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PETITIONER: UNION OF INDIA & ANOTHER

       Vs.

RESPONDENT: DHRANGADHRA CHEMICAL WORKS & ANR.

DATE OF JUDGMENT16/12/1976

BENCH: GOSWAMI, P.K. BENCH: GOSWAMI, P.K. FAZALALI, SYED MURTAZA

CITATION:  1977 AIR  720            1977 SCR  (2) 479  1977 SCC  (1) 497

ACT:             Additional Emoluments (Compulsory Deposit) Act, 1974--S.         2(b) Explanation l--Scope of

HEADNOTE:              Section  2(b) of the Additional  Emoluments  (Compulsory         Deposit)  Act, 1974 defines additional dearness allowance to         mean such dearness allowance as may be sanctioned from  time         to  time after the appointed day over  and above the  amount         of dearness allowance payable in accordance with the rate in         force  immediately before the date from which such  sanction         of additional dearness allowance is to take effect.   Expla-         nation I to the clause states that where payment of dearness         allowance  is linked to the cost of living  Index any  auto-         matic payment after the appointed day of dearness  allowance         in  consequence of any rise in such cost of living index  or         in  consequence  of any change in such other  factor  shall,         notwithstanding the provisions of this clause, be deemed  to         be the additional dearness allowance.             Dearness  allowance  was paid to the  employees  of  the         respondent  at the rate of quarterly average cost of  living         index for the relevant quarter.  The rate of dearness allow-         ance for one quarter e.g. the first quarter of 1974 was paid         on.  the basis of the average cost of living index  for  the         months  of  July---September, 1973.  For the  quarter  July-         September,  1974  there was a rise in the  cost   of  living         index  and  consequently there was a rise  in  the  dearness         allowance  payable  to the employees.  In  a  writ  petition         under  art. 226 of the Constitution the employees  contended         that the increased dearness allowance payable for the  quar-         ter July-September, 1974 was as a result of rise in the cost         of   living  index  between January-March,  1974  which  was         before the appointed day  in July 6, 1974 and, therefore, no         additional dearness allowance was deductible under the  Act.         The High Court granted the writ.         Allowing the appeal,             HELD: The High Court was wrong in its view that the rise         of  cost of living index should be after the appointed  day.         The  nexus, for the purpose of the explanation, is with  the         payment after the appointed day and not with the rise in the         cost  of living index.  There is nothing in the  Explanation         to  warrant the conclusion that rise in the cost  of  living

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       index  should  be after the appointed day.  What  is  to  be         after the appointed day is any automatic payment of dearness         allowance in consequence of any rise in such cost of  living         index  and  not that any rise in the cost  of  living  index         should be  after  the  appointed day.  [482B: 481H]             When D.A. is linked to the cost of living index,  actual         determination  of  the D.A. takes place after the  index  is         published  and known.  The index, therefore, is always of  a         past  period  by the yard-stick of which D.A.  is  adjusted.         This  being  the concept about linkage of D.A.  to  cost  of         living  index.  Explanation I makes it clear that when  pay-         ment of D.A. is linked to cost of living index any automatic         payment  after the appointed day of D.A. in consequence  ’of         any rise in the cost of living index shall,  notwithstanding         the provisions of this clause, be deemed to be the addition-         al D.A.  [481G]

JUDGMENT:         CIVIL APPELLATE JURISDICTION: CIVIL APPEAL NO. 691 of 1976.             (From the Judgment & Order dated the 16th December  1975         of the Gujarat High Court in Special Civil Appln. No. 572 of         1975).         G.L. Sanghi and Girish Chandra, for the Appellants.         480             V.M.  Tarkunde,  K.L.  Hathi and Mrs.  P.C.  Kapur,  for         respondent No. 1.         The Judgment of the Court was delivered by             GOSWAMI,  J.--This  appeal on certificate  is  from  the         judgment of the High Court of Gujarat. The appellants 1  and         2  are  respectively  the Union of India  and  the  Regional         Provident  Fund  Commissioner.  Dhrangadhra  Chemical  Works         Kamdar  Sangh (hereinafter to be described as the union)  is         the first respondent.  The second respondent is  Dhrangadhra         Chemical   Works  (hereinafter  to  be  described   as   the         employer).             With  respect  to the dearness allowance (D.A.)  of  the         workers  under the employer there was a reference No.  70/70         before  the Industrial Tribunal at Ahmedabad.   The  parties         arrived  at a settlement of the said industrial dispute  and         an award was passed in terms of the settlement. According to         the  award the employer was to pay D.A. to its employees  at         the  rate of the quarterly average cost of living  index  as         settled  by the Simla Bureau, popularly known as "All  India         Consumers  Price Index" for the relevant quarter.  Thus  for         the  ’months of January, February and March, 1974, the  rate         of D.A. was on the basis of the average cost of living index         for  the months of July, August and September 1973  as  pub-         lished  by the said Bureau and this was to follow for  every         quarter.  It is the accepted position that for the months of         April, May and June 1974 the D.A. worked out at Rs. 78/- per         month,  but for the quarter. commencing on 1st  July,  1974,         and  ending  on 30th September, 1974, it worked out  at  Rs.         88.50 per month.  In other words, it was an agreed  position         between  the  union and the employer that the rate  of  D.A.         payable  to all the workers from 1st July, 1974, was at  the         rate of Rs. 88.50 per month.             With  effect from 6th July, 1974, The Additional  Emolu-         ments  (Compulsory Deposit) Ordinance 1974 came into  force.         This  Ordinance was replaced by The  .Additional  Emoluments         (Compulsory Deposit) Act 1974 (Act No. 37 of 1974)  (briefly         the  Act) and the Act is deemed to have come into  force  on         the 6th day of July 1974.             We have already made a detailed reference to the aim and

