HYDRO (ENGINEERS) PVT. LTD. 'V. TIIE WORKMEN April 30, 1968 (S. M. SIKRI, J. M. SHELAT AND V. BHARGAYA, JJ.J l.ndustrial Dispute-Minimum Wag<-J'rinciple for fixaJwn of- Revuwn of scale of wages fixed by rhe previous award by linking up with cost of living index-I/ double advantage to
workmen-Retrospective operu11011 of award-Whether valid-What is '-'asonab/e qualifying period for gratuity. There were industrial disputes between the appellant and its workmen, the respaadcnts, which were the subject-matter of awards.
The last of such awards fixed revised wage scales taking into consideration the cost of li\iog index then prevailing. It also provided for annual increments but rejected the workmen's demand to link up the wage scales with the index of cost of living.
After the respondents had received two annual increments un.dcr that award. they served a notice on the appellant calling for revision of the scale of \\·ages and of the gratuity scheme. The dis.
·pule was referred to the Industrial Tribunal and the Tribunal passed an .award. The award retained the scales fixed in the previous award and treating them as based on the cost of living index prevailing on the date .of that award. directed that the waRes should be linked up with the cost of living index. The award also directed that effect should be given to it retrospectively from approximately the date of demand hy .the respondents. As regards gratuity, the Tribunal reduced the existing qualifying period .of 10 years 😮 8 years in cases where a workman died, resigned or retired; .and deleted completely the ex.isting qualifying period of 4 years in case ·where the services of the workman were terminated by the appellant. c
Jn appeal to this Court, it was contended that : (I) The award as regards wages should be <ct aside, because, (a) the Tribunal took a wrong view as to what \\'ould const~:ute minimum wages, (b) it ignored the financial capacity of the appellant. (c) the linking up of the waRe scales with the eost of living index was wrong, (d) the Tribunal failed to take into consideradon the principle of region-cum-industry. ( e) the respondents would get double advantage during the same period, namely, increments and a raise in the wage scales, and (f) retrospective operation. should not have been given to the award; and (2) 1bc changes made in Ule gratuity scheme were illegal.
HELD : (I) There was no reason to interfere with the minimum wage rate fixed by the Tribunal. (163 A-Bl (a) The policy of the Minimum Wages Act, 1948. was to prevent employment of sweated labour in the general interesl and so the minimum wa~ must ensure not merely the physical needs o.f the ~orker but must ensure in addition to his sustenance and that of his family, the preserva- tion of his efficiency as a workman by providing for some measure of education medical requirement~ and amenities.
In the present cac;e, (i) the Trib~nal retained the scale.~ fixed by the previous award and only provided for automatic rise or fall therein with the correspondin.(!: chan~ in the index of cost of Iivin~ and (ii) the Tribunal observed that the
appellant had to pay the minimum wages irrespective of its ability to HYDRO (ENGINEERS) V. WORKMEN (She/at, !.) bear the add;tional burden. Therefore, what the Tribunal fixed was con-
solidated minimum wages and not fair wages. [161 G-H; 162 B-FJ c .G (b) In prescribing such a minimum wage rate the capacity of the employer need not be considered as the State assumes that every employer must pay the minimum wages before he employs labour. [162 D-E] Bijay Cotton Mills Ltd. v. State of Ajmer.
