lifa1ch I.

516 SUPREME COURT REPORT~ [1942] SUPP .

.tlANAGEMENT O.F THE D.C.M. CHEMICAL

WORKS

THEIR WORKMEN

(P. B. GAJE1'DHAGADKA!t and K. N. WANCHOO, JJ.)

Industrial Di.•1mte-Company underlnlcinq several conc•rns -If independent unit•-IVage "'ruclure-lncremenlal scale8- Mini1num u; age and fair 11:age, di.i1tinction--Oratuity in addition

lo Provident Pund -&heme for-If can be framed.

The disputes between the appellant, the management of the D.C.M. Chemical Works which was a constituent unit of the' Delhi Cloth and General Mills Limited (the Company), and its workmen related, inter alia, to \Vage scales and gratuity.

The workmen claimed that the chemical works was ail integral part of the Company and, therefore, the over-all position of the Company should be takr.n into account in fixing the wagestructurc. The Industrial Tribunal to which the matter was referred held that in the circumstance~ of the case the chemical works should be treated as an indrpendent unit and that the wage-slructur9 etc .• could not be fixed on the basis of the over. all position of the Company. The facts showed that though the Company \\'as a single limited concern O\vning and control!ing various industrial units of different kinds under it. There were certain features 'vhich \\'ent to show that the various undertakings carried on by the Company had been treated as independent concerns and could not lead to the conclusion that ti.icy were one integrated whole. It was found that (i) each unit had separate book• of account and separate profit and loss account, (ii) each unit had separate muster rolls for its employees, and transfers from one unit to the other usually took place with the consent of the employees concerned, (iii) each unit had its own separate wages and dearness allowance and bonus was also paid differently in each concern,(iv) wh<re sales took place from one unit to another they were at marke[ price and not at cost price, and (v) each unit had its own separate management. The evidence showed that throughout the cour!e of its existence sincr: 1942 the chemical works had made profits only in two years and that for the rest of the time it had been making losses which had to be met by the Company out of the profits of other uniLs.

Held, that on the facts found in the present case, there \Vas no nexus of integration be.tween different lines of business carried on by the Company and that the Tribunal was right ~

its conclusion that the .chemical works was an independent unit and that, therefore, in fixing the wage structure etc., one had to look to the position of the chemical works only and could not integrate it with other units.

The Associated Cement Companies Limited, Chaibasa Cement Works, Jhinkpani v. Their Workmen, (1960) I S.C.R. 703, Pratap Press etc. v. Workmen, (1960) 1 L.L.J. 497: Pakshiraja Studios v. Workmen, (1961) 2 L.L.J. 380 and Hony. Secretary, South IndiaMiilowners' Association v. Secretary, District

Coimbatore District Textile Workmen Union, (1962) (2) S.C.lt.

(Supp.) p. 926 relied on.

Fine Knitting Co. Ltd, v. Industrial Court, Bombay,

(1962) (3) S.C, R. (Supp.) p. l 96, applied.

Held further, that in making a direction for the fixation of an incrased fair wage on an incremental scale, the present financial condition of the concern and its stability are both nece_ssary to be considered.

There is a difference between a minimum wage and fair wage which is above the bare minimum wage.

In the former case the tribunal could insist that the employer paid minimum wages even out of capital.

Messrs Crown Alvminium Works v. Their Workmen, (1958) S.C.R. 651, referred to.

Held, also, that it is well settled that both gratuity as well as provident fund schemes can be framed in the same concern if its financial position allows it, and that though the financial position of the chemical works had not been found to be good and stable enough to warrant an incremental wage structure the direction given by the Tribunal for the fram:ng of a gratity scheme was not erroneous, as it was a long term provision and there was .D.o reason to suppose that in the long run the appellant would not be in a flourishing condition.

Crvn. APPELLATE JURISDIOTION : Civil Appeals Nos. 4 and 5 of 1962.

Appeals by special leave from the award dated January 25, 1960, of the Industrial Tribunal, Delhi in I.D. No. 40 of 1957.

A. V. Viswanatha Sastri, A. N. Sinha, and S.

Venkatakrishnan for the appellant (in C.A. No. 4 of

62) and the respondent (in C.A. No. 5 of 1962).

Managenunt of te

D.C.i1f. Chemiclll

Wsrks

•• Their Workmen'

.1.ll 41111gamnl of the

D.C.~M. Cllemical

Works

•• Tht fr Workmtn

ivanchoo J.

A. S. R. Chari, R. K. Garg, D. P. Singh, S. C. "'!yarvala ml M.K. Ramamurthi for the respon<l<'nts (m C.A. No. 4 of 62) and the appellants (in C.A.

No. 5 of u2).

1962. March l. The Judgment of th<i Court was delivered by

WAXCHOO, J.-These two appeals by special leave arise out of the ame award of the Industrial Tribunal, Delhi, and will be dealt with together.

Appeal :N'o. 4 is by the management of the D.C.M.

Chemical Works while appeal No. ii is by the workmen. The management hereinafter will be referred to as the appella.nt for tho purposes of both appeals and the workmen will be referred to as respondents.

A dispute arose between the parties with respect to various matters including wage scales, dearness allow!lnce and gratuity. As the parties could not come to terms it was referred to the industrial tribunal for adjudication and there were i>s muny as eleven iSBues which were the subject-matter of refer ence.

The main point howev<>r on which the parties differed was whether in determining the wage-structure etc. of thl' chemical works which is a constituent unit of the Delhi Cloth and General Mills Limited (hereirtafter called the Company), the over-all position of the Company should be ta ken into account or only the poition of this one unit, namely, the chemical works.

The respondents contended that the chemical works was an integral part of the Company and therllforo the over-all position of the Company should be taken into acoount and the wage-structure etc. fixed accordingly; in particular it was pointed out that there were difforonces in wage-structure etc.· between the various units which were controlled and ow1wd by tho Company and which wore all situate in the same area in Delhi and that thPso differences should be eliminated and all the enterprises in Delhi controlled by the Company should be treated on the same footing. On the other hand the oontentio11 of lie

3 s.b.k.

SUPREME COURT Ril:PORTS 519

appellant was that though the chemical works was one unit of a large number of industries controlled by the Company, some of which were situate in the same area in Delhi, the various units were independent industries and each unit had to be considered on its own and the wage-structure etc. fixed on the basis of the financial position of each unit ; in particular, it was urged that two of the main units in Delhi were the textile mills run by the Company and the claim of the respondents that the ch!lmical works should in all matters be treated on a par with the textile units was untenable, on the ground, among others, that it would be against the principle of industry-cum-region. Before therefore we take up the particular matters raised in the two appeals before us, we shall first have to consider whether the claim of the respondents that the overaU position of the Company should be taken into account in fixing the wage-structure etc.· of the chemical works is sound ; for if that position is accepted, the award may have to be set aside as the tribunal has held tha.t in the circumstances of this case the chemical works should be treated as an independent unit and that the wage-structure etc. therein cannot be fixed on the basis of the over-all position of the Company.

In order to appreciate the various contentions put forward by the parties on this question it may be useful to look into the history of the Company and how it has grown.

