.. I

UNICHEM LABORATORIES LTD.

THE WORKMEN February 24, 1972

JC. A. VAIDIALINGAM, I. D. DUA AND G. K. MITTER, JJ.]

Industrial Dispute-Dearness All.owance-Deprrciation reserve~ whether to be deducted from profits--Concern.r with foreign collaboration wh~

ther can be compared with purely Jndia.n Companies-Slab system- Classification of grade~ and fixation of wages-Gratuity-Incentive Bonu's Sche1ne.

The appellant carried on the business of manufacturing and selling pharmaceutical products in Greater Bombay.

In disputes arising OOtween the ppellant and the respondents the Industrial Tribunal had to deal with questions relating to dearness allowance, classification of grades and fixation of wag.es .and the incentive bonus scheme as modified by the company. In appeal against the aw-..rd of the Tribunal,

HELD: (i) The decisions of this Court in Gramophone Company Ltd.

v. its Workmen and The !11dian Link Chain Manufacturers Ltd. v. Their Workmen show that the Tribunal .was justified in computing gross profits without deducting taxation, deprectation and development rebate~ The latter decision is directly jn point to the effect that 'provision or depreciation cannot be deducted.

[582E., 585BCJ

Gramophone Company Ltd. v. Jts'Workmen, [191i4] II L.L.J. 131 and The Indian Link Chain Manufacturers Ltd. "f. Their WOrkmen, l1971] 2 S.C.R. 759, applied.

Ahniedabad Mil/owners' Association Etc~ v. The Textile Labour A.rsociat'ion, [1966] I S.C.R. 382, referred to. ·

(ii) so long and to the extent that concerns having foreign c§ll_aboration are doing business in India and in a pafticular concerood region there is no reason why they should not be taken into account for purposes of being teated as comparable unfts, provided th-.lt the tests for. such purp06es as laid down by this Court are satisfied.

TOO object of industrial. adjudication is to secure as far as possible unifdrmity of iervice conditions among industrial units in the same regiOn. If a concern having foreign collaboration properly satisfies the tests of comparability it would be improper to regard such unit as uncomparable merely on the ground' that it is a concern with foreign collaboration or interest and t the unit with which it is 'ought to be compared. is entirely of Indian origin and resources.

!591ACI

Ch•mical IndustrieS"and Pharmaceutical Laboratories Limit<d (Cipla) Bombay v. Their W<!rkmen, [1957] !.C.R.

Bombay 1206 and Alembic Chemical Works Ltd. Baroda v. Its Workmen [1967] I S.C.R. 652,

Hindust, in Antibiotics Ltd. v. The Workmen and Ors.,. [1967] I S.C.R. 652, relied on.

(iii) On the materials before it the Tribunal was justified in treating M/S. Burroughs Wellcome & Co. as a unit comparable with the appellut.

The fact that Burroughs Wellcome .employed a le.,.r labour force did not deserve much impOrtance beoause the business performance of the two companies was equal.

Once Burroughs Wellcome Co. was timted as a comparable unit the wage scales awarded by the Tribunal oj(mld not be considered to be unjustified. [598G-599A-D]

Workmen of New Egerton Woollen Mills v. New Egerton Woollen Mills and Ors., [1969) II L.L.J. 782, applied.

(iv) On the facts of the case it was not possible t<? disagree with the view of the Tribunal that the impact of the Drugs (Price Con.trol) Order will not be such as to affect materially the business pfpects of the appellant company. If the Order materially aff<•cts the prosperity of the appiilant's trade it would be open to it to raise '3. dispute for the reduction in the wage structure and in case they are able to show that in view of the Dlrugs (Price Control) Order their financial position has weakened to such an extent that they c:annot he'll' the burden of the wage structure .fixed by the present award, the matter may have to be examined on its merits. [598B.CJ

 Wi/liamsons (India) Private, Ltd. v. It• Workmen, [1962] 1 L.L.J.

302. referred to.

(v) The Tribunal hod acted within its jurisdiction in classifying the workmen and fixing the sc:iles of pay after fitting them in particular categories. The objection based on s. 10(4) of the Industrial Disputes Act. 1947 must be rejected. [599E-600B]

(vi) When the Tribunal raised in the gratuity scheme the ceiling limit from 15 months to 17t months according to the pattern obtaining in Burroughs Wellcome Company there was no question of principle involved justifying an objection by the appellant company. [600C-DJ

(vii) There were different systems of dearness llowanc!io for the operators and the clerical and subordinate staff in the appellant company.

That such a different system of dearness auowance for employees working unde'r the same employer is not warranted is clear from the decisions of this Court in the cases of Greaves Cotton & Co. and Bengal CheinicaJ & Pharmaceutical Works Ltd. Therefore the Tribunal was justified in devising a unifonn scale of dearness allowance '3pp1icable to all the empolyees of the appellant. r600E-F]

Greaves Cotton and Co. and Ors. v. Their Workmen, [1964) 5 S.C.R. 362 and Bengal Chemical & Pharmaceutical Works Lrd. v. /Ar Workmen [1969] 2 S.C.R. 113, relied on. '

(viii) From the date of the settlement in 1966 the cost of living index hd very rapidly gone up by 220 points. At the time when the demand for revision of wages sqtles and dearness allowance was made G by the Unions and when the reference order was made by the Government. the cost of living index had gone up very high. That clearly showed that the workmen had m'3de out a case for revision of wage scaJes and dearness a11owance.

The contention of the appeUant that because a system of dearness aHowance aireadv existed there should be no revision Of the same, could not be accepted. r602C; 601A 1

WIICHEM LTD. v. WORKMEN (Vaidialingam, J.) 569

(ix) When the slab system of dearness .. allowance was prevailing in the industry in the region the Tribunal committed no error in introducing a similar pattern in the case of the appellant. [603C-DJ .

Kamani Metals & ill/oys Ltd. v. TIU!ir Workmen, [19671 2 S.C.R. 463, referred to.

(x) In regard to the Incentive Bonus Scheme the Tribunal had stated that th:! nec.essary material for that purpose had not been made available

nd as such it had not been possible to devise a scheme calculated to afford. protection to .the incentive earning of a workman at the raised base performanre index. This Court could do nothing further in this 'regard and the result would be that observations made by the Tribunal will have full effect. [6040-Hl

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1091 to 1093 oi 1971.

Appeals by special leave from the award dated April 15, 1971 of the Industrial Tribunal, Maharashtra, Bombay in References (IT) Nos. 20 of 1969, 70 of 1970 and 105 of 1969.

V. M. Tarkunde, R. A. lahagirdar and I. N. Shroff, for the appellant (in all the appeals).

K. T. Sule, lanardaro Sharma and Indira Jaisingh, for respondent No. 1 {in all the appeals).

E Urmila Kapoor and Kamlesh Bansal, for respondent No; 2 (in

all the appeals).

The Judgment of the Court was delivered by

Vaidialingam, J.-These three appeals, by special leave, arise out of the Award, dated April 15, 1971 of the Industrial Tribunal, Maharashtra, Bombay iri Reference (l.T. Nos. 20 and

105 of 1969 and 70 of 1970).

The main questions that arise for consideration in these . appeals relate to the award of Dearness Allowance, Classification of Grades and Fixation of Wages and a direction given by the Industrial Tribunal regarding the Incentive Bonus Scheme, as modified by the Company.

There is also a minor point regarding a particular clause in the Gratuity Scheme as framed by the Tribunal in Reference (l.T. No. 20 of 196.9). Though there are certain other matters dealt with in the Award in Referi:nce (l.T.

H No. 20 of 1969) they are not the subject of controversy in these appeals.

We will now state the circumstances under which the References came to be made 10 the Tribunal.

The appellant was started as a .proprietary concern in the J. year 1944 and w_as later transfonned to a public limited Company and registered as such under the Indian Companies Act, 1962.

From its inception, tile Company has been dealing in the business of manufacturing and selling phannaceutical products. It had its factory in Jogeshwari in , Greater Bombay.

At the time of the Reference, the Company was employing about 714 workmen, of B whom 558' were operatives and 156 were me.mbers of the clerical and subordinate staff.

All these employees were covered by the demands comprised in all the References.

The wage scales of the workmen had been determined originally in Reference (I.T.

No. 23 of 1959). The wage scales of 1the operatives were as follows : c

"Uns'dlled A Unskilled B Se:niski!led A

Se:niskiUed B Skilled

. Rs. t 52-0 •09-2 23-0·12-2 93

1 25.-0 J6-1 85-0 09-2 JO

2 00 _Q 12--2 72-0 18-3 80

t 76-0t1-2 64-0 15-3 39 2 59--0 13-2 85-0 22-3 •95-0 l0-

4 25".

D The wage-scales of ihe clerical and subordinate staff were as follows :

"Junior Chemist . .

Manufacturing Assistant Store-keeoers J Store-Assistants }-

Stenographers j

Junior Clerk .

Intermediate Clerks ·

SeiQr Clerks

. Rs. 120-10-200-12-260

14().._(Q-220-15-310

180-10-260-i 5_350

60-8-90~10-140-E.B.-15-215. 7l-8-115-12-175-E.B.-15-250.

115-10-255-15-315-E.B.-20-395."

In addition to the basic wages, referred to above, the em• ployees were getting dearness allowance, which in the case of operatives was equal to 80% of the revised textile scale of dearness F allowance arid in tile case of clerical and subordinate staff 100% of the revised textile scale of dearness allowance.

The nomenclature of the grades of the operatives was changed by a consent award in Reference (I.T. No. 170 of 1961). The grades and wages as per this award were as foilows :

"Unskilled .

Semi-skilled A Semi-skilled B Skilled .

Highly Skilled

. Rs. 1 25-0 06-1 85-0 -09-2 30

1 52-0·02-2·33--0·12-2·93 1 •76-0 11-2 64-0 15-3 39 2-00-0 12-2 72-0 18-l 39 2 59-0 13-2 85---0 22 .. 3 95 .. 0 30-

4 25." '

The dearness allowance of the operatives and clerical and H subordinate staff underwent a change by the award in Refere.nce

(l.T. No. 402.of 1963). Underothat award the dearness allowance

UNICHEM LTD. v. WORKMEN (Vaidialingam, J.) 571

of the oper3Jives was increased to 90% of the revised, textile scale of dearness allowance from January 1, 1964 and to 95% of the revised textile scale of dearness allowano~ from July 1, 1964.

The dearness allowance of the clerical and subordinate staff was supplemented at different slabs with effect from January 1, 1964 as follows :

"Basic salary' upto Rs. 100 .

Basic salary of Rs. 101 to 200

Basic salary of Rs. 201 to 300

Basic salary of over Rs. 300 .

Operatives' dearness allowance plus Rs. 7 50.

Qperativco;' -dearness allowance plus Rs. 15.

Operatives' dearness allowance plus Rs. 22 50.

Operatives' dearness allowance plus Rs. 25."

Though the award prescribed to the clerical and subordinate staff the same rate of dearness allowance of the operatives plus a fixed amount, as referred to above, the Company continued to give them derness allowance equal to 100% of the revised textile scale of dearness allowance. This was also supplemented with the fixed amount .depending upon the slab of the salary.

There was a settlement on :June 24, 1966 between the Com pany and its employees, in and by which. the wages of the operatives and the clerical and subordinate staff underwent a final re vision. The wages of the operatives were fixed as follow~

"Unskilled .

Semi-skilled B Semiskilled A Skilled .

