{"id":261397,"date":"1971-09-17T00:00:00","date_gmt":"1971-09-16T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/indian-link-chain-manufactures-vs-their-workmen-on-17-september-1971"},"modified":"2015-09-07T14:14:49","modified_gmt":"2015-09-07T08:44:49","slug":"indian-link-chain-manufactures-vs-their-workmen-on-17-september-1971","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/indian-link-chain-manufactures-vs-their-workmen-on-17-september-1971","title":{"rendered":"Indian Link Chain Manufactures … vs Their Workmen on 17 September, 1971"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Indian Link Chain Manufactures … vs Their Workmen on 17 September, 1971<\/div>\n
Equivalent citations: 1972 AIR 343, 1972 SCR (1) 790<\/div>\n
Author: P J Reddy<\/div>\n
Bench: Reddy, P. Jaganmohan<\/div>\n
           PETITIONER:\nINDIAN LINK CHAIN MANUFACTURES LTD.\n\n\tVs.\n\nRESPONDENT:\nTHEIR WORKMEN\n\nDATE OF JUDGMENT17\/09\/1971\n\nBENCH:\nREDDY, P. JAGANMOHAN\nBENCH:\nREDDY, P. JAGANMOHAN\nVAIDYIALINGAM, C.A.\n\nCITATION:\n 1972 AIR  343\t\t  1972 SCR  (1) 790\n 1971 SCC  (2) 759\n CITATOR INFO :\n R\t    1972 SC2332\t (62,63)\n RF\t    1977 SC2246\t (16)\n R\t    1978 SC1113\t (24)\n E\t    1980 SC  31\t (13,19,25)\n RF\t    1980 SC2181\t (135)\n R\t    1990 SC2047\t (11)\n\n\nACT:\nPayment of Bonus Act<\/a>, 1965, ss. 2(p)<\/a> and 19(2)<\/a>--'Settlement'\nwhen terminated.\nIndustrial Dispute-Settlement when  terminated--Consolidated\nwages ,fixed by Tribunal without linking dearness  allowance\nwith living wage and without granting adjustments-Propriety-\nBonus-Figures of depreciation and development rebate whether\nto  be\ttaken from income-tax assessment  order\t or  balance\nsheet-For determining return on reserves figures of reserves\nat  beginning  of year\tshould\tbe  taken-Gratuity-Financial\ncapacity How to be calculated when wage consolidated without\nindicating  how much relates to\t dearness  allowance--Scheme\nwhether fair and reasonable.\n\n\n\nHEADNOTE:\nThe appellant was registered as a public limited company  in\nor about 1956 and commenced production in or about 1958.  It\nemployed  approximately 170 persons of whom 156\t were  daily\nrated  workers-the latter being respondents in\tthe  present\nappeal.\t In respect of certain demands raised by the workmen\nin 1962 there were conciliation proceedings in the course of\nwhich the parties arrived at an amicable settlement on April\n5,  1963.   Thereby  they settled inter alia  Demand  No.  1\nrelating  to  wage  scales  and Demand\tNo.  2\trelating  to\nDearness Allowance.  The parties also agreed to discuss, the\nexisting production bonus scheme and to finalise the same by\nthe  end of June 1963.\tThe settlement was signed on  behalf\nof  the\t parties and by the Conciliation  Officer.   However\nsubsequently  there were again disputes between the  workmen\nand  the  employers  and these were referred  by  the  State\nGovernment  to the Industrial Tribunal on December 27,\t1965\nunder  s.  10(A)(d)<\/a> of the Industrial  Disputes\t Act,  1947.\nBoth  the parties being dissatisfied with the Award  of\t the\nTribunal filed appeals by special leave in this Court.\t The\nquestions that fell for consideration were : (i) whether  in\nview   of  the\tabsence\t of  a\tnotice\tof  termination\t  as\ncontemplated  in  s. 19(2)<\/a> of the Act the  settlement  dated\nAugust 5, 1963 continued to subsist and consequently whether\nthe   reference\t  of  the  dispute  to\tthe   Tribunal\t was\nincompetent,  (ii) whether the tribunal was wrong in  fixing\nconsolidated  wages without linking dearness allowance\twith\ncost  of living or granting adjustments in the\twage  scale;\n(iii) whether in the matter of determining available surplus\nthe  Tribunal  was  justified  in  taking  the\tfigures\t  of\ndepreciation  allowance\t and  development  rebate  from\t the\nbalance sheet and not from the income-tax assessment  orders\nin  which  the\tfigures were higher; (iv)  whether  for\t the\npurpose of determining the return on reserves the figures it\nthe  end of the year or the beginning of the year had to  be\ntaken; (v) whether the Tribunal was right in its  conclusion\nthat  the  financial position of the company  justified\t the\nframing of a scheme of gratuity; (vi) whether in View of the\nfact  that the Tribunal had prescribed a  consolidated\twage\nwithout\t indicating what portion of the wage was  the  basic\nwage and what portion the dearness allowance, the payment of\ngratuity  based\t on  an average of the\tbasic  wages  of  an\nemployee  exclusive of dearness allowance was impossible  to\nimplement; (vii) whether the gratuity scheme was incongruous\nbecause\t those who retired were given larger  benefits\tthan\nthose who were retrenched.\n791\nHELD : (i) Reading s. 19<\/a> with the definition of 'settlement'\nin  s. 2(p)<\/a> of the Industrial Disputes Act it  would  appear\nthat a settlement will ensure for the duration of the period\nfor  which it has been agreed to between the parties and  if\nno  period is agreed upon, for a period of six\tmonths\tfrom\nthe date on which the memorandum of settlement of-dispute is\nsigned\tby  the parties and where it is put an end to  by  a\nnotice in writing it will continue to be operative until the\nexpiry\tof two months from the date of which the  notice  is\ngiven.\tIt would appear that even where an agreement is\t for\na  fixed period it will not continue to be binding  for\t the\nduration  of  the period of settlement but  thereafter\talso\nuntil it is terminated by a notice in writing and even\tthen\nit will continue for a period of two months from the date of\nsuch  notice.  While no doubt it is true that a notice\tmust\nbe   in\t writing,  such\t a  notice  can\t be  inferred\tfrom\ncorrespondence between the parties. [798 A-C]\nIn  the\t present case the management had in a  letter  dated\n20th March 1965 addressed to the Additional Commissioner  of\nLabour, Bombay, admitted that no settlement or award was  in\nexistence,  the\t reference, of the Industrial  Disputes\t was\nmade only after that.  It was not a satisfactory explanation\nof  that  categorical  statement that it was  made  under  a\nmistake.   The said letter must be deemed to be a notice  of\ntermination because it made a categorical statement that the\nsettlement had 'been terminated on 31-12-64.  The management\nwas  therefore estopped from now taking the stand  that\t the\nsettlement  was not put an end to or that the reference\t was\ninvalid. [800 G-801 E]\nCochin\tState Power, Light Corporation Ltd. v. Its  Workmen,\n[1964] 2 L.L.J. 100, Workmen of Western India Match Co. Ltd.\nv.  Western  India  Match  Co.\tLtd<\/a>.,  [1963]  2  S.C.R\t  27\nManagement  of\tBangalore Woollen, Cotton & Silk  Mills\t Co.\nLtd. v. Workmen & Anr<\/a>., [1968] 1 S.C.R. 581, applied.\nWorkmen\t of  Continental  Commercial Co. (P)  Ltd.  v.\tWest\nBengal & Ors<\/a>., [1962] 1 L.L.J. 85, disapproved.\n(ii)The\t Tribunal  considered the financial status  of\tthe\ncompany\t and the era of prosperous business which  it  could\nlook forward to, as well as the wage structure prevailing in\nthe  relevant units of the industry and other wages.   There\nwas  no justification for interfering with it on the  ground\nthat  it bad not fixed a separate dearness allowance  linked\nwith, increase or decrease in the cost of living index or to\nlink the consolidated wage itself with it. [803 H; 804 H]\nHindustan  Times  Ltd.\tNew Delhi v. Their  Workmen  &\tVice\nVersa,\t[1964]\t1 S.C.R. 234, French Motor  Car\t Co.  Ltd.v.\nWorkmen<\/a>,  [1963]  Supp. 2 S.C.R. 16 and\t Bengal\t Chemical  &\nPharmaceutical\tWorks Ltd. v, Its Workmen, [1969]  2  S.C.R.\n113, referred to.\nHowever this was a fit case in which wage adjustment  should\nhave  been made.  The Tribunal gave no reason for  rejecting\nthe  claim  altogether.\t Why some adjustment  was  not\tmade\ntaking into consideration the length of the service bad\t not\nbeen  stated.\tThere was no adjustment in  the\t first\twage\nstructure which was the subject of a settlement as such\t and\nit  would not be fair also not to fix the wages in the\twage\nscales which in fact were those fixed for the first time  by\nthe  award.  From an analysis of the various  categories  of\nworkers\t in each of the years it would appear that a  larger\nmajority  of them had been employed between the\t years\t1963\nand 1965.  If a direction was given that there should be one\nincrement  for\tevery completed 3 years up to  the  date  of\nreference namely 27-12-65, no\n792\ninjustice  would  occur,  nor will there be  strain  on\t the\nfinancial  resources  of the appellant which  it  could\t not\nbear. [Directions given. [805 B-E]\n(iii)A\t statement   as\t per   Income,-tax   Assessment\nstatement 'A' Ex.  C-5 was filedby the company on 2-9-66.\nSimilarly another statement of profit and lossaccount as\nper  annual account of the company-Statement 'B' Ex. C6\t was\nfiled on the same date.\t In the former statement C-5 accord-\ning  to\t item  2, depreciation\tallowed\t by  the  Income-tax\nOfficer\t for 1964 was shown as Rs. 1,81,054 while  according\nto  C-6\t depreciation was shown as  Rs.\t 80,190.   Similarly\ndevelopment  rebates under C-5 was shown as Rs. 5,822  while\nunder C-6 it was shown as Rs. 3,917.  There was no challenge\nto  these  figures as such, nor did the\t respondent  dispute\nthat  these amounts were not as per the\t assessment  orders.\nThe Tribunal had accepted statement C-6 but ignored C-5 even\nthough\tboth the statements were prepared by the company  in\nexactly\t the  same circumstances, one  from  the  assessment\norders\tand the other from the balance sheet.  There was  no\njustification for the rejection of the company's claim\tthat\ndepreciation  and  development\trebate' be  allowed  as\t per\nincome-tax assessment. [806 F-H]\n(iv)The claim of the Respondent for return on reserves also\nmust  be  allowed because under s. 6(d)<\/a> read with  item\t (1)\n(iii)  of the Third Schedule to; the Bonus Act<\/a> the  Tribunal\nought to have allowed 6% of the company's reserves shown  in\nits  balance-sheet as at the commencement of the  accounting\nyear including any profits carried forward from the previous\naccounting  year.   