Ahmedabad Mill Owners' Association Vs. The Textile Labour Association [1965] INSC 149 (10 August 1965)
1965 Latest Caselaw 149 SC

Ahmadabad Mill Owners' Association Vs. The Textile Labour Association [1965] INSC 149 (10 August 1965)

10/08/1965 GAJENDRAGADKAR, P.B. (CJ) GAJENDRAGADKAR, P.B. (CJ) WANCHOO, K.N.

HIDAYATULLAH, M.

RAMASWAMI, V.

CITATION: 1966 AIR 497 1966 SCR (1) 382

CITATOR INFO :

RF 1969 SC 360 (21) RF 1972 SC1234 (18) RF 1972 SC2273 (15) R 1972 SC2332 (64,72) R 1978 SC 828 (20) R 1978 SC1113 (18,26) R 1980 SC 31 (15,22) R 1986 SC 125 (8,19) R 1992 SC 504 (27)

ACT:

The Bombay Industrial Relations Act (11 of 1947), ss. 42 and 73-Payment of dearness allowance based on cost of living index-Principles.

HEADNOTE:

After the 2nd World War broke out the industrial employees at Ahmadabad, who had organised themselves as the Textile Labour Association (Respondent herein) raisd a demand for payment of dearness allowance to meet the cost of living which had shot up as a result of the War, and the demand became the subject-matter of arbitration and an ,award by the Industrial Court at Bombay. As a result of petitions filed by the Parties and references made to it, the Industrial Court had been giving directions, from time to time, regarding the payment of dearness allowance awarded, on the basis of cost of living index number, with 1926-27 as the base year. In the Second Five Year Plan, the Planning Commission recommended that the series of cost of living indices should be revised, and accordingly, the labour Bureau and the Central Statistical Organisation of the Government of India undertook family living surveys in 1958

59. One of the centers chosen was Ahmadabad and the Government of India began to publish consumer price index number for the city -of Ahmadabad from 1960 with 1960 as the base year. The Government of India also advised the State Government to remove various anomalies in the State series of the price index number and publish a new series linking the State series with that of Government of India, with 2.98 as the linking factor. The Government of Gujarat set up an expert Committee to advise it on the question and that Committee made recommendations for the removal of anomalies and also suggested 3.17 instead of 2.98 as the linking factor. In November 1963, the Government accepted the recommendations for removing the a normalies and adjusted the consumer price index number, and the appellants paid the dearness allowance according to the adjusted consumer price index number under protest. In February 1964, the Government of Gujarat announced its decision to adopt the linking factor at 3.17. The appellants were not willing to pay dearness allowance according to the converted price index number in spite of a representation by the employees, and so, the dispute was referred to the Industrial Court under s. 73 of Bombay Industrial Relations Act, 1946. The industrial Court decided that the appellants should pay dearness allowance to their employees for the month of March 1964 and for subsequent months on the consumer price index numbers for Ahmadabad published by the State Government since February 1964 by using the index numbers in the series for Ahmadabad compiled by the Labour Bureau at Simla, and the linking factor of 3.17 adopted for linking that series to the State series with the old base. and gave directions as to the manner of paying the dearness allowance.

In their appeal to this Court, the appellants contended that (i) the reference was invalid because, before making the reference to requirements of s. 42, which prescribes the procedure which has to be followed by the employer or the employee if either of them wants a change 383 to be effected in the terms of the existing award, had not been complied with; (ii) the Industrial Court erred in overruling their contention that the new survey suffered from two major infirmities, (a) inadequacy of the sample size, and (b) impropriety of the method of interview adopted by the investigators; (iii) the linking factor of 3.17 was improper; and (iv) the Industrial Court was not right in coming to. the conclusion that the additional burden which its award would impose upon the appellants. would not be beyond their financial capacity.

HELD: (i) The dispute must be treated as an industrial dispute, notwithstanding the fact that s. 42 had not been complied with, and Industrial Court was right in coming to the conclusion that the objection raised by the appellant against the competence of the reference was mis-conceived.

[398 F; 399 E] The Act is a comprehensive piece of legislation and makes elaborate' provision for the regulation of relations between employers and employees and for the settlement of disputes between them. Section 73 deals with the powers of the State Government to make a reference and as such, it could not have been intended that those powers are to be controlled by s. 42. Section 42 provides that, if an employer or employee intends to effect any change in respect of certain industrial matters, he will have to give notice of such intention to the representative of the employees or tie employer respectively. The section can have no application to cases where the State Government itself wants to make a reference. The meaning of the non-obstante clause with which s. 73 opens also unambiguously indicates that the power of the State Government to make a reference is controlled by any other provision in the Act. The definition of "industrial dispute" in s. 3(17) is so wide and comprehensive, that, even If an, award is subsisting between the parties, if a difference arises between them, the said difference would amount to an industrial dispute for the purpose of s. 73 and a notice of change need not be given, either by the employer or by the employee. It is true that the power conferred on the State Government to make a reference is. not absolute or unqualified, but could be exercised only if one or the other of the conditions specified in sub-ss. (1), (2) or (3) of s. 73 is satisfied.

