# _I\_ KILLICK NIXON LIMITED v. KILLICK & ALLIED COMPANIES EMPLOYEES UNION

- **Citation:** [1975] Supp. 1 S.C.R. 453
- **Court:** Supreme Court of India
- **Decided:** 1975-05-02
- **Case number:** Civil Appeal Nos. 734 & 735 of 1913
- **Bench:** H. R. Khanna, P. N. Bhagwati, P. K. Goswami
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/i-killick-nixon-limited-v-killick-allied-companies-employees-union-6536
- **Pages:** 16

## Headnote

Industrial Dispute-Fixation of ceiling on D-. A .-Principles.
The appellant-company wanted to introduce the following scheme of D.A .
• (
for its clerical staff and drivers.
Basic Pay slabs.
Jst Rs. JOO
2nd Rs.JOO
Rs. 201 to Rs. 500
Over Rs.500
Percentage Of
basic salary
(C.P.l. 441-450)
120
4~
30
25
Maxjn1um D.A.R'> 325
variation for
every 10 points
of C.P.I.
5%
2%
1%
Placing the ceiling of Rs. 325 on the D.A. was not acceptable to the
employees and a reference \vas made to the Indue'tirial Tribunal anp. the Tribunal removed the ceiling.
In appeal to this Court,
HELD:
'\Vhile the question of the desirability of ceiling on
D.A. was not in
issue in any references to Tribunals or appeals therefrom, referred to by the
45 3
A
c
D
E
"
parties, the question of imposing a ceiling on D. A. is not an absolutely alien
F
phenomenon. Although it might not have been the general practice, ceiling
was not rejected out of hand as irrational or un\just by unions in the course
of collective bargaining in the Bombay region. in which the head-office· of the
appellant is situated. In the case of the employees under 'the CeRtral Govern-
"'
ment also a kind of ceiling has been in vogue. [461F.G., 462A]
(I) The problem of imposing or removing a ceiling on D. A. has to be
viewed from the following among other important aspects :
(1) Condition of the wage scale prevalent in the company.
(2) Condition of the wage level pre~alent in the industry and the
region.
G
(3) The wage -packet as a whole of each earner in the company
with all ameni.ties and ·benefits and his ability and potency to
cope with the economic requirements of daily existence consistent with his status in society, responsibilities, efficiency at work
lI
and industrial peace.
·
( 4) The position of the company viewed in relation to other compa-
, rable concerns in the industry and the region.
(5) Peremptive necessity for full neutralisation of the cost of
living at the rock-bottom of wages· scale if at, or just above,
the subsistance level.
454
SUPREME COURT REPORTS
[1975] SUPP· S.C.R.
A
(6) The rate of n_eutraiisatio'n \vhich is being given to the employees in each salary slab.
B
c
D
E
(7) Avoidance of huge distortion of \Vage differentials taking into
reckoning all persons employed in the concern.
(8) Degree of sacrifice necessarv even on the part of workers in
general interest.
-
(9) The· compulsive necessity of securing social and distributive
justice to the workmen.
_
(10) Capacity of the company to bear the additional burden.
(11) Intere~t of national economy.
(12) Repercussions on other industries and society as a whole.
(13) The state of the consumer price Index at the time of the
decision.
( 14) Forebodings and possibilities in the forseeable future as far
as can be envisaged.
( 15) Price indices have now assumed menacing figures.
Any
problem regarding wage or D.A. has to be considered in that
• background and at the same time not losing sight
of
the
national economy.
[466E-H, 467A-C]
IL The '.removal of ·ceiling in the instant case is not justified even though
(i) the appellant company is a prosperous company with capacity to bea;
the additional financial burden if the ceiling is removed, and (ii) the consumer
price index has been soaring higher and higher; because : [465A-B, 4670]
(a) The unprecedented rise in the consumer price index produces
a steep rise in D.A.
[458H]
(b) The absence of ceiling on D.A. can thus result in curious anomalous situations wherein the pay packet of the clerical staff
would exceed the pay packet of junior executives which would
hardly be conducive to discipline, efficiency and effective exercise of control.
[463-GA]
F
(c) Although the appellant employs a total of 1142 workmen in
G
its va'fious factories and branches, the dispute relates to only
265 workers in the head-office.
A general problem like imposition of ceiling on D.A. in a company ca001ot be treated
on the statistical burden relevant only to a section of the
employees, [463C-E]
III. D.A. b

## Text

_Characters 0–39,689 of 42,247. This is a partial read: ask again with offset=39689 for what follows._

_I\_
KILLICK NIXON LIMITED
v.
KILLICK & ALLIED COMPANIES EMPLOYEES UNION
May 2, 1975
[H. R. KHANNA, P. N. BHAGWATI AND P. K. GOSWAMI, JJ.J
Industrial Dispute-Fixation of ceiling on D-. A .-Principles.
The appellant-company wanted to introduce the following scheme of D.A .
• (
for its clerical staff and drivers.
Basic Pay slabs.
Jst Rs. JOO
2nd Rs.JOO
Rs. 201 to Rs. 500
Over Rs.500
Percentage Of
basic salary
(C.P.l. 441-450)
120
4~
30
25
Maxjn1um D.A.R'> 325
variation for
every 10 points
of C.P.I.
