# UNICHEM LABORATORIES LTD v. THE WORKMEN

- **Citation:** [1972] 3 S.C.R. 567
- **Court:** Supreme Court of India
- **Decided:** 1972-02-24
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/unichem-laboratories-ltd-v-the-workmen-5570
- **Pages:** 39

## Headnote

A
B
c
D
E
F
G
.. I
B
UNICHEM LABORATORIES LTD.
v.
THE WORKMEN
February 24, 1972
567
JC. A. VAIDIALINGAM, I. D. DUA AND G. K. MITTER, JJ.]
Industrial Dispute-Dearness All.owance-Deprrciation reserve~ whether to be deducted from profits--Concern.r with foreign collaboration wh~
ther can be compared with purely Jndia.n
Companies-Slab systemClassification of grade~ and fixation of wages-Gratuity-Incentive Bonu's
Sche1ne.
The appellant carried on the business of manufacturing and selling
pharmaceutical products in Greater Bombay.
In disputes arising OOtween
the ~ppellant and the respondents the Industrial Tribunal had to deal with
questions relating to dearness allowance, classification of grades and fixation of wag.es .and the incentive bonus scheme as modified by the company. In appeal against the aw-..rd of the Tribunal,
HELD: (i) The decisions of this Court in Gramophone Company Ltd.
v. its Workmen and The !11dian Link Chain Manufacturers Ltd. v. Their
Workmen show that the Tribunal .was justified in computing gross profits
without deduc~ting taxation, deprectation and development
rebate~ The
latter decision is directly jn point to the effect that 'provision ~or ·depreciation cannot be deducted.
[582E., 585B·CJ
Gramophone Company Ltd. v. Jts'Workmen, [191i4] II L.L.J. 131
and The Indian Link Chain
Manufacturers
Ltd. "f. Their
WOrkmen,
l1971] 2 S.C.R. 759, applied.
Ahniedabad Mil/owners' Association Etc~ v. The Textile Labour A.rsociat'ion, [1966] I S.C.R. 382, referred to.
·
(ii) so long and to the extent that concerns having foreign c§ll_aboration are doing business in India and in a pafticular concerood region· there
is no reason why they should not be taken into account for purposes ·of
being teated as comparable unfts, provided th-.lt the tests for. such purp06es
as laid down by this Court are satisfied.
TOO object of industrial. adjudication is to secure as far as possible unifdrmity of iervice conditions
among industrial units in the same regiOn. If a concern having foreign
collaboration properly satisfies the tests of comparability it would be improper to regard such unit as uncomparable merely on the ground' that
it is a concern with foreign collaboration or interest and ~t the unit with
which it is 'ought to be compared. is entirely of Indian origin and resources.
!591A·CI
Ch•mical IndustrieS"and Pharmaceutical Laboratories Limit<d (Cipla)
·Bombay v. Their W<!rkmen, [1957] !.C.R.
Bombay 1206 and Alembic
Chemical Works Ltd. Baroda v. Its Workmen [1967] I S.C.R. 652,
Hindust,in Antibiotics Ltd. v. The
Workmen and Ors.,. [1967] I
S.C.R. 652, relied on.
(iii) On the materials before it the Tribunal was justified in treating
M/S. Burroughs Wellcome & Co. as a unit comparable with the appellut.
568
SUPREME COURT REPORTS
[1972] 3 S.C.R.
The fact that Burroughs Wellcome .employed a le.,.r labour force did not
deserve much · impOrtance beoause the business performance of the two
companies was equal.
Once Burroughs Wellcome Co. was timted as a
comparable unit the wage scales awarded by the Tribunal oj(mld not be
considered to be unjustified. [598G-599A-D]
Workmen of New Egerton Woollen Mills v. New Egerton Woollen
Mills and Ors., [1969) II L.L.J. 782, applied.
(iv) On the facts of the case it was not possible t<? disagree with the
view of the Tribunal that the impact of the Drugs (Price Con.trol) Order
will not be such as to affect materially the business pf~pects of the
appellant company. If the Order materially aff<•cts the prosperity of the
appiilant's trade it would be open to it to raise '3. dispute for the reduction
in the wage structure and in case they are able to show that in view
of the Dlrugs (Price Control) Order their financial position has weakened
to ·such an extent that they c:annot he'll' the burden of the wage structure
.fixed by the present award, the matter may have to be examined on its
merits. [598B.CJ
· Wi/liamsons (India) Private, Ltd. v. It• Workmen, [1962] 1 L.L.J.
302. referred to.
(v) The Tribunal hod

## Text

_Characters 0–39,549 of 102,723. This is a partial read: ask again with offset=39549 for what follows._

A
B
c
D
E
F
G
.. I
B
UNICHEM LABORATORIES LTD.
v.
THE WORKMEN
February 24, 1972
567
JC. A. VAIDIALINGAM, I. D. DUA AND G. K. MITTER, JJ.]
Industrial Dispute-Dearness All.owance-Deprrciation reserve~ whether to be deducted from profits--Concern.r with foreign collaboration wh~
ther can be compared with purely Jndia.n
Companies-Slab systemClassification of grade~ and fixation of wages-Gratuity-Incentive Bonu's
Sche1ne.
The appellant carried on the business of manufacturing and selling
pharmaceutical products in Greater Bombay.
