# INDIAN LINK CHAIN MANUFACTURES LTD v. THEIR WORKMEN

- **Citation:** [1972] 1 S.C.R. 790
- **Court:** Supreme Court of India
- **Decided:** 1971-09-17
- **Case number:** Civil Appeals Nos. 204 and 610 of 1967
- **Bench:** C. A. Vaidialingam, P. Jaganmohan Reddy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/indian-link-chain-manufactures-ltd-v-their-workmen-5459
- **Pages:** 27

## Headnote

"'-, ,
Payment of _Bonus Act,' 1965, ss. 2(p) rmd 19(2)-'Sett/ement' when
Jerminated.
Industrial Dispute-'Settlemenl when terminated--Consolidated wages
fi.xed ·by Tribunal without linking dearness allowance with living wage and
1vithout granting adjustments-Propriety-Honus-Figures of depreciation
and development rebate whether to be taken from income-tax assessment
order or balance sheet-For determining return on reserves figures of reserves at beginning of year should Qe taken ... -Gratuity-Financial capacity
-How to be calculated when 1-vage Consolidated without indicating ho1v
tnuch relates t-o dearness allowance--Scherhe .wi)ether fair and reasonable.
A
B
c
The appellant was registered as a public limited company in or about
1956_and commenced production in·or about 1958. It employed approxiD
matCly 170 persons of whom 156 \Vere daily rated workers-the latter
being respondents in the present appeal.
In respect of certain demands
raised by the workmen in 1962 there were conciliation proceedings in
the course of which the parties arrived at an amicable settlement on Ap'lil
5, 1963. Thereby they settled 1"nter a/ia Demand No. 1 relating to wage
scales and Demand No. 2 relating to Dearness Allowance. The partieS
also agreed to discuss, the existing production bonus scheme and to
finalise the same by the end of June 1963. The settlement was signed on
E
behalf of the parties and by the Conciliation Officer. .However subsequently there were again disputes between the workmen and the employers
and these were referred by the State Government to the Industrial,Tribunal on December 27, 1965 under s. lO(A) (d) <If the Industrial Disputes
Act,
1947.
Both the parties being dissatisfied with the Award of the
Tribunal filed appeals by special leave in this Court.
The questions that
fell for consideration were :
(i) \vhether in view of the absence of a
notice of termination as contemplated in s. 19(2) of the Act the settlement
F
dated A. ugust 5, 1963 continued to subsist and consequently ~hether the
reference of the dispute to the Tribunal Was incompetent, Q)? whether
the tribunal was wrong in fixing consolidated wages without linking dearness allowance with cost of living Or granting adjustments in the wage
scale; (iii) whether in the matter of determining available surplu.5 the
Tribunal was justified in .taking the figures of depreciation allowance and
development rebate from the balance sheet and not from the income-tax
assessment orders in which the figures were higher; (iv)~ whether for the
G
purpose of determining the return on reserves tbe figures at the end of .•
the year or the beginning o'f the year had to be taken;, (v) whether the·
Tribunal was right in its conclusion that the financial position of the company justified the framing of a scheme of gratuity; (vi) whether in vie\~
of the fact that the Tribunal had prescribed a cons.olidated wage withou~
indicating what portion of the wage was the basic wa"ge and what portion
the dearness allowance, the payment of gratuity based on an average of
the basic wages of an employee exclusive of dearness allowance was imH
possible to implement; (vii) \Vhether the gratuity scheme was incongruous
because thOse who retired were given larger benefits than those \vho were
retrenched.
INDIAN LINK CHAIN LTD. V. WORKMEN
(Jaganmohan Reddy, J.)
79I
HELD : (i) Reading s. 19 with the definition of 'settlement' in s. 2(p)
of the Industrial Disputes Act it would appeal' that a settlement will ensure
for the duration of the period for which it has been agreed to between the
parties and if no period is agreed upon, for a period of six months from
the date on which the memorandum of settlement of dispute is signed by
the parties and where it is put an end to by a notice in \Vriting it will
continue to be operative until the expiry of two months from the date of
which the notice is given.
It would appear that even where an agreement
is for a fixed period it will not continue to be binding for the durati

## Text

_Characters 0–39,822 of 74,490. This is a partial read: ask again with offset=39822 for what follows._

790
INDIAN LINK CHAIN MANUFACTURES LTD.
v.
THEIR WORKMEN
September 17, 1971
[C. A. VAIDIALINGAM AND P. JAGANMOHAN REDDY, JJ.]
"'-, ,
Payment of _Bonus Act,' 1965, ss. 2(p) rmd 19(2)-'Sett/ement' when
Jerminated.
Industrial Dispute-'Settlemenl when terminated--Consolidated wages
fi.xed ·by Tribunal without linking dearness allowance with living wage and
1vithout granting adjustments-Propriety-Honus-Figures of depreciation
and development rebate whether to be taken from income-tax assessment
order or balance sheet-For determining return on reserves figures of reserves at beginning of year should Qe taken ... -Gratuity-Financial capacity
-How to be calculated when 1-vage Consolidated without indicating ho1v
tnuch relates t-o dearness allowance--Scherhe .wi)ether fair and reasonable.
