Bombay High Court
Indo Count Industries Ltd. ... vs General Secretary Kolhapur on 3 August, 2023
Bench: N. J. Jamadar
2023:BHC-AS:22054
23-WP-10901-22.DOC
Sayali Upasani
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.- 10901 OF 2022
Indo Count Industries Ltd., Kolhapur ...Petitioner
Vs.
General Secretary, Shahu Sooth Kapad ...Respondent
Kamgar Sangh, Kolhapur
Mr. J.P. Cama, Senior Counsel a/w Mr. Avinash Jalisatge, Mr.
T.R. Yadav, Divya Wadekar, for Petitioner.
Mr. Kiran Bapat, Senior Counsel i/b Mr. Gaurav Gawande,
for Respondent.
CORAM:- N. J. JAMADAR, J.
RESERVED ON : 17th APRIL, 2023.
PRONOUNCED ON:- 3rd AUGUST, 2023
JUDGMENT:-
1) Rule. Rule made returnable forthwith and with the consent
of the learned Counsel for the parties, heard finally.
2) By this Petition under Article 227 of the Constitution of
India, the petitioner takes exception to an order on an
application for interim relief (Exhibit-U-6) in Reference (IC) No. 07
of 2020, passed by the learned Member Industrial Court at
Kolhapur dated 20th July, 2022, whereby the petitioner has been
directed to give 10% rise in the salary per month to each
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employee in every category of employees from the date of the
application till the disposal of the Reference.
3) Shorn of unnecessary details, the background facts can be
stated as under:-
(a) The petitioner is a company registered under the
Companies Act, 1956 and is engaged in the business of
manufacturing of cotton yarn and home fabrics. The petitioner
runs spinning mills i.e. Mill A and Mill B at MIDC Gokul,
Shirgaon, Kolhapur. Shahu Sooth Kapad Kamgar Sangh, the
respondent, is a trade union registered under the Trade Unions
Act, 1923. It claims to be the Representative and Approved union
for the local area of Karveer Taluka in Kolhapur District for
cotton textile industries under the provisions of Maharashtra
Industrial Relations Act, 1946 (" MIR 1946"). It also claims to
represent all the employees employed in petitioner's spinning
Mill.
(b) The respondent issued a notice of change dated 18 th
December, 2018 under Section 42 of the MIR Act, 1946, and
raised various demands including upward revision in wage rates.
Conciliation proceedings before the Conciliator failed.
Respondent obtained the certificate of failure from the
Conciliator. Eventually, respondent-first party approached the
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Industrial Court at Kolhapur for adjudication of the Industrial
Dispute being Reference (IC) No. 7 of 2020.
(c) In the said Reference, the respondent filed an application
for interim relief. It was the case of the respondent that the
petitioner-second party introduced modern machines.
Resultantly, there has been increase in the workload but
reciprocal benefits were not being extended to the workmen. The
last settlement had expired in the year 2018. There has been a
steep increase in the cost of living since the last settlement. It
was becoming increasingly difficult for the workmen to survive
on the unrevised wages. Since the disposal of the Reference
would take time, the respondent- first party prayed for an interim
relief by way of a rise of Rs.6,000/- per month to each of the
workmen during the pendency of the Reference.
(d) The petitioner-second party resisted the Reference and the
prayers in the interim application. The tenability of the
Reference, at the instance of the Secretary of Shahu Sooth
Kapad Kamgar Sangh, was called in question. It was contended
that the petitioner- second party was facing severe financial
crunch and had been suffering huge losses in the preceding four
financial years. The situation of the spinning Mills was
precarious and they were struggling to survive. 'B' Unit of the
spinning division, to which the Reference pertains, had suffered
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huge losses. The respondent No. 1- first party had resorted to
unfair labour practices putting further strain on the smooth and
profitable management of the spinning Mills. According to the
petitioner, the wages of workmen had already been increased by
Rs.2,498/- on account of increase in dearness allowance and the
wages paid by the petitioner were higher than the wages paid by
the other spinning mills in the region. On these, amongst other,
grounds, including the unsustainability of the prayer at an
interim stage, the petitioner prayed for dismissal of the
application.
(e) The learned Member Industrial Court after appraisal of the
pleadings and material tendered for his perusal and the
submissions canvassed before him, was persuaded to partly
allow the application for interim relief and direct the petitioner to
give 10 % rise in salary to each employee in every category. The
learned Member was of the view that the grievance raised in the
Reference pertained to the period 2019-2021. The petitioner-
second party had increased the wages of its staff members but
there was no increase in the wages of the workmen though there
has been manifold increase in the cost of living. Therefore,
during the pendency of the Reference, the workmen were entitled
to some relief. The learned Member was thus impelled to grant
10% rise in the monthly salary.
