# PIPE C<JtPANY LTD v. INDIAN HlME PIPE (XMPANY LTD

- **Citation:** [1986] 2 S.C.R. 484
- **Court:** Supreme Court of India
- **Decided:** 1986-04-11
- **Bench:** 0 • Chinnappa Reddy, V. Khalid, S. Natarajan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/pipe-c-jtpany-ltd-v-indian-hlme-pipe-xmpany-ltd-9398
- **Pages:** 25

## Headnote

... .
Service Conditions of employees -
Change from the slab
system of Dearness Allowance in vogue for eighteen years to
·~·
the
textile
scale · of
D.A.
affording
115
per
cent
neutralisation in respect of the head office staff and the
monthly rated factory staff - Validity of the notice of change
~
dated 15. 7. 75 given by the company under section 9A of the
Industrial Disputes Act, 1947 - Advisability of Tribunals and
Courts to revise the wage sti:ucture of workmen to their
prejudice \When a dispute arises -
Burden of proof as to
necessity of change, upon whom lies in a reference arising out
of section 9A notice of change.
The respondent is an Engineering concern owning sixty
factories spread throughout India. In Bombay, it has a factory
~
at · Wadala and head off ice at Ballard Estate. There were four
Industrial Disputes Awards in this company pertaining to
~he
pay-scales and dearness allowance of the workmen. By the Award
passed in reference No. II 82 of 1950 pay-scales and fixed
dearness allowance were introduced with effect from l.].SO
with the consumer price index in Bombay at 312 points in 1950·
l.
In 1957 the index rose by 55 points and stood at 367 pointe as/~
a consequence of which by an Award passed in reference IT No.
17 of 1958 dated 21st May, 1959 the alab system of dearnesa
allowance was introduced with effect from 1. 2. 58. nus ,AWard
was not challenged by the company at any time• By Award
published on 30.12.65 in reference II No.47 of 1964 at the
instance of the labour marginal increase in the baSic paY
1
acalea was provided mainly on the ground that the slab systelll
~
was working satisfactorily. By an Award publiahed on 1.1.11 in
reference No. IT 42 of 1973 the clerical and subordinate staff
1n the head office were also given the slab system of D.A. lt
wu c.ateg'lrically observed in this Award that there should not
· ...... _______ _
I
. J
l-10N1'HLY-RATED WORKMEN v. INDIAN HUME PIPE co.
485
r=~f
~~ be any disparity in the D.A. between the monthly rated factor
staff and the head office staff.
Y
,I
• ..
While the wage structure stood thus, the company gave
notice of change for doing away with the slab system on
15.7.75 of D.A. in respect of head office staff and the
monthly rated factory staff. The notice of change in respect
of bead office staff was not . pressed since a Settlement was
reached between the parties, in July 1976 whereunder the D.A.
at consumer price index 1380 points was merged in the revised
consolidated pay scale of different categories with effect
. from 1.9.75. Although in September, 1975, the consumer price
·y........., index figure was 1270 points, it was taken notionally as 1380
1
for
the
purpose
of
merger,
providing
for
review
of
•
consolidated pay scales if the consumer price index IDO'."ed
~~ high. The notice of change in respect of mnthly rated factory
l
staff was, however, referred to adjudication. The Industrial
.·
Tribunal gave its Award on 27th October, 1980, holding that
!
the employer was justified in seeking abolition of the slab
·
system of D.A. and substituting it with the textile scale of
1
D.A. affording 115 per cent neutralisation. The Tribunal held
\
that the workmen should be paid D.A. at 115% of the revised
..v-;'1 textile rate in the same manner in which the daily rated
t
workmen are paid the.ir D.A. at the prevalent cost of living
index in t~ month of November, 1980 or if such index number
ia not available at that time then at the index No. 1771-1780.
While making this Award the Tribunal was conscious of the fact
that the workmen were · likely to lose quite a substantial
amount of the D.A. but it was stated that it was inevitable
when attempt was made to bring about uniformity and parity
~ woong the workmen of the same company working at the SCUI.Aa
--, place doing similar work.. The Tribunal felt that if the parity
'•
scheme
was to come into force either from the date of the
demand or from the date of reference, another unfortunate
happening would take place in th

## Text

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MON'.OJLY-kATED WORKMEN AT TilE WADAIA
~
FACTORY OF IHE INDIAN HWE
'., ·'
. '-
PIPE C<JtPANY LTD.
v.
INDIAN HlME PIPE (XMPANY LTD.,
BamA.Y
APRIL 11, 1986
..;1
[0 • CHINNAPPA REDDY, V. KHALID AND S. NATARAJAN, JJ.)
... .
Service Conditions of employees -
Change from the slab
system of Dearness Allowance in vogue for eighteen years to
·~·
the
textile
scale · of
D.A.
affording
115
per
cent
neutralisation in respect of the head office staff and the
monthly rated factory staff - Validity of the notice of change
~
dated 15. 7. 75 given by the company under section 9A of the
Industrial Disputes Act, 1947 - Advisability of Tribunals and
Courts to revise the wage sti:ucture of workmen to their
prejudice \When a dispute arises -
Burden of proof as to
necessity of change, upon whom lies in a reference arising out
of section 9A notice of change.
