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PETITIONER: UNION OF INDIA & ANR.

       Vs.

RESPONDENT: MAJUR MAHAJAN MANDAL & ORS.

DATE OF JUDGMENT16/12/1976

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

CITATION:  1977 AIR  714            1977 SCR  (2) 472  1977 SCC  (1) 548

ACT:               Additional Emoluments (Compulsory Deposit) Act, 1974--s.         2(b)--"Sanctioned" meaning 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, i.e., July 6, 1974 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.  Section 6(2) (b) enjoins on the employer  the         duty  to make deductions and to remit to the  nominated  au-         thority  additional dearness allowance from  the  emoluments         disbursed  after  the appointed day.  Section  115A  of  the         Bombay  Industrial Relations Act, 1946 provides that if  any         agreement  is arrived at between the employer and  employees         who are parties to an industrial dispute pending before  the         industrial court, the award in such proceeding shall be made         in terms of such agreement, except in certain  circumstances         stated therein.           As  a  result of negotiations between  the  employers  and         employees a settlement was entered into between the  parties         on  June  28,  1974 enhancing the  dearness  allowance  with         retrospective  effect  from  January 1,  1974.   The  Indus-         trial  Court  before which certain disputes   were   pending         gave   the  award   conformity with the settlement  sometime         in August-September, 1974.  Arrears   of dearness  allowance         were paid after the appointed day.            In  a petition under Article 226 of the  Constitution  by         the  employees’  Union,  the High Court issued  a  writ  re-         straining  the employers from effecting any  deduction  from         the arrears of D.A. payable to the employees on the basis of         the  settlement and granted certain other reliefs.            In  appeal it was contended that since the settlement  of         June  28, 1974 could   not be effective prior to  the  award         made  in August-September 1974 additional   dearness  allow-         ance could be said to be sanctioned only after the award and         so   the provisions of s. 2(b) would be attracted.         Dismissing the appeal           HELD:  One of the components of cl. 2(b) namely, that  the

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       additional    dearness  allowance is that part of  the  D.A.         which is  sanctioned  after  the   appointed day, is  absent         since  there  was  no  sanction for  any  rise  in  dearness         allowance after the appointed day.  [477 G]           (1)  According to s. 115A of the Bombay  Industrial  Rela-         tions  Act  if the   conditions enumerated therein  did  not         exist  the award "shall be made" in terms of    the  settle-         ment.   Since the settlement in this case had merged in  the         award,  the   terms of the award are those specified in  the         settlement.  The sanction of the award   in such a case  was         the  sanction under the settlement and since the  settlement         was  prior to the appointed day, additional dearness  allow-         ance could not  be  said to be sanctioned after the appoint-         ed day.  [476 F & H]            In  the instant case the Industrial Court  having  passed         the  award in conformity with the terms of  the  settlement,         the award came into operation on the date   specified in it.           (2)  Sanction  must have relevance to the reality  of  the         transaction  between    the  parties.   Increased   dearness         allowance payable between January 1, 1974 and   July 5, 1974         was  sanctioned  prior t.o the appointed day.   Once  it  is         found that   the sanction was prior to the appointed day, s.         2(b) would not be attracted.                                                                         [4 77         C & F]         473             (3) From the definition of "additional wages" in s. 2(c)         it  is clear that the Act recognises agreements and  settle-         ments  in  the same way as awards  of Tribunals.   Any  wage         revision  "whether  by or under an agreement  or  settlement         between the parties or any award" comes within the sweep  of         the  definition  clause.   Agreements  and  settlements  are         distinctly  mentioned  along with awards.  Settlement  is  a         type of sanction recognised under the Act.  There is  there-         fore sufficient warrant under the Act to give effect to  the         sanction  by voluntary settlement in respect of D.A.    When         there  is no ambiguity in the word "sanctioned" in  s.  2(b)         recourse to the aim and object of the Act is not called for.         [478 A-B]

JUDGMENT:         CIVIL APPELLATE JURISDICTION: Civil Appeal No. 690 of 1976.         Appeal from the Judgment and Order dated the 16th  December,         1975  the  Gujarat High Court in Special  Civil  Appln.  No.         571/75.         G.S. Sanghi and Girish Chandra for the Appellants.             V.M.  Tarkunde, K.L. Hathi and Mrs. P.C. Kapur  for  Re-         spondent 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. The 1st respondent  is  Majur         Mahajan Mandal (hereinafter to be described as the union), a         registered  trade  union representing the  majority  of  the         textile  workers  of the five textile mills of  Baroda  (re-         spondents 2 to 6) who are not represented before us and  who         will be described hereinafter as the mills,             Since some time in 1973, industrial disputes in  respect         of  dearness allowance (D.A.) had been pending  between  the         union and the mills in five references before the Industrial         Court, Gujarat, being Reference Nos. 406, 407, 408, 409  and