Highly skilled

Rs. 1 25-0·10-2·75

I 6<).:_0 12-2 32-0 15-3 67 I 80-0ll-2·85-0·20-4·45 2·10-0 20-3 10-0 25-5 10

2 75-0·20-3 75-0·25-5 00-0 30- 6·50."

Similarly, the wages of the clerical and subordinate staff were as follows :

''Junior Clerk

Intermediate Clerk

Senior Clerk

Sten~ and Storelceeper .

Rs. 75-6-105-10-155-15-260-E. B.-- 17-311.

90-8-130-12-190-15-295-E. B.- 18- 349.

125-10-195-15-270-20-390-E. B-

- 25-440.

180-10-260-15-380-E. B .... :0-4-

'460."

The above basic scales in respect of all die categories were again supplemented by dearness allowance as provided for in the award passed in Reference (LT. No. 402 of 1963). The Com pany had also an Incentive Bonus Scheme, by virtue of which a large number of operatives were getting on an average an addi tional sum of Rs. 28/ per month. The Company further revised

from about November 1, 1969 the wage scales of Drivers and Watchmen as follows

"Drivers

Watchmen

. Rs. 70-6-100-9-145-12-205-E. B.-

15-250.

45-4-65-6-95-E. B.-8.-135".

The above was the pattern of the wage structure and dearness B allowa.nce for the operatives and the clerical and subordinate staff.

The Unions conorned made a demand for introducing the following scheme of dearness allowance in respect of all the workmen with immediate effect :

'Wage slab.

Upto 100 . .

Frcm Rs. 101 to 200 prom Rs. 201 and above

When the working class cost of living indcix figure is in the group of 401- 410. 100 percent 50 per cent 25 per cent

Variatirn in the dearness allowance for every 10 points rise or fall. 5 percent 2t per cent

Ii Percent

Minimum dearness al](; Wance Rs. 100. Minimum variation Rs. 5."

They also demanded that the above scheme of dearness allowance was to have retrospective effect from August 1, 1967. In the same demand the Unions required that the workmen should be granted one month's wages for every year of service s gratuity in case of resignation, dismissal, discharge, death or termination of service for any reason. By this demand the Unions required modification of e then existing pattern of payment of dearness allowance at 95 '° of revised textile scale of dearness allowance to operatives and 100% of revised textile scale of dearness allowance plus Rs. 7.50 to Rs. 25/- paid to the cleri.cal and other staff.

The Company did .not agree to the demand and in consequence by order dated January 14, 1969 the Government of Maharashtra referred for adjudication to the Industrial Tribunal the demands.

This Reference was registeted as Reference (l.T. No. 20 _of 1969).

The Unions again made a demand for revision of scales of pay as well as the classification of employees, their grades and their fitment in the revised scales of pay.

As against the then existing six categories of workmen and their wage scales of the operatives the Unions demanded new classification and gradatioi1 into eight grades with new wage scales. Similarly, as against the then existing five grades of the clerical and subordinate staff, the Unions demanded the creation of six categories with enhanced wage scales.

These demands again were not accepted by the Company which led to the State Government making a reference on Jainuary 9, 1970, which reference was registered as Reference (I.T. No. 70 of 1970). ·

• A

UNICHEM LTD. v. WORKMEN (Vaidialingam, J.) 573

The Company some tilll'! in the year 1959 had introduced au Incentive Bonus Scheme.

This was introduced, according to the appellant, because of the fact that the workmen were not giving a substantial production.

The basis of the scheme; introduced by the appellant, was that if the workm!n gave only 30% of the 100% production expected of them, their performance would be considered zero.

On the other hand, if they gave production above 30% and upto 100%, they would be eligibL~ for payment of Incentive Bonus which would ho! from 31 to 100 points.

In other words, for the 70 points above the first 30 points, the workmen would get Rs. 50/- .as Incentive Bonus which would worl.: out approximately to about Rs. 71.43 per point. The appellant desired that the then existing floor limit of 30% ought to be raised to 75% without varying the quantum of Rs. 50/- that was originally payable on achievement of 100% production.

What was intended was that the 25 points between 7 5 and 100 points were io be made eligible for payment of Incentive Bonus of Rs. 2/- for each point.

The Company served a notice of change on the workmen under s. 9A of the Industrial Disputes Act, 1947. As the workmen protestec; I against this change, this led the Government to make a Reference to the Industrial Tribnual for adjudication.

This was numbered as Reference, (I.T. No. 105 of 1969).

The appellant resisted the claims made for revision of dearness allowance and wage scales as well as the modification sought for in the gratuity sche1m. The appellant also wanted the Tribunal to uphold the notice of change given by it under s. 9A of the Industrial Disputes Act in respect of the Incentive Bonus Scheme: In particular the appellant contended that it was.not a comparable concern with the units reforred to by the Unions and that any modification in •the scale of dearness allowance and wages would be beyond its financial capacity.

The appellant also relied on the comiµg into force of the Drugs (Price Control) Order 1970

with effct from May 16, 1970. According to the appellant the wages and dearness allowance paid by it to the workmen were far higher than what were paid by other units in the region. The Company also referred to the various awards wherein it had been held that it could not be compar!d with an International Company having branches in Bombay or with foreign concrn though incorporated in India. The wage scales had been fixed by Settlement dated June, 24, 1966 and tht nothing has happened since the date of S•!ttlement to justify a revision of wage scales and dearness allowance. The appellant further urged before the Tribunal that the double linl<ing of dearness allowance, as required by the Unions had never been adopted for the Pharmaceutical units in tlie Bombay region.

According to the appellant, the rvision '

effected regarding the Incentive Bonus Scheme was justified and A the amount of 2/- offered per point was much more than the prevailing rate of Rs. 71.43p. per point. It also opposed the revision of the then existing gratuity scheme as demanded by the Unions.

According to the appellant the grntuity scheme which was in force had been introduced by a consent award in 1963.

The appellant filed copies of balance sheets and profit and loss accounts from 1962-63 to 1969-70 and various other charts in support of i'ls plea •that it will not be able to bear the additional financial burden that would result if the wage scales and dearness allowance are revised as p.r the demands made by the Unions.

It will be seen from the facts mentioned above that tho~ main controversy between the parties related to the revision of wage structure and dearness allowance.

As the demands of the workmen related to regrouping in different grades, the operatives and the clerical and subordinate staff and as tllis involved a very radical change in the existing pattern of grades, the Trinal

felt that the Qpinion of an expert should be obtained on the advisibility of the reclassification. In this regard both the Unions and the appeJlant filed a joint application on December 22, 1970 requestin!( the Tribunal to appoint Sri N. L. Gadkari, retired Chief Inspector of Factories, Maharashtra State as an assessor.

They also p.rayed ihat the points mell'tioned in the application be referred for the opinion of the assessor.

The Assessor submitted his report on. February 22, 1971, in which he recommended the continuance of the then existing grades.

The Unions, while demurring •to the report of the Assessor, requested th~ Tribunal, by their application dated March 25, 1971 to fix for the then existing five grades the following wage scales :

"Un, kitlo1 Rs. 85-8-t25-10-225 s,:ni-•killed B 100-t0-t50-t2-210-15-285.

Semi-•killcd A 120-12-t80-15-255-18-345.

Skille1 . t.W-15-215-18-305-20--405.

Highly skilled 225-25-350--30-500-35-675."

The appellant, when the Reference came up for hearing, raised an objection to the selection of wage scale by the Unions for

the existing grades of the operatives on the ground that such a selection was not permissible, tdng contrary to the provisions of s. I 0( 4) of •the Industrial Disputes Act.

The Unions, ultimately, made it clear to the Tribunal that their demand for revision of wage scales of the existing five grades of operatives is to be as follows :

''Unskilled

Semi-skilled B Semi-skilled A Ski tied .

Highly skilled

Rs. 60-5-85-7--155.

70-6-100-8-180.

85-8-125-10-225. :00-10-150-12-210-15-285. 120 .. 12-180-15 .. -255.-18-345."

UNICHEM LTD. v. WORKMEN (Vaidialingam, J.) 57 5:

It is on the basis of this claim that the question of revision has been dealt with by the Tribunal.

Regarding the financial incapacity pleaded by the appellant, the Tribunal after an analysis of the balance sheets and profit and loss accounts, held that the average net profit of the Company during the years 1965-66 to 1969-70 works out to about Rs. 1384691/·. It is also of the view that the apprehensions of the appellant regarding the possible impact of the Drugs (Price Cofl'!rol) Order, 1970 are µot justified. It is 1he view of the Tribunal that in spite of the price freeze effected in. 1963, the appellant has been doing very good 'business from 1962-63 to 1969-70.

Ultimately, the Tribunal found that the financial condition of the appellant is quite sound.

Regarding the comparable concerns in the region, the Unions referred to as many as twenty units.

One of the units relied on as comparable with the appellant was M/s. Burroughs Wellcome & Co. (lndig) Private Ltd., Bombay.

The appellant opposed its being compared with the concerns relied on by the Unions on the ground that those units were either foreign conorns doing business in India or Indian units working in c0Jlaboration with foreign concerns. The appellant in turn relied on seyr_al other concerns as being comparable with it. The appellant very strongly relied on certain previous awards in support of ils contention that it has been held in those awards that the appellant-cannot be compared with foreign concerns or with the con9erns working in collaboration with foreign concerns.

The Tribunal, after a consideration of the materials placed before it, in this regard, ultimately, held that Mis. Burroughs Wellcome & 'co. (India) Private Ltd., was a unit w'1ich could be considered as a comparable concern with the aopellant. 1be Tribunal having regard to the grades and scales of pay obtaining in M/s. Burroughs Wellcome & Co. (India) Private Ltd., held that !he wage scales for the five grades for the operatives of the appellant should be as follows :

"Unkilled .

Semi-skilled B Semi-skilled A Skilled .

High skilled

. Rs. 42-3-11-4-112

47-3-50-82~4-122 50-4-90-5·50-134 55-5·50-110-6·50-155·50

72-7-142-8-182-9 5f-2<0."

The Tribunal fixed the following grades and scales of pay for the clerical and subordinate staff :

"Junior Clerks and Laboratory Assistants . Rs. 85-7 50-145-l0-l95-l2-25g._ F .. 323 Intermediate Clerks 120-10-200-12-260-15-335- 11.

353 Senior Clerk• 185-15-305-20-365- 25- 465"

The Tribunal did not accept the large demand made by the Unions for a general adjustment in increments of the employees.

Nevertheless, in view of the revision of the scales of wages, it gave certain direQtions so that rthe employees may be fitted in the appropriate revised wage scales.

The parties very hotly contested the. question of dearness al· lowance , as well as the pattern ito be adopted. As there were different systems of dearness allowance for the operativi; s and the clerical and subordinate staff, the Unions desired that a common scheme of dearness allowance on a slab system should be adopted.

The Tribunal having regard to the decisions of this Court in Greaves Cotton and Co. and others v. Their Workmen(') and

Be~ Chemic~ & Pharmaceutical Works Ltd, v. Its Workmen(') held that there was no justification for having two systems of dearness allowance--<>ne for the operatives and 1he other for the members gf the clerical and subordinate staff.

Accordingly, the Tribunal held that all 1the employees should get the same dearness allowance irrespective, of the fact whether they were operati\'s or members of the clerical and subordinate staff.

As the , dearness 3llowance has to be fixed on industry-cumregion basis, the Tribunal examined the system of dearness al- 1owance followed in the region by the industries belonging 1o the pharmaceutical units.