The respondent is an Engineering concern owning sixty
factories spread throughout India. In Bombay, it has a factory
~
at · Wadala and head off ice at Ballard Estate. There were four
Industrial Disputes Awards in this company pertaining to
~he
pay-scales and dearness allowance of the workmen. By the Award
passed in reference No. II 82 of 1950 pay-scales and fixed
dearness allowance were introduced with effect from l.].SO
with the consumer price index in Bombay at 312 points in 1950·
l.
In 1957 the index rose by 55 points and stood at 367 pointe as/~
a consequence of which by an Award passed in reference IT No.
17 of 1958 dated 21st May, 1959 the alab system of dearnesa
allowance was introduced with effect from 1. 2. 58. nus ,AWard
was not challenged by the company at any time• By Award
published on 30.12.65 in reference II No.47 of 1964 at the
instance of the labour marginal increase in the baSic paY
1
acalea was provided mainly on the ground that the slab systelll
~
was working satisfactorily. By an Award publiahed on 1.1.11 in
reference No. IT 42 of 1973 the clerical and subordinate staff
1n the head office were also given the slab system of D.A. lt
wu c.ateg'lrically observed in this Award that there should not
· ...... _______ _
I
. J
l-10N1'HLY-RATED WORKMEN v. INDIAN HUME PIPE co.
485
r=~f
~~ be any disparity in the D.A. between the monthly rated factor
staff and the head office staff.
Y
,I
• ..
While the wage structure stood thus, the company gave
notice of change for doing away with the slab system on
15.7.75 of D.A. in respect of head office staff and the
monthly rated factory staff. The notice of change in respect
of bead office staff was not . pressed since a Settlement was
reached between the parties, in July 1976 whereunder the D.A.
at consumer price index 1380 points was merged in the revised
consolidated pay scale of different categories with effect
. from 1.9.75. Although in September, 1975, the consumer price
·y........., index figure was 1270 points, it was taken notionally as 1380
1
for
the
purpose
of
merger,
providing
for
review
of
•
consolidated pay scales if the consumer price index IDO'."ed
~~ high. The notice of change in respect of mnthly rated factory
l
staff was, however, referred to adjudication. The Industrial
.·
Tribunal gave its Award on 27th October, 1980, holding that
!
the employer was justified in seeking abolition of the slab
·
system of D.A. and substituting it with the textile scale of
1
D.A. affording 115 per cent neutralisation. The Tribunal held
\
that the workmen should be paid D.A. at 115% of the revised
..v-;'1 textile rate in the same manner in which the daily rated
t
workmen are paid the.ir D.A. at the prevalent cost of living
index in t~ month of November, 1980 or if such index number
ia not available at that time then at the index No. 1771-1780.
While making this Award the Tribunal was conscious of the fact
that the workmen were · likely to lose quite a substantial
amount of the D.A. but it was stated that it was inevitable
when attempt was made to bring about uniformity and parity
~ woong the workmen of the same company working at the SCUI.Aa
--, place doing similar work.. The Tribunal felt that if the parity
'•
scheme
was to come into force either from the date of the
demand or from the date of reference, another unfortunate
happening would take place in that the workmen would be liable
to refund a lot of amount excessively recovered by them as and
by way of D.A. on account of slab system ... The Tribunal
the'refore felt that it would be too harsh and unk.ind to such
v-. WOrkmen and held that the Award would come into force
prospectively with effect from 1.11.80 and observed that the
reduction in the monthly emoluments of the workmen should be a
. gradual process so that they are able to bear the burden and
can learn to adjust themselves with little less income month
to month. It therefore, directed the reduction to be spread
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486
SUPREME COURT REPORTS
[19861 2 s.c.R.
over equally for a period of six months from 1.11.80. Hence
the appeal by special leave.
, Allowing the appeal, the Court,
..
HELD : 1. In a reference arising out of the notice of
change given by a company under section 9A of the Industrial ~
Disputes Act, 1947 the company should make available all · ('
evidence necessary to justify its stand for a change from the
existing system.
In the instant case,
overlooking the
circumstances under which reference was made such a burden was l. ;
wrongly cast on the workmen to prove that a change in the '~ ...
system was not necessary. (496 :a-c)
.r·
2.1 Normally it·would be inadvisable for Tribunals~ r
Courts to revise the wage structure of workmen to their
prejudice when a dispute arises. However, Tribunals arur Courts
f
can take judicial notice of one fact; and that is that the
J
wages of workmen, except in exceptionally rare cases, fall
within the category of mere "subsisting wages", and as such
tinkering with the wage structure of workmen cannot be permitted except under compelling circumstances. Employers have ~
seldom displayed a cooperative attitude where wage structures I
of workmen are devised. lbey have never showed a willingness .