In disputes arising OOtween
the ~ppellant and the respondents the Industrial Tribunal had to deal with
questions relating to dearness allowance, classification of grades and fixation of wag.es .and the incentive bonus scheme as modified by the company. In appeal against the aw-..rd of the Tribunal,
HELD: (i) The decisions of this Court in Gramophone Company Ltd.
v. its Workmen and The !11dian Link Chain Manufacturers Ltd. v. Their
Workmen show that the Tribunal .was justified in computing gross profits
without deduc~ting taxation, deprectation and development
rebate~ The
latter decision is directly jn point to the effect that 'provision ~or ·depreciation cannot be deducted.
[582E., 585B·CJ
Gramophone Company Ltd. v. Jts'Workmen, [191i4] II L.L.J. 131
and The Indian Link Chain
Manufacturers
Ltd. "f. Their
WOrkmen,
l1971] 2 S.C.R. 759, applied.
Ahniedabad Mil/owners' Association Etc~ v. The Textile Labour A.rsociat'ion, [1966] I S.C.R. 382, referred to.
·
(ii) so long and to the extent that concerns having foreign c§ll_aboration are doing business in India and in a pafticular concerood region· there
is no reason why they should not be taken into account for purposes ·of
being teated as comparable unfts, provided th-.lt the tests for. such purp06es
as laid down by this Court are satisfied.
TOO object of industrial. adjudication is to secure as far as possible unifdrmity of iervice conditions
among industrial units in the same regiOn. If a concern having foreign
collaboration properly satisfies the tests of comparability it would be improper to regard such unit as uncomparable merely on the ground' that
it is a concern with foreign collaboration or interest and ~t the unit with
which it is 'ought to be compared. is entirely of Indian origin and resources.
!591A·CI
Ch•mical IndustrieS"and Pharmaceutical Laboratories Limit<d (Cipla)
·Bombay v. Their W<!rkmen, [1957] !.C.R.
Bombay 1206 and Alembic
Chemical Works Ltd. Baroda v. Its Workmen [1967] I S.C.R. 652,
Hindust,in Antibiotics Ltd. v. The
Workmen and Ors.,. [1967] I
S.C.R. 652, relied on.
(iii) On the materials before it the Tribunal was justified in treating
M/S. Burroughs Wellcome & Co. as a unit comparable with the appellut.
568
SUPREME COURT REPORTS
[1972] 3 S.C.R.
The fact that Burroughs Wellcome .employed a le.,.r labour force did not
deserve much · impOrtance beoause the business performance of the two
companies was equal.
Once Burroughs Wellcome Co. was timted as a
comparable unit the wage scales awarded by the Tribunal oj(mld not be
considered to be unjustified. [598G-599A-D]
Workmen of New Egerton Woollen Mills v. New Egerton Woollen
Mills and Ors., [1969) II L.L.J. 782, applied.
(iv) On the facts of the case it was not possible t<? disagree with the
view of the Tribunal that the impact of the Drugs (Price Con.trol) Order
will not be such as to affect materially the business pf~pects of the
appellant company. If the Order materially aff<•cts the prosperity of the
appiilant's trade it would be open to it to raise '3. dispute for the reduction
in the wage structure and in case they are able to show that in view
of the Dlrugs (Price Control) Order their financial position has weakened
to ·such an extent that they c:annot he'll' the burden of the wage structure
.fixed by the present award, the matter may have to be examined on its
merits. [598B.CJ
· Wi/liamsons (India) Private, Ltd. v. It• Workmen, [1962] 1 L.L.J.
302. referred to.
(v) The Tribunal hod acted within its jurisdiction in classifying the
workmen and fixing the sc:iles of pay after fitting them in particular
categories. The objection based on s. 10(4) of the Industrial Disputes
Act. 1947 must be rejected. [599E-600B]
(vi) When the Tribunal raised in the gratuity scheme the ceiling limit
from 15 months to 17t months according to the pattern obtaining in
Burroughs Wellcome Company there was no question of principle involved
justifying an objection by the appellant company. [600C-DJ
(vii) There were different systems of dearness ~llowanc!io for the operators and the clerical and subordinate staff in the appellant company.
That such a different system of dearness auowance for employees working
unde'r the same employer is not warranted is clear from the decisions of
this Court in the cases of Greaves Cotton & Co. and Bengal CheinicaJ
& Pharmaceutical Works Ltd. Therefore the Tribunal was justified in
devising a unifonn scale of dearness allowance '3pp1icable to all the empolyees of the appellant. r600E-F]
Greaves Cotton and Co. and Ors. v. Their Workmen, [1964) 5 S.C.R.
362 and Bengal Chemical & Pharmaceutical Works Lrd. v. /Ar Workmen
[1969] 2 S.C.R. 113, relied on.
·
'
A
B
c
D
E
F
(viii) From the date of the settlement in 1966 the cost of living
index h~d very rapidly gone up by 220 points. At the time when the
demand for revision of wage·s sqtles and dearness allowance was made
G
by the Unions and when the reference order was made by the Government. the cost of living index had gone
up very high. That clearly
showed that the workmen had m'3de out a case for revision of wage scaJes
and dearness a11owance.
The contention of the appeUant that because
a system of dearness aHowance aireadv existed there should be no revision
Of the ·same, could not be accepted. r602C; 601A 1
. Work1nen of Balmer Lawries and Co, '" Babner Lawrits and Co.,
B
[1964] 5 S.C.R. 344 and Reming;pn Rand of India v. /ts Workmen,
!19621 I L. L. J. 287, followed.
A
B
c
D
WIICHEM LTD. v. WORKMEN (Vaidialingam, J.)
569
(ix) When the slab system of dearness .. allowance was prevailing in
the industry in the region the Tribunal committed no error in introducing
a similar pattern in the case of the appellant. [603C-DJ
.