5%
2%
1%
Placing the ceiling of Rs. 325 on the D.A. was not acceptable to the
employees and a reference \vas made to the Indue'tirial Tribunal anp. the Tribunal removed the ceiling.
In appeal to this Court,
HELD:
'\Vhile the question of the desirability of ceiling on
D.A. was not in
issue in any references to Tribunals or appeals therefrom, referred to by the
45 3
A
c
D
E
"
parties, the question of imposing a ceiling on D. A. is not an absolutely alien
F
phenomenon. Although it might not have been the general practice, ceiling
was not rejected out of hand as irrational or un\just by unions in the course
of collective bargaining in the Bombay region. in which the head-office· of the
appellant is situated. In the case of the employees under 'the CeRtral Govern-
"'
ment also a kind of ceiling has been in vogue. [461F.G., 462A]
(I) The problem of imposing or removing a ceiling on D. A. has to be
viewed from the following among other important aspects :
(1) Condition of the wage scale prevalent in the company.
(2) Condition of the wage level pre~alent in the industry and the
region.
G
(3) The wage -packet as a whole of each earner in the company
with all ameni.ties and ·benefits and his ability and potency to
cope with the economic requirements of daily existence consistent with his status in society, responsibilities, efficiency at work
lI
and industrial peace.
·
( 4) The position of the company viewed in relation to other compa-
, rable concerns in the industry and the region.
(5) Peremptive necessity for full neutralisation of the cost of
living at the rock-bottom of wages· scale if at, or just above,
the subsistance level.
454
SUPREME COURT REPORTS
[1975] SUPP· S.C.R.
A
(6) The rate of n_eutraiisatio'n \vhich is being given to the employees in each salary slab.
B
c
D
E
(7) Avoidance of huge distortion of \Vage differentials taking into
reckoning all persons employed in the concern.
(8) Degree of sacrifice necessarv even on the part of workers in
general interest.
-
(9) The· compulsive necessity of securing social and distributive
justice to the workmen.
_
(10) Capacity of the company to bear the additional burden.
(11) Intere~t of national economy.
(12) Repercussions on other industries and society as a whole.
(13) The state of the consumer price Index at the time of the
decision.
( 14) Forebodings and possibilities in the forseeable future as far
as can be envisaged.
( 15) Price indices have now assumed menacing figures.
Any
problem regarding wage or D.A. has to be considered in that
• background and at the same time not losing sight
of
the
national economy.
[466E-H, 467A-C]
IL The '.removal of ·ceiling in the instant case is not justified even though
(i) the appellant company is a prosperous company with capacity to bea;
the additional financial burden if the ceiling is removed, and (ii) the consumer
price index has been soaring higher and higher; because : [465A-B, 4670]
(a) The unprecedented rise in the consumer price index produces
a steep rise in D.A.
[458H]
(b) The absence of ceiling on D.A. can thus result in curious anomalous situations wherein the pay packet of the clerical staff
would exceed the pay packet of junior executives which would
hardly be conducive to discipline, efficiency and effective exercise of control.
[463-GA]
F
(c) Although the appellant employs a total of 1142 workmen in
G
its va'fious factories and branches, the dispute relates to only
265 workers in the head-office.
A general problem like imposition of ceiling on D.A. in a company ca001ot be treated
on the statistical burden relevant only to a section of the
employees, [463C-E]
III. D.A. being intimately connected with the cost of living, the matter
cannot be judged by the test submitted by the workmen, namely, that there'
cannot be a ceiling on D.A. unless there is a ceiling on profits.
[467-F]
IV. A1so, in dealing with the problem of ceiling on D.A., the Tribunal's
view that there should not be a ceiling on D.A. unless the company would be
•
'
•
required to close down if the ceiling is removed, is not correct. [465-H]
•
V. At what particular amount there ·should be a ceiling on D.A. is a
H matter which will have to be gone into by the Tribunal. But so far as th~
lowest paid employees at or just above subsistence level are concerned, they
are entitled to 100 per cent or at any irate 95 per cent neutralisation of the
rise in cost of living, and hence, there should be no ceiilng on D.A. payable
to employees within the slab of first Rs. 100/- unless it can be shown by the
management that the rate of neutrailsation in their case is more than 100
per cent. The manner in which the ceiling may be imposed, that is, at a
certain amount as the outside limit of the D.A. or by reference to the quantum
of D.A. payable at a certain wage level, or in any other manner, would als0<
/.-•
·'
,
'
•
KILLICK NIXON LTD, \'' EMPLOYEES UNION (Goswami, J,)
455
have to ·be decided by the Tribunal in the exercise 9f its judicial discretion.
A
The Tribunal will have to perform this delicate task by striking a balance
the weightage to be given to any principle being variable according to the
conditions-and keeping in view the dominant principle of doing social justice.
[467DE, GH, 468A-C]
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 734 & 735
of 1913.
B
Ap~al by special leave from the Award dated the 24th January,
1973 of the Industrial Tribunal, Bombay in Ref. Nos. (IT) 149 of
1966 & (IT) No. 257 of 1966.
A. K. Sen, I. N. Shroff. D. G. Shroff, M. S. Gagrat & F. D.
Damania, for the appellant.
