# LTD v. INDUSTRIAL TRIBUNAL, A.P. & ANR

- **Citation:** [1972] 1 S.C.R. 428
- **Court:** Supreme Court of India
- **Decided:** 1971-08-26
- **Bench:** G. K. Mitter, C. A. Vaidialingam, P. )Aganmohan, Reddy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/ltd-v-industrial-tribunal-a-p-anr-5371
- **Pages:** 22

## Headnote

Industrial D'ispute-Recommendations of Central
Wage
Board
for
sugar whether vitiated by fact tha1 it had 'fixed uniform wages region ~i$e
without further classification within each regidn-Tribunal's jurisdictio" to
go into question of financial cupacity of cq"tnpqny to implenient recommendations of Wage Board--Con1pany whether .. had financial capacity,
·The Kirlampudi Sugar Mills Ltd. was started in !951 as a small unit
and later was increased to a ]arger c!rush(ng
capacity of 1000 tons. BY
1963" the factory got into financial embarTassment. In the middle of that
year the present managemen:t took over the factory~ on the specific assur ..
ance of the Government that t~ey would provide for 3nd give all
facilities to enable them to run the factory.
After the management was taken
over there were disputes between the management and workers with the
result that they referred various matters for
adjudication incWding
the
claim for implementation of the recon1mendations of the
Central
\Vage
Board for sugar. The disputed items related to categorisation of workers
their fitments, fixation of work load, the demand. for increase of Rs. 10
to be given to every v.·orke·r over the basic wage implementation of weightage, dearness allowance. the demand for giving grades and for giving retrospective effect etc.
On issue No. IA the Tribunal held that categorisation of workers and their fitments and work load should ~ in accordance
with the recommendations of the Wage Board; it deciC.ed in favpur of the
management in respect of certain categories of workers but in respect of
some others it gave relief to the workers. The Tribunal furiher heltl in
respect of is~ue 2 and 5 before it that the financial capacity of the Appellant was not such as to justify an increase of Rs. IO to,all the workers over
the basic wag.e and dearness allowance or the payment ~f Rs. 5 to workmen for implementation of the weightage recommended by ~e Wage Board.
Appeal No. 1602 of ,.! \166 was filed in this Court by special leave bv the
management 3.gainst tlle Award of the T~ibunal in respect of issue !A in so
far as it went against them.
Appeal No. 1603 of 1966 was filed by the
workers against the Tribunal's decision 9n issues 2 and 5 and that part of
issue tA which went against them.
The questions ttiat fell for consi~era
tion were :
(i) whether the recommendations of th€ Wage Board were
vitiated by the fact that they had fixed the wages uniformly region-wise
without further classification·within each region: (ii) If they were valid,
whether the Tribunal could go into the auestiofl of the financial capacity
of the company to implement them; (iii) whether the company had the
financial capacity to implement the recon1mendations.
·
HELD : The Wage Board following the principles' laid down by this
Court has considered the capacity of the industry region-wise and has also
fixed wages different from region to region having regard to the difference
in the capacity of the Industry region-wise.
Further it' has given good
reason for not furnishing: a criteria for further classification of the industry
within the region.
In these circumstances prescribing the same wage ,for
all units of industry in the sam.e region was justified ·and the fact that the
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KIRLAMPUDI SUGAR MILLS V. IND, TRIB.
(Jaganmohan Reddy, J.)
429
industry in the region had not been dlvicled into classes could not vitiate
the recommendation of the Wage Board, [441 F-G]
Workmen of Sltri Bajrang Jute Mills Ltd, V. Employers of Sh1·i Bajrang
.lute Mills Lid., [1969] 2 S.C.R. 593, explained and distinguished.
Express Newspaper (P) Ltd. v. Union of India & Ors., [1959] S.C.R.
12 and French Motor Car Co. Ltd. v. Workmen, [1963] Supp. 2 S.C.R. 16,
referred to
However, notwithstanding the fact that a fair wage has been fixed by
the Board which would be applicable to all the units in the region for
which wage has been fixed, it may be open to any particular unit to plead
that in fact i

## Text

_Characters 0–39,312 of 61,880. This is a partial read: ask again with offset=39312 for what follows._

428
MANAGEMENT OF THE KIRLAMPUDI SUGAR MILLS
A.
LTD.
v.
INDUSTRIAL TRIBUNAL, A.P. & ANR.
August 26, 1971
[G. K. MITTER, C. A. VAIDIALINGAM AND P. )AGANMOHAN
"-,
REDDY, JJ.]
