WORKMEN EMPLOYED BY INDIAN OXYGEN LTD. v. INDIAN OXYGEN LTD.

The Judgment of the Court was delivered by B DESAI, J. In exercise of the power conferred by Sec. 4 (k) of the U.P. Industrial Disputes Act, 1947 ('Act' for short) the Govern- ..... ment of Uttar Pradesh by its order dated May 23, 1975 referred the foJtowing dispute to the Industrial Tribunal for adjudication. The reference is in Hindi. Agreed translation of the industrial dispute c referred for adjudication reads as under :

"Whether the variable dearness allowance payable by the employers to their workmen should be revised and it should be linked with the consumer price index for industrial workers at Kanpur computed by Labour D Bureau Simla ? If yes, then from what rate {sic) and with what other details."

There are two rival unions of the workmen employed by the Indian Oxygen Ltd. ('Company' for short) in its Industrial under- E taking at Kanpur. They are the Indian Oxygen Karamchari Union ("Karamchari Union' for short) and the Indian Oxygen Sharamik Sangh ('Sharamik Sangh' for short). There is a federation of trade-unions formed at various centres where the Company has its industrial undertaking. Sharamik Sangh is affiliated to the federa- tion. Karamachari Union claims to represent the workmen F employed by the Company at Kanpur. The demand and the con- sequent industrial dispute which led to the reference was espoused by Karamchari Union.

The Karamchari Union in its statement of claim stated that the Company is a unit of the multi-national British Oxygen Com- G pany. The Indian Unit of the multi-national corporation operates under the name and style of M/s Indian Oxygen Ltd. The indus- trial activities of the Company comprises manufacture and sale of industrial and medical gases etc. It was stated that while the wage structure is uniform in respect of workmen employed by the Com- pany all over the country the dearness allowance formula varies from centre to centre. Briefly it was stated that the workmen of the Company employed at Bombay, Madras, Hydrabad, Bangalore and

WORKMEN v. iNDIAN OXYGEN (Desai, J.) 115

Delhi are in receipt of higher dearness allowance compared to the workmen employed in Kanpur Unit. The immediate provocation for raising the demand was an award by the Industrial Tribunal Delhi by which the dearness allowance of the workmen employed in Delhi unit was linked to consumer price index for Delhi prepared by the Labour Bureau Simla which resulted in a substantial increase in the dearness allowance available to the workmen posted at B Delhi. Soon after the award was published, the Karamahcari Union submitted a demand on January 7, 1975 for revising the rate of dearness allowance for workmen employed in Kanpur unit and as there was no adequate response from the employer, the matter was taken into conciliation. The Company in its attempt to thwart the demand being pursued entered into a settlement with the Sharamik c Sangh in respect of the dearness allowance and then approached the Labour Commissioner Kanpur for registering the settlement. Failing to obtain the registration, the Company unilaterally enforced the new scheme of dearness allowance linked to the all-India average con- sumer price index prepared by Labour Bureau Simla. The Karamchari Union did not accept the revised formula, and pressed D its demand that the dearness allowance should be linked to all-India consumer price index number prepared by Labour Bureau, Simla for Kanpur centre, after adopting the linking factor as has been done in the award by the Industrial Tribunal at Delhi. The conversion ratio was suggested at 4.83 linked to January 1970 index number. E The Company consistent with the employer culture put forth number of preliminary objections so as to delay the adjudication of the demand. All the preliminary objections failed as per the decision of this Court in Indian Oxygen Ltd. v. The Workmen as represented by Indian Oxygen Karamachari Union.(') After the matter went back for adjudication on merits it was contended on behalf of the Company that the settlement arrived at between the Sharamik Sangh and the Company would be binding on the members of the Karamachari Union and the Tribunal should not adjudicate the dispute on merits. This settlement has been stigmatised by this Court to be a collusive one. (See page 920). It was further contended that the Company is desirous of linking dearness a!lowance to all-India average consumer price index for working class with base I 960= 100 and that the Tribunal should avoid accepting a demand of a few workmen where a majority of the workmen have accepted and are satisfied with the revised formula introduced by the Company.

