# [1994] Supp. 2 S.C.R. 217

- **Citation:** [1994] Supp. 2 S.C.R. 217
- **Court:** Supreme Court of India
- **Decided:** 1994-07-26
- **Case number:** Civil Appeal Nos. 4848-50 of 1989
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1994-supp-2-s-c-r-217-12397
- **Pages:** 41

## Headnote

HINDUSTAN LEVER LTD.
A
\'.
B.N. DONGRE AND ORS. ETC. ETC.
JULY 26, 1994
IA.M. AHMADI, K. RAMASWAMY AND R.M. SAHA!, JJ.j
B
Industrial Disputes Act, 1947-Sections JO( l)(d) & 10(2)---lmposition
of ceiling on deamess allowance-Validity of-Slab system deamess fomtula
linked to wage and CPJ-Conipany's case of neutralization .exceeding
100%-Not correct-Method adopted in ca/culati11g 11eutralizatio11 percemage C
being 1vrong-Financial position of Conzpany was sound-Neutralization
varied from 97.4% to 86o/u-Present deamess fonnula being i11 vogue since
/011~Justificatio11 of placi11g ceili11g.
Labour Law-Wages-Deamess Allowa11ce-<:oncept of-Tapering or
sliding 11eutralizatio11 system with fixed maxima at different levels of pay D
belts-Upward revisio11 of wages or deamess a/lowa11ce--Effect of-Revision
of wage stnicture to prejudice of worknten-Not pennitted if wage structure
is of n1inin1unt wage leveJ-Systen1 of n1erger of dean1ess a_llowance in basic
parSalary structure must be cost effectiv,,.-Jmposition of Ceiling on dearness allowance when justified.
Co11stitution of btdia-Alticle 43-0bjective of 'living wage'-When
workers enjoying benefit under a scheme without a ceilin~Tribunal or Coult
should be slow to interfere.
E
Altic/es 226/227-Writ jurisdiction-Award of !11dustrial Tribunal-Writ F
petition challenging award-Maintainable-- Appeals under Letters Patent
against decision of Single Judge-Maintainability-Jurisdiction of Division
Bench under Letters Patent.
The appellant Company desired placement of a ceiling on dearness
allowance based on the premise that in the absence of such a ceiling the G
neutralization factor exceeded 100%. The Company had a slab system
dearness formula linked to basic wage and CPI. The management ~ub
mitted that the slab system of dearness allowance was unrealistic as it had
the effect of distorting the entire wage strncture. Five references arose out
of certain demands made by the workmen-employees of appellant company H
217
218
SUPREME COURT REPORTS [1994) SUPP. 2 S.C.R.
A
as well as the management's Notice of Change under Section 9A of the
Industrial Disputes Act for the imposition of a ceiling on dearness al·
lowance.
B
c
The Industrial Tribunal by its Award conceded the demand of the
management for the placement of a ceiling on dearness allowance on basic
pay exceeding Rs. 500 p.m. Since the Company had a slab system dearness
allowance formula linked to basic wage and CPI, the Tribunal directed that
those workmen drawing a salary exceeding Rs. 500 per month will get the
same dearness allowance as admissible to those drawing a basic salary of
Rs. 500 p.m. without there being any variation in the dearness allowance
for salary slabs exceeding Rs. 500 p.m. The Tribunal while placing a ceiling
on dearness allowance granted an upward revision in the wages and the
placement of a ceiling on dearness allowance had a direct nexus to the
tribunal revising the salary structure of employees. The Tribunal also
opted in favour of time bound automatic promotion. In taking that view
·' D the Tribunal.acted on the region-cum-industry basis. Taking-note of the
fact that 100% neutralization is ordinarily allowed to the lowest paid staff
and as the basic salary rises the percentage of neutralization slides down,
the Tribunal felt that the neutralization factor was very high at the higher
levels of salary and even at the highest and, therefore, it opted in favour
E
of imposing a ceiling to balance the wage structure. The Tribunal pointed
out that the existing dearness allowance formula had been in vogue for
many years preceding 1976 when the company gave a Notice of Change u/s
9A of the Industrial Disputes Act, and the neutralization varied from
97.4% at the lower level to 86% at the highest point and concluded that
F
placement of a ceiling was imperative to eusure that the wage structure
did not get destroyed and the disparity ratio between the wages paid by
the appellant company and by other comparable units in the r

## Text

_Characters 0–39,936 of 101,608. This is a partial read: ask again with offset=39936 for what follows._

HINDUSTAN LEVER LTD.
A
\'.
B.N. DONGRE AND ORS. ETC. ETC.
JULY 26, 1994
IA.M. AHMADI, K. RAMASWAMY AND R.M. SAHA!, JJ.j
B
Industrial Disputes Act, 1947-Sections JO( l)(d) & 10(2)---lmposition
of ceiling on deamess allowance-Validity of-Slab system deamess fomtula
linked to wage and CPJ-Conipany's case of neutralization .exceeding
100%-Not correct-Method adopted in ca/culati11g 11eutralizatio11 percemage C
being 1vrong-Financial position of Conzpany was sound-Neutralization
varied from 97.4% to 86o/u-Present deamess fonnula being i11 vogue since
/011~Justificatio11 of placi11g ceili11g.