The Company came into existence in 1889 with a modest capital of about Rs. 10 lacs. It seems that the policy of those in control of the Company was to plough back a substantial part of the profits into the industry itself and to create a reserve for that purpose. Originally the Company started with a textile mill but in course of time with the help of ploughed back profits and also with the aid of further capital, the Company set up a large number of other industrial

11lanag1rruntofthe D.C.M. Chemic<I

Works

•• Their W or/mun

Wcncho J.

.U anagemtnl of tM D.C. M. Ch.mica/ w., A,

Theif, Worknl6n

rfanchoo J.

concerns in Ddhi and elsewhere. In Delhi itelf, the Company now has the Delhi Cloth Milla, thr Swatantra Bharat Mill~ which a.re both textile concerns, the D.C.i.. Tent J<'a.ctory ostahlishcd in

I 940, and the chemical works with whioh we are eoncernod in the present appeals.

Beside~. there a.re other industrial concerns owned and controll., d by the Company outsido Delhi, a.s for example, the Da.urala Sugar Works established in 1932, the Lyallpur Cotton Mills in 1934 and the :IIawana Sugar \Vorks in 1940.

The chemical works wore started in l9<12 and the only line of production a.t that time was sulphuric acid.

In 19,13, an a.luru plant was set up, in 1944 a. soap plant, in l\J45 a superphosphate plant and in 1946 contact sulphuric acid plant. In 1947 a vanaspati plant was established and also a. power house was erected in order to meet the requirements of tho vanasp<1ti plant. In 1948-49 a caustic soda plant was added so that what began a.s modest subsidiary to the textile mills ha8 now expanded into a. full fledged unit fur production of chemicals and vanaspati.

The total capital which was originally about Hs. 10 lacs when the Company started in 1889 has now grown to Ha. 4 crores.

Even so the capital employed in the chemical wcrks has always been found from the rnserves of th. Company and is now of the order of over a. crorc. It is also not in dispute that very little out of the production of the chemical works is used in the textile mills of the Company and that by far most of tho production is sold in the open market.

Furthr even the small part of the production that is used by other units is charged at market rates and not at cost price, so that for all practical purposes the chemical works is being run a.s an independent unit.

Certain features hi.vc however been pointed out by the respondents to show th9.t the over-all

position of the Company should be taken into account in determining the wage-structure etc. of the chemical works which should be treated as an integral part of the entire industry of all kinds carried on by the Company.

These features are: no unit has any separate paid up capital and there is no separate depreciation fund or reserve fund for each unit ; the Company publishes one balance-sheet showing the total profits . of all the undertakings after taking into account losses incurred in any undertaking ; the shareholders of the Company are the shareholders in all the units ; the Company has got one board of directors and a common managing agency and the policy of the various units is determined on , th~ basis of the Company as one integrated unit ; the p:ofits of the Company are all pooled together and the profits in any undertaking are not earmarked for expenditure in that undertaking; the dividends are paid from to profits of the Company as a whole; the Company.has a single provident fund for all its employees in all its units and the Company has established various units from the profits earned by the Company as a whole in the past and incometax is paid on the entire profits of the Company made by all the units after taking into account the losses, if any, incurred by a particular unit. It is urged therefore on behalf of tbe respondents that these features are sufficient to establish that all the different industries carried on by the Company are one integrated whole and therefore in fixing the wage-structure etc. for the chemical works this overall position should be taken into account. There is however in our opinion a very cogent reply to these features pointed out on behalf of the respondents, and t-hat is that the Company is a single limited concern owning. and controlling various industrial units of different kinds under it and therefore under the Company Law as the Company is one legal entity these features are bound to be common and may not to enough to lead to the conclusion that

M anagemenl of the

D.C.M. Chemi<al

Works

v, Their· W or.imm

Wanchoo J.

Jy1;-;

J/ tJMKtmwnl of Che D.C.M. C"""ical

JVork1

T!wfr Wor.bnen

Wonchoo J.

~22 SUPREME COURT REPOl~TS [l!JB2] SUPP.

the vttriou8 undertakings carried on by the Company are one intograted whol" and therefore when wa.gestrueture etc. hM to be fixed in any particular unit the over-all poition of the Company as a whole must be taken into account.

On the other hand there are certain features which havo been pointed out by the tribunal and . which are not in dispute which go to show th'.Lt the Company bas been treating its various unitll as inuepcndent concerns in actual practice. Each unit bas separate books of account and separate profit and l<iss account Hhowing how each particular business is faring. Each unit has separate muster-rolls for illl employees and transfers from, oc unit to the other, even wbero such transfers,,. are possible considering the utterly different kinds of business that the Company is <>.arrying on, usually take place with the consent of the employees concerned.

Further each unit bas got its own separate wa.ges and separate dearne88 allowanco and other different allowancell and bonus is also paid differrntly in e11eb concern.

Further even where eales take place from one unit to anothl'f tht1y take place at market rate and not at cost price and are adjusted on this basis in the books of account.

Lastly though there is a common board of directors and a common managing agency of tho Company. each unit has its own separate management as it is hound t-0 be for tho businc..'18 carried on by ditr'erent units is in many cases utterly different.

It is on theso facts that we have to seo whether the chemical works can he said to bo so integrated with the other units of the Company as to justify the conclusion that it is part of the samo business, and the entire business carried on the Company is one establishment, and therefore it would not be right to have different wagestructure, dear_ nese allowance, etc., in the same est'lbli!lhment•

' I

This matter was considered by this Court in connection with lay-off in The Associated Cement Companies Limited, Chaibasa Cement Works, Jhinkpani v, Their Workmen(1), where tests were laid down for determining whether. a particular unit is pa.rt of a bigger establishment. These tests included geographical proximity, unity of ownership, management and control, unity of employment and conditions of service, functional integrality and general unity of purpose. But it was pointed out that it is was impossible to )1, y down any one test as an absolute and invariable test for all cases and the real purpose of these tests was to find out the true relation between the parts, branches, units. If in ti:; ir true relation they constitute one integrated whole, then the establishment is one ; if on the contrary they do not constitute one integrated whole, each unit is then a separate unit. How the relation between the units will be judged must depend on the facts proved. Thus in one case the unity of ownership, management and control may be the important test, in another case, functional integrality or general unity may be. the important test; and in still another case, the important test may be the unity of employment.

It was pointed out that in a large number of cases several tests may fall for consfoleration at the same time and the difficulty of applying these tests arises because of the complexities of modern industrial organisation. The matter was considered again by this Court in Pratap Press etc. v. Workmen ( 2 ), Pakshiraj Studios v. Workmen( 3), Hony. Secretary, South India Millowners' Association

v. Secretary, District Coimbatore District Textile Workmen U nio.n (') and Fine Knitting Co. Lti/,. v. Industrial Court, Bombay('). In the case of Fine Knitting Co., this Court was considering one limited company but it was held in t.he . circumstances that even though there was unity of ownership, management and control the two parts of the same concern were

(1) [1960] 1 s.c.R. 703.

(2) [1960] l L.L. J. 497.

(3) [1961] 2 L. L.J. 380.

(4) C. A. 419 of 1960, decided on 1-2-62.

(5) C.A. S06 of 1961, decided on 15-2-1962.