The Unions had submitted statements Exs. DU-1 and MU.-1 containing a list of pharmaceutical unit;, in support of their contention that such units were adopting a slab system of deam, ss allowance. The Company, on the other hand. referred to certain awards of the Industrial Tribunals in support of its stand that slab systemof dearness allowance is not considered as an appropriirte mode of providing neutralisation. The Uni.:ms also relied on certain awards wher, in the slab system of dearness allowance had been introduced by the Industrial Tribunals. Though the Tribunal had held that most of the units referred to in Exs.

DU-1 and MU-1, cannot be considered for 1he purpose of being treated as units comparabl•, with the appellant, nevertheless lt held that the Pr.!!c([ce adopted by !hose units regarding 1the grant of dearness allowance can be taken into account as providing a guide regarding the system of d.earness allowance adopted in the region.

On 1this basis the Tribunal -accep!ed the statements in Exs. DU-1 and MU-1 and held that the slab system of dearness allowance was prevalent in a large number of units belonging to pharmaceutical industry. In this view, the Tribunal further held that slab system of deamm allowance can be adopted, if the financial burden consequent on the adoption of the said system, can be safely 'borne by the Company.

(I) [19641 5 S.C.R. 352. c2> [I969J 3 s.c.R. m.

UNJCHEM LTD. v. WORKMEN (Vaidialingam, !.) 577

The Tribunal then proceeded to consider the system obtaining in Burrough Wellconie Company regarding the payment of dearness allowance.

The system in the said Company, which was common for operatives as well as the clerical and subordinate staff, was as follows

Basic Salary

Rs. 1-100 .

Rs. IOl-200

Rs. 201-300

Derness allowance per month at the Boin bay working cJ."lSS cost of livig index 491-500.

1.50 per cent

150 per cent on the 1st

Rs. 100. 7! p,:r cent on the

balanr_.e. 150 per 1,;.~.11 on the 1st Rs. IOO. 72! per cent on the 2nd

!ls. 100, and 36-i per cent on the balance.

Variation for points.

5 per cent 2t per cent

lt per cent.

D Minimum Dearness allowance Rs. 4

Rs. 101.

In the said Company the above scale of dearness allowance was howev<U limited only to employees drawing a basic salary upto Rs. 300/- per month. The appellant accepted before tho Tribunal that the scheme of dearness allowance obtaining 'in Burroul(hs \Yell come Company would cast a lesser financial burden than the scale of dearness allowance as demanded by the Unions. In fact, the Company had filed two charts Exs. C 12 and C-13, showinl( the burden which it will have to bear i( the scheme of dearness allowance as demanded by the Unions was introduced. . The Company had worked out the demands . in different ways and that is why it filed two statements. According to the appellam the additional financial burden will be about Rs. 87812~.00 as per Ex. C-12 and Rs. 1252693.00 as per Ex.

C-13.

The Tribunal is of the view that under Ex. C-13, the Company had taken into account a sum of Rs. 186293.00 payabk to some members of the staff drawing a salary of over Rs. 200/- per month and amongst whom Were also included 52 chemists.

Accordinl( to the Tribunal the 52 chemists are not covered by the Reference and therefore the burden will have to be calculated only in respect of the workmen covered by the Reference and to whom dearness allowance is being fixed. On calculation the Tribunal found that about a lakh of rupees payable to 52 chemists and included in Ex. C-13 by the appellant will have to be deducted from Rs. 1252693.00 Accordingly, it held that as per the calculation ()f the appellant under Ex. C-13, leaving out the 52 chemists, the total burden will only be Rs. 1152693.00. Taking

into account the 'tax relief that the Company will get, the Tribunal A ultimately held that the additional financial burden that te appellant will have to bear will only be Rs. 555000.,00. As rt had already held that the average annual gross-profits of the Company

are over Rs. A0,00,000.00, the Tribunal held that the Company can easily bear this additional burden. The Tribunal is further of the view 'that though the financial impact of the Drugs (Price D Control) Order, on the business activities of the Company has had to be seen the impact will not be such as to make the appellant's finanr-iai' position difficutt.

For all thes•: reasons, the Tribunal fixed for the operatives and the clerical and subordinate staff of the appellant dearness allowance on a system prevalent in Burroughs Wellcome Company.

The sys•tem of dearness allowc .ance fixed bythe Tribunal is as follows :

Basic salary

Rs. 1-100

Rs. 101-200

Dearness allowance per Variation month at the Bombay working class cost of living index 521-530.

150 per cent 5 per cent

l 50 per cent on the 2t per nt

1st Rs. 100. 72! per cent on the

balance.

Rs. 201-300

Minimum dearness allowance Rs. 101 .

150 per ce:it on the lt Per cent. !st 100 Rs. 72J,. percent on the

ind Rs. 100. 36t per ce:it. ()O the balance.

Rs. 4.

The Tribunal has further directed that dearness allowance in F .accordance with the above scheme will be paya5te only to em- .ployees drawing a basic salary upto Rs. 300(- per month.

It will be seen that the Tribunal while adopting the scale of dearness allowance obtaining in Burroughs Wel\come Company, has made a departure in fixing the scale of <foarness allowance on the basis of the Bombay Working Class Cost of Living Jndel< G 521 to 530. The dearness allowance scheme obtaining in Burroughs Wellcome Company was on the Bombay Working Class Cost of Living Index 491 to 500.

The dilfurent cost of living index was adopted by the Tribunal in vie.w of the fact that the ap: pellant was paying incentive wages to its operatives and with a view to lessen the financial burden on the Company.

Another feature of tthe scheme adopted by the Tribunal is that it puts a ceiling on the employees drawing basic waes upto

UNJCHEM LTD. v. WORKMEN (Vaidialingam, J.) 579

Rs. 300/, per month alone being eligible for dearness allowance, whereas under the practice originally obtaining in the Company there was no such limit. The Tribunal held. tha:t the revised wage scales and dearness allowance would be effective from October 1 1969 and directed the Company to pay the arrears within three onths from the dat~ of the Award becoming enforceable.

At this stage it may be mentioned that the appellant is not chal~nging

this direction regarding the date from which the wage scales and dearness allowance are to take effect, though it \ery vehemently attacks the fixation of the scale of revised wage scales and dearness allowance by ithe Tribunal.

Rtlgarding _gratuity, tile Company had already a scheme which had been introduced under the Settlement Award in Reference (IT) No. 141 of 1962. It is not n.:cessary to set out the scheme that was prevalent in the Company because the only objection of the apllant to the revised scheme evolved by the Tribunal is in respec!_ of raising the ceiling from 15 months to 17! months.

The demand in this regard by the Unions was that the ceiling should be raised from 15 months basic wages to 20 months basic wages.

However, the Tribunal did not accept the claim of the Unions in toto.

On the other hand, it adopted the practice obtaining in the Burroughs Wellcome Company and accordingly fixed the ceiling at 1 7t months basic wages.

Regarding the notice of change issued to the workmen by the appellant under s.9A of the Industrial Disputes Act proposing to alter the existing floor limit of 30% to 75% in the Incentive Bonus Scheme, the Tribunal on the joint application of the parties dated April JO, 1970 appointed on April 28, 1970 Sri B. Tulpule, as Assessor to examine the question of revising the existing scheme of Incentive Bonus. The Assessor submitted his report on August F 27, 1970 making the following recommendations :

"(1) The base performance index for all sections/ in

lhe Company's factory should be revised and raised to 60 per cent.

(2) Consequent upon the revision of the base index as above, an amount of Rs. 1.00 per day should be added to the basic wages of the workers, this addition being independent of any other revision of the Wal!, C structure that the Tribunal may decide upon.

(3) The revised rates of incentive should continue H beyond 100 per cent performance."

Thoul(h the Unions generally accepted the recommendations, the appellant was opposed, particularly to the second and third

recommendations.

The Tribunal, after a consideration of the objection, is of the view that recommendations Nos. 2 and 3 were beyond the scope of ihe terms of reference made to him. ere fore, those two recommendati<ms were negatived.

Regarding

the first recommendation, it is stated by the Tribunal that the Unioris accepted the same and that 1he Company also was not opposed to that suggestion made by the Assessor rgarding the B raising of the base perfonnance index to 60%. In dealing with this aspect the Assessor in bis report had stated as follows :

"If the base index of any incentive scheme is raised from X to Y, the workers will stop getting the incen1tive earnings which they used to get for the performance range from X to Y.

This is also the main anxiety ex' pressed by both the Unions in the present case. At the outset I asked the management whe'ther the implication of th.cir proposed change was such a reduction in the 'Norkers' total pay packet, at any given level of performance. The management caterically assured me that that is not their intention. Their purpose in proposing the change is stated by. them .to induce workers to raise their performance above '!he prevaili11g level."

The Triburial in its Award had stated that the matters mentioned in the above paragraph inCluding the assurance st~1'd to . E .·

have been given by the appellant were not denied.

Therefore, the Tribunal, in view of the common measure of agreement between both the parties regarding !he first recomme'.ldation is of the view thatif the pay packet of the workman is to be protected at the wage raise base index performance of 60%, some scheme may have to be worked out But as the necessary materials for the purpose of evolving a scheme were not available, the Tribunal Fhas thrown out a suggestion that the said question should be dealt with by the appellant in consultation with the Unions and frame a scheme by common consent, if possible. Accordingly, the Tribunal left the matter to the parties to deal with the matter with .the observation that if i'l is found that no scheme could be framed by consent, the Uiuons will be free to raise any dispute that nrny be available to them in that regard. .G

We have exhaustively referred to the questions referred to the Tribunal as well as the decision of the Tribunal on those points.

In these appeals, as mentioned earlier, the controversy relate to :

(I) Scale of Dearness Allowance; (2) Fixation of Wage Scales, Classification and Grades; (3) Raising of the ceiling to 17! months basic wages in the. gratuity scheme; and ( 4) th~ direction given by the Tribunal regarding the Incentive Bonus Scheme. ·

UN!CHEM LTD. v. WORKMEN (Vaidialingam, /.) 581

As the main points in great controversy between the parties before us relate to the patitem of dearness allowance and the classification and grads of employees and the fixation of the revised wage scales, we will take up for consideration those matters.

The very_ JirS't objection of Mr. Tarkunde, learned counsel for the appellant is regarding the manner of ascertaining 'grossprofits when revising the wage scales and' awarding dearn..."Ss allowance.

We have already poinlP..d out that the Tribunal has proceeded on the basis thaJt the average annual gross-profits cf the Company are over Rs. 40,00,00Q, OO.

The appellant had submitted balance sheets and profit and loss acounts for the year

l 962-63 to 1969-70. It is enough to refer. to the particulars that could be gathered for the five preceding years, namely, 1965-uo to 1969-70.

For those years the figures are as follows : ----

Particulars 1965-66 1966-67 1967-68 1968-69 1969-70

Paid-up capital 4500000 4500000 4500000 5400000 5400000 Reserves.and Surplus 2152186 2925376 4421515 4785697 5714988 Sales . . 21997640 23866647 30359380 32994456 37152031 Depreciation . .544919 555035 784824 1111775 916719 Development rebate 97242 . 68266 105840 110858 144511 Provision for taxation 1915000 1590300 1850500 1698500 1639000 NetIDock 4601566 4905509 5458212 5745997 7375386 Net Profit 954591 1443489 1597094 1604501 1323779

From the above statement i't will be seen that the average net profits work out to Rs. 1384691.00 The net profits have bc•!n arrived at, by the Company after dedutjtinj! taxation, depreciation and development rebate. It is on the basis of the net prOfits so arrived at that 1he appellant appears to have urged b.fore the Tribtmal that th~ wage scales and dearness allowance are to b~ fixed. The Tribunal rejected this contention. On the other hand. the Tribunal has held that when considering a revision of wage struc.ture wl)at is to be taken. intq account is not the. net profit; but gross profits without l!llY deductions having been made for taxation, depreciation an~ development rebate.