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4) Being aggrieved, the employer has invoked the writ
jurisdiction.
5) I have heard Mr. J. P. Cama, the learned Senior Counsel for
the petitioner, and Mr. Kiran Bapat, the learned Senior Counsel
for the respondent. I have also perused the pleadings, material
on record before the Industrial Court, impugned order and
documents tendered before this Court along with affidavits in
support and in opposition to the Petition.
6) Mr. Cama mounted a multi-pronged challenge to the
impugned order. Firstly, according to Mr. Cama, the impugned
order suffers from the vice of granting an interim relief without
adverting to the elementary principles of prima facie case,
balance of convenience and irreparable loss. Secondly, by the
impugned order, the learned Member Industrial Court has
granted a relief which, in the circumstances of the case, cannot
be granted even at the stage of final adjudication. Thirdly, the
Industrial court has unjustifiably discarded the material which
indicated that the financial position of the employer was
precarious. A wage revision, urged Mr. Cama, cannot be granted
without considering the financial position of the employer as it
has propensity to bring down the enterprise. The learned
Member Industrial Court completely misdirected himself in
awarding interim wage revision sans consideration of the
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financial position of the employer. Fourthly, the learned Member
Industrial Court also lost sight of the fact that in determining
wage revision, unit is the test and not the group. The entire
company could not have been construed as one unit for
accessing the financial health for determining the wages. A profit
making unit, according to Mr. Cama, can not be compelled to pay
wages of a loss making unit. Lastly, the impugned order
singularly lacks consideration as to why the Industrial Court
found it appropriate to grant a wage rise of 10% and not at any
other rate.
7) Mr. Cama urged, with a degree of a vehemence, that the
over all impact of the wage rise of Rs.2200/- per month, if made
applicable to 800 workmen, would lead to further losses and
would prove disastrous for the viability of the enterprise. The fact
that the petitioner - Company had given a small wage rise to its
staff which is minuscule if compared with the number of
workmen, was given undue weight by the Industrial Court and
that led to vitiation. The fact that the staff are not entitled to
dearness allowance was also lost sight of by the Industrial Court,
urged Mr. Cama.
8) In opposition to this, Mr. Bapat stoutly supported the
impugned order. It was forcefully canvassed by Mr. Bapat that
the submission canvassed on behalf of the petitioners are neither
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factually correct nor legally sound. Laying emphasis on the fact
that the last settlement got over in the year 2018 and since the
year 2015, there has been no wage revision for almost eight
years, Mr. Bapat submitted that a 10% rise in wages can by no
stretch of imagination be said to be unreasonable.
9) Mr. Bapat further submitted that argument that the unit is
the test for wage revision is fallacious. The mere fact that there is
loss in one unit of the company by itself cannot be a ground to
deny wage revision by the company which is otherwise in the
pink of health. According to Mr. Bapat, the learned Member
Industrial Court correctly took into account the benefit of wage
revision extended to the staff and exercised the discretion. Such
a discretion, according to Mr. Bapat, is not amenable to
interference in exercise of writ jurisdiction unless it can be said
to be perverse. In the totality of the circumstances, in no way,
the exercise of discretion to grant 10% wage rise, especially in the
context of the fact that since more than eight years there has
been no wage revision, can be termed as perverse, submitted
Mr. Bapat.
10) Before adverting appreciate rival contentions, it may be
apposite to note that on the factual score there is not much
controversy. Admittedly settlements were entered into between
the representative union and the employer for the period 2011-
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2014 and 2015-2018. After the term of the second settlement got
over, the respondent first party made a demand for wage revision.
Conciliation proceedings ended in failure. The question that
wrenches to the fore is, whether during the pendency of the
Industrial Reference in the context of the charter of demand,
including a demand for wage revision, the Industrial Court could
have granted wage revision by way of an interim relief ?
11) As noted above, two factors seem to have primarily weighed
with the learned Member Industrial court in passing the interim
order. One, the settlement got over in the year 2018 and
effectively since 2015 there has been no revision in wages though
the cost of living has increased substantially. Two, the petitioner
-second party had granted wage revision to its staff. Whether the
aforesaid approach of the learned Member Industrial Court is
justifiable ?
