1. Industrial dispute regarding dearness allowance calculation based on revised consumer price index numbers referred to Industrial Court under Section 73, Bombay Industrial Relations Act, 1946. (Para 1 , 2 )
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1965 Supreme(SC) 112
SUPREME COURT OF INDIA
P.B.Gajendragadkar, CJI., V.Ramaswami, M.Hidayatulla, K.N.Venchu
Ahemadabad Millowers Associastions Versus
Textile Labour Association
Civil Appeals Nos. 167 to 173, 537 and 538 of 1965.
Decided date 1-4-1961
Advocates appeared
Mr. M. C. Setalvad, Senior Advocate, (M/s. R. J. Kolah and I. M. Nanavati, Advocates, and M/s. J. B. Dadachanji, O. C. Mathur and Ravinder Narain, Advocates, of M/s. J. B. Dadachanji and Co., with him), for Appellant (In C. A. No. 167 of 1965); M/s. R. J. Kolah and I. M. Nanavati, Advocates, and M/s. J. B. Dadachanji, O. C. Mathur and Ravinder Narain, Advocates, of M/s. J. B. Dadachanji and Co., for Appellants (In C. As. Nos. 168 and 170 of 1965); Mr. N. A. Palkhivala, Senior Advocate, (Mr. I. M. Nanavati, Advocate, and M/s. J. B. Dadachanji, O. C. Mathur and Ravinder Narain, Advocates of M/s. J. B. Dadachanji and Co., with him), for Appellants (In C. As. Nos. 169 and 173 of 1965): Mr. I. M. Nanavati Advocate, and M/s. J. B. Dadachanji, O. C. Mathur and Ravinder Narain, Advocates of M/s. J. B. Dadachanji and Co., for Appellants (In C. As. Nos. 171 and 172 of 1965); M/s. J. B. Dadachanji, O C. Mathur and Ravinder Narain, Advocates of M/s. J. B. Dadachanji and Co., for Appellants (In C. As. Nos. 537 and 538 of 1965); M/s. S. R. Vasavada, N. M. Barot, N. H. Shaikh, R. M. Shukla, A. N. Buch and D. T. Trivedi, for Respondents; Mr. C. K. Daphtary. Attorney General for India, (M/s. K. L. Hathi and B. R. G. K. Achar, Advocates, with him), for Intervener No. 1; Mr. G. B. Pai, Advocate, and M/s. J. B. Dadachanji, O. C. Mathur and Ravinder Narain, Advocates of M/s. J. B. Dadachanji and Co., for Intervener No. 2; Mr. G. Ramanujam, Secy. I. N. T. U. C., for Intervener No. 4: Mr. B. Narayanaswami, Advocate and M/s. J. B. Dadachanji, O. C. Mathur and Ravinder Narain, Advocates of M/s. J. B. Dadachanji and Co., for Intervener No. 5; Mr. I. M. Nanavati, Advocate and M/s. J. B. Dadachanji, O. C. Mathur and Ravinder Narain, Advocates of M/s. J. B. Dadachanji and Co., for Intervener No 6: M/s. H. K. Sowani and K. R. Chaudhuri. Advocates, for Intervener No. 7.
Important Points
The State Government's power to refer industrial disputes under Section 73 is an overriding power not controlled by Section 42's notice of change requirements. Furthermore, the validity of a consumer price index survey depends on scientific quality and margin of error, not the sample proportion.
Subject
Labour and Industrial Law - Industrial Disputes
Act Referred
BOMBAY INDUSTRIAL RELATIONS ACT: S.42(2), S.116(a), S.73(2), S.73(1), S.42, S.73, S.3(17), S.73(3), S.42(1)
Headnote
(A) Industrial Relations Act - Sections 42 and 73 - Power of State Government to refer industrial disputes - Reference made under Section 73 is not controlled by the procedure for notice of change prescribed under Section 42 - Non-obstante clause in Section 73 overrides other provisions of the Act - An industrial dispute exists if there is a difference between employer and employee connected with an industrial matter, regardless of whether a notice of change has been given. (Paras 23-26)
(B) Consumer Price Index - Validity of sample survey - Adequacy of sample size to be determined in light of permissible margin of error and not the proportion of the population included - Interview method is appropriate and scientific, especially where the population group suffers from illiteracy. (Paras 53-60)
(C) Wage Structure - Paying capacity of employer - Broad and overall view of financial position, including gross profits and reserves, to be considered rather than single-purpose profitability ratios - While financial deterioration may justify revision of wage structure, basic minimum or subsistence wages must be paid regardless of capacity. (Paras 70-81)
Facts of the case:
A dispute arose regarding the payment of dearness allowance following the adoption of a new consumer price index series and a specific linking factor. The State Government referred the dispute to the Industrial Court. The employers challenged the validity of the reference, the scientific basis of the survey and linking factor, and claimed they lacked the financial capacity to bear the resulting burden.