Kamani Metals & ill/oys Ltd. v. TIU!ir Workmen, [19671 2 S.C.R.
463, referred to.
(x) In regard to the Incentive Bonus Scheme the Tribunal had stated
that th:! nec.~essary material for that purpose had not been made available
~nd as such it had not been possible to devise a scheme calculated to
afford. protection to .the incentive earning of a workman at the raised base
performanre index. This Court could do nothing further in this 'regard
and the result would be that observations made by the Tribunal will have
full effect. [6040-Hl
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1091
to 1093 oi 1971.
Appeals by special leave from the award dated April 15, 1971
of the Industrial Tribunal, Maharashtra, Bombay in References
(IT) Nos. 20 of 1969, 70 of 1970 and 105 of 1969.
V. M. Tarkunde, R. A. lahagirdar and I. N. Shroff, for the
appellant (in all the appeals).
K. T. Sule, lanardaro Sharma and Indira Jaisingh, for respondent No. 1 {in all the appeals).
E
Urmila Kapoor and Kamlesh Bansal, for respondent No; 2 (in
F
G
all the appeals).
The Judgment of the Court was delivered by
Vaidialingam, J.-These three appeals,
by special leave,
arise out of the Award, dated April 15, 1971 of the Industrial
Tribunal, Maharashtra, Bombay iri Reference (l.T. Nos. 20 and
105 of 1969 and 70 of 1970).
The main questions that arise for
consideration in these
. appeals relate to the award of Dearness Allowance, Classification
of Grades and Fixation of Wages and a direction given by the
Industrial Tribunal regarding the Incentive Bonus Scheme, as
modified by the Company.
There is also a minor point regarding
a particular clause in the Gratuity Scheme as framed by the Tribunal in Reference (l.T. No. 20 of 196.9). Though there are certain other matters dealt with in the Award in Referi:nce (l.T.
H
No. 20 of 1969) they are not the subject of controversy in these
appeals.
We will now state the circumstances under which the References came to be made 10 the Tribunal.
570
SUPREME COURT REPORTS
(1972] 3 s.c.R.
The appellant was started as a .proprietary concern in the
J.
year 1944 and w_as later transfonned to a public limited Company
and registered as such under the Indian Companies Act, 1962.
From its inception, tile Company has been dealing in the business
of manufacturing and selling phannaceutical products. It had its
factory in Jogeshwari in ,Greater Bombay.
At the time of the
Reference, the Company was employing about 714 workmen, of
B
whom 558' were operatives and 156 were me.mbers of the clerical
and subordinate staff.
All these employees were covered by the
demands comprised in all the References.
The wage scales of
the workmen had been determined originally in Reference (I.T.
No. 23 of 1959). The wage scales of 1the operatives were as
follows :
c
"Uns'dlled A
Unskilled B
Se:ni·ski!led A
Se:ni~skiUed B
Skilled
. Rs. t ·52-0 •09-2 ·23-0·12-2 ·93
1 ·25.-0 ·J6-1 ·85-0 ·09-2 ·JO
2 ·00 _Q ·12--2 ·72-0 ·18-3 ·80
t ·76-0·t1-2 ·64-0 ·15-3 ·39
2 ·59--0 ·13-2 ·85-0 ·22-3 •95-0 ·l04 ·25".
D
The wage-scales of ihe clerical and subordinate staff were as
follows :
"Junior Chemist .
.
Manufacturing Assistant
Store-keeoers
J
Store-Assistants }-
Stenographers
j
Junior Clerk
.
Intermediate Clerks ·
Se~iQr Clerks
. Rs. 120-10-200-12-260
14().._(Q-220-15-310
180-10-260-i 5_350
60-8-90~10-140-E.B.-15-215.
7l-8-115-12-175-E.B.-15-250.
115-10-255-15-315-E.B.-20-395."
E
In addition to the basic wages, referred to above, the em•
ployees were getting dearness allowance, which in the case of operatives was equal to 80% of the revised textile scale of dearness
F
allowance arid in tile case of clerical and subordinate staff 100%
of the revised textile scale of dearness allowance.
The nomenclature of the grades of the operatives was changed
by a consent award in Reference (I.T. No. 170 of 1961). The
grades and wages as per this award were as foilows :
"Unskilled .
Semi-skilled A
Semi-skilled B
Skilled
.
Highly Skilled
. Rs. 1 ·25-0 ·06-1 ·85-0 -09-2 ·30
1 ·52-0·02-2·33--0·12-2·93
1 •76-0 ·11-2 ·64-0 ·15-3 ·39
2-00-0 ·12-2 ·72-0 ·18-l ·39
2 ·59-0 ·13-2 ·85---0 ·22 .. 3 ·95 .. 0 ·304 ·25."
'
G
The dearness allowance of the operatives and
clerical and
H
subordinate staff underwent a change by the award in Refere.nce
(l.T. No. 402.of 1963). Underothat award the dearness allowance
..
A
8
c
0
E
F
G
H
UNICHEM LTD. v. WORKMEN (Vaidialingam, J.)
571
of the oper3Jives was increased to 90% of the revised, textile
scale of dearness allowance from January 1, 1964 and to 95%
of the revised textile scale of dearness
allowano~ from July 1,
1964.
The dearness allowance of the clerical and subordinate
staff was supplemented at different slabs with effect from January
1, 1964 as follows :
"Basic salary' upto Rs. 100
.
Basic salary of Rs. 101 to 200
Basic salary of Rs. 201 to 300
Basic salary of over Rs. 300 .