(I) [1979] 2 S.C.R. 911.

116 SUPREME COURT REPORTS [19851 SUPPL. S.C.ll.

The Company employs 5,400 workmen in all its establishments all over the country. Out of total strength of 5,400 workmen, 3030 are employed in gas manufacturing unit. The employment strength in Kanpur unit is roughly about 200. It is not in dispute that the basic wages of all workmen employed all over the country by this Company are occupation wise uniform but the dearness allowance paid to workmen differs or varies from place to place.. This ought to be so as will be presently pointed out.

Prior to 1975 dearness allowance to the workmen employed in the units of the Company in North-Eastern Zone i.e. in the States of West Bengal, Bihar, Orissa, U.P., Delhi and Punjab was linked to c the consumer price index number (middle-class) prepared by the Bengal Chamber of Commerce for Calcutta. It may be mentioned that the Bengal index has been discontinued since 1975. It is important to note that by the two awards of the Industrial Tribunal, the office staff and the workmen employed the Company at Delhi D are being paid dearness allowance linked to consumer price index compiled by Labour Bureau Simla for Delhi. Subsequently by a decision of this Court in Govardhan Prasad and others v. The Manage- ment of Mis Indian Oxygen Ltd. (1) 10 workmen employed by the Company stationed at Ghaziabad were required to be paid dearness allowance to the same extent and in the same manner as was being paid under the awards of the Industrial Tribunal to the worlcmen of the Company at Delhi.

Before we delve into the narrow contentions raised in this behalf we would remove the gloss over the submission that the attempt of the compan} having all-India operation, is to introdnce uniformity in the matter of dearness allowance payable to its workmen all over the country. Uniformity, to an uninformed mind, appears to be very attractive. But let it not be forgotten that sometimes this uniformity amongst dissimilar person& become' counter-productive. Uniformity and equality have to be amongst equals measured by a common denominator. One can appreciate the implementation of the constitutional aspiration of 'equal pay for equal work.' In the matter of basic wages it is a consummation devoutely to be wished. But when it comes to dearness allowance any attempt at uniformity between workmen in such metropolitan areas like Delhi, Bombay, Madras, Calq1tta a11d in 'mailer centres

(I) [1984] l s.c.R. 21.

WORKMEN v. INDIAN OXYGEN (Desai, J.) 117

would be destructive of the concept of dearness allowance. Dearne's allowance is directly related to the erosion of real wages by constant upward spiraling of the prices of basic necessities and as a sequel to the inflationary input, the fall in purchasing power of the rupee. It is a notorious phenomenon hitherto unquestioned that price rise varies from centre to centre. Dearness allowance is inextricably intertwined with price rise, it being an attempt to compensate loss in real wages on account of price rise considered as a passing pheno- menon by compensation. That is why it is called variable dearness allowance. Any uniformity in the matter of dearness allowance may confer a boon on persons employed in smaller centres and those in big metropolitan areas would be hard hit. Dearness allowance by its very form and name has an intimate relation to the prevailing c price structure of basic neces:;ities at the centre in which the workman is employed. Therefore, the c1aim in the written statement on behalf of the company that imbued with the equitable principle of introduc- ing uniformity in the matter of dearness allowance, the Company with the easy availability of consent of its protege union Sharamik Sangh introduced a new scheme of dearness allowance linked to the all-India average consumer price index prepared by Labour Bureau, Simla is misleading. The Tribunal rightly observed that it is by now well-settled that dearness allowance to workmen at a particular place should depend upon the place where the workman is working irrespective of the fact that the industrial undertaking in which the workman is employed is a unit of an industrial enterprise having an aJl-India or inter-State operations. In Dunlop Rubber Co. (India) Ltd v. Workmen & Ors.,( 1) a contention on behalf of the employer that in the case of an all-India concern, it would be adviseable to have uniform conditions of servi< e throughout India was repelled observing that 'however desirable uniformity may be in the case of all-India concerns, the tribunal cannot abstain from seeing that fair conditions of service prevail in the industry with which it is con- cerned.' This view to some extent was affirmed in the Remington Rand of India Ltd. v. The Workmen~'). Leaving aside basic wages in the matter of dearness allowance specially the Court should Jean G in favour of adjudication of dispute on the principle of industry- cum-region beeause dearness allowance is linked to cost of living index of a particular centre which has a local flavour. If the concept of uniformity on an all-India basis is introduced in the matter of dearness allowance, it would work havoc, because the price structure H (I) [1960] 2 S.C R. 51. (2) (1968] I S.C.R. 164.

