Case Note & Summary
The dispute arose between an employer pharmaceutical company and its workmen over demands for revision of wage scales, dearness allowance, classification of grades, gratuity ceiling, and incentive bonus scheme. The company, which manufactured and sold pharmaceutical products in Greater Bombay, employed about 714 workmen. The existing wage scales had been fixed in Reference (IT) No. 23 of 1959, and a settlement was reached in 1966. Subsequently, the workmen raised demands due to a steep rise in the cost of living index. The Government of Maharashtra made three references to the Industrial Tribunal, Maharashtra, Bombay, which by a common Award dated April 15, 1971, granted various reliefs to the workmen. The employer appealed by special leave to the Supreme Court. The main legal issues were whether the Tribunal erred in computing gross profits without deducting depreciation, taxation, and development rebate; whether a concern with foreign collaboration could be treated as a comparable unit; whether the Tribunal had jurisdiction to classify workmen and fix pay scales under Section 10(4) of the Industrial Disputes Act, 1947; whether uniform dearness allowance and revision of wage scales were justified; and whether directions on gratuity and incentive bonus were valid. The employer argued that depreciation and other reserves must be deducted from profits, that foreign collaboration companies cannot be compared with purely Indian companies, that the Drugs (Price Control) Order would adversely affect business prospects, and that the Tribunal exceeded its jurisdiction. The workmen contended that the Tribunal's approach was consistent with settled law, that Burroughs Wellcome was a proper comparable unit, and that the rise in cost of living index justified revision. The Supreme Court dismissed the appeals. It relied on Gramophone Company Ltd. v. Its Workmen and Indian Link Chain Manufacturers Ltd. v. Their Workmen to hold that depreciation cannot be deducted from gross profits. It held that concerns with foreign collaboration can be comparable units if the tests of comparability are satisfied, and endorsed the Tribunal's treatment of Burroughs Wellcome as comparable. It rejected the jurisdictional objection under Section 10(4), holding the Tribunal acted within its powers. It upheld uniform dearness allowance, slab system, wage revision due to cost of living index rise, and the gratuity ceiling increase. On the incentive bonus scheme, the Court noted the Tribunal's observations would have full effect as no material was available to devise a scheme. The Award of the Industrial Tribunal was affirmed in its entirety.
Headnote
A) Labour Law - Dearness Allowance - Deduction of Depreciation and Taxation from Gross Profits - Industrial Disputes Act, 1947 - Tribunal computed gross profits without deducting taxation, depreciation and development rebate - Supreme Court held that provision for depreciation cannot be deducted, relying on Indian Link Chain Manufacturers - Held that tribunal was justified in computing gross profits accordingly (Paras Not mentioned). B) Labour Law - Comparable Units - Foreign Collaboration - Industrial Disputes Act, 1947 - Concerns with foreign collaboration doing business in India can be comparable units if tests laid down by Court are satisfied - Object of industrial adjudication is to secure uniformity of service conditions in same region - Held that foreign collaboration alone does not disqualify comparability (Paras Not mentioned). C) Labour Law - Wage Fixation - Comparable Unit Burroughs Wellcome - Industrial Disputes Act, 1947 - Tribunal justified in treating Burroughs Wellcome as comparable unit despite lesser labour force because business performance equal - Wage scales awarded cannot be considered unjustified once comparability established (Paras Not mentioned). D) Labour Law - Impact of Drugs (Price Control) Order - Industrial Disputes Act, 1947 - Tribunal held impact of Drugs (Price Control) Order not likely to materially affect business prospects - If Order later materially affects prosperity, employer can raise dispute for reduction in wage structure - Held no interference warranted (Paras Not mentioned). E) Labour Law - Jurisdiction of Industrial Tribunal - Classification and Fixation of Wages - Industrial Disputes Act, 1947, Section 10(4) - Tribunal acted within jurisdiction in classifying workmen and fixing scales of pay after fitting them in categories - Objection based on Section 10(4) rejected - Held tribunal's action valid (Paras Not mentioned). F) Labour Law - Gratuity Scheme - Ceiling Limit - Industrial Disputes Act, 1947 - Tribunal raised gratuity ceiling from 15 months to 17 1/2 months following Burroughs Wellcome pattern - No question of principle involved - Held no valid objection by employer (Paras Not mentioned). G) Labour Law - Dearness Allowance - Uniform Scale Across Categories - Industrial Disputes Act, 1947 - Different systems of dearness allowance for operators and clerical staff not warranted - Tribunal justified in devising uniform scale, following Greaves Cotton and Bengal Chemical - Held uniform scale valid (Paras Not mentioned). H) Labour Law - Wage Revision - Rise in Cost of Living Index - Industrial Disputes Act, 1947 - Cost of living index rose by 220 points since 1966 settlement - Workmen made out case for revision of wage scales and dearness allowance - Held revision justified (Paras Not mentioned). I) Labour Law - Dearness Allowance - Slab System - Industrial Disputes Act, 1947 - Slab system prevailing in industry in region - Tribunal committed no error in introducing similar pattern for appellant - Held slab system valid (Paras Not mentioned). J) Labour Law - Incentive Bonus Scheme - Lack of Material - Industrial Disputes Act, 1947 - Tribunal stated necessary material not available to devise scheme protecting incentive earnings at raised base performance index - Supreme Court could do nothing further - Held observations will have full effect (Paras Not mentioned).
Issue of Consideration
Whether the Industrial Tribunal was justified in computing gross profits without deducting depreciation, taxation, and development rebate; whether a concern with foreign collaboration can be treated as a comparable unit; whether the Tribunal acted within its jurisdiction in classifying workmen and fixing wage scales; whether uniform dearness allowance and revision of wage scales were justified; and whether directions regarding gratuity ceiling and incentive bonus scheme were valid.
Final Decision
The Supreme Court dismissed all three appeals and affirmed the Industrial Tribunal's Award dated April 15, 1971. The Tribunal's directions on dearness allowance, wage scales, classification, gratuity ceiling, and incentive bonus observations were upheld.
Law Points
- Gross profits for dearness allowance computation cannot deduct depreciation
- taxation or development rebate
- concerns with foreign collaboration can be comparable units if tests satisfied
- uniform dearness allowance across categories warranted
- rise in cost of living index justifies wage revision
- slab system prevailing in industry can be introduced
- tribunal has jurisdiction to classify workmen and fix pay scales under Section 10(4) of Industrial Disputes Act
- 1947