Labour Law-Wages-Deamess Allowa11ce-<:oncept of-Tapering or
sliding 11eutralizatio11 system with fixed maxima at different levels of pay D
belts-Upward revisio11 of wages or deamess a/lowa11ce--Effect of-Revision
of wage stnicture to prejudice of worknten-Not pennitted if wage structure
is of n1inin1unt wage leveJ-Systen1 of n1erger of dean1ess a_llowance in basic
parSalary structure must be cost effectiv,,.-Jmposition of Ceiling on dearness allowance when justified.
Co11stitution of btdia-Alticle 43-0bjective of 'living wage'-When
workers enjoying benefit under a scheme without a ceilin~Tribunal or Coult
should be slow to interfere.
E
Altic/es 226/227-Writ jurisdiction-Award of !11dustrial Tribunal-Writ F
petition challenging award-Maintainable-- Appeals under Letters Patent
against decision of Single Judge-Maintainability-Jurisdiction of Division
Bench under Letters Patent.
The appellant Company desired placement of a ceiling on dearness
allowance based on the premise that in the absence of such a ceiling the G
neutralization factor exceeded 100%. The Company had a slab system
dearness formula linked to basic wage and CPI. The management ~ub
mitted that the slab system of dearness allowance was unrealistic as it had
the effect of distorting the entire wage strncture. Five references arose out
of certain demands made by the workmen-employees of appellant company H
217
218
SUPREME COURT REPORTS [1994) SUPP. 2 S.C.R.
A
as well as the management's Notice of Change under Section 9A of the
Industrial Disputes Act for the imposition of a ceiling on dearness al·
lowance.
B
c
The Industrial Tribunal by its Award conceded the demand of the
management for the placement of a ceiling on dearness allowance on basic
pay exceeding Rs. 500 p.m. Since the Company had a slab system dearness
allowance formula linked to basic wage and CPI, the Tribunal directed that
those workmen drawing a salary exceeding Rs. 500 per month will get the
same dearness allowance as admissible to those drawing a basic salary of
Rs. 500 p.m. without there being any variation in the dearness allowance
for salary slabs exceeding Rs. 500 p.m. The Tribunal while placing a ceiling
on dearness allowance granted an upward revision in the wages and the
placement of a ceiling on dearness allowance had a direct nexus to the
tribunal revising the salary structure of employees. The Tribunal also
opted in favour of time bound automatic promotion. In taking that view
·' D the Tribunal.acted on the region-cum-industry basis. Taking-note of the
fact that 100% neutralization is ordinarily allowed to the lowest paid staff
and as the basic salary rises the percentage of neutralization slides down,
the Tribunal felt that the neutralization factor was very high at the higher
levels of salary and even at the highest and, therefore, it opted in favour
E
of imposing a ceiling to balance the wage structure. The Tribunal pointed
out that the existing dearness allowance formula had been in vogue for
many years preceding 1976 when the company gave a Notice of Change u/s
9A of the Industrial Disputes Act, and the neutralization varied from
97.4% at the lower level to 86% at the highest point and concluded that
F
placement of a ceiling was imperative to eusure that the wage structure
did not get destroyed and the disparity ratio between the wages paid by
the appellant company and by other comparable units in the region at the
level of employees drawing a basic salary of Rs. 500 and above remain
within reasonable bounds.
G
The workmen and the company challenged the Award by filing Writ
Petitions. The workmen challenged the Tribunal's Award conceding the
management's demand for placement of a ceiling on dearness allowance.
The High Court upheld the order of the Industrial Tribunal placing a
ceiling on dearness allowance but modified the Award with regard to
H certain other demands. The Court while examining the impact of the
HINDUSTAN LEVER LTD. r. B.N. DONGRE
219
dearness allowance formula on the wage structure pointed out that the A
emoluments of workmen exceeded the emoluments received by the Junior
Executive Staff of the Company notwithstanding the fact that the latter
were promotion posts. Due to this reason workmen were un\\oilling to
accept promotions as that would result in a shrinkage in their total
emoluments. Such a situation, as held by the High Court, "·as not conB
ducive to efficient working of the Company. the Court granted stagnation
increments as a substitute for the automatic promotion scheme introduced
by the Tribunal. Appeals "ue filed against the decision of Single Judge.
