THE SILK AND ART SILK MILLS' ASSOCIATION LTD. versus MILL MAZDOOR SABHA

THE SILK AND ART SILK MILLS' ASSOCIATION, LTD. v.

MILL MAZDOOR SABHA April 19, 1972

[C. A. VAIDIALINGAM, P. JAGANMOHAN REDDY AND K. K. MATHEW, JJ.)

ltulustri(ll Dispute-Dearness allowance-Neutralization of rise in cost oj -living-Financial capacity~ deter1nination of-Relevant materials for-Principle of region-cum-industry, application of. T.he appellant Association Was recognised under section 27 read with section 3(23) of the Bombay Industrial Relations Act, 1946 as the Asso-ciation of employers in Silk and Art Silk Textile Industry within tJu, local area of Greater Bombay. The respondent Sabha represented the workmen in the Industry. By supplementary award dated October 15, 1971 the Industrial Court modified an existing award of the Industrial. Court of Maharashtra, Bombay, elated April 25, 1962 by directing with retrospec-tive effect from January 1, 1971 that the employee• in Silk and Art Silk Industry who were concerned in the dispute shall be granted d~arness allowance at the rate of 99 per cent neutralization of the rise in the Bombay Consumer Price Index I 06 (old series) on the basis of the mini-mum wage of Rs. 30/' per month of 26 working days. The appellant Association and one of the Silk Mills appealed.

HELD : The award did not suffer from any infirmity.

(i) The Association represented 55 units of employers and out of these only 28 produced their balance-sheets and profit and loss accounts. The other 27 units did not supply any materials with respect to their financial capacity but agreed to abide· by the decision of the Industrial Court on the basis of the materials furnished by the 28 units. ·The award in se far as it concerned these 28 units proceeded on the basis of their financial capacity as judged from accounts produced by them and the materials in the case. There is no substance in the complaint that any adverse inference had been drawn against that 28 units on account of non-production of materials by others. [283·H)

(iiJ The contention that the position of the industry was not stable and that its prospects were bleak could not be accepted. oroad and overall view of the financial position of the employer units was taken into account by the Industrial Court and it had tried to reconcile the natural and just claims of the employees for higher rate of dearness allowance with the capacity of the employer to pay it and in that process it had nlade allowance for the legitimate desire of the en1ployer to make reason-nhle profits. What is really material in assessing the financial capacity of the employer units in this context is the extent of gross profits n1ade bv them. On the basis of exhibit U.9 1Mhich was an analysis of the balance sheets and. profit and loss accounts of the 28 units, the Court found that the 28 mills had been making good profits and that, on an average, the profit would work out at 40 and odd per cent of the capital. There was some decline in the profits made during the years 1966, 1967 and 1968 but. the Court found that the industry was rallying round in 1970. [286-C]Ahmedabad Mill Owners' Association, etc. v. The Textile Labour Asso-A .ciation, [19661 1 S.C.R. 382 at p. 426 and Unichem Laboratones Ltd. v. Their Workmen, Civil Appeals No. 1091-93 of 1971., decided on .24-2-1971, referred to. (iii) No evidence had been adduced to show what exactly had been the effect on the industry of the enhancement in excise duty. Without further evidence it was not possible to draw an inference that the sale of the products had been adversely affected. Moreover the economic inci-B .dence on the excise duty had been passed on to the consumer and tho em-ployer-unit dicl not have to bear any additional burden on account of the levy. [286·H] · (iv) Exhibit U.8 is comparative Table showing the minimum basic waaes and dearness allowance paid in other industries in the region like the engineering, pharmaceuticals, etc. The Court relied upon it only to show the trend in the region. The Court also relied upon the report of the Norms Committee which stated that the trend for the last decade in industrial adjud!cation as well as in settlemonts and awards, was to allow 100 per cent neutralization in the case of lowest-paid employees. The Court was of the yiew that if 80 per cent neutralization could be allowed in the industry under the settlemer. '._ arrived at in 1957, there was no reason why 100 per cent neutralization should not be granted in view ot the steep rise in the cost of livinr, from 1957, to the lowest paid em-ployees. It is not possible to agree with the contention of the appellani Lhat the Industrial Court went wrong in relying upon exhibit U.8 or the report of the Norms Committee to find out the trend in the region as to the extent of neutralization to be alloweO to the em-ployees concerned. [287-FJ

Bengal Chemical and Pharmaceutical Works Ltd. v. Its Workmen, [1968] 2 S.C.R. I 13 referred to.

