which  he recommended the continuance of the  then  existing grades. The  Unions, while demurring to the report of the  Assessor, requested the Tribunal, by their application dated March 25, 1971 to fix for the then existing five grades the  following wage scales  "Unskilled.......   Rs. 85-8-125-10-225  Semi-skilled B...               100-10-150-12-210-15--285.  Semi-skilled A 120-12-180-15-255-18-345.  Skilled   140-15-215-18-305-20-405.  Highly skilled 225-25-350--30-500-35-675." The  appellant,  when  the Reference came  up  for  hearing,

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raised  an objection to the selection of wage scale  by  the Unions  for  the existing grades of the  operatives  on  the ground  that  such a selection was  not  permissible,  being contrary  to  the provisions of s.10(4)  of  the  Industrial Disputes Act.  The Unions, ultimately, made it clear to  the Tribunal  that their demand for revision of wage  scales  of the existing five grades of operatives is to be as follows :               "Unskilled Rs. 60-5-85-7-155.               Semi-skilled B  70-6-100-8-180.               Semi-skilled A  85-8 -125-10-225.               Skilled    100-10-150-12-210-15-285.               Highly skilled  120              --12-180-15--               255--18-345." 575 It  is  on  the basis of this claim  that  the  question  of revision has been dealt with by the Tribunal. Regarding the financial incapacity pleaded by the appellant, the  Tribunal  after an analysis of the balance  sheets  and profit  and loss accounts, held that the average net  profit of  the Company during- the years 1965-66 to  1969-70  works out  to about Rs. 1384691/-.  It is also of the,  view  that the  apprehensions of the appellant/regarding  the  possible impact  of  the Drugs (Price Control) Order,  1970  are  not justified.  It is the view of the Tribunal that in spite  of the  price freeze effected in 1963, the appellant  has  been doing   very   good  business  from  1962-63   to   1969-70. Ultimately, the Tribunal found that the financial  condition of the appellant is quite sound. Regarding the comparable concerns in the region, the  Unions referred  to  as  many as twenty units.  One  of  the  units relied  on  as  comparable  with  the  appellant  was   M/s. Burroughs Wellcome & Co. (India) Private Ltd., Bombay. The  appellant opposed its being compared with the  concerns relied on by the Unions on the ground that those units  were either  foreign concerns doing business in India  or  Indian units working, in collaboration with foreign concerns.   The appellant in turn relied on several other concerns as  being comparable  with it.  The appellant very strongly relied  on certain previous awards in support of its contention that it has  been held in those awards that the appellant cannot  be compared with foreign concerns or with the concerns  working in collaboration with foreign concerns. The Tribunal, after a consideration of the materials placed’ before  it,  in  this regard,  ultimately,  held  that  M/s. Burroughs  Wellcome & Co. (India) Private Ltd., was  a  unit which  could be considered as a comparable concern with  the appellant.   The  Tribunal having regard to the  grades  and scales  of  pay obtaining in M/s.  Burroughs Welcome  &  Co. (India) Private Ltd., held that the wage scales for the five grades  for  the operatives of the appellant  should  be  as follows : "Unskilled . . . . Rs. 42-3-71-4-112 Semi-skilled B 47-3-50-82-4-122 Semi-skilled A 50--4-90-5 -50-134 Skilled   55-5 -50-110-6 -50-155 -50 High skilled   72-7--142-8-182-9 -5C-220." The  Tribunal fixed the following grades and scales  of  pay for the clerical and subordinate staff      "Junior Clerks and Laboratory      Assistants     Rs. 85-7 -50-145-10-195-12- 259-- 17           323      Intermediate Cierks 120-10-200-12-260-15-335-- 18           353      Senior Clerks  185-15-305-20-365-25- 465" 576

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The  Tribunal  did not accept the large demand made  by  the Unions  for  a  general  adjustment  in  increments  of  the employees.   Nevertheless,  in view of the revision  of  the scales  of  wages, it gave certain directions  so  that  the employees  may  be fitted in the  appropriate  revised  wage scales. The  parties very hotly contested the question  of  dearness allowance  as well as the pattern to be adopted.   As  there were  different  systems  of  dearness  allowance  for   the operatives  and  the  clerical and  subordinate  staff,  the Unions desired that a common scheme of dearness allowance on a slab system should be adopted.  The Tribunal having regard to the decisions of this Court in Greaves Cotton and Co. and others   v.   Their  Workmen(1)  and   Bengal   Chemical   & Pharmaceutical Works Ltd. v. Its Workmen(2) held that  there was  no  justification for having two  systems  of  dearness allowance-one  for  the  operatives and the  other  for  the members of the clerical and subordinate staff.  Accordingly, the Tribunal held that all the employees should get the same dearness  allowance  irrespective of the fact  whether  they were operatives ,or members of the clerical and  subordinate staff. As  the dearness allowance has to be fixed on  industry-cum- region  basis, the Tribunal examined the system of  dearness allowance followed in the region by the industries belonging to  the  pharmaceutical  units.  The  Unions  had  submitted statements  Exs.   DU-1-  and MU.-1  containing  a  list  of pharmaceutical  units, in support of their  contention  that such   units  were  adopting  a  slab  system  of   dearness allowance.   The  Company, on the other  hand,  referred  to certain awards of the Industrial Tribunals in support of its stand  that  slab  system  of  dearness  allowance  is   not considered    as   an   appropriate   mode   of    providing neutralization.   The Unions also relied on  certain  awards wherein  the  slab  system of dearness  allowance  had  been introduced by the Industrial Tribunals.  Though the Tribunal had  held that most of the units referred to in  Exs.   DU-1 and  MU-1,  cannot be, considered for the purpose  of  being treated as units comparable with the appellant, nevertheless it  held that the practice adopted by those units  regarding the grant of dearness allowance can be taken into account as providing a guide regarding the system of dearness allowance adopted in the region.  On this basis the Tribunal  accepted the statements in Exs.  DU-1 and MU-1 and held that the slab system of dearness allowance was prevalent in a large number of  units  belonging to pharmaceutical  industry.   In  this view, the Tribunal further held that slab system of dearness allowance can be adopted, if the financial burden consequent on  the adoption of the said system, can be safely borne  by the Company. (1)  [1964] 5 S.C.R. 352. (2) [1969] 3 S.C.R. 113. 577 The Tribunal then proceeded to consider the system obtaining in  Burrough Welcome Company regarding the payment of  dear- ness  allowance.  The system in the said Company, which  was common   for  operatives  as  well  as  the   clerical   and subordinate staff, was as follows      Basic Salary   Dearness allowance per   Variationfor           month at the Bom-   points.           bay working class           cost of living index           491-500.      Rs. 1-100.     150 percent    5 Per cent      Rs. 101--200   1 50 Per cent on the 1st 21 Per cent

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         Rs. 100.           71 Per cent on the           balance.      Rs. 201-300    150 per cent on the 1st  11/4 per cent.           Rs. 100.           721 Per cent on the 2nd           Rs. 100, and           36 1/4 per cent on the           balance.      Minimum Dearness allowance         Rs. 4      Rs. 101. In  the said Company the above scale of  dearness  allowance was however limited only to employees drawing a basic salary upto Rs. 360/- per month.  The appellant accepted before the Tribunal that the scheme of dearness allowance obtaining, in Burroughs  wellcome  Company would cast a  lesser  financial burden  than the scale of dearness allowance as demanded  by the Unions.  In fact, the Company had filed two charts  Exs. C-12 and C-13, showing the burden which it will have to bear if  the  scheme  of dearness allowance as  demanded  by  the Unions  was  introduced.,  The Company had  worked  out  the demands  in  different  ways and that is why  it  filed  two statements.   According  to  the  appellant  the  additional financial burden will be about Rs. 878125.00 as per Ex.   C- 12 and Rs. 1252693.00 as per Ex.  C-13.  The Tribunal is  of the  view that under Ex.  C-13, the Company had  taken  into account  a sum of Rs. 186293.00 payable to some  members  of the  staff  drawing a salary of over Rs. 200/per  month  and amongst  whom were also included 52 chemists.  According  to the  Tribunal  the  52  chemists  are  not  covered  by  the Reference   and  therefore  the  burden  will  have  to   be calculated  only  in respect of the workmen covered  by  the Reference  and to, whom dearness allowance is  being  fixed. On  calculation  the  Tribunal found that about  a  lakh  of rupees  payable to 52 chemists and included in Ex.  C-13  by the  appellant will have to be deducted from Rs.  1252693.00 Accordingly,  it  held that as per the  calculation  of  the appellant under Ex.  C-13, leaving out the 52 chemists,  the total burden will only be Rs. 1152693-.00. Taking 578 into  account the tax relief that the Company will get,  the Tribunal  ultimately  held  that  the  additional  financial burden that the appellant will have to bear will only be Rs. 555000.00.  As it had already held that the  average  annual gross-profits of the Company are over Rs. 40,00,000.00,  the Tribunal  held  that  the  Company  can  easily  bear   this additional burden.  The Tribunal is further of the view that though  the  financial impact of the Drugs  (Price  Control) Order, on the business activities of the Company has had  to be  seen, the impact will not be such as to make the  appel- lant’s financial position difficult.  For all these reasons, the  Tribunal fixed for the operatives and the clerical  and subordinate  staff of the appellant dearness allowance on  a system prevalent in Burroughs Wellcome Company.  The system of dearness allowance fixed by the Tribunal is as follows : Basic   salary                   Dearness   allowance    per Variation           month at the Bom-           bay working class           cost of living index           521 -530.      Rs. 1-100 150 per cent      Rs. 101-200    150 per cent on the           1st Rs. 100.           72 1/2 per cent on the