The Workmen Challenged the decision in regard to the placement of a
ceiling on dearness allowance which came to be affirmed by the Single C
Judge & demand for automatic promotion which was conceded by the
Tribunal but spurned by the Single Judge who substituted it by the grant
of stagnation increment. The management made a grievance in regard to
grant of stagnation increment and upward revision of wages. The Division
Bench rejected the management's plea against stagnation increment but D
made a remand in respect of wage revision while holding that time bound
automatic promotion \".QUld adversely affect merit and, therefore, upheld
its substitution by stagnation increment. It disapproved of the ceiling on
dearness allowance stating that the present dearness allowance system did
not result in over neutralization of the cost of living index at any level of
the income group, it maintained a tapering scale, though not a steeply
declining one; that the system also did not result in distortion of total
incomes either of the workmen inter se or between the workmen and their
superiors; that the Company did not plead any financial inability and there
were no other compelling reasons why the existing system which was
beneficial lo the workmen should be replaced by the new one which was
less beneficial to them and which would result in steep decline in their
incomes they would otherwise gain and that it is well recognised principle
of industrial adjudication that the Courts, Wage Bodies and the Industrial
Adjudicators should not tinker with the existing benefits available to the
workmen unless it becomes unavoidable and obligatory to do so.
On remand, the Tribunal concluded that the financial position of the
company was sound and the Company was hr a position to bear an
additional financial burden and therefore, there was justification for the
E
F
G
. wage scales, as demanded by the workmen. Partly allowing the Reference, H
220
SUPREME COURT REPORTS [1994] SUPP. 2 S.C.R.
A
the Tribunal revised the wage scales. Hence these special leave petitions.
Against the decision of the Division bench of the High Court the Company
filed appeal by special leave. The workmen complained that the company
had failed to implement the Award as modified by the Division Bench in
regard to grant of stagnation increment. The Tribunal held that the
B company had engaged in unfair trade practice and that it should desist
from doing so in future while directing the company to implement the
modified Award in relation to the grant of stagnation increment and to
work out the benefit on the wage scales existing on the date of the
Reference. The Company filed Special leave Petitions against the order of
the Tribunal which were dismissed.
c
The Company contended that the Tribunal as well as Single Judge
of the High Court had rightly appreciated the need for exercising control
by imposition of a ceiling at the appropriate salary level to ensure that
the neutralization did not exceed 100% and the wage differentials were not
D sci distorted as to make promotion to officers level unattractive, that the
dearness allowance formula based on the slab system was so unrealistic
that the employees of the Company constituted a privileged cla.ss, in that,
their total emoluments had risen to disproportionately high level as compared to their counterparts in similar other industries in the same region,
thereby posing a threat to industrial peace in the region.
E
The workers urged that under Article 43 of the Constitution the
ultimate goal or objective is to secure a 'living wage and' and till that goal
Is reached, the court should not interfere in exercise of its extra-ordinary
jurisdiction; that though the emoluments paid to the workers were much
F
higher than the subsistence level, they were far below the 'living wage'; that
there was in fact no over-neutralization and no distortion in the emoluments drawn by the workers and executive officers and, therefore, on
region cum-industry basis also the plea for placement of a ceiling on VDA
in the higher pay bracket of Rs. 500 and above was not justified; that this
formula which has been in vogue since long did not permit cent percent
G neutralization even at the lowest level of basic pay not exceeding Rs. 100
p.m. , that there has been no merger of dearness allowance in basic wage
since the scheme was introduced in 1952 and hence the workers had
suffered and if the dearness allowance was frozen as per the Tribunal's
award it would be most unjust to the workers, and there had been no
H upward revision of the basic wage since 1972; that insofar as the vertical
•
HINDUSTAN LEVER LTD. v. B.N. DONGRE
221
relativity in the wages of workers and officers were not comparable and if A
any distortion in the differential resulted, the same could be corrected by
revising the salary structure of the officers but there would be no justifica·
lion to control it by placing a ceiling on the dearness allowance admissible
to the workers under the extant sche1ne;
The appeDant Company contended that the Division Bench of the
High Court exceeded its jurisdiction in interfering with the concurrent
decisions of the Tribunal and the Single Judge of the High Court based
on appreciation of evidence on record and in particular with the decision
B
of the latter who held that under the prevailing formula the neutralization
exceeded 100% leading to a distortion in the wage structure; that the C
Tribunal Committed as error in holding that the neutralization varied
between 94.4.% at the lowest levels and 86% at the highest level; that the
Tribunal .rightly held that a ceiling at Rs. 500. and above was imperative
to ensure that wage differentials were not distorted; that this concurrent
view ought not to have been disturbed by the Division Bench on the premise D
that dearness allowance was meant to compensate the change in cost of
living and that the decision of the Division Bench was running counter to
the well recognised region-cum-Industry principle.
