# AHMEPABAD MILL OWNERS' ASSOCIATION ETC v. THE TEXTILE LABOU1t ASSOCIATION August 10, 1965

- **Citation:** [1966] 1 S.C.R. 382
- **Court:** Supreme Court of India
- **Decided:** 1965-08-10
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/ahmepabad-mill-owners-association-etc-v-the-textile-labou1t-association-august-3585
- **Pages:** 48

## Headnote

382
AHMEPABAD MILL OWNERS' ASSOCIATION ETC.
A
v.
THE TEXTILE LABOU1t ASSOCIATION
August 10, 1965- -- - - -
[P. B. GAJilNDRAGADKAR, C.J., K. N. '\VANCHOO,
M. HIDAYATULLAH AND V. RAMASWAMI, JJJ
The Bom6ay Industrial Relations Act (11 of 1947), ss. 42 and 73Payment of dearness allowance based on cost of living index-Principles.
After the 2nd World War broke out the
industrial
employees at
Ahmedabad, who had organised themselves as the Textile Labour Association (Respondent herein) raised a demand for payment of dearness
allowance to meet the cost of living which had shot up as a -result of the
War, and the demand became the subject-matter of arbitration and .:in
award by the Industrial Court at Boμibay.
As a result of petitions filed
by the Parties· and references made to it, the Industrial Court had been
giving directions, from time to time, regarding the payment of dearness .
allowance awarded, on the basis of cost of living index number,
%-1th
1926-27 as the base year. In the Second Five Year Plan, the Planning
Commission recommended that the series of cost of living indices should
be revised, and accordingly, the L'libour Bureau and the Central Statistical
Organisation of the Government of India undertook family liYing surveys
in 1958-59.
One of the centres chosen was Ahmedabad and the Govornment of India began ·to publish consumer price index number for the city
of Ahmedabad from 1960 with 1960 as the b.Se year. The Government
of India also advised the State Government to remove various anoma1ies
~n the State series of the 'price index number and publish a new series
linking the State series with that of Government of India, with 2.98 as the
linking factor.
The
1 Government of Gujarat set up an expert Committee
to advise it on the question and. that Committee made reconlmendations
for the removal of anomalies and also suggested 3.17 instead of 2.98 as
the linking factor.
In November 1963, the Government accepted the re·
commendations for removing the anomalies and adjusted the consunler
price index nfunber, and the appellants paid the dearness allowahce according to the adjusted consumer price index· number under protest. In
February 1964, the Government of Gujarat announced its decisiqn-. -~to
adopt the linking factor at 3.17. The appellants were. ,not willing 'to pay
dearness allowance according to the converted price in'dex number in spite
of· a representation by the employees, and, S'6, 11ie dispute \Vas referred to
the lndUS1trial Court under s. 73 of the Bombay Industrial Relations Act,
1946. The Industrial Court decided th~t ihe appellants should pay dearness allowance to their employees for .fhe month of March 1964 am! for
subsequent months on the consumer price index numbers for Abmeaabad
published by the State Government since February 1964 by using the
index numbers in the series for Ahmedabad
compiled by the Labour
B'ureau at Simla, and the linking factor of 3.17 adopted for linking that
series to the State series with the old base, and gave directiOns as to the
manner of paying the dearness allo\vance.
In their appeal to this Court,
the appellants contended that :
( i) the reference was invalid because, before making the reference to re·
quirements of s. 42, which prescribes the procedure which has to be followed by the employer or the eillployee if either of them wants a ch:inge
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MILL OWNERS' ASSN. V. LABOUR
383
to be effected in the tenns of the existing award, had not been complied
with; (ii) the Industrial Court erred in overruling their contention that the·
new survey suffered from two major infirmities, (a) inadequacy of the
sample size, and (b) impropriety of the method of inten·iew adopted _by
the investigators; (iii) the linking factor of 3.17 was improper; and (1v)
the Industrial Court wa• not right in coming to the conclusion that the
additional burden which its award would impose upon the
appetiants.
would not be beyond their financial capacity.
HELD : (i) The dispute mus

## Text

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382
AHMEPABAD MILL OWNERS' ASSOCIATION ETC.
A
v.
THE TEXTILE LABOU1t ASSOCIATION
August 10, 1965- -- - - -
[P. B. GAJilNDRAGADKAR, C.J., K. N. '\VANCHOO,
M. HIDAYATULLAH AND V. RAMASWAMI, JJJ
The Bom6ay Industrial Relations Act (11 of 1947), ss. 42 and 73Payment of dearness allowance based on cost of living index-Principles.
After the 2nd World War broke out the
industrial
employees at
Ahmedabad, who had organised themselves as the Textile Labour Association (Respondent herein) raised a demand for payment of dearness
allowance to meet the cost of living which had shot up as a -result of the
War, and the demand became the subject-matter of arbitration and .:in
award by the Industrial Court at Boμibay.