I
for the involvement of the labour with the capital so as to
engende~
a
participative
labour · capital
relationshiP•
Reckoning with this reality, the Courts and Tribunals have
necessarily to k.eep their hands off from upsetting a wage
:
structure that has satisfactorily worked for a long time• lhe \ l
sweat of the labour is never ref lee ted in any balance sheet .r"' t
although the latent force behind every successful industrY is
this sweat. With their present wage structure, the labour jus~
exist. No one should try to deny them even this bare source 0
existence. 1503 G-H; 504 A-c)
)
1
'-51 fCrlownl dAluainf•r• Work.a v. Dleir Worblen. (1958} s.c.R·
~L
v
,
o owe •
·r
2 2 Th
need·
1
•
e Supreme Court often times emphasised the
lt
for a living wage to workmen instead of a subsisting wage•
is indeed a matter of concern and mortification that even
!
today the as i
1
emain 1
P rat ons of a living wage for workmen r
~rage and a distant dream. Nothing short of a living wage can
~
HONTHLY-RATED WOIOOiEN v. INDIAN HUHE PIPE CO.
487
e
be a fair wage. It should be the combined effort of all
concerned including the Courts to extend to workmen a helping
hand so that they get a living wage which would keep them to
some extent at least free from want. Viewed against this background no case has been made out by the respondent in the
instant case, for a change of the slab system of dearness
allowance to the revised Textile rate of dearness allowance.
[503 D-F]
The slab system which has been app~oved by Tribunals and
by Courts was available at the head office and for the daily
rated workmen at Wadala upto the year 1976
and worked
satisfactorily for over 17 years. In the absense of any demand
from any region for the slab system, the applicability of
well-settled principle of industry-cum-region, and the sound
financial position of the company it cannot be said that if
the slab system was introduced in all the factories it would
result in the closing of the whole company itself. The
question that it would work against the principle of parity
and uniformity and that there would be a change of the
subordinate staff getting more emoluments than their officers
~ who might be recently employed does not arise. [496 C-E}
A
B
c
D
2.3 1be theory of ceiling on the quantum of dearness
allowance cannot be accepted since under the prevailing
conditions there is uo control over th~ prices of essential
E
COOJOOd.ities and as such a ceiling would not give sufficient
cushion when prices of essential commodities continuously
rise. (506 F-G]
ICU lick Nixon Ltd.
V•
Kil.liclt
& Allied Coapanfes
Employees Union. (1975) Supp. S.C.R. 453, distinguished.
F
Unichea Laboratories I.Ld. v. The Worben,
[1972] 3
S.C.R.. 567; Greeves Cotton and Co. and Ors. V• Their Workmen,
{1964] 5 S.C.R. 362; Bengal Oleaical l'ba..maceutical Works Ltd.
v. Ita Workmen. [1969} 2 S.C.R. 113
and l'ami.ni Heta.la and
Alloya Ltd. V• Ibeir Wo~, [1967] 2 S.C.R. 463, referred
G
to.
CIViL APPELLATE JURISDICTION
Civil Appeal ~o. ·3040 of
191)6.
l
l
·
d
27 10 1980 of the Industrial
L[
From the Award date
•
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..... . .._., • ...,. _
...;T-..:~;;~ ...
~b,u~na=.:l~Ma:;
· ha~r.:a:sh~t~r~a~in~~;.;f;e;.;re~n~c~e...;.( 1-T~)-No_._s_J,.l•oll!llf-19_7_5_. _____
-F
·'
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. '
488
SUPJ.ill1E COURT REPORTS
[1986} 2 S.C.R,
J_
A
N.B. Shetye, Dr. Y.S. Chitale, M.lkul Mudgal and Atul ("
B
c
D
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G
H
Chitale for the Appellants.
1
;:
G B
P i
P
u~maswami, H. S. Parihar and Vipin <llandra
•• a,
•'-'4
'
for the Respondent.
J.P. Cama and Mukul Mudgal for the Intervener.
The Judgment of the Court was delivered by
lWALID~ J. This appeal, by special leave, is directed
against the award of the Industrial Tribunal in IT No. 531 of 4.~
1975, dated 27th October,
1980.
The appellants are the
1
monthly-rated workmen at Wadala Factory of the Indian Hume
Pipe Company Ltd., Bombay and the respondent the Company
-~
mentioned above.
We will briefly refer to the history of the demands of
the workmen in this Company to appreciate how the dispute
involved in this appeal originated. The respondent (hereinafter referred to as the Company) is an Engineering concern .,._
owning sixty factories spread throughout India. In Bombay, it
·1
has a factory at Wadala and head office at Ballard Estate• In
this appeal, we are concerned with the monthly rated workmen
at the Wadala Factory. In this factory there are about 375
daily rated workers
and 80 monthly rated clerical and subordinate staff • The total labour strength all over India is
about 3000 daily rated workers and 1000 monthly rated clerical
and subordinate staff.
\
-
r~
In the year 1950,
there was an industrial diSpute
\
pertaining to the pay scales and dearness allowance of the
I
km
~
.I
wor en in this factory. An award was passed in this dispu
by the concerned Industrial Tribunal in reference No· IT 82 of
19S0· By this award pay scales and fixed dearness allowance
were introduced w.e.f. 1-7-1950, with the consumer price inde;
in Bombay at 312 pointe in 1950. In 1957, the index rose bY 5
~
points and stood at 367 points. There was another industrial
dispute in 1958 in reference IT No. 77 of 1958 resulting i:
the award published on the 21st May
1959
introducing th
slab system of O.A. w.e.f. l-2-195S. Thla award was not
challenged by the Company at any time.