Findings of Court:
The reference was held valid as the power under Section 73 is overriding. The survey and linking factor were found to be scientifically sound and based on expert recommendations. The employers were found to have sufficient financial capacity based on their overall growth, reserves, and gross profits.
Issues: Whether the failure to provide a notice of change under Section 42 invalidates a government reference under Section 73; whether the sample size and interview method of the new price index survey were inadequate; and whether the employers' financial position justified a reduction in the dearness allowance.
Ratio Decidendi: The non-obstante clause in Section 73 empowers the State Government to refer disputes to avoid serious consequences without requiring compliance with the notice of change procedure. The quality of a social survey is more critical than the absolute sample size, and interview methods are suitable for illiterate populations. Financial capacity for wages should be assessed through a comprehensive view of the industry's health rather than narrow investor-centric ratios.
Result: Appeals dismissed.
(B) Consumer Price Index - Validity of sample survey - Adequacy of sample size to be determined in light of permissible margin of error and not the proportion of the population included - Interview method is appropriate and scientific, especially where the population group suffers from illiteracy. (Paras 53-60)
(C) Wage Structure - Paying capacity of employer - Broad and overall view of financial position, including gross profits and reserves, to be considered rather than single-purpose profitability ratios - While financial deterioration may justify revision of wage structure, basic minimum or subsistence wages must be paid regardless of capacity. (Paras 70-81)
Facts of the case:
A dispute arose regarding the payment of dearness allowance following the adoption of a new consumer price index series and a specific linking factor. The State Government referred the dispute to the Industrial Court. The employers challenged the validity of the reference, the scientific basis of the survey and linking factor, and claimed they lacked the financial capacity to bear the resulting burden.
Findings of Court:
The reference was held valid as the power under Section 73 is overriding. The survey and linking factor were found to be scientifically sound and based on expert recommendations. The employers were found to have sufficient financial capacity based on their overall growth, reserves, and gross profits.
Issues: Whether the failure to provide a notice of change under Section 42 invalidates a government reference under Section 73; whether the sample size and interview method of the new price index survey were inadequate; and whether the employers' financial position justified a reduction in the dearness allowance.
Ratio Decidendi: The non-obstante clause in Section 73 empowers the State Government to refer disputes to avoid serious consequences without requiring compliance with the notice of change procedure. The quality of a social survey is more critical than the absolute sample size, and interview methods are suitable for illiterate populations. Financial capacity for wages should be assessed through a comprehensive view of the industry's health rather than narrow investor-centric ratios.
Result: Appeals dismissed.
Legal Category Hierarchy
-
labour and industrial law
- industrial disputes
- wages and allowances
- industrial adjudication
Table of Contents
2. Validity of reference without notice of change under Section 42; reliability of new consumer price index survey; rationality of linking factor; and employers' financial incapacity. (Para 21 , 22 , 25 , 28 , 29 )
3. Section 73 provides overriding power to the State Government; the consumer price index survey followed scientific standards; and the industry's financial health was sound. (Para 23 , 24 , 26 , 27 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52 , 53 , 54 , 55 , 56 , 57 , 58 , 59 , 60 , 61 , 62 , 63 , 64 , 65 , 66 , 67 , 68 , 69 , 70 , 71 , 72 , 73 , 74 , 75 , 76 , 77 , 78 , 79 , 80 , 81 , 82 , 83 , 84 , 85 , 86 , 87 )
4. Power of State Government to refer disputes under Section 73 is not controlled by Section 42 notice requirements due to the non-obstante clause. (Para 23 , 24 , 26 )
5. Appeals dismissed with costs. (Para 88 )
6. Does the requirement of a notice of change under Section 42 limit the State Government's power to refer a dispute under Section 73?