Industrial D'ispute-Recommendations of Central
Wage
Board
for
sugar whether vitiated by fact tha1 it had 'fixed uniform wages region ~i$e
without further classification within each regidn-Tribunal's jurisdictio" to
go into question of financial cupacity of cq"tnpqny to implenient recommendations of Wage Board--Con1pany whether .. had financial capacity,
·The Kirlampudi Sugar Mills Ltd. was started in !951 as a small unit
and later was increased to a ]arger c!rush(ng
capacity of 1000 tons. BY
1963" the factory got into financial embarTassment. In the middle of that
year the present managemen:t took over the factory~ on the specific assur ..
ance of the Government that t~ey would provide for 3nd give all
facilities to enable them to run the factory.
After the management was taken
over there were disputes between the management and workers with the
result that they referred various matters for
adjudication incWding
the
claim for implementation of the recon1mendations of the
Central
\Vage
Board for sugar. The disputed items related to categorisation of workers
their fitments, fixation of work load, the demand. for increase of Rs. 10
to be given to every v.·orke·r over the basic wage implementation of weightage, dearness allowance. the demand for giving grades and for giving retrospective effect etc.
On issue No. IA the Tribunal held that categorisation of workers and their fitments and work load should ~ in accordance
with the recommendations of the Wage Board; it deciC.ed in favpur of the
management in respect of certain categories of workers but in respect of
some others it gave relief to the workers. The Tribunal furiher heltl in
respect of is~ue 2 and 5 before it that the financial capacity of the Appellant was not such as to justify an increase of Rs. IO to,all the workers over
the basic wag.e and dearness allowance or the payment ~f Rs. 5 to workmen for implementation of the weightage recommended by ~e Wage Board.
Appeal No. 1602 of ,.! \166 was filed in this Court by special leave bv the
management 3.gainst tlle Award of the T~ibunal in respect of issue !A in so
far as it went against them.
Appeal No. 1603 of 1966 was filed by the
workers against the Tribunal's decision 9n issues 2 and 5 and that part of
issue tA which went against them.
The questions ttiat fell for consi~era
tion were :
(i) whether the recommendations of th€ Wage Board were
vitiated by the fact that they had fixed the wages uniformly region-wise
without further classification·within each region: (ii) If they were valid,
whether the Tribunal could go into the auestiofl of the financial capacity
of the company to implement them; (iii) whether the company had the
financial capacity to implement the recon1mendations.
·
HELD : The Wage Board following the principles' laid down by this
Court has considered the capacity of the industry region-wise and has also
fixed wages different from region to region having regard to the difference
in the capacity of the Industry region-wise.
Further it' has given good
reason for not furnishing: a criteria for further classification of the industry
within the region.
In these circumstances prescribing the same wage ,for
all units of industry in the sam.e region was justified ·and the fact that the
B
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.,
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KIRLAMPUDI SUGAR MILLS V. IND, TRIB.
(Jaganmohan Reddy, J.)
429
industry in the region had not been dlvicled into classes could not vitiate
the recommendation of the Wage Board, [441 F-G]
Workmen of Sltri Bajrang Jute Mills Ltd, V. Employers of Sh1·i Bajrang
.lute Mills Lid., [1969] 2 S.C.R. 593, explained and distinguished.
Express Newspaper (P) Ltd. v. Union of India & Ors., [1959] S.C.R.
12 and French Motor Car Co. Ltd. v. Workmen, [1963] Supp. 2 S.C.R. 16,
referred to
However, notwithstanding the fact that a fair wage has been fixed by
the Board which would be applicable to all the units in the region for
which wage has been fixed, it may be open to any particular unit to plead
that in fact its financial position is not such that it can bear the burden of
implementing the recon1mendations.
~he justification of the plea of want
of financial capacity will depend upon the evidence of its financial position
over a period of years, to show that it cannot bear the burden or that it is
only a temporary or fortuitous situation \\t'ith every po:.sibility of financial
improvement in the immediate future [442 E; 443 CJ
Ahmedabad Mill Owners' Association. etc. v. Textile Labour As ... ociation, 1.1966] I S.C.R. 382, relied on.
The Appellant's balance sheets for the years 1960 to 1970 for a period
of JO years showed that except for the year ending 30-6-69 the compan)
was not in a position to
declare any
dividends.
Though the factory
appeared to ha\·e been expanded after 1964 to 300 tons capacity it did not
show uniform net profits; on the other hand losses continued. The profits
that it made in any year seemed to be consumed by losses of the orevjous
years. Various factors contributed to financial unsteadiness. [448 G-Hl
This being the position the Tribunal wi:' justified in holding that the
Appellant did not have the financial capacity to bear the. hurde.n of payment of Rs. 10 increase and Rs. 5 as V.'eightage in accordance with the recommendations of the Wage Board. On this .conclusion and also on an
examination of the relevant material it was evident that the con1pany was
not in a financial position to nleet the burden of iinplernenting the recommendations of the Wage Board. Despite this the company had in1plcmented the a\l,'ar<l in respect of a large number of workers both as to categorisation and fitmcnt except in regard to four categories. 'fhe clain1 of the Respondent workmen for categorisation and fitment in accordance with the
Award in regard to these could not. in the circunl';tanccs. be accepted.