But once the State Government is satisfied, its power to make a reference is not limited to cases where notice of change has been given by the parties under s. 42, On principle also, the conferment of power on the State, Government is fully justified, because, if as a result of a dispute between the employer and his employees, a serious outbreak of disorder, or a breach of public peace is likely to occur, or a serious or prolonged hardship to a large section of the community is likely to be caused, or the industry concerned is likely to be affected adversely, it would be idle to require that even in the face of such serious danger, the procedure prescribed by s. 42 must be followed before reference can be made under s. 73. [396 DF; 397 E-H; 398 C-E, G; 399 C-B] (ii) (a): The appellants were not justified in contending that the inadequacy of the size of the sample in relation to the universe of the working class families vitiated the enquiry. [414 H] From the Report of Family Living Survey among Industrial workers at Ahmadabad, 1958-59, it appears that the survey and field work was the result of the cooperation of several expert institutions, official as well as non-official. and was based on accepted principles and method is. The size of the sample was determined in the light of the permissible margin of error and was selected by the application of scientific sampling techniques and according to the principle that it is the quality of survey that is more important, not so much the size of the sample. If the quality of investigation has improved, and the method of working out the sample' 384 survey has made very great progress, then, it would not be correct to say that because the size of the sample in the survey was smaller as compared to the size of the sample taken in 1926-27, the inadequacy of the size on the subsequent occasion introduces an infirmity in the investigation itself. [409 H; 410 G; 412 D, E, G; 413 D-E] (b) 'the Industrial Court was right in rejecting the appellants' contention that the impugned survey ,rut the index constructed as a result it, suffered from the infirmity that the investigation was conducted in the survey by 1he interview method, [416 D] Having regard to the fact that a majority of working class population in India is illiterate the method of interview is the only method which can be adopted. Besides according to expert opinion, the interview methods, if properly adopted gives better results than the alternative method of supplying account books and written questionnaire. [416 A-C] (iii) As the appellants had not placed before the Industrial Court any material to justify their contention that for determining the linking factor. the behaviour of prices for two or three years should have been studied, it could not be said that the Industrial Court committed an error in upholding the decision of the Government of Gujarat that the linking factor should be 317. [419 F-G; 420] The Industrial Court had to choose between two courses.

One was to work out an entirely new scale of basic wages rounded not on the pre'war level of 1939 but on the cost of living of 1960 as the base year and .to award dearness allowance thereafter. The Industrial Court thought that to adopt that course might conceivably create a large number of new problems, disturbing industrial peace and would be outside its terms of reference. Therefore, it approved the other course of linking the State series with the new series to maintain continuity, which was the method adopted by the Government of Maharashtra also. [418 E, G; 419 (iv) The appellants had failed to substantiate the contention that the -additional burden would be beyond their capacity to pay. [429 E] The claim of the employees for a fair and higher wage is undoubtedly, based on the concept of social justice, and if employees are paid better wages which would enable them to live in comfort and discharge their obligations to the members of their families in a reasonable way, their work would show an appreciable increase in efficiency. On the ether hand. industrial adjudication must take into account the problem of the additional burden which such wage structure would impose upon the employer and consider whether the employer can reasonably be called upon to bear such burden. The task of constructing a wage structure must be tackled on the basis that such wage structure should not be changed from time to time. It is a long-range plan and in dealing with the problem, which is difficult and delicate the financial position of the employer and the future prospects of the industry and the additional burden which may be imposed on the consumer must be carefully examined. A broad and overall view of the financial position of the employer must be taken into account and attempt should always be made to reconcile the natural and just claims of the employees for a fair and higher wage with the capacity of the employer to pay it, and in determining such. capacity, allowance must be made for a legitimate desire of the employer to make a reasonable profit.. Unusual profit or loss should not be allowed to play a major role.

It is true that normally, once a wage structure is fixed employees are reluctant to face a reduction in the content of the wage packet; but like all other problems associated with industrial adjudication, the decision of the problem must also be based on the major consideration that the conflicting 385 claims of labour and capital must be harmonised on a reasonable basis; and so, if it appears that the employer cannot really bear the burden of the increasing wage bill, industrial adjudication cannot refuse to examine his case and should not hesitate to give him relief if it is satisfied that if such relief is not Even, the employer may have to close down his business. The last principle, however does not apply to cases where the wages paid to the employees are no better than the basic minimum wage. If what the employer pays to his employees is just the basic subsistence wage and if he cannot afford to pay it, he would not be justified in carrying on his industry. Since the wages paid to the textile employees at ,Ahmadabad cannot be regarded as subsistence wages or bare minimum , it would not be open to the respondent to contend that the appellants must pay the wages whether the employers can afford to pay them or not. If it is shown that the appellants cannot bear the burden and that the implementation of the award would inevitably have extremely prejudicial effect upon the continued existence of the industry itself, there would be justification for revising the scale of dearness allowance.

In considering the financial position of the appellants it would not be appropriate to rely unduly on the profitability ratio which has been adopted by the Bulletin issued by the Reserve Bank of India dealing with the cotton textile industry, or other single-purpose statements produced by the parties. Industrial adjudication should not lean too heavily on such statements whilst attempting the task of deciding the financial capacity of the employer in the context of the wage problem. Taking a broad view which emerged from a consideration of all the relevant facts, there is little doubt that the productivity of the industry is increasing and that the demand for textile products will never decrease in future. It is true that the textile industry at Ahmadabad has been leaning very heavily on borrowing% but that is a peculiar feature of the textile industry at Ahmadabad. It helps the development of the industry and so the extent of borrowings, cannot be pressed into service for the purpose of showing that the financial position of the industry is unsatisfactory. On the contrary, the harmonious relations which have consistently subsisted between the employer and the. employees, would help the textile industry in Ahmadabad in its prospects towards speedy economic growth. [420 C-E, F-G; 421 A-C.

E-G, H-; 422 C, G-H; 426 B, F; 427 G-H; 428 A, D; 429 D]

CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 167 to, 173, 537 and 538 of 1965.

Appeals by special leave from the award dated October 26, 1964 of the Industrial Court Gujarat in Reference (I.C.) No.

67 of 1964.

M. C. Setalvad, R. J. Kolah, 1. M. Nanavati, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for the appellant (in CA. No. 167 of 1965).

R. J. Kolah, I. M. Nanavati, J. B. Dadachanji, O. C.

Mathur and Ravinder Narain, for the appellants (in C. As.

Nos. 168 and' 170 of 1965).