752, Express Newspapers (Pvt.) Ltd. v. Union of llldia [1959] S.C.R. 12 and Unichovi v. State of Kera/a, [1962] 1 S.C.R. 946, followed. ( c) The idea of fixing minimum wages in the light of the cost of !iv' ing: at a particular juncture of time and of neutralising the prevailing-high prices of essential commodities by linking up scales of minimum wages with the cost of living index is not alien to the. concept of minimum wages. · It oould not be contended that the Tribunal erred in linking up the wage scales with ithe living cost, because, had it not been done, the Wage scales would have become unrealistic, as the cost of living index had gone very much higher up since the Tribunal give its last award and was threatening to go up further. [161 D-F; 162 H; 163 A-BJ (d) The capacity of the employer ·and the wage scales prevailing in comparable industries in the region, are relevant factors while fixing fair wages, but not when fixing minimum wages. [162 F-H]
Novex Dry Cleaners v. Workm•n, [1962] 1 L.L.J. 271 and Airline• Hotel v. Workmen, [1964] 1 L.L.J. 415, explained. (e) What the present award directs is to pay the workmen, from approximately the date of demand, the wage scales calculated in accor• dance with the rise in the in.dex of Jiving cost which had taken place since the last award. The increments earned were on the footing of the index figure taken into consideration while passing the previous award_ There· fore, there is no question of the workmen getting any double advanta~e. 1163 C-DJ
(f) It was within the Tribunal's discretion to decide, from which date its award should come into operation. Therefore, when no ground Was made out to show that the discretion was unreasonably exercised. the
mere fact that it has retrospectively enforced its award from about the date of demand by the workmen, is not a ground for interference with tlie award. [163 E-F, HJ Hindustan Times v. Their Workmen, [1964] 1 S.C.R. 234, Jlzagrckhand Co//ierie. (Pvt) Ltd. v. C.G.l.T. Dhanbad, [1960]
2 L.LJ. and United Collieries v. Workmen, [1961] 2 L.L.J. 75 referred to. ( 2) (a) Since the justificati0n fdr gratuity is a long and meritoriou• •i service, schemes of gratuity framed by the Tribunal and approved by thi• Court have always provided some qualifying period.
Though there is no hard and fast rule, the general trend as seen from a long series of decisions is in favour of 10 years of qualifying service. The Trihunal was therefore, not right in reducing the period from 10 years to 8 years without and substantial reason. [164 C-D, F–G]
Jndlan Oxygen and· Acetv/ene Co. Ltd, Employees Union v. Indian Oxygen and Acety/.ene Co, [1956] 1 L.L.J. 435, Exvress Newsvavers (P) Ltd. v. Union of India, [1959) S.C.R. 12. Garment Cleaning Work.< v. Its Workmen, [1961] 1 L.L.J. 513, British Paints \".
Workmen, [1966] 2 S.C.R. 523 and Calcutta Insurance Co. v. Their Workmen, [1967] 2 L.LJ, 1, referred to. (1969) J S.C.R .<h) Also. as regards the deletion of the 4 years minimum qualifying period
\Vht.:1~ .the appellant tcrm1natc5 a \vorkman's service, the 1·ribunal had no leg1t1matc grounds for making the alteration in the existing scheme. [164 HJ CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1934 of
1967. Appeal by special leave from the Award dated September 15, 1967 of the Industrial Tribunal, Maharashtra, Bombay in refe- rence (IT) No. 54 of 1967. I. N. Shroff, for the appellant.
Narayan B. Shetya and K. Rajendra Chaudhury, for Ih.e res· pondents. c The Judgment of the Court was delivered by Shelat, J.-111e appellarll company is a private limited com- pany of which the authorised capital is Rs. 1 lac and the subs- cribed capital Rs. 50,000.
Its business is to manufaciure milk cans. According to the Company, it has not been able to main- tain, much less, increase, its production owing to the control orders restricting the import of raw materials required for its
manufacturing process. The Company was started in 1942 but except for a fow years when it made some profits, it has had to suffer losses during the rest of the years, the total loss suffered up to
1964-65 hein~ Rs. l ,66,912. The Company is a small unit having on its roll 53 workmen. In 1958, a reference was made under s. lO(l)(d) of thi: Industrial Disputes Act, 1947 in respect of the demands made by its employees for increase in the wage scales. The reference ended in a se:tlement dated May 27, 1959 whcreunder a slight increase in the wage scales was made.
It also provided for an ad hoc increase in the wages of those getting Rs. 2.44 or more per day. The revised wages were to come into force retrospec· lively from October 1, 1958. In 1961, another reference was
made which also resulted in a settlement da!ed September 11, 1961. Under that settlement, the workmen were classified into four categories and consolidated wage scales for each. of the cate- gories with a provision for increments were agreed upon. Since these were consolidated wage scale.s, the demand for
dearness allowance was not pressed. ·An award was made in tern1s of the said settlement with retrospective effect from April 1. 1961. In t 964, the Union once again demanded revision of wa~e scales. The dispute was referred to the Industrial Tribunal which made what has been referred to as the Bilgrami award. The Tribunal retained the same categories and the only modification it made was to increase the wage scales previously fixed, taking into con- sideration the rise in the index of cost of living in the meantime HYDRO (ENGINEERS) v. WORKMEN (Shela!, J.)