The Tribunal was wrong  in\ttaking\tinto\naccount\t the  figures  of  reserves as at  the\tend  of\t the\naccounting year. [807 B-C]\n(v)In\tdealing\t  with\tthe  financial\tcapacity   of\tan\nundertaking to bear the burden of a gratuity scheme it would\nnot  be\t appropriate  to  approach  the\t question  'from  an\ninvestors  point  of  view.   The  overall  picture  of\t the\nsoundness  of the undertaking and its future prospects\tmust\nbe taken into account. [812 D-E]\nIn  the present case the financial position of\tthe  company\nwas  such that the implementation of the scheme of  gratuity\nwas  not likely to place an undue or  unconscionable  burden\nupon the company. [812H]\n M\/s.\tBritish Paints (India) Ltd. v. its Workmen [1966]  2\nS.C.R.\t523, Management of Wengar & Co. v.  Workmen<\/a>,  [1963]\nSupp.  2  S.C.R. 962, Burlianpur Tapti Mills Ltd. v.  B.  T.\nMills\tMazdoor\t Sangh<\/a>,\t [1965]\t 1  L.L.J.  453,   Hindustan\nAntibiotics  Ltd.  v.  The Workmen<\/a>,  [1967]  1\tS.C.R.\t652,\nGramaphone Company Ltd. v. Its Workmen, [1964] 2 L.L.J.\t 131\nand  Bharatkhand  Textile Mfg, Co. Ltd.\t v.  Textile  Labour\nAssociation, Ahmedabad<\/a>, [1960] 3 S.C.R. 329, referred to.\n(vi)While  no doubt the general rule is that gratuity  must\nbe  related to the basic wage, in cases where the wages\t are\nnot very high and a consolidated wage has been fixed  taking\ninto account the dearness allowance, the scheme of  gratuity\nmay  be related to the consolidated wage, which will be\t the\nbasic  wage  in the subsequent years.  At  any\tfuture\tdate\nhaving\tregard to the price index, the claim of the  workmen\neither\tfor a rise in the wage based on the cost  of  living\nindex  or  the\tgrant  of  separate  dearness  allowance  to\nneutralise   that  rise\t is  bound  to\tbe  considered\t and\nadjudicated.  No difficulty in implementing the scheme could\ntherefore  arise because of the fact that the  Tribunal\t had\nprescribed  a  consolidated  wage  without  indicating\twhat\nposition  of that wage was the basic wage and what  position\nthe dearness allowance. [815 E-F; 8 1 3 H-814 A]\nManagement  Ghaziabad  Engineering  Co.\t (P)  Ltd.  v.\t Its\nWorkmen<\/a>,  [1970] 1 S.C.R. 622, Delhi Cloth &  General  Mills\nCo. Ltd. v. Workmen<\/a> &\n793\nOrs.  [1969] 2 S.C.R. 307, Remington Rand of India  Ltd.  v.\nThe Workmen<\/a>, [1968] 1 L.L.J. 542, referred to.\n(vii)The  criticism  that  the scheme  was  unfair  and\nincongruous  because  those  that retire  are  given  larger\nbenefits than those who are retrenched was unwarranted.\t The\ndifference  between  the  gratuity payable  to\tpersons\t who\nresign\tor retire voluntarily and those whose  services\t are\nterminated  is that the latter will receive in\taddition  to\nthe  gratuity  the retrenchment compensation  admissible  to\nthem under the Industrial Disputes Act<\/a>, while in the case of\nthe  former he will not be entitled to it.  The\t scheme\t was\nnot only reasonable but fair. [815 G-816 B]\n\n\n\nJUDGMENT:\n<\/pre>\n
CIVIL  APPELLATE JURISDICTION : Civil Appeals Nos.  204\t and
\n610 of 1967.\n<\/p>\n
Appeals by special leave from the Award dated September\t 30,
\n1966  of  the Industrial Tribunal,  Maharashtra,  Bombay  in
\nReference (IT) No. 468 of 1965.\n<\/p>\n
I.N. Shroff, for the appellant (in C.A. No. 203 of 1967) and
\nRespondent No. 1 (in C.A. No. 610 of 1967).\n<\/p>\n
Madan  G. Phadnis and Janardan Sharma, for  the\t respondents
\n(in  C.A. No. 204 of 1967) and the appellants (in  C.A.\t No.
\n610 of 1967).\n<\/p>\n
The Judgment of the Court was delivered by
\nP.Jaganmohan Reddy, J. The Government of Maharashtra  had
\nreferred  the dispute between the Appellant and its  Workmen
\nto the Industrial Tribunal under the Industrial Disputes Act<\/a>
\n1947  (hereinafter  called  ‘the Act’) in  respect  of\tWage
\nscales, dearness allowance, bonus, gratuity and\t permanency.
\nThe Award made by it is the subject matter of this appeal by
\nSpecial\t Leave (Civil Appeal No. 204 of 1967) in  which\t the
\ndispute\t relating to wage scales and dearness  allowance  is
\ncontended  only\t on the ground that there was  a  settlement
\nbetween\t the  workmen and the employers\t in  a\tconciliation
\nproceedings  and as that has not been terminated  by  either
\nparty the Govt. has no jurisdiction to refer the dispute  in
\nrelation  thereto  to  the Tribunal.  If this  plea  is\t not
\naccepted  the wage scales and dearness allowance as  awarded
\nby  the Tribunal is not challenged.  The claim for bonus  as
\nawarded\t is disputed as it often happens, on the manner\t and
\nmethod\tof  computation\t of  depreciation  and\t development
\nrebate.\t It is the case of the employers that it has not the
\nfinancial capacity to bear the burden of the gratuity scheme
\nframed\tby  the Tribunal for the workmen.  Apart  from\tthis
\ncertain\t incongruities\tin this scheme are  pointed  out  to
\nwhich we shall refer and deal with at the appropriate place.
\nThe fifth issue relating to permanency is not pressed.
\nThe workman have also filed an Appeal, (Civil Appeal No. 610
\nof 1967) against the Award in which the omission by the
\n794<\/span>
\nTribunal  to  grant  an\t adjustment in\tthe  wage  scale  by
\ndirecting  a  fitment of the wages of workmen  in  the\tsaid
\nscales\tin  accordance with the length of their\t service  is
\nassailed.  It is also pointed out that the Tribunal did\t not
\nlink  the dearness allowance granted by it with the cost  of
\nliving index and lastly the award did not compute the return
\non reserves in accordance with the schedule 3 of the Payment
\nof Bonus Act<\/a> (hereinafter called ‘the Bonus Act<\/a>).
\nA  few facts may now be stated for a better appreciation  of
\nthe matters in controversy.  The Appellant was registered as
\na Public Limited Company in or about 1956 and commenced pro-
\nduction in or about 1958.  It employs approximately 170 per-
\nsons of whom 155 are daily rated workers and it is the later
\ncategory  who are the Respondents in this case.\t In  October
\n’62  the General Secretary of the Mumbai Kamgar Union  which
\nrepresents   the  workers  of  the  Appellant\t(hereinafter
\nreferred  to as ‘the Union’) made certain demands  on  their
\nbehalf\trelating  inter-alia  to  wagescales  and   dearness
\nallowance.   These  disputes formed the\t subject  matter  of
\nconciliation proceedings in the course of which the  parties
\narrived\t at  an amicable settlement on 5th  April  ’63,\t the
\nrelevant  terms of which pertaining to. the wage  scale\t and
\ndearness allowance ire as under :\n<\/p>\n
Demand No.1-Wage scales:\n<\/p>\n
The  workers drawing at present upto Rs. 30.30 np.  per\t day
\nwill be given an ad-hoc increment of 60 np. with effect from
\n1-1-1.963  and another increment of 40 np. with effect\tfrom
\n1-1-1964.\n<\/p>\n
(b)Persons drawing more than Rs. 3.30 np. per day will\tbe
\ngiven an adhoc increment of 50 np. with effect from 1-1-1963
\nand anotherincrement  of  30 np. with effect  from  1-1-
\n1964.\n<\/p>\n
(c)The arrears of increment from 1-1-1963 till 31st March
\nwill be paid on or before 20th April, 1963.\n<\/p>\n
Demand\t  No. 2-Dearness allowance:\n<\/p>\n
As the wage, scale agreed to above are consolidated i.e. in-
\ncluding allowance, the Union has withdrawn the demand”.
\nThe  other  two demands relating to Casual  leave  and\tpaid
\nholidays  are  not before us and need not be  noticed.\t The
\nparties also agreed to discuss the existing production bonus
\nscheme and to finalise the suggestion for revising the\tsame
\nby  the\t end of June ’63, in view of the instalment  of\t new
\nmachinery.   This  settlement  was reduced  to\twriting\t and
\nsigned\tby  the\t Chief\tExecutive  of  the  Appellant,\t the
\nConciliation  Officer  and  the\t General  Secretary,  Mumbai
\nKamgar Union and was considered a ‘settlement’ as defined by
\nclause ‘p’ of Section 2<\/a> of the Act.  It was averred
\n795<\/span>
\nthat  as this settlement was binding upon the parties  under
\nSection 19(2)<\/a> of the Act for a period of six months from 5th
\nApril  ’63 and would continue to bind them after the  expiry
\nof  the said period until the expiry of two months from\t the
\ndate  on  which\t a  notice in writing  of  an  intention  to
\nterminate  the settlement is given by one of the parties  to
\nthe  other party or parties to the settlement and since\t the
\nsettlement was not terminated in accordance with any of\t the
\nrequirements  set out above by a notice in writing given  by
\nthe  Respondents, no dispute could be raised again  relating
\nto  the wage scale and dearness allowance and therefore\t the
\nreference made on 27th December ’65 under Sec. 10(A)(d)\t of
\nthe  Act  for adjudication was incompetent. On\tthe  dispute
\nrelating to the payment of bonus, the case of the  Appellant
\nwas that its profits for the year 1964 ‘before\tdepreciation
\nwas  Rs. 4,11,176\/- and that under the payment of Bonus\t Act<\/a>
\nthe  available,\t surplus was Rs. 19,921\/- out  of  which  an
\nallocable  surplus  would  amount  to  Rs.  11,977\/-.\t The
\nTribunal  however,  in arriving at its\town  computation  of
\navailable surplus aid allocable surplus disallowed the claim
\nof  the Appellant for a sum of Rs. 1,81,054\/- on account  of
\ndepreciation  and  Rs. 5,822\/in respect of  the\t development
\nrebate\treserve and instead it allowed depreciation  of\t RE.
\n80.190\/-  and development rebate of Rs. 3,917\/- as shown  in
\nthe  balance  sheet.  In respect of these items\t the  reason
\ngiven  by  the Tribunal is that while it is true,  that\t the
\nCompany\t was  entitled to deduct by way of  depreciation  an
\namount\tadmissible in accordance with Section 32(1)<\/a>  of\t the
\nIncome\ttax  Act by virtue of Sec. 6 (a) of the\t Bonus\tAct<\/a>,
\nthere  was no material on record to show that the  deduction
\nin  respect of the aforesaid items was actually made by\t the
\nAppellant in accordance with tile relevant provisions of the
\nIncome\ttax Act.  In these circumstances it did\t not  accept
\nthe deduction claimed by the Company, which were  admissible
\nunder the Bonus Act<\/a>.\n<\/p>\n
On  the question of gratuity the case of the  Appellant\t was
\nthat it has only been in existence for 8 years from 1958 and
\nthat  for the years 1958 to 1960 its working showed  losses.