A
B
c
The appellant was registered as a public limited company in or about
1956_and commenced production in·or about 1958. It employed approxiD
matCly 170 persons of whom 156 \Vere daily rated workers-the latter
being respondents in the present appeal.
In respect of certain demands
raised by the workmen in 1962 there were conciliation proceedings in
the course of which the parties arrived at an amicable settlement on Ap'lil
5, 1963. Thereby they settled 1"nter a/ia Demand No. 1 relating to wage
scales and Demand No. 2 relating to Dearness Allowance. The partieS
also agreed to discuss, the existing production bonus scheme and to
finalise the same by the end of June 1963. The settlement was signed on
E
behalf of the parties and by the Conciliation Officer. .However subsequently there were again disputes between the workmen and the employers
and these were referred by the State Government to the Industrial,Tribunal on December 27, 1965 under s. lO(A) (d) <If the Industrial Disputes
Act,
1947.
Both the parties being dissatisfied with the Award of the
Tribunal filed appeals by special leave in this Court.
The questions that
fell for consideration were :
(i) \vhether in view of the absence of a
notice of termination as contemplated in s. 19(2) of the Act the settlement
F
dated A. ugust 5, 1963 continued to subsist and consequently ~hether the
reference of the dispute to the Tribunal Was incompetent, Q)? whether
the tribunal was wrong in fixing consolidated wages without linking dearness allowance with cost of living Or granting adjustments in the wage
scale; (iii) whether in the matter of determining available surplu.5 the
Tribunal was justified in .taking the figures of depreciation allowance and
development rebate from the balance sheet and not from the income-tax
assessment orders in which the figures were higher; (iv)~ whether for the
G
purpose of determining the return on reserves tbe figures at the end of .•
the year or the beginning o'f the year had to be taken;, (v) whether the·
Tribunal was right in its conclusion that the financial position of the company justified the framing of a scheme of gratuity; (vi) whether in vie\~
of the fact that the Tribunal had prescribed a cons.olidated wage withou~
indicating what portion of the wage was the basic wa"ge and what portion
the dearness allowance, the payment of gratuity based on an average of
the basic wages of an employee exclusive of dearness allowance was imH
possible to implement; (vii) \Vhether the gratuity scheme was incongruous
because thOse who retired were given larger benefits than those \vho were
retrenched.
INDIAN LINK CHAIN LTD. V. WORKMEN
(Jaganmohan Reddy, J.)
79I
HELD : (i) Reading s. 19 with the definition of 'settlement' in s. 2(p)
of the Industrial Disputes Act it would appeal' that a settlement will ensure
for the duration of the period for which it has been agreed to between the
parties and if no period is agreed upon, for a period of six months from
the date on which the memorandum of settlement of dispute is signed by
the parties and where it is put an end to by a notice in \Vriting it will
continue to be operative until the expiry of two months from the date of
which the notice is given.
It would appear that even where an agreement
is for a fixed period it will not continue to be binding for the duratien
of the period of settlement hut thereafter also until it is terminated by a
notice in writing and even then it will continue for a period of two months
from the date of such notice.
While no doubt it is true that a notice must
be in writing, such a notice can be inferred from correspondence between
the parties.
[798 A-CJ
In the present case the management had in a letter dated 20th March
1965 addressed to the Additional Commissioner of Labour, Bombay, admitted that no settlement or award was in existence, the reference of the
Industrial Disputes was made only after that. It was not a satisfactory
explanation of that catcgurical statement that it \.Vas made under a mistake.
The said Jetter must be deemed to be a notice of termination because it
made a. categorical statement that the settlement had 'been terminated on
31-12,64. The management wM therefore estopped from now taking the
stand that the settlement was not put an end to or that the reference was
invalid. [800 G-801 E]
Cochin State Power, Light Corporation Ltd. v. Its Workmen, [1964] 2
L.L.J. 100, Workmen of Wester11 India Match Co. Ltd. v. Western India
Match Co. Ltd., [1963] 2 S.C.R 27 Management of Bangalore Woollen,
Cotton & Silk Mills Co. Ltd. v. Workmen & Anr., [I968] l S.C.R. 581, applied.
Workmen of Continental Commercial Co. (P) Ltd. v. West Bengal &
Ors., [1962] 1 L.L.J. 85, disapproved.
·(ii) The Tribunal considered the financial status of the company and the
era of prosperous business which it could look forwan.1 to, as \\'ell as the
wage structure prevailing in the relevant units of the industry and other
relev;lnt consid_erations and thereafter prescribed the consolidated scales of
wages.
There was no justification for interfering with it on the ground
that it had not fixed a separate dearness allowance linked with increase or
decrease in the cost Of living index or to link the consolidated wage its'2lf
with it. [803 H; 804 HJ
Hindustan Times Ltd. New Delhi v. Their Workmen & Vice Versa,
[1964] 1 S.C.R. 234, French Motor Car Co. Ltd. v. Workmen, [1963] Supp.