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         balance.      Rs. 201-300           150 Per cent on the           1st 100           Rs.72 1/2 Percenton the  2.  Rs. 100.  36 1/4 per cent. on the balance. Minimum dearness allow- ance Rs. 101       _   percent        _  1/2 per cent         Rs. 4. The Tribunal has further directed that dearness allowance in accordance with the above scheme will be payable only to em- ployees drawing a basic salary upto Rs. 300/- per month. It  will be seen that the Tribunal while adopting the  scale of  dearness  allowance  obtaining  in  Burroughs   Wellcome Company,  has  made  a  departure in  fixing  the  scale  of dearness allowance on the basis of the Bombay Working  Class Cost  of Living Index 521 to, 530.  The  dearness  allowance scheme  obtaining in Burroughs Wellcome Company was  on  the Bombay  Working Class Cost of Living Index 491 to 500.   The dis-rent cost of living index was adopted by the Tribunal in view  of  the fact that the appellant was  Paying  incentive wages  to  its  operatives and with a  view  to  lessen  the financial burden on the Company. Another  feature  of the scheme adopted by the  Tribunal  is that it puts a ceiling on the employees drawing basic  wages upto 579 Rs.  300/-  per  month alone  being  eligible  for  dearness allowance,  whereas under the practice originally  obtaining in  the Company there was no such limit.  The Tribunal  held that the revised wage scales and dearness allowance would be effective  from October 1, 1969 and directed the Company  to pay  the  arrears within three months from the date  of  the Award  becoming  enforceable.   At  this  stage  it  may  be mentioned  that  the  appellant  is  not  challenging   this direction regarding the date from which the wage scales  and dearness  allowance  are  to take  effect,  though  it  very vehemently attacks the fixation of the scale of revised wage scales and dearness allowance by the Tribunal. Regarding  gratuity, the Company had already a scheme  which had been introduced under the Settlement Award in  Reference (IT)  No. 141 of 1962.  It is not necessary to set  out  the scheme  that was prevalent in the Company because the  only. objection of the appellant to the revised scheme evolved  by the  Tribunal is in respect of raising the ceiling  from  15 months  to 17 1/2 months.  The demand in this regard by  the Unions was that the ceiling should be raised from 15  months basic wages to 20 months basic wages.  However, the Tribunal did  not  accept the claim of the Unions in  toto.   On  the other  hand,  it  adopted  the  practice  obtaining  in  the Burroughs Wellcome Company and accordingly fixed the ceiling at 17 1/2 months basic wages. Regarding the notice of change issued to the workmen by  the appellant   under  s.9A  of  the  Industrial  Disputes   Act proposing to alter the existing floor limit of 30% to 75% in the  Incentive  Bonus  Scheme, the  Tribunal  on  the  joint application  of the parties dated April 10 , 1970  appointed on April 28, 1970 Sri B. Tulpule, as Assessor to examine the question of revising the existing scheme of Incentive Bonus. The Assessor submitted his report on August 27, 1970  making the following recommendations :               "(1)  The  base  performance  index  for   all

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             sections  /in the Company’s factory should  be               revised and raised to 60 per cent.               (2)   Consequent upon the revision of the base               index  as above, an amount of Rs. 100 per  day               should  be  added to the basic  wages  of  the               workers,  this addition being  independent  of               any other revision of the-wage structure  that                             the Tribunal may decide upon.               (3)   The  revised rates of  incentive  should               continue beyond 100 pet cent performance." Though  the Unions generally accepted  the  recommendations, the  appellant was opposed, particularly to the  second  and third 580 recommendations.  The Tribunal, after a consideration of the objection, is, of the view that recommendations Nos. 2 and 3 were beyond the scope of the terms of reference made to him. Therefore,   those  two  recommendations   were   negatived. Regarding  the  first recommendation, it is  stated  by  the Tribunal  that  the Unions accepted the same  and  that  the Company also was not opposed to that suggestion made by  the Assessor regarding the raising of the base performance index to  60%.   In dealing with this aspect the Assessor  in  his report had stated as follows               "If the base index of any incentive scheme  is               raised  from  X to Y, the  workers  will  stop               getting the incentive earnings which they used               to get for the performance range from X to  Y.               This  is  also the main anxiety  expressed  by               both  the Unions in the present case.  At  the               outset  I  asked the  management  whether  the               implication of their proposed change was  such               a reduction in the workers’ total pay  packet,               at  any  given  level  of  performance.    The               management categorically assured me that  that               is  not  their intention.   Their  purpose  in               proposing  the  change is stated  by  them  to               induce  workers  to  raise  their  performance               above the prevailing level." The  Tribunal in its Award had stated that the matters  men- tioned in the above paragraph including the assurance stated to  have  been  given  by the  appellant  were  not  denied. Therefore,  the Tribunal, in view of the common  measure  of agreement  between  both  the parties  regarding  the  first recommendation is of the view that if the pay packet of  the workman  is  to be protected at the wage  raise  base  index performance  of 60%, some scheme may have to be worked  out. But as the necessary materials for the purpose of evolving a scheme  were  not available, the Tribunal has thrown  out  a suggestion  that the said question should be dealt  with  by the  appellant in consultation with the Unions and  frame  a scheme  by  common consent, if possible.   Accordingly,  the Tribunal  left  the matter to the parties to deal  with  the matter  with  the observation that if it is  found  that  no scheme  could be framed by consent, the Unions will be  free to  raise any dispute that may be available to them in  that regard. We have. exhaustively referred to the questions referred  to the  Tribunal  as well as the decision of the,  Tribunal  on those  points.  In these appeals, as mentioned earlier,  the controversy  relate to (1) Scale of Dearness Allowance;  (2) Fixation  of  Wage Scales, Classification  and  Grades;  (3) Raising  of the ceiling to 17’2 months basic  wages  in..the gratuity  scheme.;  and  (4)  the  direction  given  by  the Tribunal. regarding the Incentive Bonus Scheme.

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581 As the main points in great controversy between the  parties before  us relate to the pattern of dearness allowance  and the classification and grades of employees and the  fixation of   the   revised  wage  scales,  we  will  take   up   for consideration those matters. The  very _first objection of Mr. Tarkunde, learned  counsel for  the appellant is regarding the manner  of  ascertaining grosser  of its when revising the wage scales  and  awarding dearness  allowance.  We have already pointed out that  the- Tribunal has proceeded on the basis that the average  annual gross-profits of the Company are over Rs. 40,00,000.00.  The appellant had submitted balance sheets and profit and  loss accounts  for the year 1962-63 to 1969-70.  It is enough  to refer to the particulars that could be gathered for the five preceding  years,  namely, 1965-00 to  1969-70.   For  those years the figures are as follows  -- Particulars   1965-66 1966-67 1967-68  1968-69  1969-70 Paid-up      capital     4500000     4-50-000-0      4500000 54-00-00-0 Reserves and Surplus 2152186 2925376442151547856975714988 Sales 21997640 23866647 303593803299445637152031 Depreciation 5449195 55035784 8241111775916719 Development rebate 972426 8266105840110858144511 Provision for taxation 1915000 1590300185050016985001639000 Net Block 4601566 4905509 545821257459977375386 Net Profit 954591 1443489 159709416045011323779  From  the above statement it will be seen that the  average net profits work out to Rs. 1384691.00 The net profits  have been  arrived at, by the Company after  deducting  taxation, depreciation and development rebate.  It is on the basis  of the net profits, so arrived at that the appellant appears to have  urged  before the Tribunal that the  wage  scales  and dearness allowance are to (1),fixed.  The Tribunal  rejected this contentions.  On the, other hand, the Tribunal has held that  when considering a revision of wage structure what  is to be- taken into account is not the net profit.-; but gross profits  without any deductions having been made  for  taxa- tion,  depreciation and development rebate.  It is  on  that basis.  that  the  Tribunal held  that  the  average  gross- profits’ of the Company exceed Rs. 40,00,000.00. The  gross-profits without deducting taxation,  depreciation and development rebate for the years 1965-66 to 1969-70 will be. proximately as follows ------------------------------------------------------------      Year                            Gross-profits -------------------------------------------------------------                                           Rs.      "1965-66.                         35,11,752      1966-6736  ’                          57,000      1961-6843,                         37,698      1968-6945,                         25,134      1969-7040,                             24,009" -------------------------------------------------------------- 9--L1031 Sup.Cf/72 582 From  the  above  it will be seen that  the  figure  of  Rs. 40,00,000.00  arrived at by the Tribunal as  average  annual grossprofits appears to be prima facie correct. Mr.  Tarkunde, learned counsel for the appellant found  con- siderable difficulty in challenging the view of the Tribunal that  gross-profits are to be arrived at  without  decucting taxation  and  development rebate.   He  rather  strenuously urged  that there is absolutely no warrant for  arriving  at gross-profits without deducting depreciation.