·
R. !. Mehta, for the respondent
A. K. Gupta, for th~ applicant/intervener (Killick Nixon Employees' Union)
D. C. Shroff, 0. P. Mathur, K. J. John, F. K. Kaka and J. B.
Dadachanji, for the applicant/intervener (Cynamid India Ltd.)
G. B. Pai, S. V. Gupte, 0. C. Mathur, K. J. John, A. G. Meneses
and J.B. Dadachanji, for the applicant/intervener (Valtas Ltd.).
Janardan Sharma and Jitendra Sharma, and K. T. Sule, for the
applicant/intervener (Cynamid Employees' Union)
Janardan Sharma and Jitendra Sharma, for the applicant/intervcner
The Judgment of the Valtas & Vol Kart Employees Union court
was delivered by,
GosWAMI, J.-The only question with which we are concerned
in thei;e appeals by special leave is: Should there be a ceiling on
dearness allowance in this case ?
On May 11, 1966, the employers gave a notice of change for
placing a ceiling on dearness allowance (for brevity D.A.) already
. in vogue at the figure of Rs. 325/-.
Since this was not acceptable
to
the union,
both
sides
agreed
for
a
reference
to .the
the Industrial Tribunal. Maharashtra. By the impugned order of
January 24, 1973, the Tribunal removed the ceiling and hence this
appe3.l.
There was also another demand with regard to the D .A. for
drivers on the same basis as that for clerical staff.
The Tribunal
following this <lourt's decisions in Bengal Chemical & Pharmaceuticals
Works v. Its Workmen(') and Greaves Cotton and Co. and Others
v. Their Workmen (2) allowed the nnion"s claim for the two categories to be treated on equal 'footing.
This Court held in the above
decisions that employees getting the same wages should get the same
D.A. irrespective of whether they are working as clerks• or as members of subordinate staff or as factory workmen.
This· part of the
award is, .therefore, rightly not challenged before us.
(I) [1969] 2 S. C. R. 113.
I (2) J1964] 5S. c. R. 362.
10 SC/75-30
c
D
E
F
G
H
456
SUPREME· COURT REPORTS
[1975] SUPP· s.c.R.
A
The reference was made in June 1966.
There was an earlier
B
award in the reference. At the instance of the management, the High
Court set it aside and remanded the above two items of dispute alone
for disposal.
The Tribunal had in the earlier award rejected all
other claims of the union including that of revision of wage scale.
The only point that survives, therefore, is with regard to the ceiling on D.A.
When the reference was made in June 1966 the cost
of living jndex for Bombay city was 626. At the time of the impugned award in January 1973 it rose to 906 and in December 1974
it reached 1336 mark.
Various expert committees and commissions have dealt with the
C question of wages and D.A. from time to time.
Dearness allowance
as such is not known in foreign countries with the exception
of
Ceylon and Pakistan.
Whenever there is any significant rise in the
cost of living in foreign countries there is a revision of wage rather
than payment of any D.A. as such.
D.A. in India is a relic of the
D First World War to cope with the rise of cost of living although then
in the shape of ad hoc payments not linked to any consumer price
index.
During the Second World War it was introduced in the form
of a Grain Compensation Allowance to compensate the hard,hip of
the employees for the rise in prices of foodgrains.
So far as the
Central Govermnent employees were concerned, the
Government
comtituted the First Pay Commission in 194 7 to examine the wage
E structure.
The Government of India also set up a Committee on Fair
\V;1ges and the report was submitted in June 1949. A Second Pay Commission was also constituted by the Government in 1959. The Government of India in August 1964 constituted a One-man Independent Body
to enquire into the question of D.A. payable to the Central Government
employees and the report was submitted in January 1965 by Shri S. K.
F
Das.
In July 1966, the Government of India appointed a Dearness
Allowance Commission presided over by Shri P. B. Gajendragadkar.
The Commission examined the principles which should govern the
grant of D. A. to Central Government employees in future and was also
required to review the formula for the grant of D.A. as recommended
by the Second Pay Commission and to recommend, changes. if any.
In December 1966, the Government of India set up
a
National
G Commission on Labour presided over by Shri P. B. Gajendragadkar
with exhaustive terms of reference and the Commission submitted its
report on August 28, 1969. Then in sequence came the report of
the Third Pay Coll)mission in 1973.
The parties have extensively
quoted from the above reports during arguments.
Historically and by the industrial texts and also observations of
various commissions and committees, D.A. was regarded as "appliH cable to those employees whose salaries are at the subsistence level
or little
above it.. ......... .in order to
enable
them to face
the
increasing dearness of essential commodities".
(See Gajendragadkar
Commission on Dearness Allowance, May, 1967).
Like all changes in life and in continuous march in progress of
Bociety the concept of D.A. also may change to take in a wider range
•
,<
'
KILllCK NIXON LTD, v. EMPLOYEES UNION (Goswami, !.)
457
of commodities and services to make life worth living as far as
practicable subject to compelling limitations of general interest.
We
recognise that the old definition of DA, may not even serve the
climate of new aspirations of various classes of employees of this
vast country.
Luxuries of yesterday may be tlle comforts af to-day
,and necessities of tomorrow.
Economic solutions must reckon the
tum-abouts in social urges.
Because even the worm turns.