12) The thrust of Mr. Cama's submission was that the learned
Member Industrial Court committed a grave error in not giving
due weight to the financial position of the petitioner-employer
and attaching undue weight to the aforesaid two circumstances.
Financial position of the employer, according to Mr. Cama, plays
a significant, if not decisive, role in determining the wages. Wage
revision cannot be awarded so as to entail the consequence of the
very industry being closed down. Secondly, Mr. Cama would urge
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the failure to take into account the precarious financial position
of the petitioner, resulted in passing of the order, which can not
be granted even at the final adjudication, much less at an
interim stage.
13) To bolster up the aforesaid submissions, Mr. Cama placed a
strong reliance on a judgment of the Supreme Court in the case
of Punjab State Cooperative Milk Producers Vs. Balbir Kumar
Walia and Others1. In the said case, the Supreme Court after
adverting previous pronouncements including the decision of the
Supreme Court in the case of A.K. Bindal and Another Vs.
Union of India and Others2 enunciated that economic viability or
financial capacity of the employer is an important factor which
cannot be ignored while fixing wage structure lest the unit may
have to be closed down.
14) The principles which govern the aspect of revision of wages
of workmen were illuminatingly postulated by the Constitution
Bench of the Supreme Court in the case of Express newspaper
(P) Limited Vs. Union of India 3. After an elaborate analysis of the
factors which bear upon the determination of the wages, the
Supreme Court culled out the principles as under:-
1 (2021) 8 SCC 784
2 (2003) 5 SCC 163
3 AIR 1958 SC 578
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(1) In the fixation of rates of wages which include within
its compass the fixation of scales of wages also, the
capacity of the industry to pay is one of the essential
circumstances to be taken into consideration except in
cases of bare subsistence or minimum wage where the
employer is bound to pay the same irrespective of such
capacity;
(2) The capacity of the industry to pay is to be
considered on an industry-cum-region basis after taking
a fair cross section of the industry; and
(3) The proper measure for gauging the capacity of the
industry to pay should take into account the elasticity of
demand for the product, the possibility of tightening up
the organisation so that the industry could pay higher
wages without difficulty and the possibility of increase in
the efficiency of the lowest paid workers resulting in
increase in production considered in conjunction with
the elasticity of demand for the product - no doubt
against the ultimate back ground that the burden of the
increased rate should not be such as to drive the
employer out of business."
15) On the aspect of the capacity of the industry to pay, on
which considerable submissions were canvassed in the instant
case, the Supreme Court explained the import of the term of the
capacity to pay as under:-
"62. The capacity of the industry to pay being thus
one of the essential ingredients in the fixation of
wages, it is relevant to consider the different methods
of measuring such capacity.
The capacity of the industry to pay:
The capacity of industry to pay can mean one of
three things, viz :
(i) the capacity of a particular unit (marginal,
representative or average) to pay,
(ii) the capacity of a particular industry as a whole
to pay or
(iii) the capacity of all industries in the country to
pay. "
23-WP-10901-22.DOC
16) It was also enunciated that the capacity of an industry to
pay should be gauged on an industry-cum-region basis. The
observations in paragraph No. 63 read as under:-
"63. It is clear, therefore, that the capacity of
an industry to pay should be gauged on an
industry-cum-region basis after taking a fair
cross-section of that industry. In a given case it
may be even permissible to divide the industry
into appropriate classes and then deal with the
capacity of the industry to pay classwise".
17) In the case of Hindustan Times Ltd., New Delhi Vs. Their
Workmen4, again the Supreme Court emphasized that the
economic factors also deserve to be carefully considered while
assessing the ability of the industry to pay. The observations in
paragraph No. 7 read as under:-
"7. While industrial adjudication will be happy to fix
a wage structure which would give the workmen
generally a living wage economic considerations make
that only a dream for the future. That is why the
industrial tribunals in this country generally confine
their horizon to the target of fixing a fair wage. But
there again, the economic factors have to be carefully
considered. For these reasons, this Court has
repeatedly emphasized the need of considering the
problem on an industry-cum-region basis, and of
giving careful consideration to the ability of the
industry to pay. (Vide Crown Aluminium Works V.
Their Workmen, 1958 SCR 651: (AIR 1958 SC 30), the
Express Newspaper (P) Ltd Vs. Union of India, 1959
SCR 12: (AIR 1958 SC 578) and the Lipton Ltd V. Their
Union (1959) Supp (2) SCR 150: (AIR 1959 SC 676)".