As a result of petitions filed
by the Parties· and references made to it, the Industrial Court had been
giving directions, from time to time, regarding the payment of dearness .
allowance awarded, on the basis of cost of living index number,
%-1th
1926-27 as the base year. In the Second Five Year Plan, the Planning
Commission recommended that the series of cost of living indices should
be revised, and accordingly, the L'libour Bureau and the Central Statistical
Organisation of the Government of India undertook family liYing surveys
in 1958-59.
One of the centres chosen was Ahmedabad and the Govornment of India began ·to publish consumer price index number for the city
of Ahmedabad from 1960 with 1960 as the b.Se year. The Government
of India also advised the State Government to remove various anoma1ies
~n the State series of the 'price index number and publish a new series
linking the State series with that of Government of India, with 2.98 as the
linking factor.
The
1 Government of Gujarat set up an expert Committee
to advise it on the question and. that Committee made reconlmendations
for the removal of anomalies and also suggested 3.17 instead of 2.98 as
the linking factor.
In November 1963, the Government accepted the re·
commendations for removing the anomalies and adjusted the consunler
price index nfunber, and the appellants paid the dearness allowahce according to the adjusted consumer price index· number under protest. In
February 1964, the Government of Gujarat announced its decisiqn-. -~to
adopt the linking factor at 3.17. The appellants were. ,not willing 'to pay
dearness allowance according to the converted price in'dex number in spite
of· a representation by the employees, and, S'6, 11ie dispute \Vas referred to
the lndUS1trial Court under s. 73 of the Bombay Industrial Relations Act,
1946. The Industrial Court decided th~t ihe appellants should pay dearness allowance to their employees for .fhe month of March 1964 am! for
subsequent months on the consumer price index numbers for Abmeaabad
published by the State Government since February 1964 by using the
index numbers in the series for Ahmedabad
compiled by the Labour
B'ureau at Simla, and the linking factor of 3.17 adopted for linking that
series to the State series with the old base, and gave directiOns as to the
manner of paying the dearness allo\vance.
In their appeal to this Court,
the appellants contended that :
( i) the reference was invalid because, before making the reference to re·
quirements of s. 42, which prescribes the procedure which has to be followed by the employer or the eillployee if either of them wants a ch:inge
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MILL OWNERS' ASSN. V. LABOUR
383
to be effected in the tenns of the existing award, had not been complied
with; (ii) the Industrial Court erred in overruling their contention that the·
new survey suffered from two major infirmities, (a) inadequacy of the
sample size, and (b) impropriety of the method of inten·iew adopted _by
the investigators; (iii) the linking factor of 3.17 was improper; and (1v)
the Industrial Court wa• not right in coming to the conclusion that the
additional burden which its award would impose upon the
appetiants.
would not be beyond their financial capacity.
HELD : (i) The dispute must be treated as an industrial dispute, notwithstanding the fact that s. 42 had not been complied with, and the
Industrial Court was right in coming to the conclusion that the objection
raised by the appellant against the competence of the reference was n1iS··
conceived.
[398 F; 399 E]
The Act is a con1prehensive piece of legislation and n1akes elaborate
provision for the regulation of relations between employers and employees
and for tlie settlement of disputes between them.
Section 73 deals with
. the powers of the State Government to make a reference and as such, it
could not have been intended that those powers are to be controlled by
s. 42.
Section 42 provides that, if an employer or employee intenn< to
effect any change in respect of certain industrial matters, he will have·- to·
give notice of such intention to the representative of the employees or tlae·
employer respectively. The section can have no application to cases where
the State Government itself wants to make a reference.
The meaning of
the non-obstante clause with which s. 73 opens also unambiguouslv indi--
cates that the power of the State Government to make a reference· is not
controlled by any other provision in the Act. The definiiion of "indusM·
trial dispute" ins. 3(17) is so wide and comprehens-ive, that, even if an•
award is subsisting between the parties, if a difference aris-es betweeri them,_
the said difference would amount to an industrial dispute for the purpose
of s. 73 and a notice of change need not be given, either by the employer
or by the employee.
It
is true that the power conferred on the State
Government to make a reference is nOt absolute or unqualified, but could
be exercised only if one or the other of the conditions ~pccified in sub-ss....
(1), (2) or (3) of s. 73 is satisfied.