2 S.C.R. 16 and Bengal Chemical & Pharmaceutical Works Ltd. v. Its
Workmen, [1969] 2 S.C:R. 113, referred to.
However this was a fit case in which v:age adjustment should have
been made. The Tribunal gave no reason for rejecting the claim altogether.
Why some adjustment was not made taking into consideration the length
of the service had not been stated.
There \Vas no adjnstment in the first
wage structure which \\1as the subject of a settlement as such and it would
not be fair also not to fix the wages in the wage scales 'vhich in fact were
those fixed for the first time by the award.
From an analysis of the
various categories of workers in each of the years it v..,,ould appear that a
larger majority of them had been employed between the years 1963 and
1965. If .a direction was given that there should be one increment for
every completed ·3 years up to the date of reference namely 27-12-65, no
792
SUPREME COURT REPORTS
[ 1972] l S.C.R.
injustice would occur, nor will there be strain on the financial resources
of the appellant which it could not bear. [Directions given] [805 B-E]
(iii) A statement as per Income-tax Assessment statement 'A' Ex. C-5
was filed by the company on 2-9-66.
Similarly another statement of profit
and loss account as per annual account Of the company-Statement 'B'
Ex. C6 was filed on the same date.
In the former statement C-5 according to item 2, depreciation .allowed by the Income-tax Officer for 1964
was shown as Rs. 1,81,054 while according to C·6 depreciation \Vas shov.'n
as Rs. 80,190.
Simila·riy development rebate under C-5 was shown as
Rs. 5,822 while under C-6 it was shown as Rs. 3,917. There was no challenge to these figures as such, nor did the respondent dispute that these
amounts were not as per the assessment orders. The Tribunal had a:-
ceptcd statement C-6 but ignored C-5 even though both the statements were
prepared by the company in exactly the same circumstances, one fron1
the assessment orders and the other from the balance sheet.
There was
no justification for the rejection of the company's claim that depreciation
and development rebate be allowed as per income-tax assessment.
[806
F-H]
(iv) The claim of the Respondent for retU'rn on reserves alsoi must be
allowed because under s. 6(d) read with item ( l) (iii) of the Third Schedule to the Bonus Act the Tribunal ought to have allowed 6% of the
company's reserves sho\vn in its balance-sheet as at the com1nencement of
the accounting year including any profits carried fon.vard from the previous accounting year.
The Tribunal was \Vrong in taking into account
the figures of reserves as at the end of the accounting year. [807 B-C]
( v) In dealing with the financial capacity of an undertaking to bear
the bun.lcn of a gratuity scheme it would not be appropriate to approach
the ,qucstiqn 'from an investor"s point of view.
The overall picture of the
soundness of the undertaking and its future prospects must be taken into
account. [812 D-E]
.In the present case the financial position of the con1pany
~-as such
that the in1plen1entation of the scheme of gratuity. \Vas not likely to plac~
<.1n undue or unconscionable burden upon the company. [812 H]
M/s. British Paints (India) Ltd, v. Its Workmen [1966] 2 S.C.R. 523,
M!llwgement of Wengc.r & Co. v. Workmen, [1963] Supp. 2 S.C.R. 962.
llwl1anp11r Tapti Mills .Ltd. v. B. T. Mills Mazdoor Sangh, (1965] 1 L.L,J.
453, Hindustan .Antibiotics Ltd. v. The Workmen, [1967] 1 S.C.R. 652,
Gramaphone Company Ltd. v. lts Workmen, [1964] 2 L,.L.J. 131 and
Rlraratkha11d Textile Mfg. Co. Ltd. v. Textile Labour Association, Alunedahad, [l 960] 3 S.C.R. 329, referred to.
(vi) While no doubt the _general rule is that gratuity must be related
to the basic y,:age, in case'S where the Wages arc not very high and a
consolidated \.vage has be'en fixed taking into account the dearness ailowance, the scheme of gratuity may be related to the consolidated wage,
v,:hich will be the basic \Vagc in the subsequent years.
At any future date
having regard to the price index, the claim. of the \.vorkmcn either for a
rise in the wage based on the cost of living index or the grant of separate
Jca mess allowance to neutralise that rise is bound to be considered and
adjudicated.
No difficulty in implementing the scheme could therefore
arise because of the fact that the Tribunal h3-i prescribed a consolidated
wage without indicating what position df that wage was the basic wage and
what position the dearness allowance. [815 E-F; 813 H-814 Al
Manage111ellf Ghaziabad Engineering Co. (P) Ltd. v. !Is Workmen,
[l 970] 1 S.C.R. 622, Delhi Cloth & General Mills Co. Ltd. v. Workmen ,~
A
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INDIAN LINK CIIAIN LTD. V. WORl(MEN
793
(Jaganmohan Reddy, J.)
Ors. [1969] 2 S.C.R. 307, Remington Rand of India Ltd. v. The Workmen, (1968] 1 L.L.J. 542, referred to.
(vii) The criticism that the scheme was unfair and incongruous because
those that retire are given larger benefits than those who are retrenclied
was unwarranted.