(emphasis supplied)
4 AIR 1963 SC 1332
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18) In the case of A.K. Bindal (supra), the question of wage
revision arose in the context of a public sector enterprise. After
adverting to the previous pronouncements, the Supreme Court
postulated that the economic capacity of the employer also plays
a crucial part in it; as also its capacity to expand business or
earn more profits. It appeared to be a consistent view of the
Supreme Court that the economic viability or the financial
capacity of the employer is an important factor which cannot be
ignored while fixing the wage structure, otherwise the unit itself
may not be able to function and may have to close down which
will inevitably have disastrous consequences for the employees
themselves.
19) In the case of Punjab State Cooperative Milk Producers
(supra), on which a strong reliance was placed by Mr. Cama, the
following proposition was enunciated:-
"25. This Court in A.K. Bindal (2003) 5 SCC 163) also
considered two earlier judgments that the financial
capacity of the employer cannot be held to be a germane
consideration for determination of the wage structure of
the employees, therefore, it must be confined to the facts
of the aforesaid case. It was held that economic viability
or the financial capacity of the employer is an important
factor which cannot be ignored while fixing the wage
structure, otherwise the unit itself may not be able to
function and may have to close down which will inevitably
have disastrous consequences for the employees
themselves".
23-WP-10901-22.DOC
20) It cannot be gainsaid that the economic capacity of the
employer to pay the increased wages is a significant
consideration. The Counsels, however, deferred on the point of
the measure to be applied in assessing the financial capacity of
the employer. Mr. Bapat would urge that the petitioner has been
progressively making profits as is evident from the annual
reports for the financial years of 2017-2018, 2018-2019 and 2019-
2020. In fact, the petitioner selectively relied upon the profit and
loss account of spinning division to portray a picture that the
employer has been suffering losses. Thus, the learned Member
Industrial Court vide an order dated 14 th September, 2021,
directed the petitioner-employer to produce on record balance
sheet and reports for the financial years of 2017-2018, 2018-
2019, 2019-2020 and 2020-2021, which clearly indicated that the
employer has been generating profits, year after year.
21) Mr. Cama would urge that the learned Member Industrial
Court had fallen in error in taking into account the profits of the
company as a whole when the spinning division in which the
concerned workmen were working had been suffering huge losses
consistently.
22) To lend support to the submission that the unit in which
the workmen work is the test and not the company as a whole,
Mr. Cama placed reliance on a decision of the Supreme Court in
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the case of Shivraj Fine Arts Litho Works Vs. The State of
Industrial Court, Nagpur and Others 5. In the said case, the
Supreme Court after making reference to the decisions in the
cases of M/s. Unichem Laboratories Ltd Vs. The Workmen 6 and
The Silk and Art Silk Mills Association Ltd Vs. Mill Mazdoor
Sabha7, observed that it is well established that fixation of wages
has to be done on industry-cum-region basis having due regard
to the financial capacity of the unit under consideration. The
observation in paragraph No. 15 read as under:-
"15. In Unichem Laboratories Ltd. v. The
Workmen this Court after referring to the cases
cited above held that in the fixation of wages and
dearness allowance the legal position is well-
established that it has to be done on industry-
cum-region basis having due regard to the
financial capacity of the unit under
consideration. The same view was reiterated in
The Silk and Art Silk Mills Association Ltd. v.
Mill Mazdoor Sabha at p. 288, where the Court
re-emphasised the principles laid down in the
earlier cases. There is thus ample authority in
support of the view taken by the Tribunal and
the High Court that the employer can be
classified according to his paying capacity."
23) At this stage, the fact that the learned Member Industrial
Court has exercised the discretion to grant wage revision at an
interim stage needs to be kept in view while applying the
aforesaid propositions. As noted above, the factors which weighed
5 (1978) 2 SCC 601
6 (1972) 3 SCC 552
7 (1972) 2 SCC 253
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with the learned Member Industrial Court were i) the last
settlement expired in the year 2018; ii) there was in fact no
revision in wages since the year 2015; iii) Cost of living has
increased over a period of time; iv) the company has generated
profits, year on year and v) the employer had increased the wages
of its staff.
24) The first and second factors are indisputable. The third is
also rather incontestable. In this inflationary era, the prices of
the commodities and services reflect an increasing trend over a
period of time. Judicial notice of inflationary trend in the
economy cannot be faulted at.