In 1964, the labour sought revision in the pay
·.--··-------------------
L
MONTHLY-RATED WOIU<MEN v. lNDlAN HUME PIPE co. [KIIALID, J.] 489
.-
for the monthly rated clerical and subordinate staff, as a
consequence of which reference IT No. 47 of 1964 was made
resulting in an award published on 30-12-1965, which provided
marginal increase in the basic pay scales, mainly on the
ground that the slab system was working satisfactorily.
2. · In this Company the daily rated operatives were
getting the old textile scale since the year 1942 which was
raised to the revised textile scale as D.A. by an award. Thus,
the daily rated operatives and the monthly rated clerical and
subordinate staff were paid D.A. on different basis and at
different rates in this Company. As there was no revision in
the pay scales from 1950, for about 22 years a demand was made
for revision in pay sc ... les for monthly rated clerical and
subordinate staff in the year 1972. This demand was referred
to adjudication in reference
IT No.
42 of
1973 as . a
consequence of which an award was published on 7-7-1977. The
clerical and subordi '1~te staff in the head office of this
Company were also being given the slab system of D.A. This
award observed that there should not be any disparity ·in the
D.A. between the monthly rated factory staff and the head
office staff.
3. while the wage structure stood thus, the Company gave
notice of change for doing away with slab system of D.A. by
notice dated 15-7-1975, in respect of the head office staff
and the monthly rated factory staff. The notice of change in
respect of the' head office staff was not pressed since a
settlement was · reached between the parties. As per this
~A settlement arrived at in July 1976, the D.A. at consumer price
·
index 1380 points was merged in the revised consolidated pay
scale of different categories w .e. f. 1-9-197 s. Although in
September, 1975, the cons~r price index figure was 1270
points, it was taken notionally as 1380 for the purpose of
merger, indicated above, providing for review of consolidated
pay scales if the consumer price inde~ moved high. The notice
_., of change in respect of monthly rated factory staff was,
however, referr~d to adjudication. The Company's claim was to
do away with the slab systec of D.A. and to substitute it by
revised textile scale. The Union filed a written statement
justifying continuity of the slab system which was in vogue
for 17 years. The Industrial Tribunal gave the award, impuged
in this appeal, on 27th October •
19~0. The Tribunal came to
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490
SUP~ffi COURT REPORTS
[19861 2 s.c.a.
the conclusion that the employer was justified in seeking
abolition of the slab system of D.A. and substituting it with
the textile scale of D.A. affording 115 per cent neutralisation. ·
.....
'
.....
,.. r
4. The Tribunal said that. the workmen should be paid
D.A. at 115 per cent of the revised textile rate in the same
manner in which "the daily rated workmen are paid their D.A.
-~
at the prevalent cost of living index in the month of
November, 1980 or if such index. number is not available at
that time then at the index No. 1771-1780." While making this
award the Tribunal was conscious of the fact that the workmen .._ ~
were likely to lose quite a substantial amount of their D.A.
j1
However, the Tribunal got. over this concern stating that it
was
inevitable,
when
attempt
was
made
to
bring
about ,r;
uniformity and parity among the workmen of the same company
J
working at . the same place doing sirullar work. The Tribunal
j
felt conscious of another distressing result of the award. The
Tribunal felt that if the parity scheme was to come into force
·
"either from the date of the demand or from the date of J.
reference, another unfortunate happening would take place in
that the workmen would be liable to ref und a lot of amount . 1
excessively recovered by them as and by way of D.A. on account
of slab system." The Tribunal felt that "it would be too harsh
'
and unkind to such workmen" and therefore held that the award
would come into force prospectively w.e.f. 1-11-1980. The
~
'!ribunal, not rest content with the expression of concern for
"!
workmen, gave another palliative to them lest the reduction in
their D.A. should cause them dislocation financially all of 8
f
sudden and therefore observed that the reduction in the~ J
monthly emoluments of the wo rkmen should be a gradual process •
"so that they are able to bear the burden and can learn to
adjust themselves with little less income month to month•u 'The
reduction was, therefore, directed to be spread over equallY
for a period of six months from 1-11-1980.
5.
When
the matter
15-12-1980, special leave
interim relief wa8 given to
Ca
bef
this Court
on
me
up
ore
was granted and
the following
the appellants.
"Special leave granted,
Hy way of int:erim relief
it 1
l
b
in the
a
lere y directed that the difference
he
D.A. a'tiarded by the Industrial Tribunal snd t.
MONTHLY-RATED WORKMEN v. INDIAN HUME PIPE CO. [KHALID, J.] 491
D.A. being paid on slab system which is directed to
be reduced phasewise on monthly basis of l/6th,
reduction will be implemented i.n payments to be
made in the months of December, 1980 and January,
February, March, April and May, 1981, but shall be
based on monthly wages thereafter from payments in
the subsequent months and this will be subject to
the further direction of this Court. Appeal be
expedited ••••••••••••••• "
This interim order was modified by the Vacation Judge on
14-3-1981, as follows :
"The order passed by this Court on 15.12.80 to
continue till the end of August,
1981 on the
appellants agreeing to reimburse the management in
case they fail in the appeal which reimbursement
will be by way of deduction from their dues."