M anagemmt of thd

D.C. u. Chemical

Works

Thei.r Workmen

Wanchoo J.

llltil

/Jl cinogm:ent of tht- D .C.M. Ct..mical

Wor.i:s

Y, Their ff'orkmm

Wane/Joo J.

diffrrcnt uuits as th<'re waR no functional integrnlity between them. It is on the basis of these tests that we havti to consider whether the tribunal WM right in its conclus10n that the ohcmical works has to be treated as an independent unit.

The common features which have been emphasised on behalf of t.ho respondents are in our opinion clearly capable of Pxplanation on tho ground that the Company is a limited concern and carries on different kinds of business.

But as in law under the Companies Act, the Company being a limited concern is one legal entity, the Common features on which the respondPnts rely follow from that one single cirrumetancc, namely, that the

Company is a limited concern governed by the Company Law. It would thorefore in our opinion be not right to emphasise these common features and to hold on their basis only that the various buRinesses carried on by the Company have to be treated as one integrated whole for the purposes of

waµe-Rtrncturc etc. The outstanding fact in the present case is that though a large number of businesses is being carried on by the Company their nature in many caaes is utterly different and one has generally speaking nothing to do with tho other. The three main lines of business whioh the Company is carrying on are Rugar, textiles and chemicals. It is obvious that there is nothing common between these threedifferent lines of business and there can be 110 question of one depending upon the other and there cannot be functional integrality generally speakin!! between these three lines of

business.

There might be some connection speaking between the nhcmieal works and the textile mills of the Compa11y inasmuch as some of the chemicals might be used in the textile mills; but the evidence shows that a very small proportion of tho chemicalR produced in the chemical works is used in the textile mills and that most of the production is sold in the open market. It cannot therefore be eaid that the ohemical worka 88 it now

exists is therefor the purposes of the textile mills and is thus integrated with the textile mills. Even in the matter of employment. the evidence is that there is separate recruitment of labour for the different units and each unit has separate muster rolls of employees and this is quite natural considering that different skill is required for the three lines of business carried on by the Company. It cannot also be said that there is any essential dependence of the chemical works on the textile units or that one cannot be operated without the other. Further the way in which the Company has been dealing with different units in the past also shows that they have been treated as independent units. Each unit has its own separate labour union and separate agreements are entered into between the Company and its unions with respect to the conditions of service which are also different for different Units. Even in thematter of bonus there are differnnces between the different units and these differences sometimes arose out of different agreements between the various units and their unions. It appears that even in the case of units carrying ori the same business, as for example, textile, the workmen themselves contended in an earlier adjudication that the Delhi Cloth Mills and the Swatantra Bharat Mills were two distinct and separate units of the Company. In any case whatever may be said as to the units in the same line of business it is in our opinion perfectly clear that there is no nexus of integration between different lines of business carried on by the Company on the facts which have been proved in this case. We are of opinion therefore that the ratio of the decision in the Fine Knitting Co.'s case(') applies to the facts of this case and it must be held that the chemical works is an independent unit and therefore in fixing the wage structure etc. we have to look to the position 9f the chemical works only and cannot

(o) C.i\. 306 ofl961, decided on 15-2-1962.

Management ofche D.C.M. Chtmital

Work•

•• Their Workmen

Wanchoo J.

}if 1114.('tmtnl qi llk /J. ',\!. Ch<no<41

Jf' PtkJ

v. 7 li.lr U-'or.bntn

IVanchooo, J.

integrate it with other units and consider its wage structure etc. on the basis of such integration.

It is in the background of the above finding, namely, that the chemical works is an independent unit that we now come to the specific points raised in the two appeals. We shall first take the appeal by tho workmen. The following four contt-ntions 'only were pressed before us on their behalf:-

(i) Even considering the chemical works aa tin independent nnit, the tribunal should have fixed a wage structure including incremental scales ;

(ii) The trihunttl should have given the same minimum scales to the workmen cmplo yed in t-he canteen a.A are being given to the oth!'r workmen in this concern ;

(iii) The t.ribuna.l ghou ld have madn those members of the dvil engineering department who had been working for more than one year permanent and shou J<I h>tve given them t.l1e same wrms and conditions of ervice n.s are enjoyed by other workmen of the concern ;

(iv} The tribunal hould have awarded rurther bonus to the workmen.

Re. ( i).

The contention on behalf of the respondents in this respe<:t is thatthere are no incremental scales in this concern and the tribunal should have at any rate made a beginning by fixing some inoromental scales for the workmen. The tribunal however baa refused to fix incremental scales on the g-round that the concern htts neither financial ability nor stability to justify the fixing of inercme11ta.I scale, a at the resent tie. It is not in dispute that throughou~

the course of its existence the chemical works has made profits only in two years and that. for the rest of the time it has been making lossos which had to be met by the Company out of the profits of other units. Reliance in this <:onnection has been placed on behalf of the respondents on certain observations in the Tariff. Commission Report and on a book called "Fertilisers Statistics in India" to show that the chemical industry has a very prosperous future in front of it. Reliance has also been placed on a communication addressed by the appellant to the respondents in which it has been said that judging from sound business principles the chemical works had not yet turned the corner of losses, but the position appeared brighter, and it was hoped that with the co-operation of labour the chemical works would be an asset to the D. C. M. family. Our attention has also been drawn to various annual reports in which an optimistic picture has been painted by the directors for the benefit of the shareholders. We agree however with the tribunal that in spite of the possibility that in time to come the . chemical works might acquire stability and prove a source of increasing profit to the. Company, the fact remains that upto now the chemical works has been running at a loss except for two years and

one cannot be certain that it will start earning pro .. fits soon. In these circumstances it seems to us that the tribunal was justified in not framing rm incremental scale of wages at the present juncture

as that would put a heavy strain on the finances on the chemical works which has yet to attain financial stability. At the present moment the losses incurred in this unit have to be met from the profits earned in other units of the Company and in this situation we do not think that the tribunal was wrong in refusing to frame incremental scales.

It is however urged on behalf of the respondents that if in the corse of the last twenty years the capital invested +n tl!e ce!llical worJ-s bas urea.seq

196!

M ant1gemmt of lh e D.C.M. Chemical

Workr

Their Workmen

Wanchoo J.

19~1

M anag"""" of th1 D.C • .\f. Chemical

Work4

•• Their Workmen

Wanchoo J.

tremendously as compared to the modest amount with which it was started in 1942 and if the Company can find capital for the purpose of expansion, it should be able to pn.y incremental scales of wages by dipping into tho same source from which it has ben able to find ca.pit.al.

In effect this argument means that even though the concern may be making losers year after year it should find money for p:iying the labour force higher wageR in spite of tho circumstance that that may load it into incurring further losses.

The argument seems to ho that even though there may be losses the concern must pay higher wages to the workmon and if necessary pay them out of what may be called capital. Now this argument would in our opinion bo unanswerable if the cla.im was for what is called mumnum wage: (Seo Messrs Ctown Alu.miniwn Works v. '/'heir Workmen ('). If tho wages paid by tho appellant in the present case were below tho minimum wage t.ha.t the tribunal would eertainly be justified in ordering it to pay the minimum wage, for no industry can have a right to exist if it cannot pay wages at the bare subsistence level. Where

it is a case of payment of minimum wago, the tribunal can insist on the same being found, if necessary, even out of. ca.pita!.

