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PETITIONER: WESTERN INDIA MATCH CO.  LTD.

       Vs.

RESPONDENT: THEIR WORKMEN

DATE OF JUDGMENT: 03/05/1963

BENCH: GUPTA, K.C. DAS BENCH: GUPTA, K.C. DAS GAJENDRAGADKAR, P.B. WANCHOO, K.N.

CITATION:  1964 AIR  472            1964 SCR  (3) 560  CITATOR INFO :  E          1984 SC 516  (24)

ACT:      Industrial    Dispute-Production   bonus    scheme-Made applicable  only to workmen in factory-Claim by  workmen  of sales  office-Sales office and factory whether part of  same unit  of  industrial  produuction-lnspectors,  salesmen  and retail  salesmen, whether workmen U. P. industrial  Disputes Act, 1947 (U.P. 28 of 1947).

HEADNOTE:      The  appellant company was engaged in  the  manufacture and  sale  of  matches in four places  in  India,  including Bareilly,  in  which there were factories as well  as  sales offices.   As an incentive to larger production  of  matches the  company  introduced in 1945 a Production  Bonus  Scheme which was made  561 applicable  to  workmen  engaged in the  factory  in  making matches as also to those working in the factory office.   In 1947,  it  was  withdrawn in its application  to  the  sales office.   The  workmen  of the sales  office  consisting  of clerical  staff as also salesmen and inspectors of  salesmen made  a  claim to Production bonus painting out  that  there should  be  no discrimination between the employees  in  the same company.  The company resisted the claim on the grounds : (1) that the sales office was entirely independent of  the factory;  and  (2) that the salesmen,  retail  salesmen  and inspectors  employed  by the sales office were  not  workmen within  the  meaning of the U.P.  Industrial  Disputes  Act, 1947.  The facts showed : (1) that there was interdependence of  the two activities viz., manufacture of matches  in  the factory and their sale by the sales office, inasmuch as  (a) the  sales office could not exist without the  factory,  (b) the factory itself could not conveniently function without a sales organization. and (c) the factory arranged its  volume of  production  in accordance with the programme  made  from time to time by the sales manager; (2) that the sales office and  the  factory  had  the  same  banking  account,  though separate  cheque books were maintained and operated  upon  ; (3)  that  the financial forecasts that were  made  for  the

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Bareilly  branch  from  time to  time  made  no  distinction between  the  disbursements  in the  sales  office  and  the factory ; (4) the rules and practice in connection with  the recruitment,  control and discipline of man-power,  as  also documents,  including  letters of appointment  and  standing orders and the muster rolls were kept distinct and  separate between the factory and the sales office; and (5) the  sales office paid rent to the factory fir the area occupied by  it by means of book adjustments.  The evideuce also showed that 75%  of  the  time of the workmen in the  sales  office  was devoted to writing work.      Held   that,  on  the  facts,  there   was   functional integrality  and inter-dependence or community of  financial control  and management of the sales office and the  factory in the appellant company and that the two must be considered part of one and the same unit of industrial production.      Held further, that the inspectors, salesmen and  retail salesmen  were  workmen as defined in  the  U.P.  Industrial Disputes Act, 1947.