Disposing of the matter, this Court
E
Held : 1.1. Wages are among the major factors In the economic and
social life of the working classes. Workers and their families depend
almost entirely on wages to provide themselves with the three basic re·
qllirements of food, clothing and shelter. The other necessities of life like
children's education, medical expenses, etc., must also come out of the F
emoluments earned by the bread-winner. Workers are therefore concerned
with the purchasing power of the pay-packet he received for his toil. ffthe.
rise in the pay-packet does not keep place with the rise In prices of
essentials the purchasing power of the pay·packet fails r:educing the real
wages leaving the workers and their families worse off. Therefore, If on
account of inflation prices rise while the ·pay-packet remains frozen, real G
wages will fall sharply. This is what happens in periods of inflation; In
order to prevent such a fall in real wages different methqds are adopted
to provide for the rise in prices. In the cost-of-living sliding scale systems
the basic wages ·are automatically adjusted to price changes shown by the
cost-of-living index. In this way the purchasing power of worker's wages is H
222
SUPREME COURT REPORTS (1994) SUPP. 2 S.C.R.
A maintained to the extent possible and necessary. However, leap·frogging
must be avoided. [240·C to E)
B
c
While awarding dearness allowance cent percent neutralization of
the price of cost of living should be avoided to check inDationary trends.
The whole purpose of granting dearness allowance to workmen being to
neutralize the portion of the increase in the cost of living it should
ordinarily be on a sliding scale and provide for an increase when the cost
of living increases and a decrease when it falls. Normally full neutraliza·
tion is not given except to the lowest class of employees and that too on a
sliding scale. To the lowest paid employees who are near about subsistence
level, full neutralization or thereabouts would be justified. It must be
realized that even at the lowest level since neutralization is related to basic
requirements of food, clothing aud shelter, several other requirements
remain unattended and workmen have to bear the brunt of the price rise
to satisfy such needs. At higher levels also because of the tapering
D neutralization allowed. employees suffer a sharp fall in their real earnings
over a period of time. Besides, the food basket which constitutes the major
item in the kity of basic necessities on which neutralization is determined,
differs at different levels and keeps changing with the passage of time even
for employees of the lowest level with the result that the new items remain
E
F
outside the admissible items for neutralization. All these factors con·
tribute to the distortion in the real wages of the workmen. As a concomitant to the tapering neutralization system, maximum limits of the
quantum of dearness allowance at different pay belts is often insisted upon
so that lower level employees do not draw more. But as against that the
counter effect of the tapering or sliding neutralization system with fixed
maxima at different levels is that it completely distorts the pay structure
and erodes the real value of the wage. [240-F to H, 241-A to E]
The dearness allowance given to compensate the cost of living being
less than the cent percent increase ceases to make up for the ever widening
gap between wages and cost of living and an upward revision of wages or
G dearness allowance becomes imperative. The company can revise the wage
structure to the prejudice of its workmen In certain situations e.g., financial stringency, etc., but no such revision can be permitted if the wage
structure is of the minimum ·wage level. [241-G, 242-H, 243-A]
H
Clerks of Calcutta Tramways v. Calcutta Tramways Co. Ltd., AIR
•
' '
t
HINDUSTAN LEVER LTD. v. B.N. DONGRE
223
(1957) SC 781; Hindustan Times Ltd. v. Their workmen, AIR (1963) SC A
1332; Bengal Chemicals and Phannaceutica/s Works Ltd. v. Its Workmen,
AIR (1969) SC 360; Cha/than Vihag Khand Udyog Sahakari Manda/i Ltd.
v. G.S. Barot, Industrial Court, Gujarat, AIR (1980) SC 31; Kamani Metals
& Alloys Ltd. v. Their Workmen, [1967) 2 SCR 463; Killick Nixon Ltd. v.
Killick & Allied Companies Employees' Union, [1975) Supp. SCR 453 and B
Workmen v. Reptakos Brett & Co. Ltd., [1992) SCC 290, relied on.
1.2. Protection against price rise is limited to only those items
included in the basket and not to all items which a wage earner at the
lowest level consumer. For those items not included in the basket, the wage
earner at every level has to bear the brunt of inflation. While dietary habits
change, the food items in the basket remain constant for want of periodical
revision with the result that the new items of food which are highly priced
do not count for neutralization. Again wage revision do not take place for
long spells. In certain wage plans upward revision of wages take place by
c
the merger of a portion of the dearness allowance in. the basic wage plus
an addition thereto to take care of the inflationary dents in the wage D
structure in respect of other items outside the basket. Under certain
dearness allowance schemes, neutralization is allowed on tapering percentages on the assumption that those in the higher wage groups have a
certain cushion to bear a part of the inflation. Such a scheme is in a ·vogue
in Central and State Government servant's salary plans. That cushion
does not remain static and gets depleted as the prices rise and there comes
time when it b~comes necessary to inflate it once again by an upward
revision of the salary structure. But in certain industries merger of dearness allowance in the basic wage does not take place at all as in the present
case and instead periodically increases are allowed In the basic wage to
nullify the adverse effect of inflation on items outside the basket. In the
case of employees belonging to high wage islands, their carry home pay
packets shrink on account of the deduction of income tax at source.