N. A. Palkhivala, 1. M. Nanavati, J. B. Dadachanji, O. C.

Mathur and Ravinder Narain, for the appellants (in C. As.

Nos.. 169 and 173 of 1965).

I. M. Nanavati, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for the appellants (in C. As. Nos. 171 and 172 of 1965).

386 J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for the appellants (in C. As. Nos. 537 and 538 of 1965).

S. R. Vasavada, N. M. Barot, N. H. Shaikh, R. M. Shukla, A. N. Buch and D. T. Trivedi, for the respondents.

C. K. Daphtary, Attorney-General, K. L. Hathi and B. R. G.

K. Achar, for intervener NO. 1.

G. .B. Pai, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for intervener No. 2.

G. Ramanujam, for intervener No. 4.

B. Narayanaswami, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for intervener No. 5.

I. M. Nanavati, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for intervener No. 6.

H. K. Sowani and K. R. Chaudhuri, for intervener No. 7.

The Judgment of the Court was delivered by Gajendragadkar, C.J. This is a group of seven appeals which arise from an industrial dispute between the appellants, the Ahmadabad Millowners' Association, Ahmadabad, and 67 employers on the one hand, and the respondent, the Textile Labour Association, Ahmadabad, 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 (1C) 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 Ahmadabad Millowners' Association and the employers mentioned in the Annexure are bound to payness allowance to their employees on the Consumer Price Index Numbers for working class for Ahmadabad published by the State Government since February, 1964, by using the index numbers in the series for Ahmadabad 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;

387 (2) If not, whether the said Ahmadabad 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 Ahmadabad 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 Ahmadabad published by the State Government since February, 1964".

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 Ahmadabad published by the State Government since February, 1964, (by using the index numbers in the series for Ahmadabad 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 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 (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 April 30, 1965. It appears that before the Industrial Court an agreement had been reached between the Fine Knitting Co. Ltd. of Ahmadabad 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. and not to the 388 hosiery department. It is against this award that the appellants have come to this Court by special leave. On January 5, 1965, while granting special leave to the appellants, this Court directed that the statements of the case should be dispensed with and the appeals be listed for hearing in the week commencing March 8, 1965. That is how these appeals have now come for final disposal before us.

Before dealing with the points raised by the appellants in these appeals, it is necessary to set out somewhat elaborately the previous history of the present dispute.

The story about the payment of dearness allowance to textile industrial employees at Ahmadabad takes us back to the time when the Second World War broke out in September, 1939. As is well-known, as a result of the said War, the cost of living shot up; and in consequence, the industrial employees at Ahmadabad who had organised themselves as the Textile Labour Association, Ahmadabad, raised a demand for payment of dearness allowance. This demand became the subject matter of arbitration by the Industrial Court at Bombay (Case No. 1 of 1940). The Industrial Court had to consider, inter alia, two major questions; the first was as to what was the extent of the rise in the cost of living consequent upon the Second World War; and the second was as to the extent and manner in which the said rise in the cost of living should be neutralised by the payment of dearness allowance. The Industrial Court examined the matter at great length and came to the conclusion that for the purpose of determining the quantum of dearness allowance to be paid to the employees, it would be reasonable to rely on the working class budget inquiry which had been conducted by the Government of Bombay between August, 1926 and July, 1927.

Another similar inquiry had been conducted by the same Government in 1933-35, but the Industrial Court preferred to base its conclusions on the first inquiry. On the basis of the cost of living index taken as 100 for the base year 1926-27, the index for August 1939 which stood at 73 was accepted as datum index, so that the rise in cost of living over the datum index of 73 had to be neutralised by payment of dearness allowance to the employees.

Having reached this conclusion on the first question, the Industrial Court examined the problem as to the extent and method by which the rise in the cost of living should be neutralised. On this question, its conclusion was that for 11 points rise (which is equivalent to a rise of 15%) in the cost of living for the month of December, a cash relief to the extent of 10 per cent of the 389 average wage, i.e. Rs. 3-8-0 per employees, should be awarded for the month of December and a similar relief proportionately determined should be awarded for other months. It was urged before the Industrial Court that relief could be granted to the employees in kind rather than in cash; but this contention was negatived by the Court, though it expressed a hope that the employers should start cost price grain shops at convenient centres for the benefit of the employees. That, in substance, is the result of the proceedings in Case No. 1 of 1940. It is with the decision of this dispute that the story about the payment of dearness allowance under an award began in Ahmadabad in respect of textile labour. It appears that as a result of this award, 66-2/3 per cent neutralisation was allowed.

This award continued to be in operation till September, 1941. On August 12, 1941, an agreement was entered into between the appellants and the respondent by which it was resolved that the dearness allowance to be paid to the employees in the member Mills of the appellant Association be raised by 45 per cent from the month of July, 1941, and in accordance with this agreement, an award was made by the Industrial Court on September 15, 1941. As a result of this award, neutralisation came to be effected to the extent of 96% on the average wage over the pre-war cost of living index of 73 in August, 1939, and to that extent the respondent gained. We have already noticed that the neutralisation which was effected by the earlier award was 66-2/3 per cent.

Two years thereafter, the appellant Association filed a petition (No. 1 of 1943) for a substantial reduction in the quantum of dearness allowance. It urged that in the year 1943, the textile industry at Ahmadabad had suffered considerable loss in its profits, and so, it was necessary that the dearness allowance fixed by the consent award should be reduced. When the matter was considered by the Industrial Court, it was discovered that the claim made by the appellant Association was not substantiated by sufficient or satisfactory data in the form of published balance-sheets for the year 1943. The Industrial Court, therefore, refused to interfere with the award, but permitted the appellant Association to raise the same dispute in April, 1944 if it thought necessary to do so. No such application was, however, made by the appellant Association in 1944, with the result that the consent award passed on September 15, 1941, continued to be in operation.