JUDGMENT:      CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 300-301 of 1963. 562      Appeals  by special leave from the award dated  October 23, 196 of the Industrial Tribunal (111), Allahabad in Adjudication Case No. 33 of 1961.      G.B. Pai, J. B. Dadwhanji, O. C. Mathur and Ravinder Narain,  for the appellant in C.A. No. 300 of 1963  and  the respondent in C.A. No. 301 of 1963.      C.B.  Agarwala, O. P. Lal and G. O. Mathur, for  the respondents  in C.A. No. 300 of 1963 and the  appellants  in C.A. No. 301 of 1963.      1963.   May 3. The judgment of the Court was  delivered by      DAS  GUPTA.   T. The Western India Match  Gompany;  the Bareilly  Branch of which is the appellant in the  first  of the two appeals before us, is engaged in the manufacture and sale  of  matches in India.  The manufacture of  matches  is carried  on  by  the  company  at  its  four  factories   at Ambernath,   Madras,  Calcutta  and  Clutterbuckgan   j   in Bareilly.   At these four places the company has  also  four sales offices catering to the needs of the regions  assigned to them.  The sales office at Clutterbuckganj with which  we are concerned in this appeal carries on its sales activities in  the States of U.P., Punjab, Delhi, Himachal  Pradesh,  a part  of Rajasthan and a part of Madhya Pradesh.   According to  the appellant each of these sales offices is independent of  the  factories of their respective regions  and  so  the Bareilly  Sales Office is quite independent of the  "factory at  Bareilly.   As  an incentive  to  larger  production  of matches  the 0company introduced in 1945 a Production  Bonus Scheme  the details of which will be mentioned  later.   The scheme  was  applied at the beginning not only to  the  1500 workmen engaged in the factory in making matches but also to the  workmen  working in the factory  office,  who  numbered about 100.  In 1947, the production bonus was withdrawn from the  office  staff of the factory, though  it  continued  to operate as regards  563 the  other  workmen.   The factory  office  staff  raised  a dispute on this question in 1957 and ultimately as a  result of a decision of the Adjudicator given on March 13 1958, the

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factory office staff also became entitled to the benefits of the  production bonus scheme on the same terms as the  other workmen  in  the factory.  The workmen of the  sales  office consisting  of  the  clerical staff  as  also  salesmen  and inspectors  of salesmen were however denied the benefits  of the  scheme,  though it does appear that for  a  very  short period in 1946 the sales office staff also received payments purporting  to  be  production  bonus.   The   Adjudicator’s decision  extending  the  production  bonus  scheme  to  the factory staff was confirmed by this Court on March 17, 1961. It  appears  that during the pendency in this Court  of  the appeal  against  the  Adjudicator’s  order  there  was  some discussion between the Union-of which the sales office staff became  members in 1957 or thereabout-and the sales  manager ’at  Bareilly, in regard to extending the  Production  Bonus Scheme  to the members of the sales staff, if the appeal  in this Court was decided in favour of the factory office staff On  March  13, 1961, the Union wrote to  the  sales  manager reiterating  the claim to Production bonus and pointing  out that  "discrimination  between  the employees  of  the  same company  in the matter of admissibility of item of wage  was bound  to lead to heartburning." The manager replied on  May 22,  1961,  characterizing this demand of the  sales  office staff  as  unreasonable to which the  management  could  not agree.   Ultimately, on August 18, 1961, the  dispute  which thus  arose  between  the  employers  and  the  workmen  was referred by the Government of U. P. to the Third  Industrial Tribunal   at  Allahabad  for  adjudication.   The   dispute referred was described in these words:-               "Should  the  employers  be  required  to  pay               production bonus to the workmen employed               564               in  their  sales office ? If so,  with  effect               from what date and with what other details      By  a  later amendment on December 4,  1961,  the  word "’in" was substituted by the word "by".      Though  a number of matters were raised in issue,  both the  parties  rightly ’concentrated at the  hearing  on  the question  whether  the  sales office and  the  Factory  were independent units of production or formed integral parts  of one and the same unit of industrial production.  Whether  or not  an  incentive scheme for better  production  should  be introduced  in any industry is essentially a matter for  the management to decide.  This position has been recognized  by this  Court  in Titaghur Paper Mills Company Ltd..  v  Their Workmen (1). and again in Burn & Co., v. Their Workmen  (2). While  in view of the importance of industrial  adjudication not interferng with what is purely management functions, the Court felt that industrial adjudication should not impose an incentive  bonus on the management for the first  time.  the Court pointed out that the position would be different where an incentive bonus is already in force for themajority of the workmen.  "We can see no reasonwe   said  in   Burn Company’s Case"why where anincentive  bonus scheme is  in force  in  a concern for the majority of -its  workmen,  the Tribunal  should  not  be able to extend  the  same  to  the remainder of the workmen." In view of this the appellant  in this case tried to establish the fact that the sales  office was entirely ’independent of the factory, while the workmen, on  the other band, directed their efforts to  showing  that these are only two departments of the one and the same  unit of production.      Another question on which the parties joined issue  was whether Inspectors, Salesmen and Retail Salesmen out of  the sales office staff were workmen

