# • • SHIVRAJ FfNE ART LIHIO WORKS v. THE STATE INDUSTRIAL COURT, NAGPUR & ORS - **Citation:** [1978] 3 S.C.R. 411 - **Court:** Supreme Court of India - **Decided:** 1978-02-28 - **Case number:** Civil Appeal No. 2418 of 1972 - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/shivraj-ffne-art-lihio-works-v-the-state-industrial-court-nagpur-ors-7335 - **Pages:** 18 ## Headnote < y .. ---"' ' ,\ . I • • SHIVRAJ FfNE ART LIHIO WORKS v. THE STATE INDUSTRIAL COURT, NAGPUR & ORS February 28, 1978 411 [N. L. UNTWALIA, JASWANT SINGH AND P. S. KA!LASAM, JJ.\ lndustria[, Disputes Act, 1947-Powers of the Industrial Tribunal to fix Industrial mininium wage-In the absence, Mininu1m Wage fixed under Minin1un1 Wages Act 11 of 1948 will prevail-Factors to be reckoned f(Jr COHrputing Fair lf'agc Dcanlf'SS Allolvance etc . An industrial award known as Puranik Award dated 26-10-1956 -f<·hich fixed Rs. 35 /- a5 the minimum \vage in the Litho Industry in the Vidarbha regio• stood terminated with effect from July 22, 1958 as per a notice dated January 22, 1958 from the employees of Litho Industry. Pending the deci!i,ion in tke reference riiade under s. 3 lA of the C.P. and Berar Industrial Disputes Settlement Act, 1947 arising out of the demands of the employees of the Litho IndHstry, an agreement \Vas entered into on February 21, 1966 between the etnployers and the employees of various concerns requesting the State Go\'ernment to exercise its po\ver u/s 39 ot the Act and to refer to the arbitration of the State Industrial Court the disputes mentioned in the agreement. By the notification dated 7-1-1965 the Government referred the disputes in respect of the demands of the employees set out in Schedule II to the Notification made against the 10 employers specifically mentioned in Schedule I to the notification, being the employers in the Litho Press Industry in the Vidarbha region. The demands in particular V.'ere to the disputes as to the living v;agc, for fitment of the einptoyees already in service at the date of the demand for revised scales of w;lges with retrospective effect from 1956, :ind for the --.... I • • • • ' v ' t ' ' • • SHIVRAJ LITOO WORKS V. INDUSTRIAL COURT, NAGPUR (Kai/asam, J.) 415 M. C. Bhandare, V. P. Sathe & S. Bhandare for Respondent A · No. 2. P. C. Bhartari for Respondent No. 8. C.A. No. 2418/72 set down exparte against RR 1, 3, 4, 7, 9 & 11. C.A. No. 2419/72 set down exparte against RR 1, 3, 4, 6 & 12 . Shankar Anand & A. G. Ratnaparkhi for the appellant in CA B No. 2643/72. V. P. Sathe & S. Bhandare for R2 in CA 2643/72. The Judgment of the Court was delivered by KAILASAM, J: Ti>ese three appeals are filed by the Shivraj Fine Ar1E Litho Works, Vasant Fine Arts Litho Works and Shakti Offset Works by special leave granted by this Court against the decision of C the Nagpur High Court. The history of the industrial dispute may be shortly stated. The dispute relates to the Litho industry in the Vidarbha region. · An award known as the Puranik Award was made on October 26, 1956. The award fixed Rs. 35 as the minimum wage but did riot attach any scale of pay to the basic pay of Rs. 35 for the unskilled D employees. By a notice dated January 22, 1958 the employees of th<> Iitho industry gave notice of change and as a result the Puranik award stood terminated as from July 22, 1958. The employees af Shivraj, Shakti and Raj gave notice of change dated September 8, 1960 making certain demands against their .respective employers. On March 13, l'J61 the employees of the said three Units filed three references under section 38A of the C. P. and Berar Industrial Disputes Settlement E · Act, 1947, before the State Industrial Court, which were numbered as references 9, 10 and 11 of 1961. When the three references were pending employees of other industrial concerns made certain demands against their employers. Pending the decision in reference~ 9, I 0 and 11 of 1961 an agreement was entered into on February 21, 1964 between the employers and the employees of various concerns requesting the State Govermnent to exercise its powers under section 39 Of the F Act and to refer to the arbitration of the Stale Indu;trial Court the disputes mentioned in that agreement. On January 7, 1965 the State Govermnent issned its notification making a reference to the State Industrial Court under section 39 of the Act. By tl1e notification the Government referred the disputes in respect of the demands of the employees set out in Schedule II to the notification made against the 10 employers specmcally mentioned in Schedule I to the notificat!on, G being the employers in the Litho Press Industry in the Vidarbha reg10n. The demands that are set out in Schedule II are 15 in number bnt as we are concerned only demands 3, 4, 5, 6 and 7 we will leave the rest out of consideration. Demand No. 3 relates to the dispute as to living wage and Demand No. 4 for 'scales of wages for each category and occupation. Demand No. 5 is for fitment of the employees already in service at the date of the demand Demand No. 6 is that the revised H scales of wages should be given with retrospective effect