"(v) The Association never wanted the Court to make any comparison with any other units in the same industry in the region. In the written statement of the Association there was no averment t.bat there were other comparable uJlits in the same industry in the region. No did the Asso· ciation, at the time of argument before the Industrial Court, put forward the contention that there were comparable concerns in the same inC1ustry in the region and that the Court should make comparison of the em-ployer-units in question with th9se, concerns to find out the eitent of neutralization which cou1di be granted. The Association wa!! certa,inly ~'1 position to tell the Court Whether there were any other comparable unit" in the same industry in the region and the only inference from its conduct was that there were no comparable units in the industry in the region. [290-Al

French Motor· Car Co. Limited v. Workmen, f,1963) Supp. 2 S.C.R. 16. at pp. 20-21. Williamsons (India) Private Ltd., v. Th" Workmen. [1962) 1 L.L.J. 302 and Greaves Cotton and Co. and others v. Their -Workmen, [1964) 5 S.C.R. 362 at pp. 367-369, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 276

'277 of 1972.

Appeals by Special Leave from the Supplementary Award dated

the 15th October, 1971 of the Industrial Court, Maharashtra,

Bombay in Misc. Applications (IC) Nos. 1 and 2 of 1970.

S. T. Desai and I. N. Shroff, for the appellant (In C.A. No.

276 of 1972).

(Mathew, !.)

M .. C. Seta/vad and/. N. Shroff, for the appelh1nt (In C.A. No. 277 of 1972).

S. V. Gupte, M. C. Br.andare, Sunanda Bhandare, and P. H. Parekh and Advo~ates of M/s. Bhandare Parekh and Co. for the respondent (in both the Appeals). '

The Judgment of the Comt was delivered by

Mathew, J. These two appeals, by special leave, are directed against supplementary award dated October 15, 1971, passed by the Jndustrial Court, Maharashtra, Bombay, in Miscellaneous applications (IC) Nos. l, 2 and 3 of 1970, filed lfy the respondent, the Mill Mazdoor Sabha, hereinafter called the 'Sabha'. By the supplementary award, the Industrial Court has mqdified an existing award of the Industrial Court, Maharashtra, Bombay, dated April 25, 1962, passed in reference (IC) Nos. 131, 138, 139 and f55 of 1961, and published in the Maharashtra Government Gazette dated June 14, 1962, by directing with retrospective effect from January l, 1971, that the employees in Silk and Art Silk Industry who were concerned in the dispute shall be granted dearness allowance at the rate of 99 per cent neutralization of the rise in the Bombay Con-sumer Price Index 106 (old series) on the basis of the minimum wage of Rs. 30/- per month of 26 working days.

We will deal with appeal No. 276 of 1972 first. The Appellant is the Silk and Art Silk Mills' Association, Ltd.; public company having its registered office in Bombay, hereinafter called 'the Association'. For the purpose of Bombay Industrial Relation Act, 1946, the Association was recognised under section 27 read with section 3(23) of that Act as the Association of employers in Silk and Art Silk Textile Industry within the local area of Greater Bombay. Silk Textile Industry was started in India sometime in 1933 and the Association.came into being in 1939 with 16 mem-bers having 2,000 looms. Till 1965, the Association was regis-tering as members only mills having 25 or more looms. Thereafter, it begain to register smaller units also as its members. Such smaller units numbered 308 with 2,326 looms in March, 1969. The total number of mills.within and outside the State of Maharashtra which were members of the Association on March 31, 1969, was S 12 with total of 20,200 looms. According to the Association, out of the 512 units which were its members, large number of units number-ing about 444 were grey units, which means, that none of ihese units has its own raw materials and that they have not got ainy equipment for dyeing, bleaching or otherwise finishing their products.