The differcnc1'.! between the gratuity payable to persons
who resign or retire voluntarily and those whose services are terminated
is that the latter will receive in addition to the gratuity the retrenchment
compensation admissible to them under the Industrial Disputes Act. while
in the case of the former he will not be entitlc<l to it.
'fhe scheme was
not only reasonable but ff\ir. [815 G-816 BJ
CIVIL APPELLATE JURISDICTION :
Civil Appeals Nos. 204
and 610 of 1967.
Appeals by special leave from the Award dated September 30.
1966 of the Industrial Tribunal, Maharashtra, Bombay in Reference (IT) No. 468 of 1965.
I. N. Shroff, for the appellant (in C.A. No. 203 of 1967) and
Respondent No. 1 (in C.A. No. 610 of 1967).
Madan G. Phadnis and Janardan Sharma, for the respondents
(in C.A. No. 204 of 1967) and the appellants (in C.A. No. 610
of 1967).
The Judgment of the Court was delivered by
P. Jaganmohan Reddy, J.
The Government of Maharashtra
had referred ~he dispute between the Appellant and its Workmen
to the Industrial Tribunal under the Industrial Disputes Act 194 7
(hereinafter called 'the Act') in respect of Wage scales, dearness
a\lowance, bonus, gratuity and permanency.
The Award made
by it is the subject matter of this appeal by Special Leave (Civil
Appeal No. 204 of 1967) in which the dispute relating to wage
scales and dearness allowance is contended only on the ground
that there was a settlem~nt between the workmen and the employers in a conciliation p.roceedings and as that has not been terminated by either party the Govt. has no jurisdiction to refer the
dispute in relation thereto to the Tribunal. If this plea is not
accepted the wage scales and dearness allowance as awarded by
the Tribunal is nc,l challenged.
The' claim for bonus as awarded
is disputed as it often happens, on the manner and method of
computation of depreciation and developmeht r~ate. It is the
case of the employers that it has not the' financial capacity to
bear the burden of the gratuilJY scheme framed by the Tribunal
for the workmen.
Apart from this certain i:ncongruit\es in this.
scheme are pointed out to which we shall refer and deal with at
the appropriate place.
The fifth issue relating QO permanency is
not pressed.
The workman have also filed an Appeal (Civil Appeal No.
610 of 1967) against the Award in which the omission by the
794
SUPREME COURT REPORTS
[1972] l S.C.R.
Tribunal to grant an adjustment in the wage scale by directing
A
a fitment of the wages of workmen in the said scales in accordll:llce
with the length of their service is assailed.
It is also pointed
out that the Tribunal did not link the dearness allowance granted
by it with the cost of Jiving i11dex and lastly the award did not
compute the return on reserves in accordance with the schedule 3
of the Payment of Bonus Act (hereinafter called 'the Bonus Act').
B
A few facts may now be stated for a better appreciation of
the matters in controversy.
The Appellant was registered as a
Public Limited Company in or about 1956 and commenced production in or about 1958. It employs approximately 170 persons of whom 155 are daily rated workers and it is the later cateC
gory who are the Respondents in thiscase.
In October '62 the
General Secretary of the Mumbai Kamgar Union which represents
the workers of the Appellant (hereinafter referred to as 'the Union')
made certain demands on their behalf relating in11er-alia to wage.-
scales and dearness allowance.
These disputes formed the Subject matter of conciliation proceedings in the course of which the
parties arrived at an amicable settlement on 5th April '63, the
D
relevant terms of which pertaining to the wage scale and dearness
allowance are as undet:
Demand No. I-Wage scales :
The workers drawing at present upto J{s. 30.30 np. per day
will be given an ad-hoc increment of 60 np. with effect from
1-1-1963 and another increment of
40 np. with effect from
1-1-1964.
(b) Persons drawing more than Rs. 3.30 np. per day will be
given an adhoc increment of 50 np. with effect from 1-1-1963 and
another increment of 30 np. with effect from 1-1-1964.
(c) The arrears of increment from 1-1-1963 till 31st March
will be paid on or before 20th April, 1963.
Demand No. 2-Dearness allowance :
As the wage scale agreed to above are consolidated i.e. inE
F
cluding allowance, the Union has withdrawn the demand".
G
The other two demands relating to Casual leave and paid
llolidays are not before us and need not be noticed. The parties
also agreed to discuss the existing production bonus scheme and
to finalise the suggestion for revising the same by the end of
June '63, in view of the instalment of new machinery.
This settlement was reduced to writing and signed by the Chief Executive
H
cif tliie Appel!atjt, the Cqn.eiliation Officer and the Gerteral Secretary, Mqmbai :Kamgat Union anq was considered a 'seltlement'
as defined by clause 'p' of Sect,ion 2 of the Act.
It was averted
INDIAN LINK CHAIN LTD. V. WORKMEN
(Jaganmohan Reddy, J.)