ll8 SUPRBMB COURT REPORTS (1985] SUPPL. s.c.R.

in a market economy at places like Bombay, Madras, Calcutta, A Delhi, Ahmedabad has little or no relation to smaller centres like Kanpur, Varanasi etc. If workmen working in such disparate centres are put on par in the matter of dearness allowance in the name of proclaimed all-India uniformity, not only unequals will be treated as equals but the former would suffer irreparable harm. Such an B approach would deal a fatal blow to the well-recognised principle of industrial adjudication based on region-cum-industry developed by courts by a catena of decisions. Realising this situation courts have learned in favour of determination of dearness allowance Jinked to cost of living index, if available for the centre where the workman employed and in the matter of neutralisation on the industry-cum- c region principle. The Tribunal having rejected this approach committed an error apparent on the record.

At this stage, it is necessary to have some idea of what is consumer price index number, how it is being complied and what is its relevance in the matter of dearness allowance ? Pursuant to the recommendations of the Planning Commission for the Second Five Year Plan the Labour Bureau, Simla and the Industrial Statis· tical Organisation of the Government of India took steps to conduct fresh family living surveys among working class and middle class population respectively with a view to constructing the new series of consumer price index numbers. The working class surveys were conducted at 50 selected centres and the middle class surveys at 45 centres, 18 centres being common to both. The work of this survey was commenced in the second half of 1958 and was concluded by September, 1959. One of the centres selected for survey was Kanpur (See Ahmedabad Mill Owners' Associ"tion etc. v. The Textitle Labour F Association('). • What materials and statistical information enter into the compilation of consumer price index number may be briefly noticed.

The consumer price index number for industrial workers (base G 1960= JOO) are being compiled and published by the Labour Bureau, Simla every month in respect of 50 industrial centres scattered all over the country. Amongst them is Kanpur. The material collected is through the family surveys of working class families. There are six main groups for which indices for each centre are being compiled H besides the general index. They are :

(1) [1966] I S.C.R. 382.

WORKMEN ,, INDIAN OXYGEN (Desai, J.) 119

(i) Food A (ii) Pan, Supari, Tobacco and intoxicants

(iii) Fuel and light

(iv) Housing 8 (v) Clothing, bedding and footwear, and

(vi) Miscellaneous

Consumer price index numbers are intended to measure relative temporal (overtime) changes in the price of a fixed basket of goods c and services consumed by the index population in a current period in relation to the base period. The index numbers are compiled by using Laspeyres' Formula. The Broadly stated this formula takes note of base and current prices for a particular item, quantity con· snmed of that item during the base period. It would appear that D for the compilation of an index, there are three essential requirements namely : (I) weighting diagram which is the relative percentage share of the total consumption expenditure as revealed by the basic family budget enquiry in respect of different items, (2) Base prices of the different items which go into the index basket and (3) current prices in respect of each one of the items featuring in the index basket. E The weighting diagram for a centre is derived on the basis of the data collected through family budget enquiries which were conducted in the 1958·59 at each one of the 50 centres. The survey was con· ducted by taking all samples of working class families in each of the 50 centres and the data was collected by interviewing these families. F Based on the results of the family budget enquiries, the average expenditure of a family per month on different items of consumption was arrived at. All-India average consumer price index number is a weighted average of the 50 centres' indices. This is compiled and published alongwith the index number for each centre (Source : Consumer Price Index : An anatomy published by Labour Bureau, G Simla).