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On  the other hand, Mr. K. T. Sule, learned counsel for  the respondent  No. 1, whose, contentions have been  adopted  by Mrs.   Urmila  Kapoor,  learned  counsel  for   the   second respondent,  pointed  out  that the approach  made  by  the, Tribunal  is correct and is also supported by the  decisions of this Court. Mr.  Tarkunde  referred us to sections 205 and  211  of  the Companies Act, 1956, as well as Part 1, Schedule VI therein. We  do not think it necessary to% refer to those  provisions as,  in ouropinion, they have no relevance or  bearing  when considering  a  revision  of wages  and  award  of  dearness allowance  under industrial adjudication.  Those  provisions are intended for’ a totally different purpose. We  will  presently show, by reference to the  decisions  of this  Court  that the Tribunal was  justified  in  computing gross-profits  without deducting taxation, depreciation  and development  rebate.  In view of the decisions, to which  we will  immediately  refer to, Mr. Tarkunde  was  prepared  to accept  the  position  that,  at  any  rate,  taxation   and development   rebate  cannot  be  deducted,  but  he   still maintained that depreciation has to be deducted. In Gramophone Company Ltd. v. Its Workmen(1), this Court, in dealing  with  a  gratuity  scheme,  had  to  consider   the principles   applicable  for  ascertaining   the   financial capacity  of  an employer.  In that  decision  the  employer contended that before the real profit for each year can  be4 arrived  at,  the  provisions  made  for  taxation  and  for development reserves should be deducted.  On this basis,  it was  further  contended that if these deductions  are  made, there  will  not be any profit left which  will  enable  the Company  concerned to frame a gratuity scheme.   This  claim for  deducting taxation and development rebate reserves  was negatived by this Court as follows :               "When  an industrial tribunal  is  considering               the  question of wage structure  and  gratuity               which  in our opinion stands more or  less  on               the same footing as wage-struc-               (1)[1964] 2 L.L.J. 131.               583               ture,  it  has  to look at  the  profits  made               without considering provision for taxation  in               the shape of income-tax and for reserves.  The               provision for income-tax and for reserves must               in  our opinion take second place as  compared               to provision for wage structure and  gratuity,               which stands on the same footing as  provident               fund which is also a retrial benefit." It  was further observed that if an industry is in a  stable condition and the burden of provident fund and gratuity does not result in loss to the employer, that burden will have to be borne by the employer, like the burden of  wage-structure in the interest of social justice.  It was finally held that the  contention  on  behalf  of  the  Company  therein  that provision  for  taxation and provision for  reserves  should take  precedence  over  provision  for  gratuity  cannot  be accented. From  the above decision it is clear that Fixation of  wage- structure stands more or less on the same footing as framing of  a  gratuity  scheme and the  principles  applicable  for ascertaining  the profits are the same : (2)  Provision  for taxation  and provision for reserves cannot take  precedence over  for  gratuity  and  fixation of  wages;  and  (3)  The provision  for income-tax and for reserves must take  second place  as  compared  to  provision  for  wage-structure  and gratuity.

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The above decision categorically rules out any deduction  of taxation.  It also excludes from deduction all provision for reserves which will take in depreciation reserve also. But,  Mr. Tarkunde contended that the above decision  is  an authority  for the proposition that the only two items  that could be deducted are provision for taxation and  provision for  development rebate reserve.  If so, the counsel  urges that the deduction of depreciation reserve as claimed by the appellant  is  justified  and, that the  Tribunal  erred  in declining that item to be deducted. We  are  not  inclined  to accept  this  contention  of  Mr. Tarkunde.   The  above  decision  is,  in  our  opinion,  an authority  for  the  proposition  that  the  provision   for taxation and provision for reserves, which expression  will take  in depreciation reserve also, cannot be  deducted  for the  purpose  of computing the profits.  At ’any  rate  the, said   decision   had  no  occasion  to   consider   whether depreciation  reserve  can  be deducted  or  not.   We  have already  pointed  out  that  the  only  claim  made  by  the appellant  therein was for deducting provision for  taxation and  for  development  rebate reserve  and  that  claim  was rejected.  Therefore, looked at from any point of view,  the above decision is certainly not in favour of the  contention of Mr. 584 Tarkunde that depreciation reserve has to be deducted before arriving at profits. In The Indian Link Chain Manufacturers Ltd. v. Their  Work-- men(1),  this Court had occasion to consider the  principles applicable to ascertain the financial capacity of a  company in fixing wage scales and dearness allowance and framing  of a  gratuity scheme.  The Principle applicable was stated  as follows                "It is pertinent to notice that gratuity  and               wages in industrial adjudication are placed on               the  same  footing  and  have  priority   over               Income-tax  and  other reserves,  as  such  in               considering  the  financial  soundness  of  an               undertaking  for the purposes of  introduction               of a gratuity scheme the profits )that must be               taken info account are those computed prior to               the   deduction  of  depreciation  and   other               reserves."               The  decision  in Gramophone  Company  v.  Its               Workmen  2  was quoted with approval  in  this               decision.   The  Company  in  that  case   had               calculated     profits     after     deducting               depreciation.   This method was deprecated  by               this Court as follows :               "All  these  profits it may be  mentioned  are               computed after deducting depreciation and this               should betoken into account in considering               the  desirability  of formulating  a  gratuity               scheme for- the Appellant." In the end the provision made for depreciation and which had been deducted by the Company for calculation of profits  was added back. From  the above decision it is clear that profits are to  be computed  prior to the ’deduction of depreciation and  other reserves.   The said decision directly holds that  provision for  depreciation and other reserves cannot be  deducted  in computing  profits  be ascertained for  framing  a  gratuity scheme.   This decision again reiterates the legal  position that  gratuity  and  wages in  industrial  adjudication  and placed on the same footing and have priority over Income-tax

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and other reserves.  In fact, as pointed out by us  earlier, provision made for depreciation and which had been  deducted by  the Company for arriving at profits was added back.  by this Court. Mr. Tarkunde urged that this Court in The Indian Link  Chain Manufacturers Ltd. v. Their Workmen(1) has misunderstood and misinterpreted  the earlier decision in  Gramophone  Company Ltd.  v.  Its Workmen (2 ) . According to  the  counsel  the error committed by this Court was on proceeding on the basis that the decision in (1) [1971] 2 S.C.C. 759. (2)  [1964]2 L.L.J. 131. 585 Gramophone Company Ltd. v. Its Workmen(1) has laid down that depreciation reserve should not be deducted in computing the profits  available  for framing a gratuity  scheme  or  when fixing a wage scale, We  have no hesitation in rejecting this contention  of  Mr. Tarkunde.  We have already expressed our views regarding the scope  of  the decision in Gramophone Company  Ltd.  v.  Its Workmen(1) and no error has been committed by this Court  in The Indian Link Chain Manufactures Ltd. v. Their Workmen(2). On the other hand, the latter decision is directly in  point to  the  effect that provision for  depreciation  cannot  be deducted. We may also refer to the observation of this Court in  Ahme- dabad  Millowners’  Association Etc. v. The  Textile  Labour Association(3)  that..........  it is the figure  of  gross- profit  which is more important, because it is not  disputed that  wages  payable to the employees are a  first  charge,, and.  all  other  liabilities take  their  place  after  the wages." Mr.  Tarkunde  referred us to, the statements  contained  in certain leading text books on principles of Accounting, Book Keeping and Accounts and Accountancy regarding the nature of depreciation  reserve.  In "Principles of Auditing by F.  R. M. De Paula, 8th Edition," it is stated that the main object of  providing for depreciation of wasting assets is to  keep the  original  capital intact.  In "Balance Sheets,  how  to read  and understand them, by Philip Tovey,3rd Edition"  the distinction between a "Reserve" and "Depreciation" has  been stated.  The author says that depreciation should be written of before arriving at the year’s profit and that reserve  is built  up, by setting aside portions of the profits  itself. The  author proceeds to state that  depreciation  represents the estimated wear and tear which will ultimately reduce the property  and  plant to scrap value.  In  "Book-Keeping  and Accounts" ’by Cropper, Morr’s and Fison, 19th Edition,  when dealing with the Trial Balance, Trading and Profit and Loss Accounts,  it  is mentioned that depreciation  is  the  term employed   by  the  Accountants  to  indicate  the   gradual deterioration both in the value and the usefulness of  those assets  which, by reason of their nature and uses,  steadily decline in value. Again  in "Accountancy" by William Pickles, 3rd Edition  the author  has  defined  "Depreciation" as  the  permanent  and continuing diminution in the. quality, quantity or value  of an  asset.  it  Is further stated  that  the  provision  for depreciation  does  not depend upon what  the  business  can afford, as the debit therefore is an (1) [1964] 2 L.L.J.131,     (2) [1971] 2 S.C.C. 759. (3)  [1966] 1 S.C.R. 382. 586 essential  one, constituting not an appropriation of, but  a charge against, profits for the period in question.