But this is not a case of hare minimum wage and we are dealing with a case of fair wage which is above the bare minimum wage.

It is not even the case of the respondents that they are not getting the bare minimum wage. !'heir case is that they should he given a fair wage, and that the present wage~, though above the bare minimum wage, arc still not fair cnou!h and therefore should b"e increased and an incri; mental scale should be fixed.

In such a situation we are of opinion that the present financial condition of the concern and its Rtability are both necessary to be considernd before an irwr<'ased fair wage can be given. Both tho present capacity of

(I) [1958] S.C, R. 651.

of the employer to pay the increased rates of incremental wages and its future capacity have to be taken into account in determining an increased level of fair wages based on an incremental scale. Thus both financial ability at present and financial stability in the near future must be there to justify fixation of an increased fair wage on an incremental scale.

We do not think it will be right to insist on an increased fair wage on an incremental scale in a case where the financial capacity and the financial stability as judged by business principles are both lacking. Nor would it in our opinion be right to compel the employer to bear the burden of an increased fair wage on an incremental scale and tell him to find money from what may in effect be capital, for such a situation in ordinary cases can lead only to one result, namely, the closure of the business concern, which may be more detrimental to the workmen.

Therefore carr,, ying on with the present scale of fair wages and hoping that the financial ability and stability of the concern will improve, with the result that increased fair wage on an incremental basis may be fixed in future is the only alternative at present even in the interest of the workmen employed in this concern.

We therefore agree with the tribunal that in the circumstances no case has been made for fixing an incremental scale of wages at the present juncture. The contention on this head must therefore be rejected.

Re. (ii).

As to the canteen workmen, it appears that the canteen is run by the appellant departmentally on a no-profit-no-loss basis.

The workmen employed in the canteen are the workmen of the appellant and their number is sixteen or seventeen. The minimum basic wage for unskilled workmen in this concern at the relevant time was Rs. 38.plus Rs. 55 i.e. Rs. 93; but. the workmen. in the .canteen get consolidated wages and all of them (except one) get

Management pf the D.C.M. Chtmical

Works • v.

Their Workmen

Wanchoo J.

Managttnt11i of the D C.M. Chemirfl/

Works

Thftr W orknwi

W411thoa J,

530 SUPREME COURT REPORTS (1962] SuPP.

much lesa than the minimum, the figures vuying from Rs. 50 to Rs. 78.

The tribunal ha.a held that there is no reason why the conditions of surviec of the workmen in the oa.nteen should not b., brought on a. par with tho conditions of service of the rest of tho workmen. It therefore ordered tha.t the workmen in the can teen wou Id be en titled to the samo facilities relating to leave, provident fund, bonus, and gratuity etc. a.s are available to the other workmen in the chemical works ; but so far a.s wages and dearness allowance are concerned, it has not given them cve.n the minimum as indica.ted a.hove. '1:he case of the the appellant was tha.t oven if the minimum was paid to the workmen in the canteen the price of the various food-stuffs supplied by the canteen to the workmen would go up substantially and it wa.s on tha.t ground that the appellant resisted the increase in the wages of those workmen in the canteen who a.re getting less than the minimum of Rs. 93.

The tribunal ha.a hehl-a.nd we think rightly-that the fa.et that the bettering of the conditions of service of the workmen in the canteen may lead to a. rise in the price of things sold there is no reason for refusing the demand of the workmen ; but it has not carried into effect fully the implications of this observation. It has ordered thatsamc conditions as to leave facilities etc. should be extended to the canteen workmen but has stopped short of giving them the sa.me wagos a.nd dearness allowance. The reason why the tribunal did not give the workmen the same wages and dearness allowance is that thero wa.a no satisfactory material before it to permit it to fix wages and dearness allowance for the workmen in the canteen.

We are of opinion tha.t there is no reason why the tribunal should not ha.ve at least granted the minimum which is pa.id to the other workmen in the ('.Once£n to those workmen in the canteen who are getting less than . the minimum.

We can see no reason for not giving them a.lso the

1. -

mimmum wages as indicated above. This will certainly result in bringing the fifteen workmen who are getting between Rs. 50 and Rs. 78 per mensem as consolidated wages into an equal position, for each will then get the minimum, namely, Rs. 38 plus Rs. 55 and may remove part of the discontent. In the circumstances that is all that can be done in the absence of the material to which the tribunal has referred. Therefore the wages of those fifteen workmen who are getting less than the minimum should be brought to the same level.

There is no reason why they should not get such benefits as may be due to them, by their wages being brought to the same minimum as the wages . of the other workmen in the concern. We therefore disagree with the tribunal with respect to the workmen employed in the canteen and order that the wages of those workmen who are getting less than the minimum paid to the other workmen in the concern should be brought to the same minimum level. The rest of the award on this head will stand. The minimum wages as above will be paid from the date the tribunal has ordered its award to come into force.

Re. (iii).

The claim of the workmen in this connection was that there were 300 workmen employed in 1he civil. engineering department and that they should be made permanent. The tribunal however rejected this contention and pointed out that most of the workmen were.· temporarily engaged to carry on construction work which was of a temporary nature and therefore they could not be made permanent simply because the construction had Jasted for more than a year. This view of the tribunal is in our view correct in so far as the claim put forward with respect to all the three hundred workm,.n was concerned. It appears however that at the time when the tribunal recorded.

Managemem of the D.C.M.. Chmical

Works v.

Their W orkmePI

W dJJ&hoo J.

Alan-.gtm1n1ojtht D C.M. CA, mical

Works

v. 7 Am W ur/mun

H'anthoo J.

532 SUPREME COURT REPORTS [l!l62J suPP.

evidence tho large majority of these 300 workmen had been discharged because they were no longer required and only about Ci5 remained in service.

It appears from th" evidencc of thP Joint Works

~Ianager that a skelt>ton st<iff on the civil ongine<'ring side is kept for maintenance of buildings and this skeleton staff is of a more or less permanent nature. The argument therefore before us is that at any rate this skeleton staff should be made permanent. It was however urged on behalf of the appellant that this was not the way in which the matter was put before the tribunal. The poRition now is however clear that a skeleton staff is kc, pt on a pt•rmanent basis for the ci vii engineering department and it seems to us fair that the appellant should be directed to make this skeleton staff permanent and give them the same facilities and wages etc., as are given to the other workmen.

We therefore direct that the appellant shall make such of the skeleton staff as is maintainod for civil engineering purpose permanent and give them tho same conditions of service including the same minimum wages etc. as to the rest of the workmen.

It is however left to the discretion of the appellant to determine what should bo tho strength of this staff and which persons should Lo rerained as permanent employees. We say this because tho matter was not gone into from this point of view

before the tribunal and wo have no material on which we ourselves can determine the strength of the skeleton staff and the persons who should be made permanent on that account. The direction will be given effect to within throe months of this judgement.