But once the State Government
ls satisfied, its power to make a referernce is not limited to cases where
notice o.f change has been given by the partie9 under s. 42, On principle
also, the _conferment of powe~ on the State, Governn1ent is fu1ly justified ..
because, 1f as a result of a dispute between the e:mployer and his emplo~
yees, a serious outbreak of disorder, or a breach of public peace is likt'ly·
to occur, or a serious or prolonged hardship to a large section of the
community is likely to ~e caused, ?r the indu_stry concerned is _likely
to be affec~~d adversely, it would be idle to requ:ie that even in the face·
. of such serious danger, the procedure prescribed by s. 42 must be fOllowed
before reference can be made under s. 73. [396 D-F; 397 E-H; 398 C-E, G;
399 C-B]
(ii) (a) : The appellants were not justified in contending that the
inadequacy of the size of the sample in relation to the universe of the
'vorking class families vitiated the enqu:ry. [414 HJ
From the Report of Family Living Survey among Industrial v..'orkers
.at Abmedabad, 1958-59, it appears that the survey and field work was
the result of the cooperation of several expert institutions, official :-i:s well
as non-official. and w·as based on accepted principles and methods.
The
size of the sample was determined in the light of the permissible margin
of error and was selected by the application of scientific sampling techniques and
according to the principle that it is the quality of survey
that is more important, not so much the size of the sample.
If the quality
of investigation has improved, and the method of working out the sample
J84
SUPl.BMll COUl.T llBPOl.TS
[1960] I S.CN.
sunocy has made very great progrw, then, it would not be correct 10
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•ay that because !he size of the sample in the survey was smaller a.•
rumpared «> the sire of the sample taken in 1926-27, the inadequacy of
the size on the subsequent occasion introduces an infirmity in the investigation itself. [409 II; 410 G; 412 D, E, G; 413 D-EJ
(b) The Industrial Court was right in rejecting the appelbnts' contention that the impugned survey and the index constructed as a re5Ult
of it, suffered from the infirmity that ::le investigation v..·a.s conductl.XI in
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the 8UrYey by the intefView method. (416 DJ
Having regard to the fact that a majority of working class population
in India is illiterate the method of interview is the only method which can
he adopted.
Besides, according to expen opinion, the interview method•.
if prorerly aJopled gives belier results than the alternative method ~f
supplymg account books and written questionnaire. (416 A-CJ
(iii) A' the ap!'Cllants had not p!a=l before the Industrial Court any
material to justify their contention that for determining the linking factor,
!he behaviour of prices for two or th= years should have been studied.
it could not be said that the Industrial Court committed an error in upholding the decision of the Government of Gujarat that the linking factOr
should be 3.17. (419 F-G; 420 BJ
Tbe lndr•trial Court had to cboooe between two courses. One was to
work out an entirely new scale of basic wages founded not on the pr~
war level of 1939 but on the cost of living of 1960 as the base year and
to award dearness allowance thereafter.
The Industrial Court thought
that to adopt that course might conceivably create a large number of new
.problems, disturbing industrial peace and would be outside its terms of
reference.
Therefore, it approved the other course of linking the State
seri~ with the new 9Cries to maintain continuity, which was the method
adopted by the Government of Maharashtra also. (418 E, G; 419 Bj
(iv) The appellants had failed to substantiate the contention that the
additional burden would be beyond their capacity to pay. [429 E]
Tbe claim of the employees for a fair and higher wage is undoubtedly
based on the concept of social justice, and if employees are paid helter
wa~eo which would enable them to live in comfort and discharge thclr
obligations to the membcn of their familie-5 in a reasonable way, their
work would show an appreciable increase in efficiency. On the other hand.
industrial adjudication must take into account the problem of the additional
burden which such wage structure would impose UPon the employer and
consider whether the employer can reasonably be called upon to bear such
burden. The task of consrructing a wage structure must be tackled oo
the basi• that such wage structure •hould not be changed from time to
time. It is a long.range plan and in dealing with the problem, which b
difllcult and delicate the financial position of the employer and the future
prospects of the industry and the additional burden which may be impooed
on the consumer must be carefully examined.
A broad and overall view
of the financial position of the employer mU5t be taken into account and
attempt should always be made to reconcile the natural and just claims of
the employees for a fair and hi~her wage with the capacity of the employer to pay it, and in determining such capacity, allowance must be
made for a legitimate desire of the employer to make a reasonable prollt.
Unusual profit or loss should not be allowed to play a major role.
It
ii true that normally, once a wage structure is fixed employees .are reluctant
to face a reduction in the contemt of the wage packet: but hke all otha
problems associated ~th industrial adjudication, the decision of the pro.
blet'n must also be based on the major consideration that the confticting
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MILL OWNERS' ASSN. V. LABOUR
385
claims of labour and capital must be harmonised on a reasonable basis;
and so, if it appears that the employer cannot really bear the burden of
the increasing wage bill, indusuial adjudication cannot refuse to examine
hi• case and should not hesitate to give him relief if it is satisfied that
if ouch relief is not given, the employer may have to close down his
business. The last principle, however does not apply to cases where the
wages paid to the employees are no better than the basic minimum wage.