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       421  of  1973.  The rate of D.A. for the  employees  in  the         cotton textile industry in Ahmedabad had earlier been  fixed         by an award of an industrial Tribunal which will be referred         to hereinafter as the Ahmedabad Rate. The prevalent D.A.  in         1973 in the mills with which we are concerned was 90% of the         Ahmedabad Rate. The union was raising the aforesaid disputes         for  increasing the D.A. to 100% of the Ahmedabad Rate  with         effect from October 1, 1972. Hence the above references were         pending before the Industrial Court.             As  a result of negotiations between the parties  during         the  pendency  of the said disputes  before  the  Industrial         Court  D.A. was agreed to be paid at the rate of 95% of  the         Ahmedabad Rate of D.A. with effect from January 1, 1974,  as         will  appear from an interim award of the  Industrial  Court         dated June 21, 1974.  Thereafter by further negotiations the         disputes  regarding D.A. were finally resolved by the  mills         and  the union entering into a settlement on June 28,  1974,         by  fixing  D.A. at 100% of the Ahmedabad Rate  with  effect         from January 1, 1974. Awards were later made bY the Court in         conformity with the said settlement in the pending  disputes         some time in August and September, 1974.             It  is  not disputed that the workers of the  mills   in         pursuance of the settlement of the disputes received D.A. at         100% of the Ahmedabad Rate retrospectively with effect  from         1st  January, 1974.  It may even be assumed that the  arrear         D.A. for the past period from January         474         1, 1974, was paid to the workers in August or perhaps.  even         later,  that is to say, after 6th July, 1974,  the  signifi-         cance of which date we will immediately see.             While  the aforesaid disputes  were pending  before  the         Industrial  Court,  The  Additional  Emoluments  (Compulsory         Deposit)  Act 1974 (briefly the Act), replacing the  earlier         Ordinance  on the subject, came into  force  retrospectively         from 6th July, 1974, the appointed day, under the Act.  This         Act  was  passed as the preamble says, "to provide,  in  the         interests of national economic development, for the  compul-         sory deposit of additional emoluments and for the framing of         a  scheme  in relation thereto, and  for  matters  connected         therewith or incidental thereto".             The employees to whom the Act is applicable are  classi-         fied into three categories, namely, employees of the Govern-         ment, of local authorities and other employees.             The  principal object of the Ordinance and later of  the         Act is to control the menacing inflationary trend which  has         been  the  bane of the country’s economy.  On the  one  hand         there  has been  persistent demand from employees for  revi-         sion  of wages and increase of D.A. on account of  the  high         cost of living and on the other the State has to tackle  the         national  problem  of  mounting  pressure  of   inflationary         forces. While, therefore, meeting with the demands for  rise         in emoluments, simultaneously, steps with equal force had to         be  taken  so that the additional amounts disbursed  do  not         immediately  flow to the market adding a further  fillip  to         inflation.  The Ordinance and later the Act thus provide for         compulsory deposit for a period of one year of the whole  of         the additional wages and for a period of three years of half         of the additional D.A.             The  additional  emoluments earned  are  thus  impounded         under  the  Act  and are not immediately  available  to  the         employees  for  instant  consumption.  The  Act  provides  a         scheme of beneficial forced saving and the deposited amounts         will  be finally repaid to the employees in  different  ways         specified  in the Act with interest at 21/2% over and  above         the Bank deposit rate.