The said consent award had provided that the member mills were to pay the dearness allowance prescribed by it till the termi390 nation of the Second World War; and so, as soon as the war came to an end, the member mills stopped the payment of dearness allowance with effect from May 8, 1945. The respondent then filed Petition No. 1 of 1945 before the Industrial Court asking for a direction against the appellant Association for payment of' the dearness allowance on the same scale as was then prevailing for three months after May 8, 1945. This prayer was .granted by the Industrial Court. That is how matters stood as a result of the order passed on Petition No. 1 of 1945.

Meanwhile, the respondent gave a notice of change on May 20, 1945 and demanded continuance of the payment of dearness allowance until the working class cost of living index for Ahmadabad stood above 73. It suggested that the quantum of dearness allowance should be related to the cost of living index as awarded by the Industrial Court Award dated the 26th April, 1940, and revised by the subsequent Award dated the 15th, September, 1941. While making this demand, the respondent made it clear that this demand was made without prejudice to the claim of the employees for a revision in the entire wage structure. It appears that during the course of these proceedings, it was urged before the Industrial Court that the rise in the cost of living should be computed not with reference to the index figure of 73 in August, 1939, but with reference to the figure of 100 in 1926-27. This contention was, however, rejected by the Industrial Court. By its award, the Industrial Court directed that neutralisation should be effected to the extent of 76 per cent. As a result of this decision, the Court awarded Rs. 4 for 11 points rise in the cost of living index.

In 1946, the respondent moved for the revision of the said award (Revision Petition No. 1 of 1946). By this revision petition, the respondent claimed that the rise in the cost of living should be neutralised fully instead of 76%, and this claim was based on the allegation that the profits of the textile industry had maintained a high level and the reduction in the extent of neutralisation from 96% to 76% in the award of the previous year had adversely affected the employees and they had in fact begun to leave the industry.

It may be pointed out that on all these occasions, the appellant Association urged before the Industrial Court that the average monthly income and expenditure of the textile employees in Ahmadabad left surplus with them and the need for neutralising the rise in the cost of living was not as much as was sought to be made out by the respondent. This contention has, however, been consistently rejected by the Industrial Court. Even so, the claim made by the respondent for increasing the extent of 391 neutralisation was rejected by the Industrial Court, liberty being reserved to both the parties to approach the Court with a request for continuance or revision of the allowance at the end of seven months.

As soon as seven months expired, the respondent tiled a Revision Petition (No. 1 of 1947) before the Industrial Court on March 8, 1947. By this petition, the respondent renewed its claim for an increase in the dearness allowance.

Meanwhile, the minimum wage for textile employees in Bombay had been fixed at Rs. 30 and dearness allowance was awarded to them with the object of neutralising the rise in the cost of living to the extent of 90% on the minimum wage of Rs. 30. Taking advantage of the fact that the minimum wage for textile employees in Bombay had been fixed at Rs. 30, the appellant association urged that there was no occasion to increase the rate of dearness allowance because the wages of the employees had already been increased under the standardization scheme which had been adopted in Ahmadabad.

Alternatively, the appellant Association contended that if the Court was inclined to revise the dearness allowance, it should follow the same formula as in Bombay and provide for neutralisation at the most at 90% on the minimum wage of Rs. 28 in Ahmadabad. This contention was, however, rejected by the Industrial Court. By its award, the Court directed that the rise in the cost of living over pre-war level of 73 in the case of the lowest paid employee should be neutralised to the extent of 100% and all employees earning Rs. 150 or less a month should be paid at a flat rate. On arithmetical calculation, it was found that this rate came to 2.84 pies per day for rise of each point in the cost of living index number over the pre-war figure.

The appellant Association issued a notice on October 31, 1949, purporting to terminate this award with effect from 1st January, 1950. The -round for terminating, the award set out by the appellant Association in its notice was that the textile industry in Ahmadabad was passing through a crisis and that certain mills were completely closed down while others were partially closing down. It appears that about that time, the Central Government acting in pursuance of the recommendations made by the Tariff Board, directed a 4% cut in ex-mill cloth prices; and that, according to the appellant Association, led to a crisis in the financial affairs of the textile industry at Ahmadabad. It was also alleged in the notice that though the prices fixed were uniform, the dearness allowance paid was not uniform and that the member mills of the appellant Association were paying Rs. 15-4-0 more per 392 month per employee in dearness allowance at Ahmadabad as compared to that paid to the textile employees in Bombay.

Arithmetical calculations showed that as a result of this extra payment, the Ahmadabad mills had to bear an additional burden of Rs. 238 lakhs in 1949 as compared to the burden bore by the Bombay textile mills.

Before the notice thus issued by the appellant Association came into force, the respondent gave a notice of change to the mills to continue to pay the dearness allowance according to the existing award; and since no settlement could be reached between the parties, a reference was made to the Industrial Court. As a result of these proceedings, however, neither party scored a victory, and the award directed that payment of the dearness allowance should be made in accordance with the orders passed in Revision Petition No. 1 of 1947. Since the date when this order was made, the terms of the award in Revision Petition No. 1 of 1947 have been in operation between the parties.

Meanwhile, the Central Wage Board for the Cotton Textile Industry was constituted. One of the points which the Wage Board had to consider was the demand made by the employees for consolidating a part of the dearness allowance in the basic wage. The Wage Board recommended that 75% of the dearness allowance should be consolidated in the basic wage, and the remaining 25% should bear a flexible character. The Board also made other recommendations which are not relevant for our purpose. In consequence of the recommendation made by the Board as to the consolidation of the dearness allowance, an agreement was reached between the appellant Association and the respondent, as a result of which a joint application (No. 1 of 1960) was made by both the parties under s. 11 6A of the Act; and on this joint application an award by consent was passed directing that 75% of the average dearness allowance of the first 6 months of 1959 which is Rs. 63-15-9 p.m. of 26 working days should be consolidated with the basic wage, and the balance of the dearness allowance should be paid as worked out on the existing basis. That is how matters then stood between the parties.