Re. (iv):

The W<>rkmen have been given 2 1/2 months basic wages as bonus for tho years in dispuk, namely, 1!153-54 and 1954-55. They have claimed additional bonus. It is however conceded fairly

on behalf of the respondent that if the chemical works is treated as an independent uuit their case for additional bonus on the basis of the Full-Bench formula cannot succeed. The demand for additional bonus was rightly rejected by the tribunal, considering the chemical works as an independent unit. We may add that this case is distinguishable from the case of Hony. Secretary, South India Mill-oUJMrs Association, (1) for here the two lines of business are distinct and have nothing to d0 with each other.

This brings us to the appeal by the appelJant.

Five points hiive been urged on behalf of the appellant. They are: (i) dearness allowance; (ii) uniforms, (iii) acid and gas allowance.

(iv) leave facilities, and (v) gratuity. We shall deal with them one by one.

Re. (i).

So far as dearness allowance is concerned, the tribunal has ordered that the dearness allowance in the chemical works shall be fixed at the same rate as it is in the power house which is a part of the chemical works. It may be m3ntioned that dearness allowance at the relevant tim11 in the chemical works was Rs. 55 per mensem while in the power house it was Rs. 66 per mensem. Tbe contention on behalf of the appellant in this connection is that the reason why there was this diffe- ,.. rence between the dearness allowance in the power house and in the rest of the chemical works is historical. It is further pointed out that though the difference in the two dearness allowances is H s. 11 the actual difference in the total wage packet was only Rs. 3 inasmuch as the minimum. basic wage in the power house was Rs. 30 while in the chemical works it was Rs. 38 at the relevant time.

Thus the minimum that an employee was getting in the power house was Rs. 96 while the minimum for the rest of the workmen was Rs. 93,. and it is - Pl C.A. 41U of I W 1, <l•cid<d OD l-2·1962.

111an1gement of tht

LJ.C.M. Chemical

JVorks

Their Workmen

~V anchoo J.

1962 •

Monagttn#nl of the D.C .lit. Chnnical

U'orks

Their H orlmen

'Vanchoo J.

urged that the difference is not serious. The reason that the tribunal gave for increasing the dearness allowance for the other workmen in the concern was that there was no ground for dis criminating between the workmen in the power house and the rest of the workmen. In increasing the dearness allowance on this sole ground the tribunal ignored firstly the historical reason why there was this difference between the dcarn088 allowance for the power house staff and for the rest of the workmen and also ignored the difference in the basic minimum wages in the power house and for the rest of the workmon. It further s<'ems to have ignored its own earlier finding .that the chemical works was running at a loss and did not have the financial capacity to bear further burden. As a matter of fact it appears that but for this discrimination which the tribunal found between the rate oC dearness allowance for the powor house employees and the rest of the workmen it may not have made any change in the dearness allowance payable to the rest of the workmen. It may be mentioned that the system of dearness allowance in the concern is to allow neutralisation at the rate of 2-l/2 annas (now 17 nP.) for each point rise over the workir:ig class cost of living index treating the base as 100 for the year 1939. It may also be mentioned that since the reference was ma.do there has been a voluntary increase in tho dearness allowance for the rest of the workmen at the rate of Ra. 6 per mensem.

The reason why this difference is existing between the rate of dearness allowance for the power house employees and rest of the workmen

is that for sometime the power house was integrated with the Swatantra Bharat Mills. Therefore as an integral part of the cotton textile industry tho rates of basic wages and dearness allowance

....

in the power house were the same as in the cotton textile business of the company. Thus the rates there at the relevant time were, as we have already said, Rs. 30 basic wage and Rs. 66 dearness allowlance.

At that time the minimum .wage in the chemical works was Rs. 38 basic plus Rs. 55 dearness allowance i.e. Rs. 93 in all. It appears however that there wa.s some objection by the Excise Departmel\t of the Government as there was a gate between the Swatantra Mills and the chemical works.

The Excise Department wanted this gate to be blocked iu order to have better control over the excisable articles produced in the chemical works. The appellant therefore had to block up this gate in 1950 a.nd therefore the power house which existed on the chemical works side of this gate was transferred from the Swatantra fills to the chemical works. However as the. power house workmen were getting the textile rates, the Company assured them that though they would thereafter be under the control of the chemical works they will be governed for tho purposes of pay scales and dearness allowance etc. by the rules of the Swatantra Mills. It is this circumstance which has resulted in different scales for the power house staff and the rest of the workmen of the chemical works. It further appears that there was some retrenchment in the power house in 1957 and the retrenched workmen were absorbed as far as possible in others units. At thn, t time there was an agreement between the Company and the power house workmen and it was agn:ed that these workmen would be absorbed in other units but they would accept the conditions of service etc. of those units where they were absorbed, with the result that only those who are left in the power house continue on the textile scales of the Swatantra Bharat Mills.

These circumstances however were not taken into account by the tribunal at all when it ordered that the power house scale of

Management flj lhe D.C.M. Chemical

Works

•• Their W orkrrun

Wanchoo J.

,\fa11a:cmP'll of the /) .C. ~1. r:emical

1r 01A:s

' . ?"htir If orknu111

dearness allowance. should be introdueed for the rest of the workmen also. The power house 8cale is really the textile scale and the appellant contended that it would lead to a good deal of complication if the textile scale of dearness qllowauce is ordered to be introduced for tho chemical works.

We are of opinion that thero is force in this contention raised on behalf of the appellant and tho tribunal was not juRtified in increasing the dearness allowance for the chemical works merely because of this fortuitous circumstance a.rising out of historical reasons. In any case the number of the power house workmen is very small, say about 30/40, who who are getting a difforent rate of dearness allowance. l•'urthcr it appears that there was not much difference between the total wage packet for the power house workmen and for the rest and that was another reason 'why the tribunal should not have introduced the power house scale for tho rest of the workmen. [t has however been urgPd on behalf of the repondonts that the difforonce in the basic minimum wages between the power house workmen and tho rest of the workmen in the chemical works has <lisappe, ircd afwr the recommendations of the Textile Wage Board by which the minimum ba.ic wage for textile workers has been increased by Jis. 8 and it became Rs. :!8 from January l, l\l60. Therefore, it is urged that there is no reaRon why tho tribunal's award with respect to making the dearness allowance for the rest of.

the workmen the same as the workmen of the power house should not be allowed to stand. Superficially,

this argument looks attractive ; but if one examines it in the light of the T0xtile Wage Board's recommendations it will be found that the linking of tho dearness allowance for tho chemical work's workmen with the power house workmen would load to endless complications, for the power house workmen would be entitled to the same dearness allowance etc. 118 would govern the tox; tile workmon in the

3 S.C.R.

SUPREME COURT Rl!]PORT3 , 537

Swatantra Bharat Mills. The Textile Wage Board report shows that it recommended not only that the basic wage should be increased but also that a large part of the dearness allowance should be merged with basic wage, the remainder alone remaining as dearness allowance. It'is submitted on behalf of the appellant that it has carried out the recommendations of the Textile Wage Board and the result of the same has been that the basi9 wages of the textile workmen which would apply to the power house workmen would be fhed at about Rs. 88 or Rs. 8ll and the dearness allowance would be reduced , to about Rs. 15.