Operatives' dearness allowance
plus Rs. 7 ·50.
Qperativco;' -dearness allowance
plus Rs. 15.
Operatives' dearness allowance
plus Rs. 22 ·50.
Operatives' dearness allowance
plus Rs. 25."
Though the award prescribed to the clerical and subordinate
staff the same rate of dearness allowance of the operatives plus
a fixed amount, as referred to above, the Company continued to
give them de~rness allowance equal to 100% of the revised textile
scale of dearness allowance. This was also supplemented with
the fixed amount .depending upon the slab of the salary.
There was a settlement on :June 24, 1966 between the Com·
pany and its employees, in and by which. the wages of the operatives and the clerical and subordinate staff underwent a final re·
vision. The wages of the operatives were fixed as follow~
"Unskilled .
Semi-skilled B
Semiskilled A
Skilled
.
Highly skilled
Rs. 1 ·25-0·10-2·75
I ·6<).:_0 ·12-2 ·32-0 ·15-3 ·67
I ·80-0·ll-2·85-0·20-4·45
2·10-0 ·20-3 ·10-0 ·25-5 ·10
2 ·75-0·20-3 ·75-0·25-5 ·00-0 ·306·50."
Similarly, the wages of the clerical and subordinate staff were
as follows :
''Junior Clerk
Intermediate Clerk
Senior Clerk
Sten~ and Storelceeper .
Rs. 75-6-105-10-155-15-260-E. B.--
17-311.
90-8-130-12-190-15-295-E. B.-
18- 349.
125-10-195-15-270-20-390-E. B-
- 25-440.
180-10-260-15-380-E. B .... :0-4-
'460."
The above basic scales in respect of all die categories were
again supplemented by dearness allowance as provided for in the
award passed in Reference (LT. No. 402 of 1963). The Com·
pany had also an Incentive Bonus Scheme, by virtue of which a
large number of operatives were getting on an average an addi·
tional sum of Rs. 28/ · per month. The Company further revised
572
SUPREME COURT REPORTS
[1972] 3 S.C.R.
from about November 1, 1969 the wage scales of Drivers and
Watchmen as follows
"Drivers
Watchmen
. Rs. 70-6-100-9-145-12-205-E. B.-
15-250.
45-4-65-6-95-E. B.-8.-135".
A
The above was the pattern of the wage structure and dearness
B
allowa.nce for the operatives and the clerical and subordinate staff.
The Unions cono~rned made a demand for introducing the
following scheme of dearness allowance in respect of all the workmen with immediate effect :
'Wage slab.
Upto 100
.
.
Frcm Rs. 101 to 200
prom Rs. 201 and above
When the working class
cost of living indcix
figure is in
the group of 401410.
100 percent
50 per cent
25 per cent
Variatir·n
in
the
dearness
allowance for every 10
points rise
or
fall.
5 percent
2t per cent
Ii Percent
Minimum dearness al](;Wance Rs. 100. Minimum variation Rs. 5."
They also demanded that the above scheme of dearness allowance was to have retrospective effect from August 1, 1967. In
the same demand the Unions required that the workmen should
be granted one month's wages for every year of service ~s gratuity
in case of resignation, dismissal, discharge, death or termination
of service for any reason. By this demand the Unions required
modification of ~e then existing pattern of payment of dearness
allowance at 95 '° of revised textile scale of dearness allowance
to operatives and 100% of revised textile scale of dearness allowance plus Rs. 7.50 to Rs. 25/- paid to the cleri.cal and other staff.
The Company did .not agree to the demand and in consequence
by order dated January 14, 1969 the Government of Maharashtra
referred for adjudication to the Industrial Tribunal the demands.
This Reference was registeted as Reference (l.T. No. 20 _of 1969).
The Unions again made a demand for revision of scales of
pay as well as the classification of employees, their grades and
their fitment in the revised scales of pay.
As against the then
existing six categories of workmen and their wage scales of the
operatives the Unions demanded new classification and gradatioi1
into eight grades with new wage scales. Similarly, as against the
then existing five grades of the clerical and subordinate staff, the
Unions demanded the creation of six categories with enhanced
wage scales.
These demands again were not accepted by the
Company which led to the State Government making a reference
on Jainuary 9, 1970, which reference was registered as Reference
(I.T. No. 70 of 1970).
·
c
D
E
F
G
H
•
A
B
c
D
E
F
G
H
UNICHEM LTD. v. WORKMEN (Vaidialingam, J.)
573
The Company some tilll'! in the year 1959 had introduced au
Incentive Bonus Scheme.
This was introduced, according to the
appellant, because of the fact that the workmen were not giving
a substantial production.
The basis of the scheme; introduced
by the appellant, was that if the workm!n gave only 30% of the
100% production expected of them, their performance would
be considered zero.
On the other hand, if they gave production
above 30% and upto 100%, they would be eligibL~ for payment
of Incentive Bonus which would ho! from 31 to 100 points.
In
other words, for the 70 points above the first 30 points, the workmen would get Rs. 50/- .as Incentive Bonus which would worl.:
out approximately to about Rs. 71.43 per point. The appellant
desired that the then existing floor limit of 30% ought to be raised
to 75% without varying the quantum of Rs. 50/- that was originally payable on achievement of 100% production.
What was
intended was that the 25 points between 7 5 and 100 points were
io be made eligible for payment of Incentive Bonus of Rs. 2/-
for each point.
The Company served a notice of change ·on the workmen
under s. 9A of the Industrial Disputes Act, 1947. As the workmen protestec;I against this change, this led the Government to
make a Reference to the Industrial Tribnual for
adjudication.