\nFor  1961  there was a carry forward from prior years  of  a
\nloss of Rs. 2,19,948\/- which when set off against the profit
\nof Rs. 93,062\/in the year 1961 left a carry forward of\tloss
\nof  Rs. 1,26,880′ In the year 1962 it earned profits of\t Rs.
\n84,837\/- but the losses incurred in the earlier years  could
\nnot  be\t wholly set off and the balance of the loss  of\t Rs.
\n42,049\/- had to be carried forward to the year 1963.   After
\nsetting\t off this carry forward of loss against\t the  profit
\nfor the year 1.963 there was only a profit of Rs.  65,323\/-.
\nIn   these  circumstances  no  dividend\t was  paid  to\t the
\nshareholders for the years 1958, to 1962.  Dividends however
\nwere  paid for the year 1963,1964 and 1965 but the stand  of
\nthe  Appellant\twas  that  notwithstanding  the\t earning  of
\nprofits and declaration
\n 96<\/span>
\nbe provided for fully in accordance with the Income tax Act.
\nApart  from this there were large foreign loans the  payment
\nof  which was made difficult by the further  burden  imposed
\nupon it on account of devaluation of the Rupee.\t To this was
\nalso  added the increase in the wage bill consequent on\t the
\nsettlement  entered  into  with the Union  as  well  as\t the
\nincrease  of  Rs.  20,869\/-  due  to  Interim  wage   relief
\nrecommended  by\t the Wage Board\t for  Engineering  Industry.
\nTaking\tall these factors into consideration  the  Company’s
\ncase  before the Tribunal was that it had not the  financial
\nability\t to  sustain a scheme of gratuity, Apart  from\tthis
\nground of attack, the Appellant also contested the scheme as
\nbeing vague, contradictory and impossible to implement.\t The
\nTribunal  it is said while it had prescribed a\tconsolidated
\nwage,  directed the payment of gratuity by reference to\t the
\nbasic  wage  excluding\tthe  dearness  allowances.   It\t  is
\ntherefore  contended  that it is not possible  to  ascertain
\nwhich portion of the consolidated wage is the basic wage and
\nwhich  portion the dearness allowance and  consequently\t the
\nimplementation\tof the scheme has become impossible.  It  is
\nalso  submitted that as the scheme stands it is\t incongruous
\nbecause a person who resigns or retires after 10 years\tgets
\na   larger  gratuity  than  a  person  whose  services\t are
\nterminated.\n<\/p>\n
In  so\tfar  as\t the  claim  for  bonus\t is  concerned\t the
\nRespondents in their Appeal have challenged the Award of the
\nTribunal on the ground that it had worked out the return  no
\nreserves not as they were shown in the balance sheet at\t the
\nbeginning of the year viz.  Rs. 2,70,497\/- as required under
\nSchedule III of the Bonus Act but on the reserves  appearing
\nat  the end of the year amounting to Rs.  4,92,349\/-.\tThis
\nmethod of computation would reduce the return on the reserve
\ndeductable as a prior charge by Rs. 14,000\/and\tconsequently
\nwould increase the available and allocable surplus.  We have
\nalready\t stated\t that the Respondents in their\tAppeal\thave
\nfurther\t challenged  the Award relating to the\tfixation  of
\nwage scales and dearness allowance, the former on the ground
\nthat  the  Tribunal gave no directions on  the\tquestion  of
\nadjustments  or fitments notwithstanding the fact  that\t the
\nissue  was  specifically referred for adjudication  and\t the
\nlatter\tby  not\t linking  it to the  cost  of  living  index
\nallegedly on the ground that “no change for worse is  likely
\nto take place for some time to come”.  It will be convenient
\nto examine these rival contentions in respect of each of the
\nitems separately.\n<\/p>\n
The  question  whether the settlement in Ex.  C.  9  was  in
\nforce at the time when the Government made the reference  of
\nthe  dispute  to the Tribunal, will depend  on\twhether\t the
\nprovisions of Sec. 19(2) read with Sec. 2(p) of the Act were
\ncomplied  with.\t  There\t is no dispute that  Ex.   C9  would
\namount\tto a settlement but on behalf of the workmen  it  is
\ncontended that it only records an ad-\n<\/p>\n
797<\/span><\/p>\n
hoc  settlement, the operative portion of which\t relates  to
\ntwo  increments\t one to be given from 1.1.63 and  the  other
\nfrom 1-1-64, and it is during this period that the  dearness
\nallowance   was\t given\tup.   In  these\t circumstances\t the
\nmanagement,  it\t is  claimed, terminated  the  agreement  by
\nmaking counter proposals to the workmen in the\tconciliation
\nproceedings Which terminated the settlement.  This  averment
\nis supported by the finding of the Tribunal to That  effect,
\nnamely,\t that  there was a waiver of the  requirement  of  a
\nwritten\t notice\t putting  an end  to  the  settlement.\t The
\ncontention  on behalf of the Appellant on the other hand  is
\nthat there could be no waiver of a statutory notice required
\nby the provisions of the Act to be in writing to put an\t end
\nto  the\t settlement,  and that the analogy of  waiver  of  a
\nnotice required to be given in suits against the Govt. under
\nSec. 80 of the Civil Procedure Code is neither apt nor is it
\napplicable  to\tcases where as a matter of public  policy  a
\nwritten notice is required to be given by one of the parties
\nto  the\t other party to terminate the  settlement.   Section
\n2(p)<\/a> of the Act defines `settlement’ as meaning :
\n”   a  settlement arrived at in the course  of\tconciliation
\nproceeding  and\t includes a written  agreement\tbetween\t the
\nemployer and workmen arrived at otherwise than in the course
\nof  conciliation  proceeding where such agreement  has\tbeen
\nsigned\tby  the\t parties thereto in such manner\t as  may  be
\nprescribed  and a copy thereof has been sent to\t an  officer
\nauthorised in this behalf by the appropriate Government\t and
\nthe conciliation officer”\n<\/p>\n
In so far as it is relevant, Section 19<\/a> is as follows
\n19(1) A settlement shall come into operation on such date as
\nis agreed upon by the parties to the dispute, and if no date
\nis  agreed upon, on the date on which the memorandum of\t the
\nsettlement is signed by the parties to the dispute.
\n(2)  Such settlement shall be binding for such. period as is
\nagreed upon by the parties, and if no such period is  agreed
\nupon, for a period of six months from the date on which\t the
\nmemorandum,  of settlement is signed by the parties  to\t the
\ndispute,  and  shall continue to be binding on\tthe  parties
\nafter  the expiry of the period aforesaid, until the  expiry
\nof two months from the date on which a notice in writing  of
\nan intention to terminate the settlement is given by one  of
\nthe parties to the other party or parties to the settlement.
\n(3)  No notice given under sub-section (2) of sub-section
\n(6)  shall  have  effect,  unless it is\t given\tby  a  party
\nrepresenting   the  majority  of  persons’  bound   by\t the
\nsettlement or award, as the case may be.,,
\n798<\/span>
\nReading\t Sec. 19 with the definition in sec. 2(p)  it  would
\nappear that a settlement will enure for the duration of\t the
\nperiod\tfor which it has been agreed to between the  parties
\nand  if no period is agreed upon for a period of six  months
\nfrom  the  date\t on which the memorandum  of  settlement  of
\ndispute is signed by the parties and where it is put an\t end
\nto  by a notice in writing it will continue to be  operative
\nuntil the expiry of two months from ;the date on which\tthat
\nnotice\tis  given.   It\t would appear  that  even  where  an
\nagreement is for a fixed period it will not only continue to
\nrebinding  for the duration of the period of settlement\t but
\nthereafter  also  until\t it is terminated  by  a  notice  in
\nwriting\t and even then it will continue for a period of\t two
\nmonths\tfrom the date of such notice.  While no doubt it  is
\ntrue that a notice must be in writing, such a notice can  be
\ninferred from correspondence between the parties.
\nIn Cochin, State Power, Light Corporation Ltd. v. Its  Work-
\nmen(1) a settlement between the employers and the  employees
\nhad been arrived at on 25th November 1954 and was to  remain
\nin  force  for a period of five years from 1st\tOctober\t ’54
\ni.e.,  upto  30th September ’59.  While this  was  so  under
\nSection\t 19(2)<\/a>\tof  the\t Act it\t would\tcontinue  to  be  in
\noperation  till\t it was terminated by a notice\tin  writing.
\nThe  case  of  the  employers in  that\tcase  was  that\t the
\nsettlement  was\t never terminated by notice in\twriting,  as
\nsuch  it  continued to be in force when\t the  reference\t was
\nmade,  and  since a reference of a dispute made\t during\t the
\ncontinuance  of the settlement is bad, the Tribunal  had  no
\njurisdiction  to  adjudicate the dispute  relating  to\twage
\nfixation  and dearness allowance.  It however appeared\tthat
\nthe  workmen  had  presented a charter of  demands  on\t14th
\nOctober ’59 in which there was a reference to the settlement
\nand  it\t was stated therein that the Union had on  the\t13th
\nOctober\t ’59 resolved to terminate the\texisting  settlement
\nand  submit the charter of demands to the management.\tThen
\nfollowed the charter of demands.  It was contended that this
\ndid not put an end to the settlement as required by  Section
\n19(2)<\/a>  of  the\tAct because there was no  reference  to\t the
\ntermination  of the settlement by that charter.\t  The  Court
\nhowever rejected this contention and held that as there\t was
\na reference under the charter of demands to a resolution  in
\nwhich  a  specific statement that the settlement  was  being
\nterminated  thereby  was  made it was  held  that  that\t was
\nsufficient  notice as required under Section 19<\/a> (2)  of\t the
\nAct  and hence the reference in regard to items\t covered  by
\nthe settlement were valid.  Wanchoo, J. at page 101 observed
\n\t      “There  is  however  no  form  prescribed\t for
\n\t      terminating settlements under S. 19(2)<\/a> of\t the
\n\t      Act and all
\n\t      (1) [1064] 2 L.L.J. 100.\n<\/p>\n
\t      799<\/span><\/p>\n
\t      that has to be seen is whether the  provisions
\n\t      of  S.  10<\/a>  (2)  are  complied  with  and\t  in
\n\t      substance a notice is  given as required
\n\tX\tX
\nthereunder”.\n<\/p>\n
The facts in the Workmen of Western India Match Co. Ltd. .
\nThe  Western India Match Co. Ltd.,(1) were that\t during\t the
\npendency of negotiations the Union by a letter had asked the
\nCompany to treat the charter of demands as notice under Sec.
\n19(2  )\t of the Act without first  terminating\tthe  earlier
\nsettlement  in an Award and the Company had agreed to  refer
\nthe  matter  in dispute to the adjudication of\ta  Tribunal.