It is on .that basis tha\ the Tribunal held that th~ average gross-profits of the Company exceed Rs. 40,00,000.QO.

The gross-profits without deducting taxation, depreciation and development rebate for the years 1965-66 to 1969-70 will"b.:

approximately as follows :

vear Gross-profits

~-· Rs. "1965-66 35,11.752 . 1961;-67 36,57,090 1967-68 43,37,69~ .)968-69 45.15,134 • 1969-70 40.24,009""

9'-L1031 Sun.Cl/72

From the above it will be seen that the figure of Rs. 40,00,000.00 arrived at by the Tribunal as average annual grossprofits appears to be prima facie correct.

Mr. Tatj<:unde, learned counsel for tlie appellant found considerable difficulty in challenging the view of the Tribunal tht gross-profits are to be arrived at without decucting truration and development rebate.

He rather strenuously urged tha!t there b absolutely no warrant for arriving at gross-profits without deducting depreciation.

On the other hand, Mr. K. T. Sule, learned counsel for the respondent No. 1, whose contentions have been adopted by Mrs.

Unnila Kapoor, learned counsel for the second respondent, pointed out that the approach made by the Tribunal is correct and is also supported by the decisions of this Court.

Mr. Tar](unde referred us to sections 205 and 211 of th~ Companies Act, 1956, as well as Part I, Schedule VI therein.

We do not think it necessary to refer to those provisions as, in oor

opinion, they have no relevance or bearing when considering a revision of wages and award of dearness allowance under industrial adjudication.

Those provisions are intended for a totally different purpose.

 We will presently show, by reference to the decisions of this Court that the Tribunal was justified in computing gross-protits without deducting taxation, depreciation and development rebate.

In view of the decisions, to which we will immediately refer to.

Mr. Tarkunde was prepared to accept the position that, at any rate, taxation and development rabate cannot be deducted, but he still maintained that depreciation has to be deducted.

In Gramophone Company Ltd, v. Its lforkme11('), this Court, in dealing with a gratuity scheme, had to consider the pril)ciples F applicable for ascertaining the financial capacity of an employer.

In that decision the employer contended that before the real profit for each year can bie arrived at, the provisions made for taxation and for development reserves should be deducted.

On this basis, it was further contended that if these deductions are made, there G will 111ot be any profit left which wil! enable the Company concerned to frame a gratuity scheme. This claim for deducting taxation and development rebate reserves was negatived by this Court as follows :

"When an industrial tribunal is considering the question of wage structure and gratuity which in our opinion H stands more or less on the same footing as wage-struc-

11 l [1964] 2 L.L.J. 13!.

I )

UNJCHEM LTD. v. WORKMEN (Vaidialingam, J.) 583

iure, it has to look at the profits made without considering provision for taxation in the shape of income-tax and for reserves.

The provision for income-tax and for reserves must in our opinion take second place as compared to provision for wage structure and gratuity, which stands on ihe same footing as provident fund which is also a retiral benefit."

It was further observed that if an industry is in a stable condition and the burden of provident fund and gratuiiy does not resul1 in loss to the employer, that bJurden will have to be borne by the employer, like the burden of wage-structure in the interest of social c justice.

It was finally held that the contention on behalf of the Company therein that provision for taxation and provision for reserves should take precedence over provision for gratuity cannot be accepted.

From the above decision it is clear that : ( l) Fixation of wagcstructure stands more or less on the same footing as framing of a D gratuity scheme a:nd the principles applicable for ascertaining the profits are the same : ( 2) Provision for taxation and provision for reserves cannot take precedence over for gratuity and fixation of wages; and (3) The provision for income-tax and for reserves must take second place as compared to provision for wage-structure and gratuity.

The above decision categorically rules out any deduction of taxation. It also excludes from deduction all provision for reserves which will take in depreciation reserve also.

But, Mr. Tarkunde contended that the above decision is an F auihority for the proposition that the only two items that could be deducted are provision for taxation and provision for development rebate reserve.

If so, the counsel urges that the deduction .of depreciation reserve as claimed by the appellant is justified and that the Tribunal erred in declining that item to be deducted .

. We are not inclined to accept this contention of Mr. Tarkunde.

G The above decision is, in our opinion, an authority for the proposition that the provision for taxation and provision for reserves, which expression wiil take in depreciation reserve also, cannot be deducted for the purpose of computing the profits.

At any rate the said decision had no occasion to consider whether depreciation reserve can lie deducted or no( We have already pointed out that the H only claim made by the appellant therein was for deducting provision for taxation and for development rebate reserve and that claim was rejected.

Therefore, looked at from any point of view. the above dedsion is certainly not in favour of the contention of Mr.

Tarkunde that depreciation reserve has to be deducted before arriving at profits.

1n The Indian Link Clwin Manufacturers Ltd. v. Their Workmen('), this Court had occasion to consider the principles applicable to ascertain the financial capacity of a company in fixing wage scales and dearness allowance and framing of a gratuity scheme.

The nrinciple applicable was stated as follows :

"It is pertinent to notice that gratuity and wages in industrial adjudication are placed on the same footing and have priority over Income-tax and other reserves, as such in considering the financial soundness of an undertaking for the purposes of introduction of a gratuity scheme the profits that must be taken inio account are those computed prior to the deduction of depreciation and other reserves."

The decision in Gramophone Company v. bs Workme11(') wa<. quoted with approval in this decision.

The Company in that case had calculated profits after deducting depreciation.

This method was deprecated by this Court as follows :

"All these profits it may be mentioned are computeu after deducting depreciation and this should be taken into account in considerinl! the desirability cf formulating a gratuity scheme for the Appellant."

In. the end the provision made for depreciation and which had been deducted by the Company for calculation of profits was added tmk.

From the above decision it is clear that profits are to be computed prior to the deduction of depreciation and other reserves.

F The. said decision direc!ly holds that provi$ion for depreciation and other reserves cannot be deducted in computing profits to be ascertained for framing a gratuity scheme. This decision again reiterates the legal position that graiuity and wages in industrial adjudication and placed on the same footing and have priority over Income-tax and other reserves.

In fact, as pointed out by us earlier, provision G made for depreciation and which had been deducted by the Company for arriving at profits was added back by this Court.

Mr. Tarkunde urged that this Court in The !lldian Link Chain Ma1111fact11rers Ltd. v. Their Workmen(') has misunderstood and

1niinierpreted the earlier decision in Gramophone Company Ltd.

v. lr.1 Workmen(').

According to the.counsel the error committed by 1his Court was on proceeding on the basis that the decision in

fl) [1971] 2 s.c.c. 759.

(2) [1964] 2 LLJ. JJI.

LNICHEM LTD. 1'. WORKMEN (Vaidialingam, J.) 585

A Gramophone Company Ltd. v. Its Workmen(!) has laid down that depreciation reserve should not be deducted in computing the profits available for framing a gratuity scheme or when fixing a ', wage

ca.le.

We have no hesitation in rejecting this contention of Mr. Tarkunde.

We have already expressed our views regarding the scope of the decision in Gramophone Company Ltd. v. Its Workmen( 1 ) and no error has been committed by this Court in The Indian Link

Chain Manufacturers Ltd. v. Their Workmen(').

On the other hand, the latter deelsion is directly in point to the effect that provi- 'ion for depreciation cannot be deducted.

We may also refer to the observation of this Court in Al1medabad Millowners' Association Ere. v. The Textile Labour A.l'Ociarion(") that" ........ it is the figure of gross-profit which is more important, b•cause it is not disputed that wages payable to the employees are a lirst charge. and all other liabilities take their place after the wages:·

Mr. Tarkunde referred us to the statements contained in certain leading text books on principles of Accounting, Book Keeping and Accounts and Accountancy regarding the nature ol depreciation reserve.

In "Principles of Al'diting by F. R .. M. De Paula, 8th Edition," it is stated that the main ob.iect of providing for depreciation of wasting assets is to keep the original capital intact.

In "'Balance Sheets, how to read and understand them, by Phillip Tovey,3rd Edition" the distinction between a "Reserve" and ·Depreciation" has been stated. The author says that depreciation should !:le written of before arriving at the year's profit and that reserve is built up by setting aside portions of the profits itself. The author proceeds to state that depreciation represents the estimated wear and tear which will ultimately reduce the property and plant to scrap value.

In "'Book-Keeping and Accounts" by Cropper, Morrs and Fison, 19th Edition. when dealing with the Trial Balance. Trading and Profit and Loss Accounts, it is mentioned that depreciation is the term employed bY. the Accountants to indicate the gradual deterioration both in the value and the usefulness of those assets which, by reason of their nature and uses. steadily decline in value.

Again in "Accountancy" by William Pickles, 3rd Edition the author has defined "Depreciation" as the permanent and continuing

dimnution in the quality, quantity or value of an asset.

It is further stated that the provision for depreciation does not depend

upon what the business can afford. as the debit therefor i.' an

,(I) '1964] 2 L.L.J.Jll.

(2) [1971] 2 S.C.C. 759.

(l) [t966) I S.C'.R. J82.

esse.ntial one, constit\lting not an appropria.tion of, but a charge A• agamst, profits for the period in question.

Based upon the above statements contained in the text books. referred to above, Mr. Tarkunde urged that the principle in Accountancy is that depreciation must be deducted before ascertaining the profits.

In our opinion, the above statements may have considerable bearing in the preparation of profit .and loss accounts having due regard to the provisions of the Companies Act and Mercantile usage; but they have no bearing on the question of fixation of wage structure and dea1111ess allowance in an industrial adjudication.

From what is stated above, it follows that the Tribunal was justified in arriving at gross-profits without deducting the provision for Depreciation.

As already mentioned by us, Mr. Tarkunde has

acepted that the Tribunal was justified in not_ deducting the proviion made for taxation and develop]Ilent rebate.

The result 1s that the average gross-profits of the appellant being about n, Rs, 40,00,000.00, as held by the Tribunal, is correct.

i:n the fixation of wages and dearness allowance the legal position is well-established that it has to be done on an industry-cumregion basis having due regard to the financial capacity of the unit under consideration-,-vil:le Express Newspaper~ (Private) Ltd..

E and Another v. The Union cf India and others('), Greaves Cotton and Co. and others v. Their Workmen('), and Bengal Chemical & Pharmaceutical Works Ltd. v. Its Workmen(').

It has been further stated in Greai'es Corron arid Co. and others

v. Their Workmen(') as follows:

"The principle Jherefore which emerges from thei.1: two decisions is that in applying the industry-cum-region formula for fixing wage scales the Tribunal should lay stress on the industry part of the tonnula if there are a large number of concerns in the same region carrying on the same industry; in such a case in order that production cost may not be unequal and there may be equal competition, wages should generally be fixed on the b(asis of the comparable industries, namely, industries of the same kind.

But where the number of industries of the same kind in a particular region is small it is the region part of the industry-cum-region formula which ssumes importance . ....... ''

(I) [1959] S.C.R . .12.