It would appear at a glance that there would be a noticeable difference between the consumer price index number for a centre and H its weighted average for 50 centres which would be the all-India average consumer price index number, the latter would generally be lower than the former in some cases.

120 SUPREME COURt REPORTS ( ! 985) SUPPL. S.CJi..

Reverting to the demand in this case, the Karamchari Union A raised a demand that the variable dearness allowance payable to the workmen should not only be revised but it should be linked with the consumer price index for industrial workers at Kanpur. The Tribunal by its award directed the employer to pay dearness allowance linked to the all-India consumer price index (1960= 100) for the Kanpur Centre compiled by Labour Bureau, Simla. On the B question of neuturalisation, the Tribunal directed that the calcula- tion in the rate of dearness allowance will remain the same as presently operative and no change is required therein. In reaching this conclusion, the Tribunal committed two manifest errors apparent on the record. c The company introduced as stated in its written statement, a new scheme of dearness allowance linked to the all-India consumer price index prepared by Labour Bureau, Simla. That was a very recent innovation introduced by way of a counter blast to the de- D mand raised by the Karamchari Union. Prior thereto, it is an admitted position that the workmen at Kanpur were being paid dearness allowance linked to Bengal Chamber of Commerce Index Number. That was unilaterally given up by the Company. There appeared to be at least two valid reasons for scrapping that scheme : one is that since 1975 Bengal Chamber of Commerce Index which was compiled for middle class families and was being artificially applied to industrial workers has been scrapped. In other words, the index is no more being compiled. Secondly, the constituent members of the Bengal Chamber of Commerce had started their business in India long before the present century and most of them were incorporated in England or other Western countries while the Company in the present case has been started a few decades back and therefore, re-induction of the Bengal Chamber Index Number would not he relevant.

On behalf of the Karamchari Union, it was contended that in devising a dearness allowance formula, the region·cumcindustry principle should ordinarily be accepted. As pointed out earlier, dearness allowance generally has a local flavour. A man is exposed to the vagaries of the market where he resides and works, even though he may be an employee of a national, multinational or trans-national industrial empire. The workman is concerned with the vagaries of price fluctuation in the area in which he resides and works for gain and to which he is exposed. Therefore, the region-

WORKMEN v. INDIAN OXYGEN (Desai, i.) i2i cum- industry principle must inform industrial adjudication in the matter of dearness allowance. In Woo/combers of India Ltd. v. A Woo/combers Workers Union & Anr. (1) this Court following its earlier decision in Greaves Cotton & Co. and Ors v. Their Work- men( 2), held that in devising basic wages and dearness allowance structure, industrial adjudication sometimes Jeans on the industry part of the industry-cum-region formula and at other times, on the region part of the formula as the situation demands. This well- B recognised principle of industrial adjudication cannot be given a go- by on the specious plea that the workmen are employed by an industrial undertaking which has an all-India operation. In this case, the Tribunal has overlooked this important principle of indus- trial adjudication. c Before we examine the second manifest error committed by the Tribunal in narrowly construing the terms of reference, it would be advantageous to briefly recapitulate what relevant considerations have to be kept in view in devising dearness allowance formula. This aspect is no more res integra. In Bengal Chemical and Pharma- D ceutical Works Ltd. v. Its workmen('). after reviewing all the earlier decisions, the court restated the principles on which a fair and just dearness allowance formula must be devised. They are :

"J. Full neutralisation is not normally given, except E to the very lowest class of employees.