[251-G-H, 252-A-CJ
E
F
1.3. The appellant company was a big industrial establishment and G
there was no other similar establishment of that size in that region. The
company was financially sound and it was in a position to absorb any
additional financial burden that might be thrown, on it if all the demands
made by the employees were conceded. The extent dearness allowance
scheme had been in vogue since long before the Company gave the Notice
of Change. Ordinarily, when the workers are enjoying the benefit under a H
224
SUPREME COURT REPORTS (1994) SUPP. 2 S.C.R.
A scheme without a ceiling the Tribunal or the Court would be slow to interfere with the scheme unless compelling reasons are shown. The salary
structure must be cost effective and merely because the company is financially sound and in a position to absorb the additional burden is no ground
to revise the emoluments upward. No industrial establishment can be expected to show such financial indulgence or indicipline as would distort the
B existing differentials, etc., merely because its financial condition is sound
enough to absorb additional financial burdens. This is for the reason that
irresponsible an unjustified upward revision of wage would create ripples
elsewhere and disturb the wage structure in the region. (243-C-D]
C
2.1. In the instant case, on the facts to the case, the Company's case
of the neutralization exceeding 100% did not seem to be correct. Under the
Company's dearness allowance scheme, the dearness allowance was payable uniformly to all the workers and hence it was not likely to disturb the
internal differentials between the workers covered by the scheme. It was
nobody's case that when the scheme was introduced the company had
D permitted itself the indulgence of conceding more than cent percent
n~utralization to its employees. Nor was it the company's case that the
dearness allowance initially agreed upon exceeded 100% at any level.
Therefore, the Tribunal was right in concluding that the neutralization
varied from 97.4% to 86%. The Single Judge committed an error in setting
E aside the said finding in upholding the Company's case, the Division
Bench, as an appellate forum was justified in correcting the error crept in
because the method adopted by the Company in calculating the neutralization percentage was wrong. (250-F, B, G]
F
2.2 The Company sought imposition of control or ceiling on dearness
allowance on ground that it distorted the vertical relativity, in that, clerks
received emoluments exceeding what was paid to junior executives and were,
therefore, disinclined to accept promotion. Since the basic pay of the
workers was as low they continued to be governed by the provisions of the
G Industrial Disputes Act whereas the junior executives did not belong to that
class and their salaries were differently determined. These workers, therefore, constituted a class by themselves. The process of determination of
salary of junior executives had nothing to do with the workers governed by
the Industrial Dispute Act. Executives enjoy a certain status and perquisites which the workers did not receive. The better way to overcome the
H
difficulty was to make the junior executive grade more attractive rather
HINDUSTAN LEVER LTD. v. B.N. DONGRE
225
than to deny to the workers what they were receiving since Imig. [25l·A to DJ A
3. The decision of the Industrial Tribunal rendered under the In·
dustrial Disputes Act would be subject to review by the High Court under
Articles 226/227 of the Constitution. Since against" the decision of the
Industrial Tribunal no remedy was available under the provisions of the B
Act, the aggrieved party could only invoke the jurisdiction of the High
Court under Articles 226/227. Since both the Company and the workers
were aggrieved by the award, they preferred writ petition challenging the
award. All the three writ petitions, two on behalf of the workers by the
Sabha and the Union, and the third by the company, were heard together
and disposed of by a common judgment. Against the decision of the C
learned Single Judge, appeals under the Letters Patent were preferred once
again by the said three parties. The Company never questioned the jurisdiction of the High Court to hear and decide the writ petitions nor did it
question the jurisdiction of the Division Bench under the Letters Patent.
Even the Company had appealed against the learned· Single Judge's D
decision to the extent if was against it. No contention regarding the scope
and ambit of the jurisdiction of the Division Bench wa:s rai:;t:d in the
app_eal. If the jurisdiction of the learned Single Judge was not challenged
by the Company, the Company itself had invoked it, it is difficult to
comprehend how the Company can challenge the jurisdiction of the appel·
late court. If the Single Judge had jurisdiction to hear the writ petitions E
against the decision of the Industrial Tribunal, at any rate if his jurisdic·
lion was not question by the Company, the Company cannot challenge the
appellate jurisdiction of the Division Bench since that jurisdiction was
conferred by the letters patent. [246·D to HJ
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 4848-50
of 1989.
From the Judgment and Order dated 6.9.89 of the. Bombay High
Court in A.No. 151/89, 1606 & 1607 of 1988.
Kapil Sibal, P.K. Raile, P.N. Mongia, O.C. Mathur, Ms. Lekha
Mathur for JBD & Co. K.P. Menon, M.A. Krishnamoorthy, Mrs.
Ramamurthi, H.S. Manian, and Gopal Jain for the appearing parties.
The Judgment of the Court was delivered by
F
G
H
226
SUPREME COURT REPORTS [1994] SUPP. 2 S.C.R.
A
AHMADI, J. Special Leave granted in the aforesaid special leave
B
petitions.