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Based upon the above statements contained in the text books, referred to above, Mr. Tarkunde urged that the principle  in Accountancy  is  that depreciation must be  deducted  before ascertaining the profits. In  our opinion, the above statements may have  considerable bearing  in  the  preparation of profit  and  loss  accounts having due regard to the provisions of the Companies Act and Mercantile  usage; but they have no bearing on the  question of  fixation of wage structure and dearness allowance in  an industrial adjudication.- From what is stated above, it follows that the Tribunal  was justified  in arriving  at gross-profits  without  deducting the provision for Depreciation.  As already mentioned by us, Mr. Tarkunde has accepted that the Tribunal was justified in not   deducting   the  Provision  made  for   taxation   and development  rebate.  The result is that the average  gross- profits  of the appellant being about Rs.  40,00,000,00,  as held by the Tribunal, is correct. In  the fixation of wages and dearness allowance  the  legal position  is well-established that it has to be done  on  an industry-cumregion basis having due regard to the  financial capacity  of  the  unit  under  consideration-vide   Express Newspapers  (Private)  Ltd., and Another v.  The  Union  of India  and others(1), Greaves Cotton and Co. and  others  v. Their  Workmen  (2) , and Bengal Chemical  &  Pharmaceutical Works Ltd. v. Its Workmen(3). It  has  been further stated in Greaves Cotton add  Co.  and others v. Their Workmen (2 ) as follows :               "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.......... (1) [1959] S.C.R. 12.   (2) [1964] 5 S.C.R. 362. (3)  [1969] 2 S.C.R. 113. 587 It  has  been further emphasized  in  Ahmedabad  Millowners’ Association  etc. v. The Textile Labour Association(1)  that industrial  adjudication  should always take  into  account, when  revising  the  wage structure  and  granting  dearness allowance,  the  problem  of the additional  burden  to  be imposed  on the employer and ascertain whether the  employer can  reasonably  be called upon to bear  such  burden.   The principles to be borne in mind have been stated in the  said decision as follows :               " It is a long-range, plan; and so, in dealing               with  this problem, the financial position  of               the employer must be carefully examined.  What               has  been  the  progress of  the  industry  in               question;  what  are  the  prospects  of   the               industry  in  future; has  the  industry  been               making profits; and if yes, what is the extent               of profits; what is the nature of demand which               the industry expects to secure; what would  be

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             the  extent  of  the burden  and  its  gradual               increase which the employer may have to face ?               These and similar other considerations have to               be  carefully  weighed before  a  proper  wage               structure  can  be reasonably  constructed  by               industrial adjudication.......... As pointed out in Greaves Cotton and Co. and others v. Their Workmen (2) , one of the principles to be adopted in  fixing wages  and  dearness allowance is that the  Tribunal  should take  into  account the, wage scale and  dearness  allowance prevailing  in’  comparable concerns carrying  on  the  same industry in the region., The factors which have to be  taken into account for ascertaining comparable concerns have  also been laid down by this Court. In Workmen of Balmer Lawrie and Co. v. Balmer Lawrie and those principles have been stated as follows               "Besides, it is necessary to emphasise that in               dealing  with  the  comparable  character   of               industrial      undertakings,       industrial               adjudication  does  not usually rely  on  oral               evidence  alone.  This question is  considered               in   the   light   of   material   fact    and               circumstances  which are generally  proved  by               documentary  evidence.   What  is  the   total               capital  invested by the concern, what is  the               extent  of its business, what is the order  of               the profits made by the concern, what are the,               dividends   paid,  how  many   employees   are               employed by the concern, what is its  standing               in the industry to which it belongs, these and               other   matters   have  to  be   examined   by               industrial  adjudication  in  determining  the               question  as  to whether one concern  is  com-               parable  with another in the matter of  fixing               wages.  Now,               (1) [1966] 1 S.C.R. 382.               (2) [1964] 5 S.C.R. 362.               (3)   [1964] 5 S.C.R. 344.               588               it  is obvious that these questions cannot  be               decided  merely  on the  interested  testimony               either of the workmen, or of the employer  and               his witnesses’" In  Workmen  of  New Egerton Woollen Mills  v.  New  Egerton Woollen  Mills  and others(1) , the  above  principles  have again been reiterated. From  the decisions, referred to above, it follows that  two principal factors which must weigh while fixing or  revising wage scales and grades are: (1) How the wages prevailing  in the  establishment in question compare with those  given  to the   workmen  of  similar  grade  and  scale   by   similar establishments  in the same industry or in their absence  in similar  establishments in other industries in  the  region; and  (2) What wage scales the establishment in question  can pay  without  any undue strain on its  financial  resources. The  same  principles substantially apply  when  fixing  or revising the dearness allowance. The  question is whether the Tribunal has adopted the  above principles  when  revising  the  wage  scales  and  dearness allowance in the case of the appellant. The  Unions  had relied on as many as  twenty  one  concerns located  in the region of Greater Bombay and  belonging  to the   same  pharmaceutical  units  of  industry  as,   units comparable with the appellant. The   appellant  opposed  its  being  compared  with   those

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concern,,  on  the ground that the units relied  on  by  the Unions  were  companies  haying  foreign  collaborations  or connections, and as such possessing several advantages.  The appellant  in turn relied on several concerns in the  region as comparable units. Before we refer to the concerns relied on by the Unions  and the  appellant  as comparable concerns, it is  necessary  to deal  with  an  objection raised by  Mr.  Tarkunde  that  no foreign  unit  doing business in India or no unit  in  India doing business in collaboration with a foreign concern,  can ever be considered for purposes of comparison.  According to the  appellant  such concerns have  distinct  advantages  of international  research facilities, reputation  in  business which  enables such concerns to market their  products  more easily  and  thus enable them to pay higher wages  to  their employees.   In  view of the special  technical  facilities, that  may  be available to them, their output  will  be  far higher though the number of employees will be much less, and as such they will be able to pay to their lesser  number  of employees  higher  wages.  In this connection  Mr.  Tarkunde relied on certain awards of the Industrial Tribunal (1)[1969] 2 L.L. J. 782. 589 wherein   it  is  held  that  the  comp’es  having   foreign collaboration  though  in the same region and  in  the  same industry,   cannot  be  considered  for  the   purposes   of comparison with purely local- On  the other hand Mr. Sule, has opposed the above  position and  urged that the question as to who is the  employers  is absolutely immaterial so long as the tests for the purposes of comparability as laid down ’by this Court, are  satisfied and   the   capacity  to  bear  the  financial   burden   is established.   We  will  deal  with  aspects  in  the  first instance. It  must  be  stated at the outset that  the  Unions  placed reliance on certain information contained in the  prospectus of the Company and certain statements contained in the  book "Indian,  Pharmaceutical  Industry" published  in  1963  and 1969,  to show that the appellant concern is also one  which has foreign collaboration and as such it is to be ranked  as a concern with foreign attachment. has recorded a finding in favour of the appellant that it is not a unit having foreign collaboration.  Therefore, this finding is III favour of the appellant. The question that now arises for consideration is whether in law  there is any objection or prohibition in an  industrial tribunal,  when  dealing with comparable units in  a  region from   taking   into   account   concerns   having   foreign collaboration.   It  is  no  doubt true  that  some  of  the concerns  relied  on by the Unions are concerns  working  in collaboration with foreign firms. In  Chemical  Industries  and  Pharmaceutical   Laboratories Limited  (Cipla) Bombay v. Their Workmen(1), it was held  by the Industrial Tribunal that the Cipla cannot be compared to Glaxo Laboratories, Raptakos Brett and other  pharmaceutical concerns  which are either subsidiaries of foreign  concerns or  are closely linked with them.  It was further held  that if  any  comparis  on  could be made,in  can  only  be  with concerns  like Kemp & Company.  Sandu  Pharmaceutical,  Fair Deal  Corporation, Edison Continental  Laboratories,  Bengal ’Chemicals and such other indigenous concerns. Again in Alembic Chemical Works Ltd.  Baroda v. Its  Workmen (2)  , the Tribunal held that Alembic cannot be compared  to concerns  like  the Glaxo Laboratories and others  who  have associations  in  different degrees and forms  with  certain

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foreign concern, of international repute. On  this  reasoning the Tribunal relied more on  the  scales wages prevailing in concerns like the Jhandu Pharmaceutical, Cipla.  Kemp  & Co., and such similar concerns  although  it held that    (2) [1958] I.C.R. Bombay, 1305. (1)  [1957] I.C.R Bombay, 1206. 590 Alembic  is a much bigger concern, than the said units.   It must  be  stated  that in-both these  awards  concerns  with foreign    collaboration   have   been    eliminated    from consideration on the ground that they cannot be regarded  as comparable  concerns  and to that extent  they  support  Mr. Tarkunde’s contention. In  Reference  (IT) No. 223 of 1959, which  related  to  the appellant  Company,  the workmen placed reliance  on  Indian units  of foreign concerns for being treated  as  comparable units. ,The appellant, however, pointed out that those units which  have  international fame and repute in  world  market were  in a position to sell their products more  easily  and profitably  and hence they cannot be treated  as  comparable units.   The Tribunal, no doubt, accepted the contention  of the  appellant  that  the Unions had selected  some  of  the bigger  concerns  for comparison and held that it  would  be more  appropriate  if the appellant is placed  somewhere  in between  the bigger and smaller concerns.  In this view  the Tribunal took to    the financial capacity of the appellant. Again  in Reference, (IT) No. 402 of 1963, relating  to  the appellant,  wherein the dearness allowance was revised,  the appellant had contended that it should not be compared  with the units like Ciba, Dumex, Glaxo, Sandoz and the like.  The Tribunal  held that the appellant cannot be  compared  with international pharmaceutical units having branches in Bombay or  with  foreign concerns like Glaxo,  Ciba,  Sandoz  etc., which  though  incorporated  in India  are  subsidiaries  of foreign  companies having all the advantages of  connection with  respect of home companies in Europe and America.   The Tribunal referred to the award in Reference (IT) No. 223  of 1,959  and held ’that a fair cross-section of  the  industry has to be taken into account for fixing a scale of  dearness allowance,  which will be within the financial  capacity  of the appellant.  But, how-ever, the Tribunal held that  the appellant  is a firm of good reputeand standing and that  it has  very fair prospects.  Though in Reference (IT) No.  223 of  1959, the Tribunal did not specifically  eliminate  from consideration  units having foreign collaboration  as  such, nevertheless,  in Reference (IT) No. 402 of 1963,  the  Tri- bunal  has held that the appellant cannot be  compared  with international  pharmaceutical companies having  branches  in Bombay or with concerns, though, incorporated in India,  are subsidiaries of foreign, companies. From  what is stated above, it is no doubt true that in  the three  awards,  one  of which specifically  relates  to  the appellant,  concerns having foreign collaboration have  been eliminated  for  purposes  of  comparison.   But  no   legal principle  on  the basis of which such a decision  has  been arrived at has been stated in any of these awards. 591 In  our  opinion, so long and to the  extent  that  concerns having-foreign collaboration are doing business in India and in  a particular concerned region, we do not see any  reason why  they should not be taken into account for  purposes  of being  treated as comparable units, provided the  tests  for such  purposes as laid down by this,, Court  are  satisfied. No  doubt some of those concerns may be having an  advantage