795
A that as this settlement was binding upon the parties under Section
19(2) of the Act for a period of six months from 5th April '63
and would continue to bind them after the expiry of the
said period until the expiry of two months from the date on which
a notice in writing of an intention to terminate ifue settlement is
given by one of the parties to the other party or parties to the
B.
settlement and since the settlement was not terminated in accordance with any of the requirements set out above by a notice in
writing given by the Respondents, no 'dispute could be raised
again relating to the wage scale and dearness allowance and therefore the reference mad~ on 27th December '65 under Sec. l O(A1
( d) of the Act for adjudication was incompetent.
c
On the dispute relating to the payment of bop.us, the case of
the Appellant was that its profits for the year 1964 before depreciation was Rs. 4, 11, 17 6 /- and that under the payment of Bonus
Act the available, surplus was Rs. 19, 921 / - out of which an allo-
~able surplus would amount to Rs. 11,977 /-.
The Tribunal however, in arriving at its own computation of
available
surplus
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and allocable surplus disallowed the claim of the Appellant for a
sum of Rs. 1,81,054/- on account of depreciation and Rs. 5,822/-
in respect of the development rebate reserve and instead it allowed
deprecia:tion of R~. 80.190/- and development rebate
of Rs.
3,917 /- as shown in the balance-sheet. In respect of these items
the reason given by the Tribunal is that while rt is true that the
Company was entitled to deduct by way of depreciation an amount
admissible in accordance with Section 32 (I) of the Income tax
Act by virtue of Sec. 6( a) of the Bonus Act, there was no material
on record to show that the deduction in respect of the aforesaid
items was actually made by the Appellant in accordance with the
relevan1 provisions of the Income tax Act. In these circumstances
it did not accept the deduction claimed by the Company, which
were admissible under the Bonus Act.
On the question of gratuity the case of the Appellant was that
it has only been in existeno~ for 8 years from 1958 and that for
the years 1958 'to 1960 its working showed losses.
For
1961
there was a ~arry forward from prior years of a loss of Rs.
2,19,948/- which when set off against the profit of Rs. 93,062/-
in the year 1961 left a carry forward of loss of Rs. 1,25,886/-.
In .the year 1962 it earned profits of Rs. 84,837 /- but the losses
incurred in the earlier years could not be wholly se1 off and the
balance of 'th.~ loss of Rs. 42,049/- had to be carried forward
to the year 1963.
After setting off this carry forward of loss
against the profit for the year 1963 there was only a profit of Rs.
65,323/-. In these circumstances no dividend was paid to the
shareholders for the years 1958 'to I 962. Dividends however were
paid fcs tbe year 1963,1964 and 1965 bm the stand of the Appellant was that notwithsta~ the earning of profits and declaration
SUPREME COURT REPORTS
[1972] l S.C.R.
of dividend •the depreciation and developm~n:t n:bate could not
be provided for fully in accordance with tlll! Income tax Act.
Apart from this there were large foreign loans the payment of
which was made difficult by the further burden imposed upon it
on account of devaluation of the Rup·~e. To this was also added
the increase in the wage bill cons.~quent on the settlement entered
into with the Union as well as the increase of Rs. 20,869/- due
to J nterim wage relief recommended by the Wage Board for Engineering Industry.
Taking all these factors into consideration
the Company's case before the Trib/una.l was that it had not the
financial ability to sustain a scheme of gratuity.
Apart from this
ground of attack, the Appellarn also contes·ted the scheme as being
vague, contradictory and impossibk to implement. The Tribunal
it is said while it had prescribed a consolidated wage, directed the
payment of gratuity by reference •to the basic wage excluding •the
dearness allowances. lt is therefore contended that it is not possible to ascertain which portion of the consolidated wage is the basic
wage and which portion ·the dearness allowance and consequently
th•:: implementation of the scheme has become impossible.
It is
also submitted that as 'lhe scheme stands it is incongruous because
a person who resigns or retires after I 0 years gets a larger gratui·ty
than a person whose services are terminated.
In so far as the claim for bonus is concerned the Respondents
in their Appeal have challenged the Award of the Tribunal on the
ground that it had worked out the r~turn no reserves not as they
were shown in the balance sheet at the beginning of the year vi".
Rs. 2, 70,497 /- as required under Schedule III of the Bonus Act
but on the reserves appearing at the end of the year amounting
to Rs. 4,92,349. -. This me•thod of computation would reduce the
return on the reserve deductable as a prior charge by Rs. 14,000/-
and consequently would increase th<:: available and allocable surplus. We have already stat.ed that the Respondents in their Appeal
have further challenged the Award relating to the fixation cf wage
scales and dearness allowance, th·~ former on the ground that the
Tribunal gave no directions on the question of adjustments or
fitments
notwithstanding the fact that the issue was specifically
referred .for adjudication and the latter by not linking it to the cost
of living index allegedly on the ground that "no change for worse
is likely to take place for some time to come".
It will be convenient to examine these rival contentions in respect of each of
the items separately.
· ·
_,
The qw~stion whether the settlement in Ex. C~ 9 was in force
a•t the time when the Government made the reference of the dispute
to the Tribunal, will depend on whether the provisions of Sec.