It appears that about this time, there was a growing feeling amongst both the employers and the employees that the different series of consumer price index compiled and published in India were not very satisfactory and some of them had become obsolete. In the Second Five Year Plan, it was, therefore, recommended that it was desirable that steps should be taken simultaneously with the undertaking of wage census to institute enquiries for the 393 revision of the present series of cost of living indices at different centres. According to the recommendation made by the Planning Commission Report, the Labour Bureau, Simla, and the Central Statistical Organisation of the Government of India took steps to conduct fresh family living surveys among working class and middle class population respectively with a view to construct the new series of consumer price index numbers. The working class surveys were conducted at 50 selected centres and the middle class surveys at 45 centres, 18 centres being common to both. The work of these surveys was commenced in the second half of 1958 and was concluded by September, 1959. One of the centres selected for this survey was Ahmadabad. The Government of India began to publish consumer price index number for the city of Ahmadabad, having index number 100 for the base year 1960.

The publication of these series naturally raised the problem of arriving at a linking factor between the present series published by the State Government and the new series published by the Government of India. The Government of India considered this problem and indicated that 2.98 would be a proper linking factor. This figure was arrived at as a result of taking the annual average of the monthly index numbers of the State series for 1960 which then stood at 298. For the base year of 1960, the figure of the new series was 100 and the linking factor was, therefore, taken at 2.98.

It then appeared clear that there were several anomalies in regard to the collection of prices in the State series.

Some of the items which were specified in such series had ceased to exist, whereas quotation for one major item, viz., house rent allowance had been frozen for many years. After the Government of India began to publish its new series, it advised' the Government of Gujarat to stop publishing its old series and publish the converted index in its place.

The Government of India thought that it would be unjust to the employees if the conversion were allowed to take place without removing anomalies of the State series.

Faced with this problem, the Government of Gujarat set up an expert Committee under the Chairmanship of Dr. M. B. Desai.

The terms of reference of this Committee were thus formulated "(1) to examine the validity of the submissions and representations made to Government and to make recommendations as to whether any readjustment is necessary in the existing series for Ahmadabad published by the State Government, and if so, what readjustment should be made;

394 (2) to consider how the new series of Consumer Price Index Numbers for Ahmadabad should be linked with the existing series, so readjusted if found necessary; and in so considering, to take into consideration the factor that the period of family budget enquiry on which the new series for Ahmadabad is based is different from the base period for the said new series".

The said Committee made a fairly exhaustive investigation, and made two main recommendations. The first recommendation involved an addition of 19 points in the overall price index in the State series and the same was fixed at 317 instead of 298 as it stood when the new series and its base period were decided upon. The other recommendation which it made was that the conversion or the linking factor should be 3.17 as against 2.98 per point in the new series.

The Government of Gujarat accepted the first recommendation and revised the index number for the month of November, 1963, by adding 19 points to the figure originally released by it and stated that its existing series would be adjusted month to month by the addition of 19 points for adjusting the index for clothing and house rent groups as recommended by the Expert Committee. In regard to the second recommendation, the Government took the view that it was necessary to continue publication of the current series to permit industry and labour time to have necessary modifications in the existing agreements, settlements and awards made to link up the dearness allowance with the new series published by the Labour Bureau, Simla. This decision was announced by the Government by a Press Note on January 31, 1964.

When this decision of the Government of' Gujarat was announced, the appellant Association found that it entailed considerable additional burden on the textile industry even so, it advised its member mills to pay the dearness allowance according to the adjusted consumer price index number by adding 19 points for the month of January, 1964, under protest. This protest was expressed by the President of the Appellant Association by issuing a press communique criticizing the Government for its unilateral and hasty decision in the matters.

On February 29, 1964, the Government of Gujrat issued another Press Note by which it accepted the second recommendation made by the Expert Committed to take the linking factor at 317 instead of 298. The Press Note shows that this decision was reached by the Government of Gujarat in accordance with the 395 advice received from the Government of India. In consequence of this decision, the Government of Gujarat discontinued publication of the cost of living index number of its 1926-27 numbers from January, 1964. This decision of the Government raised a storm of protest from the appellant Association. A general meeting of the members of the appellant Association was held on March 30, 1964, and it passed a resolution to the effect that the discontinuance of the publication of the cost of living index by the Government of Gujarat made it impossible for the appellant Association to comply with the terms of the existing award in respect of the payment of dearness allowance in the manner prescribed by the award and so, the appellant Association advised its members to pay to their employees dearness allowance for the month of March, 1964, calculated on the basis of the last published index number for the month of December, 1963 in the State's 1926-27 series and to continue to pay dearness allowance for succeeding months on the basis of the same index number till such time as the Government of Gujarat resumed publication of index numbers in the said series. According to the appellant Association, as a result of the decision of the Government of Gujarat, an unbearable burden would be imposed on the members of the appellant Association in the matter of dearness allowance;

and so, it was not prepared to accept that decision.

When the appellant Association adopted this attitude, the .Secretary of the respondent Association expressed his profound sorrow at the decision of the appellant Association, and by his letter addressed to the appellant Association on April 3, 1964, he requested the members of the appellant Association to pay dearness allowance to their employees according to the converted number published by the Government of Gujarat. This letter was accompanied by a resolution passed by the respondent Association in which it set forth its version of the financial position of the members of the appellant Association and the justice of the claim made by the employees for the payment' of dearness allowance in accordance with the decision of the Government of Gujarat. 'no appeal thus made by the Secretary of the respondent Association did not, however, receive any sympathetic response from the appellant Association; and that made it necessary for the Government of Gujarat to refer the present dispute to the Industrial Court at Gujarat under s. 73 of the Act. That, broadly stated, is the background and the previous history of the present dispute.