Five references bearing Nos. (i) 123 of 1977, (ii) 215 of 1979, (iii) 91
of 1984, (iv) 92 of 1984 and (v) 43 of 1985, the first three under Section
10(2) and the remaining two under Section lO(l)(d) of the Industrial
Disputes Act, 1947, hereinafter called 'the I.D. Act', arose out of certain
demands made by the workmen- employees of Hindustan Lever Limited
as well as the management's Notice of Change for the imposition of a
ceiling on dearness allowance. These dispute concerned the demands made
C , by the monthly rated clerical and technical staff working at the Sewree
faCtory of the Company as well as the monthly rated C & T categories of
workmen employed at the company's head-office and branch office in
Bombay, the former represented by Hindustan Lever Employees Union,
hereinafter called 'the Union' and the latter represented by Hindustan
Lever Mazdoor Sabha, hereinafter called, 'the Sabha'. The company had
D desired placement of a ceiling on dearness allowance based on the premise
that in the absence of such a ceiling the neutralization factor exeeded
100%. ·It may here be mentioned that both the clerical and technical staff
of the company was, at all material times classified into four categories,
E
F
namely, C-1 to C-4 and T-1 to T-4 carrying different pay-scales. The
clerical staff worked for 36 hours a week, whereas the technical staff
worked for 48 hours a week. It is not necessary for us to indicate the nature
of demands made by the workmen in the aforesaid references because we
are, in the present appeals, mainly concerned with the Company's demand
for placing a ceiling on dearness allowance. The Indiistrial Tribunal,
Maharashtra, by its award dated 18th December, 1985 conceded the
demand of the management for the placement of a ceiling on dearness
allowance on basic pay exceeding Rs. 500 per month. The Tribunal also
granted certain demands of the workmen in regard to upward revision of
pay-scales, grant of special allowance, social security allowance, adhoc
allowance, automatic promotion scheme, etc., but since we are concerned
G with the limited question in regard to the placement of a ceiling on
dearness allowance ,as demanded by the management, it is unnecessary for
us to refer to the demands of the workmen which were not conceded by
the Tribunal and against which the workmen had approached the High
Court. The workmen had also challenged the Tribunal's Award conceding
H the management's demand for placement of a ceiling on dearness allowance, The learned Single Judge who heard the Writ Petition upheld the
HINDUSTAN LEVER LTD. v. B.N. DONGRE [AHMADI,J.]
227
B
order of the Industrial Tribunal placing a ceiling on dearness allowance A
but modified the Award with regard to certain other demands. Against the
decision of the learned Single Judge appeals were carried to the Division
Bench of the High Court. In the said appeals the division Bench was called
upon to examine the Correctness of the view taken by the Industrial
Tribunal in regard to the placement of a ceiling on dearness allowance
which came to be affirmed by the learned Single Judge. In additional the
Division Bench was also invited to deal with the demand for automatic
promotion which was conceded by the Tribunal but spurned by the learned
Single Judge who substituted it by the grant of stagnation increment. The
management also made a grievance before the Division Bench in regard to
grant of stagnation increment and upward revision of wages. The Division C
Bench rejected. the management's plea against stagnation increment but
preferred to make a remand in respect of wage revision. The major issue
was, however, in regard to ceiling fixed on dearness allowance where basic
wage exceeded Rs. 500.
Under the extant scheme, the dearness allowance was linked to index
1450 of the Consumer Price Index (CPI), Bombay (1934 = 100) at 635%
of basic wage for the first Rs. 100, at 284.25% of basic wage for the second
D
Rs. 100 and at 251 % of basic wage where the salary exceeded Rs. 200 per
month. This was the Fixed Dearness Allowance (FDA) payable to the
workmen. However, on the CPI Index exceeding 1450, the Variable DearE
ness Allowance (VDA) was payable on every 10 points rise at 5% of basic
wage for the first ~s. 100, 2.25% of basic wage for the second Rs. 100 and
2% of basic wage on salary exceeding Rs. 200 per month. The Company's
demand was that the exiting scheme of dearness allowance should be
applicable to workmen whose basic salary, inclusive of dearness allowance, F
did not exceed Rs. 1500 per month. However, for those whose basic salary,
inclusive of dearness allowance, exceeded the said figure of Rs. 1500 per
month, it was contended that the existing scheme should continue upto
the CPI point of 1450 and for every 10 point rise above the same, 5% of
basic wage should be allowed for first Rs. 100 and 1 % of basic wage for G
the second Rs. 100 and to those basic wage exceeded Rs. 200 the workmen
should not be paid any FDA. So far as VDA is concerned, it was contended
that it should be subject to a maximum of Rs. 1310 for C-1, Rs. 1535 for
C-2, Rs. 1725 for C-3, and Rs.1900 for C-4 categories of clerical employees
~~.~b~~h~b~h~bN~h~b
T-4 categories of technical employees. The Tribunal while continuing the H
228
SUPREME COURT REPORTS (1994] SUPP. 2 S.C.R.