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in  various matters.  But merely because that  they  possess such  advantage  in the field of business is not  a  circum- stance  for  eliminating  such  concerns  for  purposes   of comparability.  The object of industrial adjudication is, as far as possible, to secure uniformity of service  conditions amongst  the  industrial  units in the same  region.   If  a concern having foreign collaboration properly satisfies  the tests of comparability, it would be improper to regard’ such unit as uncomparable merely on the ground that it is a  con- cern  with foreign collaboration or interest and  that  ’the unit  with which it is sought to be compared is entirely  of Indian origin and resources. The  object  of Industrial.  Law is to improve  the  service conditions  of industrial labour so as to provide  for  them the  ordinary amenities of life with a view to  bring  about industrial   peace   which   would   in   ’turn   accelerate productivity  of  the country resulting in  its  prosperity. The  prosperity  of the country, in its turn  will  help  to improve  the condition of labour.  The principles  regarding fixation  of  wage scales and dearness allowance  have  been laid down in several decisions, by this Court and they apply equally  to all industries irrespective of the character  of the  employer.  The worker is interested in his  pay  packet and  given  reasonable  wages, he can be expected  to  be  a satisfied worker.  There is no justification from the  stand point  of  view of the employees for fixing  different  wage scales  merely because of the fact that some workmen are  in the employ of purely local concerns while some others are in the  employ of units though in the same region,  working  in collaboration  with,  foreign concerns.   As  the  paramount consideration  is the interest of the worker, the  character of  the  employer  is  irrelevant,  provided’  the  latter’s financial  capacity to bear the burden is  established.   In the ultimate analysis the, character of the employer or  the destination  of profits has no relevance in the fixation  of wages and dearness allowance. We  are fortified in the above view by The decision  of  the Constitution  Bench of this Court in  Hindustan  Antibiotics Ltd.  v. The, Workmen and others(1). In that case on  behalf of  the appellant it was urged that as it was  a  government company  in the public sector, the principles governing  the fixation  of  wages applicable to companies in  the  private sector do not have any relevance.  On (1)[1967]1.S.C.R.652. 592 the  other hand, on behalf of the workmen it  was  contended that  in  fixing  the  wage  structure  including   dearness allowance  the question, who is the employer, is  irrelevant and  that only the needs of the employee are  of  paramount importance.   The  contention on behalf of the  workmen  was accepted  by  this  Court  and it was  held  that  the  same principles  that  have  been laid  down  by  the  industrial adjudication  and the courts regarding the fixation of  wage scales and dearness allowance in respect of companies in the private  sector apply with equal force to companies  in  the public  sector  also.   It  was further  held  that  in  the application  of  the  industry-cum-region  principle  to  be adopted  to  distinction can be made between  one  unit  and another in the same industry in the fixation of wage scale,; provided  the test of financial capacity is  satisfied.   It was  further  held that by and large the acceptance  of  the principle-of  industry-cum-region will be more conducive  to industrial relations and that the same principles evolved by the  industrial  adjudication in regard  to  private  sector undertakings   will  govern  those  in  the  public   sector

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undertakings having a distinct corporate existence. Though the decision cited above had to deal with a claim for ,differentiation  being made on behalf of a company  in  the public sector and which claim was rejected, in our  opinion, the basic principle underlying the said decision will  apply even with respect ’to the question whether the units, having collaboration  with  foreign  concerns  can  be  taken  into account  for  purposes of comparison, In  our  opinion,  the above  decision  warrants  the conclusion  that  such  units having  foreign  collaboration or  foreign  companies  doing ’business in India can be taken into account for purposes of being  considered  whether they are comparable  units.   Of course,  the test laid down by this Court for  treating  one unit  as  a comparable one, will have to be  satisfied,  and once  that  test is fulfilled, there can be  no  distinction made between such units and purely local units.   Therefore, in  our  view,  the Tribunal, in the case  ’before  us,  was perfectly  justified in taking into account for purposes  of comparison units having collaboration with foreign  concerns and foreign units doing business in India in the same region and being in the same industry.  It follows, therefore, that the  principles  laid  down to the contrary  in  the  awards relied on by Mr. Tarkunde, are erroneous. Coming  to the units relied on by the parties as  comparable units. as mentioned earlier, the Unions relied on as many as 21 concerns as comparable with the appellant.  No doubt some of   the  units  relied  on  by  them  were   units   having collaboration with foreign concerns.  The appellant also, in turn  filed statement Ex.  C-26. referring to six  companies which could be treated as comparable concerns.. 593 The  Tribunat  rejected most of the units relied on  by  the Unions   on  the  ground  that  the  information   furnished regarding  such  units.  were  not  adequate  and   complete regarding   various  factors  necessary  to   constitute   a comparable  unit.  We have also gone through the  statements filed  by  the  Unions.  In Ex.  DU-2,  one  of  the  Unions furnished information regarding the business performance  of about  nine concerns till the year 1964-65.   Similarly,  in Ex.   DU-3, another Union had given the average  performance of nearly ton units for the years 1962-63 to 1964-65.  As it would  be more desirable to consider the financial  capacity of  the  appellant  in  the light  of  the  trading  results disclosed in the balance sheets and profit and loss accounts from  the  years 1965-66 to 1969-70, it must  he  considered that the information furnished in Exs.  DU-2 and DU-3 cannot he considered to be upto date and helpful.  The Unions  also did not make any further attempt to supplement the  informa- tion   contained  in  these  two  exhibits   by   furnishing information  regarding the years subsequent to 1964-65.   No doubt,  the Unions have furnished particulars regarding  one unit,  Burroughs Welcome India) Private Ltd., which will  be dealt with later.  Therefore, the rejection by the  Tribunal of most of the units relied on by the Unions, was justified. The  appellant Company relied on six units mentioned in  Ex. C-26.   Those  units are Cipla,  Chemo-Phama,  Zandu,  Opil, Sigma and Bengal Chemicals.  But the Company did not furnish information  regarding  the business  performance  of  these concerns  for a period of years in the immediate past.   But it will be noted that the four units referred to in Ex.   C- 26.   namely,  Zandu,  Cipla,  Opil  and  Sigma,  had   been considered by the Industrial Tribunal in its previous  award Reference  (IT) No. 402 of 1963, when the scale of  dearness allowance  obtaining in the appellant Company  was  revised. On  that  occasion the Tribunal had held that it  was  only