If what the employer pays to his employees is just the basic subsistance
wage and if he cannot a!Iord to pay it, he would not be justified in carrying on his industry. Since the wages paid to the textile employee• at
Ahmedabad cannot be regarded as sub>istence wages or bare minimum
wages, it would not be open to the re>pondent to contend that the appellants must pay the wages whether the employers can aJiord to pay them
or not. If it is shown that the appellants cannot bear the burden and
that the implementation of the award would inevitably have extremely prejudlcial effect upon the continued existence of the industry itself, there
would be justification for revising the scale of dearness allowance.
Jn
considering the financial position of the appellants it would not be appropriate to rely unduly on the profitability ratio which has been adopted by
the Bulletin issued by the Reserve Bank of India dealing with the cotton.
textile industry, or other single-purpose statements produced by the parties ..
Indusuial adjudication should not lean too heavily on such statements.
whilst attempting the task of deciding the financial capacity of the employer
in the context of the wage problem. Taking a broad view which emerged
from a consideration of all the relevant facts, there is little doubt that
the productivity of the industry is increasing and that the demand
foc textile products will never decrease in future.
It is true that the
te><tile industry at Ahmedabad has been leaning very heavily on borrowings, but that is a peculiar feature of the extile industry at Ahmedabad .
It helps the development of the industry and so the extent of borrowings.
cannot be pressed into service for the purpose of showing that the financial
position of the industry is unsatisfactory. On the contrary, the harmonious:
relations which have consistently subsisted between the employer and thi>
employees, would help the textile industry in Ahmedabad in its prospects
IO'Wllrds speedy economic growth.
[420 C-E, F-G; 421 A-C, E-G, H;
422 C, G-H; 426 B, F; 427 G-H; 428 A, D; 429 DJ
CIVIL AP PELLA TE JURISDICTION : Civil Appeals Nos. 167 tC>
173, 537 and 538 of 1965.
Appeals by special leave from the award dated October 26,
1964 of the Industrial Court Gujarat in Reference (I.C.) No. 67
of 1964.
M. C. Setalvad, R. J. Ko/ah, I. M. Nanavati, J. B. Dadachanji, 0. C. Mathur and Ravinder Narain, for the appellant (in
C.A. No. 167 of 1965).
R. J. Kolah, I. M. Nanavati, J. B. Dadachanji, 0. C. Mathur
and Ravinder Narain, for the appellants (in C. As. Nos. 168 and
170 of 1965).
N. A. Palkhivala, I. M. Nanavati, J.B. Dadachanji, 0. C.
Mathur and Ravinder Narain, for the appellants (in C. As. Nos.
169 and 173 of 1965).
I. M. Nanavati, J.B. Dadachanji, 0. C. Mathur and Ravinder
Narain, for the appellants (in C. As. Nos. 171and172 of 1965).
386
SUPUMB COUJlT REPORTS
[ 1966) l S.C.R.
J. B. Dadaclranji, 0. C. Mathur and Ravinder Narain, for the
appellants (in C. As. Nos. 537 and 538 of 1965).
S. R. Vasavada, N. M. Barot, N. fl. Shaiklr, R. M. Shukla.
A .. N. Buch and D. T. Trivedi, for the respondents.
C. K. Daplztary, Attorney-GC'11eral, K. L. Tlathi and B. R. G. K.
A char, for intervener N'o. I.
G. B. l'ai, J. B. Dadachanji, 0. C. Mathur and
Raviiufrr
Narain, for intervener No. 2.
G. Ramanujam. for intervener No. 4.
B. Narayanaswami,
J. B. Dadachanji,
0. C. Mathur and
Ravi11der Narai1~. for intervener No. 5.
I. M. Nanamti, J.B. Dadac/umji, 0. C. Mathur and Ravinder
Narain, for intervener No. 6.
II. K. Sowani and K. R. Chaudlwri, for intervener No. 7.
The Judgment of the Court was delivered by
Gajendrogadkar, CJ. Tbis is a group of seven appeals which
arise from an industrial dispute between the
~ppcllants, the
Ahmedabad Millowncrs' Association, Ahmedabad. and 67
employers on the one hand. and the respondent, the Textile Labour
Association. Ahmcdabad, on the other. This dispute was referred
by the Government of Gujarat to the Industrial Court, Gujarat,
under section 73 of the Bombay Industrial Relations Act, 1946
(No. XI of 1947) (hereinafter called 'the Act').
In making the
order of reference. the Government stated that 1t was satisfied
that the industrial dispute in question was not likely to be settled
by oth:!r means. The dispute itself consisted of three questions.