Industrial adjudication which has not the limitations of the ordinary
courts has to respond to the needs of changing ,Society and it may
be possible to widen the scope of D.A if that serves the cause of
general welfare.
There may be no inexorable rule tying down ecomimiC existence to definitions of bygone days, if unsuitable or irrelevant in the context of the times.
The National Commission on Labour (1969) while dealing with
DA. observed :
"We consider that payment of D.A. has to be viewed
in broader context of wage policy, many elements of which
have been discussed in the previous chapter. Jn a developing economy where price stabilisation has proved ineffective, or the inflationary potential cannot be controlled. any
arrangement for compensating for price rise will have its
raison d'etre,
At the same time, a direct linkage between
a rise in the index and the D.A. may create problems for
price stabilisation. It can hardly be disputed that the index,
is the best available indicator of changes of price leveL The
reason for a disproportionately high DA, is the fixation of
basic wage on a date far remote from the present". (Para
16,39, page 240),
The Commission further observed :
"It is obvious that unless money wages rise as fast
as the consumer prices, it would
result in an erosion
of real wages,
But the extent of its impact will depend
on the ,margin of cushion available at different levels of
income .... ,,, .. We accordingly recommend that 95 per cent
neutralisation should be granted against rise in
cost
of
living to those drawing minimum wage in
non-scheduled
employments". (para 16.47, page 242).
The Third Pay Commission in its Interim Report made some significant observations :
,
A
B
c
D
E
F
G
"We need hardly empha~ise that it would be an exercise in futility to keep on increasing the emoluments of
C~ntral Government employees, if these increases are largely
H
wiped 01;1t soon afte~ards by increases in prices of goods
and services.
There is, therefore, paramount need to maintain price stability and we are confident that the Government will ~ake ~11 necessary fiscal, monetary
and
other
~easures, ~nci~dmg c~ntrol over production and distribut10n, to mamtam the pnce line".
•
458
A
B
c
SUPREME COURT REPORTS
(1975] SUPP· S.C.R.
D.A. was primarily intended to be a temporary expedient and
was sought to be made available as a protection to those who have
no cushion at all in their wage packet in the face of any appreciable
rise in prices. Some relief was given to others also.
The hope of
the two Pay Commissions that prices will decline and stablise, never
came true.
D.A. has, therefore, come to stay.
The price indices
have now assumed menacing figures.
This is the stark reality of the
situation and any problem regarding wage or D.A. has to be considered in that background at the same time not losing sight of the
national economy.
In considering the question of D.A. the total wage packet of the
employee must be -kept iu view.
The first and foremost consideration is the case of the employees at the minimum wage Tevel.
It
must, however, be remembered that minimum wage should enable an
employee not merely for the bare sustenance of life but for the preservation of his efficiency by providing for some measure of education,
medical requirements and amenities.
The concept of
minimum
wage as also of fair wage cannot be static. It will change with the
D
progress of time and development.
E
F
In a recent decision of this Court in Bengal Chemical
(supra)
the principles for fixing of D.A. came up for consideration.
After
reviewing the earfor decisions, this Court held as follows :-
"1. Full neutralisation is not normally given, except to
the very lowest class of employees.
2. The purpose of dearness allowance being to neutralise
a portion of the increase in the cost of Jiving,
it
should ordinarily be on a sliding scale and provide
for an increase on the rise in the cost of living and
a decrease on a fall in the cost of living.
3. The basis of fixation of wages and dearness allowance
is industry-cum-region.
4. Emplqyees getting the same wages should get the same
dearness allowance, irrespective of whether they are
M>rking as clerks or members of subordinate staff
or factory workmen.
C
5. The additional financial burden which a revision of
the wage structure or dearness allowance would impose upon an employer, and his ability to bear such
burden, are very material and relevant factors to be
taken into account".
It is submitted on behalf of the employers that in . a scheme of
H D.A. Jinked not only to the cost of Jiving index but also to basic
wages by way of slabs, there must he a ceiling as otherwise it wilt
not be a compensation for increased cost of Jiving but additional
remuneration unconnected with the increasing cost of living at the
lowest level. It is emphasised that where there is a dual link,
a
ceiling removes the incongruity in the D.A. rising with the basic
wages out of proportion to the cost of living compensation at the
·~
'
•
y
....
KILLICK NIXON LTD. y. EMPLOYEES UNION (Goswami, J.)
4.\)
lowest level. It is fairly admitted that the ceiling fixed at any given
A
time on the basis of a possible rise in the cost of living index in the
foreseeable future may be altered if the rise in the cost of living index later makes the ceiling nnrellective of the requisite neutralisation of the increase in the cost of living at the lowest level. It is
submitted that withont a ceiling it will be impossible for any manage-·
meat to plan the business of the employers including
production,
B
el!pansion, etc. without any certainty of wage bill being estimated at
any definite figure for the foreseeable future.
On the other hand it is submitted on behalf of the workers that
there should be no ceiling on D.A. till the workers reach the level
of living wage.
It is also submitted that in the interest of social
justice there should be no ceiling on wages without first putting· a
C
ceiling on profits and controlling and stablising prices.
The award pertains to the clerical staff and drivers working in
the Head Office of the appellant numbering about 265 out of about
743 workmen in its various establishments (page 120 of the record).
