# WORKS v. THEIR WORKMEN - **Citation:** [1962] Supp. 3 S.C.R. 516 - **Court:** Supreme Court of India - **Decided:** 1960-01-25 - **Bench:** P. B. GAJE1'DHAGADKA!t, K. N. Wanchoo - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/works-v-their-workmen-2398 - **Pages:** 26 ## Headnote Industrial Di.•1mte-Company underlnlcinq several conc•rns -If independent unit•-IVage "'ruclure-lncremenlal scale8Mini1num u;age and fair 11:age, di.i1tinction--Oratuity in addition lo Provident Pund -&heme for-If can be framed. The disputes between the appellant, the management of the D.C.M. Chemical Works which was a constituent unit of the' Delhi Cloth and General Mills Limited (the Company), and its workmen related, inter alia, to \Vage scales and gratuity. The workmen claimed that the chemical works was ail integral part of the Company and, therefore, the over-all position of the Company should be takr.n into account in fixing the wagestructurc. The Industrial Tribunal to which the matter was referred held that in the circumstance~ of the case the chemical works should be treated as an indrpendent unit and that the wage-slructur9 etc .• could not be fixed on the basis of the over. all position of the Company. The facts showed that though the Company \\'as a single limited concern O\vning and control!ing various industrial units of different kinds under it. There were certain features 'vhich \\'ent to show that the various undertakings carried on by the Company had been treated as independent concerns and could not lead to the conclusion that ti.icy were one integrated whole. It was found that (i) each unit had separate book• of account and separate profit and loss account, (ii) each unit had separate muster rolls for its employees, and transfers from one unit to the other usually took place with the consent of the employees concerned, (iii) each unit had its own separate wages and dearness allowance and bonus was also paid differently in each concern,(iv) whs muny as eleven iSBues which were the subject-matter of refer· ence. The main point howev<>r on which the parties differed was whether in determining the wage-structure etc. of thl' chemical works which is a constituent unit of the Delhi Cloth and General Mills Limited (hereirtafter called the Company), the over-all position of the Company should be ta ken into account or only the po~ition of this one unit, namely, the chemical works. The respondents contended that the chemical works was an integral part of the Company and therllforo the over-all position of the Company should be taken into acoount and the wage-structure etc. fixed accordingly; in particular it was pointed out that there were difforonces in wage-structure etc.· between the various units which were controlled and ow1wd by tho Company and which wore all situate in the same area in Delhi and that thPso differences should be eliminated and all the enterprises in Delhi controlled by the Company should be treated on the same footing. On the other hand the oontentio11 of ·lie - - • - - 3 s.b.k. SUPREME COURT Ril:PORTS 519 appellant was that though the chemical works was one unit of a large number of industries controlled by the Company, some of which were situate in the same area in Delhi, the various units were independent industries and each unit had to be considered on its own and the wage-structure etc. fixed on the basis of the financial position of each unit ; in particular, it was urged that two of the main units in Delhi were the textile mills run by the Company and the claim of the respondents that the ch!lmical works should in all matters be treated on a par with the textile units was untenable, on the ground, among others, that it would be against the principle of industry-cum-region. Before therefore we take up the particular matters raised in the two appeals before us, we shall first have to consider whether the claim of the respondents that the overaU position of the Company should be taken into account in fixing the wage-structure etc.· of the chemical works is sound ; for if that position is accepted, the award may have to be set aside as the tribunal has held tha.t in the circumstances of this case the chemical works should be treated as an independent unit and that the wage-structure etc. therein cannot be fixed on the basis of the over-all position of the Company. In order to appreciate the various contentions put forward by the parties on this question it may be useful to look into the history of the Company and how it has grown. The Company came into existence in 1889 with a modest capital of about Rs. 10 lacs. It seems that the policy of those in control of the Company was to plough back a substantial part of the profits into the industry itself and to create a reserve for that purpose. Originally the Company started with a textile mill but in course of time with the help of ploughed back profits and also with the aid of further capital, the Company set up a large number of other industrial 1163 11lanag1rruntofthe D.C.M. Chemic.arrying on, usually take place with the consent of the employees concerned. Further each unit bas got its own separate wa.ges and separate