frbm 1958, and Demand No. 7 is for dearness allowance with.retrospective effect from 1959 and that the dearness allowance should be linked with the .A B c D .E F G H 416 SUPREME COURT REPORTS [1978] 3 s.c.R. index number at the rate of 2 paise per point with 1955 as 100. The State Government by the notification dated December 31 1964 fixed Rs. 70 per month as the minimum wage under the Minimum Wages Act. The notification divided the employees into several classes. It did not attach any scale of pay to the minimum wages fixed but provided that at an interval of every six months the State Government may issue a notification fixing certain amounts payable in addition to the minimum wages as special allowances. The Industrial Court made its award on May JO, 1963. Tiile award divided the employers into two classes being Classes A and B on the basis of the financial capacity of the employers to pay. The award fixed rates and scales of wages for the employees of the three employers in Class A being Shivraj, Shakti and Vasaut Litho Works. Tue award did not fix any rates and scales of wages in respect of other units of the industry the reason being that they did not have adequate financial capacity. In the case of class A the award also fixed the employe~ of various duration of service by way of fitment into the scales of wages awarded in the award. It also fixed the date from which the new rates and scales of wages were to be deemed to have commenced. Against the award six writ petitions were filed before the High Court, three by the appellants in this Court, Shivraj Fine Arts Litho Works, Vasant Fine A:rfs Litho Works and Shakti Offset Works. Another three writ petitions were filed by the employees, they being Special Civil Applications Nos. 210 of 1969, 733 of 1969 and 734 of 1969. There· are no appeals filed in this Court by the employees. The High Court agreed with the view of the Industrial Court and held that the award classifying the employers into two classes A and B on the basis of their paying capacity determinirig the rates and scales of wages and the dearness allowance regarding class 'A' employers is valid. The High Court set aside the award on Demands 3, 4, 5, 6 and 7 and directed the Industrial Court to reconsider the above 5 Demands and to make a fresh award in accordance with the law and principles laid down by the High Court. In so directing the High Court held that fixation of au industrial minimum wage is necessary and that in fixing such industrial minimum wage the factor of employer's capacity to pay is irrelevant and the industry or th!l' employer must pay it or perish. According to the High Court the industrial minimum wage should be· fix~d on a consideration of different ingredients which it seeks to provide for i.e. contents of the basket. It was possible that the industrial mini· mum wage can be higher in some, cases than the current statutory minimum wage and when the industrial minimum wage happens to be higher than the statutory minimum wage it will be industrial minimum wage which has to be paid because when it is fixed by an industrial award it becomes enforceable at law. The High Court further held that the provisions of minimum wages show that there is nothing in it to prevent payment of anything more than the minimum wage fixed under it. The appellants in these appeals seriously challenge the direction of the High Court to the Industrial Court to fix an industrial minimum wage regardless of the paying c~pacity of the industry or theemployer. Their contention is that there is no warrant for such a: .conclusion. • \! • • • • 11 ' J.- -'I. ' > SHIVRAJ LITHO WORKS V. INDUSTRIAL COURT, NAGPUR . 417 (Kailasam, !.) The High Court went into the question as to how the cap·acity of u industry to pay a fair wage has to be determined. For determining the surplus for paying capacity the High Court held that a sort of Joss and profit account will have to be prepared having a credit and debit side. On the credit side will appear all the gro8s takings of the unit of the industry. Gross taking will include gross realisations by the sale of the goods or services, the income, if any, earned by way of rents, interest or dividends or investments and the mcome 0£ all other nature. Dealing with the items of expenses that can be legitimately deducted from the gross income the High Court held that all the expenses incurred by the employer in connection with the working of the industry will have to be deducted. It accepted the plea on behalf of the. employers that the cost of raw materials which are necessary for production and expenses in connection with the working of the industry and sale of the finished products will have to be deducted, but not any other wage paid apart from the minimum wage payable. The court held that appropriate amount for depreciation i£ deductible and interest on capita! will also have to be deducted. It also held that a fair amount of remuneration payable to the partners can also be deducted. Regarding the bonus the High Court held that annual incidence of only the minimum bonus can be deducted, and any excess bonus