\nBut  nonetheless  it was contended that when  there  was  no
\nnotice of termination of settlement in the charter of demand
\nthe  subsequent\t reference  in a letter that  it  should  be
\nterminated  as\tfrom the charter of demand  was\t not  valid.
\nThis  contention was however negatived on the ground that  a
\nformal\tnotice\tunder  s. 19(2)<\/a> of the\tAct  was  immaterial
\ninasmuch as the presentation of the charter of demands filed
\nby  a letter amounted to a notice of termination of  settle-
\nment.  In the Management of Bangalore Woollen, Cotton & Silk
\nMills Co. Ltd., v. The Workmen & Anr<\/a>.,(2), it was sought  to
\nbe  contended that the case in the Workmen of Western  India
\nMatch Co.  Ltd., supported the proposition that an inference
\nto terminate an award or settlement can be gathered from the
\nvarious\t correspondences that passed between the  management
\nand  the  Union but one of us Vaidialingam, J. at  page\t 586
\npointed out that that decision “does not lend any support to
\nsuch  a\t view”.\t It was ultimately held in that\t case  that-
\nthough\tno  such  formal notice was  given  in\tthe  earlier
\ncorrespondence\tthe letter of April 8, 1957 written  by\t the
\nUnion could itself be construed as notice within the meaning
\nof Section 19(2)<\/a> and therefore the Tribunal had jurisdiction
\nto  adjudicate upon the claim as the reference was  made  by
\nthe  State  Government long after the expiry of\t two  months
\nfrom April 8, 1957.  It is true that though a written notice
\ncan  be\t spelled out of the correspondence there must  be  a
\ncertainly regarding the date on which such a written  notice
\ncan  be\t construed to have been given because  a  settlement
\nnotwithstanding\t such notice continues to be in force for  a
\nperiod of two months from that date.\n<\/p>\n
The  tribunal drew support from the Workmen  of\t Continental
\nCommercial Co. (Private) Ltd. v. Govt. of West Bengal and
\nOrs<\/a>.  ( 3 )   for holding that the charter of demands itself
\nconstitute  the notice as required under Section 19<\/a>  (2)  of
\nthe,  Act.   It thought that that case was decided  by\tthis
\nCourt.\tThis however was a case decided by the Calcutta High
\nCourt  where it was held that the charter of demands  was  a
\ntacit representation by the workmen
\n(1) [1963]2 S.C.R. 27.\t     (2) [1968]1 S.C.R. 581.
\n(3) [1962] 1 I.L.J. 85.\n<\/p>\n
800<\/span><\/p>\n
not  to remain bound any more by a settlement arrived at  in
\nconciliation  proceedings  but\tsub-.sec.  (2)\tof  Sec.  19
\ncontemplates an express representation physical, in the form
\nof  writing terminating the agreement.\tWhile holding so  it
\nnonetheless  observed  that a notice under Sec., 19  (2)  of
\nthe.  Act can also be waived by the party to whom the notice
\nis  to\tbe sent.  This view of the Calcutta  High  Court  is
\nopposed,  to  the  view\t taken by this\tCourt  and  must  be
\nrejected as not good law because in our view there cannot be
\nany waiver by conduct or implication of the requirement of a
\nwritten\t notice which that Court had itself recognised\tmust
\nnot be a tacit representation but an express  representation
\nin the form of writing terminating the settlement.
\nThis  being  the legal position it is necessary\t to  examine
\nwhat in fact took place in this case.  The settlement in  C.
\n9  would  appear  to be as  contended  by  the\tRespondent’s
\nAdvocate  on  an ad hoc basis because it  provides  even  in
\nrespect\t of  the demand for wage scale that  the,  employees
\nwill  be  given two ad hoc increments one with\teffect\tfrom
\n1-1-63 and another with effect from 1-1-64.  Even in respect
\nof the bonus scheme which was not part ,of the settlement it
\nwas agreed to finalise the suggestion for revising it by the
\nend of June ’63, in view of the instalment of new machinery.
\nNonetheless Exh.  C. 9 embodies a settlement and even if the
\nduration  of that settlement is not fixed as  contended,  it
\nwill  continue to be in operation until a notice in  writing
\nto terminate it is given, or from the correspondence such  a
\nnotice to terminate can be ascertained.\t The Company had  in
\nits  written statement taken up- the stand that Exh.   C.  9
\nstill subsists but the correspondence shows that the Company
\nhad  put  an end to it before the charter  of  demands\twere
\npresented   to\tit.   It  would\t appear\t that\tduring\t the
\nproceedings  in conciliation of the dispute that  has  given
\nrise  to the reference which is the subject matter  of\tthis
\nappeal, the Additional Commissioner of Labour, Bombay, wrote
\nto  the Manager on 26-1-65 before entering upon\t the  conci-
\nliation\t asking him to give information as to whether  there
\nis  any\t agreement,  settlement or an  Award  governing\t the
\ndemand\traised\ton  behalf of the  workmen  in\tthe  present
\ndispute.   The\tCompany by its reply dated 20th\t March\t1965
\ninformed  him  that  the agreement between  itself  and\t its
\nworkmen had expired.  It said :\n<\/p>\n
\t      “at    present\twe   do\t  not\t have\t any
\n\t      agreement\/settlement or an Award covering\t the
\n\t      demands raised on behalf of the Workmen in the
\n\t      present  dispute with the present\t Union.\t  We
\n\t      had an agreement with the previous Union\tM\/s.
\n\t      Mumbai Kam2ar Union, for two years, which\t has
\n\t      expired  on 31-12-1964.  There are no  demands
\n\t      pending for adjudication”.\n<\/p>\n
The stand taken by the company that there is, no settlement
\nin  force  covering the, demands raised by  the\t workmen  is
\nclear.\tIn
\nBody text\t\ttQ34pe4-~
\n $-(#,&p{been  remitted
\nduring his life time he would certainly have been liable  to
\nBody textunder the provUtQ34pe4-~
\n $-(#,&p{with  regard  to
\nmatters sing out of the Administration of the, Act.   Sub-s.
\nBody textides, the coUf tQ34pe4-~
\n $-(#,&p{with  regard  to
\nmatters sing out of the Administration of the, Act.   Sub-s.
\n(2)  provides, the co
\n802<\/span>
\nOn  behalf  of\tthe  Union it is pointed  out  that  by\t not
\ndirecting  an adjustment in these wage scales a\t worker\t who
\nhas  been in the service of the Company for 8 years  drawing
\nless  than  the\t initial start in each of  the\twage  scales
\naccording to the category in which he is placed will get the
\nsame  initial wage as a person who is taken into service  at
\nor  near  the date of the claim of the\tenforcement  of\t the
\nAward  which is not in conformity with social justice.\t The
\nTribunal  it is said should have directed an ad hoc  fitment
\nlike that given in the case of The Hindustan Times Ltd., New
\nDelhi v. Their Workmen Vice Versa(1), or in French Motor Car
\nCo. Ltd. v. Workmen<\/a>(2).\t The Tribunal in the case before  us
\npointed out that the demand of the Union for wage scales was
\nthat  all the workers should be classified  in\tconsultation
\nwith the Union and to be fixed in the wage scales claimed by
\nit on a point to point basis with retrospective effect\tfrom
\n1-2-1965.  It is these demands that were considered and\t the
\nTribunal  did not see its way in adopting either the  scales
\nof wages claimed by it or fixing them in the wage awarded on
\na point to point- basis.  There is therefore no question  of
\nthe Tribunal not exercising a jurisdiction vested in it\t but
\nit  must  be taken as having been considered  and  rejected.
\nThe  question whether that rejection is valid or  not  Would
\ndepend on the facts and circumstances of the case as can ,be
\nascertained  from  the\tmaterial placed before\tit.   It  is
\ncontended by the Union that the material before the Tribunal
\nwas such that it could have made fitments for instance, from
\nthe statement of the dates of joining and the classification
\nand  designation of the workmen as given in  U-3  statement.
\nFrom this statement the, Tribunal could have ascertained the
\nlength\tof service of each of the employees,  his  category,
\nhis  date  of  joining and the wage  scales  which  he\twas
\ndrawing\t on the date of the Award and could have  formulated
\nand  directed an ad hoc fitment.  It is true that taking  as
\ntypical, a case of a semi-skilled operator who joined on  1-
\n12-1958,  another in the same category who joined  on  13-3-
\n1961  and  one who joined on 19-3-1964, more nearer  to\t the
\ndate of the Award, it would appeal that as all of them would
\nbe  drawing less than the initial wage of Rs. 5.50 in  their
\nold  wage  scales they will start with Rs. 5.50 in  the\t new
\nwage  scales fixed for semi-skilled workers even though\t the
\nfirst of them had on the date when the wage scales came into
\noperation 8 years service and the second of them 5 years and
\nthe last of them only 2 years.\tIn the French Motor Car\t Co.
\nLtd.’s\tcase  (2) this Court after considering\tthe  several
\ninstances where the Tribunal had granted fitments  expressed
\nthe view that general adjustments are granted when scales of
\nwages are fixed for the first time.  At page 27-28  Wanchoo,
\nJ. observed:\n<\/p>\n
(1)  [1964] 1 S.C.R. 234.\n<\/p>\n
(2) [1963] Supp. 2 S.C.R.16.\n<\/p>\n
801<\/span><\/p>\n
  the  statement  of claim the General\tSecretary  of  Sarva
\nShramik Sangh representing the workmen said that the private
\nagreement between the Company and Mumbai Kamgar Union  dated
\n5th April 1963 was duly terminated and thereafter a  charter
\nof  demands  were  presented on\t 4-2-1965.   Thereafter\t the
\nAssistant Labour Commissioner tried to conciliate and in his
\nreport\t Ex.   U  ,  6\twhile  stating\t that\tconciliation
\nproceedings have ended in a failure, relying upon the fetter
\nof  the\t management,  stated that there\t was  no  subsisting
\nsettlement\/agreement  or  Award presently in  this  dispute.
\nThe  admission by the management is said to be made under  a
\nmistake.  We do not think this is a satisfactory explanation
\nof a categorical statement.  In our view the letter of\t20th
\nMarch  1965  must at any rate be deemed to be  a  notice  of
\ntermination, because there, is a categorical statement\tthat
\nthe  settlement has been terminated on 31-12-1964.  Even  if
\nthere is no evidence of written notice terminating it on the
\ndate  specified,  the  letter  which said  that\t it  had  so
\nterminated must be taken as the requisite notice, if so, the
\nreference  to adjudication under the Act has been made\tlong
\nafter the expiry of the two months i.e., on 27-12-1965.\t  If
\nwe view the matter slightly differently, the, result is\t the
\nsame, because when both the parties to the dispute Proceeded
\non the specific plea that there was no settlement binding on
\neither\tof them in respect of the wages and dearness  allow-
\nance  even  prior  to conciliation, the\t Government  had  no
\noption, on a failure of the conciliation proceedings and  on
\nbeing\tinformed  by  the  written  representation  of\t the
\nappellant  that\t there was no settlement in  force,  but  to
\nrefer the dispute to the Tribunal.  The management therefore
\nis  estopped from now taking the stand that  the  settlement
\nwas not put an end to or that the reference was invalid.