On February 6, 1970, when Miscellaneous Application (IC) No. 1 was filed, the Association had, as its members, about 325

units of employers in the art silk textile industry within the local area of Greater Bombay. Out of these 325 employer-units, 90 employer-units alone were concerned with the Miscellaneous Appli-cation (IC) No. 1 of 1970, as that application sought modification of the award dated .April 25, 1962, in reference Nos. (IC) 13 l. 138, 139 and 155 of 1961 which governed only the 90 units of the Art Silk Industry. In this case, we are directly concerned with 55 member-units only, as the remaining 35 units had gone out of business between April 25, 1962 and February 5, 1970.

There were two p•evious decisions binding on these units regard-ing dearness allowance. One was the award passed in reference No. 97 of 1951 which granted neutralization to the extent of 75 per cen( rise in the Bombay Consumer Price Index 106 (old series). The other was settlement arrived at during the pendency of Miscellaneous Application (IC) No. 3 of 1957 which modified the award in reference No. 97 of 1951 by raising the percentage of neutralization to 80 per cent with effect from June l, 1957.

The Sabha is recognised under section 30 read with section 3(32) of the Bombay Industrial Relation Act as the representative Union of employees in the Silk and Art Silk Industry within the local area of Greater Bombay.

The demand of the Sabha in Miscellaneous Application (IC) No. l of 1970 was, that "the employees shall be granted with effect from May 1, 1970, dearness allowance at the rate of 100 per cent neutralization of the rise in the Bombay Consumer Price Index 106 (old series) on the basis oi the .minimum wage in force at present, namely Rs. 36.50 per month of 26 working days". As already stated, the application was, in effect, to modify the award passed on April 25, 1962, in reference (IC) Nos. 131, 138, 139 and 155 of 1961; that award provided 'that the employees covered bty the references should be given an adhoc increase of Rs. 5.20 per month of 26 working days over their wag~ at that time, that the increase should be in force for two years from February 1, 1962, that the•e-after, the increase _should be Rs. 6.50 per month of 26 working days instead of Rs. 5.20 and that this will continue for further period of 2 years. The award rejected the prayer for increased rate of dearness allowance.

The grounds on which the Sabha claimed 100 per cent neutrali-zation were, that the total pay packet of the employees in the industry was far lower than the minimum need of the workmen and also Jess than that of the employees in other i'Ildustries in the region, that there has been steep rise in the cost of livin<Y since the-Jn5t revision of basic wages and greater rise in the co,fof livin!! since the decision fixing neutralization at 80 per cent of the basic wage of Rs. 30/- per month for 264('(,orking davs that the employer-units

SILK MILLS ASSOC. v. MtLL MAZDOOR SABHA

have the capacity to bear the additional burden as the art-silk imiustry in the region has prospered and established it.self as s-table one with good prospects.

art-silk

The main c-0ntentions of the Association were tha:t the total pay packet of the workmen in Rayon and Artificial Silk industry in lhe local area of Greater Bombay was Rs. 190.12 per month of 26 working days, that deatl'J'ess allowance to the extent oi 80 per cent n1:utral.ization was automatically responsive to the rise in the cost of living and, therefore, there was no real fall in the pay packet consequent on the rise in the cost of living, that the workmen had received an ad hoc increase of Rs. 5.20 per month of 26 working days from February 1, 1962, and that this has been. further raised to Rs: 6.50 from February 1, 1964, that the base for neutralization which was Rs. 30/- should not and ought not to be changed to Rs. 36.50 as demanded by the Sabha, that the demand was beyond the capacity of most a{ the 55 lllllit.s concerned, that the dearness allowance paid in the other industries in the region canno1 furnish any relevant criterion as the financial position of these units was quite different, that over the years, the position of the. industry has steadily deteriorated, that on account of the paucity of foreign exchange, restrictions on import of the required machinery, the non-availability of the necessary types of raw materials, the high cost of yarn, the heavy excise duty on indigenous yam, the industry has been declinilllg, that the import oi. nylon yarn was canalised through the State Tradin11 Corporation of India and it kept for it.self very high pr,ofit margm, that the price of raw materials in the industry has gone up, that prior to March, 1970, the excise duty on pJOcessed yarn and artificial silk fabric varied. from 9 paise to 30 paise per square metre whereas from March, 1970, onwards, there was· steep rise in the excise duty per square metre . and therefore the industry cannot bear any further burden and. that in any event, the demand for 100 per cent neutralization is unwarranted.