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           Before we proceed further we may note some of the provi-         sions of the Act material for our purpose:             By section 2(a) of the Act "appointed day" means the 6th         day of July, 1974".             By section 2(b) "’additional dearness allowance’   means         such  clearness 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".         *                      *                    *              *             By  section  2(e) "’dearness allowance’ means  all  cash         payments,  by whatever name called, made to an  employee  on         account of rise in         475         the  cost  of  living".  Under  section  2(g)  "’emoluments’         include wages and dearness allowance".             Under  section 5 every specified authority  (herein  the         employer)  shall  open two separate  accounts,  namely,  the         Additional Wages Deposit Account and the Additional Dearness         Allowance  Deposit Account. The employer shall open a  sepa-         rate  ledger account in the name of each  employee.  Section         6(2)(b)  of the Act enjoins on the employer a duty  to  make         deductions and to remit to the nominated authority addition-         al wages and additional D.A. from emoluments disbursed after         the appointed day.  In the case of additional wages it  will         be  the whole amount and in the case of additional  D.A.  it         will be half of it.         It is common ground that the Act applies to the mills  which         are  the "employers" under the Act and also  "specified  au-         thorities" under the Additional Emoluments Compulsory Depos-         it  (Employees other than employees of Government and  Local         Authorities) Scheme, 1974, which is made under section 10 of         the Act.         The union applied to the High Court under Article 226 of the         Constitution for a writ of mandamus or other suitable  order         to permanently restrain the mills from effecting any  deduc-         tion from the arrears of dearness allowance payable to their         employees  from  January to June 1974 on the  basis  of  the         settlement  of 28th June, 1974.  There was a further  prayer         to permanently restrain the mills from treating the base for         calculation  of  additional  D.A. at a rate  less  than  the         agreed  100% of the Ahmedabad Rate and to direct  the  mills         not to deduct or deposit 21/2% of D.A. per month payable  to         each employee treating the same as not being additional D.A.         within the meaning of section 2(b) of the Act. Lastly  there         was  a prayer for refund of the amount already  deducted  by         the mills.  The High Court allowed the writ application  and         also granted certificate to appeal to this Court.             The appellants contend that 100% of the  Ahmedabad  Rate         of  D.A. to the workers was sanctioned after  the  appointed         day,  that is to say after 6th July, 1974, when  the  awards         were made between August and September 1974 in pursuance  of         the settlement of June 28, 1974. The claim of the appellants         is two-fold: First, since   the increased D.A. to the  work-         ers  was sanctioned after the appointed day, only  when  the         awards were made, the difference between the increased  D.A.         at  100% of the Ahmedabad Rate and the prevailing rate  pay-         able  in arrears from 1st January, 1974 to 30th June,  1974,         will be additional D.A. in terms of section 2(b) of the  Act         and is, therefore, subject to deduction of 50% of the  same.         Second, for future deductions of additional D.A., after  the         appointed  day, the base for calculation of additional  D.A.         should  be 95% of the Ahmedabad Rate of D.A. which was  pre-         vailing  prior  to 6th July, 1974, in terms of  the  interim

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       award  of  21st  June, 1974.  In  other  words,  for  future         deductions  of additional D.A. after 6th  July,   1974   the         appellants  claim that the workers should be treated  as  if         they were in receipt of D.A., prior to the appointed day, at         95%  of the Ahmedabad Rate which had been in force in  terms         of the interim award of 21st June, 1974, which is the earli-         er sanction for the 95% rate.  Hence, 2 1/2% (that is 50% of         5%  being the difference between 95% and 100%) of  the  same         will  be liable for deduction under the Act from  6th  July,         1974.  According to the appellants, the benefit of 100%  was         available  only  after the making of the awards  which  was,         thus, sanctioned after         476         the appointed day notwithstanding the fact that the  settle-         ment had been entered upon on 28th June, 1974.  Section 2(b)         will,  therefore,  be clearly attracted,  according  to  the         appellants.             It  is submitted by the appellants that the word  "sanc-         tioned" in the definition of ’additional dearness allowance’         under  section  2(b) is very significant.  It  is  contended         that  the  settlement during the pendency of  an  industrial         dispute  before the industrial Court has to be  approved  by         the Court before it can be said to be sanctioned within  the         meaning of the provisions of section 2(b). Reference is made         to  section  115A of the Bombay  Industrial  Relations  Act,         1946.   That section, so far as it is material for our  pur-         pose,  provides that if any agreement is arrived at  between         an employer and the union which are parties to an industrial         dispute pending before an Industrial Court the award in such         proceeding  shall be made in terms of such agreement  unless         the Industrial Court is satisfied that the agreement was  in         contravention  of  any of the provisions of the Act  or  the         consent  of  either  party to the agreement  was  caused  by         mistake, misrepresentation, fraud, undue influence, coercion         or threat.  Relying on section 115A, it is submitted by  the         appellants,  that unless the award is made in  pursuance  of         the  settlement  under the said section  the  settlement  is         inchoate  and cannot be said to be effective, in law,  prior         to  the making of the award which was done, in  the  instant         case, between August and September 1974.  It is,  therefore,         submitted  that the additional D.A. can be said to be  sanc-         tioned only under the award which was made admittedly  after         the appointed day, that is after July 6, 1974.             We  are  unable to accept this contention.  It  is  true         that an agreement arrived at between the parties during  the         pendency  of  an industrial dispute  before  the  Industrial         Court  has to be placed before that Court. It is  also  true         that  if  the  Industrial Court is  satisfied  that  certain         conditions  enumerated  in section 115A exist  it  will  not         recognise  the  settlement  and dispose of  the  dispute  in         accordance with law.  If, however, the conditions enumerated         in  section 115A do not exist the award "shall be  made"  in         terms of the settlement.  There is no. other option.             In this particular case the settlement was placed before         the  Industrial Court which ultimately passed the awards  in         conformity  with  the terms of the settlement.  We  are  not         required  to consider a case where the Industrial Court  has         not approved of the settlement under section 115A.             Once,  therefore,  the  award is made in  terms  of  the         settlement, under section 75 of the Bombay Industrial  Rela-         tions  Act, the award shall come into operation on the  date         specified  in the award or where no such date  is  specified         therein  on the date on which it is published under  section         74.   We  are  informed that the awards have  not  yet  been         published but that should not detain us in this case.  It is