paid is not deductible. It disallowed the claim of the an1ounts that wer~ paid as income-tax or other taxes in ascertaining the paying capacit i of the industry or the employer. Regarding dearness allowance the High Court held that the industrial minimum wage has got to be paid on the basis of pay or perish and the neutraJigation must be 100 per cent of the rise in prices. Reiarding the claim for giving e.ffect to the enhanced rates of wage, scales of wages and dearness allowance from the date of the order of reference i.e. from 7th January, 1965 the court held that the provisions of the award should Uike effect from January 7, 1965 being the date of the order ol reference. While fixing January 7, 1965 as the date of operation it gave a discretion to the Industrial Court for valid and lawful reasons to fix a later date in respect of all or any of the employer-units. In the rei>ult the High Court found that the award in respect of Demands 3, 4, 6 and 7 was not in accordance with law and had to be set aside as the award did not ascertain the rates and scales of wages and dearness allowance on the basis of an industrial minimum wage and that the indus.. trial minimum wage should be ascertained without any referenco to the capacity of the industry or the employer to pay. The court also found tha( the correctness and truthfulness of the accounts and the balancesheets of some of the employer-units has not been praperly appreciated, investigat!)d into and taken into account. The financial capacity to pay has not been properly evaluated. The financial capacity to pay has not been taken into consideration fol'. the purpose of awarding a fair wage with corresponding dearness allonance. Finally, the question of ¢.ving retrospective effect and fixing the date from which the wages and dearness allowance awarded should become operative has not been properly considered. As Demand No. 5 is also an integral part of the , award the court also quashed the award on that Demand. A B c D E p G H B c 418 SUPREME COURT REPORTS [1978] 3 S.C.R. The appellants in these appeals challenge the correctness of the order of the High Conrt remanding the award for fresh disposal according to the directions given in the judgment. First and foremost the appellants questioned the correctness of the order of the Industrial Court as confirmed by the High Conrt classifying the employers into two categories Classes A and B and directing that the employers belonging to Class A should pay enhanced wages, dearness allowance etc. Secondly, it was submitted that the High Court misdirected itself in holding; that the Industrial Court ought to have fixed an industrial minimum wage and that such wage should have been fixed without taking into account the paying capacity of the industry or the employer. Thirdly, it was contended that the conrt erred in holding that in determining the paying capacity certain items such as minimum wage and the minimum bonus can alone be deducted. The disallowance of the income-ta'!: and other taxes that were paid was also questioned. The method of fixation of the dearness allowance as well as the direction to give retrospective effect to the payment of wages, dearness allowance etc. from the date of the order of, reference was challenged as imposing an intolerable burden on the industry. We will now proceed to deal with each of the above contentions. D Mr. Phadke, the learned counsel for the appellants, submitted that the classification of the employers into two categories A and B depending upon the profits is not justified in law. He submitted that the rule is that the wages, dearness allowance, scales of pay etc. should be fixed on the basis of region-cum-industry, the wages normally being the same in all industries in the region. The Tribunal in its award found that the Industrial Court is entitled to fix a wage for every unit in accordance E with its capacity to pay. This view was affirmed by the High Court. But the submission of the learned counsel is that this view is unsustainable in law. Before the High Court apart from the proposition of law enunciated that the classification should be fixed on the basis of region-cum-industry, it was submitted that as on the facts of the present case no such classifiF cation was contemplated in the agreement between the parties or in the reference by the Government, the Tribunal ought not to have classified the industry into two categories. Reliance was placed on the word~ ing of the agreement requesting the Government to make an industrywise reference to the entire region and the reference necessarily being in accordance with the agreement it was submitted would not justify any such classification. This argument was rejected by the High Court on G the ground that the Industrial Court had inherent jurisdiction to classify the employers into several categories. Reference was made by the appellants to the demands and it was submitted tlfat the power to classify was restricted only in respect of employees and not as regards employers. This plea was rightly rejected by the High Court as no such express reference is necessary in view of the powers of the Industrial Court. The third contention of the appellants before the High Court was that the H pleadings did not refer to the classification of the employers. It was rightly held by the High Conrt that the absence of any reference to the classification of the employers in the pleadings would not affect the power of the Industrial Conrt. The other contentions put forward • . \.. , ' ~-... 