25) On the fourth, pertaining to the revision in wages of the
staff, an endeavour was made on behalf of the petitioner to
demonstrate that the said consideration was irrelevant on the
premise that there were only 60 staff members as compared to
800 workmen and the increase was also marginal. The number
of staff may be small as compared to the workmen. However, the
fact that the employer could afford to raise the wages of the staff
cannot be totally discounted. The learned Member Industrial
Court thus cannot be said to have committed any error in taking
the said factor into account.
26) The controversy essentially boils down to the financial
capacity of the employer. The learned Member, Industrial Court
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proceeded on the premise that the balance sheet of the employer
reflected profits. That leads to the question as to whether the
profits of the company as a whole or the profitability of the unit
in which the concerned workmen were working, ought to be the
measure for assessing the financial capacity.
27) The copies of the annual statements of the petitioner-
Company do indicate that for the financial year ending 31 st
March, 2018, the profit was Rs.12,527.60/-; for the financial year
2018-2019, the profit was Rs.5,983.89/- and for the financial
year 2019-2020, the profit arose to Rs.7,309.69/-.
28) In contrast, the profits and loss account statements of the
spinning division (as claimed and annexed at Exhibit -A to the
Petition) indicate that the said unit has suffered losses as under:-
FINANCIAL YEAR LOSSES (IN RS.)
2017-2018 2,51,64,619/-
2018-2019 4,22,61,466/-
2019-2020 7,84,07,928/-
2020-2021 14,76,15,256/-
29) At this interim stage, in my considered view, the issue
cannot be determined by taking into account the sole factor that
the spinning division had suffered losses, even if the case of the
petitioner is taken at par on the said count. Rest of the factors
adverted to above, like the absence of settlement post 2018 and
no revision in wages since the year 2015 and the inflationary
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trend in the economy also deserve to be taken into account. It is
not the case that the petitioner-Company, as such, is in financial
doldrums. The annual statements of accounts paint a rosy
picture. Incontrovertibly, there has been a growth in over all
profits. Nor is it the case that the petitioner-Company has
refrained from increasing the wages of the administrative staff
and other employees.
30) Lastly, the average increase in the wages of the employees,
pursuant to the impugned order, in the contemplation of the
petitioner-Company, also deserves consideration. To the affidavit-
in-reply filed on behalf of the respondent, a copy of the notice
dated 3rd August, 2022 (Exhibit- 3) is annexed. By the said
notice, the workmen were informed that having considered the
impugned order passed by the Industrial Court, the employer
reckoned that the interim increase would be Rs.600/-and the
management was contemplating implementation of the said
order taking a sympathetic view of the interest of the workmen. If
this is the amount of average increase in the wages of the
workmen, in the contemplation of the employer, the financial
burden which would fall on the employer cannot be said to be
such as would render the enterprise itself unviable or bring
about the closure of the establishment.
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31) If the interim order is considered in the backdrop of the
aforesaid factors, it does not warrant interference in exercise of
extraordinary writ jurisdiction as the learned Member, Industrial
Court can be said to have exercised the discretion keeping in
view the relevant considerations.
32) The submission of Mr. Cama that, in the facts of the case,
even a final relief by way of wage revision cannot be granted does
not merit countenance at this stage. As noted above, all the
relevant considerations will have to be delved into at the time of
final adjudication of the reference. On the basis of the sole
consideration of the losses, which the spinning division has
allegedly suffered, the claim for wage revision cannot be thrown
overboard. Nor the submission of Mr. Cama that the aspects of
balance of convenience and irreparable loss were not adequately
considered by the learned Member Industrial Court merits
acceptance. In the light of the burden, which may fall on the
employer, in the estimation of the employer itself, the balance of
convenience tilts in favour of the workmen, who had no revision
of wages since the year 2015. Grant of such wage revision, in the
circumstances of the case, does not seem to cause an irreparable
loss to the employer. Lastly, in the matter of wage revision at an
interim stage, some element of guess and estimation is bound to
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occur and thus the impugned order cannot be assailed for
increasing the wages by 10% and not at a higher or lower rate.
33) The upshot of the aforesaid consideration is that this Court
is not persuaded to interfere with the discretionary order in
exercise of writ jurisdiction. Hence, the Petition deserves to be
dismissed.
34) Hence, the following order.
ORDER
i) The Petition stands dismissed.
ii) Rule discharged.
iii) In the circumstances, there shall be no order as
to costs.
[N. J. JAMADAR, J.]
At this stage, the learned Counsel for the petitioner seeks
continuation of stay to the Criminal BIR No. 1 of 2022, for a
further period of six weeks.
The stay shall continue to operate for a period of four weeks
from today.
[N. J. JAMADAR, J.]