[448 H-4i9 Gl
CAVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1602
and 1603 of 1966.
'G
Appeals by special leave from the Award dated November 19.
H
1965 of the Industrial Tribunal, Andhra Pradesh, Hyderabad in
l.D. No. 23 of 1965.
K. Srinivasamurthy, Naunit Lal and Swaranjit Sodhi for the
appellant (in C.A. No. 1602 of 1966) and 'the respondent in C.A.
No. 1603 of 1966).
M. K. Ramamurthi and Vineet Kumar, for respondent No. 2
(In C.A. No. 1602 of 1966) and the appellant (in C.A. No. 1603 ·
o.f 1966).
·
9-L1340Sup.Cl/71
430
SUPREME COURT REPORTS
[1972] I S.C.K
The Judgment of the Court was delivered by
A
P. Jagamnohan Reddy, J.
These are two appeals by Special
Leave. Civil Appeal No. 1602 of 1966 is by the Management
against the Award passed by the Industrial Tribunal on a reference made by the Government for categorisation of workers,.
their fitments, fixation of work load, the demand for
incp~ase B
of Rs. 10/- to be given to every worker over the basic wage, implementation of weightage, dearness allowance, the demand for
giving grades and for giving re'trosp.ective effect etc. Civil Appeal
No. I603 of 1966 by the Workmen is against the same Award for
disallowing the increase of Rs. 10/- and the weightage of Rs. 51and also against ithe fitment of certain categories of workers. The
Tribunal held that the financial capacity of the Appellant was not
C
such as to justify an increase of Rs. l 01- ito all the workers over
the basic wage and dearness allowance.
On ithe same grounds
it also disallowed the payment of Rs. 51- to workmen for implementation of the weightage p~commended by the Wage Board for
Sugar Industry. These were the subjeot matter of issue 2 and 5
of the reforence made to the Tribunal. So far as issue IA is conD 1
cerned, it held that categorisation of workers and their fitments
and work load should be in accordance with the recommendations of the Wage Board for Sugar and even as to these it decided
in favour of the management in respect of certain categories of
workers but in respect of some others, it gave
relief to
the
workers.
The employers appealed against that part of issue IA E
which was decided against 1th.em, while the Workmen's Appeal is
against the finding of issues 2, 5 and part of IA which was against
them. We will first take up the appeal of the Management.
It appears that the Kirlampudi Sugar factory was started in
I95I as a small unit and later was increased to a larger crushing
capacity of 1,000 tons which according to the Tariff Commission
would not be considered economically profitable, though according to the Sugar Wage Board H would be. By 1963 the factory
got into financial embarrassment as it had to pay heavy debts to
the Government on account of Sugar cess, cane prio~ payable
F
to the growers and Income-tax.
These demands it
is
alleged
practically brought 1the factory to a stop, when in the middle of G
1963 the present management took over the factory on the specific assurance from the Government that they will provide for
and give all facilities to enable them ito run the factory.
After
the inana.rement was taken over there were disputes between the
Management and workers with the result
that they
referred
various ma'tters for adjudication including the claim for impleH
mcntation of the wage Board's recommendation which was alleged
to have been implemented by the former management as early as
1961-62. It was the case of the workers that that implementa•
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KIRLAMPUDI SUGAR MILLS v. IND. TRIB.
431
(Jaganmohan Reddy, J.)
tion was not satisfactory and it was their demand that the sugar
wage board's recommendations should
be implemented.
The
management raised a specific objection before the Industrial
Tribunal that the reference relates to a wholesale promotion of
workers from one grade to the other under the guiw of frtment
under the Wage Board's recommendations which is illegal and
without jurisdiction; and in any case the question of promotion,
categorisation and fitment is a managerial function in which !he
Tribunal cannot interfere unless it can be es1ablis!r.,d that the
management acted mala fide or it resorted to unfair practices. It
was further pleaded that the factory had not the financial capacity to implement the demand. One of the grievance of the
Appellant was that though the Tribunal found that it had not
the financial capacity to meet the additional
burden
of
the
demands made by the workm~n rt granted large scale promotions
which it had no jurisdiction to grant. Despite this the inanagement states •that it had implemented the Award in most of the
cases and challenged it in respect of some only.