1 ' • SH!VRAJ LITHO WORKS V. INIJUSTRIAL COURT, NAGPUR 41 \j (Kailasam, !.) before the High Court basing on the construction of section 22 of the A Industrial Disputes Act and Rule 238 of the C.P. and Berar Industrial Disputes Settlement Rules, 1949, that the increase or decrease of wages should be in an industry as a whole and not differing from one industry to another is also without any basis. This Court has clearly laid down in a series of decisions starting from the case of Express Newspapers (P) Ltd. and Anr. v. The Union B of lndia and Others('), that it is permissible to divide the industry into appropriate classes and then deal with the capacity of the industry to pay classwise. At p. 20 of the Reports this Court in laying down the principle in determining the capacity of an industry observed : "The relevant criterion should be the capacity of a particular industry in a specified region, and as far as possible the same wages should be prescribed for all units of that industry in that region." But the Court C qualified the rule by stating "It is clear therefore that the capacity of an industry 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 into appropriate classes and then deal with the capacity of the industry to pay classwise." In Williamsons (India) Private Ltd. v. The Workmen(') this Court D he:Jd that the extent of the business carried on by the concerns the capital invested by them, the profits made by them, the nature of the bu·siness carried on by them, their standing, the strength of their labour force, the dividends declared· by them and the prospects about the future of their business and other relevant factors have to be borne in mind for the purpose of comparison. Approving the view expressed in the abo·ve decision in French .Motor Car Co. Ltd. v. Workmen,(8) this Court E. observed at p. 20 thai comparison should be made in the same line of business and a small concern cannot be compared even in the same line' of business with a large concern. When there is a large disparity in the two concerns in the same business, it would not be safe to fix the same wage structure as in the large concern without any other consideration. In Cinema Theatres v. Their Workmen,(') this Court approved the F dassification of the Tribunal of the Cinemas into two classes based on gross· revenue. The Court observed that the gross revenue taken by the Tribunal as the oasis for classification. appears to be a satisfactory criterion. In Workmen of Balmer Lawrie and Co. v. Balmer T.awrie cmd Co.,(~) at p. 353 this Court held ihat in determining the question whec;. ther one concern is comparable with another in th.e matter of fixing wages, ·the total capital invested by the concern, the extent of its bnsiness, the order of the profits made by th~ concern, the dividends paid, the number of employees employed in the concern, the standing in the industry to which it belongs and other matters have to be examined. In (I) (1939] S.C.R. 12. (2) [1962] 1 L.L.J. 302. H (3) [1963] Snpp, 2 S.C.R. 16. (4) [1964] 2 L.L.l. 128. (5) [1964} 3 S.C.R. 344. A B c D E F G H 420 SUPREME COURT REPORTS [1978] 3 S.C.R. Greaves· Cotton and Co. and Others v. Their Workmen,(') after referring to the decision in French Motor Car Co. Ltd. v. Workmen (supra) this Court held that the principle is that in applying the industry-<:umregion formula for fixing wage scales the Tribunal should lay stress on the industry part of the formula if Uurre were a large number of concerns in the same region carrying on the same industry, but where the number of industries of the same kind in a particular region was small, it was the region part of the formula which assumed importance. In the former case in order that production cost may not be unequal and there may be equal competition, wages should generally be fixed on the basis of the comparable industries, namely, industries of the same kind. In Unichem Laboratories Ltd. v. The Workmen(") this Court after referring to the cases cited above held that in the fixation of wages and dearness allowance the legal position is well-established that it has to be done on industry-cum-region basis having due regard to the financial capacity of the unit under consideration. The same view was reiterated in The Silk and Art Silk Mills' Association Ltd. v. Mill Mazdoor Sabha( 3 ) at p. 288, where the Court re-emphasised the principles laid down in the earlier cases. There is !hus ample authority in support of the view taken by the Tribunal and the High Court that the employer can be classified according to his paying capacity. ·n1e second contention of the learned counsel for the appellants is that the High Court was in error in holding that the