(21 [19(;41 5 S.C.R . .162

UNICHEM LTD. v. WORKMEN (Vaidialingam, /.) 587

It has been further emphasised in Ahmedabad Millowners' Association etc. v. The Textile Labour Association(') that industrial adjudication should always take into account, when revising the wage structure and granting dearness allowance, the problem of the additional burden to be imposed on the employer and ascert:1in whether the employer can reasonably be called upon to bear such burden.

The principles to be bprne in mind have been stated in the said decision as follows :

"It is a long-range 'plan; and so, in dealing with this problem, the financial position of the employer must be carefully amined. What has been the progress o{ the industry in question; what are the prospects of the indusiry in future; has the industry been making profits; and if yes. what is the extent of profits; what is the nature of demand which the industry expects to secure; what would be the extent of the burden and its gradual increa5e which the employer may have to face ? These and similar other considerations have to be carefully weighed before a proper wage structure can be reasonably constructed by industrial adjudication ........ "

As pointed out In Greaves Cotto11 a11d Co. and others v. Their JV orkmen (' )., one of the principles to be adopted in fixing wages and dearness allowance is that the Tribunal should take into account the wage scale and dearness allowance prevailing in comparable ''oru:erns carrying on the same industry in the region.

The factorsc which have to be taken into account for ascertaining comparable concerns have also been laid down by this Court.

In Workmen of Balmer Lawrie and Co. v. Bil/mer Lawrie and Co.(") those principles have been stated as follows:

"Besides, it is necessary to emphasise that in dealing with the comparable character of industrial undertaking5, industrial adjudication does not usually rely on oral evidence alone. This question is c01l5idered in the light of material fact aoo circumstances which are generally proved by documentary evidence.

What is the total capital invested by the concern, what is the extent of its business. what is the order of the profits made by the concern, what are the dividends paid. how many employees are employed by the concern, what is its standing in the industry to which it belongs, these and other matters have to be examined by industrial adjudication in determining the question as to whether one concern is comparable with another in the matter affixing wages.

Now,

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

(2) j1964] S S.C.R. 36:!.

(3) [1%4] S S.C.R. 344.

it is obvious that these questions cannot be decided merely on the interested .testimony either of the workmen, or of the employer and his witnesses."

J:n Workmen of New Egerton Woollen Mills v. NewEger1011 Woollen Mills and others('), the above principles have again been reiterated.

From the decisions,. referred to above, it follows that two principal factors which must weigh while fixing or revising wage scales and grades are : ( 1) How the wages prevailing in the establishment

in question compare with those given to the workmen of similar grade and scale by similar establishments in the same industry or in their absence in similar establishments in other industries in the region; and ( 2) What wage scales the establishment in question can pay without any undue strain on its financial resources.

The same principles substantially apply when fixing or revising the dearness allowance.

The question is whether the Trilµlal has adopted the above principles when revising the wage scales and dearness a!lowance in the case of the appellant.

The Unions had relied on as many as twentyone ccmcerns located in the region of Greater Bombay and belonging to the same pharmaceutical units of industry as units comparable with the appellant.

The appellant opposed its. being compared with those concerns on the groqnd that the units relied on by .the Unions were companies having foreign collaborations or connections, and as such possessing several advantages.

The appe)Jant in tum relied on several concerns in the region as comparable units;

Before we refer to .the concerns relied oo by the Unions and the appellant as comparable concerns, it is necessary to deal with an objection raised by Mr. Tarkunde that no foreign unit doing business in India or no unit in India doing business in collaboration

with a foreign concern, can ever considered for purposes of comparison.

According .to the appellant such concerns have dis- G tinct advantages of international research facilities, reputation in business which enables such concerns to market their products more easily and thus enable them to pay higher Wliges to their employees, In view of the special technical facilities,' that may be available to them, their output will be far higher though the number of. emplo- yees wi!J be much Jess, •and as such they will be able to pay to their lesser number of employs higher wages.

In this connection H Mr.· Tarkunde relied on certain awards of the Industrial Tribunal

(I) [1%9] 2 LL. J. 782.

. ..;,

UNICHEM LTD. \". WORKMEN ( Vaidialingam. J.) 5~,,

wherein it is held that the companies having foreign collaboration though in the same region and in the same industry, cannot he considered for the purposes of comparison with purely local units.

On the other hand Mr. Sule, has opposed the ah!ove position and urged that the question as to who is the employer, is absolutd: inunaterial so long as the tests for the purposes ol' comparability. as laid down by this Court, are satisfied and the capacity to he; i: the financial burden is established, We will deal with aspect; in the first instance.

lt must be stated at the outset that the Unions placed re!ianc: on certain information contained in the prospectus of the Compa111 and certain statements contained in the book "'Indian Pharma. ceutical Industry" published in 1963 and 1969, to show that th,· appellant concern is also one which has foreign collaboration and as such it is to be ranked as a concern with foreign attachmnt. has recorded a finding in favour of the appellant that it is not '' unit having foreign collaboration.

Therefore. this finding i' i" favour of the appellant.

The question that now arises for consideration is whether in 13,, there is any objection or prohibition in an industrial tribunal, whon dealing with comparable units in a region from taking into account concerns having foreign collaboration.

It is no doubt true that some of the concerns relied on by the Unions are concerns working

in collaboration with foreign firms.

In Chemical Industries and Pharmaceu4ica/ Laboratori<'., Limited (Cipla) Bombay v. Their Workmen('), it was held by the Industrial Tribunal that the Cipla cannot be compared to GlJ.~'' Laboratories, Raptakos Brett and other plrarmaceutical concernwhich are either subsidiaries of foreign concerns or are c!osel) linked with them.

It was further held that if any comparison could be made, it can only bie with concerns like Kemp & Compan~.

Sandu Pharmaceutical, Fair Deal Corporation, Edison Continenta: Laboratories, Bengal Chemicals aci1d such other indigenot<- concerns.

Again in Alembic Chemical Works Ltd. Baroda v. Its Workmen('), the Tribunal held that Alembic cannot be compared tn concerns like the Gloom Laboratories and others who have associatidns in different degrees and forms with certain foreign concern' of international repute.

On this reasoning the Tribunal relied more on the scales L'f wages prevailing in concerns like the Jhandu Pharmaceutical, Cipla.

Kemp & Co., and 'such similar concerns.although it held that

(ll [1957] !.C.R. Bombay, t206.

12) 11958] l.C.R. B:imbay, 1305.

Alembic is a much bigger concern than .the said units.

It must A be stated that in both theSe awards, concerns with foreign collaboration have been eliminated from consideration oo the.ground that they cannot~ regarded as comparable concerns1aiid to that extent they support Mr. Tarkund<s contention.

In Reference (IT) No. 223 of W59, which related to the appellant Company, the workmen pla~ reliance on Indian units of foreign cancems for being treated \as comparable units.

The :ippellant, however, pointed out that\ those units which have international fame and repute in world market were in a position to sell their products more easily and profitably and hence they cannot be treated as comparable units.

The Tribunal, no doubt, accepted C the contention of the appellant that the Unions had selected some of the bigger concerns for comparison. and held•that it would be more appropriate if the appellant is placed somewhere in between the bigger and smaller concerns. In this view the Tribunal took a fair cross-section of the industry and fixed the wages having regard to the financial capacity of the appellant.

D Again in Reference (IT) No. 402 of 1963, relating to the appellant, wherein. the dearness allowance was revised, the appellant had contended that it should not be compared with the units like Ciba, Dumex, Glaxo, Sandoz and the like.

The Tril:!unal held that the appellant cannot be compared with international pharmaceutical units having branches in Bombay or with foreign concerns like Glaxo, Ciba, Sandoz etc., which though incorporated in India E. are subsidiaries of forei!lll companies having all the advantages of connection with respect of home companies in Europe and America.

The Tdbunal referred to the award in Reference (IT) No. 223 of

I 959 and hela that a fair cross-section of the industry has to be taken into account for fixing a scale of dearness allowance, which

F'. will be within the financial capacity of the appellant. But, however,, the Tribunal held that the appellant is a firm of good repute and standing and that it has very fair prospects.

Though in Refe. rence (IT) No. 223 of 1959, the Tribooal did not specifically eliminate from consideration units having foreign collabora•ion as such, nevertheless, in Reference (IT) No." 402 of 1963, the Tribunal has held that the appellant cannot be c'Olllpared with inter- G national pharmaceutical companies having branches in Bombay or with concerns, though incorporated in India, are subsidiaries of foreign companies.

From what is stated above, it is no doubt true that in tjie three awards, one of which specifically relates to the appellant, concerns H having foreign collaboration have been eliminated for P!1rpdses of comparison.

But no legal principle on , the basis of which such a decision has been arrive4 at has been stated in any of these award<.

UNICHEM LTD. v. WORKMEN (Vaidialingam, l.) 5911

In our.opinion, so.long and to the extent that concerns having foreign collaboration are doing business in India and-in a particular concerned region, we do not see any reason why they should not be taken into account for purposes of being treated as comparab e units, provided the tests for such, purposes as laid down by this Court are satisfied.

No doubt s<hne of thOSe concerns may be having an , advantage in various matters.

But merely because that they possess such advaniage in the field of business is not a circurn" stance for eliminating such c0ncerns for purposes of comparability.

The object of industrial adjudication is, as far as possible, to secure uniformity of service conditions amongst the industrial units in the same region.

If a concern having foreign c01Iaboration properly satisfies the tests of comparability, it would be improper to regard such unit as uncomparable merely on the ground that it is a concern with foreign co!Jaboration or interest and that the unit with which it is sought fo be compared is entirely of Indian origin and resources. ·

The object .of Industrial Law is to improve the service c0ndi- 1ions of industrial labour so as to provide for them the ordinary

amenitis ()f life with a view to bring ahPut industrial peace which would in "turn accelerate productivity of the country resulting in its prosperity.

The prosperity of the country, in its turn will help 10 improve the conditiQll of Jabour.

The principles regarding fiiration of wage scales and dearness allowance have been laid down in several decisions by this Court and they apply equally to all industries irrespective of the character of the.employer. The worker is interested in his pay packet a:nd given reasonable wages, he can be expected to be a satisfied worker.

There is no juStification from the stand point of View of the emproyees for fixing different wage scales merely because of the fact that some workmen are in the employ of pu~Jy local concerns. while some others are in the employ of units though in the same region, working in collaboration with foreign concerns.

As the paramoun:t consideration is the inu:rest of the worker, the character of the emp1oyer is irrelevant, provided 1he latter's financial capacity to bear the burden is establish~. . In the ultimate analysis the character of the employer or the destmatmn of profits has no. relevance in the fixation of wages and dearness allowance. ·

We are fortified in the above view by the decision of the Con1 stitution Bench of this Court in Hindustan Antibiotics Lhl. v. The Workmen and others('). In that case on behalf of hehappellt

it was urged that as t was a government eompany m t e J?Ubhc sector, the principles governing the fixation of wag~ applicable to companies in the private sectr do not haw \\nytt:levooce.. On

(1) [1%7] I S.C.R. 652.

1he other hand, on behalf of the workmen it was contended that in fixing the wage structure including dearness allowance, 'the quest ion, who is the employer, is irrelevant and that only the needs ol I he employee are of paramount importance.

The contention on behalf oi the workmen was accepted by this Court and it was held that the same principles that have been laid down by the industrial adjudication and the courts regarding the fixation of wage scale' 11nd dearness allowance in respeci of companies in the priva:te sector apply with equal force to companies in the public sector also.