It may be mentioned that the Central Wage Board for S~ar
was appointed in terms of paragraph 25 of Chapter XXVII of
the Second Five Year Plan. This Wage Board for Sugar Industry divided India into 4 regions and each region included every
State containing even a single unit unlike that adopted by the
Tariff Commission which in its Report on the cost structure left
out some of the States from the 4 divisions. It then considered'
the wage structure, categorisation etc. for each of the snid
regions, in relation to a fair cross-S".ction of the Industry in each
of the regions. In comparison with this method, the Jute Wage
Board had taken India as a whole and fixed a uniform rate for
the Jute industry. The first contention which has been urged is
that the recommendations of the Wage Board were not binding
in view of the fact that it was not a statutory board but was only
a recommendatory one and 1ho~ Tribunal could not implement
them as a whole because it had recommended that fitments and
categorisation should be affected by recourse to Tripartite machinery. The case of Workmen of Shri Bajrang Jute Mills Ltd., v.
Employees of Shri Bajrang Jute Mills Ltd. (1), is cited as
an
authority for the proposition that as the procedure prescribed
therein was not valid, the r1:9ommendations of the Wage Board
were declarec! to be invalid and inapplicable to the Jute Industry.
The learned Advocate on behalf of the Respondents raised a preliminary objection to the maintainability of this contention as
thi< issue had neither been referred to the Tribunal, nor has it
H
been urged before it nor had a ground been taken in the Special
Leave Pe.titian. He seeks to distinguish the case of the Bajrang
(I} [1969] 2 S.C.R. 593.
432
SUPREME COURT REPORTS
[1972] l S.C.R
Mills, as in that case there was a specific issue while there is n9ne
in this case. In answer it is pointed out that the contention raised
Qn behalf of the Respondents is implicit in issue 1 (a) which is
<is follows :
1 (a) "Whether the demand for
categorisation of
workers and their fitment and work load should be in
accvrdance with the
recommendations of the Wage
Board for Sugar industry is justified".
The Appellant had in its sta!tement before the Tribunal in para
9 categorically challenged the
recommendations of the
Wage
Board in these words :
"It may be noticed even though the
Wage Board recommendations are not binding, in spite of huge
losses the management went out of the way and implemented
the same".
In the Special Leave Petition also in paragraph 2
ilie Appellant had challenged the jurisdiction of the Tribunal "to
go into the question of the capacrty to pay of an individual unit
in respect of one of the recommendations of the Wage Board
for Sugar industry when such recommendations had been made
for-the industry as a whole and agreed ·to by the Management
itsel".
A
B
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It is •therefore contended that if the financial capacity is taken
into account for placing fitments on the basis of Bajrang Jup~
Mills, no other question arises. In the Bajrang Milis case(1) it
was held that fixation of fair wage depends on the financial capacity but once when the Tribunal had held that the Appdlant did
E
not have the financial capacity the categorisation and fitments
directed by H in its Award are invalid. The Tiibunal is concerned
with the implem~ntation of the Wage
Board recommendation
forgetting that it cannot do so when the implementation of those
recommendations relating to categorisation and fitment
cannot
be effected without recourse to the Tripartite machinery.
It is
also contended 1hat categorisation and fitment is a managerial
fonction and requires technical knowledge of the various duties
antl functions which each of the category of workmen haw to
discharge.
The
following
contentions
have
been
urged,
J:'.ll11Cly :
(I) The Wage Boartl recommendations having
regard
to
tl1e •:asc cf Bajrang Jute Mills are invalid and cannot be
enforcect. inasmuch as it has fixed a uniform wage for •the .entir~
region without further dividing the industry in the region i:no
classe' of units according to their capacity namely region-cuminciustry for fixation of th·~ wage structure for 1hose classes
of
units.
At any rate since what is
prescribed in the
r.~port is
only r•cc01rnnendatory, unless there is a capacity to pay, no on~
cJn claim iis implementa1ion as of right.
-IT)ff9~iJJ 2Tc.1t 593.
F
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KIRLAMPUDI SUGAR MILLS V. IND. TRIB.
433
(Jaganmohan Reddy, !.)
( 2) The Appellant has not the financial capacity to implement the Award which has been held by the Tribunal to be a
fact. On this score itself it cannot implement the Award.
( 3) Jn para 263 of the Wage Board recommendation of
J 960 that when th<~re is a difference between management and
labour reoarding frtment the Tripartite machinery
should
be
brou£ht i~to existence.
The Tribunal was wrong in
thinking
that the Wage Board was giving an example of border-lines cases
where there may be a difference of opinion and it is only in those
cases that the Tripartite machinery in the case of fitment is to be
resorted to.
( 4) Fitment is a managerial function and unless the Tribunal
finds that the Act of •the manag.~ment is ma/a fide or it has resortco to unfair practices it is not justified in interfering with the fitments effected by the management.
( 5) In any case in respe~t of certain specific fitments
the
Tribunal was in error and acted without evidence.