These questions have been thus stated in the reference :-
"(!) Whether under the award of the Industrial
Court, Bombay. dated the 2nd March, 1950, in Reference (IC) No. 189 of 1949 (as suhsequcntly modified)
read with award of the Industrial Court date<l the 27th
April, 1948, in Revision Petition No. Misc. 1 of 1947,
the Ahmcdabad Millowners' Association and the emploers mentioned in the Annexure arc bound to pay dearness allowance to their employees on the Consumer Price
Index )';umbers for working class for Ahmedabad published by the State Go"ernment since February, 1964,
by using the index numbers in the series for Ahmedabad compiled hy the Labour Bureau, Simla, and the
linking factor of 3.17 adopted for linking that series to
the State series with the old base;
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MILL OWNERS' ASSN. v. LABOUR (Gajendragadkar, C.J.)
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(2) If not, whether the said Ahmedabad Millowners' Association and the employers mentioned in the
Annexure should pay dearness allowance to their
employees for March, 1964 and subsequent months in
terms of the aforesaid awards, by treating the index
numbers for working class for Ahmedabad published by
the State Govenunent since February, I 964, as the index
numbers in the State series compiled on the basis of the
family budget survey made in 1926-27;
(3) If not, how the dearness allowance to the aforesaid employees for March 1964 and onwards should be
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paid on the index numbers for Ahmedabad published by
the State Government since February, 1964".
The Industrial Court has answered the first question in favour
of the appellants, whereas the two remaining questions have been
answered in favour of the respondent. In the result, the appellants
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have been directed to pay dearness allowance to their employees
for the month of March, 1964 and for subsequent months 0n
the consumer price index numbers for working class for Ahmedabad published by the State Government since February, 1964,
(by using the index numbers in the series for Ahmedabad comE
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piled by the Labour Bureau, Simla, and the linking factor of 3.17
adopted for linking that series to the State series with the old
base) at the rate of 2.84 pies per day for rise of each point in
the cost of living index number over the pre-war figure 73. The
Industrial Court has further directed that as per the award in
Miscellaneous Application (IC-G) No. l of 1960, 75% of the
average dearness allowance of the first six months of 1959, i.e.,
Rs. 63-15-9 per month of 26 working days, shall be consolidated
with the basic wage and the difference between the dearness allowance as worked out as indicated and the said sum of Rs. 63-15-9
shall be continued to be paid as dearness allowance.
The other
terms and conditions in regard to payment of wages, including the
dearness allowance, shall continue as under the existing award.
The Industrial Court has made it clear that these directions should
be given effect to from 1st of January, 1965 and the difference
between what is paid and what has become payable under the
present award shall be paid on or before April 30, 1965.
It
appears that before the Industrial Court an agreement had been
reached between the Fine Knitting Co. Ltd. of Ahmedabad and
the Textile Labour Association, and the award has, therefore,
provided that the directions issued by it shall apply only to the
spinning department of the Fine Knitting Co. and not to the
388
SUPREME COURT REPORTS
(1966] I S.C.R.
hosiery department. It is against this award that the appellants
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have come to this Court by special leave.
On January 5, 1965,
while granting special leave to the appellants. this Court directed
that the statements of the case should be dispensed with and the
appeals be listed for hearing in the week commencing March 8,
1965. That is how these appeals have now come for final disposal
before us.
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Before dealing with the points raised by the appellants in these
appeals. it is necessary to set out somewhat elaborately the previous history of the present dispute.
lbc story about the payment of dearness allowance to textile industrial employees at
Ahmcdabad takes us back to the time when the Second World c
War broke out in September, 1939.
As is well-known, as a
result of the said War, the cost of living shot up; and in consequence, the industrial employees at Ahmedabad who had organised themselves as the Textile Labour Association, Ahmedabad,
raised a demand for payment of dearness allowance. This demand
became the subject-matter of arbitration by the Industrial Court
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at Bombay (Case No. 1 of 1940). The Industrial Court had to
consider, inter a/ia, two major questions; the first was as to what
was the extent of the rise in the cost of living consequent upon
the Second World War; and the second was as to the extent and
manner in which the said rise in the cost of living should be
neutralised by the payment of dearness allowance. The Industrial
C'..ourt examined the matter at great length and came to the conclusion that for the purpose of determining the quantum of dearness allowance to be paid to the employees, it would be reasonable
to rely on the working class budget inquiry which had been conducted by the Government of Bombay between August, 1926 and
July, 1927.
Another similar inquiry had been conducted by the
same Government in 1933-35, but the Industrial Court preferred
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to base its conclusions on the first inquiry. On the basis of the
cost of living index taken as I 00 for the base year 1926-27, the
index for August 1939 which stood at 73 was accepted as datum
index, so that the rise in cost of living over the datum index of
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73 had to be neutralised by payment of dearness allowance to the
employees.