It \\'as further held that in the application ot the industry-cum-region principle to be adopted to distinction can be made between on~ unit anCI another in the same industry in the fixation of wage scale' provided the test of financial capacity is satisfied.

It was furthr held that by and large the acceptance or the principle of indu>try- , um-region will be more conducive to industrial relations and that the same principles evolved by the indusirial adjudication in regard 10 private sector undertakings will govern those in the public sect.'r undertakings having a distinci corporate existence.

Though the decision cited above had to deal with a claim for differentiation being made on behalf of a company in the public

<ector and which claim was rejected, in our opinion, the ba,,, ic principle underlying the said decision will apply even with respe<:t to the question whether the units, having collaboration with foreign

concerns can be taken into account for purposes of compari .. , on.

In our opinion, the above decision warrants the conclusion that such units ha:ving foreign collaboration or foreign companies doin~

hlLiness in India can be taken into account for purposes of being considered whether they are comparable units.

Of course, the test laid down by this Court for treating one unit as a comparable one, will have to be satisfied, and once that test is fulfi.lled, there can be no distinction made between such units a:nd purely local units.

Therefore, in our view, the Tribunal, in the case before us, was perfectly justified Jn taking into account for purposes of comparison units having collaboration with foreign concerns and foreign units doing business in India in the same region and bein~ in the same industry.

It follows. therefore, that the principles laid down to the contrary in the awards relied on by Mr. Tarkunde, are erroneous.

Coming to the units relied o.u by the parties as comparable units. as mentioned earlier, the Unions relied on as many as 21 concern., as comparable with the appellant.

No doubt some of the unib relied on by them were units having coUab(oration with foreign concerns.

The aooellant also in turn filed statement Ex. C-26. referring to six companies which could be treated as comparable concerns.

UN!CHEM LTD. v. WORKMEN (Vaidialingam, J.) 593

The Tribunal rejected most of the units relied on by the Unions on the ground that the information furnished regarding such units were not adequate and complete regarding various factors necessary

to constitute a comparable unit.

We have also gone through the statements filed by the Unions. In Ex. DU-2, one of the Unions furnished information regarding.the business performance of about nine concerns till 1he year 1964-65.

Similarly, in Ex. DU-3, another Union had giveri the average performance of nearly ten units for the years 1962-63 to 1964-65. As it would be more desirable to consider the financial capacity of the appellant in the

liglit of the trading results disclosed in the balance sheets and profit and loss accounts from the years 1965-66 to 1969-70, it must be c considered that the information furnished in Exs. DU-2 and DU-3

cannot be considered to be upto date and helpful. The Unions also did not make any further attempc to supplement the information contained in these two exhibits by fur.nishing information regarding the years subsequent to 1964-65. No doubt, the Union, haYe furnished particulars regarding: one unit, Burrouhs Wel!cornc

1 lndia) Private Ltd., which will be dealt with later.

Therefor~.

U the rejection by the Tribunal of most of the units relied on by the

L:nions was justified.

The uppellant Company relied on six units mentioned in E~.

C-26.

Those units are Cipla, Chemo-Phama, Zandu, Opil, Sigm" and Bengal Chemicals. But the Compa, ny did not furnish informu- E ti<Jn regarding the business performa:nce of these concerns for u

priod of years in the immediate past.

But it will be noted that the four units referred to in E~. C-26, namely. Zandu. Cipla. Opil

•ind Sigma, had been considered by the Industrial Tribunal in its previous uward Reference. (IT) No. 402 of 1963,, when the scale of dearness allowance obtaining in the appellant Company was r reised. On that occasion the Tribunal had held that it was only Cipla which came nearest to the apPCllant Company and even there the dearness allowance obtainmg in Cipla cannot be taken for comparison. !hat means that these four units were left out of 11ccount and were not treated as units comparable with the appelltmt.

No fresh materials. were placed by the appellant regarding G these four units after the decision of llie Tribunal in Reference

1 IT) No. 402 of 1963. Therefore, the Tribunal in the present case, was justified in rejecting the claim of the .. appellant that those four units are comparable concerns. The elimination of the four units, thus left for consideration only two concerns, namely, Chemo-Phaina andBengal Chemic; als.

Even here the Unions had furnished statements Bxs. DU-8 and DU-9, regarding these two H uni!S.

In Ex. DU:8; the business ce of Chemo-Phama from 1965 to 1969 was given and m Ex. DU-9, the business perfonnance of Bengal Chemicals from 1965 to 1970 was given. The

SUPREME COURT REPORTS

A comparison of the statements contained in Exs. DU-8 and DU-9 with. the material relatin.,. to the appellant in Ex. DU-44, regarding the paid up capital, ':-eserves and surplus sales. net block, net profits and gross-profits it is quite clear that the business performance of Chemo-Phama ; nd Bengal Chemicals do not come anywhere nor that of the appe!lant. The

B appellant in al! respects stands on a much higher footing.

The average gross-profits of the appellant work out to Rs. 40,11,176. while. the average gross-profits of Chemo-Phama works 9ut to Rs. 5,31,511 and that of the_ Bengal Chemicals to Rs. ll,'.l9,553.

Therefore, it is clear that these two units also cannot be treated as concerns comparable with the appellant and hence the wage strucc ture prevailing in those concerns cannot provide any useful guidance.

We have already mentioned that the Tribunal has ultimately held that M/s Burroughs Wellcome (India) Private Limiied is a concern comparable with that of the appellant.

It is no doubt a foreign company in the sense that its entire capital is held by I> foreign company as shown in the statement Ex. C-11. filed by the appeJlant.

But we have already rejected the contention that such a concern cannot be ruled out of consideration for purpose of comparability.

A very severe attack has been levelled by Mr. Tarkunde in the E Tribunal's treating M/ s Burroughs Wellcome Company as a comparable unit.

According. to the learned counsel if the various factors relevant for the purpose of comparison are considered, it will be clear that the appellant cannot stand any comparison with this unit.

Mr. Tarkunde further pointed out that instead of taking only one unit for purposes of comparison, theTribunal should ha.ve taken fair cross-section of the industry in order to find out where F exactly the appellant can be fitted in. It is no dout true that a fair cross-section of the industry should be taken into account.

But in this case when all the other units have been held to be not comparable with the appellant, this criticism leveJled against the approach made by the Tnbllllal cannot be accepted. ·

Regarding Burroughs Wellcome Company, the Unions had submitted a statement Ex. DU-2A under a seal of confidential as it was a private limited company. A comparison of the information -contained in the said statement Ex. DU-2A regarding the paid up

-capital, reserves and surplus ' sales, depreciation,, development rebate, provision for taxatipn, net-profit's, gross-lll'Ofits, net block H and dividend declared for the,.ears 1967 to 1970 with tho corresponding items in Ex. DU-4A with respect to the appellant shows 1hat both the units are substantially on a par; Normally, the

UNICHEM LTD. v. WORKMEN (Vaid{a/ingam, /.) 595

statements in Ex. DU-2A could have been extracted in this judgment b, ut for the fact that .Burroughs Wellcome Cpany being a private limited company and the Statements havirig been furnished in a sealed cover, they could not be made public.

The paid up capital is identical in both the conce.rns. The average sales of Burroughs Wellcome Company and those of the appellant are substantially the same.

The difference between the net-profits of the two is significantly smrul.

The gro'ss-proJitS of the two units are also close to each other. No doubt there are sO!\le small differences between the two in these items, but they are of no significance. The various factors which have to be taken into account for he purpose of a unit being treated as a comparable one as laid down by this Court have already been reierre4 to. If so, all thoe factors taken into account clearly show that Burroughs We!Jcome Company is a unit comparable with the appellant.

No doubt the appellant has .relied on the ratio of employees to sales, as well as to debt equity ration and the percentage of profit to sales in respect of the appellant and the Burroughs Wellcome Company. Ex. C-22 co, ntains the ratio of employees to sales in 1968-69. Though there are certain other units referred to therein. we will only advert to the particulars regardini:i: the appellant and the Burroughs Wellcome Company, which are as follows :

Ration of Employee to Salef

No.of Per Name of the Company Year Sales Employees employee

sale

Rs.

Rs.

Uruchem 68-69 32994456 752 43875 Burrouahs. 69 25000000 425 58823

A reference to Ex. C-22 will show that the sales of the appellant is higher than that of Burroughs Wellcome Co.

No doubt the ratio per employee is slightly less in the case of the appellant.

It is also seen that the appellant employs nearly 752 workmen wheica5 Burroughs Wellcome Co. employs only 425 workmen.

In Ex. Cc 18, particulars regarding Debt Equity Ratio have been given.

That statement contains particulars regarding the various firms including the appellant. In 1969 the capital of the appellant was Rs. 101.86 Jakhs.

It had borrowed Rs. 95.89 lakhs and the percentage on borrowed funds to capital works out to 94.1 % . It is no doubt ti:ue that there is no borrowed capital in Burroughs Wellcome Co. In Ex. C-18 particulars regarding nine !!!rlis have l>een given and it is Seen that except two units al] the

ote~ seven }Jlllits, including e appellant, .have borrowed. ' Jn fact It IS mteresting to note that Glaxo, which has a capital of Rs. 1196.81 laths had also borrowed Rs. 26.80 lalchs. S!milarJy,

Chemo-Phama which had a capital of only Rs. 32.05 lakhs had A borrowed Rs. 37.08 lakhs and the percentage works out to Rs. 115.7%. We are referring fo these aspects because it was

mesed by M.r. Tarkunde that the Debt Equity Ratio in the appellant 1s very fogh and that it has to pay a large amount by way of inlt!rest on borrowed funds which is not the case with Burroughs Wellcome Company. But the statements contained in Ex. C-18 s themselves clearly show that borrowing for the purpose of business

>eems to be a usual pattern followed by the companies in the region.

Ex. C-15 is a statement relating to percentage of profit to s'ales for the years 1965-66 to 1969-70. No doubt the figures given C therein show that the percentage of profits has been fluctuating: but. in our opinion, the particulars contained in the above exhibits. relied on by the appel!ant, do not affect the findings of the Tribunal that Burroughs Wel!come Company is .a unit comparable with the Cippellant.

Another criticism that has been levelled by Mr. Tarkunde is that the Tribunal has not taken into account the prospects of the t\1ture business of the appellant. ln .this connection the appellant :elied on the coming into force with effect from January l, 1971 of the Drugs (Price Control) Order. 1970 .. According to Mr. Tarkunde wh11tever may have been the financial position of the appellant in the past, its future business is bound to suffer in view of thh price control order. He referred us to 'the decision in Wil/iamsons

1 Tndia) Privae. Ltd. v. Its Workmen(') of this Court wherein it hus been held, amongst the various factors which have to be taken into account for the purpose of fixation of wage scales and dearness uJlowance, the prospect of future business is a very relevant circum- 'tance. This factor, according to the appellant, has not been taken into account by the Tribunal. ·

We have earlier referred to the decisions of this Court regardinp. the principles governing the fixation \lf wages nd dearness allowance.

It is no doubt a long range plan and the prospects o[ future

buiness amongst other factors bave also to be taken.into account.

Tile case of the appellant is that in 1963, there has 'Ileen a 1'r.ice

freeze and that has affected its busiliess and therefore the Druir.;

i'Price Control) Order, 1970 Will affect its future business.