It is urged that the practical linking of the dearness allowance :(or the rest of the workmen with the dearness allowance in the power house whioh has been ordered by the .tribunal on the ground that there should be no discrimination, would result in endless trouble, apart from the question whether in view of the earlier finding of the tribunal as to the financial capacity of the appellant it would be possible for the appellant to bear the extra burden of the increased dearness allowance. The operative order of the tribunal is that the. ';"Orkmen of the chemical works, excluding the workmen who are governed by Ex. W/2, should be paid dearness allowance at the rate at which it is being given to the workmen of the power house, and this undoubtedly in our opinion would lead to endless trouble now that the recmnmendations of the Textile Wage Board will for historical reasons apply to the workmen in the power house.

We are therefore of opinion that the ground on which the tribunal ordered the rate of dearness allowance for the other workmen of the chemical works to be paid on a par with the rate for the power house is not sustainable and the tribunal went wrong in not giving due weight to the historical reasons for the rates prevailing in the power house. Further we are of opinion that the increase is not sustainable on its own merits on the rounq

. 1962

M anagtment of tht D .C .M. Chemical

W01ks

v,," Thir W Or km en --.- , WanCoo', J~

M anog"""'1 •f •At D.C.M. Chemical

Works

Tluir Workmen

Wane.loo J.

of tho financial capacity of the concern, which the tribunal itself found was not sound. as tho conrern had been running at loss practically sinrc it camo into existence except for two years. The contention therefore on behalf of the appellant 011 this head must be accepted and the order of the tribunal increasing the dearness allowance set aside.

Re. (ii).

As to uniforms, we see no reason to differ from the view takC'n by the tribunal. The roason's given by tho tribunal for ordering that uniforms should be given to certain category of workmen are in our 1 opinion sound. But the tribunal has made a mistake when it went on to order that protective equipment ahould also be given in addition to uniforms, to the persons found entitlP-d to w1iforms according to the directions of the tribunal.

The tribunal seems to have overlooked the difference between uniforms and protective equipment; which is provided in the Delhi Factory Rules.

So far as protective equipment is concerned, it is given for certain specific purposes to be found in tho ltules and has no connection with uniforms which employers are ordered to supply to their workmen, for reasons entirely different.

We are thereforn of opinion that the direction of the tribunal that proteotiye equipment should also be supplird to persons founct entitled to uniforms under its order, is not correct and should be set aside.

So far as protective equipment is concerned, it will only be supplied to those who are entitled to it under tho

".1 Delhi Factory Rules and not necessarily to all to whom µniforms may have to be supplied under the orders of the tribunal. We order accordingly.

Re. (iii).

As to aci<l and gas allowance, the tribunal ha.A: ordered the faymcnt of Rs. 3 per month to certais categories o workmen. It appears that originalln

the appellant used to pay Rs. 5 as acid and gas allowance in the Nitric acid gas plant and Rs. 3 in the contact plant. Later, however, this gas allow- . ance was merged in pay. But it appears that gas allowance is still being paid to the workmen in the nitric acid gas plant. It is contended on behalf of the appellant that this was because the gas allow ance in the case of these workmen was not merged in pay. There is, however, nothing on the record to prove this. As the record stands we have no reason to hold that the gas allowance which was originally paid to the workmen of the nitric acid gas plant was not merged in their pay. On the whole therefore the reasons giv!'n by the tribunal for making the allowance of Rs. 3 to those workmen who are engaged in the manufacture of chlorine, sulphuric acid, caustic soda and hydrochloric acid appear to us to be sound end we see no reason to interfere with that part of the award.

I ' Re. (iv).

So far as leave facilities are concerned, the tribunal has awarded that privilege should be granted as provided under the Factories Act.

It has further provided that casual-cum-sick leave should be granted for twelve days in the year. We do not think that this award is in any way unreasonable. The tribunal has however gone on to deal with festi v.al holidays, and that in our opinion the tribunal had no jurisdiction to do.

The reference was in these terms : "Whether leave facilities should be increased, and if so, to what extent".

There was no reference with respect to holidays.

The tribunal has however taken the view that holidays are. covered within the words ·"leave facilities" used in the order of reference. We are of opinion that this view is incorrect. . Holidays are entirely different from leave fadlities. On a,

Managemenl oftht D. C. M, Chemical

Works

Tluir W 11kmen

Wanchoo J,

M •MfltmMI af the JJ. C. M. ChtmiCal

Works

v. '• Thrir 0Wrkm1n

Wandlao J,

SUPREDU'.: COURT REPORT3 [1962] SUPP.

holiday the entire business is closed and no one works while leave faoilities deal with leave for individual workers while the busin•ess as a wholo is running. \Ve may in this connection refer to item 4 of tl1•3 1'ilir, i SJhedule to the Ind11strial Disputes Act (o. l-1of L9!7), which is in theso terms : ·

"Leava witl1 wages and holidays".

This shows that holidays stand on a different footing altogether from leave with wages and a reference with respect to leave facilities cannot include a consideration of holidays.

The tribunal's order with respect to holidays is set aside.

Re. (v).

Lastly we come to the gratuity scheme sanctionrd by the tribunal.

It is true that in this concern there is already a provident fund scheme in force.

But it is now well settled that both gratuity a.s well as provident fund schemes can he framed in the same concern if its financial position allows it.

It is true that the financial position of the chemical works has not been found to bo good and stable enough to warrant an inoremental wage-structure ; but gratuity is a long term provision and there is no reason to suppose that in the long run tho appellant 'viii not be in a flourishing condition. As to the burden of tho scheme, we do not think that, looking at it from a practical point of view and taking into account the fact that there are about 800 wotkmen in all in the ooncern, the burden per yoar would be very high, considering that tho numbor of retirements is between three to four por centum of the total strength.

Fnrther we find that in this very concern there is a gratuity schem-3 for clerks who number between 100 and 200 and aro part of tho labour force. \Ve can .see under the circumstanco1< no reason why a similar gratuity

cheme should not be framed for the rest of the

a s.c.R. SUPREl\lE COURT REPORTS

~ ' I 541

1962 k We therefore see no reason to interfere wor men. ·. t with the order of the tribunal in this respec ·

We therefore allow the appels .in par~ and dismiss them in part in the manner md1?ated m the course of this judgment.

In . the mrcumstances parties will bear their own costs m both the appeals.

Managtment of the

D. c. M. Chmiical

Works

Appeals allowed in part.

PRATAPRAY MANMOHANDAl::i ·

BOMBAY BULLION AS~OCIATION LTD.

(J. L. KAPUR, K. 0. DAS GUPTA and RAGHUBAR

DAYAL, JJ.)

Bullion Association-Member owing amount to creditor- Pailure to submit Kapli (voucher) for amount - Committee declaring him a defaulter-Legality of -Giving of opportunity to •ubmit Kapli if denied-Bombay Bullion . Asaociation Bye Laws 155 (4).

The appellant was a member of the Bombay Bullion Association Ltd.

He entered into certain forward transactions with certain other persons.

According to the bye-laws of the Association the appellant had to submit a balance sheet and to give kaplis (vouchers) for the amounts due from him, but the appellant did not include the amounts due from him in the balance sheet nor did he give the kaplis on the ground that these transactions were fictitious and illegal.

On the settlement day the Clearance House committee called upon the appellant to appear before them.