This was numbered as Reference, (I.T. No. 105 of 1969).
The appellant resisted the claims made for revision of dearness
allowance and wage scales as well as the modification sought for
in the gratuity sche1m. The appellant also wanted the Tribunal
to uphold the notice of change given by it under s. 9A of the
Industrial Disputes Act in respect of the Incentive Bonus Scheme:
In particular the appellant contended that it was.not a comparable
concern with the units reforred to by the Unions and that any
modification in •the scale of dearness allowance and wages would
be beyond its financial capacity.
The appellant also relied on
the comiμg into force of the Drugs (Price Control) Order 1970
with eff~ct from May 16, 1970. According to the appellant the
wages and dearness allowance paid by it to the workmen were
far higher than what were paid by other units in the region. The
Company also referred to the various awards wherein it had been
held that it could not be compar!d with an International Company
having branches in Bombay or with foreign conc~rn though incorporated in India. The wage scales had been fixed by ·Settlement
dated June, 24, 1966 and th~t no·thing has happened since the
date of S•!ttlement to justify a revision of wage scales and dearness
allowance. The appellant further urged before the Tribunal that
the double linl<ing of dearness allowance, as
required by the
Unions had never been adopted for the Pharmaceutical units in
tlie Bombay region.
According to the appellant, the
r~vision
·'
574
SUPREME COURT REPORTS
[1972] 3 S.C.R.
effected regarding the Incentive Bonus Scheme was justified and A
the amount of 2/- offered per point was much more than the prevailing rate of Rs. 71.43p. per point. It also opposed the revision
of the then existing gratuity scheme as demanded by the Unions.
According to the appellant the grntuity scheme which was in force
had been introduced by a consent award in 1963.
The appellant filed copies of balance sheets and profit and
loss accounts from 1962-63 to 1969-70 and various other charts
in support of i'ls plea •that it will not be able to bear the additional
financial burden that would result if the wage scales and dearness
allowance are revised as p.~r the demands made by the Unions.
It will be seen from the facts mentioned above that tho~ main
controversy between the parties related to the revision of wage
structure and dearness allowance.
As the demands of the workmen related to regrouping in different grades, the operatives and
the clerical and subordinate staff and as tllis involved a very
radical change in the existing pattern of grades, the Tri~nal
felt that the Qpinion of an expert should be obtained on the advisibility of the reclassification. In this regard both the Unions
and the appeJlant filed a joint application on December 22, 1970
requestin!( the Tribunal to appoint Sri N. L. Gadkari, retired
Chief Inspector of Factories, Maharashtra State as an assessor.
They also p.rayed ihat the points mell'tioned in the application be
referred for the opinion of the assessor.
The Assessor submitted
his report on. February 22, 1971, in which he recommended the
continuance of the then existing grades.
The Unions, while demurring •to the report of the Assessor,
requested th~ Tribunal, by their application dated March 25, 1971
to fix for the then existing five grades the following wage scales :
"Un,kitlo1
Rs. 85-8-t25-10-225
s,:ni-•killed B
100-t0-t50-t2-210-15-285.
Semi-•killcd A
120-12-t80-15-255-18-345.
Skille1
.
t.W-15-215-18-305-20--405.
Highly skilled
225-25-350--30-500-35-675."
The appellant, when the Reference came up for hearing, raised
an objection to the selection of wage scale by the Unions for
the existing grades of the operatives on the ground that such a
selection was not permissible, tdng contrary to the provisions of
s. I 0( 4) of •the Industrial Disputes Act.
The Unions, ultimately,
made it clear to the Tribunal that their demand for revision of
wage scales of the existing five grades of operatives is to be as
follows :
''Unskilled
Semi-skilled B
Semi-skilled A
Ski tied
.
Highly skilled
Rs. 60-5-85-7--155.
70-6-100-8-180.
85-8-125-10-225.
:00-10-150-12-210-15-285.
120 .. 12-180-15 .. -255.-18-345."
B
c
D
E
F
G
H
A
8
c
D
E
'
G
H
UNICHEM LTD. v. WORKMEN (Vaidialingam, J.)
57 5:
It is on ·the basis of this claim that the question of revision
has been dealt with by the Tribunal.
Regarding the financial incapacity pleaded by the appellant,
the Tribunal after an analysis of the balance sheets and profit and
loss accounts, held that the average net profit of the Company
during the years
1965-66 to 1969-70 works out to about
Rs. 1384691/·. It is also of the view that the apprehensions of
the appellant regarding the possible impact of the Drugs (Price
Cofl'!rol) Order, 1970 are μot justified. It is 1he view of the Tribunal that in spite of the price freeze effected in. 1963, the appellant has been doing very good 'business from 1962-63 to 1969-70.
Ultimately, the Tribunal found that the financial condition of the
appellant is quite sound.
Regarding the comparable concerns in the region, the Unions
referred to as many as twenty units.
One of the units relied on
as comparable with the appellant was M/s. Burroughs Wellcome
& Co. (lndig) Private Ltd., Bombay.
The appellant opposed its being compared with the concerns
relied on by the Unions on the ground that those units were either
foreign cono~rns doing business in India or Indian units working
in c0Jlaboration with foreign concerns. The appellant in turn
relied on sey~r_al other concerns as being comparable with it. The
appellant very strongly relied on certain previous awards in support of ils contention that it has been held in those awards that
the appellant-cannot be compared with foreign concerns or with
the con9erns working in collaboration with foreign concerns.