dearne88 allowanco and other different allowancell and bonus is also paid differrntly in e11eb concern. Further even where eales take place from one unit to anothl'f tht1y take place at market rate and not at cost price and are adjusted on this basis in the books of account. Lastly though there is a common board of directors and a common managing agency of tho Company. each unit has its own separate management as it is hound t-0 be for tho businc..'18 carried on by ditr'erent units is in many cases utterly different. It is on theso facts that we have to seo whether the chemical works can he said to bo so integrated with the other units of the Company as to justify the conclusion that it is part of the samo business, and the entire business carried on the Company is one establishment, and therefore it would not be right to have different wage·structure, dear_ nese allowance, etc., in the same est'lbli!lhment• ' I I ·' 3 S.C.R. SUPREME COURT REPORTS 529 This matter was considered by this Court in connection with lay-off in The Associated Cement Companies Limited,Chaibasa Cement Works, Jhinkpani v, Their Workmen(1), where tests were laid down for determining whether. a particular unit is pa.rt of a bigger establishment. These tests included geographical proximity, unity of ownership, management and control, unity of employment and conditions of service, functional integrality and general unity of purpose. But it was pointed out that it is was impossible to )1,y down any one test as an absolute and invariable test for all cases and the real purpose of these tests was to find out the true relation between the parts, branches, units. If in ti:; ir true relation they constitute one integrated whole, then the establishment is one ; if on the contrary they do not constitute one integrated whole, each unit is then a separate unit. How the relation between the units ·will be judged must depend on the facts proved. Thus in one case the unity of ownership, management and control may be the important test, in another case, functional integrality or general unity may be. the important test; and in still another case, the important test may be the unity of employment. It was pointed out that in a large number of cases several tests may fall· for consfoleration at the same time and the difficulty of applying these tests arises because of the complexities of modern industrial organisation. The matter was considered again by ·this Court in Pratap Press etc. v. Workmen ( 2 ), Pakshiraj Studios v. Workmen( 3), Hony. Secretary, South India Millowners' Association v. Secretary, District Coimbatore District Textile Workmen U nio.n (') and Fine Knitting Co. Lti/,. v. Industrial Court, Bombay('). In the case of Fine Knitting Co., this Court was considering one limited company but it was held in t.he . circumstances that even though there was unity of ownership, management · and control the two parts of the same concern were (1) [1960] 1 s.c.R. 703. (2) [1960] l L.L. J. 497. (3) [1961] 2 L. L.J. 380. (4) C. A. 419 of 1960, decided on 1-2-62. (5) C.A. S06 of 1961, decided on 15-2-1962. 1962 M anagemmt of thd D.C. u. Chemical Works v. Thei.r Workmen Wanchoo J. llltil /Jl cinogm:ent of thtD .C.M. Ct..mical Wor.i:s Y, Their ff'orkmm Wane/Joo J. fi24 SUPREME COURT REPORTS (1962] SUPP. diffrrcnt uuits as th<'re waR no functional integrnlity between them. It is on the basis of these tests that we havti to consider whether the tribunal WM right in its conclus10n that the ohcmical works has to be treated as an independent unit. The common features which have been emphasised on behalf of t.ho respondents are in our opinion clearly capable of Pxplanation on tho ground that the Company is a limited concern and carries on different kinds of business. But as in law under the Companies Act, the Company being a limited concern is one legal entity, the Common features on which the respondPnts rely follow from that one single cirrumetancc, namely, that the Company is a limited concern governed by the Company Law. It would thorefore in our opinion be not right to emphasise these · common features and to hold on their basis only that the various buRinesses carried on by the Company have to be treated as one integrated whole for the purposes of waμe-Rtrncturc etc. The outstanding fact in the present case is that though a large number of businesses is being carried on by the Company their nature in many caaes is utterly different and one has generally speaking nothing to do with tho other. The three main lines of business whioh the Company is carrying on are Rugar, textiles and chemicals. It is obvious that there is nothing common between these three- different lines of business and there can be 110 question of one depending upon the other and there cannot be functional integrality generally speakin!! between these three lines of business. There might be some connection speaking between the nhcmieal works and the textile mills of the Compa11y inasmuch as some of the chemicals might be used in the textile mills; but · the evidence shows that a very small proportion of tho chemicalR produced in the chemical works is used in the textile