6. We will now proceed to consider the rival contentions
put forward by the parties in support of and against the
award. The Company, in justification of their change of notice
r- and defending the award passed, put forward their case as
follows:
The Company manufactures various pipes, cement concrete
pipes as well as steel pipes for Hydro Electric Projects.
These products are manufactured as per definite orders and
specifications
by
governmental
bodies
and
other
local
authorities, unlike other industrial units which are at
"(. liberty to manufacture their products and market them. Their
products are usually bulky in nature, making transport
difficult and costly. For easy transport of these bulky
products, the Company decided to establish as many as sixty
factories all over India to cater to the needs of the local
markets ang to make them easily accessible to avoid damage to
their products and. he~vy transporting charges. The products of
the Co~any have only ~ limited market and therefore, has to
face keen competit~on unlike cement, steel, sugar, chemicals
etc. which have an · expanding market
and which can be
programmed in anticipation of sale.
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The Comp'any has three thousand . daily paid workmen and
H
chousand mOnthly paid workmen all over India. Out of these,
A
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D
492
SUPREME COURT REPORTS
[19861 2 s.c.R.
the appellants form only 80 monthly paid workmen, employed in
Wadala manufacturing factory. The slab system of dearness
allowance, according to the Company, has been universally
condemned by successive Tribunals. The appellant -
Union
enjoys a privileged position out of this four thousand workmen
of the Company all over India. While conceding that the
appellant -
Union had been enjoying the slab system of
dearness allowance till the reference was made, it is stated ~
that at the time the slab system was introduced it was never
conceived by the Tribunals that the cost of living index would
spiral upto such great heights as to make payments difficult.
The dearness allowance enjoyed by the appellant - Union is so
high in certain cases that neutralisation is at rates IIl.lCh;
higher than 100 per cent which is discouraged and is ~
disapproved consistently by this Court and other Industrial ~
Tribunals. It is further stated that the Company does not have
the capacity to pay the slab system of dearness allowance and
in case the remaining monthly rated workmen put forward such a
claim, the respondents will be forced to close down their
factories.
The appellant -
Union pleaded that the award of the
Tribunal was defective both in law and on facts. The Tribunal ~
did not have any material before it compelling it to change a
E
system that had satisfactorily worked for 18 years and in
effect had become part and parcel of the service conditions of
the workmen. The findings of the Tribunal that the slab system
had become unscientific and improper, that continuance of the
system was not in national interest or in public interest,
that ever since slab system was introduced neutralisation had
F
become more than 100 per cent and that the slab system·)'
confined to the appellant alone would create disparity and
discontent among workmen are according to the appellants not
based on evidence. The observation in the award that the Union
did not bring on record any evidence to show that wages paid
to them were far below the living wage or to show that the
G
modification sought would cause them hardship which they would
not be able ·to stand is incorr~ct and is made without being
faithful to the facts and evidence
in the case. With these
rival contentions in view, we will now proceed to consider the
award.
H
7. The dispute arose when the respondent-company served a
MONTHLY-RATED WORKMEN v. INDIAN HUME PIPE CO. [KHALID·, J.} 493
~ notice under Section 9-A of the Industrial Disputes Act. The
dispute referred to arbitration reads as follows :
nThe rate of payment of Dearness Allowance payable
to monthly rated clerical and subordinate staff
working at the Wadala factory will be changed and
will be worked out as per revised Textile scale
calculated on the bas is of working days in the
month with a ceiling on dearness allowance payment
at consumer price index number for working class of
Bombay at 800 (base 1933-34 : 100) with effect from
1975."
'y It was the TribWlal presided over by Shri Sawarkar, in I. T.
·
I No. 77/58 by its award dated 21.5.1959 that introduced the
~ "f slab system of dearness allowance first. Before making the
award, the Tribunal considered the various contentions put
forward by the company. The Tribunal considered the nature of
this industry and held that it was an Engine~ring concern, and
a member of the Engineering Association of India. The Tribunal
examined the scales of dearness allowance in eight different
units of the Engineering Industry and concluded that the total
emoluments of the monthly rated staff of the Indian Hume Pipe
r-- Company Ltd., at its Wadala factory (i.e. Rs. 125 to Rs. 385)
were far lower than those of the other concerns with which
they were compared. This Tribunal repelled the plea that an
increase in dearness allowance woul~ cause disparity between
the workmen at the head office and at the factory and passed
~ the award introducing the slab system as follows :
Slab
~
1 - 100
D.A. at cost of living
index 311-320.
65% of the basic salary or
Textile scale calculated on the
basis of the number of days in
the month whichever is higher.
101 - 200
~ 202- 300
~ 301 & above
30% -doIS% -dolO% -doVARIATION
per 10 pts.
5%
2%
1%
1%
A
B
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494
SUPREME COURT REPORTS
[19861 2 s.c.R.