Tribunal ought to have fixed an industrial minimum wage without any reference to the paying capacity of the employer. According to the High Court even when a statutory minimum wage is payable an industrial minimum wage has to be ascertained to find out which is high because it is the higher of the two which has to be paid. The High Court also held that the industrial minimum wage will have to be fixed without reference to the paying capacity of the industry. The agreement dated July 30, 1968 entered into between the parties which led to the reference by the Government states that both the parties also requested the Govemmen~ to expedite fixation of minimum wages in the Litho Industry in the Vidarbha region if necessary by appointing a sub-committee for this purpose. In pursuance of the agreement the notification was issued by the Government on January 7, 1965. Schedule II lists the demands of the employees. The demands with which we are concerned in this appeal have already been referred to. The demand is that the employees should be paid a living wage. In pursuance of the agreement the Government fixed a minimum wage on December 30, 1964 under the Minimum Wages Act, 11 of 1948 and again revised it pending the· appeal before this Court on May 7, 1966. It was conceded before the Tribunal by the employees that there was no justification for demanding a living wage but that the units had the capacity to pay fair wages. On the basis of the stand taken by the employees, the Tribunal proceeded to fix a fair wage· taking into account the paying capacity of the industry. The dispute therefore related (I) [1964] 5 S.C.R. 362. (2) 11972] 3 S.C.R. 367. (31 (1973] 1 S C.R. 277 ,i ' " ' • \.' . ' ~ • • • • , . ' • SHIVRAJ LITHO WORKS V. INDUSTRIAL COURT, NAGPUR 421 (Kai/asam, J.) to fixation of a fair wage and not a minimum wage. In fact, the employees requested the Government to fix a mi;iimum wage w~i~h was accordingly fixed. The High Court relied mainly on two dec1S1ons of this Court in Express Newspapers (P) Ltd. and Anr. v. The Union of India and Others (supra) and U. Unichoyi and Others v. The State of Kera/a,(') for coming to the conclusion that the Tribunal is bound to fix an industrial minimum wage. In the former case this Court stated that broadly speaking the wages have been classified into three categories, the living wage, the fair wage and th~ minimum wage. After elaborately setting out the concept of living wage at p. 79, the concept of minimum wage at p. 82 and the concept of a fair wage at p. 84 of the Reports, this Court observed that fair wage is a mean between living wage and minimum wage and even the minimum wage contemplated above is something more than the bare minimum of the subsistence wage which would be sufficient to cover the bare physical needs of the worker and his family, a wage which would provide also for the preservation of the efficiency of the worker and for some measure of education, medical requirements and amenities. The Court fnrther observed that it must be remembered that whereas the bare minimum or subsistence wage wonld hav,e to be fixed irrespective of the capacity of the industry to pay, a minimum wage thns contemplated postulates the ~apacity 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. This view is explained in U. Unichoyi and Others v. The State of Kerala (supra). The Court in rejecting thfl contention on behalf of the employers that the minimum wage prescn'bed under the Minimum Wages Act can only be fixed taking into account the capacity of the industry to pay held that it had no hesitation in rejecting the argument that because the Act prescribed the minimum wage rates it is necessary that the capacity of the employer to bear the burden of the wage structure must be considered. It is now not in dispute that so far as minimum wage is concerned it is to be fixed without any reference to the paying capacity of the industry . The Minimum Wages Act, Act 11 of 1948, secures the payment of the minimum wage. This Act was enacted with a vk-w to provide for fixing minimum rates of wages in certain employments. It pmvides under section 3 that the appropriate Government shall fix the' minimum rates of wages according to the provisions of the section. Section 4 provides that the minimum rate of wages fixed or revised by the Government in respect of scheduled employments under section 3 may consist of basic rate of wages and a special allowance at a rate to be adjusted, at such intervals and in such manner as the appropriate Government may direct, to accord as nearly as practicable with the variation in the cost of living index. Section 5 provides the procedure for fixing and revising minimum wages. Section 3 (2A) provides that when an industrial . dispute relating to !he rates of wages payable to any of the employees employed in a 5cheduled employment is pending before a Tribunal or National Tribunal under the Industrial Disputes Act, 194;' or before any like authority under any other law for tiJe time being in force, or an award made by any Tribunal, National Tribunal or such authority is in (!) [1962] I S.C.R.