Ratio decidendi
The rule this decision rests on
The capacity of the employer to pay is a material and important consideration when determining dearness allowance, and must be examined by an industrial tribunal in light of the five principles laid down in Bengal Chemical & Pharmaceutical Works Ltd. v. Its Workmen, the fifth principle being the additional financial burden which the revision of dearness allowance would impose upon the employer and his ability to bear such burden. An industrial tribunal has no jurisdiction to grant relief beyond the scope of the reference made by the Government, and where the Government has referred a dispute in a limited form—such as a claim for 100% of Ahmedabad Textile dearness allowance—the tribunal cannot entertain or award additional components such as percentage additions to basic wages in higher pay brackets, even if such claims were made in the original charter of demands but were not included in the Government's reference. An award granting relief outside the terms of the reference must be quashed, but the quashing of such parts does not prevent the Government from making a fresh reference including the excluded items in the future.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 9 of 1977.Appeal by Special Leave from the Award of the IndustrialTribunal, Gujarat dated 8th October, 1976 in Reference No.11 of 1975., published in the Gazette Part I-L datedNovember 11, 1976.H. R. Gokhale, A. P. Hathi and Ashok Grover for theAppellant.R. K. Garg, P. H. Parekh, Miss Manju Jetley and K.Vasudev for Respondent No. 1.The Judgment of the Court was delivered byGOWSAMI, J.-This appeal by special leave is directed againstthe award of the Industrial Tribunal, Gujarat, of October 8,1976. Although it is a composite award disposing of tworeferences by the :State Government, we are concerned inthis appeal with Reference (IT) No. 11 of 1975 as per theState Government notification of January 21, 1975 and evenout of the two questions referred to therein only withregard to one of these regarding dearness allowance.The relevant, issue which arises for consideration in thisappeal may be quoted below:"All workmen should be paid dearness allowanceat the rate of 100% dearness allowance paid tothe workers of the Cotton Textile Mills atAhmedabad".Before we advert to the submission of Mr. H.R. Gokhale,appearing on behalf of the appellant, it will be appropriateto indicate that there is no dispute about granting ofdearness allowance of the pattern ,of what is known as theAhmedabad Textile D.A. The question to 'be determined by theTribunal was only with regard to the percentage ,of theTextile D.A. to be paid to the employees of the company.The Tribunal has noticed that-"the recent trend in the several industries-textile, engineering and others, in Ahmedabad,Baroda and in some other parts of the State ofGujarat, is to make a demand for dearnessallowance on the lines of the dearnessallowance paid to the workers of the cottontextile mills at Ahmedabad, with a varyingpercentage".The Tribunal describes this as what in ordinary parlance iscalled 'the "Textile D.A." and reckons it "as before therevision of the basic wage in the mills prior to 1-1-1974".The company is manufacturing high precision ball and rollerbearings in collaboration with a West German company. Ithas its plant in the district of Baroda with a manufacturingcapacity of 24 lakh pieces of bearings per annum upto 1973and 28.82 lakh pieces per annum from 1974. The company wasincorporated in April, 1962 and went into commercialproduction from June 1965. Its registered office is inBombay and has its sales offices in Bombay, Calcutta, Delhi.,and Madras. The plant is being operated almost to fullcapacity from June 1965 onwards. The production has alsoincreased progressively.468The number of workers on 31-8-1974 was about 630. Thecompany' is said to be the third largest unit in the ballbearing industry in the-country-the other two concerns beingAntifriction Bearings and the Associated Bearings, the nextone to the company being Shriram Bearings.Two questions are raised before us by Mr. Gokhale. Counselis, conscious of his limitations in an appeal by specialleave under Article 136 of the Constitution and has,therefore, fairly enough confined his, submissions withinnarrow bounds and we fully appreciate this stand. The firstsubmission of Mr. Gokhale in the forefront of his argumentis that the Industrial Tribunal has failed to consider theimpact of the rise in dearness allowance granted by it onthe financial capacity of the appellant to bear the burden.It is true that in considering the question of dearnessallowance, the capacity to pay of the company is one of themost important considerations. Mr. Gokhale has pointed outthat the additional liability as a result of the award wouldbe Rs. 8,29,312 in 1975, Rs. 7,42,563' in 1976, and Rs.12,42,395 in 1977 and the percentage increase over theannual wage bill will respectively be 3 6.76 %, 32.91 % and5 5.07 % for the said three years. He has also pointed outthat the company was able to declare 8% dividend for thefirst time in the year 1970-71 and had been incurring lossfor the earlier years from 1962-63. He: also points outthat although dividends have been progressively increasingfrom 8% to 12%, from 1970-71 to 1974-75, only 8% dividendwas declared in the year 1975-76. Besides, the, company hasto, spend huge sums for replacement costs which, accordingto counsel, the Tribunal has not properly taken intoaccount. It is true that the Tribunal has mentioned in theaward that this could be done in a; phased manner. Mr.Gokhale submits with some justification that this was purelya management function and the Tribunal should have taken thefigures as furnished by the management in making reserve&for replacement costs. We have, however, seen that althougha substantial sum was kept as reserve towards thereplacement costs, only a fraction