At the hearing of the present reference before the Industrial Court the appellants had urged a preliminary objection against 3 9 6 the competence of the present reference. They contended that the reference under s. 73 of the Act was invalid, because, before making the reference, the requirements of s.

42 of the Act had not been complied with. The argument was that, in substance, the reference relates to a change in the terms of the award binding between the parties, and for effecting such a change, the procedure prescribed by S. 42 and the other sections in Chapter VIII of the Act has to be complied with. It is common ground that the -said procedure has not been followed and the Government of Gujarat has made the present reference in exercise of the power ,conferred on it by s. 73. The Industrial Court has rejected the appellants' contention and has held that the reference is valid. Mr. Setalvad for the appellants has urged before us that the view taken by the Industrial Court is not justified by the terms of S. 73 read along with s. 42 of the Act.

The Act was passed by the Bombay Legislature in 1947. It purports to regulate the relations of employers and employees, to make provision for settlement of industrial disputes, and to provide for certain other purposes. It is a comprehensive piece of legislation and it makes elaborate provisions for the regulation of relations between employers and employees and for the settlement of disputes between them. Section 42 of the Act provides for a notice of change. It is unnecessary to cite the provisions of the said section, because for the purpose of dealing with the point raised by Mr. Setalvad, it would be enough if we state the sum and substance of S. 42 (1) & (2). Section 42 (1) provides that if an employer intends to effect any change in respect of an industrial matter specified in Schedule II, he will have to give notice of such intention in the prescribed form to the representative of employees. Similarly,s. 42(2)provides that if an employee desires a change in respect of an industrial matter not specified in Schedule I or III, he shall give notice in the prescribed form to the employer through the representative of employees. Mr. Setalvad relies on the fact that Entry 9 in Sch. II relates to wages including the period and mode of payment, and be points out that the definition of "wages" prescribed by S. 3(39) includes dearness allowance. His case is that the present dispute falls under Sch. 11, Entry 9, and if the employees had intended to make a change in the existing award in relation to the payment of dearness allowance, it would have been necessary for them to take action as prescribed by s. 42(2). Since it is common ground that no notice of change has been given by the respondent, it is urged that the reference made by the Government of Gujarat under S. 73 -of the Act is invalid. It would be noticed that this argument 397 assumes that the provisions of S. 42 would govern the provisions of S. 73. The question is: is this assumption well-founded? Let us then read S. 73; it reads thus :"Notwithstanding anything contained in this Act, the State Government may, at any time, refer an industrial dispute to the arbitration of the Industrial Court, if on a report made by the Labour Officer or otherwise it is satisfied that(1) by reason of the continuance of the dispute (a) a serious outbreak of disorder or a breach of the public peace is likely to occur;

(b) serious or prolonged hardship to a large section of the community is likely to be caused; or (c) the industry concerned is likely to be seriously affected or the prospects and scope, for employment therein curtailed; or (2) the dispute is not likely to be settled by other means; or (3) it is necessary in the public interest to do so".

On a fair reading of s. 73, it is plain that it deals with the powers of the State Government to make a reference and as such, it is difficult to assume that the said powers of the State Government are intended to be controlled by the provisions of S. 42. Section 42 prescribes the procedure which has to be followed by the employer and the employee respectively if either of them wants a change to be effected as contemplated by it. The scheme of S. 42 read along with the other provisions in Ch. VIII clearly shows that the said Chapter can have no application to cases where the State Government itself wants to make a reference. That is the first consideration which militates against the construction which Mr. Setalvad suggests.

The opening clause in s. 73 also unambiguously indicates that the power of the State Government to make a reference will not be controlled by any other provision contained in the Act. This clause plainly repels the argument that the provisions of S. 42 should be read as controlling the provisions of s. 73. The meaning of the non-obstante clause is clear and it would be idle to urge that the requirements of S. 42 must be satisfied before the power under s. 73 can be invoked by the State Government.

Sup.Cl/65-11 398 It is, however, urged that the power conferred on the State Government by s. 73 is the power to refer an industrial dispute to the arbitration of the Industrial Court, and there can be no industrial dispute unless a notice of change has been given either by the employer or the employee. In other words, the argument is that unless a notice of change is given as required by s. 42, no industrial dispute can be said to arise between the employer and his employee, and that is how s. 42 governs s. 73. If it was the true legal position that there can be no industrial dispute between an employer and his employee unless a notice of change is given by either of them, there would have been some force in this contention but the definition of the words "industrial dispute" does not justify the assumption that it is only a notice of change that brings into existence an industrial dispute. Section 3(17) of the Act defines an "industrial dispute" as meaning any dispute or difference between an employer and employee or between employers and employees or between employees and employees and which is connected with any industrial matter. This definition is so wide and comprehensive that it would be impossible to accept the argument that it introduces the limitation suggested by Mr. Setalvad. Even if an award is subsisting between the parties but a difference arises between them, as in the present case, it is not easy to hold that the said difference does not amount to an industrial dispute for the purpose of s. 73 merely because notice of change has not been given either by the employer or the employee.

Therefore, we are satisfied that the dispute which has been referred by the Government of Gujarat in the present case must be treated as an industrial dispute, notwithstanding the fact that s. 42 has not been complied with either by the appellants or by the respondent.

