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 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 )
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1965 Supreme(SC) 176
SUPREME COURT OF INDIA
P.B.Gajendragadkar, C.J.I., K.N.Wanchoo, M.Hidayatullah, V.Ramaswami, JJ.
Ahmedabad Mill Owners Association: State Of Gujarat
Versus
Textile Labour Association
Case No. : 167 , 173 of 1965
Date of Decision : 8/10/65
Advocates Appeared: Achar B.R.G.K. : Barot N.M. : Buch A.N. : Chaudhuri K.R. : Dadachanji J.B. : Daphtary C.K. : Dapthary C.K. : Hathi K.L. : Kolah R.J. : Mathur O.C. : Nanavati I.M. : Narain Ravinder : Narain Ravindra : Narayanaswamy B. : Palkhivala N.A. : Rai G.B. : Ramanujam G. : Setalvad M.C. : Shaikh N.H. : Shukla R.M. : Sowani H.K. : Trivedi D.T. : Vasavada S.R.
Advocates:
A.N.BUCH, B.NARAYANASWAMY, B.R.G.K.Achar, C.K.DAFTARY, CO., D.T.TRIVEDI, G.B.Rai, G.RAMANUJAM, H.K.SOVANI, I.M.NANAVATI, J.B.DADACHAN, K.L.Hathi, K.R.CHAUDHARY, M.C.SETALVAD, N.A.PALKHIWALA, N.H.SHAIKH, N.M.BAROT, O.C.MATHUR, R.J.KOLAG, R.M.SHUKLA, RAVINDER NARAYAN, Ravindra Narayan, S.R.VASAVADA
A.N.BUCH, B.NARAYANASWAMY, B.R.G.K.Achar, C.K.DAFTARY, CO., D.T.TRIVEDI, G.B.Rai, G.RAMANUJAM, H.K.SOVANI, I.M.NANAVATI, J.B.DADACHAN, K.L.Hathi, K.R.CHAUDHARY, M.C.SETALVAD, N.A.PALKHIWALA, N.H.SHAIKH, N.M.BAROT, O.C.MATHUR, R.J.KOLAG, R.M.SHUKLA, RAVINDER NARAYAN, Ravindra Narayan, S.R.VASAVADA
The State Government's power to refer an industrial dispute under Section 73 of the Bombay Industrial Relations Act is an overriding power not contingent upon the prior issuance of a notice of change under Section 42.
Headnote:(A) Bombay Industrial Relations Act, 1946 - Sections 42 and 73 - Reference of industrial dispute - Notice of change - Power of State Government - Non-obstante clause - Validity of reference - The power of the State Government to refer an industrial dispute under Section 73 is not controlled by the procedure for notice of change prescribed under Section 42. An industrial dispute exists if there is a difference between employer and employee connected with any industrial matter, regardless of whether a notice of change has been given. (Paras 23-26)
(B) Consumer Price Index - Sample Survey - Adequacy of sample size - Interview method - The adequacy of a sample size is determined by the permissible margin of error rather than the proportion of the population included. The interview method is a scientifically valid approach for data collection, particularly in populations with high illiteracy, provided it is conducted by trained investigators. (Paras 53-60)
(C) Wage Structure - Financial Capacity - Revision of wages - While a wage structure may be revised if the employer's financial position deteriorates substantially, such revision is not permissible if the wages are at the basic minimum or subsistence level. In cases where wages are above the minimum, a broad view of the employer's financial health, including reserves and growth, must be taken to determine the capacity to pay. (Paras 70-74)
Facts of the case:
A dispute arose regarding the payment of dearness allowance following the introduction of a new consumer price index and a specific linking factor to transition from an old series. The employers challenged the validity of the government's reference to the industrial court on procedural grounds, arguing that a notice of change was required. They further contested the scientific validity of the survey used to determine the index and claimed that the resulting financial burden was beyond their capacity to pay.
Findings of Court:
The reference under Section 73 was held valid despite the absence of a notice of change under Section 42. The new survey's sample size and interview method were found to be scientifically sound and appropriate for the target population. The linking factor adopted by the government was upheld as a reasonable method to maintain continuity. The employers failed to prove that the additional financial burden was beyond their capacity, as the industry's overall growth and reserves indicated financial stability.
Issues: Whether the failure to comply with the notice of change procedure under Section 42 invalidates a reference made under Section 73; whether the sample size and interview method of the consumer price index survey were inadequate; and whether the employers' financial capacity justified a reduction in dearness allowance.
Ratio Decidendi: The non-obstante clause in Section 73 overrides the procedural requirements of Section 42. Sample size in social surveys depends on the margin of error, not the population percentage. Financial capacity for wage payments is assessed based on a broad overall view of the industry's health and reserves, rather than solely on investor-centric profitability ratios.
Result: Appeals dismissed with costs.
Legal Category Hierarchy
-
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 consumer price index survey; rationality of linking factor; and employers' financial incapacity to pay. (Para 21 , 22 , 28 , 29 )
3. Section 73 provides overriding power to government; survey methodology was scientific; linking factor was based on expert advice; industry financial health was sufficient. (Para 23 , 24 , 25 , 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 non-obstante and not controlled by the notice of change procedure prescribed in Section 42. (Para 23 , 24 , 25 , 26 )
5. Appeals dismissed with costs. (Para 88 )
6. Does the requirement of a notice of change under Section 42 limit the 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 satisfied that they are unlikely to be settled by other means, regardless of whether Section 42 procedures were followed. (Para 23 , 24 , 25 , 26 )
7. Is the interview method for collecting family budget data scientific and reliable for determining consumer price indices in India?
Yes. Given the high rate of illiteracy among the working class in India, the interview method is the most feasible and scientific approach, provided it is conducted by trained investigators. (Para 58 , 59 , 60 )
8. How should industrial adjudication evaluate an employer's financial capacity to pay wages or dearness allowance?
Adjudication must balance social justice for employees with the employer's capacity to pay, considering long-term financial health, profits, and prospects, rather than relying on single-purpose financial statements or short-term fluctuations. (Para 70 , 71 , 72 , 73 , 74 , 81 )
GAJENDRAGADKAR. C.J.I.
(1) THIS is a group of seven appeals which arise from an industrial dispute between the appellants, the Ahmedabad Millowners 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 2/03/1950, in Reference (1C) No. 189 of 1949 (as subsequently modified) read with award of the Industrial court dated the 27/04/1948, in Revision Petition No. Misc. 1 of 1947, the Ahmedabad Millowners Association and the emploers mentioned in the Annx. are bound to payness 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 Anexure 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 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) at the rate of 2.84 piesper 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 (1C-G) No. 1 of 1960, 75% 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 30/04/1965. 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 Fine Knitting Co.