We have. already extracted in the e8!11ier part of the jud2ment the .trd ing res).l!ts of the appellant from 1965-66to 1969-70. If the price freeze which came Into force in 1963 had any affect, then it mu5t

hve been feflected in the. trading results of the al)pellant. 'The

UN!CHEM LTD. v. WORKMEN (Vaidialingam, J.) 597

trading results of the appellant during the years 1962-63 to 1964-65 are as follows :

Particulars 1962-63 1963-64 .1964-65

Paid-up capital . 4491000 4499250 4499500 Reserves and Surplus . 476569 1010753 1505353 Sales • 10241405 15665883 17388705 Net Block 3907400 4371113 4345467 Provision for Taxation 934000 1065000 1515000 Depreciation . 297243 379256 390878 . Development rebate 33686 100617 22329 Net Profits . , • 442881 703567 877271 ·-------

A glance of the above statement clearly' shows that though the paid-up capital remains the same, there has been a steady rise in

tile reserve and surplus sales and net profits. Similarly, the net block has also an increase: There has been no set back in the sales.

On the other-hand there has been a steady rise in the sales.

No doubt for the year 1969-70 the profits did go down; but the drop is comparably small and the appeliant has not been able to satisfy us that it is due to the price freeze. ·

Then the question is regarding the impact of the Drugs (Price Control) Order, 1970, which has come into effect from January 1,

1971. In this connection it is necessary to refer to the speech E made hr; the Chainnan of the Board of Directors of the appellant Company at the Annual General Meeting held on January 9, 1971.

At this stage it may be mentioned that the Accounting year of the appellant Company is from October 1, to September 30, of the succeeding year. On January 9, 1971, the Chairman was giving a review of the working of the Company for the year ending September 30, 1970. He had clearly stated that the impact of the F Drugs (Price Control) Order, 1'970, which had come into force only recently will be felt by the Company only after the year

1970-71. The appeal wrui heard by us from January. 3, 1972 and concluded only on January 10, 1972. As the Company, in the previous years had been having its Annual' ral Meetings in early January, of each year, we suggested to the counsel for the G appellant that as the approximate trading results for the year commencing from October 1, 1970 to September 30, 1971 would have been •available by then, they may be furnished so that it may be possible to find out the impact of the Drugs (Price Control) Order

on the trading results of the appellant, But it was represented that the figures are ilot available. It is not necessary for us to com- H ment except to state that going by the fact that on 'former occasions the figure had b!een ready by the first week of Janurv to euRhle the Annual General Meetin~ of the Company to be held, it would . not have been ditlioult for the appellant to have furnished at least IO-LI031 Sup.CJ/72

the pproximate figures, if really the trading results had shown a A <l7chne. . The appeant has missed an opportunity 'that was provided to it to establish that the Drugs (Price Control) Order has .adversely affected its business. Under those circumstances, it is not

possie for us to disagree with the view of the Tribunal that the impact of the Drugs (Price Control) Order will not tie such as to affect materially the business prospects of the appeHant Company.

We may stale that if the Drugs (Price Control) Order materially affects the prosperity of the appellant's trade, it wuld be opell: to it to raise a dispute for the reduction in the wage structure and m case they are able to show that in view of the Drugs (Price Control) Order, their financial position has been weakened to such C an extent that they cannot bear the burden of wage structure fixed by the present award, the ma'tter may have to be examined on its merits.

The questio:n of fixation o( wage scales need not detain us very . long. We have already extracted the wage scales prevailing in the appellant company as wel! as the categories of workmen when the D reference was made.

We have also referred to the fixation of wage scales by the Tribunal on a comparison with the wage scale.obtaining in Burroughs Wellcome Company .. The wag~ structure as well as the grades that were prevalent in Burroughs Wellcome Co. in pursuance of the settlement dated June 13, 1966 regarding the operatives and clerical and subordinate staff have peen incorporated E by the Tribunal in its Award.

We do not think it necessary to reproduce the same. A comparison of the wage scales in Burrough Wellcome Company and the wage scales fixed by the Tribunal in 'the Award for the Company will show that the Tribunal has only :made some slight variation in view of the fact that lt accepted the report of the assessor for the continuance of the exigting grades in F the Company. Assome of those grades were not existing in Burroughs Wellcome Company, the Tribunal had to :make some .slight changes. Wherever it was possible the wage structure in Burroughs Wellcome Co. has been retained but the maximum has been raised a 1ittle and some slight changes have also been made in the incre- mental stage.

Once Burrough Wellcome Company is treated as a comparable unit we are satisfied that the wage scales awarded by the Tribunal canot be considered to be unjustified.

The Triunal's finding regarding the financial capacity of the appellant has already been referred to and we accept the same.

It wa8, however, J?Ointed out by Mr. Tarkunde that in cqnsidering w comp.arabihty of a unit; strength of the labour forcehas :lilso to be given due importance. Mr. Tarlcuncle l'Ointed out that

UNICHEM LTD. v. WORKMEN (Vaidialingam, !.) 599

A while 'the appellant employs 752 workmen, there are only 436 i:n

Burroughs Wellcome Co. as is seen from the State)lle!It Ex. C-22.

No doubt to this extent, the two units differ, but when one be'ars in mind the business performance of both , the units, there is not much of a substanfral difference. It may be that because of the fact that Burroughs Wellcome Co. adopts more modem methods tl of production, it was employing a smaller complement of worker5.

Having due regard to all the other tests that have been satisfied, this difference in "the strength of labour force alone, in our opinion, cannot.l>e given undue importance. It is pertinent io note that this Court in Workmen of New Egertorli Woollen Mills v. New Egerton Woollen MU/sand others(1) did not disagree with the vie~ c of the Industrial Tribunal which had treated the respondent therein and another unii as a comparabi1e unit, notwithstanding the fact that the respondent was employing at the material time about 3000 workmen whereas the unit which was treated as a comparable unit was havin_g the labour force of only about 1000 men, in view of the fact that all other requirements for comparability were satisfied.

In fact, in the case before us, the Tribunal has adverted to this D difference o{ Jabour force of the appellant and Burroughs Wellcome Company, but nevertheless it held that, that by itself is not sufficient to eliminate Burroughs Wellcome Company as a comparable unit.

We agree with this approach made by the Tribunal.

An objection was taken on the asis of s. 10(4) of the Industrial Disputes Act, 1947 that ihe Tribunal has permitted the Unions to revise their demand regarding classification and grades of workmen and that the Tribunal has further committed an error i, n upholding the grades of Stenographers, Assistants and Store-keepers and merging them with that of the Senior Clerks.

We are not inclined to accept this contention advanced on behalf of the appellant.

We have already referred to the fact that as the question of classification and fixing grades were matters cf a technical nature, at the joint request of both the parties, the Tribunal appointed Sri Gadkari, as an assessor.

It was really in view of the stand taken by both the parties before the assessor and the Tribunal, after the report was submitted by the assessor that the Tribunal has G accepted the report that the existing grades should continue.

But as the '"'.orkmen had to be fitted in the appropriate grades, the Tribunal was justified in fitting in the categories the workmen and their grades as well as their scales of wages.

The above contention based upon s. 10( 4) of the Industrial Disputes Act, at the most can relate, if at all. only to the operatives.

The report of .Sri Gadkari has already been referred to.

He . had suggested the .H retention of the existing categories.

The workmen have necessarily to be classified for the puri>ose pf being put in particular categories

(I) [1969] 2 L.L.J. 782.

and the wages also have to be suitably fixed depending upon the category in which they are so fitted.

Having due regard to the nature of the reference, olassificatio, n though jobwise and the fixing of wages of pay and fitting the workmen in suitable categories were all matters incidental and as such the Tribunal has acted within its jurisdiction in classifying the workmen and fixing the scales of pay after fitting them in particular categories. In the view above expressed, we do not think it necessary to refer to the decisions referred either by Mr. Tarkunde, learned counsel for the appellant or by Mrs. Urmi!a Kapoor, o, n behalf of the respondent No. 2 as to when exactly the matter can ble considered to be incidental to the question referred for adjudication.

Before we 'take up the question of dearness allowance, one other point that requires to be adverted to is the objection taken on behalf of the appellant regarding. the raising in the gratuity scheme the ceiling limit from 15 months to l 7t months' basic wages.

The Tribunal has adopted the pattern obtaining in Burroughs Wel!come Company. We do not see any question of principle involved in this matter and therefore we find no merit in the objection raised by the Company.

The pattern of dearness allowance that was in force in the appellant Company at the time of the reference has been indicated already.

We have also referred to the scale of deaess allowance fixed by the Tribunal.

There were different systems of dearness allowance for the operatives and the clerical and subordinate staff.

That such a different system of dearness allowance for the employees working under the same employer is not warranted, is clear from the decisions of this Court in Greaves Cotton & Co. and others

v. Their Workmen(') and Bengal Chemical & Pharmaceutical Works Ltd. v. Its Workmen('). Therefore, the Tribunal was justified in devising a uniform scale of dearness allowance applicable to all the employees of the appellant. The Unions required a common scheme of dearness allowance of slab! system to be introduced for all employees.

The appellant resisted the claim on the ground that there was already a scheme of dearness allowance existing in the Company and that there is no justification for revising the same. But, nevertheless, the Tribunal has adopted, by and large, the scheme of dearness allowance which was in vogue in Burroughs Wellcome Co. Normally, once Burroughs We!lcome Co. is treated as a unit comparable with the appellant, the Tribunal must be considered prlma facle to be j, usfified in introducing the pattem obtaining in that unit. However, it is pointed out on behalf of the appellant that the slab system of dearness allowance does not obtain in any of the pharmaceutical industries in the region.

(1) [19641 S S.C.R. 362.

(2) {19691 2 S.C.R. 113.

UN!CHEM LTD. v .. woRKMEN (Vaidialingam, J.) 60 l

The contention that because there was a system of dearness allowance in existence in the Company and therefore there was no justification for revising the same, cannot be accepted.

A similar contention raised in Remington Rand of India v. Its Workmen(') was rejected by this Court. In that case there was a system of dearness allowance providing for payment of not only a rate of B percentage on the basic salary biut also a variation in the percentage on the rise or fall of the cost of living index.

The workmen demanded revision of the scale of dearness allowance on the ground that the cost of living }ndex had increased.

The clainr was resisted by the Company on the ground that the scheme of dearness allowance then existing in the Company itself provided for an increase c

in the cost of living index and therefore no revision is required.

This contention was not accepted by this Court. It was held that a clainr made by the workmen, if otherwise justified, cannot be rejected on the sole ground that a provision is already made in an existing scheme of dearness allowance for adjustmt1llt depending upon an increase in the cost cf living index.

This Coun further held that if it is established that the cost of living shows a tendency to rise very high, the workmen would be entitled to claim and there may be a change .in the rate of dearness allowance originally fixed, so as to provide for more neutralisation. It was further held that a claim made by the workmen will have to be properly considered and adjudicated upon by the Tribunat.

J:n fact, in that case, it is seen that there was only a 50 point rise in the cost of living index and nevertheless the revision of the scale of dearness aMowe by the Tribunal was upheld.

We may also refer to the decision of this Court in Workmen of Balmer Lawrie and Co. v. Balmer Lawrie and Co. (2 ) wherein it has been held as follows :

"If the paying capacity of the employer increases or the cost of Jiving shows an upward trend, or there are other anomalies, mistakes or errors, in the award fixing wage structure, or there has been a rise in the wage siructure in comoarable industries in the region, industrial employees would be justified in making a claim for the

e-examination of the wage structure and if such clainr is referred for adjudication, the Adjudicator would not normally be , iustified in rejecting it solely on the ground that enough time has not passed after the making of the award, or that material change in relevant circumstances b.ad not been proved. . It .is of course, not possible to lay down any hard and fast rule in the matter. The question as to revision must be examined on the merits in each

(I} [19621 I L.L.J, 287.

