PETITIONER:
MANAGEMENT OF lNDIAN OIL CORPORATION LTD.
Vs.
RESPONDENT:
ITS WORKMEN
DATE OF JUDGMENT24/07/1975
BENCH:
FAZALALI, SYED MURTAZA
BENCH:
FAZALALI, SYED MURTAZA
RAY, A.N. (CJ)
MATHEW, KUTTYIL KURIEN
KRISHNAIYER, V.R.
CITATION:
1975 AIR 1856 1976 SCR (1) 110
1976 SCC (1) 63
CITATOR INFO :
R 1980 SC2181 (38,41)
ACT:
Industrial Disputes Act, 1947 Section 9-A-Appellant
paying compensatory, allowance to workmen voluntarily but
withdrawing it later unilaterally without notice to workmen-
Appellant, if entitled to withdraw the concession.
HEADNOTE:
By virtue of a notification dated September 3, 1957,
the Central Government granted compensatory allowance
according to certain rates to all Central Government
employees posted throughout Assam. The appellant thought it
fit in the circumstances to grant compensatory allowance to
all its employees in September 1959. It was not made through
any standing order or circular. Thereafter there was another
notification by the Central Government dated December 8,
1960 by which it was provided that the employees in receipt
of the compensatory allowance would be given the option to
choose the house rent allowance or compensatory allowance
but will not be entitled lo draw both. this was to remain in
force for five years. In view, however, of the notification
dated December 8, 1960, the management thought that the
contents of the circular were binding on the company and
therefore they unilaterally. without giving any notice to
the workers, withdrew the concession of the compensatory
allowance which had been granted to the workers in September
1959. This concession was withdrawn with effect from July
1960. The workers moved the Government for making a
reference to the Tribunal because a dispute arose between
the parties regarding the competency of the appellant to
withdraw he concession granted by it unilaterally. The
Government made a reference to the Industrial Tribunal which
has held that there was a dispute between the parties and as
s.9A of the Industrial Disputes Act, 1947, has not been
complied with by the Company the management was not legally
entitled to with- draw the concession of the Assam
Compensatory Allowance granted to. the employees. This
appeal has been preferred by the management on the basis of
the specials leave granted by this Court.
It was contended for the appellant (i) that the
compensatory allowance was given purely on the basis of' the
Central Government circular dated September 3, 1957, on the
distinct understanding that it was a temporary measure which
could be withdrawn at the will of the employer and did not
amount to a condition of service at all; (ii) that even if
the provisions, of s.9A of the Act applied, since the
management had substituted the house rent allowance for
compensatory allowance the workers were not adversely
affected and, therefore, it was not necessary to give any
notice to them before withdrawing the concession of the,
compensatory allowance.
Rejecting the contentions and dismissing the appeal,
^
HELD: (i) 'There is no evidence to show that the
management before granting the concession of the
compensatory allowance had in any way indicated to the
workers that this was only a stop-gap arrangement which
could be withdrawn after the housing subsidy was granted.
Even before the unilateral withdrawal of the concession
granted by the appellant no notice was given to the workers
nor. were they taken into confidence, nor any attempt was
made to open a dialogue with them on this question. So far
as the compensatory allowance is concerned it was given in
order to enable the workers to meet the high cost of living
in a far-off and backward area like Assam. It had absolutely
no casual connection with the housing subsidy or house rent
allowance which was a different type of concession.
Furthermore, the grant of compensatory allowance by the
appellant was indeed a very charitable act which showed that
the employers were extremely sympathetic towards the need of
their
111
workers. In these circumstances, the conclusion is
irresistible that the grant of compensatory allowance was an
implied condition of service so as to attract the mandatory
provisions of s. 9A of the Act. Twenty-one days notice has
to be given to the workmen. This was not done in this case.
[113C-114B]
Workman of Hindustan Shipyard (Private) Ltd. v.
Industrial Tribunal Hyderabad and others, [1961] 2 L.L.J.
526, Bhiwani Textile Mills v. Their The Workman and others
[1969] 2 L.L.J. 739, Oil and Natural Gas Commission v. The
Workman [1973] 2 S.C.R. 482, Hindustan Lever Ltd. v. Ram
Mohan Ray and Other [1973] 4 S.C.C. 141, and M/s. Tata Iron
and Steel Co. Ltd. v. The Workman and others[1972] 2 S.C.C
383, referred to.