No. Section 73 contains a non-obstante clause, granting the State Government overriding power to refer industrial disputes if certain conditions are met, regardless of whether the procedure under Section 42 was followed. (Para 23 , 24 , 26 )
7. How is the adequacy of a sample size determined in the construction of a consumer price index?
Sample size is determined by the permissible margin of error and the quality of the survey rather than the absolute number of families or the proportion of the population included. (Para 53 , 54 , 55 )
8. Is the interview method a scientifically valid approach for conducting family living surveys among illiterate populations?
Yes. In contexts where the population suffers from illiteracy, the interview method is the most feasible and satisfactory approach, provided it is conducted by well-trained investigators. (Para 58 , 59 , 60 )
9. Can a wage structure be revised to the detriment of workmen based on the employer's financial incapacity?
Yes, if the financial position has substantially deteriorated and the wages are above the basic minimum or subsistence level, industrial adjudication may revise the structure to ensure business continuity. (Para 32 , 72 , 73 , 74 )
Judgment
GAJENDRAGADKAR, C.J.I. : This is a group of seven appeals which arise from an industrial dispute between the appellants, the Ahmedabad Mill Owners Association, Ahmedabad, and 67 employers on the one hand, and the respondent, the Textile Labour Association, Ahmedabad, on the other. This dispute was referred by the Government of Gujarat to the Industrial Court, Gujarat, under Section 73 of the BOMBAY INDUSTRIAL RELATIONS ACT , 1946 (No. XI of 1947) (hereinafter called the Act ). In making the order of reference, the Government stated that it was satisfied that the industrial dispute in question was not likely to be settled by other means. The dispute itself consisted of three questions. These questions have been thus stated in the reference:-
"(1) Whether under the award of the Industrial Court, Bombay, dated the 2nd March, 1950, in Reference (IC) No. 189 of 1949 (as subsequently modified) read with award of the Industrial Court dated the 27th April, 1948, in Revision Petition No. Misc. 1 of 1947, the Ahmedabad Millowners Association and the employers mentioned in the Annexure are bound to pay dearness allowance to their employees on the Consumer Price Index Numbers for working class for Ahmedabad published by the State Government since February, 1964, by using the index numbers in the series for Ahmedabad compiled by the Labour Bureau, Simla, and the linking factor of 3.17 adopted for linking that series to the State series with the old base:
(2) If not, whether the said Ahmedabad Millowners Association and the employers mentioned in the Annexure should pay dearness allowance to their employees for March, 1964 and subsequent months in terms of the aforesaid awards, by treating the index numbers for working class for Ahmedabad published by the State Government since February, 1964, as the index numbers in the State series compiled on the basis of the family budget survey made in 1926-27:
(3) If not, how the dearness allowance to the aforesaid employees for March, 1964 and onwards should be paid on the index numbers for Ahmedabad published by the State Government since February. 1964"
2. The Industrial Court has answered the first question in favour of the appellants, whereas the two remaining questions have been answered in favour of the respondent. In the result, the appellants have been directed to pay dearness allowance to their employees for the month of March, 1964 and for subsequent months on the consumer price index numbers for working class for Ahmedabad published by the State Government since February, 1964, (by using the index numbers in the series for Ahmedabad complied by the Labour Bureau, Simla, and the linking factor of 3.17 adopted for linking that series to the State series with the old base) at the rate of 2.84 pies per day for rise of each point in the cost of living index number over the pre-war figure 73. The Industrial Court has further directed that as per the award in Miscellaneous Application (IC-G) No. 1 of 1960, 75 per cent of the average dearness allowance of the first six months of 1959, i.e., Rs. 63-15-9 per month of 26 working days, shall be consolidated with the basic wage and the difference between the dearness allowance as worked out as indicated and the said sum of Rs. 63-15-9 shall be continued to be paid as dearness allowance. The other terms and conditions in regard to payment of wages, including the dearness allowance, shall continue as under the existing award. The Industrial Court has made it clear that these directions should be given effect to from 1st of January, 1965 and the difference between what is paid and what has become payable under the present award shall be paid on or before April 30, 1965. It appears that before the Industrial Court an agreement had been reached between the Fine Knitting Co. Ltd. of Ahmedabad and the Textile Labour Association, and the award has, therefore, provided that the directions issued by it shall apply only to the spinning department of the K