2Copy pinpoint2. The purpose of dearness allowance being to neutra- lise a portion of the increase in the cost of living, it should ordinarily he on a sliding scale and provide for an increase on the rise in the cost of living and a decrease on F a fall in the cos! of living.

3Copy pinpoint3. The basis of fixation of wages and dearness allowance is industry-cum-region. G

4Copy pinpoint4. Employees getting the same wages should get the same dearness allowance, irrespective of whether they are working as clerks or members of subordinate staff or factory workmen. H (!) [1974] 1 S.C.R. 504. (2) [1964] 5 S.C.R. 362. (3) [1969] 2 S.C.R. IJ3.

SUPREME COURT REPORTS (198S} SUPPL. s.c.it.

5Copy pinpoint5. The additional financial burden which a revision of A the wage structure or dearness allowance would impose upon an employer, and his ability to bear such burden, are very material and relevant factors to be taken into account."

B We need not examine whether the dearness allowance formula as at present existing is valid according to the principles herein extracted because we are not devising a dearness formula for the workmen working in the industrial undertaking of the company at Kanpur for the first time. The demand is for upward revision of the dearness allowance formula and its linkage. c The terms of reference extracted hereinbefore unmistakably show that the workmen sought upward revision of the variable dearness allowance by linking it to the consumer price index number for industrial workers at Kanpur computed by Labour Bureau, D Simla. If the demand is to be granted, the Tribunal was requested to specify the rate and other details. Interpreting this refernece the Tribunal observed that the new dearness allowance formula which was in vogue at the time of the reference as being related to all- India average consumer price index number for industrial wo.rkers in accordance with the settlement with the Shramik Sangh which settlement was found to be collusive by this Court yet the Tribunal mus! proceed on the basis that dearness allowance was being paid to the workmen at Kanpur as per the settlement and that cannot be wished away. This approach overlooks a vital fact that the intro- duction of the new formula under a collusive settlement led to the demand for revision. The Tribunal rejected .the submission that it must examine and devise a new formula in relation to the Bengal Chamber of Commerce Index Scheme which was in vogue before the formula as per the collusive settlement was introduced. If the settlement between the company which is found to be collusive by this Court is to be the starting point of revision of the dearness allowance formula as has been done by the Tribunal, the conclusion is inescapable that the Tribunal started from a wrong premise and landed itself into an utterly unsustainable conclusion. This is the second apparent error in the face of the record which would impoll us to interfere. Mere so because the genesis of the demand for a H revision of the dearness allowance was the collusive settlement. The Tribunal committed a grave error in accepting the settlement as the starting point of the revision.

WORKMEN v. INDIAN OXYGEN (Desai, J.) 123

The demand of the Karamchari Union was that the Tribunal should first take into account, relevant to a certain date, the all· A India consumer price index number for Kanpur centre (1960=100) and then the index figure should be multiplied by the conversion factor of 4. 83 and then dearness allowance should be linked to the figure so worked out. The Tribunal rejected this demand on the ground that in the statement of claim, the Karamchari Union B demanded payment of dearness allowance according to Simla Index Number for Kanpur. The Tribunal took note of the fact of the linking factor but observed that as the same has been discontinued by the Labour Commissioner, U.P., the demand has been essentially for dearness allowance according to the Simla Index for Kanpur. This reasoning manifests an error in approaching, appreciating and evaluating the demand for revision of dearness allowance.