The Tribunal, after a consideration of the materials placed
before it, in this regard, ultimately, held that Mis. Burroughs
Wellcome & 'co. (India) Private Ltd., was ·a unit w'1ich could
be considered as a comparable concern with the aopellant. 1be
Tribunal having regard to the grades and scales of pay obtaining
in M/s. Burroughs Wellcome & Co. (India) Private Ltd., held
that !he wage scales for the five grades for the operatives of the
appellant should be as follows :
"Un~killed .
Semi-skilled B
Semi-skilled A
Skilled
.
High skilled
. Rs. 42-3-11-4-112
47-3-50-82~4-122
50-4-90-5·50-134
55-5·50-110-6·50-155·50
72-7-142-8-182-9 ·5f-2<0."
The Tribunal fixed the following grades and scales of pay for
the clerical and subordinate staff :
"Junior Clerks and Laboratory
Assistants
. Rs. 85-7 ·50-145-l0-l95-l2-25g._ F ..
323
Intermediate Clerks
120-10-200-12-260-15-335- 11.
353
Senior Clerk•
185-15-305-20-365- 25- 465"
576
SUPREME COURT REPORTS
[19'/2] 3 S.C.R.
The Tribunal did not accept the large demand made by the
Unions for a general adjustment in increments of the employees.
Nevertheless, in view of the revision of the scales of wages, it gave
certain direQtions so that rthe employees may be fitted in the appropriate revised wage scales.
The parties very hotly contested the. question of dearness al··
lowance ,as well as the pattern ito be adopted. As there were different systems of dearness allowance for the operativi;s and the
clerical and subordinate staff, the Unions desired that ·a common
scheme of dearness allowance on a slab system should be adopted.
The Tribunal having regard to the
decisions of this
Court in
Greaves Cotton and Co. and others v. Their Workmen(') and
Be~ Chemic~ & Pharmaceutical Works Ltd, v. Its Workmen(') held that there was no justification for having two systems
of dearness allowance--<>ne for the operatives and 1he other for
the members gf the clerical and subordinate staff.
Accordingly,
the Tribunal held that all 1the employees should get the same dearness allowance irrespective, of the fact whether they were operati\'~s
·or members of the clerical and subordinate staff.
As the ,dearness 3llowance has to be fixed on industry-cumregion basis, the Tribunal examined the system of dearness al1owance followed in the region by the industries belonging 1o the
pharmaceutical units.
The Unions had
submitted statements
Exs. DU-1 and MU.-1 containing a list of pharmaceutical unit;,
in support of their contention that such units were adopting a slab
system of deam,ss allowance. The Company, on the other hand.
referred to certain awards of the Industrial Tribunals in support of
its stand that slab system- of dearness allowance is not considered
as an appropriirte mode of providing neutralisation. The Uni.:ms
also relied on certain awards wher,in the slab system of dearness
allowance had been introduced by the Industrial Tribunals. Though
the Tribunal had held that most of the units referred to in Exs.
DU-1 and MU-1, cannot be considered for 1he purpose of being
treated as units comparabl•, with the appellant, nevertheless lt held
that the Pr.!!c([ce adopted by !hose units regarding 1the grant of
dearness allowance can be taken into account as providing a guide
regarding the system of d.earness allowance adopted in the region.
On 1this basis the Tribunal -accep!ed the statements in Exs. DU-1
and MU-1 and held that the slab system of dearness allowance was
prevalent in a large number of units belonging to pharmaceutical
industry. In this view, the Tribunal further held that slab system
of deamm allowance can be adopted, if the financial burden
consequent on the adoption of the said system, can be safely
'borne by the Company.
(I) [19641 5 S.C.R. 352.
c2> [I969J 3 s.c.R. m.
A
II
c
D
E
F
G
H
A
B
c
UNJCHEM LTD. v. WORKMEN (Vaidialingam, !.)
577
The Tribunal then proceeded to consider the system obtaining
in Burrough Wellconie Company regarding the payment of dearness allowance.
The system in the said ·Company, which was
common for operatives as well as the clerical and subordinate
staff, was as follows
Basic Salary
Rs. 1-100 .
Rs. IOl-200
Rs. 201-300
De~rness allowance per
month at the Boin·
bay working
cJ."lSS
cost of livig index
491-500.
1.50 per cent
150 per cent on the 1st
Rs. 100.
7! p,:r cent on the
balanr_.e.
150 per 1,;.~.11 on the
1st
Rs. IOO.
72! per cent on the 2nd
!ls. 100, and
36-i per cent on the
balance.
Variation
for
points.
5 per cent
2t per cent
lt per cent.
D
Minimum Dearness allowance
Rs. 4
E
F
G
H
Rs. 101.
In the said Company the above scale of dearness allowance
was howev<U limited only to employees drawing a basic salary
upto Rs. 300/- per month. The appellant accepted before tho
Tribunal that the scheme of dearness
allowance obtaining 'in
Burroul(hs \Yell come Company would cast a lesser financial burden than the scale of dearness allowance as demanded by the
Unions. In fact, the Company had filed two charts Exs. C· 12
and C-13, showinl( the burden which it will have to bear i( the
scheme of dearness allowance as demanded by the Unions was
introduced. . The Company had worked out the demands . in
different ways and that is why it filed two statements. According
to the appellam the additional financial burden will be about
Rs. 87812~.00 as per Ex. C-12 and Rs. 1252693.00 as per Ex.
C-13.
The Tribunal is of the view that under Ex. C-13, the
Company had taken into account a sum of Rs. 186293.00 payabk
to some members of the staff drawing a salary of over Rs. 200/-
per month and amongst whom Were also included 52 chemists.