1,59 from 450 to 538. The said award fixed the wage scales as follows : c Unskilled Semi Skilled Skilled Il Skilled I -Rs. 4·15-0.10-Rs. 5.15. -·Rs. 4.75-0,15-Rs. 6.25. –Rs. 5.50-0.25-Rs. 8.00.
-Rs. 6.50-0.30-Rs. 9.50. Apprentices -Rs. 3.25-3.75-Rs. 4.25. The award provided that the increments in the revised scales were ·to be annual and were to start from April 1, 1965. The award was made effective from November 9, 1964 which was the date of the reference.
It, however, rejected the Union's demand to link up the wage scales with the index of cost of, living. By April 1, 1967, therefore, the workmen had received two annual increments and consequently the wages paid to the first four categories were Rs. 4.35, 5.05, 6.00 and 7.10 per day respec- tively.
It is thus clear that the Bilgrami award took the scales previously fixed as its basis when the cost of living index stood at 450 and increased them taking into consideration the fact that the said figure had gone up by about 94, that is, by raising it by 1 n.p. for every point.
On June 17, 1967, the Union served a notice of demand which called for (a) revised scale of wages with effect from July 1, 1966; (b) for certain adjustments; (c) for linking up the scales with the cost of living index; ( d) revision in the existing gratuity scheme; and (e) for bonus for the year 1964-65. We are not concerned in this appeal with the last demand as the im- pugned award does not deal with that demand. The demand for revision of wage scales was based on the fact that the Bilgrami award had fixed the wage scales on the footing of the cost of living index being then 538 while that figure had shot up since then to 675 and that if the rise were to be neutralised as it was done by the Bilgrami award, the scale of unskilled workmen would come to Rs. 5.30 per day.
So far as the gratuity scheme was concerned, the demand required that the qualifying period for the retrial gratuity should be reduced from ten to eight years and the qualifying period in case of termination of service by the employer· should be done away with. The Company resisted the demand and the conciliation proceeding having failed, the State Government referred the dispute to the Tribunal.
The Tribunal took note while considering the demand for revision of scales and their linking up with the index of cost of living of the fact (a) that the Bilgrami award itself had sought to neutralise the rise in the living cost by raising the scales in proportion to the rise in the cost of living by then; and (b) that though that award was made in 1964, the wage scales thereunder (1969] I S.C.R.
fixed had already become unreal in the sense that the index had gone up to 675 by the time the Union filed its statement of claim, that is, March 25, 1967 and had reached the figure of 7 JO in July 1967 when the award was made. In these circumstances, the Tribunal thought that the Union had made out a case for revision, that it was necessary to make the wage scales realistic and therefore to link them up with cost of living index though the Bilgrami award had declined to do so.
What the Tribunal did, therefore, was to retain the scales fixed by Mr. Bilgrami and treating them on the basis of 538 index of Jiving cost, directed that they should be linked up with the index so that the scala; would automatically go up as the index rose or fell.
The award also directed that effect should be given to it as from July I, 1966, the notice of demand having been served on June 17, 1966. The gratuity scheme framed in 1961 prov'ded that ten
days' wages for every year of service should be paid as gratuity in case of death, retirement or resignation, provided the work- men had put in the minimum period of ten years of service. For the workmen whose services would be terminated by the em-
ployer, the qualifying period was four years of service. The Tri- bunal revised the scheme in two particulars; (a) it reduced the period from ten to eight years in case where the workmen has died or resigned or retired; and (b) it deleted the qualifying period of four years altogether where his service has been terminated by the employer. The Tribunal considered the financial position of the Company and came to the conclusion that though it
had been making losses, it was of a fairly long standing, that the losses incurred in the past years were a temporary phase, that the Conr pany's future was not bleak and, though no• prosperous, it was in a satisfactory financial position.