\nIn  view  of  this finding though the  management  does\t not
\nassail\tthe wages and dearness allowance as awarded  by\t the
\nTribunal,  as already noticed, this Award is  challenged  by
\nthe Union on the ground that no adjustment in the wage scale
\nwas granted and that the dearness allowance’ was not  linked
\nwith  the cost of living index.\t It is also  contended\tthat
\nthe Tribunal by not making an Award_ in respect of  fitments
\nin   the  wage\tscale  committed  an  error  and   ‘is\t not
\nadjudicating the dispute in respect thereof, ‘has failed  to
\nexercise a jurisdiction vested in it.  It is true that while
\nthe  Tribunal prescribed a consolidated wage scale of  daily
\nwages, it did not direct fitments in those wage scales.\t The
\nscales that have been prescribed for the various  categories
\nof workers are as follows
\n     Unskilled…………     Rs. 4 .50-0 .20-6 .50
\n     Semi-skilled\t       Rs. 5 .50-0 .25-8 .00
\n     Skilled\t\t       Rs. 7 -00-0 .35-10 .50
\n     Highly skilled\t       Rs. 8 .50-0 .50-12 .50
\n803<\/span>
\n.lm15
\n“A  review  therefore of the cases cited on  behalf  of\t the
\nrespondents  shows  that generally adjustments\tare  granted
\nwhen  scales  of wages are fixed for the  first\t time.\t But
\nthere  is  nothing  in\tlaw to\tprevent\t the  Tribunal\tfrom
\ngranting  adjustment  even  in cases  where  previously\t pay
\nscales were in existence; but that has to be done  sparingly
\ntaking\tinto  consideration the facts and  circumstances  of
\neach  case.  The usual reason for granting  adjustment\teven
\nwhere  wage scales were formerly in existence is  that\twage
\nscales were particularly low and therefore justice  required
\nthat adjustment should ‘be granted a second time.”
\nThis principle in our view recognises that the payment in  a
\ngraduated wage scale should reflect the years of service  of
\nan employee in that grade.  When the graduated wage scale is
\nfirst  fixed  and  a  fitment  is  made\t therein  subsequent
\nrevision  in wage scales do not require any further  fitment
\nbecause the original fitment will continue to give them\t the
\nadvantage  of  their service.  The case of  Hindustan  Times
\nLtd.  v.  Their Workmen<\/a>(1), is one where the  Tribunal\ttook
\ninto  consideration in deciding the question  of  adjustment
\nthat  it would be fair to give some relief to  the  existing
\nemployees by means of an adjustment, while at the same\ttime
\nnot  burdening the employer with higher rates of  wages\t for
\nnew incumbents.\t In the circumstances it has held that there
\nwas  no\t justification for interfering with  the  directions
\ngiven by the Tribunal in the matter of adjustments.
\nThe  decision  referred to would clearly indicate,  that  in
\neach  case  depending on the facts  and\t circumstances,\t the
\nquestion  whether any fitments should be made at all  or  if
\nfitments  are  to  be  made,  what  adjustments\t should\t  be
\naffected, will have to be considered.  In this case while no
\ndoubt the wage scales and dearness allowance demanded by the
\nUnion  which  was  said to be, prevalent in as\tmany  as  26
\nconcerns  engaged in the Engineering Industry in the  region
\nof  Bombay would place fairly heavy burden on the  financial
\nresources  of the Company, the Tribunal observed that  there
\nwas  no material on record which would furnish a  basis\t for
\ntreating the concerns relied upon by the Union as comparable
\nconcerns.  It was also pointed out that there were about  21
\nconcerns in the same unit of the industry which were  paying
\nminimum\t consolidated  daily  wages of\tRs.  5.08  to  their
\nemployees  and\ttherefore their wage  structure\t would\tthus
\nrepresent  a  cross-section  of the wage  structure  of\t the
\nemployees  working in Engineering concern and would be\tvery
\nrelevant for fixation of wage structure of employees in\t the
\nCompany.  In the end the Tribunal considering the  financial
\nstatus\tof  the Company and the era of\tprosperous  business
\nwhich it can look forward to, as well as the wage-
\n(1)  [1964] 1 S. C. R. 234.\n<\/p>\n
\t\t\t    804<\/span><\/p>\n
structure  prevailing in the relevant units of industry\t and
\nother  relevant considerations, prescribed the\tconsolidated
\nscales\tof  wages.  We must therefore reject the  claim\t for
\ndearness  allowance being linked with cost of living  index.
\nThe  case  of  the  Respondents is  that  the  Tribunal\t had
\nmisdirected itself by relying upon a recent award made by it
\nin  the case of another Company where it was said  that\t the
\ncost  of. living had gone up to 70 points but that  was\t not
\ntaken\tinto  consideration  because  the  Company   was   a
\nflourishing  Company  and as such the  minimum\tconsolidated
\nwage  was fixed as being proper.  The criticism against\t the
\napproach  of the Tribunal is in our view not  warranted\t be-
\ncause  it specifically stated in respect of the Award  which
\nit  considered that that “award may not be taken  as  laying
\ndown  a\t standard minimum wage in the  engineering  unit  of
\nindustry,  the\taward  would have its own  importance  as  a
\ncontributory factor for determination of the wage-structure,
\nof  the\t employees in the Company’.  As we pointed  out\t the
\nTribunal  considered  several  factors in  fixing  the\twage
\nscale.\t Each case must be considered on its own merits\t and
\nwhat  was awarded in the Hindustan Times Ltd. case(1) or  in
\nthe  Bengal  Chemical  & Pharmaceutical Works  Ltd.  v.\t Its
\nWorkmen<\/a>\t (  2 ) , cannot be a detemining  factor  in  other
\ncases.\tThe principles relating to the fixation of fair wage
\nincluding  the payment of dearness allowance to provide\t for
\nadequate   neutralisation,  which  should  be\ttaken\tinto
\nconsideration in industrial adjudication, were stated by one
\nof us, Vaidialingam J, at page 123 of which the two that are
\nrelevant are as follows
\n\t      “(1)
\n\t      (2)   The purpose of dearness allowance  being
\n\t      to neutralise a portion of the increase in the
\n\t      cost  of living, it should ordinarily be on  a
\n\t      sliding  scale and provide for an increase  on
\n\t      the rise in the cost of living and a decrease
\n\t      on a fall in the cost of living.\n<\/p>\n
\t      (3) (4)
\n\t      (5)   The additional financial burden which  a
\n\t      revision\tof  the wage structure\tor  dearness
\n\t      allowance\t would impose upon an employer,\t and
\n\t      his  ability  to bear such  burden,  are\tvery
\n\t      material and relevant factors to be taken into
\n\t      account”.\n<\/p>\n
In  these circumstances we are satisfied that  the  Tribunal
\nafter  considering the various factors to which a  reference
\nwas  made awarded a consolidated wage having regard  to\t the
\nfinancial   capacity  of  the  industry\t and  there  is\t  no
\njustification for interfering with it on the ground that  it
\nhad not fixed a separate dearness
\n(1)  [1964] 1 S.C.R. 243.\n<\/p>\n
(2)  [1969] 2 S.C.R. 113.\n<\/p>\n
805<\/span><\/p>\n
allowance  linked with increase or decrease in the  cost  of
\nliving\tindex or to link the consolidated wage\titself\twith
\nit.\n<\/p>\n
We  are however satisfied that this is a fit case  in  which
\nwage  adjustment should have been made.\t The Tribunal  gave’
\nno reason for rejecting the claim altogether.  We could have
\nunderstood  the rejection of the claim of the Union that  it
\nshould be given the right to make the adjustment itself, but
\nwhy  some adjustment was not made taking into  consideration
\nthe  length of the service, has not been stated.  There\t was
\nno  adjustment\tin the first wage structure  which  was\t the
\nsubject\t of  a settlement as such and it would not  be\tfair
\nalso  not to fix the wages in the wage scales which in\tfact
\nare  those fixed for the first time by the away\t Besides  we
\nfind  from an analysis of the various categories of  workers
\nin  each  of the years that a larger majority of  them\thave
\nbeen  employed between the years 1963 and 1965.\t If we\twere
\nto direct one increment for every completed 3 years upon the
\ndate  of  reference namely 17-12-1965,\tno  injustice  would
\noccur nor will there be a strain on the financial  resources
\nof the Appellant which it cannot bear.\tIt would appear that
\nof the 145 workers shown in the statement U-3 only about  43
\nWorkers\t will have the benefit namely 9 employed in 1958,  7
\nin  1959, It in 1960, 5 in 1961 and 1 1 in 1962.   Of  these
\nonly  16 will get two grade increments in the adjustment  as
\nproposed.   In this view we direct the fitments\t accordingly
\nsubject\t however, that the other workers will start  at\t the
\ninitial\t wage in their respective categories and their\tnext
\nincrement as also the movement in respect of those who\thave
\njoined\tservice\t between 1958 to 1962  after  the  aforesaid
\nfitment\t is made will be due to them on completion  of\teach
\nyear from the date of the enforcement of the Award.
\nOn  the computation of bonus the three items that have\tbeen
\nchallenged are those in respect of depreciation, development
\nrebate,\t and  return  on  reserves-the\tformer\ttwo  by\t the
\nAppellant  and the latter by the Respondent in\tits  appeal.
\nThe  computation  of bonus as already  noticed\tis  governed
\naccording  to the Bonus Act<\/a>.  Under Section 23<\/a> of  this\t Act
\nthere is a presumption about the accuracy of  balance-sheets
\nand  profit and loss accounts of Corporations and  Companies
\nand since the accuracy of the particulars contained in these
\ndocuments  have not been challenged in this  case,  reliance
\nwill have to be placed thereon.\t Taking the first two  items
\nregarding  which the management had objection, the  Tribunal
\nhad   deducted\ta  sum\tof  Rs.\t 80,190\/-  on\taccount\t  of
\ndepreciation  and  Rs.\t3,917\/- on  account  of\t development
\nrebate\tand  rejected the claim of the Company to  make\t the
\ndeductions  in respect of the aforesaid items in  accordance
\nwith the Income-tax Act<\/a> as provided by Section 6<\/a> (a) of\t the
\nBonus  Act<\/a>, by merely adopting the amount ‘as shown  in\t the
\nbalance-sheet and profit and
\n806<\/span>
\nloss account.  While the, Tribunal, no doubt recognised that
\nthe  Company  was  entitled  to deduct\tamounts\t by  way  of
\ndepreciation in accordance with Section 32(1)<\/a> of the Income-
\ntax Act it rejected the claim because there was no  material
\non  record to show that the, deduction as actually  made  by
\nthe Company towards depreciation and development rebate were
\nin accordance with the relevant provisions of the Income-tax
\nAct<\/a>.   The  figures for deduction on account  of  return  on
\nreserves have been taken not on those shown in the  balance-
\nsheet at the beginning of _the year, which is what the Bonus
\nAct<\/a>  prescribes but on the figures shown at the end  of\t the
\nyear.  It is submitted by the Respondent’s advocate that the
\nTribunal  was  right  in disallowing  the  first  two  items
\nbecause\t the Company did not prove by satisfactory  evidence
\nthat the amounts claimed by them were true.  This contention
\nmust  be rejected.  There can be no doubt that the  employer
\nis  entitled to deduct from the gross profit,-, as  computed
\nunder  Sec. 4, depreciation under Section 6(a)<\/a> of the  Bonus
\nAct  in accordance with Section 32(1)<\/a> of the Income-tax\t Act
\nand under Section 6(d)<\/a> such further sums as are specified in
\nthe  Third  Schedule to the aforesaid Bonus Act<\/a>.   The\tonly
\ndispute is whether the Appellant has placed material  before
\nthe  Tribunal  from which it could make the  computation  as
\nrequired under the Income-tax Act<\/a>.  In our view the employer
\nhas  been claiming from the very beginning depreciation\t and
\ndevelopment rebate reserve under the Income-tax Act<\/a> and\t had
\nproduced  a statement signed by the Company’s  officials  in
\nwhich  these  figures  were  shown  as\tper  the  Income-tax
\nassessments for each of the year specified therein.   Before
\nthe  conciliation  officer a statement was  filed  in  which
\ndepreciation  as  per  Income-tax was claimed  as  Rs.\t1.80
\nlakhs.\t In  the, statement of claim also  this\t amount\t was
\nclaimed.   Apart  from these averments a statement,  as\t per
\nIncome-tax assessment, statement ‘A’, Ex.  C-5 was filed, by
\nthe  Company  on 2-9-1966.  Similarly another  statement  of
\nprofit\tand  loss  account  as per  annual  account  of\t the
\nCompany-Statement  ‘B’ Ex.  C-6 was filed on the same  date.