Accordinl( to the Tribunal the 52 chemists are not covered by the
Reference and therefore the burden will have to be calculated
only in respect of the workmen covered by the Reference and to
whom dearness allowance is being fixed. On calculation the Tribunal found that about a lakh of rupees payable to 52 chemists
and included in Ex. C-13 by the appellant will have to be deducted from Rs. 1252693.00 Accordingly, it held that as per the
calculation ()f the appellant under Ex. C-13, leaving out the 52
chemists, the total burden will only be Rs. 1152693.00. Taking
l
I
'578
SUPREME COURT REPORTS
[1972] 3 S.C.R.
into account the 'tax relief that the Company will get, the Tribunal
A
ultimately held that the additional financial burden that t~e appellant will have to bear will only be Rs. 555000.,00. As rt had
already held that the average annual gross-profits of the Company
are over Rs. A0,00,000.00, the Tribunal held that the Company
can easily bear this additional burden. The Tribunal is further
of the view 'that though the financial impact of the Drugs (Price
D
Control) Order, on the business activities of the Company has
had to be seen the impact will not be such as to make the appellant's finanr-iai' position difficutt.
For all thes•: reasons, the Tribunal fixed for the operatives and the clerical and subordinate
staff of the appellant dearness allowance on a system prevalent in
Burroughs Wellcome Company.
The sys•tem of dearness allow- c
.ance fixed by·the Tribunal is as follows :
Basic salary
Rs. 1-100
Rs. 101-200
Dearness allowance per Variation
month at the Bombay working
class
cost of living index
521-530.
150 per cent
5 per cent
l 50 per cent on the 2t per ~nt
1st Rs. 100.
72! per cent on the
balance.
Rs. 201-300
Minimum
dearness
allowance Rs. 101
.
150 per ce:it on the lt Per cent.
!st 100
Rs. 72J,. percent on the
ind Rs. 100.
36t per ce:it. ()O the
balance.
Rs. 4.
D
E
The Tribunal has further directed that dearness allowance
in
F
.accordance with the above scheme will be paya5te only to em-
.ployees drawing a basic salary upto Rs. 300(- per month.
It will be seen that the Tribunal while adopting the scale of
dearness allowance obtaining in Burroughs Wel\come Company,
has made a departure in fixing the scale of <foarness allowance
on the basis of the Bombay Working Class Cost of Living Jndel<
G
521 to 530. The dearness allowance scheme obtaining in Burroughs Wellcome Company was on the Bombay Working Class
Cost of Living Index 491 to 500.
The dilfurent cost of living
index was adopted by the Tribunal in vie.w of the fact that the ap:
pellant was paying incentive wages to its operatives and with a
view to lessen the financial burden on the Company.
Another feature of tthe scheme adopted by the Tribunal is that
·it puts a ceiling on the employees
drawing basic
wa~es upto
'
H
A
B
c
D
E
UNJCHEM LTD. v. WORKMEN (Vaidialingam, J.)
579
Rs. 300/, per month alone being eligible for dearness allowance,
whereas under the practice originally obtaining in the Company
there was no such limit. The Tribunal held. tha:t the revised wage
scales and dearness allowance would be effective from October
1 1969 and directed the Company to pay the arrears within three
~onths from the dat~ of the Award· becoming enforceable.
At
this stage it may be mentioned that the appellant is not chal~~nging
this direction regarding the date from which the wage scales and
dearness allowance are to take effect, though it \ery vehemently
attacks the fixation of the scale of revised wage scales and dearness allowance by ithe Tribunal.
Rtlgarding _gratuity, tile Company had already a scheme which
had been introduced under the Settlement Award in Reference
(IT) No. 141 of 1962. It is not n.:cessary to set out the scheme
that was prevalent in the Company because the only objection
of the ap~llant to the revised scheme evolved by the Tribunal
is in respec!_ of raising the ceiling from 15 months to 17! months.
The demand in this regard by the Unions was that the ceiling
should be raised from 15 months basic wages to 20 months basic
wages.
However, the Tribunal did not accept the claim of the
Unions in toto.
On the other hand, it adopted the practice obtaining in the Burroughs Wellcome Company and accordingly
fixed the ceiling at 1 7t months basic wages.
Regarding the notice of change issued to the workmen by the
appellant under s.9A of the Industrial Disputes Act proposing to
alter the existing floor limit of 30% to 75% in the
Incentive
Bonus Scheme, the Tribunal on the joint application of the parties
dated April JO, 1970 appointed on April ·28, 1970 Sri B. Tulpule,
as Assessor to examine the question of revising the existing scheme
of Incentive Bonus. The Assessor submitted his report on August
F
27, 1970 making the following recommendations :
G
"(1) The base performance index for all sections/ in
lhe Company's factory should be revised and
raised to 60 per cent.
(2) Consequent upon the revision of the base index
as above, an amount of Rs. 1.00 per day should
be added to the basic wages of the workers, this
addition being independent of any other revision
of the Wal!,C structure that the Tribunal may decide upon.
(3) The revised rates of incentive should continue
H
beyond 100 per cent performance."
Thoul(h the Unions generally accepted the recommendations,
the appellant was opposed, particularly to the second and third
\
580
SUPREME COURT REPORTS
[1972] 3 .S.C.R.
recommendations.
The Tribunal, after a consideration of the
objection, is of the view that recommendations Nos. 2 and 3 were
beyond the scope of ihe terms of reference made to him. ~ere
fore, those two recommendati<ms were negatived.