As already stated, the Industrial_ Court, after evaluating the materials produced by parties, came to the conclusion that the employees in the Silk and Art Silk lndustry should be grai\'.ed dearness ·allowance at the rate of 99 per cent neutralization of the rise in the Bombay Consumer Price Index 106 ("old series) on the basi$ of the minimum basic wage of Rs. 30/ • per month of 26 working days with effect from January I, 1971

· The. Court found that at the time when the wages were ·raised in !962, the consumer price index stoo.d at 429, that there has been a· steep ri~ jn the cost of living as reflected in the Bombay Con-SllD).er Price Index-in May 1970 it stood at 799~nd on the date of the award it stood at 839, and so, there was fall in real wages· by 39 paise per day of the lowest class of workers. The .Court,

19-1208 Sup CI/72

therefore came to the condusion that the demand for neutralization of the ri;e in the cost of living was reasonable. It further found that exhibit U. 8, which is comparative Table showing the mini-mum basic wages and dearness allowance paid in other industries in the region was relevant document as it indicated the trend in other industries in the region to allow full neutralization on account of the rise in the cost of livmg. The Court then proceeded to assess the financial ·capacity of the employer-units with particular reference to their volume of business, the capital invested, the profits earned, the standing of the industry, the strength of the labour force employed, the posit.ion o.f reserves, the dividend declared and the future prospect of the industry. The Association, although 1t represented 55 employer-nnits, produced no data as regards the, fina.ncial capacity of 27 s in spite of the clear direct.ion of the Court, and so, the Cour., on the basis of the materials placed before it by the other units, came to the conclusion that the att and art-silk industry has prospered and has established itself, that the. prospect of the indus,try was bright and that the financial position of the 28 units which produced their balance sheets and profit and Joss accounts or other documents to show their gross profits was such that they could afford to bear the additional burden.

For reaching the conclusion that the industry is prosperous and has bright future, the Court relied on the speech made by the Chairman o.f the Silk and Art Silk Mills Association at the 30th Ain.nual General Meeting in 1969, in which he said that the man-made fibre industry had made remarkable progress during the last decade, that the production during the year l 969 exceeded the Third Plan target by over 25 per cent, that there was ris~ in lllt per-capita consumption of fabrics, that ~apid progress was expected in the production of non-cellulosic yarn and that the total demand in relation to the year 1969 was likely to increase by 41 per cent by the year 1973-74 and by 110 per cent by the year 1978·79, The Court also relied upon thr, fact that actual export in 1970 exceeded the export in the previous three years, the fa,ct that produc· tion has substantially increased in the first six months of 1970, ti)at it was as much as 525. 77 million metres compared to the to.ta! production of 892.67 million metres in 1969 and the fact that the total production of art-silk yarn had reached the figure of 114.680 thousand kilograms compared to 106.480 thousand kilograms in 1969. The Court estimated tllat export of Rayon fabrics and syn. lhetic textiles will reach Rs. 26.50 crores year qy 1973-74. Although excise duty has been increased, the Court found that ft had ·not advers.ely. ~ected the industry in any substantial degree as the econoDl!c mc1dence of the burden of the excise duty was passed on to the. consumer. As regards the financial capacity of· the units, the CoJJrt relied on exhibit U. 9 which is an analysis of the.profit and loss accounts of the 28 mills and exhibit U.10, which is consolidated statement showing the finaincial condition of these

(Mat1¥w, /.)