It is true that the power conferred on the State Government to make a reference is not absolute or unqualified. It can be exercised only if one or the other of the conditions specified by sub-sections (1), (2) or (3) of s. 73 is satisfied. But once the State Government comes to the conclusion that one or the other of the said conditions is satisfied, its power to make a reference is not limited to cases where notice of change has been given by the parties as required by s. 42. It is an over-riding power which is intended to be exercised to avoid anomalies or other serious consequences which would flow in case the Government does not make an immediate reference. The requirements prescribed by sub-sections (1), (2) and (3) of S. 73 indicate the types of cases which are intended to be referred without requiring the parties to take recourse to s. 42. In the present case, the 399 Government of Gujarat was satisfied that the dispute was not likely to be settled by other means, and so, it made the present reference. Therefore, we do not think there is any substance in the argument that the reference is bad, because s. 42 has not been complied with. The terms of s. 73 are plain and unambiguous and them leave no doubt that the power of the State Government to make the reference is not at all controlled by the requirements of s. 42.

On principle, the conferment of this power seems to be fully justified. If as a result of a dispute between the employer and his employees, a serious outbreak of disorder or a breach of the public peace is likely to occur, or a serious or prolonged hardship to a large section of the community is likely to be caused, or the industry concerned is likely to be affected adversely, it would be idle to require that even in the face of such a serious danger, the procedure prescribed by s. 42 must be followed before reference can be made under s. 73. The very nature of the conditions prescribed by sub-sections (1), (2) and (3) of s. 73 emphasises the fact that the said conditions refer to categories of cases or types of occasions on which reference has to be made promptly and immediately, and that explains the conferment of the wide powers on the State Government as prescribed by s. 73. We are, therefore,, satisfied that the Industrial Court was right in coming to the conclusion that the preliminary objection raised by the appellant-, against the competence of the present reference was misconceived.

It appears that a similar view has been expressed by the Bombay High Court in Suryaprakash Weaving Factory v. The Industrial Court(1).

That takes us to the merits of the controversy between the parties in the present appeals. Let us begin by briefly indicating the broad contentions raised by the appellants before the Industrial Court and its findings on them which are relevant for the purpose of the present appeals. The first contention which was urged before the Industrial Court was that the family living survey which was conducted by the Labour Bureau, Simla, in 1958-59, was unreliable, because the sample survey on which it was based was inadequate, and the interview method which was adopted in conducting it was unsatisfactory. It was also contended that the linking factor at 3.17 which had been adopted by the Government of Gujarat was unscientific and irrational; and that the scientific and rational way to deal with the problem presented by the new (1) 53 B.L.R. 902 400 consumer price index recently adopted by the Government of Gujarat would be to devise a scheme of dearness allowance afresh, taking the present basic salary as a base, and relating it to the changing price pattern from month to month with the base year 1960 = 100. The appellants' case in respect of this aspect of the matter was that for the purpose of fixing the dearness allowance, the basic salary should be taken to be the total amount which is paid to the lowest-paid employee after consolidating 75% of the dearness allowance in the basic wage. That amount, it is said, represents the true basic wage today. In the alternative, it was suggested that if it is intended to correlate the present prevailing wage structure, including the scheme of payment of dearness allowance, by making suitable adjustments required by the change in the level of prices in the light of the new consumer price index with the same base year, it would be more rational and scientific to watch the behaviour of prices for two or three years and then devise a linking factor on the average rise in prices during the said period. The appellants also emphasised the fact that before the Industrial Court accepts the new arrangement on the basis of the linking factor of 3.17, it is essential to examine their paying capacity, and in this connection, they strongly urged that the burden which would be imposed on them by the new scheme would be plainly beyond their capacity.

The validity of these contentions was strenuously disputed by the It urged that the, sample survey was conducted on rational and scientific lines and it did not suffer from any infirmity at all. It further argued that the attempt to construct a new wage structure by taking the basic salary with 75% of the consolidated dearness allowance as the basis with 1960 := 100 as the base year, would be beyond the terms of reference, and it would, besides, create many problems and complications. According to the respondent, the basic salary still continues to be what it was before, though for practical purposes 75% of the dearness allowance has been consolidated with it. The respondent seriously challenged the appellants' case that the operation of the linking factor was either unscientific, unreasonable or unjust; and the appellants' theory that the average rise in prices should be determined after watching the behaviour of prices for two or three years, was characterised by the respondent as unreasonable, inexpedient and unscientific. The respondent emphatically contended before the Industrial Court that the appellants' financial position was perfectly sound and the argument that the burden would be beyond their capacity is wholly untenable.

401 During the course of hearing before the Industrial Court, the appellants examined two Experts, Mr. Gokhale and Mr. Chokshi. They also led voluminous documentary evidence.

The respondent filed detailed statements disputing the correctness of the pleas taken by the appellants, and in support of them, they filed several charts which were prepared from the balance-sheets of the appellants themselves. Both parties referred to the opinions expressed by several writers on the subject of the preparation of consumer price index and on other matters which became relevant for the decision of the present dispute. Broadly stated, the Industrial Court has rejected all the contentions raised by the appellants. It has found that the recent survey was conducted under the advice and guidance of a technical advisory committee of a high order and that the work of carrying on the survey had scrupulously followed the relevant recommendations made by the International Labour Office and the United Nations. The Industrial Court did not accept the contention of the appellants that the sample size was inadequate or had vitiated the quality of the survey.

It held that the method of inquiry adopted by the Investigators who conducted the survey was by no means unsatisfactory or unscientific, and in its opinion, having regard to the local conditions, it was indeed the most feasible and satisfactory way to adopt. The adoption of the interview method did not, in the opinion of the Industrial Court, introduce any infirmity in the survey. The Industrial Court was thus not satisfied that the compilation of the consumer price index number by the Labour Bureau, Simla, for the city of Ahmadabad was not proper or was unscientific or suffered from any more infirmity.