mills and that most of the production is sold in the open market. It cannot therefore be eaid that the ohemical worka 88 it now I - - 3S.C.R. SUPREME COURT REPORTS 525 exists is therefor the purposes of the textile mills and is thus integrated with the textile mills. Even in the matter of employment. the evidence is that there is separate recruitment of labour for the different units and each unit has separate muster rolls of employees and this is quite natural considering that different skill is required for the three lines of business carried on by the Company. It cannot also be said that there is any· essential dependence of the chemical works on the textile units or that one cannot be operated without the other. Further the way in which the Company has been dealing with different units in the past also shows that they have been treated as independent units. Each unit has its own separate labour union and separate agreements are entered into between the Company and its unions with respect to the conditions of service which are also different for different Units. Even in thematter of bonus there are differnnces between the different units and these differences sometimes arose out of different agreements between the various units and their unions. It appears that even in the case of units carrying ori the same business, as for example, textile, the workmen themselves contended in an earlier adjudication that the Delhi Cloth Mills and the Swatantra Bharat Mills were two distinct and separate units of the Company. In any case whatever may be said as to the units in the same line of business it is in our opinion perfectly clear that there is no nexus of integration between different lines of business carried on by the Company on the facts which have been proved in this case. We are of opinion therefore that the ratio of the decision in the Fine Knitting Co.'s case(') applies to the facts of this case and it must be held that the chemical works is an independent unit and therefore in fixing the wage structure etc. we have to look to the position 9f the chemical works only and cannot (o) C.i\. 306 ofl961, decided on 15-2-1962. 1962 Management ofche D.C.M. Chtmital Work• •• Their Workmen Wanchoo J. }if 1114.('tmtnl qi llk /J. ',\!. Chtve given them t.l1e same wrms and conditions of ~ervice n.s are enjoyed by other workmen of the concern ; (iv} The tribunal ~hould have awarded rurther bonus to the workmen. Re. ( i). The contention on behalf of the respondents in this respe<:t is thatthere are no incremental scales in this concern and the tribunal should have at any rate made a beginning by fixing some inoromental scales for the workmen. The tribunal however baa refused to fix incremental scales on the g-round that the concern htts neither financial ability nor stability to justify the fixing of inercme11ta.I scale,a at the ~resent ti~e. It is not in dispute that throughou~ 3 S.C.R. SUPREME COURT REPORTS 527 the course of its existence the chemical works has made profits only in two years and that. for the rest of the time it has been making lossos which had to be met by the Company out of the profits of other units. Reliance in this <:onnection has been placed on behalf of the respondents on certain observations in the Tariff. Commission Report and on a book called "Fertilisers Statistics in India" to show that the chemical industry has a very prosperous future in front of it. Reliance has also been placed on a communication addressed by the appellant to the respondents in which it has been said that judging from sound business principles the chemical works had not yet turned the corner of losses, but the position appeared brighter, and it was hoped that with the co-operation of labour the chemical works would be an asset to the D. C. M. family. Our attention has also been drawn to various annual reports in which an optimistic picture has been painted by the directors for the benefit of the shareholders. We agree however with the tribunal that in spite of the possibility that in time to come the . chemical works might acquire stability and prove a source of increasing profit to the. Company, the fact remains that upto now the chemical works· has been running at a loss except for two years and one cannot be certain that it will start earning pro .. fits soon. In these circumstances it seems to us that the tribunal was justified in not framing rm incremental scale of wages at the present juncture as that would put a heavy strain on the finances on the chemical works which has yet to attain financial stability. At the present moment the losses incurred in this unit have to be met from the profits earned in other units of the Company and in this situation we do not think that the tribunal was wrong in refusing to frame incremental scales. It is however urged on behalf of the respondents that if in the co~rse of the last twenty years the capital invested +n tl!e c~e!llical worJ-s bas ~urea.seq ' 196! M ant1gemmt of lh e D.C.M. Chemical Workr v. Their Workmen Wanchoo J. 19~1 M anag"""" of th1 D.C • .