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(1) [1959] Supp. 2 S.C.R. 1012   (2) [1969] 3 S.C.R. 423  565 or  not within the meaning of the U. P. Industrial  disputes Act.   The management contended that they were  not  workmen and  so  were  not  within  the  terms  of  reference;   the respondents  claimed  that  they  were  workmen  within  the meaning of the Act.      Applying  the  principles laid down by  this  Court  in several  cases where the question whether two or more  units of  business  under the same ownership form  one  industrial unit or more to the facts and circumstances of this case  as disclosed by the oral and documentary evidence, the Tribunal came to the conclusion that the sales office and the factory form  one single unit of industry and there being no  reason for making any discrimination against the sales office staff on the question of production. bonus held that the employers should  be required to pay production bonus to  the  workmen employed by their sales office also.  The Tribunal  directed that the sales office staff should be paid production  bonus at the same rate at which it was given to the workmen of the factory  and  the  factory  office.   The  question  whether inspectors,  salesmen  and retail salesmen employed  by  the sales office were workmen was also answered by the  Tribunal in the affirmative so that they also became entitled to  the benefit  of  the award.  Being of opinion that  the  dispute should have been raised earlier by the workmen of the  sales office, the Tribunal directed that the payment of production bonus  to the sales office staff would start from  the  date the award became enforceable in law.  Against this  decision the employers, the Western India Match Co., Ltd.,  Bareilly, has  appealed by special leave granted by this  Court.   The workmen  have also appealed against the direction  that  the payment  of production bonus should start from the date  the award became enforceable in law.      Three  points have been raised before us on  behalf  of the-employers in support of their appeal, 566 which  has been numbered Civil Appeal No. 300 of 1963.   The first and the main contention is that the Tribunal has erred in  holding  that the sales office and  the  factory  formed parts of one and the same unit of industrial production.  In any case, it was next urged, the Tribunal ought not to  have extended  to  the sales office staff  the  production  bonus scheme,  for the factory and the factory office without  any modification.   Thirdly, it was contended that the  Tribunal was  wrong in holding that Inspectors, Salesmen  and  Retail Salesmen  are  workmen  within  the  meaning  of  the   U.P. Industrial Disputes Act.      This  last  contention  can  be  disposed  of   easily. "Workman" has been defined in the U. P. Industrial  disputes Act  to  mean any person employed in an industry to  do  any manual, supervisory, technical or clerical work for hire  or reward.   The  Tribunal  has accepted the  evidence  of  the workmen’s witness Sexena that the writing work takes up  75% of the time of these categories of the sales staff  Mr.  Pai has  characterized  this finding as arbitrary.   We  do  not think  this  criticism is justified The management  did  not file  any  document  to show the list  of  duties  of  these persons  but contented itself with filing an affidavit  that no  certified duty list of inspectors, .salesmen and  retail salesmen  has been circulated for travelling letters by  the employers.  A statement of duties of the salesmen and retail salesmen  was filed on behalf of the workmen and was  marked Ex.   W.  61.  The correctness of what  is  stated  in  this document  has not been challenged by the management.   On  a