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       object  of the Act and also dealt with the  material  provi-         sions  thereof in dealing with a similar question  in  Civil         Appeal No. 690 of 1976 in which we have delivered our  judg-         ment  to-day(1). It is, therefore, not necessary  to  repeat         those observations here.             The short question that arises in this particular appeal         turns  on the Explanation-I to section 2(b) of the  Act.  We         will, therefore, read that provision:                             "2(b)  ’additional  dearness  allowance’                       means such dearness allowance as may be  sanc-                       tioned from time to time, after the  appointed                       day,  over  and above the amount  of  dearness                       allowance payable in accordance with the  rate                       in  force  immediately before  the  date  from                       which  such  sanction of  additional  dearness                       allowance is to take effect.         (1) [1977] 2 S.C.R.472.         481                             Explanation-I. Where payment of dearness                       allowance is linked to a cost of living  index                       or  any other factor, any  automatic  payment,                       after the appointed day, of dearness allowance                       in  consequence  of any rise in such  cost  of                       living  index or in consequence of any  change                       in  such other factor  shall,  notwithstanding                       the provisions of this clause, be deemed to be                       the additional dearness allowance."             It is clear under section 2(b) that additional D.A.  has         to  be sanctioned after the appointed day.  "Sanctioned"  is         the heart of the definition clause. Since additional D.A. is         defined  to mean such D.A. as may   be sanctioned from  time         to  time  after  the appointed day,  Explanation-I  ’to  the         definition  is inserted to. deal with a situation  to  avoid         any  controversy about the sanction while there is an  auto-         matic  rise in D.A. linked to a cost of living index.  Where         D.A.  is  linked  to a cost of living  index  any  automatic         payment, after the appointed day, of D.A. in consequence  of         any rise in such cost of living index shall be deemed to  be         the  additional D.A. In the absence of  Explanation-I  there         would  have  been scope for controversy  whether  additional         D.A.  which is paid automatically with the rise in the  cost         of  living  index, as agreed upon, can be said  to  be  D.A.         sanctioned from time to time.  Such a controversy is set  at         rest  by  insertion  of Explanation-I  which  is  a  deeming         clause.             The  question  that  arises for  consideration  in  this         appeal is whether -the rise in the cost of living index  has         also got to be after the appointed day.  The union  contends         that  the  D.A. of Rs. 88.50 which is payable  from  1st  of         July, 1974, for the quarter--1st July, 1974 to 30th  Septem-         ber,  1974---is an pursuance of the rise of cost  of  living         index  between January to March 1974 which is prior  to  the         appointed  day, namely, 6th July, 1974.  It  is,  therefore,         submitted  that no additional D.A. is deductible  under  the         Act. The High Court has accepted the contention of the union         and  allowed the application under Article 226 of the.  Con-         stitution granting a Mandamus restraining the employer  from         deducting  additional D.A.  from the emoluments of  the  em-         ployees.  The High Court also granted certificate to  appeal         to this Court.             it  is  common knowledge that when D.A. is linked  to  a         cost of living index, actual determination of the D.A. takes         place  after  the index is published and known.  The  index,         therefore,  is always of a past period by the  yardstick  of         which D.A. is adjusted.  This being the concept about  link-

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       age of D.A. to cost of living index, Explanation-I makes  it         clear  that  when  payment of D.A. is linked to  a  cost  of         living  index any automatic payment after the appointed  day         of  D.A.  in consequence of any rise in the cost  of  living         index shall. notwithstanding the provisions of this  clause,         be deemed to be the additional D.A.              The  non obstante clause in the Explanation takes  note         of the definition clause where sanction after the  appointed         day  has been mentioned. Explanation-I therefore, plays  its         role,  not withstanding whatever is stated in section  2(b),         the definition clause.  We do not find anything in  Explana-         tion-I  to warrant the conclusion that rise of the  cost  of         living index should be after the appointed day.  What is  to         be after the appointed day is "any automatic payment of D.A.         in consequence of any         482         rise   ......  "and not that any rise in the cost of  living         index should be after the appointed day.             We  are, therefore, unable to agree with the High  Court         that  the rise of cost of living index also should be  after         the  appointed  day.  It is sufficient for  the  purpose  of         Explanation-I if payment of D.A., in consequence of rise  of         cost of living index, takes place after the appointed day on         account  of rise in the cost of living index even  prior  to         the  appointed day.  The nexus for the purpose  of  Explana-         tion-I  is with the payment after the appointed day and  not         with  the rise in the cost of living index.   The  specified         percentage  of  additional  D.A. which is 50% of  the  rise,         being  the  difference, between Rs. 78/- and Rs.  88.50  is,         therefore,  deductible under section 6(2)(b) of the Act  and         the High Court was not correct in holding to the contrary.             The appeal is allowed and the judgment of the High Court         is set aside.  There will be, however, no order as to costs.         P.B.R.                                                Appeal         allowed.         483