\f. Chemical Work4 •• Their Workmen Wanchoo J. 528 SUPREME COURT REPORTS [1962) SUPP. tremendously as compared to the modest amount with which it was started in 1942 and if the Company can find capital for the purpose of expansion, it should be able to pn.y incremental scales of wages by dipping into tho same source from which it has b~en able to find ca.pit.al. In effect this argument means that even though the concern may be making losers year after year it should find money for p:iying the labour force higher wageR in spite of tho circumstance that that may load it into incurring further losses. The argument seems to ho that even though there may be losses the concern must pay higher wages to the workmon and if necessary pay them out of what may be called capital. Now this argument would in our opinion bo unanswerable if the cla.im was for what is called mumnum wage: (Seo Messrs Ctown Alu.miniwn Works v. '/'heir Workmen ('). If tho wages paid by tho appellant in the present case were below tho minimum wage t.ha.t the tribunal would eertainly be justified in ordering it to pay the minimum wage, for no industry can have a right to exist if it cannot pay wages at the bare subsistence level. Where it is a case of payment of minimum wago, the tribunal can insist on the same being found, if necessary, even out of. ca.pita!. But this is not a case of hare minimum wage and we are dealing with a case of fair wage which is above the bare minimum wage. It is not even the case of the respondents that they are not getting the bare minimum wage. !'heir case is that they should he given a fair wage, and that the present wage~, though above the bare minimum wage, arc still not fair cnou!h and therefore should b"e increased and an incri;mental scale should be fixed. In such a situation we are of opinion that the present financial condition of the concern and its Rtability are both necessary to be considernd before an irwr<'ased fair wage can be given. Both tho present capacity of (I) [1958] S.C,R. 651. - 8 s.c.R. SUPREME COURT REPORTS 529 of the employer to pay the increased rates of incremental wages and its future capacity have to be taken into account in determining an increased level of fair wages based on an incremental scale. Thus both financial ability at present and financial stability in the near future must be there to justify fixation of an increased fair wage on an incremental scale. We do not think it will be right to insist on an increased fair wage on an incremental scale in a case where the financial capacity and the financial stability as judged by business principles are both lacking. Nor would it in our opinion be right to compel the employer to bear the burden of an increased fair wage on an incremental scale and tell him to find money from what may in effect be capital, for such a situation in ordinary cases can lead only to one result, namely, the closure of the business concern, which may be more detrimental to the workmen. Therefore carr,,ying on with the present scale of fair wages and hoping that the financial ability and stability of the concern will improve, with the result that increased fair wage on an incremental basis may be fixed in future is the only alternative at present even in the interest of the workmen employed in this concern. We therefore agree with the tribunal that in the circumstances no case has been made for fixing an incremental scale of wages at the present juncture. The contention on this head must therefore be rejected. Re. (ii). As to the canteen workmen, it appears that the canteen is run by the appellant departmentally on a no-profit-no-loss basis. The workmen employed in the canteen are the workmen of the appellant and their number is sixteen or seventeen. The minimum basic wage for unskilled workmen in this concern at the relevant time was Rs. 38.plus Rs. 55 i.e. Rs. 93; but. the workmen. in the .canteen get consolidated wages and all of them (except one) get 1962 Management pf the D.C.M. Chtmical Works • v. Their Workmen Wanchoo J. 1962 Managttnt11i of the D C.M. Chemirfl/ Works v. Thftr W orknwi W411thoa J, 530 SUPREME COURT REPORTS (1962] SuPP. much lesa than the minimum, the figures v·uying from Rs. 50 to Rs. 78. The tribunal ha.a held that there is no reason why the conditions of surviec of the workmen in the oa.nteen should not b., brought on a. par with tho conditions of service of the rest of tho workmen. It therefore ordered tha.t the workmen in the can teen wou Id be en titled to the samo facilities relating to leave, provident fund, bonus, and gratuity etc. a.s are available to the other workmen in the chemical works ; but so far a.s wages and dearness allowance are concerned, it has not given them cve.n the minimum as indica.ted a.hove. '1:he case of the the appellant was tha.t oven if the minimum was paid to the workmen in the canteen the price of the various food-stuffs supplied by the canteen to the workmen would go up substantially and it wa.s on tha.t ground that the appellant resisted the increase in the wages of those workmen in the canteen who a.re getting less than the minimum of Rs. 93. The tribunal ha.a hehl-a.nd we think rightly-that the fa.et that the bettering of the conditions of service of the workmen in the