(ii) The compensatory allowance and housing subsidy are
two different and separate categories of the terms of
service conditions and they cannot be clubbed together, nor
can one be made dependent on the other. the object of these
two concessions is quite different and both of them serve
quite different purposes.
[118A-B] .
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 377 of
1970.
From the Award dated the 22nd October, 1969 of the
Industrial Tribunal, Gauhati in Reference No. 16 of ]965.
Anand Prakash and D. N. Mishra, for the appellant.
D.L. Sen Gupta and S. K. Nandy, for respondents.
The Judgment of the Court was delivered by
FAZAL AL1, J.-This is an appeal by special leave
against the award dated October 22, 1969 by Mr. R. Medhi,
Presiding officer, Industrial Tribunal. Gauhati on a
reference made to the Tribunal by the Government of Assam by
virtue of its notification No. FLR. 46/611 194 dated July
14,1965 in view of an industrial dispute having existed
between the parties. The appellant is the management of the
Indian oil Corporations Ltd. which has undertaken what is
known as the Assam oil Refineries situated at Gauhati. The
reference to the Tribunal was made by the Government in the
following circumstances:
By virtue of a notification dated September 3, 1957,
the Central Government granted compensatory allowance
according to certain rates to all Central Government
employees posted throughout Assam. The appellant set up the
refinery some time in the year 1959 and in view of the
circular of the Central Government referred to above the
management thought it fit in the circumstances to grant
compensatory allowance to all its employees some time in
September 1959. The grant of compensatory allowance was not
made through any standing order or circular but it is
alleged to have been given as an implied condition of
service. Thereafter there was another notification by the
Central Government dated December 8, 1 960 by which it was
provided that the employees in receipt of the compensatory
allowance would be given the option to choose the house rent
allowance or compensatory allowance but will not be entitled
to draw both. This order was to remain in force for five
years. By virtue of another notification dated August 9,
1965 the Central Government made it further clear that the
employees of the Central Government would have to draw
either compensatory allowance at the existing rates or the
house
112
rent allowance but not both. In view, however, of the
notification dated December 8, 1960, alluded to above, the
management thought that the contents of the circular were
binding on the Company and, therefore, they unilaterally,
without giving any notice to the workers, withdrew the
concession of the compensatory allowance which had been
granted to the workers in September 1959. This concession
was withdrawn with effect from July 1960. The workers moved
the Government for making a reference to the Tribunal
because a dispute arose between the parties regarding the
competency of the appellant to withdraw the concession
granted by it unilaterally. The Government made a reference
to the Industrial Tribunal which has held that there was a
dispute between the parties and as s. 9A of the Industrial
Disputes Act, 1947-hereinafter referred to as ‘the Act’-has
not been complied with by the Company the management was not
legally entitled to withdraw the concession of the Assam
Compensatory Allowance granted to the employees. The award
of the Industrial Tribunal was published by the Government
of Assam in the Gazette dated July 14, 1965.
Dr. Anand Prakash, counsel for the appellant, made the
following three contentions before us:
(1) that the compensatory allowance was given
purely on the basis of the Central Government
circular dated September 3, 1957, on the
distinct understanding that it was a
temporary measure which could be withdrawn at
the will of the employer and did not amount
to a condition of service at all;
(2) that even if the provisions of s. 9A of the
Act applied, since the management had
substituted the house rent allowance for
compensatory allowance the workers were not
adversely affected and therefore, it was not
necessary to give and notice to them before
withdrawing the concession of the
compensatory allowance: and
(3) that even if the provisions of s. 9A of the
Act were not complied with, the Tribunal
should have at least gone into the question
on merits instead of basing its award on the
question of applicability of s. 9A of the
Act.
Before, however, dealing with the contentions raised
before us, it may be necessary to mention a few admitted
facts. In the first place it 1 is the admitted case of the
parties that the circulars of the Central Government were
not binding” on the appellant Corporation, but the
Corporation chose to follow them in its own wisdom Secondly
it is also `’ ‘ admitted that at the time well the
concession of compensatory allowance was granted to the
employees of the Corporation. there was nothing to show that
it was given only by way of an interim measure which
113
could be withdrawn at the will of the employer. Thirdly it
is also not disputed that before withdrawing the concession
of compensatory allowance in August 1960 the appellant gave
no notice to the workers, not did it consult them in any way
before depriving them of the concession originally granted
by the employer. In fact the Tribunal has found very clearly
that the act of the Corporation in granting the Assam
Compensatory Allowance was an independent one and made out
of their own volition, though the circulars of the Central
Government may have been one of the factors that swayed the
decision of the management. It is against the background of
these admitted facts and circumstances that we have to
examine the contentions raised by counsel for the appeal in
this appeal.