Dearness allowance was being paid to the appellants at ·~
this r~te without any objection by the Company till the notice
I
of chat~e was given. It has to be borne in mind even at the
/
outset that the reference was occasioned because of the notice
of change given by the Company. It was therefore necessary for
the Company to make available before the Tribunal all evidence
necessary to justify its stand for a change from the existing
system. We were taken through the award in full by the learned
Counsel for the appellants. All that we find in the award, by~
way of justification for this change, is that the Company
would be confronted with similar demands by the workers in its
other factories, that it has no capacity to pay the dearness
allowance at this rate, that it would result in more than 100
per cent neucralisation and that this system had not found "'( "
favour with many of the Tribunals who considered the question '.
of the dearness allowance in Maharashtra.
1(
We will presently refer to some portions of the award to
see whether the Tribunal was justified in doing away with the
existing scheme and thus denying to the workmen what they were
getting till the award was made. But before we do so, we would
like to show the effect of the award on the emoluments of the
workmen involved in this case if the award were to be~
implemented.
TABLE-I
Monthly Pay at
Monthly Pay at Index
Reduction in
Index 1771-1780
1771-1780 that would
the monthly
available prior
be available as per
emoluments.
,..,-
to the award
the award.
under challenge.
'i
Basic
D. A.
Total
Basic
D.A.
Total
Rs.
Rs.
Rs.
Rs.
Rs.
Rs.
Rs.
500
1,590
2,090
500
542
1,042 1,048
400
1,434
1,834
400
542
942
892
300
1,278
1,578
300
542
842
736
200
l, 117
1,317
200
542
742
575
100
795
895
100
542
642
253~
40
544
584
40
542
582
2
..
The table below shows the total monthly pay of the above
workmen and the consolidated pay that similarly placed workmen
get at the head office.
MONTHLY-RATED WORIOO:N v. INDIAN HLME PIPE CO. [KHALID, J.] 495
Basic
pay
Rs.
500
400
~ 300
200
100
Dearness
allowance
as per
slab system D.A.
applicable at
Index
1771-1780
prior to
the award
Rs.
1,590
1,434
1,278
1,133
795
TABLE II
--------------------------
Total
monthly
pay
Rs.
2,090
1,634
1,578'
1,347
895
Total
monthly
pay
packet
of
Wadala
Factory
workmen as
per the
award
Rs.
1,042
942
842
742
642
Monthly
consolidated
pay
packet
at head
Difference
between
total pay
packet of
head
office
office
workmen
as per
and total
statepay packet
ment
of similar
submitworkmen at
ted by
Wadala
the
Factory as
company
awarded
before the
Tribunal
Rs.
1,815
1,635
1,380
1,185
790
Rs •.
773
693
538
443
148
------------------·------------------------------------
The first table glares one in the face. The reduction is
1
substantial in most of the cases. Mr. Pai, the learned counsel
"1
for
~he company had to agree that as per the award the
difference in the dearness allowance was substantial and the
~ damage to the workmen was not inconsequential.
However,
he
tried to get over this inconvenient position with the plea
that continuance of the scheme would spiral up the dearness
allowance so much that it would render the working of the
Company difficult and create wide disparity between these
workmen. and
others.
The
second table which shows
the
difference between the pay packet of Wadala Factory workmen
and the head office was explained away by Mr. Pai with the
~ plea that the head office workmen had bigger responsibilities
and did better work. These justifications put forward by him,
have been echoed by the Tribunal also.
As indicated1earlier, we will now refer to the award
A
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496
SUPRFl1E COURT REPORTS
(1986] 2 s.c.R.
under challenge. The company had a case that out of its sixty }-
factories, each factor-y should be treated as an independent
unit. This contention did not find favour with the Tribunal.
According to us, the Tribunal rightly held that since there
was no functional integrality, the units had to be taken as
one. The Tribunal also found that the Company's financial
position taken as a whole was not only satisfactory but quite
z:;ound till 1979.
The Tribunal committed an error
by
overlooking the
circumstances under which reference was made and casting the
burden wrongly on the workmen to prove that a change in the
system was not ne.cessary. The Tribunal assumed that so far as
the Bombay Region was concerned) it was an admitted fact that \...oilllilll
the daily rated workmen at Wadala factory and the staff at the ,..
head office were not paid wages as per the slab system. This ¥
assumption is wrong because the slab system was available at
the head office and for the daily rated workmen at Wadala upto•f
the year 1976. The Tribunal apprehends that if the slab system
was introduced in all the factories the net result would be
that the whole company will have to be closed down. This
apprehension is without any foundation because at the time the
Tribunal considered the dispute there was no demand from any
region for the slab system. D1e Tribunal admits that the slab -4rf
system hact been in vogue for 18 years and that it had worked
satisfactqrily and had become part of the service conditions
of the mQnthly rated workmen. However, the Tribunal observes
that the system could be revised if it was shown that the
system had out-lived its utility. The justification for this
~~
observation is that at the time the slab system was introduced
no one fore-saw the spiralling rise in the cost of living ,
index and that it would work against the principle of parity Y
and uniformity and the danger of the subordinate staff getting
more emoluments than their officers who might be recently
employed.