canteen· may lead to a. rise in the price of things sold there is no reason for refusing the demand of the workmen ; but it has not carried into effect fully the implications of this observation. It has ordered that·samc conditions as to leave facilities etc. should be extended to the canteen workmen but has stopped short of giving them the sa.me wagos a.nd dearness allowance. The reason why the tribunal did not give the workmen the same wages and dearness allowance is that thero wa.a no satisfactory material before it to permit it to fix wages and dearness allowance for the· workmen in the canteen. We are of opinion tha.t there is no reason why the tribunal should not ha.ve at least granted the minimum which is pa.id to the other workmen in the ('.Once£n to those workmen in the canteen who are getting less than . the minimum. We can see no reason for not giving them a.lso the I 1. - - - 3 S.C.R. SUPREME COURT REPORTS 53i mimmum wages as indicated above. This will certainly result in bringing the fifteen workmen who are getting between Rs. 50 and Rs. 78 per mensem as consolidated wages into an equal position, for each will then get the minimum, namely, Rs. 38 plus Rs. 55 and may remove part of the discontent. In the circumstances that is all that can be done in the absence of the material to which the tribunal has referred. Therefore the wages of those fifteen workmen who are getting less than the minimum should be brought to the same level. There is no reason why they should not get such benefits as may be due to them, by their wages being brought to the same minimum as the wages . of the other workmen in the concern. We therefore disagree with the tribunal with respect to the workmen employed in the canteen and order that the wages of those workmen who are getting less than the minimum paid to the other workmen in the concern should be brought to the same minimum level. The rest of the award on this head will stand. The minimum wages as above will be paid from the date the tribunal has ordered its award to come into force. Re. (iii). The claim of the workmen in this connection was that there were 300 workmen employed in 1he civil. engineering department and that they should be made permanent. The tribunal however rejected this contention and pointed out that most of the workmen were.· temporarily engaged to carry on construction work which was of a temporary nature and therefore they could not be made permanent simply because the construction had Jasted for more than a year. This view of the tribunal is in our view correct in so far as the claim put forward with respect to all the three hundred workm,.n was concerned. It appears however that at the time when the tribunal recorded. 1962 Managemem of the D.C.M.. Chmical Works v. Their W orkmePI W dJJ&hoo J. 1962 Alan-.gtm1n1ojtht D C.M. CA,mical Works v. 7 Am W ur/mun H'anthoo J. 532 SUPREME COURT REPORTS [l!l62J suPP. evidence tho large majority of these 300 workmen had been discharged because they were no longer required and only about Ci5 remained in service. It appears from th" evidencc of thP Joint Works ~Ianager that a skelt>ton strkmen have been given 2 1/2 months basic wages as bonus for tho years in dispuk, namely, 1!153-54 and 1954-55. They have claimed additional bonus. It is however conceded fairly 3 S.C.R. SUPREME COURT REPORTS 5S3 on behalf of the respondent that if the chemical works is treated as an independent uuit their case for additional bonus on the basis of the Full-Bench formula cannot succeed. The demand for additional bonus was rightly rejected by the tribunal, considering the chemical works as an independent unit. We may add that this case is distinguishable from the case of Hony. Secretary, South India Mill-oUJMrs Association, (1) for here the two lines of business are distinct and have nothing to d0 with each other. This brings us to the appeal by the appelJant. Five points hiive been urged on behalf of the appellant. They are: (i) dearness allowance; (ii) uniforms, (iii) acid and gas allowance. (iv) leave facilities, and (v) gratuity. We shall deal with them one by one. Re. (i). So far as dearness allowance is concerned, the tribunal has ordered that the dearness ·allowance in the chemical works shall be fixed at the same rate as it is in the power house which is a part of the chemical works. It may be m3ntioned that dearness allowance at the relevant tim11 in the chemical works was Rs. 55 per mensem while in the power house it was Rs. 66 per mensem. Tbe contention on behalf of the appellant in this connection is that the reason why there was this diffe- ,.. rence between the dearness allowance in the power house and in the rest of the chemical works is historical. It is further pointed out that though the difference in the two dearness allowances is H s. 11 the actual difference in the total wage packet was only Rs. 3 inasmuch as the minimum. basic wage in the power house was Rs. 30 while in the chemical works it was Rs. 38 at the relevant time. Thus the minimum that an employee was getting in the power house was Rs. 96 while the minimum for the rest of the workmen was Rs. 93,. and it is - Pl C.A. 41U of I W 1,