mills and exhibit U. 11, the statement regardin11; the bonus paid by the mills which did not file their balance sheets and profit and loss accounts and Exhibit U. 12, statement shOw-ing the interest paid by some of the units which had filed their bal-ance sheets and Exhibit U. 13, statement showing the profitability ratio for art-silk ind11stry in Bombay and eXhibit U. 14, compara-tive statement of the profitability ratio in cotton textiles, engineering and chemical industry. The Court found from exhibit U. 9 that there was an increase in the paid-up capital of 44.07 lakhs Dom. 1965, an increase in the reserve amounting to 32.96 Jakhs ad increase in the gross block amounting to Rs. 285.54 lakhs IDd Ill increase in the net block of Rs. 140.63 lakhs from 1965 to 1968. From the figures given in exhibits in U. 9 and U. 10, the Court found that, after providing for depreciation to the total paid up capital, the profit would work out at 40.02 per cent and that after providing for depreciation to the total paid up capital and reserve, it would work out at 21.10 per cent. From the large amount of interest paid by some of the units as disclosed in exhibit U. 12, the Court inferred that these units are under-capitalised bUt that, at the same time, they prelerred to borrow money at the current rate of interest. The Court also found from exhibit U. 11 that 17 mills which did not file their balance sheets or profit and loss accounts were in position to pay bonus in excess of the 4 per cent which is the statutory minimum under the Payment of Bonus Act and, therefore, these units must have been making profits and, as their present financial position was not shown to have become worse, they had the financial capacity to bear the additional burden.

Mr. S. T. Desai for the appellant submitted that the Industrial

Court drew an adverse inference against the 28 units although they had produced their balance sheets and profit and loss accounts on the ground that the 27 mills did not produce any data to show their financial capacity to bear the additional burden and that that was unjustified. He argued that so far as the 28 mills which had produced their balance sheets 3llld profits and loss aceounts, there should have been an appreciation of the materials placed before the Court on their merit and no adverse inference should have been drawn against them because the other units did not place any relevant materials as regards their finar,cial capacity. In other words, his argument was that as the 28 mills had produced r~levant documents to show their financial capacity, the Court should not have drawn. aRy adverse inference as against them merely from 1he · non-production of the relevant documents by the other units. We do not think that there is any substance in this argument ..

As already stated, the Association represented 55 units of cm~ players and out of 1he 55 units, only 28 units pro<luced their bal· ance sheets and profit and Joss accounts. Statements were filed by

17 units (exhibits C. 185 to 201) undertaking that they would abide by the information and the balance sheets and profit and loss accounts supplied by the 28 mills and praying for decision of the dispute on the basis of the irJormation and statement of accounts so supplied. The remaining 1 O mills orally agreed that they would also abide by the statement and bialance sheets supplied by the 28 mills arid for deciding the dispute on that basis. Therefore, an adjtidication by the Industrial Court as regards the rate cf neutra-liiatfon to be allowed on· the basis of the financial capacity of the 28 units as guaged from the balance sheets and profit and loss acco11rtts produced by the 28 mills was quite proper. To put it differently, the award in so far as it conc~rned the 28 units, pro-ceeded on the basis of their financial capacity as guaged from the balance sheets and profit. and loss accounts produced by them and from the materials in the case. They can, therefore, have no reason for any complaint, that the Court drew any adverse inference as regards them from the non-production of relevant materials in the possession of the other employer units. And, as regards the 27 employer-units which did not supply any materials with respect to their finoocial capacity, they cannot also have any reason for com-plaint in view of their undertaking to abide by the decisioo of the Industrial Court on the basis of ma<erials furnished by the 28 units The only reason why they did not furnish the basic informati® as regards their financial capacity in spite of the direction of the Court, is that the information, if furnished, would go again~t them. We are satisfied that the award was based on the materials pro-Juced in the case so far as the 28 ttnits are concerned and not on any adverse inference drawn from the non-production of the rele-vant materials by the 27 units.

Mr. Desai contended that the position of the industry is not stable and that its prospects are bleak. He said that the Court did not give due weight to exhibits C. 1 to C. 4 and C. 15 in reaching the conclusion that the position of the industry was stable. Exln'bit C. 1 is statement showing the number of mills and the looms owned by them as on April l, 1970. Exhibit C. 2 is statement showing the number of members of the Association and their looms. Eil:hib;.t C. 3 is statement showing the looms run by member-mills of the Association as on April 1. 1970. Exhibit C. 4 is sfatement showing the number of grey and composite units in the industry and their looms. Exhibit C. 15 is statement concerning 25 mills. It shows the number of looms installed, average nuinber of loom-shifts worked per month, average produc-tion and average export per month during the 4 years namely 1966 to 1959. Exhibits C. 1 to C. 4 do not throw much light upon the question in controversy as they only show the all-India figures. Exhibit C. 15 was taken into consideration by the Industrial Court. But the Court did not place much reliance upon it as it was of

"" , ...

opinion that the data furnished by the balance sheets and profit and loss accounts was more relevant.