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Cipla  which came nearest to the appellant Company and  even there  the dearness allowance obtaining in Cipla  cannot  be taken for comparison.  That means that these four units were left out of account and were not treated as units comparable with  die appellant.  No fresh materials were placed by  the appellant  regarding these four units after the decision  of the Tribunal in Reference (IT) No. 402 of 1963.   Therefore, the Tribunal in the present case, was justified in rejecting the  claim  of  the  appellant that  those  four  units  are comparable  concerns.   The elimination of the  four  units. thus  left  for  consideration only  two  concerns,  namely, Chemo-Phama and Bengal Chemicals.  Even here the Unions  had furnished  statements Exs.  DU-8 and DU-9,  regarding  these two  units in Ex’ DU-8, the business performance  of  Chemo- Phama  froth  1965 to 1969 was given and-in Ex.   DU-9,  the business  performance of Bengal Chemicals from 1965 to  1970 was given.  The 594 ’Unions had also furnished Ex.  DU-44 regarding the business performance   of  the  appellant.   A  comparison   of   the statements  contained  in  Exs.   DU-8  and  DU-9  with  the material relating to the appellant in Ex.  DU-44,  regarding the paid up capital, reserves and surplus sales, net  block, net  profits and gross-profits, it is quite clear  that  the business performance of Chemo-Phama and Bengal Chemicals  do not come anywhere nor that of the appellant.  The  appellant in  all  respects  stands on a  much  higher  footing.   The average  gross-profits  of  the appellant work  out  to  Rs. 40,11,176.  while the average gross-profits  of  Chemo-Phama works  out to Rs. 5,31,511 and that of the Bengal  Chemicals to  Rs.  11,39,553.  Therefore, it is clear that  these  two units also cannot be treated as concerns comparable with the appellant  and hence the wage structure prevailing in  those concerns cannot provide any useful guidance. We have already mentioned that the Tribunal has  ultimately held that M/s Burroughs Wellcome (India) Private Limited  is a  concern comparable with that of the appellant.  It is  no doubt a foreign company in the sense that its entire capital is held by foreign company as shown in the statement Ex.  C- 11,  filed by the appellant.  But we have  already  rejected the  contention that such a concern cannot be ruled  out  of consideration for purpose of comparability. A  very severe attack has been levelled by Mr.  Tarkunde  in the Tribunal’s treating M/s Burroughs Wellcome Company as  a comparable  unit.  According to the learned counsel  if  the various  factors relevant for the purpose of comparison  are considered, it will be clear that the appellant cannot stand any comparison with this unit.  Mr. Tarkunde further pointed out  that instead of taking ,only one unit for  purposes  of comparison,  the  Tribunal  should have  taken  fair  cross- section  of the industry in order to find out where  exactly the appellant can be fitted in.  It is no doubt true that  a fair  cross-section  of the industry should  be  taken  into account.   But  in this case when all the other  units  have been  held to be not ,comparable with the appellant,  this criticism levelled against the approach made by the Tribunal cannot be accepted. Regarding  Burroughs Wellcome Company, the Unions  had  sub- mitted  a statement Ex.  DU-2A under a seal of  confidential as  it was  a private limited company.  A comparison of  the information  ,contained  in the said  statement  Ex.   DU-2A regarding the paid up ,capital’, reserves and surplus sales, depreciation,  development rebate, provision  for  taxation, net-profits, gross-profits, net block and dividend  declared for  the years 1967 to 1970 with the corresponding items  in

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Ex.  DU-4A with respect to the appellant shows that both the units are substantially on a par.  Normally, the 595 statements  in Ex.  DU-2A could have been extracted in  this judgment  but for the fact that Burroughs  Wellcome  Company being  a private limited company and the statements  having been  furnished  in a sealed cover, they could not  be  made public.   The  paid  up capital. is identical  in  both  the concerns.   The average sales of Burroughs Wellcome  Company and those of the appellant are substantially the same.   The difference   between   the,  net-profits  of  the   two   is significantly small.  The gross-profits of the two units are also  close  to each other.  No doubt there are  some  small differences between the two in these items, but they are  of no significance.  The various factors which have to be taken into  account  for he purpose of a unit being treated  as  a comparable one as laid down by this Court have already  been referred  to.  If so, all those factors taken into account clearly  show  that  Burroughs Wellcome Company  is  a  unit comparable with the appellant. No doubt the appellant has relied on the ratio of  employees to  sales,  as  well  as  to  debt  equity  ration  and  the percentage  of profit to sales in respect of  the  appellant and the Burroughs Wellcome Company.  Ex.  C-22 contains  the ratio  of employees to sales in 1968-69.  Though  there  are certain other units referred to therein, we will only advert to the particulars regarding the appellant and the Burroughs Wellcome Company, which are as follows                 Ration of Employee to Sales                No. of       Per      Name of the Company Year SalesEmployees   employee sale           Rs.                        Rs.      Unichem   68-6932994456  752  43875      Burroughs.     69 25000000 425 58823 ----------------------------------------------------------- A  reference  to Ex.  C-22 will show that the sales  of  the appellant  is higher than that of Burroughs Welcome  Co.  No doubt the ratio per employee is slightly less in the case of the  appellant.  It is also seen that the appellant  employs nearly  752 workmen whereas Burroughs Wellcome  Co.  employs only 425 workmen.  In Ex.  C-18, particulars regarding Debt Equity Ratio  have been  given.  That statement contains particulars  regarding the  various  firms including the appellant.   In  1969  the capital  of  the  appellant was Rs. 101.86  lakhs.   It  had borrowed  Rs.  95.89 lakhs and the  percentage  on  borrowed funds  to capital works out to 94.1 %. It is no  doubt  true that there is no borrowed capital in Burroughs Wellcome  Co. In  Ex.   C-18 particulars regarding nine  Units  have  been given  and it is seen that except two units, all  the  other seven  units,  including the appellant, have  borrowed.   In fact  it  is  interesting to note that Glaxo,  which  has  a capital  of  Rs. 1196.81 lakhs had also borrowed  Rs.  26-80 lakhs.  Similarly, 596 Chemo-Phama which had a capital of only Rs. 32.05 lakhs  had borrowed Rs. 37.08 lakhs and the percentage works out to Rs. 115.7%.  We  are referring to these aspects because  it  was stressed  by Mr. Tarkunde that the Debt Equity Ratio in  the appellant is very high and that it has to pay a large amount by  way of interest on borrowed funds which is not the  case with   Burroughs  Wellcome  Company.   But  the   statements contained   in  Ex.   C-18  themselves  clearly  show   that borrowing  for the purpose of business seems to be  a  usual

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pattern followed by the companies in the region. Ex. C-15 is a statement relating to percentage of profit  to sales  for  the  years 1965-66 to  1969-70.   No  doubt  the figures  given therein show that the percentage  of  profits has  been fluctuating. but, in our opinion, the  particulars contained in the above exhibits. relied on by the appellant, do  not affect the findings of the Tribunal  that  Burroughs Wellcome Company is a unit comparable with the appellant. Another criticism that has been levelled by Mr. Tarkunde  is that  the Tribunal has not taken into account the  prospects of the future business of the appellant.  In this connection the  appellant relied on the coming into force  with  effect from  January 1, 1971 of’ the Drugs (Price  Control)  Order, 1970.  According to Mr. Tarkunde whatever may have been  the financial. position of the appellant in the past, its future business  is bound to suffer in view of this  price  control order.   He  referred  us to  the  decision  in  Williamsons (India)  Private,  Ltd.  v. Its Workinen(1)  of  this  Court wherein it has been held, amongst the various factors  which have to be taken into account for the purpose of fixation of wage  scales and dearness allowance, the prospect of  future business  is  a very relevant  circumstance.   This  factor, according to the appellant, has not been taken into  account by the Tribunal. We  have  earlier referred to the decisions  of  this  Court regarding the principles governing the fixation of wages and dearness  allowance.  It is no doubt a long, range plan  and the Prospects of future business amongst other factors  have also  to be taken into account.  The case of the  appellant is that in 1963, there has been a price freeze and that has affected  its  business  and  therefore  the  Drugs  (Price, Control)  Order, 1970 will affect its future  business.   We have, already, extracted in the earlier part of the judement the trading results, of the appellant from 1965-66 to  1969- 70.  If the- price freeze which came into force in 1963  had any affect, then it must have been reflected in the  trading results of the appellant.  The (1)  [1962] 1 L.L.J. 302. 597 trading results of the appellant during the years 1962-63 to 1964-65 are as follows :      Particulars1962-63   1963-64   1964-65      Paid-up capital                   4491000   44992504499500      Reserves and Surplus 476569  1010753  1505353      Sales  10241405    1566588317388705      Net Block   3907400  4371113   4345467      Provision for Taxation   934000   1065000  1515000      Depreciation297243379256390878      Development rebate  33686  100617 22329      Net Profits   442881 703567   877271 --------------------------------------------------------------- A  glance of the above statement clearly shows  that  though the  paid-up  capital  remains the same, there  has  been  a steady  rise  in  the  reserve and  surplus  sales  and  net profits.   Similarly,  the net block has also  an  increase. There has been no set back in the sales.  On the other  hand there has beena steady rise in the sales.  No doubt for  the year  1969-70  the  profits did go down;  but  the  drop  is comparably  small  and the appellant has not been  able  to, satisfy. us that it is due to the price freeze. Then  the  question  is regarding the impact  of  the  Drugs (Price Control) Order, 1970, which has come into effect from January 1,1971.     In  this connection it is  necessary  to refer  to  the speech made bythe Chairman of  the  Board  of