Before dealing with these contentions it is necessary to consider the preliminary objection rais-~d on behalf of the Respondents that before the Tribunal the Appellant did not object to
the implementation of the Wage Board on the ground that its recommendations were not industry-cum-region wise or that it had
not divided the industry into various classes and fixed a wage
for those classes in that region, and in any case no such issue
was referrecJ to the Tribunal unlike in th·~ Bajrang Jute Mills
case('). In that case what was referred to the Tribunal was
whether the demand of the workmen in Shree Bajrang Mills Ltd.,
for implementation of the recommendations of the Central Wage
Board for Jute Industry is justified, and if so, to what extent. In
this case issue IA did not specifically raise an objection to
the
implementation of the Sugar Wage
Board's recommendations
in general terms but issues 1, 2, 4, 5 & 6 did raise the question
whether 1the Board was justified in its recommendations regarding categorisation of workers, fitment, increase of Rs. IOI- ro
every worker over the basic wage, dearness allowance, the minimum wage, the demand for fixation of work-load and the demand
for implementation of weightage.
Apart from
this a question
seems to have been raised that the Tribunal could not implement
the Wage Board recommendations because it had envisaged the
implementation of the categorisation etc.
through the Tripartite
machinery, as such as Tribunal had no jurisdiction to implement
it. It would appear from ithe Award that the learned Advocate
for the Appellant had challenged the jurisdiction of the Tribunal
to fix the workload or undertake the fitments in view of the recommendations in paragraph 263 of the Wage Board's report
tn (10691 2 s.c.R. 593.
434
SUPREME COURT REPORTS
[1972J 1 s.c.R.
A
that fi'tments have to be effected by the Tripartite machinery to
be appointed by the Government. Even in the startement of claim
filed on behalf of the management it was said that though the
Wage Board's reco=endations are not binding in spite of the
huge losses the management went out of the way and implemented the same. The fact that rt was said that the Wage Board
recommendations are not binding is pressed into service to supB
port the contentions that the validity of the reco=endations of
the Wage Board was challenged. While we are inclined to ,gree
with the submission of the learned Advocrute for the RespoJJd.ents
that nowhere except in the statement of the case before this Court
has a specific plea that the reco=endations of 1the Wage Board
not being in accordance with the well accepted principles laid c
down by this Court in the several cases to which reference has
been made cannot be implemented and on that account · the
Tribunal has no jurisdiction to implement those recommendations
it may nonetheless be pointed ou1 that issue IA and other i$sues
in terms challenge the implementation of the reco=endations.
Even if we permit the learned Advocate for the Appellant-and
we think there is justification for it-to challenge the Wage
Board's reco=endations generally, for reasons which we will
presently give, those reco=endations do not suffer from any
vice but on the other hand the Board has fixed a fair wage for
the industry in accordance wi1h the principles laid down by this
Court.
Since a good deal of argument is based on the reco=endations of the Wage Board it may be profitable to examine generally the factors which were taken into consideration in
fix.ing
D
E
the wage structure for the industry. The Wage Board as has
already been noticed adopted the method employed by the Tariff
Commission by dividing the country into four zones or regions
but unlike it included every State in each region which had even
F
one unit. It further took these regions which were considered
for fixation of price structure of sugar also for wage structure
in this industry. In adopting this course the Wage Board took
into consideration the seasonal nature and
the
duration, the
-sucrose content of sugar cane and its yield which varies from
rel(ion to region.
It was noticed that the duration of seasons
G
vary somewhat widely from area to area depending on the availability of cane and the year to year varirution. As a consequence
-of some of the factories in the South owninl? their own sugar-cane
farms while this is not so in the North, the Southern factories do
not suffer from the handicap of Northern factories which have ro
-get sugar cane from nearby growers depending on the conditions H
of the crop in the vicinity which is not destroyed by pest or is
unsuitable for anv o•her reason. for otherwi~e to ~ the sugar-
-cane from growers from Jong distance would involve transport
A
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RIRLAMPUDI SUGAR MILLS V. IND. TRIB.
(laganmohan Reddy, l.)
435
costs.
This disadvantage the Southern factories do not have.
The quality of cane as detennined by the sucrose content varies
from area to area depending on climatic conditions, in:ig,ation
facilities and cane development aotivities.
Factories in Maharashtra and to some extent those in the North enjoy these adventages.
Their recovery percentage is higher than in the North.
Thus the average percentage of recovery of sugar in Maharash!tra
was noted to be the highest as against ,those in U.P. and Bihar
and also as compared with the All India average. The variation
in the yield of cane per acre was also taken into consideration;
for instance in Bombay it is much higher 1than in the North. The
Board indicated the main factors responsible for vai,ation
in
the yield of sugar cane in different regions due to : ( 1) Improved
variety of cane; (2) irrigation facilities; (3) ecological faotors;
and ( 4) improved methods of cultivation. The difference in the
case of yield in 1the various areas has been one of the factors
which the Board said had persuaded it to divide 1he country into
four regions.