(2) [1964]5 s.c.R. 344,

individual case that is brought before an adjudicator for his adj.udication."

On the date when the settlement was entered into be'tween the

ppell'ant and its workmen on April 20, 1966, the cost of iiving mdex was 630.

From Ex. C-1 it is seen that in August 1969, the cost of living index had gone up to 790 and from Ex. DU-10 dated B December 8, 1970, it is seen that when the second settlement was entered into between Bmroughs Wellcpme Co. and its workmen, the cost of living index had gone upto 800.1.

It is also seen that at the time of the Award.it had gon.e up farther to about 850 points.

Therefore, from the date of the setllement in 1966 the cost of living index had very rapidly gone up by 220 points.

At the time when the demand for revision of wage-scales and dearness allowance wss made bly the Unfons and when the reference order was made by the Government, the cost of living index had gone up very high.

That clearly shows that the workmen had made out a case for revision of wage-scales and dearness allowance.

We have earlier referred to the scheme of dearness allowance D fixed by the Tribunal in ihe Award.

The scheme provides for payment of a particular percentage on the basic salary and it also provides for variation on 10 points.

But the dearness allowance has been fixed on the Bombay Working Class Cost of Living lndex of 521-530.

Though more or less the same pattern of dearness allowance was obtaining in Burroughs Wellcome Co., the dearness allowance in the latter was fixed at the Bombay Worki; ng Class Cost of Living Index of 491-500.

The scale of dearness allowance, as demanded by the Unions, was on the basi's of the cost of living index 401-410.

It was accepted by the appellant that the scheme obtaj.ning in Burroughs Weilcome Company is more advantageous from the financial point of view than the_ scheme of dearness allowance demanded by the Unions.

In fact, the Tribunal itself has made a further concession in favour of the appellant by adoptin~

the cost of living index of 521-530 instead of 491-500 as was obtaining in Burroughs Wellcome Co.

The Tribunal had made this change in the cost of living index n view of the fact that in the appellant Company, there was an Incentive Wages Scheme in and by which operatives were gettinii on an average about Rs. 28/- per G month.

Therefore the financial burden cast on the appellant by the dearness allowance scheme fixed by the Tribunal is such that the appeilant can bear the burden.

In order to show that in the Bombay region the pharrnaceµtical units were adopting the slab system of. dearness allowance, the

Unions had filed a chart Ex. DU-1.

It is evident from Ex. DU-!, that out of 19 pharmaceutical units, referred to therein, at least 11 of them adopt the slab sys'tem of dearness allowance which has been

UNICHEM LTD. v. WORKMEN (Vaidialingam, 1.) 603

introduced in the case of the appellant in the Award.

No doubt,. it is pointed out by Mr. Tarkunde that in the statement filed biy the appellant, Ex. C-25, it will be seen that none of the Indian owned units have adopted the slab system. But whether those units have adopted or not, we have already indicated, that no distinction can be made between a purely local unit and a foreign unit doing B busi:ness in India.or an Indian unit doing business in collaboration with foreign concern.

When oince such units can be taken into account as comparable units, the pattern of dearness allowance ob'taining therein can very well be cqnsidered to ascertain the system adopted by the industry as that will show the trend in the

region.

As pointed out above, ai leas't 11 units, referred to in Ex. DU-I have adopted the system now introduced in the case of the appeHant tjy the Tribunal. Under those circumstances, when such sysiem is prevailing in the industry in the same region, it cannot t\e held that the Tribunal has committed any error, in introducing a similar pattern in the case cf the appellant.

The slab sysiem has been approved by this Coun as will be seen by the decisions in Greaves Cotton and Co. and others v. Their Wo.rkmen(1) and Bengal Chemical and Pharmaceutical Works-Ltd. v.

Its Workmen(').

Even in Bombay that such a pattern of dearness allowance, as the one introduced in ihe case of the appellant, is existing is see111 by the decisions of this Court in Greaves Cotton and Co. and others v. Their Workmen(') and Kamani Metals & Alloys Ltd. v. Their Workmen(').

No doubt the industries therein E were not pharmaceutical units. But that such a system exists in Bombay region is clear from the above decisiQDS.

Mr. Tarkunde referred us to the Award of the Industrial Tribunal in Reference (IT) No. 411 of 1966 in Voltas Limited, Bombay v. The Workmen Employed under them dated September

30, 1969 wherein the adoption of slab system has not been approved. Orr the other hand, Mrs. Urmila K'apoor, learned counsel for respondeni No. 2 has drawn our attention to a number of awards of the Industrial Tribunal rendered during the years 1965 to 1968 wherein the slab system ol dearness allow11nce has been

adopte? in Bombay region.

It is only necessary to refer to the award m the case of May and Baker Limited, Bombay v. Its Work- G '!1en, because that is a pharmaceutical unit. The award was given m or about June 1967 3flld it is seen that the dearness allowance on the patiern now given by the Tribunal in respect of the appellant has been adopted.

We have already referred to the fact that in Ex. DU-I, it is seen H that as many as 11 pharmaceutical u.uiis in Bomijay region have adopted the pattern of granting dearness allowance on the slab

(I) [1964] S S.C.R. 362, .

(2) [19691 2 S.C.R, 113.

system._now incorporated !fl the present award.

Though most of A the umts referred to therein could not be treated as units comparable ith the appellant because of lack of fu!J information regarding material factors, yet those concerns can be taken into account inasmuch as the system obtaiining in those concerns will show that the slab system is not something new to the pharmaceutical units.

We have already referred to the award in May an.d Baker Limited, B Bombay v. Its Workmen. These facts clearly show that the scheme of dearness allowance provided in the award before us in respect of. the appellant is ,; not anything new.

On the other hand, the Tribunal has only adopted the system prevailing in the region in respect of pharmaceutical units.

So far as the financial burden is concerned, we have already referred to the filndings recorded by the Tribunal.

Even on the basis that the Tribiunal was not justified in proceeding on the assumption that 52 chemists are not covered by the reference, in -0ur opinion, the additional burden that will be cast qri the appellant

can be easily borne by ii.

Therefore, we see no error in the scheme of dearness allowance introduced, in the case of the appellant, by the Tribupal. ·

The only other point that requires to be considered is in respect -Of. the direction given by the Tribunal regarding the Incentive Bonus Scheme in respect of which the appellamt had given notice of change under s. 9A of the Industrial Disputes Act, 1947. We have already referred to the natiure of the scheme that originally existed and the modification sought to be made by the appellant.

We have also pointed out that the Triblunal has not accepted most of the recommeindations made by Sri Tulpule, who was appointed as an assessor on the joint application of both the parties.

The Tribunal has s'tated that it is desirable that a scheme is worked out, if possible, by consent of parties for the purpose of pr<itecting the interest of the workmen at the increased base performance index.

AccordiJng to Mr. Tarkunde the Tribunal itself should have gone into the matter and evolved a scheme.

No dpubt, it would have been desirable if. the Tribunal had actually evolved a scheme.

But the Tribunal has stated ihat the necessary material for that purpose has not been made avm1ae and as such it has not been possible to devise a scheme calculated to afford protection to the incentive earning of a workman at the raised base performance index.

In fact, we also suggested to the counsel that the parties may consider the matter and submit a scheme for that puroose.

But it was represented to us on February 9, 1972 by Mrs. U'lllila Kapoor, learned counsel for respondent No. 2, that it bas not en possible for the parties to arrive at 3111 agreement in respect of that matter, at present.

Therefore; there is nothing fµrther that could

UN!CHEM LTD. v. WORKMEN (Vaidialingam, J.) 605

be done by this Court in this regard; and the resul't is that the observations made by the Tribunal in this regard will have full effect.

In the result, all the contentions of the appellaint are rejected and the A ward ot the Industrial Tribunal in respect of the matters in controversy in the appeaJs are confirmed.

All the appeals are dismissed. In Civil Appeal No. 1091 of 1971, the appellant will pay the costs of respondents Nos. 1 and 2.

In the other appeals, parties will l:iear their. own costs.

The appellant will have three months' time from today for f)ayment of the amounts due under the award.

G.C.

I

UNICHEM LABORATORIES LTD

THE WORKMEN

I. D. DUA

G. K. MITTER, JJ.

Indian Link Chain Manufacturers Ltd.

1971] 2 S.C.R. 759

India

Burroughs Wellcome & Co.

Burroughs Wellcome

Burroughs Wellcome Co.

s. 10(4)

Industrial Disputes Act

Burroughs Wellcome Company

Greaves Cotton & Co.

Bengal CheinicaJ & Pharmaceutical Works Ltd.

[1964) 5 S.C.R. 362

[1969] 2 S.C.R. 113

CIVIL APPELLATE JURISDICTION

Industrial Tribunal, Maharashtra, Bombay

V. M. Tarkunde

R. A. lahagirdar

I. N. Shroff

K. T. Sule

lanardaro Sharma

Indira Jaisingh

E Urmila Kapoor

Kamlesh Bansal

Vaidialingam

Jogeshwari

Bombay

June 24, 1966

November 1, 1969

Jainuary 9, 1970

s. 9A

Industrial Disputes Act, 1947

s. 9A

Industrial Disputes Act

May 16, 1970

, 24, 1966

N. L. Gadkari

Maharashtra State

February 22, 1971

Industrial Disputes Act

Burroughs Wellcome & Co. (lndig) Private Ltd.

Burroughs Wellcome & 'co. (India) Private Ltd.

Industrial Disputes Act

April 28, 1970

B. Tulpule

August F 27, 1970

Tarkunde

Unnila Kapoor

sections 205 and 211

Companies Act, 1956

Schedule VI

Phillip Tovey,3rd

William Pickles

Companies Act

UNICHEM LTD

Sule

Cipla

GlJ.~'' Laboratories

Raptakos Brett

Sandu Pharmaceutical

Fair Deal Corporation

Edison Continenta

Bengal Chemicals

Alembic

Gloom Laboratories

Jhandu Pharmaceutical

Cipla.

Kemp & Co.

Tarkund

Ciba

Dumex

Glaxo

Sandoz

Glaxo

Ciba

Sandoz

Europe

America

Jabour

Zandu. Cipla. Opil

Cipla

Burroughs Wellcome (India) Private Limiied

Tnbllllal

.Burroughs Wellcome Cpany

Burroughs We!Jcome Company

Glaxo

S!milarJy

M.r. Tarkunde

Burroughs Wel!come Company

January 1,

1971

January 9, 1971

September 30, 1970

January. 3, 1972

The appeal wrui heard by us from January.

January 10, 1972

3, 1972 and concluded only on January 10, 1972.

October 1, 1970

September 30, 1971

Burrough Wellcome Company

Tarlcuncle

Mr. Tarlcuncle l'Ointed out that

UNICHEM LTD.

s. 10(4)

Industrial Disputes Act, 1947

Gadkari

s. 10( 4)

Industrial Disputes Act

Urmi!a Kapoor

Burroughs We!lcome Co.

December 8, 1970

Bmroughs Wellcpme Co.

Burroughs Weilcome Company

Urmila K'apoor

Bomijay

s. 9A

Industrial Disputes Act, 1947

Tulpule

February 9, 1972

U'lllila Kapoor