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Directors of the appellant Companyat  the  Annual   General Meeting held on January 9, 1971. At thisstage it may be mentioned that the Accounting year of the appellant  Company is from October 1, to September 30, of the succeeding  year. On January 9, 1971, the Chairman was giving a review of  the working  of  the Company for the year ending  September  30, 1970.   He had clearly stated that the impact of  the  Drugs (Price Control) Order, 1970, which had come into force only recently  will  be felt by the Company only after  the  year 1970-71.   The appeal was heard by us from January  3,  1972 and concluded only on January 10, 1972.  As the Company,  in the  previous  years  had been having  its  Annual,  General Meetings in early January, of each year, we suggested to the counsel  for the appellant that as the  approximate  trading results  for  the year commencing from October  1,  1970  to September  30, 1971 would have been available by then,  they may be furnished so that it may be possible to find out  the impact  of  the Drugs (Price Control) Order on  the  trading results  of the appellant.  But it was represented that  the figures  are not available.  It is not necessary for  us  to cornment  except  to state that going by the  fact  that  on former occasions the figure had been ready by the first-week of  January  to  enable the Annual General  Meeting  of  the Company  to  be held, it would not have been  difficult  for the- appellant to have furnished at least 1031 Sup.CI/72 598 the  approximate figures, if really the trading results  had shown  a decline.  The appellant has missed  an  opportunity ’that was provided to it to establish that the Drugs  (Price Control)  Order has adversely affected its business.   Under those  circumstances, it is not possible for us to  disagree with  the view of the Tribunal that the impact of the  Drugs (Price  Control)  Order  will  ’not be  such  as  to  affect materially the business prospects of the appellant Company. We may state that if the Drugs (Price Control) Order,  mate- rially  affects the prosperity of the appellant’s trade,  it would be open to it to raise a dispute for the reduction  in the wage structure and in case they are able to show that in view  of  the Drugs (Price Control) Order,  their  financial position  has  been  weakened to such an  extent  that  they cannot  bear  the  burden of wage  structure  fixed  by  the present award, the matter may have to be examined on its merits. The  question of fixation of wage scales need not detain  us very  long.   We  have already  extracted  the  wage  scales prevailing   in  the  appellant  company  as  well  as   the categories of workmen when the reference was made.  We  have also  referred  to  the  fixation of  wage  scales  by  the, Tribunal  on a comparison with the wage scale  obtaining  in Burroughs Wellcome Company.  The wage structure. as well  as the grades that were prevalent in Burroughs Wellcome Co.  in pursuance  of the settlement dated June 13,  1966  regarding the ,operatives and clerical-and subordinate staff have been incorporated ,by the Tribunal in its Award.  We do not think it  necessary  to reproduce the same.  A comparison  of  the wage scales in Burrough Wellcome Company and the wage scales fixed by the Tribunal in the Award for the Company will show that  the  Tribunal has only made some slight  variation  in view of the fact that it accepted the report of the assessor for  the continuance of the existing grades in the  Company. As  some  of those grades were, not  existing  in  BurToughs Wellcome  Company,  the  Tribunal bad to  make  some  slight changes.   Wherever  it was possible the wage  structure  in Burroughs Wellcome Co. has been retained but the maximum has

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been raised a little and some slight changes have also  been made in the incremental stage. Once  Burrough Wellcome Company is treated as  a  comparable unit,  we are satisfied that the wage scales awarded by  the Tribunal  cannot  be  ’considered to  be  unjustified.   The Tribunal’s  finding regarding the financial capacity of  the appellant  has  already been referred to and we  accept  the same. it was, however, pointed out by Mr. Tarkunde that in  consi- dering the comparability of a unit; strength of the  labour force  has  also to be given due importance.   Mr.  Tarkunde pointed out that 599 while the appellant employs 752 workmen, there are only  436 in Burroughs Wellcome Co. as is seen from the Statement  Ex. C-22.   No doubt to this extent, the two units  differ,  but when one bears in mind the business performance of both the units,there is not much of a substantial difference.  It may be  that  because of the fact that  Burroughs  Wellcome  Co. adopts more modem methods of production, it was employing  a smaller complement of workers.  Having due regard to all the other tests that have been satisfied, this difference in the strength  of labour force alone, in our opinion, cannot  be given  undue importance.  It is pertinent to note that  this Court  in  Workmen  of New Egerton,  Woollen  Mills  v.  New Egerton  Woollen Mills and others(1) did not  disagree  with the  view of the Industrial Tribunal which had  treated  the respondent  therein and another unit as a comparable  unit, notwithstanding the that the respondent was employing at the material time about 3000 workmen whereas the unit which  was treated as a comparable unit was having the labour force  of only  about  1000 men, in view of the fact  that  all  other requirements for comparability Were satisfied.  In fact,  in the  case  before  us, the Tribunal  has  adverted  to  this difference  of labour force of the appellant  and  Burroughs Wellcome  Company,  but nevertheless it held that,  that  by itself  is  not sufficient to eliminate  Burroughs  Wellcome Company  as a comparable unit.  We agree with this  approach made by the Tribunal. An  objection  was  taken on the basis of s.  10(4)  of  the Industrial   Disputes  Act,  1947  that  the  Tribunal   has permitted  the  Unions  to  revise  their  demand  regarding classification  and grades of workmen and that the  Tribunal has  further committed an error in upholding the  grades  of Stenographers, Assistants and Store-keepers and merging them with  that  of the Senior Clerks.  We are  not  inclined  to accept this contention advanced on behalf of the  appellant. We have already referred to the fact that as the question of classification and fixing grades were matters cf a technical nature,  at  the  joint request of  both  the  parties,  the Tribunal  appointed  Sri Gadkari, as an  assessor.   It  was really in view of the stand taken by both the parties before the  assessor  and  the  Tribunal,  after  the  report   was submitted by the assessor that the Tribunal has accepted the report that the existing grades should continue.  But as the workmen  had  to be fitted in ’the appropriate  grades,  the Tribunal  was  justified in fitting in  the  categories  the workmen  and their grades as well as their scales of  wages. The  above contention based upon s. 10(4) of the  Industrial Disputes Act, at the most can relate, if at all. only to the operatives.   The  report of Sri Gadkari  has  already  been referred  to.   He  had  suggested  the’  retention  of  the existing  categories.  The workmen have necessarily  to,  be classified  for  the  purpose of  being  put  in  particular categories

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(1)[1969] 2 L.L.J.782. 600 and the wages also have to be suitably fixed depending upon the category in which they are so fitted.  Having due regard to  the,  nature  of the  reference,  classification  though jobwise  and  the  fixing of wages of pay  and  fitting  the workmen  in suitable categories were all matters  incidental and  as such the Tribunal has acted within its  jurisdiction in  classifying  the workmen and fixing the  scales  of  pay after  fitting them in particular categories.  In  the  view above  expressed, we do not think it necessary to  refer  to the  decisions  referred  either by  Mr.  Tarkunde,  learned counsel  for  the  appellant or by Mrs.  Urmila  Kapoor,  on behalf of the respondent No. 2 as to when exactly the matter can be considered to be incidental to the question  referred for adjudication. Before  we take up the question of dearness  allowance,  one other point that requires to be adverted to is the objection taken  on behalf of the appellant regarding the  raising  in the gratuity scheme the ceiling limit from 15 months to  17- 21  months’  basic  wages.  The  Tribunal  has  adopted  the pattern obtaining in Burroughs Wellcome Company.  We do  not see  any question of principle involved in this  matter  and therefore  we find no merit in the objection raised  by  the Company. The  pattern of dearness allowance that was in force in  the appellant  Company  at the time of the  reference  has  been indicated  already.  We have also referred to the  scale  of dearness  allowance  fixed  by  the  Tribunal.   There  were different  systems of dearness allowance for the  operatives and  the  clerical  and  subordinate  staff.   That  such  a different  system  of dearness allowance for  the  employees working  under the same employer is not warranted, is  clear from the decisions of this Court in Greaves Cotton & Co. and others   v.   Their  Workmen(1)  and   Bengal   Chemical   & Pharmaceutical Works Ltd. v. Its Workmen(2).  Therefore, the Tribunal  was  justified  in devising  a  uniform  scale  of dearness  allowance applicable to all the employees  of  the appellant.  The Unions required a common scheme of  dearness allowance of slab system to be introduced for all employees. The  appellant resisted the claim on the ground  that  there was  already a scheme of dearness allowance existing in  the Company and that there is, no justification for revising the same.   But, nevertheless, the Tribunal has adopted, by  and large,  the scheme of dearness allowance which was in  vogue in ’Burroughs Wellcome Co. Normally, once Burroughs Wellcome Co. is treated as a unit comparable with the appellant,  the Tribunal  must be considered prima facie to be justified  in introducing the pattern obtaining in that unit.  However, it is  pointed  out on behalf of the appellant  that  the  slab system  of dearness allowance does not obtain in any of  the pharmaceutical industries in the region. (1) [1964] 5 S.C.R. 362. (2) [1969] 2 S.C.R. 113. 601 The  contention that because there was a system of  dearness allowance  in existence in the Company and  therefore  there was  no  justification  for revising  the  same,  cannot  be accepted.  A similar contention raised in Remington Rand  of India  v.  Its Workmen(1) was rejected by  this  Court.   In that.  case  there  was  a  system  of  dearness   allowance providing  for payment of not only a rate of  percentage  on the  basic salary but also a variation in the percentage  on the  rise or fall of the cost of living index.  The  workmen demanded revision of the scale of dearness allowance on  the