Though the industry is rural based, it was stated the price of
essential commodities in townships where sugar factories are
located, did not vary appreciably from the urban areas. In spite
of the urban amenities not being available in these factory areas,
the Board noted that while the impact of the wages it worked
out, on the economy of the coun1try has been taken into account,
it was not proper ro take agricultural wages as the prevailing
rate of wages for comparison. Further it appeared to the Board
that the Sugar industry was a highly regulated industry where
the minimum cane price is fixed by the State and higher price
depending upon the quality of the cane is to be paid according
to the price linking formula laid down by the State and that even
the ex-factory price for the finished product is fixed by the State
F
in the North and some other St~tes haw fixed prices at least for
one of its by-products and molasses.
The price 'fixation in the
North it is observed has its effect on the price of sugar in the
South where normally sugar cannot be sold for a price higher
than fixed in ithe North plus the freight.
<G
The Board also set out the procedure followed by it in ascertaining the financial capacity and profitability of the industry
region-wise by calling for the balance-sheets of all the factories
for a period . of 10 years and undertook detailed studies for 8
years beginning from 1951 which corresponds to the beginning
of the First Five· Year Plan. However, out of the balance-sheets
H
of 118 Companies, balance-sheets for 8 years were available in
respect of 8 7, 8 Companies supplied balance-sheets for 7 out
of 8 years and among the rest balance-sheets were available for
cne or more years.
The Board thought 1that this data is fairly
43;
SUPREME COURT REPORTS
[ 1972] l s.c.R.
A
well, if not absolutely, comparable from year to year. Where a
Company owned two or more factories in the same State or
region it was decided to consider only the combined balancesheets for the number of factories covered, because spli~ting the
combined balance-sheets over the number of factories did not
serve the end in view.
However, where a Company had under
its management two or more factories in different States but in
8·
the same region, it was decided to exclude it from State-wise study
and include it in the regional total. It also took into consideration some of the Companies which along with the sugar manufacture carried other manufacturing activities. Then it also applied
the dividend tests, examined the main profitable ratio, considered
the total dividend as coverage by paid up
capital,
compared
gross profits and tatal capital employed and profits and profitability in relation to per day crushing capacity from 1955-58. A
region-wise analysis of financial data was made and the same was
also distributed in different rang~s of daily crushing capacity. In so
c
far as South region is concerned in which the Appellant's unit is
located it was observed that "the factories seem to have been D
more or Jess evenly distributed among all the regions".
Analysis
of financial data region-wise was also made according to differenit crushing capacity ranges for each of the years 1955 to 1958
under differ.ent heads namely, gross profits, sales, total capital
employed, profits after tax, ordinary dividend, ordinary paid up
capital total dividends, total paid up capital, profits before tax,
taxation provision, retained profits and net worth.
After taking into consideration the several factors in detail
the conclusions of the Tribunal are summed up as unde~ :
(a) "the profit margin whether on sal'-!s or on total
capital employed, or on the net worth does not appear
to bear any set relationship increase or decreas.e consistently-with the size of the Company.
The trends
are mixed and irregular.
This observation is equally
app!ica ble 'to other ratios and also to the allocation of
profits.
It do~s not seem possible from these studies
to loc~te any optimum size of the factory in respect
of any region.
The reason probably is
that profits
depend not only on the size of the faotory but on
various other factors e.g. efficiency
of management,
condition of machinery, availabili1y of raw materials
and efficiency of workers;
(b) However, considering the overall position it is.
evident that with no outside compeititor in the
field,
with a consuming public increasing and with national
income which is rising, the industry has a good future.
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KIRLAMPUDl SUGAR MILLS V. IND. TRIB.
43 7.
(laganmohan Reddy, I.)
'Jn spite of high taxation, high GoverD:men.t in_iposts. oy
way of cess rise in price of raw matenal nse m freight
charges and in some regi.:ms higher labour
char!?ies
owing to recel,lt revision of wag.~s the deman~ ~or white
sugar has been increasing and most of the ex1stmg sugar·
mills have been fairing well.
Many of ·them have expanded their• capacity and new units are fast coming
into operation.
Progress of the industry
has
been
rapid._ .. bi:rt the increase in taxes .has hit 1he retained
earnings particularly in the case of North and Central
region "comp.'!_nies.
( c). Taken "region-wise, the financial position of
Maharashtra is the best.
It has natural ,advantages.
The yield of cane per acre is
higher. 'Its quality is
be~ter. A large number of' the factories have tho~ir own
farms.
The cooperatjve have also assured ~upply-t5f
cane.
The cane growers are the share-holders.
Then
comes the South region.
North. region occupies the
third position and Central region
•the
last.
In cess
Pun.iab, West Bengal,, Madhya Pradesh,
Rajasthan,
Madras and Kerala enjoy some advantage with no or
lower rates per maund of cane. . . .
:i;t J:!lay be adde<l
here that recovery in some 9f these States is lower than
the average of the country'.