Having reached this conclusion on the first question, the Industrial Court examined the problem as to the extent and method by
which the rise in the cost of living should be neutralised. On this
question, its conclusion was that for 11 points rise (which is
equivalent to a rise of 15%) in the cost of living for the month
of December, a cash relief to the extent of 10 per cent of the
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MILL OWNERS' ASSN. v. LABOUR (Gajendragadkar, C.J.)
389·
A average wage, i.e. Rs. 3-8-0 per employees, should be awarded
for the month of December and a similar relief proportionately
determined should be awarded for other months.
It was urged
bdore the Industrial Court that relief could be granted to the
employees in kind rather than in cash; but this contention was
negatived by the Court, though it expressed a hope that the
B employers should start cost price grain shops at convenient centres
for the benefit of the employees. That, in substance, is the result
of the proceedings in Case No. 1 of 1940. It is with the decision
of this dispute that the story about the payment of dearness allowance under an award began in Ahmedabad in respect of textile
Jabour.
It appears that as a result of this award, 66-2/3 per cent
C neutralisation was allowed.
This award continued to be in operation till September, 1941.
On August 12, 1941, an agreement was entered into between the
appellants and the respondent by which it was resolved that the
dearness allowance to be paid to the employees in the member
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Mills of the appellant Association be raised by 45 per cent from
the month of July, 1941, and in accordance with this agreement,
an award was made by the Industrial Court on September 15,
1941. As a result of this award, neutralisation came to be effected
to the extent· of 96% on the average wage over the pre-war cost
of living index of 73 in August, 1939, and to that extent the
E respondent gained. We have already noticed that the neutralisation which was effected by the earlier award was 66-2/3 per cent.
Two years thereafter, the appellant Association filed a petition
(No. 1 of 1943) for a substantial reduction in the quantum of
dearness allowance.
It urged that in the year 1943, the textile
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industry at Ahmedabad had suffered considerable loss in its
profits, and so, it was necessary that the dearness allowance fixed
by the consent award should be reduced.
When the matter was
considered by the Industrial Court, it was discovered that the
claim made by the appellant Association was not substantiated
by sufficient or satisfactory data in the form of published balanceG sheets for the year 1943. The Industrial Court, therefore, refused
to interfere with the award, but permitted the appellant Association to raise the same dispute in April, 1944 if it thought necessary
to do so.
No such application was, however, made by the
appellant Association in 1944, with the result that the consent
award passed on September 15, 1941, continued to be in operaH
tion.
The said consent award had provided that the member mills
were to pay the dearness allowance prescribed by it till the termi-
390
SUPREME COURT
REPORTS
[1966] I S.C.R.
nation of the Second World War; and so, as soon as the war came:
to an end, the member mills stopped the payment of dearness allow-
.ance with effect from M<ay 8, 1945.
The respondent then filed
Petition No. I of 1945 before the Industrial Court asking for a
direction against the appellant Association for pay1n~n1 <'f :he
deame!>.;
allowance on
t~c same scale as wa; then
prevailing for three montl1s after May 8, 1945.
This prayer "''L'
granted by the lndu;trial Court. That is how matters stood as a
result of the order passed on Petition No. I of 1945.
l\.kJnwhilc, the respondent gave a notice of change on May 20.
1945 and demanded continu<mce of the payment of dearness allowance until the working class cost of living index for Ahmedabad
stood above 73. It suggested that the quantum of dearness alllowance should be related to the cost of living index as awarded by
the lndtblrial Court Award dated tile 26th April, 1940, and
revised by the subsequent Award dated the 15th September. 1941.
While making this demand, the respondent made it clear that this
demand was made without prejudice to the claim of the employees
for a revision in the entire wage structure.
It appears that during
lhe course of these proceedings, it was urged bdor~ the Industrial Court that the rise in the cost of living should he wmputed
not with reference to the index figure of 73 in August, 1939, but
with reference 10 the figure of I 00 in 1926-27.
This contention
was, however, rejected by lhG Industrial Court. By its award, the
Industrial Court directed that neutralisation should be effected
to the extent of 76 per cent.
As a result of this decision, the
Court awarded Rs. 4 for 11 points rise in the cost of living
index.
In 1946, the respondent moved for the revision of the said
award (Revision Petition No. I of 1946).
By this revi>ion petition, the re-spondent claimed that tl1e rise in the cost of living
should be neutralised fully instead of 76%, and this claim was
based on the allegation that the profits of the textile industry had
maintained a high level and the reduction in the extent of neutralisation from 96% to 76% in the award of the previous year had
adversely affected the employees and they had in fact begun to
leave the industry.