Counsel submitted that tJi.e number of looms has gone down, that the cost of production has gone up, that export of mancfactured silk has dwindled, that sales have declined and therefore, the profits of the units have gone down from 1965 to 1968. Counsel in this connectioo referred to exhi~'it U. 13, document produced by the Sabha to show the profitability ratio and argued that that document would itself indicate that there was decline in profits from 1965 to 1968. Exhibit U. 13 is statement of the gross profits for the years from 1965 to 1968 of these Ulllits from the point Of view of total sales, of total capital and of total net worth. In Ahmedabad Mill Owner;' Association, etc. v. The Textile Labour Association (1) the Court observed

"We do not think in considering the financial position of the appellants in the context of the dispute before us, it woU!d be appropriate to rely unduly on the profitability ratio which has been adopted by the said Bulletin. In-deed, in appreciating the effect of the several statements produced before the Industrial Court by the parties in the present proceedings, it would be relevant to remember that some of these single-purpose statements are likely to create confusion and should not ordinarily be regarded as decisive. As Paton has observed : "Different groups for whom financial statements are prepared are :interested in varying degree in particular types of information; and so, it has been held in some quarters that no one form of statemMt will sa~actorily serve all these purposes, that separate single-purpose statements should be pre-pared for each need or that the statements usually p~­pared for general distribution should be expanded so as to include all the detail desired" (Accountaint's Handbook Edited by Paton, p. 13). Paton cites the comment of Wilcox aeainst these single-purpose statements. Said Wilcox : "The danger in undertaking to furnish s~ngle· purpose financial statements lies in increasing confusion a1nd misunderstanding, and in the possible mis-me of such statements for unintended purposes". Paton has then referred to certain methods for determining the financial position of commercial and industrial con-cern. In this connection, he refers to the proprietory ratio rate of earnings on total capital em1Jlgycd, nte of dividends on comm0n stockholden' equity and others. Our purpose in referring to these comments made by

(!} lf966] 1 S.C'.R. 1~2 at t>. 426.

Paton is to emphasise the fact that industrial adjudication cannot lean too heavily on such single-purpose statements or adopt any one of the tests evolved from such state-ments, whilst it is attempting the task of deciding the financial capacity of the employer in the context of the wage problem. While we must no doubt examine the positiqn in detail, ultimately we must base our decision on broad view which emerges from consideration of -all the relevant factors".

V.'e think that the Industrial Court has carefully examined the

financial position of the employer-units as also the position of the industry and its future prospects. The Court was fully aware of the nature of the demand and the extent of the burden which the employer units will have to bear. broad and overall view of the financial position of the employer units was taken into account bv the Court and it has tried to reconcile the natural and just claims oi the employees for higher rate of dearness allowance with the capacity of the employer to pay it and in that process it has made allowance for the legitimate desire of the employer to make reason-able profit. What is really material in assessing the financial capacity of the employer-units in this context is the extent of gros~ profits made bly them (see Unichem Laboratories Ltd. v. Their Workmen([1]). On the basis of exhibit U. 9 which is an analysis of the balance sheets and ·profit and loss accounts of the 28 units, the Court found that the 28 mills have been making good profits and that, on an -average, the profit would work out at 40 and odd per cent of the capital. There was some decline in the profits made durin1t the years 1!!66, 1967 and 1968 but, the Court found that the industry was rallying ro1.nd in 1970.

Mr. Desai contended that the Industrial Court did not appreciate the impact on the industry cf the enhancement of excise duty upon the manufaciure of silk products. Counsel co..Tltended that. there has been considerable increase in excise duty on all varieties of silk and that has affected the consumption of manufactured silk products. No evidence has been adduced to show what exactly has been the effect on the industry of the enhancement in excise duty. Although the Managers of two units were examined a, wit-nesses No. 2 and 3 in March and April, 1971, they did not give any evidence as regards the adverse effect on the sale of silk pro-ducts on account of the imposition of enhanced excise duty during the financial year 1970. . We do not think that without further evidence as regards the effect of the enhancement in the excise duty, it is possible to draw an inference that the sale of the products has been adversely affected. Quite apart from this, we do not

(ll Civil A'.'pe-1!~ N,;-]O?f-91 ,.Jf t971. decided on '.!4-~-1971.

i ' ~ ' \ ' \ '

understand how when the economic incidence of the' excise duty has been passed on to the consumer, the employer-units have to bear any additional burden on account of the levy.