These
are
all
assumptions
without
necessary
materials and this is the second error committed by Tribunals.
It is not uncommon that even in prestigious institutions
recently employed officers get emoluments less than the
subordinate staff. On this plea, the benefits that the workmen ~
were enjoying till then should not be denied to them. To say
that the system had become 'unscientific' and 'improper'
because the workmen were getting fantastic amount of dearness
allowance was again without necessary material. 'The Tribunal;:-
J
MONTHLY-RATED WORKMEN v. ·INDIAN HUME PIPE CO. [KHALID, J.] 497
~f then proceeded to say that change in the slab system was
necessary in the
~·larger interest of the country", "in the
interest of social justice", "in the interest of jus tice and
fair play
11 ,
11to avoid industrial unrest.,, 11genera1 interest of
the company and in the larger interest of the nation. 11 These
·•
are empty verbiage without any basis on the facts of the case.
,
The discussion in the award that continuation of t he dearness
~
allowance would bring about neutrali&ation above 100 per cent
·1
is also not supported by sufficient materials. The Tribwtal
~ devoted some discussion in support of the highly placed
, j
officers and went to their rescue with the plea t.hat they were
· ~ - ·""" subject to taxation rendering their salaries modest. We wish
J:'
to state that all these statements could have been avoided in
' I
i
a matter where the Tribunal had only to consider whether the
:~
. ·.
management was justified in trying to upset a scheme that had1
~
worked satisfactorily for a period of 18 years. We do not
propose to make further comments upon the award of the
Tribunal. Suffice it to say that the whole approach is
erroneous and the conclusions were arrived at on assumptions
Without acceptable evidence. The management had not produced
before the Tribunal sufficient evidence to persuade it to
change the existing system. It may be that the slab system did
not find favour with some other Tribunals. But that is no
reason why a system that had existed for a long period of time
Should be stopped to the detriment of the workmen without
COmpelling reasons.
Notice of change was given by the company to bring about
Parity or uniformity of D.A. in respect of its workmen. The
:. f Tribunal accepted this case of the company in passing the
~~- · award. A close scrutiny of the facts of the case, however,
would indicate that such a parity was not possible and that
the
company
also
knew
that
parity
was
impossible of
~
achievement. This is evident from the fact that notice of
.
change did not relate to all the workmen in the company • It
Will be seen that the company had three systems for payment of
1dearness allowance i.e., dearness allowance based on revised
.,.
~ teJttile for daily rated factory workers; dearness allowance
1
lllithout
ceiling
for
JDOnthly
rated
factory
staff
and
I
ton.aolidated wages and dearness allowance for KOOnthly rated
lif:ad Office staff
The Company has not shown that it had
I
.lldovttd a Uniform ~earness allowance system for all its wor~-
1
a.tn even in the Bombay region. 'Therefore, the Tribunal s
'
' ·~
A
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F
G
H
,•:,
1 • • ...
/~
:'
: •
<'
,.
r
:-.
.,
·'
\•
'·
1- ·
;
I ' · .·
498
SUPREME COURT REPORTS
[19861 2 s.c.R.
A
conclusion based on the object of achieving uniformity in )...
dearness allowance does not appear to be correct.
n
c
D
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F
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H
Mr. Pai learned counsel for the respondent-company took
us through the various awards passed by different Tribunals in
his attempt to impress upon us the fact that such Tribunal had
not only discouraged the slab system of dearness allowance but
had even condemned it.
In the case of Hind Cycles Ltd., an award was given by
Mr. M.R. Mehar, Industrial Tribunal, Bombay, wherein it was
observed as follows :
" •••• • The slab system was devised when it was not U
expected that the consumer price index would shoot ~
up to the extent that it has with the result that
where the slab system is followed
(as in the ..
concerns listed in Exhibit
U-3) the dearness l
allowance of monthly paid staff have shot up
completely out of proportion to basic wages with
the result that in industries and occupations in
which that system is not followed but some other
system is followed the dearness allowances, even
though linked with the index, are much lower than~
the dearness allowance in the concerns listed in
Exhibit U-3 •••••••••••• "
In the case of Shaw Wallace & Co.
Tribunal, presided over by Mr.
M.R.
follows :
Ltd., the Industrial
Mehar,
observed as ~
" ••••••• I have made
reference to the dearness'J'
allowance
in
Banks,
Mill
companies
and
in
Government offices not because these are concerns
comparable with Hind Cycle but to show the varying
systems of dearness allowance and to illustrate how
the total emoluments of employees in industrial
employments in which the slab system referred to
above prevails have shot up so as to be completely ,t~
out of proportion with those employees doing
similar work in employments in which there is
either fixed dearness allowance or the dearness
allowance though linked with the index, is not on
MONTHLY-RATED WORKMEN v. INDIAN HUME PIPE CO. [KHALID, J,] 499
the slab system. Thus, by the slab system a certain A
class of fortunate employees have been absolutely
protected against rise in cost of living and have
not to bear hardships which other larger sections
of
employees
have
to suffer on
account
of
inflation •••• "
-+The same Tribunal has this to say in the case of the Wadala
B
factory, with which we are concerned, in its award dated 6th
December, 1965 :
"This dispute concerns only the monthly rated staff
of the factory. The demands concerning daily rated
staff
is
pending
before
a
Board
of C
Conciliation •••••••••• ! have therefore to make the
award having in mind the total emoluments i.e. wage
scales
and
dearness
allowance
prevailing
in
factories of this size in the region belonging to
other prosperous
concerns
in the
engineering
industry.