Before the Committee the appellant took the stand that they had no jurisdiction to proceed with the matter as he was claiming arbitration. Th committee passed a resolution declaring him a defaultere The: appellant filed a suit challenging the resolution. inter alia. on the ground that the Committee, after its decision, was bound, under bye-law 155 (4) to give him an opportunity to give the kaplis before it could declare him a defaulter.

The bye-law provided:-

Tluir W •rkm1n

Wonohoo J,

March 2.

THEIR WORKMEN

K. N. WANCHOO, JJ.

MANAGEMENT O.F THE D.C.M. CHEMICAL WORKS

as in law under the Companies Act

s. 11

Delhi Factory Rules

Factories Act


a s.c.R. SUPREl\lE COURT REPORTS

~ ' I 541

1962 k We therefore see no reason to interfere wor men. ·. t with the order of the tribunal in this respec ·

We therefore allow the appels .in par~ and dismiss them in part in the manner md1?ated m the course of this judgment.

In . the mrcumstances parties will bear their own costs m both the appeals.

Managtment of the

D. c. M. Chmiical

Works

Appeals allowed in part.

PRATAPRAY MANMOHANDAl::i ·

BOMBAY BULLION AS~OCIATION LTD.

(J. L. KAPUR, K. 0. DAS GUPTA and RAGHUBAR

DAYAL, JJ.)

Bullion Association-Member owing amount to creditor- Pailure to submit Kapli (voucher) for amount - Committee declaring him a defaulter-Legality of -Giving of opportunity to •ubmit Kapli if denied-Bombay Bullion . Asaociation Bye Laws 155 (4).

The appellant was a member of the Bombay Bullion Association Ltd.

He entered into certain forward transactions with certain other persons.

According to the bye-laws of the Association the appellant had to submit a balance sheet and to give kaplis (vouchers) for the amounts due from him, but the appellant did not include the amounts due from him in the balance sheet nor did he give the kaplis on the ground that these transactions were fictitious and illegal.

On the settlement day the Clearance House committee called upon the appellant to appear before them.

Before the Committee the appellant took the stand that they had no jurisdiction to proceed with the matter as he was claiming arbitration. Th committee passed a resolution declaring him a defaultere The: appellant filed a suit challenging the resolution. inter alia. on the ground that the Committee, after its decision, was bound, under bye-law 155 (4) to give him an opportunity to give the kaplis before it could declare him a defaulter.

The bye-law provided:-

Tluir W •rkm1n

Wonohoo J,

March 2.

196t

PrJtdpr_, iy

.l anmohond as v.

Bomb<!Y Bullion

AuociotiOA lJd.

Kop., J.

542 SUPREME COUB.T REPORTS (1962] SUPP.

"Jf any member docs not submit a kapli in the prescribed form in respect of the amount found cla1mable from him to hi; party (creditor), the Clearing Ho"se Commi!lee shall call him and demand an explanatio; i from him and can there after, if such a kapli is not submitted the Clearing House Committee can declare him a defaulter."

lltld, that the resolution declaring the appellant a defaulter was , alidly passed.

Bye-la,. 155 (4) provides that if a member did not submit a kapli found clai.nable from him, the Committee shall cal\ him and demand an explanation from him and can thereafter if such kapfi is not submitted declare him a defaulter.

Under this byelaw first the explanation is rall('d and after it is given and some decision is arrived at 1 the person complained against can file the kapl-i, but no specific period is prescribed for doing so nor is the Com1ni1trc required to call him for this purpose. rhe period of titne depends upon the circumstances in each C"\se.

In the present case since the appellant had made it clear before the Committee that he ,, as not going to make the payment, the giviug of time was wholly unnecessary.

It is not a requirement of the bye-law that the clearing House Committee should call the person defaulting by telephone or by letter or by giving him notice.

Crv11. .APP}~LLATE Jmus1>ICTION : Civil Appeal No. 437/60.

Appeal by special le&ve from the and decree dated July 12, 1957, of the :sigh Court in Appeal No. 71 of 1956.

judgment Bombay

C. K. Da)lhtary, Soliciwr General of India, S. G. Patwardhan and Naunit Lal, for the appellant.

A. V. Vi.rwanatha Sa.tri, N. P. NatJiwani and K. L. flat/ti, for respondent No. I.

1962. ;\farch 2. The Judgment of the Court was delivered by

KAPUR. J.-This is an appeal against the judgment and decree of the High Court of Bombay con firming the decree passed in its original juris diction.

The appPllant. who waA the plaintiff in the suit, was trading under the name and style of

Messrs.

Pratapray Manmohandas as a bnllion merchant and trader in Bombay. He was a member of the Bombay Bullion Association Ltd., which was defen<:lant No. 1 in the suit and is respondent No. l in the appeal.

Respondents 2 to 7 were defendants 2 to 7 and at all material times were members of the Clearing House Committee appointed under the Bye-laws of the lst respondent. The appellant had also added as parties in the suit defendants 8 to 12 but they are no longer parties as their names were struck off in the trial court.

The appellant entered into certain forward transactions with defendants 8 to 12 during the period from May 30, 1949 to June 30, l94!l.

On June 13, 1949, the Hawala rate of these transactions was fixed and on June 14, 1949, the appellant "admitted a clearance sheet under bye-law 131 of the bye-laws of lst respondent in which outstanding transactions for the Valan day" (settlement) wern entered. They included the transactions which had been entered into with defendants 8 to 12.

All these transactions were Rajued (tallied) on the following day. According to the bye-laws of the respondent Association the balance sheet had to be submitted and money Kiplis (vouchers) had to be given. In this balance sheet which was submitted the appellant did not include the amounts which were due to defendants Nos. 8 to 1 :l or the transactions he had entered into on the ground that he disputed the transactions entered into with those defendants as they were fictitious and illega.L On June 21, 194!J, which was the .

Valan day (settlement day). the appellant claimed reference to arbitration in regard to those items under byelaw 38. On that day defendants 8 to 12 oomplained to the respondent Association that the appellant had not issued the necessary kapli8 (vouchers). At 3 Pm. on the same day the appellant received a notice from the Clearing House

Praeapray Manmohanfias ...

Bombay Bullion Association Ltd.

Kapur J.

Prtapray ;\l anmollandtu ..

BombC!)'.Bulli.n Aasociotion [, td

Kapur J.

Committee, respondents 2 to 7 calling upon him to appear before them. The appellant appeared with his solicitor and counsel and his cont<:ntion before the Clea.ring House Committee was that it had no jurisdiction to p1 occcd with the ma.ttor because he was claiming arbitru.tion and tho dispute betwe,<n him and defendants 8 to 12 had to be settled by the arbitrators. The Committee heard the explanation and passed a. resolution under bye

law 155 (4) declaring the plaintiff a defaulter and it io this resolution which is tho matter in controversy between the parties.

On Ju11e 20, 1952, the appellant brought a suit for declaration that the resolution in dibpute dated .June :!l, 1949, was bad in law, inopnrative, ultra vire,, and not binning on the appellant and also for damages against the respondents.

He also prayed for reinstatement as a member of the rcsponde11t Association.

The pica. tak<•n by the respondent was that tho transactions in dispute were not phatak ( fictitiou~ and i11opera.tive ); that at the meeting on June :! I, 1919. defendants 8 to 12 had complained that amounts of monev had become payable to them from th<i appellat; that at the said meeting the a.ppnlla.nt ha.d made it clear that he would not give any lcapliB (voucher~) and had therefore defaulted and they were therefore entitloo to declare him defaulter under bye law 155 (4) of the respondent Association.