This appeal by snccial leave disputes the correctness of the award made by the Tribunal. Counsel for the Company objected to the aforesaid observa- tion regarding the Company's financial position and pointed out that its position cannot at all be said to be satisfactory in view of the fact that, barring onlv a few years, it had made substan'ial losses all throughout. Taking a cue from this fact, he contended that (I) the reason which imnelled the Bilgrami Tribunal to refuse to link up the wage scales with the cost of living index still held good; (2) the Tribunal took a wrong view as to what wof.!ld constitute a minimum wage: (3) it ignored the financial capacity of the Company; ( 4) it failed to take into considcrati.on, the principle of region-cum-industry: and (5) there w~s no 1ushfica- tion in reducing the qualifying period for the. retiral benc~t. of gratuitv from ten to eil!ht vears and for deletmg the quahfymg period in the case of termination of service bv the empl~yer. We propose to deal with contentions I to 4 first and consider se~a rately the changes made by the Tribunal in the existing gratuity scheme.
c c HYDRO (ENGINEERS) V. WORKMEN (She/at, 1.) The Minimum Wages Act, XI of 1948 does not define 'mini· mum wage's' presumably because it would not be possible to lay down a unifo1m minimum wage for all industries throughout the country on account of different and varying conditions prevailing from industry to industry and from one part of the country to another. The legislature also throught it inexpedient to apply the Act to all industries at a time and, therefore, it applied the Act to certain employments only specified in the Schedule thereto leaving it to the appropriate government to add by notification to that effect industries in the said Schedule at suitable times and in appropriate conditions. But s. 4 of the Act provides that the minimum rates of wages may consist of a basic rate of wages and a special allowance at a rate to be adjusted or a basic rate of wages with or without the cost of living allowance and cash value of concessions in respect of supplies of essential commodities at concession rates where so authorised or an all inclusive rate allowing for the basic rate, the cost of Jiving allowance and the cash value of the concessions if any.
Sub-section (2) of s. 4 provides that the cost of living allowance and the value of the concessions in respect of supplies of essential commodities at concession rates shall be computed by the competent authority at such intervals and in accordance with such directions as may be specified or given by the appropriate government. It is thus clear that the concept of minimum wage does take in the factor of the prevailing cost of essential commodities whenever such minimum wage is to be fixed.
The idea of fixing such wage in the light of cost of Jiving at a particular juncture of time and of neutralising the rising prices of essential commodities by linking up ~cales of minimum wages with the cost of living index cannot, therefore, be said to be alien to the concept of a minimum wage. Further- more, in the light of spiraUing of prices in recent years, if the wage scales are to be realistic, it may become necessary to fix them so as to neutralise at least partly the price rise in essential commodities. Indeed, when the Bilgrami award revised the wage scales, it took, as aforesaid, into account the rise in the cost of living index and neutralised that rise by approximately raising them by 1 n.p. for every point in the rise though it declined to join up the scales with the index of cost of living.
What the present award does is to fix the minimum wage scales and not to fix fair wages. That is clear from the fact that it retains the scales fixed by the earlier award and taking them on the basis of the index figure at 538 it provides for automatic rise or fall therein with the corresp0nding change in the index of Jiving cost.