As regards the first contention that the concession of
the compensatory allowance was granted to the workers by way
of a temporary 4 measure and would not amount to a condition
of service, we find absolutely no material on the record to
support the same. There is no evidence to show that the
management before granting the concession of the
compensatory allowance had in any way indicated to the
workers that this was only a stop-gap arrangement which
could be withdrawn after the housing subsidy was granted.
Even before the unilateral withdrawal of the concession
granted by the appellant no notice was given to the workers
nor were they taken into confidence, nor any attempt was
made to open a dialogue with them on this question. Indeed
if the circulars of the Central Government are admittedly
not binding on the Corporation, then we are unable to
appreciate the stand taken by the appellant that the
management unilaterally withdrew the concession merely
because of the Central Government circulars. So far as the
compensatory allowance is concerned it was given in order to
enable P the workers to meet the high cost of living in a
far-off and back ward area like Assam. It had absolutely no
causal connection with the housing subsidy or house rent
allowance which was a different type of concession.
Furthermore, the grant of compensatory allowance by the
appellant was indeed a very charitable act which showed that
the employers were extremely sympathetic towards the needs
of their r workers. In there circumstances we have no
hesitation in holding that the grant of compensatory
allowance was undoubtedly an implied condition of service so
as to attract the mandatory provisions of s.9A of the Act
which runs thus:
“No employer, who proposes to effect any change in
the conditions of service applicable to any workman in
respect of any matter specified in the Fourth Schedule,
shall effect such change,-
(a) without giving to the workmen likely to be
affected by such change a notice in the prescribed
manner of the nature of the change proposed to be
effected; or
(b) within twenty-one days of giving such notice:
Provided …………………… ”
An analysis of s. 9A of the Act clearly shows that this
provision comes into operation, the moment the employer
proposes to change any condi
114
tion of service applicable to any workman, and once this is
done twenty- one days notice has to be given to the
workmen. This admittedly was not done in this case. By
withdrawing the Assam Compensatory Allowance the employers
undoubtedly effected substantial change in the conditions of
service, because the workmen were deprived of the
compensatory allowance for all, time to come.
Dr. Anand Prakash however relied on a few decisions in
support of the fact that such a change in the conditions of
service does not amount to any change as contemplated by s.
9A of the Act. Reliance was placed on a decision of the
Andhra Pradesh High Court in Workmen of Hindustan Shipyard
(Private) Ltd. v. Industrial Tribunal, Hyderabad and
others(J). In our opinion the facts of that case are clearly
distinguishable from the facts in the present case. In that
case a concession was granted to the employees to attend the
office half an hour late due to war time emergency, but this
concession was conditional on the reservation of the right
to change the office hours and it was open to the employer
to take a different decision. Secondly the working hours
being fixed at 6 1/2 hours were below the maximum prescribed
by the Factories Act which were 8 hours and, therefore,
there t was no adverse change in the conditions of service.
Finally in this case there was a clear finding given by the
learned Judge that the concession would not amount to a
condition of service. In this connection,: Jaganmohan Reddy,
J., observed as follows:
“In this case as it cannot be said that the
concession which they were enjoying in the winter month
was a privilege to which they were entitled before the
Act came into force in February 1948. I have already
stated that the concession was subject to the condition
of its withdrawal unilaterally and cannot, therefore,
be said to have conferred any right on the employees to
enjoy it as such.
…….. further that s. 9A came into play only
when the conditions of service were altered, but the
workmen having agreed to the reservation of the
employer lo alter it, they have made the right to alter
it also a condition of service and therefore the action
in accordance with the said right can give no cause
for complaint.”
In the instant case we have already held that the grant of
compensatory allowance cannot be construed to be merely an
interim measure. hut having regard to the circumstances in
which this concession was given will amount to an implied
condition of service.
Reliance was also placed on a decision by this Court in
Bhiwani Textile Mills v. Their Workmen and others(2), where
this Court observed as follows:
“Sri G. B. Pai, on behalf of the mills, and Sri M.