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ground  that  the cost of living index had  increased.   The claim  was  resisted by the Company on the ground  that  the scheme  of dearness allowance then existing in  the  Company itself provided for an increase in the cost of living  index and therefore no revision is required.  This contention  was not  accepted by this Court.  It was held that a claim  made by  the Workmen, if otherwise justified, cannot be  rejected on  the sole ground that a provision is already made  in  an existing   scheme  of  dearness  allowance  for   adjustment depending  upon  an increase in the cost  of  living  index. This  Court further held that if it is established that  the cost  of  living  shows a tendency to rise  very  high,  the workmen  would  be  entitled to claim and there  may  be a change  in the rate of dearness allowance originally  fixed, so,  as to provide for more neutralisation.  It was  further held  that  a  claim  made by the workmen  win  have  to  be properly  considered and adjudicated upon by  the  Tribunal. In  fact, in that case, it is seen that there was only a  50 point rise in the cost of living index and nevertheless  the revision of the scale of dearness allowance by the  Tribunal was upheld. We  may also refer to the decision of this Court in  Workmen of Balmer Lawrie and Co. v. Balmer Lawrie and Co.(2) wherein it has been held as follows :               "If  the  paying  capacity  of  the   employer               increases  or  the  cost of  living  shows  an               upward  trend, or there are  other  anomalies,               mistakes or errors’, in the award fixing  wage               structure,  or  there has been a rise  in  the               wage structure in comparable industries in the               region,   industrial   employees   would    be               justified   in   making  a   claim   for   the               reexamination  of  the wage structure  and  if               such  claim is referred for adjudication,  the               Adjudicator would not normally be justified in               rejecting it solely on the ground that  enough               time  has not passed after the making  of  the               award,  or  that material change  in  relevant               circumstances  had not been proved.  It is  of               course, not possible to lay down any hard  and               fast  rule in the matter.  The question as  to               revision  must be examined, on the  merits  in               each (1) [1962] 1 L.L.J. 287. (2) [1964] 5 S.C.R. 344. 602               individual  case  that is  brought  before  an               adjudicator for his adjudication." On the date when the settlement was entered into between the appellant  and  its workmen on April 20, 1966, the  cost  of living-,  index was 630.  From Ex.  C-1 it is seen  that  in August  1969, the cost of living index had gone up to  7  90 and from Ex.  DU- IO dated December 8, 1970, it is seen that when   the  second  settlement  was  entered  into   between Burroughs  Welcome, Co. and its workmen, the cost of  living index had gone upto 800.1. It is also seen that at the  time of  the  Award it had gone up further to about  850  points. Therefore, from the date of the settlement in 1966 the  cost of living index had very rapidly gone up by 220 points.   At the  time  when the demand for revision of  wage-scales  and dearness  allowance  wag  made by the Unions  and  when  the reference  order  was made by the Government,  the  cost  of living index had gone up very high.  That clearly shows that the workmen had made out a case for revision of  wage-scales and dearness allowance.

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We have earlier referred to the scheme of dearness allowance fixed by the Tribunal in the Award.  The scheme provides for payment  of a particular percentage on the basic salary  and it  also  provides  for variation on  10  points.   But  the dearness  allowance  has been fixed on  the  Bombay  Working Class Cost of Living Index of 521-530.  Though more or  less the  same  pattern of dearness allowance  was  obtaining  in Burroughs Welcome Co.., the dearness allowance in the latter was  fixed at the Bombay Working Class Cost of Living  Index of 491-500.  The scale of dearness allowance, as demanded by the  Unions,  was on the basis of the cost of  living  index 401-410.   It was accepted by the appellant that the  scheme obtaining in Burroughs Welcome Company is more  advantageous from the financial point of view than the scheme of dearness allowance  demanded  by the Unions.  In fact,  the  Tribunal itself  has  made  a further concession  in  favour  of  the appellant  by adopting the cost of living index  of  521-530 instead of 491-500 as was obtaining in Burroughs Welcome Co. The  Tribunal  had made this change in the  cost  of  living index  in  view of the fact that in the  appellant  Company, there  was  an  Incentive  Wages  Scheme  in  and  by  which operatives’were  getting on an average, about Rs.  28/-  per month.  Therefore the financial burden cast on the appellant by  the dearness allowance scheme fixed by the  Tribunal  is such that the appellant can bear the burden. in   order   to  show  that  in  the   Bombay   region   the pharmaceutical  units  were  adopting  the  slab  system  of dearness allowance, the Unions had filed a chart Ex.   DU-1. It is evident from Ex.  DU-1, that out of 19  pharmaceutical units,  referred to therein, at least 1 1 of them adopt  the slab system of dearness allowance which. has been 603 introduced  in the case of the appellant in the  Award.   No doubt,  it  is  pointed out by Mr.  Tarkunde  ’that  in  the statement  filed bay the appellant, Ex.  C-25, it  will  be. seen  that none of the Indian owned units have  adopted  the slab  system.  But whether those units have adopted or  not, we  have already indicated, that no distinction can be  made between a  purely  local unit and  a  foreign  unit  doing business  in  India  or an Indian  unit  doing  business  in collaboration  with foreign concern.  When once  such  units can be taken into, account as comparable units, the  pattern of  dearness allowance, obtaining therein can very  well  be considered  to ascertain the system adopted by the  industry as  that will show the trend in the region.  As pointed  out above,  at  least  11 units, referred to in  Ex.  DU-1  have adopted  the.  system  now introduced in the  case  of’  the appellant  by the Tribunal.  Under those circumstances  when such  system  is  prevailing in the  industry  in  the  same region,  it cannot be held that the Tribunal  has  committed any  error, in introducing a similar pattern in the case  of the  appellant.  The slab system has been approved  by  this Court as will be seen by the decisions in Greaves Cotton and Co.  and others v. Their Workmen(2) and Bengal Chemical  and Pharmaceutical  Works  Ltd.  v. Its Workmen (2)  .  Even  in Bombay that such a pattern of dearness allowance, as the one introduced in the case of the appellant, is existing is seen by the decisions of this Court in Greaves Cotton and Co. and others  v. Their Workmen(2) and Kamani Metals & Alloys  Ltd. v. Their Workmen (3).  No doubt the industries therein  were not pharmaceutical units.  But that such a system exists  in Bombay region is clear from the above decisions. Mr. Tarkunde referred us to the Award of the Industrial Tri- bunal  in Reference (IT) No. 411 of 1966 in Voltas  Limited, Bombay  v. The Workmen Employed under them  dated  September

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30,  1969 wherein the adoption of slab, system has not  been approved.   On the other hand, Mrs. Urmila  Kapoor,  learned counsel  for respondent No. 2 has drawn our attention  to  a number of awards of the Industrial Tribunal rendered  during the  years 1965 to 1968 wherein the slab system of  dearness allowance  has  been adopted in Bombay region.  It  is  only necessary to refer to the award in the case of May and Baker Limited,   Bombay  v.  Its  Workmen,  because  that   is   a pharmaceutical  unit.  The award was given in or about  June 1967  and  it  is seen that the dearness  allowance  on  the pattern  now  given  by  the  Tribunal  in  respect  of  the appellant has been adopted. We  have already referred to the fact that in Ex.  DU71,  it is  seen that as many as 11 pharmaceutical unit s in  Bombay region  have  adopted  the  pattern  of  granting   dearness allowance on the slab (1) [1964] 5 S.C.R. 362. (3) [1967] 2 S.C.R. 463. (2) [1969] 2 S.C.R. 11 3. 604 system  now incorporated in the present award.  Though  most of  the  units referred to therein could not be  treated  as units comparable with the appellant because of lack of  full information  regarding material factors, yet those  concerns can  be taken into account inasmuch as the system  Obtaining in  those  concerns will show that the slab  system  is  not something new to the pharmaceutical units.  We have  already referred  to the award in May and Baker Limited,  Bombay  v. Its  Workmen.  These facts clearly show that the  scheme  of dearness  allowance  provided  in the  award  before  us  in respect of the appellant is not anything new.  On the  other hand, the Tribunal has only adopted the system prevailing in the region in respect of pharmaceutical units. So far as the financial burden is concerned we have  already referred to the findings recorded by the Tribunal.  Even  on the basis that the Tribunal was not justified in  proceeding on  the assumption that 52 chemists are not covered  by  the reference,  in our opinion, the additional burden that  will be  cast  on  the  appellant can  be  easily  borne  by  if. Therefore,  we  see  no  error in  the  scheme  of  dearness allowance  introduced, in the case of the appellant, by  the Tribunal. The  only other point that requires to be considered  is  in respect of the direction given by the Tribunal regarding the Incentive Bonus scheme in respect of which the appellant had given  notice  of  change  under S.  9A  of  the  industrial Disputes Act, 1947.  We have already referred to the  nature of  the scheme that originally existed and the  modification sought  to be made by the, appellant.  We have also  pointed out  that  the  Tribunal  has  not  accepted  most  of   the recommendations  made by Sri Tulpule, who was  appointed  as an  a ssessor on the joint application of both the  parties. The  Tribunal has stated that it is desirable that a  scheme is  worked out, if possible, by consent of parties  for  the purpose  of  protecting the interest of the workmen  at  the increased base performance index. According  to Mr. Tarkunde the Tribunal itself  should  have gone  into  the matter and evolved a scheme.  No  doubt,  it would  have  been  desirable if the  Tribunal  had  actually evolved  a  scheme.  But the Tribunal has  stated  that  the necessary  material  for  that purpose  has  not  been  made available  and as such it has not been possible to devise  a scheme  calculated  to afford protection  to  the  incentive earning  of a workman at the raised base performance  index. In fact, we also suggested to, the counsel that the  parties

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may  consider  the  matter  and submit  a  scheme  for  that purpose.   But it was represented to us on February 9,  1972 by Mrs. Urmila Kapoor, learned counsel for respondent No. 2, that  it has not been possible for the parties to arrive  at an  agreement  in  respect  of  that  matter,  at   present. Therefore, there is nothing further that could 605 be done by this Court in this regard; and the result is that the  observations made by the Tribunal in this  regard  will have full effect. In  the  result, all the conventions of  the  appellant  are rejected and the Award of the Industrial Tribunal in respect of the matters ,in controversy in the appeals are confirmed. All the appeals are dismissed.  In Civil Appeal No. 1091  of 1971, the appellant will pay the costs of respondents Nos. 1 and  2.  In the other appeals, parties will near  their  own costs. The  appellant will have three months’ time from  today  for payment of the amounts due under the award. G.C. 606