Counsel next contended that the Industrial Court was not justi-fied in relying upon exhil:i~t U. 8 for coming to the conclusion that 99 per cent of neutralization on account of rise in cost of living should be granted to the employees on the basis of the percenta~e of neutralization in oilier industries in the region. Counsel satd that granting 99 per cent neutralization has not been countenanced by this Court, that the basis of fixation of dearness allowance is industry-cum-region and that the Industrial Court went wrong in taking into account the percentage of neutralization in other indus-tries in the region for fixing the extent of neutralization on account of the rise in cost of living to the employees in qu~stioti. here and relied on the decision of this Court in Bengal Chemical and Phar-maceutical Works Ltd. v. Its Workmen('). In that case, Vaidia-1ingam, J., speaking for the Court, laid down among other things, the following propositions : I. Full neutralization is not normally given, except to the very lowest class of employees, 2. the purpose of dearness !allowance being to neutralize portion of the increase in the cost/of Jiving, it should ordinarily be on sliding scale and provide fflt an increase in the rise in the cost of living and decrease -011,a fall/in the cost of living, 3. the basis of fixation of wages and dearness allowance is industry-cum-region.

We do not think that the Industrial Court, w~nt wrong in relying upon exhibit U. 8, or, in granting 99 per cent neutralization on account of the steep rise in the cost of living. Exhibii U. 8, it may _be recalled is comparative Table showing the minimum basic wages and dearness allowance paid in order industries in the region like the engineering, pharmaceuticals, etc. The Court relied upon it only to show the trend in the region. The Court afao relied upon the report of the Nonns Committee which stated that the trend fo; the last decade in industrial adjudication as well as in settlements and awards, .was to allow 100 per cent neutralization in the case of lowest-paid employees. The Court was cf the view that if 80 per cent neutralization could be allowed in the indU5try ul!lder !he settlement arrived at in 1957, there was no reason why 100 per cent · neutralization should not -be granted in view of the steep rio,e in the cost of living from 1957, to the lowest paid employees. We can-not agree with the contention oe the appellant that the Industrial Court went wrong in .relying upon exhibit U. 8 or the report of the Norms Committee to find out the trendin the region as to the.extent of neutralization to be allowed .to the employees concerned. The question of the extent of neutralization to the workmen in the units

does not depend solely upon the fact whether neutralization to that extent has been allowed to the employees in comparable concerns in the same industry in the same region. Much distinction cannot be made in this respect among the lowest paid employees in the region merely because some of them are employed in other indus-tries. In other words, for finding the trend or the norm in the region as regards the extent o( neutralization for the lowest paid employees, the Industrial Court cannot be said to have gone wrong in relying upon either the Norms Committee Report or on exhibit u. 8.Counsel for the appellant submitted that the Industrial Court did not make wny attempt to fix the dearness allowance on the basis of the industry-cum-region formula, and that that was fatal ble-mish in the award. In French Motor Car Co. Limited v. Work-men ( [1]) this Court observed that the principle of industry-cum-region has to be applied by an industrial court, when it proceeds to consider questions like wage structure, dearness allowance and · similar conditions of service and in applying that principle indus-trials courts have to compare the wage scale or the dearness allow-ance prevailing in similar concerns in the region with which it is dealing, and generally speakin" similar concerns would be those in the same line of business as the concern with res-pect to which the dispute is under consideration a.;d further, even i<n the same line of business, it would not be proper to compare small struggling concern with large flourishing ··ncern. In Wi//ian:sons (India) Private Ltd. v. The Workmen(' the Court observed that the extent of business carried Ol!l by :..,c concerns. the capital invested by them, the profits made by ti' .n, the nature of the business carried on by them, their standing, the strength of their labour force. the presence or absence and the extent of reserves, the dividends declared by there and the prospects about the future of their business and other relevant factors have to be borne in mind for the purpose of comparison. These observations were made to show how comparison should be made, even in the same line of business a.nd were intended to lay down that small concern cannot be compared even in the same line of business with large concern. In Greaves Cotton. and Co. and olhers v. Their Workmen('), the main argument was that the Tribun~l went wrong in relving more on the region aspect of the industry-ci<m ·region formula ancl not on the industry aspect when dealing with clerical and subordinate staff. The Court said that it was ordinarily desir-able tb have as much uniformity as possible in the wage-scales of different concerns of the same industry working in the same region. as this puts similar industriei; more or less on an equal footing in their production struggle. The Court them referred to the Frenc ·