S. K. Sastri and Y. Kumar for the two unions
representing the workmen, stated before us that the
parties are agreed that this
115
direction given in the award may be deleted as no party
objects to its deletion. Consequently, we need not go
into the question whether the tribunal was in law
competent to make such a direction in the award or not
In view of this agreement between the parties, the
only question that remains for decision by us is
whether the tribunal was right in directing that
workmen, who do duty on any Sunday, will be entitled to
an extra payment of 20 per cent of their consolidated
wages for that Sunday.”
A perusal of the observations made by this Court would
clearly show that the case before this Court proceeded on
the basis of a consent order as agreed to by counsel for the
parties. Secondly the question for decision was whether the
workmen were entitled to additional payment for working on
Sundays even if they were given another off day as a
substitute for Sunday. The Court pointed out that this could
not be treated as a condition of service because all that
the workman were entitled to was that they should take at
least one day off in a week and this facility was not
disturbed but instead of giving Sunday off they were given
some other day as weekly off. In these circumstances this
case also does not assist the appellant.
Dr. Anand Prakash also cited a decision in oil &
Natural was Commission v. The Workmen(1). In this case also
there was a finding of fact by this Court that there was
nothing to show that 6 1/2 hours per day was a condition of
service. In this connection, the Court observed as follows:
“In our opinion, on the facts and circumstances of this
it can not be said that 6 1/2 working hours a day was a
term of service, for the simple reason that it was only
during a period of the first six months, when the
factory was being constructed . at the site of the
workshop that, due to shortage of accommodation, the
administrative office was, as an interim arrangement,
temporarily located in tents at a place about 2 k.m.
away, that the state in this office was not required to
work for more than 62- hours per day. There is no
evidence that 6 1/2 hours per day was a condition of
service; neither is there any such term of service in
their letters of appointment, nor is such a term of
service otherwise discernible from other material on
the record.”
In view of our finding, however, that the grant of the Assam
Compensatory Allowance was undoubtedly a condition of
service this case has absolutely no application.
Reliance was placed on a decision of this Court in
Hindustan Lever Ltd. v. Ram Mohan Ray and others(2) for the
proposition that withdrawal of the concession of the
compensatory allowance did not adversely affect the service
conditions of the workmen. In this case this Court observed
as follows:
116
“As regards item 11 it was urged that as one
department out of three has been abolished, this item
applies. Though to bring the matter under this item the
workmen are not required to show that there is increase
in the work-load, it must be remembered that the 4th
Schedule relates to conditions of service for change of
which notice is to be given and section 9-A requires
the employer to give notice under that section to the
workmen likely to be affected by such change. The word
affected’ in the circumstances could only refer to the
workers being adversely affected and unless it could be
shown that the abolition of one department has
adversely affected the workers It cannot be brought
under item 11. The same consideration applies to the
question of change in usage under item 8.”
It is true that this Court held on the facts of that case
that the Company had abolished one department, but as the
work-load was not increased the workers were not adversely
affected and the abolition of one department could not be
brought under item 11. The contingency contemplated in the
aforesaid case, however, cannot be equated with the present
case by virtue of the unilateral deprivation of the
compensatory allowance which was received by the employees
by the withdrawal of which they were undoubtedly prejudiced.
It cannot be contended that the sudden withdrawal of a
substantial concession in the conditions of service would
not materially or adversely affect the workmen. We are,
therefore, of opinion that the aforesaid case also does not
support the contention of the learned counsel for the
appellant.
On the other hand Mr. Sen Gupta appearing for the
respondents drew our attention to the decision of this Court
in M/s. Tata Iron and Steel Co. Ltd. v. The Workmen and
others(1) where this Court, while pointing out the object of
s. 9A, observed as follows: –
“The real object and purpose of enacting Section 9-A
seems to be to afford an opportunity to the workmen to
consider the effect of the proposed change and, if
necessary, to represent their point of view on the
proposal. Such consultation further serves to stimulate
a feeling of common joint interest of the management
and workmen in the industrial progress and increased
productivity. This approach on the part of the
industrial employer would reflect his harmonious and
sympathetic co-operation in improving the status and
dignity of the industrial employee in accordance with
the egalitarian and progressive trend of our industrial
jurisprudence, which strives to treat the capital and
labour as co-sharers and to break away from the
tradition of labour’s subservience to capital.”