It would appear therefofo that the Board took into con<ideration the special features of the sugar iμdustry and all the relevant
factors wi'lh-gl'eat care and perspicuity and fixed a fair wage for
the industry in each of the regions.
What is was called on to
assess is the ,fair wage which as it may be noticed according to
the Report of the fair wag>~ Commil'tee was that which while
determining the capacity of an industry to pay, it considered it
to be wrong to take the capa~ity of a particular unit or the capacity of all indu~tries in the counlry, into account. The relative
criterion should be the .capacity of a par"ticular industry in a
specified region and as .far as possible same wages should be prescribed for .all units in tha·t region. It will obviously not be possible for the wage fixation Board to measure the capacity of e,ach
of the units of an industry ·in a region, as such the only practical
method is to take into consideration a fair cross section of that
industry. This is what in fact the Board has C!on·~-
The minimum wage that has ·to'be paid. is as interpreted by this Court in
Express Newspapers (Pvt.) Ltd. v. (he Union of lndir. & Ors.(1)
different from the' subsistence wag_e "which has got to be paid
to the workers irresoective of the capacity of 'the industry 10 pay
while the minimum wage is something more than the bare mini-
( () [19,59) 5.C.R.
(~.
438
SUPREME COURT REPORTS
[1972] 1 s.c.R.
mum or subsistence wage.
It further obset'\"'.d "The minimum
wage thus contemplated postulates the capacity of the industry to
pay and no fixation of wages which ignores this essential factor of
the capacity of the industry to pay could ever be supported". In
that case the Court also observed at page 90 : "that the capacity
of an industi:y to pay should be gauged on an industry-cum-region
basis after taking a fair cross section of that industry. In a given
case it may be even permissible to divide the industry irito appropriate classes and then deal with the capacity of the industry to pay
class-wise".
The classification into classes, it will be seen is not
an obligatory one but is required only in cases where otherwise a
fair wage cannot be determined. Any injunction that the industry
A
B
in a region should in all cases be divided inio classes in dererminC
ing a fair wage for that industry would on the other hand likely to
introduce greater disparity.
A reference has been made to the case of French Motor Car
Co. Ltd. v. Workmen(1) for the proposition
1that large units
ought not be compared with small units even where the Board
is considering the wage structure on industry-cum-region basis.
No doubt in that case the Tribunal had gone in'to the history of
D
the wage revision in 1he undertaking and having regard to. a Jar)',':'
increase in •the cost of living found that a case for further revision
was made out notwithstanding the fact that wage scales were the
highest in the industry. In Appeal this Court held that it was
settled law that in fixation of wage scales, dearmss allowance and E
similar conditions of servic an industrial Court has to proceed on
indusiry-cum-region basis and compare similar concerns in the
region which would be those in the same line of business as the
concern in dispute. But such comparison must not be between a
small struggling concern and a large flourishing one.
These cases were considered in Workmen v. Bairang Jute
Mills( 2 ) to which one of us was a party (Vaidialingam, J.). That
care was considering the Report of the Jute Wage Board which
in making recommendations for 'the
industry
adop1ed a different approach. The Wage Board took the whole of India
as one unit while in fact almost all the Jute Mills were situated
in West Bengal and a few in Bihar and still fewer in Andhra
Pradesh.
What the Wage Board did was to compare 20 Mills
from West Bengal and 9 mills from the rest of India as representing a fair cross section of the industry. The Respondenis haw
a fairly small unit in Andhra Pradesh which was considered as
a comparable unit with two larger mills in the State and with
some of the prosperous Mills in Wes'!
Bengal.
The management of the Mill refused to accede to the d~mand of the workman
(I) [1963) Supp. 2 S.C.R. !«.
(7) [1%9) 2 S.C.R. 593.
F
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K!RLAMPUDI SUGAR MILLS V. IND. TRIB.
439
(Jaganmohan Reddy, J.)
to pay the wages in accordance with the recommendations of
the Wage Board, fixing uniform wage scale for the industry on
the plea th~t the Mill had no financial capacity to bear the burden
of the wage scale. On the disput•e being referred to the T1ibunal
it upheld the claim of the management. This Court in Appeal
sustained the Award of the Tribunal thwt the payment of the
workmen for implementation of the recommendation of the Wage
Board is not justified. In this connection at page 609-610 it was
observed by reference to the manner in which ithe Wage Board
had laid down uniform scales for the entire industry irrespective
of where its several units were situate and of the different conditions prevailing in various areas, that it would have been better
if it had "considered the units in each area separately and determined the wage-scalr..s for each such area by taldng from
that
area a representative cross-section of ~he industry where possible
or where that was not possible by taking comparable units from
other industries within that area, thus following the principle of
industry-cum-region". It was fu~ther observed :
"It is true that in doing so uniformity of wage scales
for the entire industry would not have been attained.