\nIn the former document C-5 according to item 2, depreciation
\nallowed by the Income-tax Officer for 1964 was, shown as Rs.
\n1,81,054\/- while according to C-6 depreciation as per annual
\naccount of the Company was shown as Rs. 80,190\/-.  Similarly
\ndevelopment  rebate under C-5 was shown as  Rs.\t 5,822\/while
\nunder C-6 it was shown as Rs. 3,917\/-.\tIt may be  mentioned
\nthat  there was no challenge to these figures as  such,\t nor
\ndid  the Respondent dispute that these amounts were  not  as
\nper  the  assessment  orders.\tThe  Tribunal  had  accepted
\nstatements  in\tC-6  but ignored C-5 even  though  both\t the
\nstatements  were prepared by the Company in exactly  similar
\ncircumstances, one from the assessment orders and the  other
\nfrom  the balance-sheet.  We find no justification  whatever
\nin the reduction of the claim by
\n807<\/span>
\nthe  Company.  The claim of the Company for a  deduction  on
\naccount\t of  depreciation  and\tdevelopment  rebate  of\t Rs.
\n1,61,054\/and  Rs.  5,822\/- instead of Rs. 80,190\/-  and\t Rs.
\n3,970\/- is therefore, accepted.\n<\/p>\n
The claim of the Respondent for return on reserves also must
\nbe  allowed because under s. 6(d)<\/a> read with item  1(iii)  of
\nthe  Third Schedule of the Bonus Act the Tribunal  ought  to
\nhave  allowed  6%  of the Company’s reserves  shown  in\t its
\nbalancesheet  as at the commencement of the accounting\tyear
\nincluding  any\tprofits carried forward\t from  the  previous
\naccounting  year.  A reference to the balance-sheet for\t the
\nyear  ending  31-12-1964,  would show that the\t3  items  of
\nreserves  at the end of the previous year which will be\t the
\nbeginning  of the accounting year 1964 were (1)\t development
\nrebate\treserve-Rs.  1,82,174\/-,  (2)  general\t reserve-Rs.
\n60,000\/-, and (3) profit and loss account Rs. 5,323\/-  which
\ntogether  add  to Rs. 2,47,497\/-.  A return of\t6%  on\tthis
\namount\tshould have been taken into account but instead\t the
\nTribunal  allowed  6%  on  Rs.\t4,92,349\/-  which  were\t the
\nreserves at the end of the year comprised of Rs. 1,86,091\/as
\ndevelopment rebate reserve, Rs. 30,000\/- as General  reserve
\nand  Rs. 6,289\/- profit and loss account.   The\t computation
\nunder the Bonus Act<\/a> is as stated and not as the Tribunal has
\ncalculated.   It would make a difference of Rs. 14.000\/-  in
\nrespect\t of this item.\tWe have at the end of the  arguments
\nasked  both  the  learned Advocates to\tgive  us  an  agreed
\nstatement  on  the  lines  indicated  above  in\t respect  of
\ndepreciation, development rebate and return on reserves.  We
\ngive below that statement:\n<\/p>\n
“BONUS CALCULATION FOR THE YEAR 1964
\n     (1-1-1964 to 31-12-1964)
\n\t\t\t\t\t   Rs.\n<\/p>\n
Gross profits of the year 1964\t       4,11,176.00
\nAdd bonus paid for the year 1963       19,129.00
\nDeduct prior charges\t\t\t4,30,304.00\n<\/p>\n
(a) Less Depreciation as per Income-tax1,81,054.00
\n\t\t\t\t\t2,49,250.00\n<\/p>\n
(b) Less Development Rebate Reserve5,822.00
\n\t\t\t\t\t 2,43,428.00\n<\/p>\n
(c) Less Income-tax as\t5% and Surcharge 1,21,714.00
\n\t\t\t\t\t 1,21,714.00\n<\/p>\n
(d) Less Return on capital at 8-1\/2 Y. on Rs. 8,50,000\/-\n<\/p>\n
\t\t\t\t\t    72,250.00
\n\t\t\t\t\t   49,464 .00
\n808<\/span>\n<\/p>\n
(e) Less Return at 6% on Reserve of Rs.\t 2,47,497\/-
\n(Rs. 1,82,174+Rs. 60,000\/-+Rs. 5,323\/-)\t 14,849 .82-\n<\/p>\n
Available Surplus\t\t\t   34,6118
\nAllocable surplus (60 Y. of Available Surplus)20,768.50
\nAnnual Wage Bill during 1964\t\t\t 2,43,562.98
\nTherefore, Allocable Surplus of\t\t     Rs. 20,768 .50″
\nAccording  to this statement the available surplus  will  be
\nRs. 34,614.18 and the allocable surplus which is 60% of\t the
\navailable surplus amounts to Rs. 20,768.50. This will be the
\namount\twhich  will be available for distribution  as  bonus
\ninstead\t of Rs. 42,783\/- as computed by the  Tribunal.\t The
\nAward will have ‘to be accordingly modified.
\nThe,  item  relating  to  gratuity  is\tchallenged  by\t the
\nAppellant mainly on the ground that the Company’s  financial
\ncapacity  is not such as to bear the burden of the  increase
\nin the wage scale and dearness allowance.\n<\/p>\n
A  good\t deal of criticism was directed against\t the  method
\nadopted\t by  the Tribunal in laying emphasis on\t the  fairly
\nheavy wage bill-which it was said the Company could bear and
\nby  picking  and  choosing  convenient\tpassages  from\t the
\nDirector’s  Reports  to\t buttress the  conclusion  that\t the
\nfinancial position of the Company was sound.  Some of  these
\nare as follows
\nThat  the  Company turned the profits received in  the\tyear
\n1963 into losses and very substantially reduced the  profits
\nfor  the  years 1961 to 1965; that the observations  of\t the
\nChairman of the Board of Directors in the Director’s  Report
\nfor  the year ending 31st December 1965 had shown  that\t the
\nloan  was  increasing and the capital was being\t raised\t and
\nthat the import licences had been received, that orders\t for
\nprincipal  equipment had been finalised and that  production
\nof  alloy steel chains will commence in the last quarter  of
\n1966.\tThe  observation  that this  expansion\tproject\t was
\nresponsible  for the foreign exchange loan of  the  Company;
\nthat all these loans are payable in well-spaced\t instalments
\nand  with the increasing business turnover and profits\tfrom
\nyear to year, that the Company should not find itself in  an
\nembarrassing  financial\t position or that it is in  a  sound
\nfinancial  position are, all it is said a mere\tspeculation.
\nIn  our\t view  this  criticism\tis  not\t justified   because
\neverything  that  the Tribunal has pointed out as  we  shall
\nshow presently is warranted by the material on record.\t The
\nTribunal  it  may also be noticed did not prescribe  a\tvery
\nonerous or burdensome scheme either.  After referring to the
\ndecisions of this Court in M\/s.\t British Paints
\n809<\/span>
\n(India) Ltd. v. Its Workmen<\/a>(1), Management of, Wenger &\t Co.
\nv.  Their  Workmen<\/a>(2), Burhanpur Tapti Mills Ltd. v.  B.  T.
\nMills  Mazdoor Sangh<\/a>(3), it had on the principles laid\tdown
\ntherein\t observed that it would be necessary and  proper  to
\nmake  a\t modest beginning by introducing a lower  scheme  of
\ngratuity   consistently\t with  the  standing  and   business
\npotential of the Company.\n<\/p>\n
In  determining the financial capacity of an  industry\twhat
\nshould be the approach of a Tribunal has been dealt with  by
\nthis  Court  in\t some  of  the\tCases.\t In  the   Hindustan
\nAntibiotics Ltd. v. The Workmen & Ors<\/a>. (4) Subba Rao, J.  as
\nhe then was held that :\n<\/p>\n
\t      “The  Tribunal  considered  all  the  relevant
\n\t      circumstances;  the stability of\tthe  concern
\n\t      the profits made by it in the past, its future
\n\t      prospects\t and its capacity and came  to\t‘the
\n\t      conclusion  that in the concern  in  question,
\n\t      the labour should be provided with a  gratuity
\n\t      scheme in addition to that of a provident fund
\n\t      scheme.\tWe see no justification\t to  disturb
\n\t      this conclusion.” (page 674)
\nIt  is\tpertinent  to  notice that  gratuity  and  wages  in
\nindustrial  adjudication are placed on the same footing\t and
\nhave priority over Income-tax and other reserves, as such in
\nconsidering  the financial soundness of an  undertaking\t for
\nthe  purposes  of  introduction of  a  gratuity\t scheme\t the
\nprofits\t that must be taken into account are those  computed
\nprior  to the deduction of depreciation and other  reserves.\n<\/p><\/blockquote>\n
In  the\t Gramophone  Company Ltd.  v.  Its  Workmen(“),\t the
\nintroduction  of  a  scheme  for  the  benefit\tof  only  72
\nemployees  who\twere  non-factory workmen,  working  at\t the
\nBombay\tBranch\tof the Company was contested on\t the  ground
\nthat  the Company had already a provident fund\t‘Scheme\t for
\nthe benefit of the employees and’at the time when the  Award
\nfor  the introduction of the scheme was made the  percentage
\nof  contribution  to the provident fund had  been  increased
\nthough that benefit was not given to a small number of\tnon-
\nfactory workmen at Calcutta and to the concerned workmen  at
\nthe  Bombay  Branch but was made available only\t to  factory
\nworkers.   This contention was negatived on the ground\tthat
\nthe  mere  existence of a provident fund scheme\t is  not  by
\nitself\t a   reason  for  reducing   the   gratuity   scheme
\nparticularly  when a good part of the services\tof  existing
\nworkmen\t were not covered by the provident fund scheme.\t  In
\nthat  case while considering the financial position  of\t the
\nCompany\t and  the contention on behalf of the  Company\tthat
\nbefore\tthe  real profits for each year can  be\t arrived  at
\namounts to
\n(1)[1966] 2 S.C.R. 523. (2) [1963]Supp. 2 S.C.R. 862.