It may be pointed out that on all these occasions, the appellant Association urged before the Industrial Court
that the average monthly income and expenditure of the textile
employees in Ahmedabad left surplus with them and the need for
neutralising the rise in the cost of living was not as much as was
sought lo be made out by the respondent.
This contention has,
however, been consistently rejected by the Industrial Court. Even
so, the claim made by the respondent for increasing the extent of
A
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MILL OWNERS' ASSN. v. LABOUR (Gajendragadkar, C.J.)
391
A neutralisation was rejected by the Industrial Court, liberty being
reserved to both the parties to approach the Court with a request
for continuance or revision of the allowance at the end of seven
months.
B
c
D
As soon as seven months expired, the respondent filed a Revision Petition (No. 1 of 1947) before the Industrial Court on
March 8, 1947.
By this petition, the respondent renewed its
claim for an increase in the dearness allowance. Meanwhile, the
minimum wage for textile employees in Bombay had been fixed
at Rs. 30 and dearness allowance was awarded to them with the
object of neutralising the rise in the cost of living to the extent of
90% on the minimum wage of Rs. 30. Taking advantage of the
fact that the minimum wage for textile employees in Bombay had
been fixed at Rs. 30, the appellant association urged that there was
no occasion to increase the rate of dearness allowance because the
wages of the employees had already been increased under the
standardization scheme which had been adopted in Ahmedabad.
Alternatively, the appellant Association contended that if the Court
was inclined to revise the dearness allowance, it should follow the
same formula as in Bombay and provide for neutralisation at
the most at 90% on the minimum wage of Rs. 28 in Ahmedabad.
This contention was, however, rejected by the Industrial Court.
By its award, the Court directed that the rise in the cost of living
E
over pre-war level of 73 in the case of the lowest paid employee
should be neutralised to th_e extent of' l 00% and all employees
earning Rs. 150 or less a month should be paid at a flat rate. On
arithmetical calculation, it was found that this rate came to 2.84
pies per day for rise of each point in the cost of living index
F
number over the pre-war figure.
The appellant Association issued a notice on October 31,
1949, purporting to terminate this award with effect from 1st
January, 1950.
The ground for terminating the award set out
by the appellant Association in its notice was that the textile
industry in Ahmedabad was passing through a crisis and that cerG tain mills were completely closed down while others were partially
closing down. It appears that about that time, the Central Government acting in pursuance of the recommendations made by
the Tariff Board, directed a 4% cut in ex-mill cloth prices; and
that, according to the appellant Association, led to a crisis in the
H
financial affairs of the textile industry at Ahmedabad. It was also
alleged in the notice that though the prices fixed were uniform,
Qte dearness allowance paid was not uniform and that the member
mills of the appellant Association were paying Rs. 15-4-0 more per
SUPREME
COURT REPORTS
(1966] I S.C.R.
month per employee in dearness allowance at Ahmedabad as
A
compared to that paid to the textile employees in Bombay.
Arithmetic:d calculations showed that as a result of this extra payment, the Ahmedabad mills had to bear an additional burden of
Rs. 238 lakhs in 1949 as compared to the burden borne by the
Bombay textile mills.
Before the notice thus issued by the appellant Association came
into force, the respondent gave a notice of change to the mills to
continue t<> ray the dearness allowance according to the existing
award; and since no settlement could be reached between the
parties, a reference was made to the Industrial Court. As a result
8
of these proceedings, however, neither party scored a victory, and c
the award directed that payment of the dearness allowance should
he made in accordance with the order.s passed in Revision Petition
No. 1 of 194 7.
Since the date when this order was made, the
terms of the award in Revision Petition No. 1 of 1947 have been
in operation between the parties.
Meanwhile, the Central Wage Board for the Cotton Textile
D
Industry was constituted.
One of the points which the Wage
Board had to consider was the demand made by the employees for
consolidating a part of the dearness aUowance in the basic wage.
The Wage Board recommended that 75% of the dearness allowance should be consolidated in the basic wage, and the remaining
E
25% should bear a flexible character. The Board also made other
recommendations which arc not relevant for our purpose.
In
consequence of the recommendation made by the Board as to
the consolidation of the dearness aUowance, an agreement was
reached between the appellant Association and the respondent,
as a result of which a joint application (No. I of 1960) was made
F
hy both the parties under s. I l 6A of the Act; and on this joint
application an award by consent was passed directing that 75%
of the average dearness allowance of the first 6 months of 1959
which is Rs. 63-15-9 p.m. of 26 working days should be con-
~olidatcd with the basic wage, and the balance of the dearnes.~
allowance should be paid as worked out on the existing basis.
That is how matters then stood between the parties.
It appears that about this time, there was a growing feeling
G
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amongst both the employers and the employees that the different
•
series of consumer price index compiled and published in India
were not very satisfactory and some of them had become obsolete.