Regarding
A
the first recommendation, it is stated by the Tribunal that the
Unioris accepted the same and that 1he Company also was not
opposed to that suggestion made by the Assessor
r~garding the
B
raising of the base perfonnance index to 60%. In dealing with
this aspect the Assessor in bis report had stated as follows :
"If the base index of any incentive scheme is raised
from X to Y, the workers will stop getting the incen1tive
earnings which they used to get for the performance
range from X to Y.
This is also the main anxiety ex'
pressed by both the Unions in the present case. At the
outset I asked the management whe'ther the implication
of th.cir proposed change was such a reduction in the
'Norkers' total pay packet, at any given level of performance. The management cate~rically assured me that
that is not their intention. Their purpose in proposing
the change is stated by. them .to induce workers to raise
their performance above '!he prevaili11g level."
c
D
The Triburial in its Award had stated that the matters mentioned in the above paragraph inCluding the assurance st~1'd to . E .·
have been· given by the appellant were not denied·.
Therefore,
the Tribunal, in view of the common measure of agreement between both the parties regarding !he first recomme'.ldation is of the
view that- if the pay packet of the workman is to be protected at
the wage raise base index performance of 60%, some scheme
may have to be worked out But as the necessary materials for
the purpose of evolving a scheme were not available, the Tribunal
Fhas thrown out a suggestion that the said question should be dealt
with by the appellant in consultation with the Unions and frame
a scheme by common consent, if possible. Accordingly, the Tribunal left the matter to the parties to deal with the matter with
.the observation that if i'l is found that no scheme could be framed
by consent, the Uiuons will be free to raise any dispute that nrny
be available to them in that regard.
.G
We have exhaustively referred to the questions referred to the
Tribunal as well as the decision of the Tribunal on those points.
In these appeals, as mentioned earlier, the controversy relate to :
(I) Scale of Dearness Allowance; (2) Fixation of Wage Scales,
Classification and Grades; (3) Raising of the ceiling to 17!
months basic wages in the. gratuity scheme; and ( 4) th·~ direction
given by the Tribunal regarding the Incentive Bonus Scheme. ·
H
A
B
c
D
E
F
J
G
H
UN!CHEM LTD. v. WORKMEN (Vaidialingam, /.)
581
As the main points in great controversy between the parties
before us relate to the patitem of dearness allowance and the
classification and grad~s of employees and the fixation of the revised wage
scales,
we will take up· for
consideration those
matters.
The very_ JirS't objection of Mr. Tarkunde, learned counsel
for the appellant is regarding the manner of ascertaining 'grossprofits when revising the wage scales and' awarding
dearn..."Ss
allowance.
We have already poinlP..d out that the Tribunal has
proceeded on the basis thaJt the average annual gross-profits cf
the Company are over Rs. 40,00,00Q,OO.
The appellant had
submitted balance sheets and profit and loss a~counts for the year
l 962-63 to 1969-70. It is enough to refer. to the particulars that
could be gathered for the five preceding years, namely, 1965-uo
to 1969-70.
For those years the figures are as follows :
----
Particulars
1965-66
1966-67
1967-68
1968-69
1969-70
Paid-up capital
4500000
4500000
4500000
5400000
5400000
Reserves.and Surplus
2152186
2925376
4421515
4785697
5714988
Sales
.
.
21997640 23866647 30359380 32994456 37152031
Depreciation
.
.544919
555035 · 784824
1111775
916719
Development rebate
97242
. 68266
105840
110858
144511
Provision for taxation
1915000
1590300
1850500
1698500
1639000
NetIDock
4601566
4905509
5458212
5745997
7375386
Net Profit
954591
1443489
1597094
1604501
1323779
From the above statement i't will be seen that the average net
profits work out to Rs. 1384691.00 The net profits have bc•!n
arrived at, by the Company after dedutjtinj! taxation, depreciation
and development rebate. It is on the basis of the net prOfits so
arrived at that 1he appellant appears to have urged b.~fore the
· Tribtmal that th~ wage scales and dearness allowance are to b~
fixed. The Tribunal rejected this contention. On the o·ther hand.
the Tribunal has held that when considering a revision of wage
struc.ture wl)at is to be ·taken. intq account is not the. net profit;
but gross profits without l!llY deductions having been made for taxation, depreciation an~ development rebate.
It is on .that ·basis
tha\ the Tribunal held that th·~ average gross-profits of the Company exceed Rs. 40,00,000.QO.
The gross-profits without deducting taxation, depreciation
and development rebate for the years 1965-66 to 1969-70 will"b.:
approximately as follows :
·vear ·
Gross-profits
~-·
Rs.
"1965-66
35,11.752 .
1961;-67
36,57,090
1967-68
43,37,69~
.)968-69
45.15,134 •
1969-70
40.24,009""
9'-L1031 Sun.Cl/72
582
SUPREME COURT REPORTS
[1972) 3 S.C.K.
From the above it will be seen
that the figure of Rs.
40,00,000.00 arrived at by the Tribunal as average annual grossprofits appears to be prima facie correct.
Mr. Tatj<:unde, learned counsel for tlie appellant found considerable difficulty in challenging the view of the Tribunal th~t
gross-profits are to be arrived at without decucting truration and
development rebate.
He rather strenuously urged tha!t there b
absolutely no warrant for arriving at gross-profits without deducting depreciation.
On the other hand, Mr. K. T. Sule, learned counsel for the
respondent No. 1, whose contentions have been adopted by Mrs.
Unnila Kapoor, learned counsel for the second respondent, pointed out that the approach made by the Tribunal is correct and is
also supported by the decisions of this Court.
Mr.