\n(3) [1965] 1 L.L.J. 453. (4) [1967] 1 S.C.R. 652.
\n(5)[1964] (2) L.L.J. 131.\n<\/p>\n
810<\/span><\/p>\n
be provided for compensation and development reserves should
\nbe deducted.  Wanchoo J, as he then was observed at page 136
\n\t      “When  an industrial tribunal  is\t considering
\n\t      the  question of wage structure’ and  gratuity
\n\t      which in our opinion stands nor or less on the
\n\t      same footing as wage structure it has to\tlook
\n\t      at   the\tprofits\t made  without\t considering
\n\t      provision for taxation in the shape of income-
\n\t      tax  and\tfor  reserves.\t The  provision\t for
\n\t      income-tax  and  for  reserves  must  in\t our
\n\t      opinion  take  second  place  as\tcompared  to
\n\t      provision\t for  wage structure  and  gratuity,
\n\t      which stands on the same footing as  provident
\n\t      fund which is also a retrial benefit,  payment
\n\t      towards provident fund and gratuity is expense
\n\t      to  be  met  by an  employer  like  any  other
\n\t      expense  including wages and if the  financial
\n\t      position\tshows that the burden of payment  of
\n\t      gratuity and provident fund can be met without
\n\t      undue strain on the financial position of\t the
\n\t      employer,\t that  burden must be borne  by\t the
\n\t      employer.\t  It will certainly result  in\tsome
\n\t      reduction in profits but if the industry is in
\n\t      a stable condition and the burden of provident
\n\t      fund  and gratuity does not result in loss  to
\n\t      the  employer,  that burden will\thave  to  be
\n\t      borne by the employer like the burden of wage-
\n\t      structure in the interest of social justice”.
\nOn  the\t facts\tof this case it may be\tmentioned  that\t the
\nTribunal  did not award a separate basic wage  and  dearness
\nallowance  but\ta consolidated wage.  That  apart  while  no
\ndoubt  the  Company  did not, from the years  1958  to\t1962
\ndeclare\t any  dividends as it had made losses, it  began  to
\nmake  profits  increasingly  each year from  1963  to  1965.
\nDuring\tthis  period not only did the capital which  was  in
\n1958  at Rs. 2,25,000\/- increase to Rs. 1  1,00,000\/in\t1965
\nbut  the  salaries and wage bill  correspondingly  increased
\nfrom  Rs.  43,443\/- to Rs. 5,42,609\/-.\tThe loans  no  doubt
\nalso  increased\t from Rs. 2,81,129\/- to Rs.  8,29,343\/-\t but
\nthis by itself is not indicative of the financial insecurity
\nof the Appellant because we find that notwithstanding  these
\nloans the Company steadily built up reserves from about\t Rs.
\n0.70  lakhs in 1958 to Rs. 6.16 lakhs in 1965.\t The  losses
\nwhich continued upto 1962 from 1.05 lakhs in 1958 came to be
\nreduced to Rs. 0.42 lakhs in that year, no doubt mostly\t due
\nto the Appellant earning profits in 1961 and 1962 of 80\t and
\n84  lakhs respectively.\t Thereafter the profits were on\t the
\nincrease;  which  in 1963 were Rs. 1.81 lakhs,\tin  1964-Rs.
\n3.21 lakhs and in 1965-Rs. 2.80 lakhs.\tAll these profits it
\nmay  be mentioned are computed after deducting\tdepreciation
\nand  this should be taken into account in  considering\tthe
\ndesirability of formulating a gratuity scheme for the
\n811<\/span>
\nAppellant.   The  gross block which consists of\t assets\t and
\nloans  etc. has also progressively increased from  Rs.\t5.01
\nlakhs  in  1958\t to  Rs.  20.00\t lakhs\tin  1965.   The\t two
\nstatements  one on behalf of the Appellant and the other  on
\nbehalf\tof  the Respondents, the figures in  which  we\thave
\nchecked\t up  from the balance-sheets for  the  corresponding
\nyears  and  with respect to which there is no  dispute,\t are
\ngiven below
\nStatement of the Appellant\n<\/p>\n
————————————————————
\nYear   Capital\tLoanLoss\/ProfitSalaries &  Dividend
\n\t\t\t\t\t   Wages\n<\/p>\n
————————————————————-\n<\/p>\n
\t\tRs.\t    Rs.\t\t   Rs.\t  Rs.\t Rs.\n1958\t      2,25,000\t 81,129.001,05,283.8443,443.29Nil\n\t      2,00,000.00\n1959\t 3,00,000   71,347.00\n\t       2,60,000.00\t1,59,537.6888,801.01   Nil\n1960\t  3,00,000  1,10,588.68\n<\/pre>\n
\t       2,77,800.002,19,948.911,15,947.60Nil.<\/p>\n
\n1961\t       4,20,000\t 85,786.491,26,886.451,42,090.43Nil\n\t       2,41,260.00\n1962\t   8,50,000 2,04,720.00\n\t\t3,99,535.67   42,049.801,56,805.23Nil\n1963\t   8,50,000 81,626 -60\n<\/pre>\n
\t\t 1,68,180.00  56,322.002,22,986.6951,000
\n\t\t 3,77,500.00
\n1964\t   8,50,000 29,294 -00
\n\t\t  1,31,640.00 74,289.003,21,242.0068,000
\n\t\t  3,31,415 -00
\n1965\t   11,00,000\t 94,100.00
\n\t\t   2,82,727.00\t   96,999.003,42,609.0093,767
\n\t\t   4,52,516.00\n<\/p>\n
—————————————————————-
\nStatement of the Respondent\n<\/p>\n
—————————————————————-\n<\/p>\n
\t\t All figures in lacs\n<\/p>\n
—————————————————————–\n<\/p>\n
     1958   1959    1960 1961  1962   19631964\t    1965\n<\/p>\n
—————————————————————–\n<\/p>\n
\t Rs.  Rs.  Rs.\t  Rs. Rs.   Rs.\t   Rs.\t      Rs.\nPaid up capital\t    2.25 3.003.004.208.508.508.50    11.00\nReserves\t    0.700.820.92Nil\t0.802.474.92 6.16\nLoans\t\t    4.564 -11 5.24 3.276.046.254.928.29\nLosses\t\t    1.051.592.191.26\t0 -42-\t -\nProfits---\t    0.80 0.841.813.21 2.80\nGross Block\t    5.016.39  7.07 7.7915.2716.7918.7820.00\nDividend---    -    6 P.C.  8 P.C.10 P.C.\n<\/pre>\n
—————————————————————–
\nBoth the above statement$ would lead to the same  conclusion
\nnamely\tthat  the  Company’s  financial\t position  was\tpro-
\ngressively  getting better and stronger each year  and\tthat
\nfrom the year 1968 when the gratuity
\n812<\/span>
\nscheme will be given effect to it would not be difficult for
\nthe Appellant to bear the burden of its implementation.\t  At
\nany  rate  there is nothing to indicate that  the  financial
\nposition of the Appellant would not be further\tstrengthened
\nas and from that year.\tEven the Appellant’s Advocate  could
\nnot  contend that it will deteriorate.\tNor has the  Company
\nplaced\tbefore\tus any other material from  which  we  could
\njudge that the financial implication of the gratuity  scheme
\nwould  place a heavy burden on the Company’s finances  which
\nit  will  not be able to bear, nor are we in a\tposition  to
\nascertain  how\tthe pressure of the  implementation  of\t the
\nscheme\tis distributed over the years because  the  employer
\ndoes not have to provide the gratuity for all its members at
\nonce.\tThe Tribunal has stated and in our view\t justifiably
\nso, having regard to the list of the employees and the years
\nin  which  they\t have  joined  the  Company  that  they\t are
\ncomparatively  young and not likely to retire all  at  once.
\nIn  fact  our  own examination of  the\tstatement  Ex.\t U-3
\nshowing\t classification of the employees incline us  to\t the
\nview  taken  by\t the  Tribunal.\t  The  years  in  which\t the
\nemployees have joined service were all staggered and even if
\nthey retire by completion of their full service the pressure
\non   the  Company’s  financial\tresources  is  pretty\twell
\nuniformally  spread  out.   In dealing\twith  the  financial
\ncapacity  of an undertaking to bear the burden it would\t not
\nbe  appropriate to approach its capacity to bear the  burden
\nfrom an investors point of view.  The overall picture of the
\nsoundness  of the Undertaking and its future prospects\tmust
\nbe  taken into account.\t In’ this regard Gajendragadkar,  J.
\nas he then was in the Bharatkhand Textile Mfg.\tCo. Ltd.&
\nOrs.  v. The Textile Labour Association, Ahmedabad<\/a>(1),\tsaid
\nat page 342-343
\n\t      “It  is  not  disputed  that  the\t benefit  of
\n\t      gratuity\tis in the nature of retiral  benefit
\n\t      and there can be no doubt that before  framing
\n\t      a scheme for gratuity industrial\tadjudication
\n\t      has  to  take into  account  several  relevant
\n\t      facts;   the   financial\tcondition   of\t the
\n\t      employer,\t his  profit  making  capacity,\t the
\n\t      profits earned by him in the past, the  extent
\n\t      of his reserves and the chances of his  reple-
\n\t      nishing them as well as the claim for  capital
\n\t      invested\tby  him, these\tand  other  material
\n\t      considerations may have to be borne in mind in
\n\t      determining the terms of the gratuity scheme”.