D
In considering the demands for improved wage scales
the total emoluments have to be borne in mind.
While the daily rated staff get the textile rate of
dearness allowance the monthly rated staff get
dearness allowance according to the slab system at E
the same rate as for the Head Office, and which
dearness allowance is very satisfactory •••••••••• "
The Tribunal did not interfere with the slab system prevalent
vi,n the Company.
In the case of Central Tin Works, a demand was made for
the intorduction of the slab system. But the Industrial
Tribunal, Bombay, presided over by K.R. Pawar, raised the rate
of dearness allowance to 100 per cent of the cotton textile
rate.
y¥
In the case of Voltas Limited, in an award given on the
30th September, 1965, the Industrial Tribunal presided over by
t-lr. v;A. Naik raised ceiling of maximum dearness allowance
from Rs. 400 to Rs. 450. Fixation of the ceiling, according to
Mr. Pai, is to contain the rigours of the slab system.
F
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500
SUPREME COURT REPORTS
[1986] 2 s.c.R.
In Forbes Forhes Compbell & Co. Ltd., an award was passed~
A
by the Industrial Tribunal presided over by Mr. V.A. Naik on
23-12-1969, on the claim for raising the dearness allowance
declining the demand.
Mr. R. D. Tulpule, Industrial Tribunal Bombay, passed an
award in the case of Polychem Ltd., on 9th June, 1970. In this
case, the Tribunal noticed the criticism of the slab system o~
B
dearness allowance and sought to rectify it by granting 110
per cent of the revised textile dearness allowance along with
fixed ad-hoc payment tapering with increase of the slab of the
salary.
Considerable stress was made by Mr. Pai on the following~
C
observation of the Tribunal at page 246 of Volume VII paper'(
book :
D
E
"I have not come across a case where slab rate of
dearness allowance was introduced for the first
time."
The answer to this observation is that in the case of the
Company with which we are concerned it was introduced for
the~
first time in 1958. We may also state that we have not come
across any award wherein the slab system once introduced was
abolished except in one case.
In the case of Mazagaon Ihcks, an award was passed by the
Industrial Tribunal presided over by Shri S.A. Patel on 13th Y
December, 1984, substituting the existing scheme of dearness
allowance based on the slab system by a revised textile seal~
/
of dearness allowance. This was done following the decision of
F
this Court in tilllck HUon Ltd. v. Iillick & Allied t;cwpanietJ
E.ployees Union, [1975] Supp. S.C.R. 453 rendered on May
2~
1975. It can be argued, perhaps justifiably, that in this case
this Court introduced a ceiling on dearness allowance in place
of slab system available in the Mazagaon Docks. This decision
was pressed into service in support of the submission that- the
G
situation obtaining· in the company with which we are dealing y._ ....
is the same as in the above case and to contend that the slab
system should yield place to at least a
ceiliqg on dearness
allowance.
MONTHLY-RATED WORKMEN v. INDIAN HUME PIPE CO. [KHALID, J.] 501
~
We have no quarrel with the conclusion arrived at in the
above case on the facts of that case. However, the conclusion
arrived at in that decision cannot be applied in a general
manner in all cases. In that case, the employer's grievance
was this: The post of junior executives is a promotional post
for supervisors. Still the fo~er were drawing less emoluments
than the latter. This is because there was no ceiling on
-~dearness allowance in respect of workmen and supervisors. The
employer produced a chart in support of his case and contended
that this would restilt in indiscipline and unrest in this
industry. It was in this context that this Court laid down
fourteen different aspects, not exhaustive in their scope,
which had to be taken into account before tinkering with the
I dearness allowance. The Mazagaon Docks case has taken support
f
) from Killick Nixon U:d. case without sufficient material to
sustain its conclusion that slab system should be abolished to
avoid huge distortion of wage differences among the persons
employed in that concern. A close study of Ki.llick. Nixon Ltd.
case will bear out that this Court did not lay down that in
all cases slab system of dearness allowance should be
abolished or done away with to the detriment of the workers.
All that this Court held in that case was that the employer
• having made out a case for putting a ceiling on dearness
allowance, it was for the Tribunal to decide at what
particular amount there should be a ceiling on dearness
allowance. An attempt was made by the employer in that case to
press into service the view of the National CoDIJ.lissioner of
Labour to ascertain the minimum wage in the Company at which a
~ worker would require complete neutralisation of the cost of
living and then find the aiOOunt necessary as a protection
~gainst his real wages. This was not accepted by this Court •.
The Court observed
" •••• we do not wish to lay down as an invariable
rule that in all cases there should be ceiling on
D.A.