Presumably the Tribunal thought it necessary to do so because by the time it came to mal):e the award th.e index figure had already gone up to 710. If the Tribunal' were to reftise !o !_ink • up the scales with the in~ex of cost of living. the neutral1satton 1t sought to do would agam go out of gear makin~ St:PREME COt:RT REPORTS
[l 969 J l S.C.R• once again the scales unreal and reduce them even below the floor-level. That the Tribunal fixed the consolidated minimum wages and not fair wages is clear from the facts ( 1) that it retain- ed the scales lixed by the previous award which had increased them from Rs 3.20 per day .for an unskilled workman to Rs. 4.15 per day as by that time the index had gone up from 450 to 538; and ( 2) by its observation that the Company has to pay the mini- mum wages irrespective of il> ability to bear the additional burden. The fact that an employer might find it difficult to carry on his business on the basis of minimum wages is an irrelevant con· sideration is now a well-settled principle :
(cf. Bi jay Collon Mills Ltd. v. State of Ajmer('), Unichovi v. State of Kera/a(°) and Express Newspapers (Pvt.) Ltd. v. Union of India("). While considering the distinction between minimum and fair wages this Court in the case of Uniclwvi v. State of Kera/a(') observed at p. 967 that the policy of the Minimum Wages Act, 1948 was to prevent employment of sweated labour in the general interest and so in prescribing the minimum wage rates, the capacity the em- ployer need not be considered as the State assumes
that every employer must pay the minimum wage before he employs labour. It also observed that the Act contemplates that minimum wage rates must ensure not merely the mere physical need of the worker which would keep him just above starvation but
must ensure for him not only his subsistence and that of his family but also preserve his cfliciency as a workman. It should. therefore, provide as the Fair Wages Committee appointed by the Govern- ment recommended, not merely for the bare subsistence of his life but for the preservation of the worker and so must provide for some measure of education, medical requirements and ameni'.ies. This concept of the Committee has been accepted by industrial adjudi- cation in the country and was expressly approved of in
Expreu Newspaper (Pvt.) Limited('). Counsel for the Company how- ever, cited before us the decisions in Airlines Hotel v. Work- men(') and Novex Dry Cleaners v. Workmen(") where the ques- tion of capacity and the wage scales prevailing in comparable in- ·dustries in the region were considered relevant factors.
But those were not cases where minimum wage rates were fixed but were ·cases of fair wages where those two factors had to be taken into account. The Company's contention that the Tribunal failed to
take into consideration the financial capacity, the fact of the Com- pany having made losses during the pas! years, its difficultie~ in importing raw materials and had also failed to apply !~e rcg10n- c11m-industry principle and therefore the award was vitiated, has no merit.
We cannot also accept the contention that the Tribu- (t l [19551 I S.C.ll. 752. (2) J196l] I SCR. '!46. 0) [1959JS.C.R.12. f.I) [1%4JILLJ.415. f5) [1962) 1 L.L.J. 271. c p HYDRO (ENGINEERS) v. WORKMEN (Shelat, J.)
nal erred in linking up the wage scales with the living cost OO,- cause had it not been done, the wage scales would have again gone unreal once the index had gone up as it then threatened to do. We find, therefore, no reason to interfere with the minimum wage rates fixed by the Tribunal.
c A subsidiary contention ra.ised by the Company that by reason of the Bilgraini award having provided for incremental · scales, the workmen under the present award will get double ad- vantage, namely, increment and the raise in the wage scales dur- ing the same period, has also no substance. The incremental scale was fixed in that award on the basis of the index figure being 538.
Those scales have been retained. The two incre- ments that the workmen have earned in 1965 and 1966 were on the footing of those scales which, as aforesaid, were fixed on the basis of the index figure of 538. What the present award directs is to pay the workmen as from July 1, 1967 the wage scales cal- culated in accordance with the rise in the index of living cost which had taken place since the last award. The increments earned having been on the footing of the index figure of
538, there is no question of the workmen getting a double advantage. The next objection to the award was that the Tribunal erred in giving effect to the award retrospectively as from July 1, 196~, that is, approximately from the date of the demand and that if at all it wanted to give such retrospective effect, the utmost that it could do was to enforce it from the date of the reference. In
some cases retrospective effect, no doubt, has been ·given from the date of the reference. But it is a matter of discretion for the Tribunal to decide from the circumstances of each case from which date its award should come into operation.
No general rule can be laid down as to the date from which a Tribunal should bring its award in force : (see Hindusthan Times v. Their Work- men('). Presumably, the Tribunal gave effect to its award from July 1966 as by that time the cost of living index had already gone up considerably and not to have done so would have been to deprive the workmen of the minimum wages commensurate
with that rise. In lhagrakhand Collieries (Private) Ltd. v. C.G.l.T. Dhanbad(2 ) and United Collieries v. Workmen(') the awards were made operative from the respective dates of demands and this Couq did not interfere with those awards on the ground that there was thereby any breach of any recognised principle. If the Tribunal has exercised its discretion and no substantial ground is made out to show that it was unreasonably exercised, the mere fact that it was retrospectively enforced its award from the date of the demand is hardly a gronnd for interfer.ence with 1he award.