(1) [1963] Supp, 2, S.C.R. 16. at pn. 20-21.

(2) [1962] I L.LJ. 302.

Motor Co.'s([1]) case and observed that in that case this Court held so far as clerical and subordinate staff are concerned that it may be possibie to take into account even those concerns which are engaged in different lines of business for the work of clerical and sub-ordinate staff is more or less the same in all kinds of concerns. The Court further observed that where there are large number of industrial concerns of the same kind in the same region it would be proper to put greater emphasis on the industry part of the industrv-cum-region principle as that would put all concerns on more or less equal footing in the matter of production costs and therefore in the matter of competition iin the market and this will equally apply to clerical and subordinate staff wbose wages and dearness allowance also go into calculation of production costs : but where the number of comparable concerns is small in parti-cular region and therefore the competition aspect is not of the same importance, the region part of the industry-cum-region formula assumes greater importance particularly with reference to clerical aind subordinate staff and this was what was emphasised in the French Motor Car Co.'s(1[1]) case where that company was already paying the highest wages in the particular line of . business and therefore comparison had to be made with as similar concerns as possible in different Jines of business for the purpose of fixing wage scales and dearness allowance. According to the Court, the prin-ciple, therefore, which emerges from these 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 formula if there are large '1umber of concerns in the same region carrying on the same industry; in such case in order that prPduction cost may not be unequal and there may be equal competition, wages should generally be fixed on the basis of the comparable industries, namely, industries of the same kind. But where the number of industries of the same kind in particular regio,n is small it is the region part of the industry-cum-region formula which assumes importance particularly in the case of clerical and subordinate staff. for as pointed out in the French Motor Car Co.'s case('[1]), there is not much difference in the work of this class of einployees in different industries.

Ii the employer has the financial capacity, would it be just to reject the claim of the lowest paid workmen for an enhancement in dearness allowa.nce to neutralize the rise in cost of living and thus to maintain their subsistence wage at its real level in terms of the purchasing capacity, merely because there is comparable concern in the industry in the region tn which '"orkmen are paid dearness all<Ywance at ·a low rate? y{e do not think it necessary to answer this question for the purpose of decidtng this case.

(ll [1963] Supp. 2 S.C.R. ot 20-21.

The Association never wanted the Court to make any compari-son with any other units in the same industry in the region. In the written statement of the Association there was no averment that there were other comparable units in the same industry in the region. Nor did the Association, at the time of argument before the Industrial Court, put forward the contention that there were comparable concerns in the same industry in the region and that the Court should make comparison of the employer-units in ques-tion with those concerns to find out the extent of meutralization which could be granted. The Association had membership of 325 units in Greater Bombay on February 6, 1970, when the Mis'. cellaneous Application (IC) No. 1 was filed. It was certainly in position to tell the Court whether there were any other compar-able units in the same industry in the region and the only inference from its c•nduct is that there were no comparable units in the industry in the region.We do not think that the award suffers from any infirmity. At the time of the admission Of the Special Leave Petition the Court bas ordered that the appellant should pay the cost of the respon-dent irresp :ctive of the result of the appeal. We dismiss the appeal and direct the appelloot to pay the cost of the respondent.

In Civil Appeal No. 277 (NL) of 1972, the cont11ntions raised on behalf of the appellant are much the same as those raised in Civil Appeal No. 276(NL) of 1972 and for the reasons given in the above judgment, we dismiss that appeal also and direct the appellant to pay the cost of the respondent.

Appeals dismissed.