Out of that also only two classes of workers are involved, namely,
D
the clerks and the drivers.
Amongst the clerical staff there are
three grades, Grade A, Grade B and Grade C as under :-
Grade A: Rs. 165-15-240-20-400-E.B.-25-500.
Grade B: Rs. 110-10-150-12t-200-15-260-E.B.-20-360.
Grade C: Rs. 70-5-90-8-130-10-200-E.B.-12!-250.
The wage scale for drivers is as follows;
Rs. 75-5-100-7-135-7.50-150.
The scheme of D.A. which is sought to be introduced with the ceilin~
is as under :-
...,
Percentage
Basic Pay slabs
of Basic Salary
(C.P.I. 441-450)
!st ·Rs. 100
120
2nd Rs. 100
40
Rs. 201 to Rs. 500
30
Over Rs. 500
25
Maximum D.A. Rs. 325/-
variations
for every
10 po:nts
of C.P.L
5%
2%
1%
Mr. Mehta? representing the union, has drawn our attention to.
a _few awards m the Bombay region prescribing slab system of D.A.
w1tlumt ceil1~g._ The first 1s tha~ of the Ahmedabad Manufacturing
& Calzco Prmtmg Company L1m1ted.
It is true that on 4th slab "Of
Rs. 100/~ .and balance, 9.75% D.A. was allowed without imposition
of any ceilmg. D.A. was awarded by the Industrial Tribunal in this
<:ase on. a slab system at the consumer price index 841-850. The
second Is the case of Indian Vegetables Products Limited, Bombay,
E
F
G
H
460
SUPREME COURT REPORTS
(1975] SUPP· S.C.R.
A
where there was no introduction of any ceiling and 10% D.A. at
.the 3rd slab of Rs. 100/- and above was granted. In that case the
r
consumer price index was at 311-320. The third case is that of
Godrej Soap Private Limited where again although no ceiling on D.A.
was imposed, the Tribunal was dealing with a case when the consumer price index was at 396-405. It is pointed out that in all the
B
three above cases special leave was refused by this Court.
That,
however, cannot be a ground for holding that this Court endorsed
non-imposition of ceiling on D.A. as a principle.
The question as
such was neither raised before the Tribunal nor before this Court in
.any of the above cases.
c
D
E
F
G
H
Mr. Mehta also filed a list of 25 awards during the period between
1st January, 1970 and December, 1974 in the Bombay region. This
was with the object of establishing case for a slab system of
D.A.
linked to the consumer price index with point variation
without
ceiling, Mr. A K. Sen has commented that some of these awards were
as a result of settlement and the question of ceiling on D.A. was not
even raised for a decision.
In the case of
Dorr-Oliver
(India)
Limited, the scale of pay was fixed on the basis of the consumer
price index 700 and D.A. was fixed, if the index rose beyond 700,
on a slab system. It is to be noted that a flat sum of Rs. 9 /-
as
D.A. was allowed on the salary of Rs. 500/- and above and for
variation for rise of every ten points in slab above 700, Rs. 9/- was
fixed for such slab. It is to be noted that there is no percentage
basis of D.A. on the salary and it is ony linked to the consumer
price index.
In the case of Kanji Jadhavji & Company, it is, however, seen that for pay in excess of Rs. 210/- but upto Rs. 670/-
per month t paisa per rupee per point upto Rs. 180/- per month
plus '/3 paisa per rupee per point in excess of Rs. 180/- upto Rs.
210/- plus Hh paisa per rupee per point in excess of Rs. 210/- subject to a maxiinum of Rs. 1.65 per point per month was allowed.
There is a fixed salary of Rs. 670/- beyond which D.A. was not
made admissible.
In the case of Tata Press Limited which is an
award said to be by settlement, additional D.A. of 10 per cent has
been given on the basic wage of above Rs. 401, but there is no
linkage to the consumer price
index.
In. Godavari Sugar Mills
Mam!i Private Limited, D.A. stopped at the 4th Rs. 100/- of basic
salary.
At this slab 36 per cent D. A was awarded with variation
of 1 per cent for every ten points rise or fall in the consumer price
index 791-800. Identical is the case of another award in the case of
Somaiya Organo Chemicals Limited.
In Britannia Biscuit Company
Limited's case. no D.A. has been awardecl beyond the salary slab of
Rs. 5001- D. A. was considered in this case when the cost of living
index number was 301-310 (old series).
In servcral awards in the
compilation given by Mr. Mehta, minimum D.A. has been fixed.
On the other
hand Mr. Kaka
intervening for Cynamid India
Limited has drawn our attention to a number of awards in the Bombay
region wherein there appears to be a ce'iling on D. A
These are :
1. National M2chinery Manufacturers Ltd.
Maharashfra· Gazette (M.G.G.)
dated 30.6.1966.
2. Indian Organic Chemicals Ltd.
M.G.G. dated 21.11.1974.
•
.
I -
..
,
'
'
KILLICK NIXON LTD. V. EMPLOYEES UNION (Goswami, l.)
461
3. The Millowners Association.
M.G.G. dated 31.10.1974.
4. Phoenix Mills Ltd .
M.G.G. Pa.t 1-L dated 22.6.1972.