(1) [1964] 1 S.C.R. 234. (2) [196G] 2 L.L.l. 71. (3) [1961] 2 L.L.J. 75. [ 1969] I S.C.R. We now tum to the changes made by the Tribunal in the existing gratuity scheme framed by the Savarkar Tribunal.
In our view, there is force in the Company's contention that the changes, namely, reduction of the qualifying period from ten to eight years in the case of termination of service by death, retire- ment or resignation and deletion of the qualifying period of four years in the case of termination of service by the employer, were not justified.
The Tribunal in fact has not given any specific reason which necessitated the two changes. It is now wel! settled that gratuity is a reward for llood, effi- cient and faithful service rendered for a fairly substanual period and that it is not paid to the employee gratuitously or merely as a matter of boon but for long and meritorious service; (cf. Gar- ment Cleaning Works v. Its Workmen(') and
Express News- papers (Private) Limited. v. Union of India('). Since the justi- fication for gratuity is a long and meritorious service, schemes of gratuity framed by the tribunals and approved of by this Court have always provided some qualifying period. In Indian Oxygen and Acetylene Company Ltd. Employees Union v. Indian Ox}'f(en and Acetylene Company(') and Express Newspapers (Private)
Ltd. v. Union of India(') the qualifying period for gratuity on termination of service by resignation or retirement was fixed at 15 years. In Garment Cleaning Works v. Its Workmen('),
though the Company objected to the period of ten years and con- tended on the analogy of the aforesaid two decisions that it should be fi.ftcen years, this Court gave its approval to the period of ten years in case of retirement or resignation. On the other hand, in British Paints v. Workmen(') the period of five
years pro- vided by the award was changed into ten years on the ground that a fairly long minimum period for qualifying for gratuity in the case of resi1mation or retirement was necessary to prevent the workmen leaving one concern after another after putting in the short minimum service for qualifying for
gratuity. Similarly, modification from five to ten years was made in a recent decision of this Court in Calcutta Insurance Co. Ltd .. v. Their Work- men('). Though no hard and fast rule can be laid down and
each case must be decided on its own circumstances, the general trend as seen from a long series of decisions is in favour of ten years of qualifying service. The Tribunal in the absency of any sub~tantial reason, was, therefore, not
right in reducing the period from ten to eight years. As ·regards the deletion of four years minimum period in cas.es where the employer terminates the service also we do not find any legitimate ground for the alteration of the scheme. It was, however, said that if such a
period is provided for in a scheme, it was possible that an em- (i')[196i]!L.L.J. 5ll. – (2) (19591S.C.R.12. (1) (19561 J L.l.J. 435. (4) (196612 S.C.R. 523. (S) [! 967] 2 L. L.J. 1.
c c HYDRO (ENGINEERS) v. WORKMEN (She/at, /,) 111.oyer would terminate the services of a workmen even though the employee wants to render continuous service to enable him to earn the gratuity.
This does not appear to be a legitimate apprehension for unless the employer is in a position to establish misconduct justifying termination of service under a standing order, he cannot put an end to the service only to deprive the workman of gratuity. On the other hand, there is the danger that whereas in the case of retirement or resignation the workman would have to put in ten years of service, if no minimum period is provided for in the case of termination by the employer it would be possible for a workmen to commit some misconduct and earn gratuity within a shorter time than the one who after a long period of meritorious service retires or resigns. Since doing away with the qualifying period is likely to result in such an anomaly, it is necessary to have some qualifying minimum period. As the period of four years provided in the scheme is not under challenge before us, there is no reason to interfere with it. We, therefore, set aside the two changes made by the Tribunal in the gratuity scheme. The scheme for gratuity will, therefore remain the same as framed by the Savarkar award.
In the result, except for the aforesaid modifications in the award, we find no reason to interfere with the award. The appeal, except to the extent aforesaid, fails and is dismissed. There will be no order as to costs.
V.P.S. Appeal partly allowed.