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consideration of the statement of duties as detailed in this document  along  with the oral testimony  of  the  workmen’s witnesses,  we  are of opinion that the Tribunal  cannot  be said to have acted unreasonably or arbitrarily in  believing that  75%  of  the time of these categories  of  workmen  is devoted to writing work.  It is not out of place to  mention in  this  connection  that on some  previous  occasions  the management  567 itself  has treated these categories as workmen  within  the meaning   of  the  U.  P.  Industrial  Disputes  Act.    The management’s  contention  that  the Tribunal  has  erred  in thinking  that the inspectors, salesman and retail  salesmen are workmen must therefore be rejected, A  more difficult question is whether the sales  office  and the factory form part of one and the same unit of industrial production  or  are independent of each other.  It  will  be useful  to  clear the ground first of  the  confused  notion which  is  expressed  in para. 8 of  the  Company’s  written statement  that  the  employees of  the  Sales  office  have nothing  to  do with "Production".  It does not  require  an economist  to  tell us that just as the man  who  tills  the soil, and grows the crop is engaged in producing wealth  for the community, so also is the person who reaps the  harvest, the  person who transports it from the field to a  place  of storage  and  the people who are engaged in  completing  the process  by  bringing it to the ultimate  consumer.   It  is equally trite that just as a man who makes an article, be it bricks  or  steel  or  boxes  or  something  else-by   using different  materials  in  such a way as to  make  them  more suitable to satisfy people’s wants is engaged in  productive labour,  so  also is the person or persons who help  in  the ultimate  achievement  of  satisfaction of  those  wants  by bringing  them to the consumer’s reach  Therefore, it  would be  unreasonable  to  say that though  those  who  make  the matches are "producing" but those who sell them are not.      Once,  this misapprehension is cleared we are  face  to face  with the centre of the problem.  The principles to  be followed  in  deciding  these problems have  so  often  been considered  by this Court and the tests that can be  applied to  assist their solution have so frequently been laid  down that  further detailed discussion is un-neccessary.   It  is enough to mention 568 that among the many tests that have been evolved, functional integrality,  inter-dependence  or  community  of  financial control  and management; community of man-power and  of  its control, recruitment and discipline, the manner in which the employer has organised the different activities, whether  he has treated them as independent of one another or as  inter- connected  and inter-dependent, enjoy pride of  place.   But this list is by no means exhaustive.      Nor  can  the tests and the principles that  have  been laid down be applied mechanically or by way of syllogism.  A mechanical or syllogistic approach may appear to furnish the easiest  way  of  solving a  complicated  problem,  but  the allurement  of the easy way has to be resisted.  For,  while such  ways are beset with risks of error in all branches  of law, they are even more unsafe and inexpedient in industrial law, where sensitive problems of human relations have to  be solved  in  the  midst  of all  the  complexities  of  modem industrial  Organisation.  That is why in applying the  well settled  tests and principles on these problems we  have  to bear  in  mind  that while all tests that  are  possible  of application  should be applied, the value and importance  to

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be  attached to individual tests will vary according to  the nature  of  the industrial activities and according  to  the nature  of  the disputes in which the  problem  has  arisen, viz.,  whether  it is in respect of lay  off,  retrenchment, production bonus, profit bonus or something else.      Again,  as  in  most questions which  come  before  the courts, it is the substance which matters and not the  form; and   every   fact   and  circumstance   relevant   to   the ascertainment of the substance deserve careful attention.      In  the  first place, functional  integrality  is  writ large  on  the activities under  consideration.   The  sales -office cannot exist without the factory  While  569 it  is  true that the sales office does from  time  to  time handle  the production of a sister concern of  the  company, the  Assam  Company,  by  far the  largest  portion  of  its activities  is devoted to the marketing of what is  made  at the Bareilly factory and to a certain extent of the products of  the  Western India Match Company.  It is  equally  clear that the factory itself cannot conveniently function without a  sales  organization.   The inter-dependence  of  the  two activities  the  manufacture of matches in the  factory  and their sale by the sales office-is further emphasized by  the fact  that the factory arranges its volume of production  in accordance with the programmes made from time to time by the sales manager.      Turning  now to the question of finance, we  find  that the  sales  office  and the factory have  the  same  banking account,  though  separate cheque books are  maintained  and operated  upon   Even more important is the  fact  that  the financial forecasts that are made for this Branch from  time to time make no distinction between the disbursements in the sales office and the factory.  This is clear from the  fore- cast  for the period October-December 1961, Ex.  W.27.  This forecast  was  prepared by the sales manager and  bears  the heading  "Bareilly  Sales  Office"   Under  the  head  "Cash Disbursements"  we  find first some figures  in  respect  of bonus, woods, splints,’ raw-materials and general stores and then  one  inclusive item for salaries and  wages  for  both factory  and  sales  office.  This  document  discloses  the further  interesting  fact that excise duty-a  duty  on  the production  of  matches-also finds place  in  the  financial forecast,  prepared  by  the sales  manager  for  the  sales office.      The manner in which the financial forecast was prepared by  the sales manager in respect of functions not  only  of, the sales office but also of the factory proper is  eloquent testimony that the 570 company  did consider them as inter-dependent parts  of  the same production unit.      Against  all  this,  Mr.  Pai  seeks  support  for  his contention  that  the  sales office is  independent  of  the factory, mainly in the rules and practice in connection with the  recruitment, control and discipline of man-power.   The documents,  including  letters of appointment  and  standing orders,  which have been produced undoubtedly show that  the company has kept these matters distinct and separate between the  factory  and the sales office.  It is also  clear  that separate muster rolls are maintained for the factory and the sales  office,  though  it must be pointed out  that  a  few workmen are common.      Our attention has been drawn also-to the fact that  the sales office pays rent to the factory for the area  occupied by  it by means of book adjustments.  These and  some  other