of it was actuallyutilised. The company, therefore, can-not make anygrievance about the manner in which the Tribunal has, dealtwith this aspect. Mr. Garg, on behalf of the respondents,also drew our attention to paragraph 4 of the company'swritten statement (page 62, Volume 1) where after havingreferred to certain offers made by it the company wasprepared to the "increase of about Rs. 15 lacs in theemployee cost in the very first year. . . . . .We find that the Tribunal has exhaustively gone into thewholes matter with care and kept in view the five principleslaid down by this Court in the Bengal Chemical &Pharmaceutical Works Ltd. v. Its Workmen(l), the 5th onebeing additional financial burden which dearness allowancewould impose upon the employer and his ability for bear suchburden. We are unable to find any infirmity in the Tribunaldealing with the point of the financial capacity of theemployer to bear the burden. The Tribunal finally observedas follows(1) [1969] 2 S.C.R. 113.469.lm15"On a careful consideration of all the relevant factors, inmy opinion, the dearness allowance paid to the PBI (Pre-cision Bearings India) workmen at the minimum level of basicpay from Rs. 26-upto Rs. 100-should be from 80 per cent, ofthe textile D.A. to 89 per cent, of the textile D.A. phasedover a period of three years, The dearness allowance in thehigher pay scale of Rs. 101-to Rs. 200should be 40 per centand. in the still higher slab of Rs. 201 and above, shouldbe 20 per cent, the percentage for the higher two slabsremaining the same".The 40 per cent and 20 per cent of the basic wages in thehigher slabs were in addition to the Ahmedabad TextileDearness Allowance granted in the award. This takes us tothe second objection of Mr. Gokhale.It is submitted that in the charter of demands of the unionthere were two specific demands with regard to dearnessallowance. These were as follows :-1 : 1. It is demanded that the existingminimum dearness allowance of Rs. 146/- shouldbe modified and that all the workers includingworkers known as staff should be paid minimumdearness allowance at the rate of fulldearness allowance that is being paid toTextile workers at Ahmedabad, i.e. 100% ofAhmedabad Textile rate.1 : 2 With the above minimum dearnessallowance the workers and workers known asstaff should be further continued the higherdearness allowance as under-Below Rs. 100 pay-100% Ahmedabad TextileDearness Allowance.Pay range between Rs. 100 to Rs. 200-100%Ahmedabad Textile DA+40% of basicPay above Rs. 200/-100% Ahmedabad Textile DA+20% + of basic."
Even though the demand for dearness allowance was as above, the State Government referred the dispute only in the form set out at the outset. The Government did not entertain the claim of dearness allowance in addition to the 100% D.A. paid to the workers of the cotton textile mills at Ahmedabad. In other words, while the claim of the union was Ahmedabad Textile D.A. plus, the Government did not entertain the dispute between the parties in that form. We find great force in the above submission of Mr. Gokhale. The Tribunal in view of the content of the dispute referred to it had no jurisdiction in this reference to grant anything more then 100% of the Ahmedabad Textile D.A. on the outside. Since, the Tribunal after having given appropriate consideration to all aspects of the matter granted varying percentage from 80% to 89% phased in a particular way, it had virtually rejected the union's claim for 100% of the Textile D.A. Having done so, there was no scope for allowing to the higher brackets of wage earners in addition 40% and 20% of basic wages as dearness 470 allowance. This part of the award is, therefore, beyond the scope, of the reference and must be quashed which we hereby do. If the Government at a future time intends to entertain a dispute of this nature with regard to higher brackets of wage earners that will be a different dispute but such a claim could not be entertained by the Tribunal in the present reference.
We may observe that during the course of the proceedings before the Tribunal the clerical and the supervisory staff seem to have withdrawn from the reference and even an application was filed by some of them before the Tribunal to confine the dispute as pertaining to the, manual and technical workers. The Tribunal however, did not accede to this request and proceeded on the footing that all the members of the-staff were included in the reference. We should not be taken to suggest that the 40% and 20% plus is either wrong or excessive by way of high cost allowance. Indeed, we even felt that the lowest bracket upto Rs. 100/- needed full neutralisation of the rise in the cost of living as has been held in Killick Nixon Limited v. Killick & Allied Companies Employees Union.(1) Nor do we fail to see the force of Shri Garg's submission that social justice perspectives being integral to industrial jurisprudence. the high cost allowance as a component of D.A. is not impermissible in principle. It is a legitimate item. But we disallow because there is I deliberate omission to make a reference, of that item and so, falls outside the jurisdiction of the tribunal. That is why we have expressly observed that such a dispute may well be referred by Government, if it considers fit, and this decision will not bar such a course.
In the result the appeal is partly allowed. The award of the Tribunal with regard to the 40% and 20% for the higher two slabs is set aside In all other aspects the award of the Tribunal stands. The appellant will pay the costs (one set) of the respondents as ordered at the time of granting the special leave and will also pay interest as ordered therein. The arrears calculated in terms of the Award now upheld will be paid to the respondents in two equal instalments, the first instalment within three months from today and final instalment within three months thereafter. Appeal partly allowed.