A existing scheme directed that the maximum dearness allowance payable to
the workmen shall be that which is payable to a workman drawing a basic
salary of Rs. 500. To put it differently the Tribunal directed that those
workman drawing a salary exceeding Rs. 500 per month will get the same
dearness allowance as admissible to those drawing a basic salary of Rs. 500
B per month without their being any variation in the dearness allowance for
salary slabs exceeding Rs.500 per month. This direction given by the
Tribunal was made retrospective from 1st October, 1979. Those workmen
who received dearness allowance in excess of the scheme worked by the
Tribunal between 1st October, 1979 and 30th December, 1985, the date of
the Award, were directed to refund the excess amount by adjusting the
C same against dearness allowance payable to them subsequent to 30th
December, 1985. Thus the dearness allowance scheme worked out by the
Tribunal immediately affected those workmen whose basic salary exceeded
Rs. 500 per month and was likely to affect those who crossed the Rs. 500
mark at ·a future date. The contention of the management before the
D Tribunal was that the slab system of dearness allowance was unrealistic as
it had the effect of distorting the entire wage structure as it exceeded the
100% neutralization factor which has always been the justification for the
intrnduction of the dearness allowance formula.
Indisputably the existing dearness allowance formula was in vogue
E for many years before the Company gave a Notice of Change under Section
9A of" the l.D. Act sometime in 1976. The company had entered into
settlements in 1979 and 1983 with a section of the workmen whereunder it
had agreed to continue the existing dearness allowance formula at certain
levels of salary. It is unnecessary to go into the details in regard to the said
F
settlements but it would be sufficient to say that the extant scheme provided
neutralization at the lowest level varying between 95% and 100% whereas
for those drawing higher pay the neutralization was much more than
ordinarily granted to that class of employees. The main justification for
imposition of a ceiling on dearness allowance payable to workmen drawing
G
a basic salary exceeding Rs. 500 per month was that it exceeded what other
comparable companies paid by way of dearness allowance to those whose
basic wage exceeded Rs. 500 per month. The Tribunal noted that in such
comparable companies, having no ceiling on VOA, the percentage of
dearness allowance was quite low and, therefore, it did not result in any
distortion in th: wage structure. The learned Single Judge while examining
H
the impact of the dearness allowance formula on the wage structure
HINDUSTAN LEVER LTD. v. B.N. DONGRE [AHMADI,J.)
229
pointed out that the emoluments of workmen exceed the emoluments· A
received by the Junior Executive staff of the Company notwithstanding the
fact that the latter are promotion posts. Due to this reason workmen are
unwilling to accept promotions as that would result in a shrinkage in their
total emoluments. Such a situation, points out the learned Single Judge, is
not conducive to efficient working of the company. In this view of the
matter the learned Single Judge upheld the Award insofar as it placed a
ceiling on dearness allowance as explained earlier. It also upheld the
Tribunal's decision making the same retrospective w.e.f. 1.10.1979.
It may be mentioned that the Tribunal while placing a ceiling on
dearness allowance granted an upward revision in the wages. One of the
Justifications for the upward revision of basic salary was the placement of
B
c
a ceiling on dearness allowance, vide paragraph 53 of the Award. The
second reason was that the basic wage paid to workmen in TOMCO was
higher at the maximum levels and, therefore, there was justification for
increasing the maxima of the scales applicable to each category of workmen D
of the Company. In that view of the matter the Tribunal revised the basic
wage of the workmen belonging to C-1 to C4 categories and T-1 to T-4
categories as is evident from paragraph 53 of the Award. The revised wage
structure was also brought into force from 1st october, 1979. It will thus be
seen that the placement of a ceiling on dearness allowance had a direct
nexus to the Tribunal revising the salary structure of the aforesaid
categories of employees. Secondly the Tribunal also opted in favour of time
bound automatic promotion. The other demands conceded by the Tribunal
have no direct bearing on the question of placement of a ceiling on
dearness allowance and, therefore, need not be adverted to. The learned
Single judge while affirming the Tribunal's decision in regard to placement
E
F
of a ceiling on dearness allowance granted stagnation increment in lieu of
the Tribunal's formula in regard to time bound automatic promotion. It
will thus be seen that over and above the upward revision of the salaries
sanctioned by the Tribunal, the learned Single Judge granted stagnation
increment as a substitute for the automatic promotion scheme introduced G
by the Tribunal. The grant of stagnation increment, therefore, it is contended has a direct nexus to the ceiling on dearness allowance.
The Division Bench of the High Court upheld the learned Single
Judge's .view that time bound automatic promotion would adversely affect H
SUPREME COURT REPORTS (1994) SUPP. 2 S.C.R.