H
In the Second Five Year Plan, it was, therefore, recommended
that it was desirable that steps should be taken simultaneously with
the undertaking of wage census to institute enquiries for the
-
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MILL OWNERS' ASSN. v. LABOUR (Gajendragadkar, C.J.) 393
A
revision of the present series of cost of living indices at different
centres. According to the recommendation made by the Planning
Commission Report, the Labour Bureau, Simla, and the Central
Statistical Organisation of the Government of India took steps to
conduct fresh family living surveys among working class and
middle class population respectively with a view to construct the
B
new series of consumer price index numbers.
The working class
&llrveys were conducted at 50 selected centres and the middle
class surveys at 45 centres, 18 centres being common to both. The
work of these surveys was commenced in the second half of 1958
and was concluded by September, 1959.
One of the centres
selected for this survey was Ahmedabad.
The Government of
c
India began to publish consumer price index number for the city
of Ahmedabad, having index number 100 for the base year 1960.
The publication of these series naturally raised the problem of
arriving at a linking factor between the present series published by
the State Government and the new series published by the GovemD ment of India.
The Government of India considered this problem and indicated that 2.98 would be a proper linking factor.
This figure was arrived at as a result of taking the annual average
of the monthly index numbers of the State series for 1960 which
then stood at 298. For the base year of 1960, the figure of the
new series was 100 and the linking factor was, therefore, taken
E at 2.98.
It then appeared clear that there were several anomalies in
regard to the collection of prices in the State series.
Some of the
items wlrich were specified in such series had ceased to exist,
whereas quotation for one major item, v(z., house rent allowance
bad been frozen for many years. After the Government of India
F
began to publish its new series, it advised the Government of
Gujarat to stop publislring its old series and publish the converted
index in its place. The Government of India thought that it would
be unjust to the employees if the conversion were allowed to take
place without removing anomalies of the State series.
G
Faced with this problem, the Government of Gujarat set up
an expert Committee under the Chairmanship of Dr. M. B. Desai.
The terms of reference of this Committee were thus formulated :-
H
"(1) to examine the validity of the submissions and
representations made to Government and to make
recommendations as to whether any readjustment
is
necessary in the existing series for Ahmedabad published by the State Government, and if so, what readjustment should be made;
394
SUPREME COURT REPORTS
[1966] I S.C.R.
(2) to consider how the new series of Consumer
Price Index Numbers for Ahmedabad should be linked
with the existing series, so readjusted if found necessary;
and in so considering, to take into consideration the
factor that the period of family budget enquiry on which
the new series for Ahmedabad is based is different from
the base period for the said new series".
The said Committee made a fairly exhaustive investigation, and
A
B
made two main recommendations.
The first
recommendation
•
involved an addition of 19 points in the overall price index in the
State series and the same was fixed at 317 instead of 298 as it
stood when the new series and its base period were decided upon. c
The other recommendation which it made was that the conversion
or the linking factor should be 3. 17 as against 2. 98 per point in
the new series.
D
The Government of Gujarat accepted the first recommendation and revised the index number for the month of November,
1963, by adding 19 points to the figure originally released by it
and stated that its existing series would be adjusted month to
month by the addition of 19 points for adjusting the index for
clothing and house rent groups as recommended by the Fxpcrt
Committee. In regard to the second recommendation, the
Government took the view that it was necessary lo continue publication of the current series to permit industry and Jabour time to
E
have necessary modifications in the existing agreements, settlements and awards made to link up the dearness allowance with
the new series published by the Labour Bureau, Simla. This decision was announced by the GO\ crnment by a Press Note on
January 31, 1964.
When this deci,inn of the Government of Gujarat was
announced, the appellant Association found that it entailed considerable additional hurdcn on the textile indmtry: even so, it
advised its member milb to P"Y the dearness allowance according
to the adjusted consu111cr pric,· index number hy '1dding 19 points
for the month of JanU<lr). 1964. under prote't. This protest was
expressed by th,· President of the ,\ppcllant Association by issuing
a prcs"i conltnuniquc critici~inμ the Governn1cnt for its unilateral
and hasty dcci,ion in the matl<'r.
On Fcbru;iry 29. I 964. the Government of Guj;irat issued
another Pre:;s Note hy which it accepted the second recommendation made by the Expert Committee to take the linking factor at
317 instead of 298. The Pre" Note shows that this decision was
reached by the Gmcrnment of Gujarat in acc,1rdance with the
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MILL OWNERS' ASSN. v. LABOUR (Gajendragadkar, C.J.) 39 5.
A
advice received from the Government of India. In consequence·
of this decision, the Government of Gujarat discontinued publication of the cost of living index number of its 1926-27 numbers
from January, 1964. This decision of the Government raised a
storm of protest from the appellant Association.