The observations made by this Court lay down the real test
as to the circumstances in which s. 9A would apply. In the
instant case, however, we are satisfied-(1) that the grant
of the compensatory allow-
117
ance was an implied condition of service; and (2) that by
withdrawing this allowance the employer sought to effect a
change which adversely and materially affected the service
conditions of the workmen. In these circumstances,
therefore, s. 9A of the Act was clearly applicable and the
non-compliance with the provisions of this section would
undoubtedly raise a serious dispute between the parties so
as to give jurisdiction to the Tribunal to give the award.
If the appellant wanted to withdraw the Assam Compensatory
Allowance it should have given notice to the workmen,
negotiated the matter with them and arrived at some
settlement instead of withdrawing the compensatory allowance
overnight.
It was also contended that the compensatory allowance
was only an allowance given in substitution for housing
subsidy. We are, however, unable to agree with this
contention. Mr. Sen Gupta appearing for the respondents
rightly pointed out that there is a well-knit and a clear
distinction between the compensatory allowance and a housing
subsidy or house-rent allowance. This distinction is clearly
brought out by the Second Pay Commission’s Report (1957-59)
in which the Commission observed as follows:
“The compensatory allowances considered here fall
into there broad groups: (i) allowances to meet the
high cost of living in certain specially costly cities
and other local areas, including hill stations where
special requirements such as additional warm clothing
and fuel etc., add to the cost of living; (ii) those to
compensate for the hardship of service in certain
areas, e.g. areas which have a bad climate, or are
remote and difficult of access; and (iii) allowances
granted in areas, e.g. field service areas, where
because of special conditions of living or service, an
employee cannot, besides other disadvantages, have his
family with him. There are cases in which more than one
of these conditions for grant of a compensatory
allowance are fulfilled.”
The Second Pay Commission also observed:
“The rent concessions dealt with here are of two
kinds: (i) provision of rent free quarters, or grant of
a house rent allowance in lieu thereof; and (ii) grant
of a house rent allow ance in certain classes of cities
to compensate the employees concerned for the specially
high rents that have to be paid in those cities. The
former is allowed only to such staff as are required to
reside on the premises where they have to work. and is
thus intended to be a facility necessary to enable an
employee to discharge his duties. In some cases, it is
a supplement to pay or substitute for special pay etc.,
which would have been granted but for the existing of
that concession. In either case, it is not related to
the expensiveness of a locality. The latter, on the
other hand, is a compensatory or a sort of a dearness
allowance, intended to cover not the high cost of
living as a whole but the prevailing high cost of
residential accommodation; and it has no relationship
to the nature of an employee’s duties.”
118
The observations made by the Second Pay Commission throw
light on this question. In fact the compensatory allowance
and housing subsidy are two different and separate
categories of the terms of service conditions and they
cannot be clubbed together, nor can the one be made
dependent on the other. The object of these two concessions
is quite different and both of them serve quite different
purposes.
It was next contended that even if s. 9A of the Act
applied, the Tribunal should have gone into the question on
merits instead of giving the award on the basis of non-
compliance with the provisions of s. 9A. This argument also
appears to us to be equally untenable. On the facts and
circumstances of the present case the only point that fell
for determination was whether there was any change in the
conditions of service of the workmen and, if so, whether the
provisions of s. 9A of the Act were duly complied with. We
cannot conceive of any other point that could have fallen
for determination on merits, after the Tribunal held that s.
9A of the Act applied and had not been complied with by the
appellant.
It was also faintly suggested that there was no
question of a customary claim or usage because the period
during which the compensatory allowance was granted and
withdrawn was too short. It is, how- ever, not necessary to
take any notice of this argument, because counsel for the
respondents Mr. Sen Gupta fairly conceded that he had not-
based his claim on any customary claim at all. It was argued
by Mr. Sen Gupta that after the Central Government
notification of September 3, 1957, the appellant took an
independent and voluntary decision on their own to give the
facility of the Assam Compensatory Allowance as an implied
term of the contract and having done so they could not
wriggle out from the provisions of s. 9A of the Act.
Thus all the contentions raised by the appellant fail
and the appeal is dismissed, but in the circumstances of
this case we leave the parties to bear their own costs.
V.M.K. Appeal dismissed.
119