In regard to the question of the linking factor on which both parties addressed the Industrial Court elaborately, the Court consider the matter in the light of expert opinion cited before it and held that the Government of India was justified in recommending a sample arithmetical method of linking; it found that the said method had been accepted by the Expert Committee appointed by the Government of Gujarat and had been recommended by the Expert Committee appointed by the Government of Maharashtra as well. It, therefore, reached the conclusion that the said method based on the application of the linking factor at 3.17 was the most suitable to adopt. In this connection, it rejected the appellants suggestion that the dearness allowance, should be paid at a flat rate and held that flexible dearness allowance alone would meet the ends of justice and would lead to industrial peace. It noticed the fact that now there was only one cost of living index existing in Ahmadabad and that is based on the new series 402 The old series had rightly gone out of existence since it had become antiquated. In this situation, there were two possibilities; one was to work out an entirely new scheme of basic wages based not on the prewar level of 1939 but based on the cost of living of 1960 as the base year and to award dearness allowance thereafter. The Industrial Court thought that if such a course was to be adopted, it would create a large number of problems in the industry and would seriously disturb industrial peace. It observed that this aspect of the matter would also be beyond the terms of its reference.

Nevertheless, it was inclined to take the view that "the results in terms of rupees, annas and pies may also not be very different", if this alternative, method was adopted.

It suggested that such a method may be adopted by the Central Cotton Textile Wage Board which had been recently appointed with a view to bring out a fair amount of uniform wage level all over India; but speaking for itself, it held that it would not be Necessary, advisable or practicable for it to attempt that task. That left only one alternative and that is the adoption of the arithmetical method of linking.

The argument that even if the arithmetical method of linking is intended to be adopted, it should be worked on the basis of the average result derived from watching the behaviour of prices during two or three years, does not appear to have been seriously pressed before the Industrial Court and has not been examined by it.

The Industrial Court then considered the question about the paying capacity of the appellants. As a matter of law, it rejected the respondent's argument that a wage structure once constructed by industrial adjudication can never be revised to the detriment of workmen, and it held that if it was shown that the financial position of the employer had substantially deteriorated and such deterioration was likely to persist for some time, it would be open to industrial adjudication to make a suitable revision of the wage structure, provided, of course, the wage structure does not represent the wages at their basic minimum level.

Considering the problem presented by the appellants plea of incapacity to bear the burden in the light of this legal position, the Industrial Court has found that, in its opinion, the textile industry of Ahmadabad is in a sound financial position. It has also added that "in any event, there has been no substantial deterioration in its condition so as to justify any wage cut or abandonment of the basic principles in respect of its employees which have been laid down in the past". It is on these findings that the Industrial Court has held against the appellants on issuer, 2 & 3. As we have already mentioned, the Industrial Court has found against the respondent 403 on issue No. 1; but since the respondent has not challenged the correctness of the said finding, it is only the conclusions of the, Industrial Court on issues 2 and 3 that fall to be considered in the present appeals.

The first point which we must now consider is whether the appellants are justified in contending that the Industrial Court erred in over-ruling their contention that the new survey suffered from two major infirmities-inadequacy of the sample size, and impropriety of the method of interview adopted by the Investigators. In support of this plea, the appellants examined Mr. Gokhale as an expert witness. Mr. Gokhale who served in the Labour Office at Bombay from 1926 to 1937, was directly associated with the family budget inquiries, compilation of cost of living index numbers, and with the first General Wage Census conducted by the Labour Office in Bombay. He also worked as Assistant Secretary of the Bombay Textile Labour Enquiry Committee. Later, he joined the Millowners' Association, Bombay, as their Labour Officer on 1-1-1938 and served in that capacity until he retired on 1-11-1962. He was deputed on a study tour to Lancashire in 1951 and attended the International Labour Conference at' Geneva. He has also been a member of the I.L.O. Committee on Women's Employment. According to Mr. Gokhale, the 'new survey was not as scientific as it might have been. He was inclined to take the view that the sample selected in the Ahmadabad inquiries was very inadequate. He commented on the fact that the choice of the size of sample was determined, inter alia, on the ground of the workload manageable by the investigator, and he said that it was difficult for him to understand as to why in deciding the sample size. "workload manageable by the investigator" had to be considered as a relevant factor. He then produced a chart showing the ratio of the size of the universe with the size of sample, and said that nowhere had he found such a low size of the sample as in the impugned inquiry. The size of the sample, according to him, in the impugned inquiry was less than even half a per cent of the population group which was intended to be covered.

Mr. Gokhale was cross-examined by the respondent. It was put to him that his experience in the matter of sample survey was somewhat limited and that the said experience had now become antiquated in view of the great strides of progress which had been made in the science of sample survey after 1926. He agreed that sampling technique involves knowledge of statistics and statistics involves mathematics, and he did not make any claim to be an 404 expert either in statistics or in mathematics. In his examination-in-chief, Mr. Gokhale appeared to criticise the extent of imputation which was evident in the preparation of the new series; but in his cross-examination, he fairly conceded that amputations have always got to be done in compiling consumer price index. It had been done in the past, he said, as also in the case of the present series.

When he was asked whether he knew what the percentage of imputation was in the compilation of the consumer price index of 1926-27, he admitted that he did not know. He was, however, reluctant to agree with the Labour Bureau in so far as the application of their reasons to individual items was concerned, and in support of his theory he relied upon the illustrations given by him in the affidavit which he had filed before he gave evidence.

The statements made by Mr. Gokhale in his affidavit were disputed by the respondent and the accuracy and the validity of the views expressed by him were seriously challenged by Mr. Vasavada who filed a reply on behalf of the respondent (Item 19). In his reply, Mr. Vasavada referred to Clause 14 of the Resolution as reported at p. 403 of the International Labour Code-1951 Vol. III; and emphasised the fact that the main distinguishing feature of the new survey was that it was carried out under the technical guidance of professional statisticians not only with adequate knowledge of sampling theory but also with actual experience in sampling practice, and with the help of a properly trained field and computing staff. Thi