19(2) read with Sec. 2(p) of the Act were complied with. There
is no dispute that Ex. C9 would amount to a settlement but on
behalf of the workmen it is contended that it only records an adA
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INDIAN LINK CHAIN LTD. V, WORKMEN
797
(Jaganmohan Reddy,!.)
hoc settlement, the operative portion of which relates to two increments one to be given from 1.1.63 and the other from 1-1-64, and
it is during this period that the dearness.allowance was given up.
In these circumstances the management, it is claimed, terminated
the agreement by making counter proposals to the workm;~n iR
the conciliation proceedings which terminated the settlement. This
averment is supported by the finding of the Tribunal to that effect,
namely, that there was a waiver of the requirement of a written
notice putting an end to the s·~ttlement. The contention on behalf
of the Appellant on the other hand is that there.could be no waiver
of a statutory notice required by the provisions of the Act to be
in writing to pu1 an end to the settlement, and that the analogy of
waiver of a notice required to be given in suits against the Govt.
under Sec. 80 of the Civil Procedure Code is neither apt nor is it
applicable to cases where as a matter of public policy a written
notice is required to be givien by one of the parties to the other
party to terminate the settlement. Section 2(p) of the Act defines
'settlement' as meaning :
"a settlement arrived at in the course of conciliation
proceeding and includes a written agreement between the
employer and workmen arived at otherwise than in the
course of conciliation proceeding where such agreement
has been signed by the parties thereto in such manner as
may be prescribed and a copy ·thereof has been sent to
an officer authorised in this behalf by the appropriate
Government and the conciliation officer".
In so far as it is relevant, Section 19 is as follows :
19 (1) A settlement shall come into operation on such date
as is agreed upon by the parties to the dispute, and if
no date is agreed upon, on the date on which the
memorandum of the settlement 1s signed by the parties
to the dispute.
(2) Such s•mlement shall be binding for such period as
is agreed upon by •the parties, and if no such period
is agreed upon, for a period of six months from the
date on which the memorandum, of settlement is
signed by the parties to the dispute, and shall continue
to be binding on the parties after the expiry of the
period aforesaid, until the expiry of two months from
the date on which a notice in wriiing of an intention
to terminate ·t!J.~ settlement is given by one of the
parties to the other party or parties to the settlement.
( 3) No notice given under sub.section ( 2) of sub-section
( 6)
shall ha Ye effeot, unless it is given by a party
representing the majority of persons· bound by the
set<tlement or award, as the case may be."
798
SUPREME COURT REPORTS
[1972] l S.C.R.
Reading Sec. 19 with the definition in Sec. 2 ( p) it would
appear that a settleme)lt will enure for the duration of the period
for which it has been agreed to between the parties and if no period
is agreed upon for a period of six months from the date on which
the memorandum of settlement of dispute is signed by the parties
and where it is put an end to by a notice in writing it will continue
to be operative until the expiry of two months from the date on
which that notice is given. It would appear that even where an
agreement is for a fixed period it will not only continue to
l:l'~
binding for the duration of tl1e period of settlement but thereafter
also until it is terminated by a notice in writing and even then it
will continue for a period of two months from the date of such
notice. While no doubt it is true that a notice must be in writing,
such a notice can be inferred from correspondence between the
parties.
In Cochin, State Power, Light Corporation Ltd. v. hi Workmen(')
a settlement between the employers and the employees
had been arrived at on 25th November 1954 and was to remain
in force for a period of five years from !st October '54 i.e., upto
30th September '59.
While this was so under Section 19(2) of
the Act it would continue to be in operation till it was terminated
by a notice in writing.
The case of the employers in that case
was that the settlement was never terminated by notice in writing,
as such it continued to be in force when the reference was made,
and since a reference of a dispute made during the continuance
of the settlement is bad, the Tribunal had no jurisdiction to adjudicate the dispute relating to wage fixation and dearness allowance.
It however appeared that the workmen had presented a
charter of demands on 14th October '59 in which there was a
reference to the settlement and it was stated therein that the Union
had. on the 13th October '59 resolved to terminate tlie existing
settlement and submit the charter of demands to the management.
Then followed the charter of demands. It was contended that this
did not put an end to the settlement as required by Section 19(2)
of the Act because there was no reference to the termination of
the settlement by that charter. The Court however rejected this
contention and held that as there was a reference
under
the
charter of demands to a resolution in which a specific statement
fhat the settlement was being terminated thereby was made it was
held that that was sufficient notice as required under Section 19
(2) of the Act and hence the reference in regard to items covered
by the settlement were valid. Wanchoo, J. at page 101 observed :
"There is however no form prescribed for terminating settlements under S. 19(2) of the Act and all
----
(1) [1964] 2 L.L.J. 100.
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INDIAN LINK CHAIN LTD. V. WORKMEN
799
(Jaganmohan Reddy,/.)
that has to be seen fa whether the provisions of S. 1 C)
(2) are complied with and in substance a notice is given
as required thereunder".
The facts in the Workmen of Western India Match Co. Ltd. v.