But in a vast country like ours, where conditions differ
o~ten radically from region to region and even
the
index of living differs within a fairly wide range, such a
target cannot always be just or equitable. If the wagescales had been determined by the Board in the man-
. ner aforesaid, even though the Board is not a statutory
body and consequently i1ts decision are of a recommendatory character, it would be possible for industrial
tribunals to give due weight to its recommendations as
such recommendations would have been in conformity
with the principle of industry-cum-region, a principle
binding on the 'tribunals. It would be diftlcult in that
· event for any unit in the industry in that region to propound a grievance that its capacity to pay was
not
taken into account as the scales so framed would have
·been determined after taking into consideration scales
prevailing in comparable units, whether in that industry or other indus1tries in that region
depending on
whether in a particular area the accent was on the industry part or the region part of the principle of industry-cum-region".
The leai:ned Adv?cate for the Appellant lay~ stress
upon thel
observahon contamed at page 607 where while dealing with the
Express Newspapers case, this Couvt had observed :
". . . . the requirement of considering the capacity
of each individual unit to pay may not beco~e neces-
440
SUPREME COURT REPORTS
[1972] l S.C.R.
sary if the industry is divided into different classes.
A
Even if the industry is divided into different classes it
will still be necessary to consider the capacity of the
respective classes to bear the burden imposed on them.
For this purpose a cross-section of
these
respective
classes may have to be taken for careful consideration
for decid~ng what burden
th·~ class considered as a
B
whole can bear".
These observations must be read in the light of wha!t was earlier
stated namely "as the Wage Board was fixing a fair wage for the
entire jute industry it may not have been strictly necessary to
consider the financial capadty of each individual unit".
There
is nothing in the Bajrang Jute Mills case(1) which makes it obligaC
tory on a Wage Board to divide the industry into regions as well
as classes or to examine the financial capacity of every unit in
that industry in ilie region, irrespective of the conditions prevailing in th·~ different regions of that industry. As long as all relevant factors appertaining to that industry,
industry-wise
and
region-wise have been considered and the capacity of a fair cross
D
section of that industry to pay in tha1 region has been ascertained,
the recommendations of the Wage Board cannot be held to be
invalid. It is not in every case that a division into classes in the
same region, on a unrt-wise capacity should be made before recommendations of the Wage structure, dearness
allowance
or
other conditions of service in that industry could be held ito be
E
fair and within the financial capacity of the
industry in that
region.
The criteria on which the recommendations of the Jute
Wage Board were held not to be in accordano~ with the principle
laid down by this Court in Bajrang Mills case do not form the
basis of the recommendations of the Sugar Wage Board.
The
Sugar Wage Board not only divided the industry into regions as
already pointed out bu1 on the other hand found that there was
F
no great disparity in the region nor did the size of the unit make
any difference. It standardised the wage structure, it adopt·~d a
standardisation of nomenclature by taking note of the various
nomenclatures used in the industry and defined the qualification
for each of the caotegories.
The pre-dominant
conditions
for
wage structure which weighed with the Board were that firs11y
G
in view of the great unemployment nothing should be done to
reduce the existing employment but on the other hand efforts
should be made to increase it.
Secondly the need for increase
in production was paramount and any action likely to reduce it
should be studeously avoided as far as possible.
Thirdly the
capital should not be idle for if a wag-~ structure
is
evolved
H
which leads to the closure of any unit or units, a number of
persons will be thrown out of employment, production will be
(l) [1969j2s.C.R. 593.
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KIRLAMPUD! SUGAR MILLS v. IND. TRIB.
441
(Jaganmohan Reddy, J.)
reduced and capital invested in them will become idle. Keeping
these considerations in view the Board
d~termined the wage
structure which it recognised may be lower than norms laid down
by the Fifteenth Labour Conference but the fact that there is a
tremendous rush for employment in factories is proof that the
wages recommended by it are higher than the rates fixed under
the minimum W a,ges Act in industries to which that Act applies
or those prevailing in the open market.
It also took irnto consideration the economic units in the regions which as accepted
by it is a unit having a crushing capacity of atleast 800 to 1000
tons 1thought it has noted that the majority of sugar factories
have a crushing capacity hig!J.~r than this and several of those
having uneconomic size have already applied for
expansion.
According to the Board there were only 38 factories which were
below 800 tons crushing capacity but a good many of them were
making profits.
However, there are some which are running at
loss and for them •the Board recommended that some consideration should b~ given to adjust themselves which should be the
same as these given to n.~w factories.
This is what the Board
stated in Chapter XIII at page 111 :
"The conclusion is that except some
cases other
units below 800 tons are making profits.
Tho~ examination is set out in the Annexure to this Chapter. The
Board is of the view that relax~tion in wa,ges is not ithe
real remedy for those
un-economic units.
They will
have to fall in line with .the sche1m of wages recommended by the Board.