5. Bayer (India) Ltd.
M.G.G. dated 31.1.1974
6. West Coast Paper Mills
M. G. G. dated 20.7.1972
7. Voltas Limited
I. c. R. Febru1ry 1970" page 57
8. M'1fphy India Limited
M. G. G. dated 27. 7. 1972
9. Polychem Limited
M. G. G. dated 6. 8. 1970
Mr. Mehta has, however, submitted that most of the settlements
in pursuance of which awards had been
made have expired and
notices of termination have been served on the employers and in
some cases disputes have been raised.
The management also argued that this Court in M/s Unichem
Laboratories Ltd. v. The workmen ( 1 ) noticed in paragraph 33 of the
decision-
"Another feature of the scheme adopted by the Tribunal
is that it puts a ceiling on the employees drawing basic wages
up to Rs. 300 per month alone being eligible for dearness
allowance; whereas under the practice originally obtaining in
the company there was no such limit."
and, therefore, must be held to have approved of imposition of ceiling. We are unable to accept that this Court was called upon to decide about the questio!l of ceiling in that appeal which was at the
instance of the employers and not of the employees nor against the
imposition of ceiling. The management also drew our attention to a
decision of this Court in Remington Rand of India v. Its Workmen (2)
wherein the scheme of D.A. contained a maximum of Rs. 200 at the
index figure 351-360 and the maximum was not interfered with by
this Court. It is sufficient to point out that the question of desirability
of ceiling or otherwise was not at all in issue in that appeal and therefore, this Court was not called upon to pronounce upon the matter.
We, however, find that in the case of employees under the Central
Government a kind of ceiling has been in vogue. For example one
of the Second Pay Commission's recommendations was that the benefit
A
B
c
D
E
F
of D.A. should in future adjustments be extended to all employees
drawing a basic pay below Rs. 400 per mensem in such a way that
G
the total of basic pay and D.A. paid to an employee in the pay range
of Rs. 300 to Rs. 400 does not exceed Rs. 400 (page 97, paragraph
16). The Third Pay Commission also after fixing D.A. at a percentage of 3.5 per cent of pay upto the pay range of Rs. 300 fixed a
maximum of Rs. 10 per month and a minimum of Rs. 7 per month.
Similarly for the pay range above 300 a percentage of 2.5 per cent of
pay was fixed subject to a maximum of Rs. 20 per month and a
H
minimum of Rs. 10 per month. The Commission further recommended that the pay plus D.A. should in no case exceed Rs. 2,400 per
month.
(!) (1972] I L. L. J. 576,
(2) [1962] I L. L. J. 287,
,
r
462
SUPREME COURT REPORTS
(1975] SUPP· S.C.R.
A
From the above one thing, however, is clear that the question of
imposition of ceiling on D.A. is not an absolutely alien phenomenon.
Although it might not have been the general practice, ceiling was not
rejected out of hand as irrational or unjust by unions in the course of
collective bargaining in the Bombay region.
B
So far as the workers involved in these appeals are concerned the
question whether D.A. should cease at a certain level of salary does
not anse for consideration.
The maximll!ll basic of the highest grade
in tile case of these employees is Rs. 500. It may, however, be noted
that a system has been in vogue in the case of Government employees
where D.A. ceases to be admissible on reaching a certain level of
C salary. The question remains as to whether a ceiling should be placed
on D.A. itself, when it exceeds Rs. 325 as has been sought to be
done by the _employers. The employers gave a notice of change for
imposition of ceiling on D.A. in May 1966 when the cost of living
index has been on the constant rise each year. While the average tor
1966 was 630 those for the subsequent years from 1967 to 1974
were 697, 740, 766, 797, 832, 876, 982 and 1198. In December
D 1974 it was 1336. The cost of living index being on a constant rise it
is necesrnry to consider the totality of the wage packet of the workers
and other relevant factors in order to decide if a ceiling on D.A. should
be imposed. In this context our attention has been drawn by Mr. Sen
to the statement of objects and reasons to the Additional Emoluments
E
F
G
H
(Compulsory Deposit) Bill 1974 which is as follows :-
"Controlling inflation is today the single most important task facing the country. Periodical revision of wages and
adjustments in the rates of dearness allowance, which have
been adopted as remedies for moderating the impact of rising prices, have been proving ineffective.
In view of the
mounting pressure of inflationary forces, payments of additional wages or dearness allowance will give an upward thrust
to prices and will inevitably aggravate the situation, and also
neutralise the effect of any increase in the wages or dearness
allowancr. In the circumstances, urgent steps aimed at breaking this vicious circle of money incomes chasing prices be;.
came inescapable. These measures undoubtedly involve some
sacrifices by different sections of the community. As a part
of these anti-inflationary measures, the Additional Emoluments (Compulsory Deposit) Ordinance, 1974, was promulgated by the President on the 6th July, 197 4. : ....... "
Reference to the above is made in order to highlight the dieadfur
consequences of inflation and the inefficacy of mere wage rise as a
solution.
We may, however, in this connection usefully refer to what the
National Commission on Labour said on this subject :
"Firstly, the increased purchasing power in the hands
of the workers on account of compensatory payments for
rise in cost of living forms a small part of the overall increase
, -
KILLICK NIXON LTD. v. EMPLOYEES UNION (Goswami, !.)