Before we examine the error, let it be made clear that where for a certain industrial centre, a dearness allowance formula is in vogue and it is linked to some cosumer price index number, whenever the base year for consumer price index number is changed, a fresh linkage requires a conversion ratio. In the absence of a conversion ratio, the whole scheme falls out of gear and becomes unworkable. To illustrate, in the textile industry, the consumer price index number was compiled on the basis of base year 1939=100. The year 1939 was chosen as the year in which the second world war engulfed the world which completely overhauled the consumer pattern and the prices of essential articles. Over years the price spiral relentlessly moved upward and that too so rapidly that in most of the industries where even though 100% neutralisation was not given by devising a dearness allowance yet the dearness allo· F wance for a given month was occasionally double or trible of the basis wage. This was unjust, unfair and from an economist's point of view, imprudent. Therefore, as pointed out earlier, a fresh survey was undertaken in 1958 with the base year 1960= 100. A fresh index was compiled and continues to be compiled with > 1960= 100 as base year. In fact, the 1960= 100 base year is being replaced. We will however, confine ourselves in this appeal to the base year of 1960= 100. Now if those industrial undertakings in which dearness allowance formula was linked to the bare year !939= 100 are to be delinked and relinked to the index number compiled on the base year 1960=100, before the fresh number is adopted, a linking or a conversion ratio between 1939-100 and 1960= 100 will have to be computed. Only then a fresh linkage

i24 SUPREME COURT REPORTS t19ss] SUPPL. s.c.R. can be devised. This very obvious fact has been wholly overlooked by the Tribunal when it merely awarded that the workmen of the company at Kanpur should be paid dearness allowance linked to the all-India consumer price index number (1960= 100) for Kanpur Centre compiled by Labour Bureau, Simla. This approach over- looks the linking factor. The rejection of the linking or conversion factor makes the scheme devised by the award unworkable, ineffe- ctive and in fact unjust. In this connection, we may refer to the Ahmedabad Mill Owner's Association case in which this Court after noting the fact that the base year having changed, pointed out that the question of linking factor loomed large and assumed importance. The court had before it the admitted position that there was only c one index existing in Ahmedabad which was based on the new series (1960=100) and the old series (1939=100) has rightly gone out of existence since it had beoome antiquated. Two alternatives were submitted to the court for its consideration. It was submitted that an entirely new scheme of basic wages based not on the pre-war level of 1939, but based on the cost of living of 1960 as the base year D be devised and then award dearness allowance in relation thereto. In the alternative, it was submitted that an arithmatical method of linking the old and the new series be devised. The Tribunal had accepted the conversion ratio at 3.17. This was attacked on diverse grounds. After examining the whole gamut of argnments, this E Court held that the linking factor of 3.17 was valid and correct

Approaching the matter from the same angle, and avoiding the arguments which have been rejected by this Court in the afore· mentioned judgment, we are of the opinion that the conversion ratio F of 4.83 is valid and correct and the Tribunal ought to have accepted the same.

It is usual in the matter of dearness allowance to examine the paying capacity of the employer. Rightly Mr. Pai did not at all contend that this employer can not bear the additional burden. We G therefore, need not stray into this aspect at all.

On behalf of the Karamchari Union, it was seriously contended that the award of the Industrial Tribunal at Delhi between this very H Company and its Workmen at Delhi be accepted. We need not examine the same as the comparison between Delhi and Kanpur is ill-conceived and untenable. Delhi is the capital of the sub-continent and it is fast growing. Kanpur is at best a district town though

WORKMEN v. INDIAN OXYGEN_{Desai, J.) 125

undoubtedly an important industrial centre in U .P. But the compa- rison wonld be invidious. A Accordingly, this appeal partly succeeds and is allowed. The award of the Industrial Tribunal that the workmen of the Kanpur unit of the Indian Oxygen Ltd. should be paid dearness allowance linked to all-India consumer price index (1960= 100) for Kanpur centre compiled by the Labour Bureau, Simla is modified to read B that 'the dearness allowance should be paid according to all-India consumer price index number for Kanpur (1960= 100) compiled by Labour Bureau, Simla after applying conversion factor also called linking factor of 4.83.' In all other respects i.e. the date of enforce- ability etc. the awrd remains unaltere.d except for the modification c herein granted. The appeal is allowed to this extent with costs quantified at Rs. 3,COO,

A.P.J . Appeal partly allowed.