The Western India Match Co. Ltd.,(1) were that during the
8
pendency of negotiations the Union by a letter had asked the
Company to treat the charter of demands as notice under Sec.
19(2) of the Act without first terminating the earlier settlement
in an Award and the Company had agreed to refer the matter in
dispute to the adjudication ot a Tribunal.
But nonetheless it
was contended that when there was no notice of termination of
settlement in the charter of demand the subsequent reference in
C
a letter that it should be terminated as from the charter of demand
was not valid.
This contention was however negatived on the
ground that a formal notice under s. 19(2) of the Act was immaterial inasmuch as the presentation of the charter of demands
filed by a letter amounted to a notice of termination of settlement. In the Management of Bangalore Woollen, Cotton & Silk
D Mills Co. Ltd., v. The Workmen & Anr.,(2 ), it was sought to be
contended that the case in the Workmen of Western India Match
Co. Ltd., supported the proposition that an inference to terminate an award or settlement can be gathered from the various
correspondences that passed between the management and the
Union but one of us Vaidialingam, J. at page 586 pointed out
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that that decision "does not lend any support to such a view". It
was utimately held in that case that though no such formal notice
was given in the earlier correspondence the letter of April 8,
1957 written by the Union could itself be construed as notice
within the meaning of Section 19 (2) and therefore the Tribunal
had jurisdiction to adjudicate upon the claim as the reference was
made by the State Government long after the · expiry
of two
months from April 8, 1957.
It is true that though a written
notice can be spelled out of the correspondence there must be a
certainly regarding the date QU which such a written no'tice can
be construed to have been given because a settlement notwithstanding such notice continues to be in force for a period of two
n;ionths from that date.
The tribunal drew support from the Workmen of Continental
Commercial Co. (Private) Lid. v.
Govt. of West Bengal and
Ors. (3), for holding that the charter of demands itself constitute
the notice as required under Section 19(2) of the Act. It thought
that that case was decided by this Court.
This however was a
case decided by the Cakutta High Court where it was held that
H
the charter of demands was a tacit representation by the workmen
------------
(!) [1963] 2 S.C.R. 27.
(2) [1968] 1 S.C.R. 581.
(3) [1962] I L.L,J. 85.
iOO
SUPREME COURT REPORTS
(1972] l S.C.R.
not to remain bound any more by a settlement arrived at in conciliation proceedings but sub-.scc. (2) of Sec. 19 contemplates an
express representation.physical, in the form of Writing terminating
the agreement.
Whije holding so it nonetheless observed that a
notice under Sec. 19(2) of the. Act can also be waived by the
party to whom the notice is to be sent. This view of the Calcutta
High Court is opposed to the view taken by this Court and must
be rejected as not good law because in our view there cannot be
any waiver by conduct or implication of the requirement of a
written notice which that Court had itself recognised must not
be a tacit representation but an express representation in the form
of writing terminating the settlement.
This being the legal position it is necessary to examine what
in fact took place in this case.
The settlement in C. 9 would
appear to be as contended by the Respondent's Advocate on an
ad hoc basis because it provides even in respect of the demarid
for wage scale that the employees will be given two ad hoc increments one with effect from 1, 1-63 and another with effect from
1--1-64. Even in respect of the bonus scheme which was not part
of the settlement it was agreed to finalise the
suggest10n - for
revising it by the end of June '63, in view of the instalment of new
machinery. Nonetheless Exh. C. 9 embodies a settlement and
even if the duration of that settlement is not fixed as contended.
it will continue to be in operation until a notice in writing to terminate it is given, or from the correspondence such a noti\:e to
terminate can be ascertained.
The Company had in its written
statement taken up the stand that Exh. C. 9 still subsists but the
correspondence shows that the Company had put an end to it
before the charter of demands were. presented to it.
It would
appear that during the proceedings in conciliation of the dispute
that has given rise to the reference which is the subject matter
of this appeal, the Additional Commissioner of Labour, Bombay,
wrote to the Manager on 26-1-65 before entering upon the conciliation asking him to give information as to whether there is any
agreement, settlement or an Award governing the demand raised
on behalf of the workmi;n in the present dispute.
Tl)e Company by its reply dated 20th March 1965 informed him that the
agreement between itself and its workmen had expired. It said :
"at present we do not have any agreement/ settlement or an Award covering the demands
raised on
behalf of the Workmen in the present dispute with the
present Union.
We had an agreement with the previous Union M/s. Mumbai Kamear Union, for two
years, which has expired on 31-12-1964.
There are
no demands pending for adjudication".
The stand taken by the company that there is no settlement m
force covering the demands raised by the workmen is clear.
In
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INDIAN LINK CHAIN LTD. V. WORKMEN
(Jaganmohan Reddy, J.)
801
the statement of claim the Gene.ral Secretary of Sarva Shramik
Sangh representing the workmen said that the private agreement
between the Company a:nd Mumbai Kamgar Union dated 5th
April 1963 was duly terminated and thereafter a charter of
demands were presented on 4-2-1965. Thereafter the Assistant
Labour Commissioner tried to conciliate and in his report Ex.