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       common  ground that the awards were in terms of the  settle-         ment which had retrospective operation from January 1, 1974.             Since the settlement has merged in the awards the  terms         of the awards are those specified in the settlement.  It  is         those dates which         477         are,  therefore, specified in the awards and, under  section         75  of the Bombay Industrial Relations Act, the awards  came         into operation with effect from January 1, 1974.  The  sanc-         tion of the awards in such a case is the sanction under  the         settlement  and  since the settlement was prior to  July  6,         1974,  the additional D.A. cannot be said to  be  sanctioned         after the appointed day.  100% of the Ahmedabad Rate of D.A.         will  be payable to the workers with effect from January  1,         1974 and the sanction for that rise was on 28th June,  1974,         the date of the settlement which was prior to the  appointed         day.             Sanction  must  have  relevance to the  reality  of  the         transaction  between  the parties.  The settlement  of  28th         June,  1974, makes the increased D.A. of 100%  payable  with         effect  from  January 1, 1974. Hence the said  rate  of  in-         creased D.A. which was payable to the workers between  Janu-         ary  1, 1974 and July 5, 1974, was sanctioned prior  to  the         appointed day.             We have already noted the definition of additional  D.A.         in  section  2(b) which is an  integrated  definition.   The         definition  clause  has twin components both of  which  will         have  to be satisfied in order that a particular amount  can         be  held to. be additional D.A.  To put it clearly  the  two         components are--                           ( 1 ) additional D.A. is that part of  the                       D.A.  which is sanctioned after the  appointed                       day; and                           (2)  which  is  over and  above  what  was                       payable immediately before the date from which                       sanction of the particular rise in D.A. is  to                       take effect.             With regard to the first component any unilateral  deci-         sion to increase the D.A. or a bilateral settlement for  its         increase, to take only two instances, must take place  after         the appointed day.         It  is manifest that if the sanction is after the  appointed         day  it  is then only the question of additional  D.A.  will         arise within the meaning of section 2(b).  Once it is  found         that  the sanction of rise in DA. is prior to the  appointed         day,  section  2(b) will not at all be  attracted.  In  that         event it will not be necessary even to. consider the  second         component of the definition mentioned above.  In the instant         case  we have already held that the rise in D.A. to 100%  of         the Ahmedabad Rate of D.A. was sanctioned under the  settle-         ment of 28th June, 1974, that is, before the appointed  day.         One of the principal components    of the definition  clause         is, therefore, clearly absent in this case since there is no         sanction for any rise in D.A. after the appointed day.             We should observe that this is not a case where Explana-         tion-I to section 2(b) is applicable.             Mr.  Singhvi for the appellants submits that in view  of         the  aim  and  object of the Act the Court  should  lean  in         favour of an interpretation advancing the remedy by constru-         ing  the  word "sanctioned" in section 2(b) to  .mean  sanc-         tioned  by  the  award and not by the  settlement.  We  have         already  given our reasons for our inability to accept  this         submission.  One other reason may be added.         478             The  Act  recognises agreements and settlements  in  the

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       same  way as awards of Tribunals, vide, section  2(c).   The         definition of "additional wages" under section 2(c)  clearly         points to that.  Any  wage revision "whether by or under  an         agreement   or  settlement  between  the  parties   or   any         award  ....  "comes within the sweep of the aforesaid  defi-         nition  clause.  Agreements and settlements  are  separately         and distinctly mentioned along with awards.  Settlement is a         type of sanction recognised under the Act.  There is, there-         fore, sufficient warrant under the Act to give effect to the         sanction  by voluntary  settlement in respect of  D.A.  when         the  same has never been repudiated by any of the  concerned         parties. When there is no ambiguity in the word "sanctioned"         in  section 2(b), recourse to the aim and object of the  Act         is not even called for in this case.             Both the contentions of the appellants, therefore,  fail         on  the solitary. ground, namely, that the particular  sanc-         tion  of additional D.A. in this case is not after  the  ap-         pointed day.  The appeal is dismissed with costs.         P.B .R.                                                               Appeal         dismissed.         479