463
in purchasing power. Secondly, the elasticity of compensatory
payments to changes in cost of living is generally less thari
unity so that the feed-back must taper off. Money wage stability, though important for price stability, is seldom a necessary, much less a sufficient condition for it. On the other
hand, holding of the price line, particularly of the cost of living is an adequate condition for preventing increases in money
wage payments that are not related to increases in productivity. This alone can prevent a fall in real wages."
Before we proceed further we have to take note of certain facts
concerning the dispute. Although the company employs a total of
1142 workmen in its various factories and branches the present dispute
relates to 265' workers in the Head Office (Bombay) out of them.
It is not disputed that the supervisory staff consisting of 86 members,
although not involved in this reference, have been in receipt of
D.A. under the same scheme. There is uo ceiling on D.A. in the
Calcutta branch of the company where the workers are paid according
to the Bengal Chamber of Commerce's rates. The industry-cum-region
aspect may at present take care of the few employees working in
Calcutta. It is, however, not unlikely that all the employees of the
company may claim to be treated alike. There .are also disputes
pending in respect of the
subordinate
staff at the
Head Office.
Without. adding fnrther details it is sufficient to state that 'a general
problem like imposition of ceiling on D.A. in a company cannot
be treated on the statistical burden relevant only to a sectio?:! of the
employees. Both the parties realise the importance of this aspect
and produced before us a large number of documents containing
various details inculding balance-sheets of the company upto 1973 to
enable us to have a complete picture of the entire matter.
The management has produced a statement showing the comparison of total emoluments of
clerical and
supervisory
staff after
implementation of the award and those of the junior executive staff.
We have quoted therefrom showing the figures in April 1973 and
July 1974 with the respective index at 924 and 1194.
It will be seen that the minimum basic salary of a junior executive
is Rs. 400 and maximum is Rs. 1000. With allowances the junior
executive at the minimum gets a total of Rs. 700 and at intermediate
stages, namely, of Rs. 530 and 800, he gets a total of Rs. 830 and
Rs. 1150 respectively. When he reaches the maximum the total with
allowance is Rs. 1350. The clerical staff at the maximum grade which
is Rs. 500 gets a total amount of Rs. 1230 inclusive of D.A. of
Rs. 730 after removal of the ceiling at the C.P.I. 924. At the intermediate stage a clerk gets Rs. 874 in the same index (Rs. 300 basic
salary plus Rs. 574 D.A.). At the minimum he gets Rs. 70 basic pay
plus Rs. 340 D.A. totalling Rs. 410 in the same index 924. The
position is worse when the consumer price index touches 1194 as
seen above. The absence of ceiling on D.A. can result in curious
anomalous situations where in the pay packet of clerical staff would
exc:'Cd the pay packet o! junior execuliye staff. This is hardly conducive to d1sc1plme, efficiency and effective exercise of control.
A
B
c
D
E
F
G
H
KILLICK NIXON LIMITED BOMBAY
COMPAR!SON OF TOTAL EMOLUMENTS OF CLERICAL SUPERVISORY AND JUNIOR EXECUTIVE STAFF
en
c:
"'
CLERICAL
SUPERVISORY
JUNIOR EXECUTIVE
"'
m·
is:
Travel-
"'
Basic
Basic
Basic
House
Salary
To:al
S•lary
R~!lt Al· tin~ AlTotal
("l
DA.
Total
Salary
DA.
8
lowcane lowance
"'
...;
Rs.
Rs.
Rs.
Rs.
Rs.
R<;.
Rs.
Rs.
Rs.
Rs.
"' "' "'
APRIL 1973
Minitnum
70
340
410
Min.
275
555
830
400
150
150
700
0
"'
(Feb.
830
...;
CPI
Middle
300
574
874
Mid.
520
730
1250
530.
150
150
en
924)
Maximun1
500
730
1230
Mid.
800
730
1530
800
200
150
1150
~
Max.
1200
730
1930
1000
200
150
1350 -'°
...,
~
JULY 1974
en
Minilnum
70
475
545
Min.
275
764
1039
400
150
150
700
c:
"'
(May CPI
Middle
300
790
1090
Mid.
520
1000
1520
530
150
150
830
':"
1194).
Maximum
500
1000
1500
Mid.
800
1000
1800
800
200
150
1150
en n
Max.
1200
1200
2200
1000
200
i:;o
1350
1-
•
'
.
~
•.
'I[
,
'
•
KILLICK NIXON LTD, v. EMPLOYEES UNION (Goswami,!.)
465
Although the change in the D .A. scheme imposing the ceiling
was notified in May 1966, it could not have been then contemplated
that the index would touch such a high mark; yet within these nearly
nine years that the dispute unfortunately has dragged on, it has given
the court an idea of the effect of removal of the ceiling.
The management has submitted statements showing the actual
working of the D.A. formula without the ceiling and· tried to show
that it would not be possible for it to bear the financial burden. The
Tribunal went into this aspect, although at that time the figures of
the actual working could not be there, and refused to accept the
plea of incapacity to bear the burden. The main argument of the
management was about the loss of Managing Agency which, according to it, resulted in shrinkage of income. The Tribunal went into the
matter and came to the conclusion and, according to us, rightly,
that the said pica had no substance.