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details to which our attention has been drawn by Mr. Pai are of little assistance however to    establish his proposition that the Tribunal hasacted arbitrarily in deciding  that the sales officeand the factory are parts of one and the same industrial unit.      We  have to mention here that our purpose in  referring to these details of evidence is not to find out whether  the Tribunal has come to a wrong conclusion on fact, but only to see  if  it  has made any mistake in  applying  the  correct principles or has come to a conclusion that is unreasonable, arbitrary  or perverse  On an analysis of the  materials  on the  record  we  are clearly of  opinion  that  the  correct principles have been applied in a fair and reasonable manner and the conclusion reached cannot be challenged before us.      There  remains  for consideration Mr.  Pai’s  cotention that the Tribunal was not justified in  571 extending to the sales office staff the production bonus for the factory and the factory office without any modification. Mr.  Pai complains that having come to the  conclusion  that production  bonus  should be extended to  the  sales  office staff  the  Tribunal did not apply its mind to  the  further question  that was referred to it, viz.; with  what  details the  production bonus scheme should be applied to the  sales office  staff  According to Mr. Pai the sales office  staff, speaking generally, enjoys much higher rates of pay than the corresponding categories in the factory office and that this was  a factor which ought to be taken into consideration  in deciding whether the production bonus scheme in force in the factory for the factory staff should be applied to the sales office  staff  without any modification.  If it  were  clear that the Tribunal had applied its mind to this aspect of the problem  we would not have felt justified in  upholding  Mr. Pai’s complaint.  As it appears however that this aspect was not considered, we think it will be in the best interests of industrial  peace  and of social justice that  the  Tribunal applies  its  mind  to  the question and  then  comes  to  a decision.      We express no opinion whether Mr. Pai’s contention that the  sales  office staff enjoys higher pay scales  than  the factory staff is correct in fact or not nor on the  question whether  if  this  assertion  be found  to  be  correct  any modification in the production bonus scheme would be  called for.      We confirm the Tribunal’s decision that the  production bonus  scheme should be extended to the sales  office  staff and  remand  the  case to the Tribunal  for  decision  after taking  note  of all relevant facts whether  the  production bonus  scheme in force in the factory and the factory  staff should be extended to the sales office staff with or without modification. 572 This disposes of the management’s appeal viz., Civil  Appeal No. 300 of 1963.      The workmen’s appeal Which is numbered Civil Appeal No. 301  of  1963 challenges the correctness of  the  Tribunal’s direction that the payment of production bonus should  start from   the  date  the  award  became  enforceable  in   law. According  to  the workmen the payment of  production  bonus should  have been directed to be made with effect  from  the date of reference, if not from the date of the demand.      The  question  as to the date from  which  the  benefit granted  by  an award should take effect must  generally  be left to the discretion of the Tribunal making the award  and this Court ordinarily refuses to interfere with the exercise

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of  that  discretion.   We are unable to  find  any  special circumstances in this case that would justify any  departure from our established practice.      The  Appeal No. 301 of 1963 is therefore dismissed.   In view of the fact that the case is going back to the Tribunal for  a decision of the question as mentioned above we  think it proper to direct  that the ultimate award by the Tribunal should  be  given effect from the same date from  which  the award now under appeal would have come into force.      There  will  be no order as to costs in either  of  the appeals.                                     Appeal No. 300 remanded.                                    Appeal No. 301 dismissed.  573