U. 6 while stating that con_s;iliation proceedings have ended in a
failure, relying upon the letter of the management, stated that
there was no subsisting settlement/ agreement or Award presently
in this dispute. The admission by the management is said to be
made under a mistake.
We do not think this is a satisfactory
explanation of a categorical statemenf In our view the letter of
20th March 1965 must at any rate be deemed to be a notice of
tennination, because there is a categorical statement that the
settlement has been terminated on 31-12-1964. Even if there i~
no evidence of written notice terminating it on the date specified,
the letter which said that it had so terminated must be taken as
the requisite notice, if so, the reference to adjudication under the
Act bas been made long after the expiry of the two months i.e.,
on 27-12-1965. If we yiew the matter slightly differently, theresult is the same, because when both the parties to the dispute
j)roceeded on the ~pecific plea that there was no settlement binding on either of them in respect of the wages and dearness allowance, even prior to conciliation, the Go\lernment had no option,
on a failure of the conciliation proceedings and on being informed
E
by the written representation of the appellant that there was
no settlement in force, but to refer the dispute to the Tribunal.
The management therefore is estopped from now taking the
stand that the settlement was not put an end to or that the reference was invalid.
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In view of this finding though the management does not assail
the wages and dearness allowance as awarded by the Tribunal, as
already noticed, this Award is challenged by the Union on the
ground that no adjustment ,in the wage scale was granted and
that the dearness allowance was not linked with the cost of
living index.
It is also contended that the Tribunal by
not
making an Award in respect of fitments in the wage scale committed. an error and Is not adjudicating the dispute in respect
thereof, has failed to exercise a jurisdiction vested in it.
It is
true that while the Tribunal prescribed a consolidated wage scale
of daily wages, it did not direct fitments in those wage scales. The
scales that have been prescribed for the various categories of
workers are as follows :
·
Unskilled
.
Semi-skilled
Skilled
Highly skilled
Rs. 4 •50-0 ·20-6 ·50
Rs. 5 ·50-0 ·25-8 ·00
Rs. 7 -00-0 •35-10 ·50
Rs. 8 ·50-0 ·.50-12 ·50
:so2
SUPREME COURT REPORTS
[1972] I S.C.R.
On behalf of the Union it is pointed out that by not directing an
adjustment in these wage scales a worker who has been in the
service of the Company for 8 years drawing less than the initial
start in each of the wage scales according to the category in
which he is placed will get the same initial wage as a person
who is taken into service at or near the date of the clainr of the
enforcement of the Award which is not in conformity with social
justice.
The Tribunal it is said should have directed an ad hoc
fitment like that given in the case of The Hindustan Times Ltd.,
New Delhi v. Their Workmen Vice Versa('), or in French Motor
Car Co. Ltd. v. Workmen(').
The Tribunal in the case before
us pointed out that the demand of the Union for wage scales was
that all the workers should be classified in consultation with the
Union and to be fixed in the wage scales claimed by it on a point
to point basis with retrospective effect from 1-2-1965.
It is
these demands that were considered and the Tribunal did n?t
see its way in adopting either the scales of wages claimed by it or
fixing them in the wage awarded on a point to point basis. There
is therefore no question of the Tribunal not exercising a jurisdiction vested in it but it must be taken as having been considered and
rejected.
The question whether that rejection is valid or not
would depend on the facts and circumstances of the case as can
be ascertained from the material placed before it. It is contended
by the Union that the material before the Tribunal was such that
it could have made fitments for instance, from the statement of the
dates of joining and the classification and designation of
the
workmen as given in U-3 statement. From this statement the
Tribunal could have ascertained the length of service of each of
the employees, his category, his date of joining and the wage
scales which he was drawing on the date of the Award and could
have formulated and directed an ad hoc fitment.
It is true that
taking as typical, a case of a semi-skilled operator who joined on
1-12-1958, another in the same category who joined on 13-3-1961
and one who joined on 19-3-1964, more nearer to the date of
the Award, it would appeal that as all of them would be drawing
less than the initial wage of Rs. 5.50 in their old wage scales
they will start with Rs. 5.50 in the new wage scales fixed for
semi-skilled workers even though the first of them had on the
date when the wage scales came into operation 8 years service and
the second of them 5 years and the last of them only 2 years.
In
the French Motor Car Co. Ltd.'s case(') this Court after considi!ring the several instances where the Tribunal had granted fitments expressed the view that general adjustments are
granted
when scales of wages are fixed for the first time.
At page 27-28
Wanchoo, J. observed:
(l) [1964] l S.C.R. 234.
(2) [1963] Supp. 2 S.C.R.16.
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INDIAN LINK CHAIN LTD. V. WORKMEN
803
(laganmohan Reddy, J.)
"A review therefore of the cases cited on behalf of
the respondents shows that generally adjustments are
granted when scales of wages are fixed for the first time.
But there is nothing in law to prevent the Tribunal from
granting adjustment eve11 in cases where previously
pay scales were in existence; but that has to be done
sparingly taking into consideration the facts and circumstances of each case.