The company is one of the twenty big industrial houses in the
country. Originally there were two companies, one Killick Industries
Limited and another Killick Nixon & Co. Private Limited. Killick
Industries Limited was incorporated as a Public Limited Company
on November 14, 1947 and Killick Nixon & Co. Private Limited was
incorporated as a Private Company on January 23, 1948. Some time
in 1957 the Killick Industries Limited purchased all the shares
of
Killick Nixon & Co. Private Limited with the result that Killick Nixon
& Co. Private Limited became a wholly owned subsidiary of Killick
Industries Limited. Under section 43A of the Companies Act, 1956,
Killick Nixon & Co. Private Limited became a Public Limited Company with effect from March 28, 1961 and by an order of the Bombay High Court of March 24, 1970, was amalgamated with Killick
Industries Limited with effect from August 1, 1969. Following the
amalgamation and with the approval of the Central Government the
name of Killick Industries Limited was changed to Killick Nixon
Limited (the appellant). The activities of the company are : manufacturing of engineering products, namely, Jhonson Vibrators,
U
dall Pressing equipments and E.F.C.C. Furnaces; Selling agency of
engineering products such as Vibrators, drilling equipment, electric
meters and dredgers, general selling agency in respect of snowcem
cement paint and allied products, carbon papers; slotted angles, Hawkins pressure cookers; export of piece goods; and agency of City Line
and Hall Linc of U.K. and clearing and forwarding work.
The question, however, in this case may not be simply the finanA
B
c
D
E
F
G
cial capacity of the company alone. Ordinarily the capacity to bear
the additional burden would certainly be a relevant factor. We are,
however, not considering fhc matter from that aspect in the present
H
case. We will assume that the company will be able to bear the additional financial burden if the ceilil!g is removed. We do not agree
with the Tribunal that it is only if the company would be required to
close down that such a demand should be rejected. That is an incorrect view to take in dealing with th~ problem with which we are
concerned .
1
.,., .. ,_
r
466
SUPREME COURT REPORTS
[1975] SUPP· S.C.R.
A
·We have, therefore, a company which is prosperons. The consumer. price index has been soaring higher and higher. The employees
have to get protection of their real wages. It is well settled that complete neutralisation of the rise of cost of living cannot be allowed
except to the lowest category of employees. In the view of the National Commission on Labour "the only purpose of dearness allowB ance is to enable a worker in the event of a rise in cost of living to
purchase the same amount of goods of basic necessity as before.
This purpose would be served by an equal amount of dearness allowance to all employees irrespective of differences in their emoluments" (page 243). It was strenuously submitted that this view of
the Commission should be accepted by us. In other words we should
first ascertain what. is the minimum wage in this company at which
C
a worker would require complete neutralisation of the cost of living
and whatever amount is found to be necessary for him as a protection agah>t hi' i;eal wages should only be available to all other employees. We are not required to give our opinion about this submission for the simple reason that the management here has already
introduced a scheme in which there is· percentage system on salary
D slabs linked with the consumer price index and there is no dispute
about it.
E
F
G
H
All that the management wants in this case is that D.A. must not
go on rising with the~ soaring price index and a limit should be imposed. We have already observed that in view of the status of the
eompany the capacity to pay will not alone be of moment in favour
of removal of the ceiling. The problem will have to be viewed from
the following important aspects :-
'
( 1) Condition of the wage scale prevalent in the company.
(2) Condition of the wage level prevalent in the industry and the region.
(3) The wage packet as a whole of each earner in the
company with all
amenities and
benefits and
ii$
ability and potency to cope with the economic requirements of daily existence
consistent with his
status in society, responsibilities, efficiency at work
and industrial peace.
( 4) The position of the company viewed in relation to
other comparable concerns in the industry and the
region.
(5) Peremptive necessity for full neutralisation of the
cost of living at the rock-bottom of wage scale if at
or just above the subsistence level.
( 6) The rate of neutralisation which is being given to
the employees in each salary slab.
(7) Avoidance of huge distortion of wage differentials
taking into reckoning all persons employed in the
concern.
'
•.
\
KILLICK NIXON LTD. v. EMPLOYEES UNION (Goswami, J.)
(8) Degree of sacrifice necessary even on the part of
workers in general interest.
(9) The compulsive necessity of securing social and distributive justice to the workmen.
467
A
(10) Capacity of the company
to bear the additional.
burden.
B
(11) Interest of national economy.
(12) Repercussions in other industries and society as a
whole.
( 13) The state of the c<1nsumer price index at the time
c
of decision.
( 14) Forebodings and possibilities in the foreseeable future
as far as can be envisaged.
We should also add that revision of D.A. is not the same thing
as revision of wages.
D
Having given our anxious thought to all the above aspects, which
are not exhaustive, we are unable to come to the conclusion that
removal of the ceiling in the present context will be justified. The
company has been able to make out a case for imposition of a ceiling. At what particular amount there should be a ceiling on D.A.
is a matter which will have to be gone into by the Tribunal keeping
E,
in view the above principles. The financial capacity will have to be
judged with regard to the commitment of the company as a whole
towards all its employees.
We are unable to agree with the contention of the workers that
unless there is a ceiling on profits there cannot be a ceiling on D.A.
F. ·
The question of D.A.