\nIn  our view the financial position of the Company  is\tsuch
\nthat  the  implementation of the scheme of gratuity  is\t not
\nlikely\tto  place an undue or unreasonable burden  upon\t the
\nCompany.\n<\/p>\n
(1)[1960] 3 S.C.R. 329.\n<\/p>\n
813<\/span><\/p>\n
There is also in our view no validity in the criticism\tthat
\nthe scheme is difficult if not impossible to implement.\t  It
\nis therefore necessary to examine the scheme proposed by the
\nTribunal which is given below:\n<\/p>\n
\t      1.On  the\t death of an employee  while  in
\n\t      service  of  the Company or  on  his  becoming
\n\t      physically   or  mentally\t incapacitated\t for
\n\t      further\tservice\t in  the  Company,   or\t  on
\n\t      voluntary retirement or resignation of an\t em-
\n\t      ployee  after ten years of continuous  service
\n\t      in the Company; he or his heirs, executors  or
\n\t      nominees as the case may be, shall be paid  as
\n\t      gratuity\t 21  days’  basic  wages  for\teach
\n\t      completed\t year  of  service,  subject  to   a
\n\t      maximum of 390 days basic wages.\n<\/p><\/blockquote>\n
\t      2.On  termination\t of the services  of  an
\n\t      employee\tby the Company after five years\t but
\n\t      less  than ten years of continuous service  in
\n\t      the  Company,  the employee shall be  paid  as
\n\t      gratuity\ta  sum equivalent to 13\t days  basic
\n\t      wages  for each completed year of\t service  in
\n\t      addition to retrenchment compensation that may
\n\t      be  admissible  to him  under  the  Industrial
\n\t      Disputes Act<\/a>, 1947.\n<\/p><\/blockquote>\n
\t      3.On  termination\t of the services  of  an
\n\t      employee\tby  the Company after ten  years  of
\n\t      continuous   service  in\tthe   Company;\t the
\n\t      employee\tshall  be  paid as  gratuity  a\t sum
\n\t      equivalent  to 17 days’ basic wages  for\teach
\n\t      completed\t year  of  service  in\taddition  to
\n\t      retrenchment   compensation   that   may\t  be
\n\t      admissible   to  him  under   the\t  Industrial
\n\t      Disputes Act<\/a>, 1947.\n<\/p><\/blockquote>\n
\t      4.An  employee  dismissed\t for  misconduct
\n\t      will  not be disentitled to gratuity,  but  in
\n\t      the   case  of  an  employee   discharged\t  or
\n\t      dismissed\t for  misconduct  causing  financial
\n\t      loss to the Company, the losS most be deducted
\n\t      and the balance shall be paid to the  employee
\n\t      towards gratuity.\n<\/p><\/blockquote>\n
\t      5.The  basic  wages  for\tthe  purpose  of
\n\t      gratuity\tshall  be the average of  the  basic
\n\t      wages  of\t an employee exclusive\tof  dearness
\n\t      allowance\t during the period of twelve  months
\n\t      immediately preceding the event entitling\t him
\n\t      to gratuity.\n<\/p><\/blockquote>\n
With  reference\t to,  clause 5 it is  said  that  while\t the
\nTribunal   has\tprescribed  a  consolidated   wage   without
\nindicating  what portion of that wage is the basic wage\t and
\nwhat portion the dearness allowance, the payment of gratuity
\nbased  on  an  average of the basic  wages  of\tan  employee
\nexclusive of dearness allowance is
\n814<\/span>
\nimpossible  to\timplement.  In our view this  contention  is
\nmisconceived  for  the reason that while  the  Tribunal\t has
\nawarded a consolidated wage without specifying what part  of
\nit is the basic wage and what part dearness allowance,\tthat
\nconsolidated  wage is the basic wage at a future  date\twhen
\nthe scheme of gratuity comes into force namely in 1968.\t The
\nTribunal  when it formulated the scheme was fully  aware  of
\nthe  fact that there would only be a consolidated wage\tfrom
\nthence\tonwards\t till new wage scales are  fixed  when\tmost
\nlikely basic wage and harness allowance will ,be  separately
\nfixed,\thaving\tregard to the price index existing  at\tthat
\ntime.\tWe  have not been referred to any decision  of\tthis
\n,Court\tlaying\tdown  that a  consolidated  wage  cannot  be
\ntreated ,as a basic wage in any subsequent year to the\tyear
\nin which it has been prescribed.  On the other hand there is
\nwarrant\t for the proposition that gratuity can be  fixed  on
\nthe basis of a consolidated wage.  In Hindustan\t Antibiotics
\nLtd. v. The Workmen & Ors<\/a>.(1), it was observed that gratuity
\nis an additional form of relief for the workers to fall back
\nupon  and  it would depend on the facts of each case  as  to
\nwhether the scheme, as prepared by the Tribunal was fair and
\nequitable.\n<\/p>\n
The  case of Management, Ghaziabad Engineering Co. (P)\tLtd.
\nv.  Its Workmen<\/a>(2), has been cited to show that the  quantum
\n,of  gratuity is only related to the basic wage and  not  to
\nthe consolidated wage but in our view this decision does not
\nsupport\t that contention.  In that case what this Court\t was
\nconsidering  was the gratuity applicable to the workmen\t who
\nare  being  paid wages consisting of  two  components-basic
\nwages  and 5001,, of the basic wages as dearness  allowance.
\nIt also appears that prior to 1960 the Company used to\tmake
\na  consolidated payment without specifying any basic  salary
\nor  dearness allowance but since 1960 in  every\t appointment
\nletter it was expressly recited that the ,employees will get
\na  consolidated\t salary consisting of 2\/3 of the  salary  as
\nbasic  wages and the balance as dearness allowance.  In\t the
\ncontext\t of these facts the observations of Shah, J.  as  he
\nthen was, at page 627 upon which reliance is being placed on
\nbehalf\tof the Appellant in support of the proposition\tthat
\ngratuity must be related to basic wage should be understood.
\nShah J. said :\n<\/p>\n
\t      “There is no clear evidence on the record, and
\n\t      precedents have been brought to our notice, to
\n\t      justify a departure from the normal rule\tthat
\n\t      the quantum of gratuity is related not to\t the
\n\t      consolidated  wage  packet but  to  the  basic
\n\t      wage”.\n<\/p><\/blockquote>\n
\t      On  the other hand the sentences that  follows
\n\t      immediately do not justify any rigid principle
\n\t      relating\tgratuity  to  basic  wage.   It\t was
\n\t      ,observed
\n\t      (1)   [1967] 1 S.C.R. 652.\n<\/p><\/blockquote>\n
\t      (2)   [1970] 1 S.C.R. 622.\n<\/p><\/blockquote>\n
\t      815<\/span><\/p>\n
\t      “A  departure  may be made  from\ttile  normal
\n\t      rule,  if\t there be some\tstrong\tevidence  or
\n\t      precedent\t in the industry, or conduct of\t the
\n\t      employer or other exceptional circumstances to
\n\t      justify  that course.  In the absence of\tsuch
\n\t      evidence,we  are\tof the\tview  that  gratuity
\n\t      should be related to the basic wage and not to
\n\t      the consolidated wage packet”.\n<\/p><\/blockquote>\n
In  that case as the basic wage and the, dearness  allowance
\nwas ascertainable because dearness allowance was  prescribed
\nas  a percentage of the basic wage there was no warrant\t for
\nrelating gratuity to the consolidated wage.
\nIn  Delhi Cloth & General Mills Co. Ltd. v. Workmen  &\tOrs<\/a>.
\netc.(1),  Shah,\t J. after a review of the various  cases  in
\nwhich  the  claim  of gratuity in  relation  either  to\t the
\nconsolidated  wage  or basic wage was  considered,  admitted
\nthat it was not easy to extractany principle from  these
\ncases, because they were conflicting. It was also  pointed
\nout that in Hindustan Antibiotics Ltd. v.Their
\nWorkmen<\/a>(2), the Tribunal had awarded a scheme for  gratuity
\nrelated to consolidated wages and that order was  confirmed.
\nEven in Remington Band of India Ltd. v. The Workmen<\/a>(3),\t the
\nclaim for gratuity being based on consolidated wages  though
\nchallenged  was\t accepted.   It appears to us  that  a\tmore
\nreasonable  way of reconciling this conflict is, that  while
\nno  doubt the general rule is that gratuity must be  related
\nto  the\t basic wage, in cases where the wages are  not\tvery
\nhigh  and  a consolidated wage has been\t fixed\ttaking\tinto
\naccount the dearness allowance, the schemes of gratuity\t may
\nbe related to the consolidated wage, which will be the basic
\nwage  in  subsequent year.  As we pointed  out\tearlier\t the
\nconsolidated wage will be the basic wage in subsequent years
\nand at any future date having regard to the price index, the
\nclaim of the workmen either for a rise in the wage based  on
\nthe  cost  of  living index or for  the\t grant\tof  separate
\ndearness  allowance to neutralise that rise is bound  to  be
\nconsidered and adjudicated.\n<\/p>\n
Lastly\tthe scheme is challenged as unfair  and\t incongruous
\nbecause\t those\tthat retire are given larger  benefits\tthan
\nthose  who  are retrenched.  But this criticism\t is  equally
\nunwarranted.  In the first clause of the scheme a worker who
\nvoluntarily retires or resigns after 10 years of  continuous
\nservice\t is to be paid as gratuity 21 days basic  wages\t for
\neach  completed year of service subject to a maximum of\t 390
\ndays  basic wages, while, under clause 3, on termination  of
\nservices of an employee after 10 years of continuous service
\nhe  shall be paid as gratuity a sum. equivalent to  17\tdays
\nbasic wages for each completed year.  The difference between
\nthe gratuity payable to persons who resign
\n(1)  [1969] 2 S.C.R. 307\/.\n<\/p>\n
(2) [1967] 1 S.C.R. 652.\n<\/p>\n
(3) [1968] 1 L.L.J. 542
\n816<\/span>
\nor  retire voluntarily and those services are terminated  is
\nthat the latter will receive in addition to the gratuity the
\nretrenchment  compensation  admissible\tto  him\t under\t the
\nIndustrial Disputes Act<\/a>, while in the case of the former  he
\nwill not be entitled to it.  The scheme, itself in clause  3
\nmakes this specific distinction.  We do not think that there
\nis  any\t justification for the several\tcriticisms  directed
\nagainst\t this  scheme.\tIn our view the scheme is  not\tonly
\nreasonable  but fair having regard to the interests  of\t the
\nworkmen and the financial capacity of the industry.
\nIn  the result both the Appeals are partly allowed  and\t the
\nAward is modified in respect of two items (1) that a payment
\nof  bonus of Rs. 20,768\/50 be made instead of  Rs.  42,783\/-
\nawarded\t by the Tribunal, and (2) subject to the  directions
\nalready\t given there shall be a fitment of the wages of\t the
\nworkers\t in  the new scales awarded by\tthe  Tribunal  after
\ntaking\tinto account one increment for every three years  of
\ncompleted  service up to the date of the statement of  claim
\ni.e., 15th January, 1966.  In the circumstances the  parties
\nwill bear their own costs in each of the Appeals.
\nG.C.\n<\/p>\n
Appeals partly allowed.\n<\/p>\n
817<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Indian Link Chain Manufactures … vs Their Workmen on 17 September, 1971 Equivalent citations: 1972 AIR 343, 1972 SCR (1) 790 Author: P J Reddy Bench: Reddy, P. Jaganmohan PETITIONER: INDIAN LINK CHAIN MANUFACTURES LTD. Vs. RESPONDENT: THEIR WORKMEN DATE OF JUDGMENT17\/09\/1971 BENCH: REDDY, P. JAGANMOHAN BENCH: REDDY, P. JAGANMOHAN VAIDYIALINGAM, […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-261397","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nIndian Link Chain Manufactures ... vs Their Workmen on 17 September, 1971 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/indian-link-chain-manufactures-vs-their-workmen-on-17-september-1971\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Indian Link Chain Manufactures ... vs Their Workmen on 17 September, 1971 - 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