A
merit and, therefore, upheld its substitution by stagnation increment. It
disapproved of the ceiling on dearness allowance and summed up its
conclusion in that behalf in paragraph 42 of the Judgment as under :
B
c
D
'42. To sum up, the present dearness allowance system, as shown
above, does not result in over-neutralisation of the cost of living
index at any level of the income group. It maintains tapering scale,
though not a steeply declining one. The system also does not result
in distortion of total incomes either of the distortion of the
workmen inter se or between the workmen and their superiors,
namely, the executive staff. The Company does not plead any
financial inability. The industry-cum- region formula does not
warrant its replacement. There are no other compelling reasons
why the existing system which is beneficial to the workmen should
be replaced by the new one which is less beneficial to them and
which would result in steep decline in their incomes they would
otherwise gain. It is a well recognized principle of industrial
adjudication that the Courts, Wage Bodies and the Industrial
Adjudicators should not tinker with the existing benefits available
to the workmen unless it becomes unavoidable and obligatory to
do so. The ComP.any has failed to make out any such case."
E
However, in regard to the upward revision of wages it felt that the issue
should go back to the Tribunal for a de nova consideration whether in view
of the rejection of the management's demand. for ~ ceiling on dearness
allowance, upward revision of wages was any rr.ore justified. This is how
the Division Bench concluded in paragraph 48 of its judgment :
F
G
H
"48. We have commented upon the approach of the Tribunal and
the leaned Judge by observing that to the extent that they have
mixed up the considerations for increasing the wage scale with
those for fixing the dearness allowance, they have committed an
error apparent on the face of the record. It cannot also be gainsaid
that one of the main considerations, which has weighed with the
tribunal, while introducing the revised pay-scales is that it was
introducing the ceiling on dearness allowance, for those earning
salary above Rs. 500 per month. In fact, as pointed out earlier,
what the Tribunal has done is to give by way of some increase in
the' maximum of the pay scale, particularly to those in category
/
-
HINDUSTAN LEVER Lffi. v. B.N. DONGRE[AHMADI,J.)
231
C-3, C-4 and T-3 and & T-4, what it has taken away from them A
by reduction in dearness allowance. Thus both the revision of salary
and introduction of the new dearness allowance system are interlinked. Since we are setting aside the Award with regard to the
dearness allowance and directing the continuation of the existing
dearness allowance system, it is only fair that we remand the matter
to the Tribunal to consider the case for revision of wage scales
afresh independently and irrespective of the change in the dearness
allowance system which was proposed by it. We are aware that this
would involve prolongation of the litigation between the parties.
But in the circumstances it is unavoidable. We, therefore, set aside
B
the Award with regard to the revision of wage scales and remand C
the demand of the workmen for the revision of wage scales to the
Tribunal for fresh consideration, in the light of what we have stated
hereinabove.
11
The issue of upward revision of wages was, therefore, remanded to the
Tribunal in the aforestated circumstances.
D
After the matter went back to the Tribunal, the Tribunal went into
the question whether or not an upward revision of wages for the clerical
and technical staff was called for. On the question of financial capacity of
the employer-company it rightly concluded that the financial position of
the Company was sound and the Company was in a position to bear an
additional financial burden. On this point there was no controversy even
before us. Secondly it compared the extant wage structure with the wage
structure prevailing in comparable similar concerns and came to the conclusion in Paragraph 25 of its order dated 25th June, 1991 as under :
"25. To sum up, since 1970 there is no wage revision as such in
HLL Company in respect of the employees of C-1 to C-4 and T-1
to T-4 grades. As in 1970 there was a Reference, which has been
decided by the president, Shri Chitale in 1974 and Shri Bhojwani,
E
F
J. slightly modified it. Thus for allowing the period till today, there G
is no revision of wage scales. Admittedly the cost of living index
has increased from 1400 to 2900 and in September, 1990 it is 4524.
Considering this, it is clear that there is justification for the wage
scales, as demanded by the workmen."
Partly allowing the Reference the Tribunal revised the wage scales H
A
B
c
D
E
F
232
SUPREME COURT REPORTS [1994) SUPP. 2 S.C.R.
w.e.f. 1st October, 1970 as under :
Clerical
Modified Demand
C-1
160-15-445
C-2
211-18-553
C-3
220-20-620
C-4
260-22-700
Technical Grade
..
T-1
200-17-523
I
T-2
250-20-630
T-3
270-22-710
T-4
320-25-820."
It is against this order of the Tribunal in Reference No. 123/77 that Special
Leave Petition 14558-59 of 1991 came to be•preferred.
Against the aforesaid decision of the Division Bench of the High
Court the Company approached this court seeking special leave to appeal·
under Article 136 of the Constitution. Pending grant of special leave an
ad-interim stay was granted against the implementation of the judgment of
the Division Bench. Ultimately this Court while granting special leave
vacated the ad-interim stay of the judgment of the Division Bench. The
Company, therefore, became liable to implement the award as modified by
the Judgment & order of the Division Bench. Despite the same the
workmen 'complained that the Company had failed to implement the
Award as Modified by the Division Bench.in regard to grant of stagnation
increment to those employees who had reached the maxima in their •
G pay-scales and were entitled to stagnation increment every alternate year
of their se'rvice from 1st October, 1979 and that the Company had refused
to pay tlie dues under the modified Award to those employees who had in
the meantime retired or left service of the Company.