The suit was triod by Tcndolkar .J. Several issues were raiBed but tho appellant led no evidence and respondents I to 8 examined Mr. Trikamdas Dwarkadas a solicitor of Bombay, who was pre- Bent at the meeting of the Clearing House Committee on June 21, 1949.

On June 6, l!.156, the suit was dismissed and a.n appeal was taken to the Appeal Court which was also dismissed and the appellant ha.B come in appeal by Special Leave.

~I ' !

The trial court had held that the plea taken by the appellant that after he and his counsel were heard they were made to. leave the meeting and the hearing proceeded in their absence was not established; that for bye-law 38 relating to arbitration becoming operative, it was necessary to have a genuine dispute between the parties and mere pretence of a dispute in order to evade or postpone the liability on the Valan Day is not sufficient, that where the defaulter appears before the Clearing House Committee and denies liability on some flimsy pretexts and thereby makes it abundantly plain that he does not wish to give a kapli giving him an opportunity for giving a kapli was a mere formality the failure to observe which does not lead to the conclusion that the decision of the Clearing House Committee is void.

Considering the evidence of Mr.

Trikamdas Dwarkadas it was clear that the appellant had no intention of admitting the liability or dischargmg it. He also held:

"Moreover, it is not the plaintiff's case that if time had been given he would have given the kaplis and therefore assuming that it is necessary under bye-law 155 (4)-a point which I did not wish to decide in this casein the present case to give such. time would have been perfectly futile and therefore failure to give such time does not invalidate the actioµ which was ta.ken. by the Clearing House Committee".

The Appeal Court concurred in dismissing the appeal. It held that on a proper interpretation of bye-law 155(4) it was necessary for the Cleltr ing House Committee to give an opportunity to the appellant to submit his kaplis because that was the meaning of the words "and can thereafter, if such. a ka pli is, not submitted, the Clearing House Committee can declare him a defaulter". In other

P., atopray M anmohandas

Bombay Bullion Associalion Ltd

KapurJ.

196~

Pratapry M .JnrtUJhat1d11s

Bombay Bu! lion Ars"iation Ltd.

KapurJ.

~46 SUPREME COURT REPORTS [1962) SuPP.

words the Committee had to ghe the member a Zo:us penitmtiae and that after giving his explanation a member could still rnbmit a kapli and escape the penalty of being a defaulter. From the conduct of the appellant. and his counsel however it appeared quite clearly t'hat having challenged the jurisdiction of the CommittPe and having told them that th"Y could not proceed in the absence of reference to arbitration the appcllent had no intention of giving the kaplis.

Two questions have been raised in this appeul; (I) the question of interpretation and ( 2 J that no opportunity was given after the decision was made against the appellant to give the k.aplw. The submission of the respondents on th<' other hand

was that the appellant had deliberately made a false allegation that after he made a submiEsion he was asked to leave. This was to buttersay his plea that the matter was decided in his a'bsence.

The court below have found that whether an opportunity had be1n given to the appellant or not, he had no inntion of giving his kaplis.

Issuo No. 5 was specific on this point. That issue was "whether the appellant and biB legal adviHers volun ta.rily left the meeting after indicating that the appellant was not going to give the kaplis'' and that was the principal question which has been raised throughout the course of these proceedings.

Even in the statement of the appellant's ca.se he has put in the fordront of the question for decision the question whether the appellant left the meeting dated June 21, 1949, voluntarily after indicating his unwillingness to submit the kapli,,, The finding of both the courts on this question wa.s

against the appellant. In our opinion that is fully justified hy the evidt•nce on the record.

According to the evidence dayH were fixed by the Association (or the settlement of all transactions which bad been entered into for that period.

,' =.\ .. ,,!

3 s.c.:R..

SUPREME UOURT REPORTS 547

According to the ohart of Born bay Bullion exchange settlement had to be made, i. e. the monies had to be paid by 3-30 p.m. on June 21, 1949. The appellant made it clear, however, that he was not going to make the payment in accordance with the requirements of the Valan day; on the other hand he stated that he will pay after the arbitration award was made. The evidence produced by the respondents makes it abundantly clear that the contention of the appellant was that no action should be taken unless the arbitration which he had asked for had been disposed of and after saying that he went away. This is clear from the Attendance Book of Mr. Trikamdas Dwarkadas solicitor.

The respondent Association was therefore justified in taking the action that it did. The minutes of the proceedings of the Clearing House Committee dated June 21, 1949, also show that the appellant and his legal advisers stated that they wanted to go to arbitration and that no action should be taken against them until the arbitrators had given their award. It is stated therein that the appellant admitted that the transactions which his solicitor said were fictitious were entered in his books and they had been rajued (tallied) and that he had shown the transaction in his •'olias" (clearance sheet). All this indicated that the contentions raised by the appellant were false and had been raised in order to gain time. In these circumstances it cannot be said that the respondent Committee acted without giving due consideration to the facts of the case or in any precipitate manner. .

Bye-law 155(4) reads:

"If any member does not submit a kapli in the prescribed form in respect of the amot found claimab!e from him to his party (creditor), the C!earmg House Committee shall call him and demand an explanation

rom him ad can thereater, if such a kapli 1s not submitted the Clearmg House Commit tee can declare him a. defaulter".

Prata; ray M anmohandas

Bombay Bullion

AssocitJlion Ltd.

Kaput" J.

196!

Pratopro1 .ll anmohdndaa ..

BollWay Bui/inn .A rsotialion LlJ.

Kopu> J.

That clause requires that in the event of default of submission of a kapli the Clearing House Committee shall call the dofa.ultor and demand an explanation and thereafter, if such kapli is not submitted, doclare him a defaulter. It was contended that the meaning of this is that first the C!earring House Committeo is to demand au explanation and after such an explanation is given, time has to be given for the purpose of enabling the person not giving the kapli to submit his kaplis. In our opinion the intorpretation of the learned Chief Justice of tho High Court is in consonance with the language used. i. e. first the explanatian is called and aft<ir explanation is given and some decision is arrived at in regard to the validity of the reasons for not giving the kaplis then the person complained against can file the kapli but it does not mean that the time to be given has to be one or half an hour or any other specific period.

As we have said above the appellant had made it clear that he was not going to make the

payment and had just left after making his submissions. It is not a requirement of the bye-law that the Clearing House Committee should r.a.11 the person defaulting either by telephone or by letter or by giving him a notice and considering the promptitude with which the payments have to be made and the dates fixed for the finishing of all the transactions it will he unreasonable to hold that such is the procedure oontemplated by cl.(4) of bye-law 155. The period of time, must, in oach oase, depend upon the circumstances, but where it is made absolutely clear that no payment is going to be made tho giving of time is wholly without utility.

In our view tho High Court has given a correct decision and we therefore dismiBS this appeal with costs.

Appeal dismi.se, d.

in part.

PRATAPRAY MANMOHANDAl

L. KAPUR

K. 0. DAS GUPTA

DAYAL, JJ.

the Bombay Bullion Association Ltd